UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-22132
Exact name of registrant as specified in charter:
Aberdeen Funds
Address of principal executive offices:
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Name and address of agent for service:
Ms. Andrea Melia
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Registrant’s telephone number, including area code: 866-667-9231
Date of fiscal year end: October 31
Date of reporting period: October 31, 2018
Item 1. Reports to Shareholders.
Aberdeen Funds
Equity Series
Annual Report
October 31, 2018
Aberdeen Asia-Pacific (ex-Japan) Equity Fund
Aberdeen China Opportunities Fund
Aberdeen Dynamic Dividend Fund
Aberdeen Emerging Markets Fund
Aberdeen Focused U.S. Equity Fund
Aberdeen Global Equity Fund
Aberdeen Global Infrastructure Fund
Aberdeen Income Builder Fund
Aberdeen International Equity Fund
Aberdeen International Small Cap Fund
Aberdeen Japanese Equities Fund
Aberdeen U.S. Mid Cap Equity Fund
Aberdeen U.S. Multi-Cap Equity Fund
Aberdeen U.S. Small Cap Equity Fund
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Investors should carefully consider a fund’s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a prospectus, or download a prospectus at www.aberdeen-asset.us. Please read it carefully before investing any money.
Investing in mutual funds involves risk, including possible loss of principal.
Aberdeen Funds is distributed by Aberdeen Fund Distributors LLC, Member FINRA, 1735 Market Street, 32nd Floor, Philadelphia, PA 19103.
Aberdeen Asset Management Inc. (AAMI) has been registered as an investment adviser under the Investment Advisers Act of 1940 since August 23, 1995.
Statement Regarding Availability of Quarterly Portfolio Schedule.
The complete schedule of portfolio holdings for each fund of Aberdeen Funds (each a “Fund” and collectively, the “Funds”) is included in the Funds’ semi-annual and annual reports to shareholders. Aberdeen Funds also files complete schedules of portfolio holdings for each Fund with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q filings are available on the Commission’s website at http://www.sec.gov. The Funds’ Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330; and the Funds make the information on Form N-Q available to shareholders on www.aberdeen-asset.us or upon request without charge.
Statement Regarding Availability of Proxy Voting Record.
Information regarding the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-866-667-9231. The information is also included in the Funds’ Statement of Additional Information, which is available on the Funds’ website at www.aberdeen-asset.us and on the Commission’s website at www.sec.gov.
Information relating to how each Fund voted proxies relating to portfolio securities held during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling 1-866-667-9231; and (ii) on the Commission’s website at www.sec.gov.
Global financial markets weathered numerous bouts of significant volatility during the 12-month period ended October 31, 2018, capped off by a major downturn in October 2018. Global stock markets in aggregate gained ground for the first few months of the period, as generally upbeat corporate earnings reports, tax reform in the U.S., and relatively steady economic growth buoyed investors’ confidence. However, market sentiment soon turned negative amid concerns that rising inflation could lead to more aggressive global central bank monetary policy, as well as fears of a possible global trade war spurred by tensions between the U.S and China. Global equities recovered during the third quarter of 2018, led by the U.S., with the broader-market Standard and Poor’s (S&P) 500 Index1 climbing 7.7% – its strongest quarterly performance since 2013. Nonetheless, in an apparent case of “financial whiplash,” global markets declined sharply towards the end of the reporting period in October. Investors were rattled by concerns ranging from lower corporate earnings estimates to the impact of continued monetary policy normalization. There also was a spike in U.S. Treasury yields during the month, triggered by expectations of further U.S. Federal Reserve (Fed) interest-rate increases. Shares of technology companies tumbled as higher interest rates led to investors’ apprehension about the rising valuations in the sector.
There was divergent performance among the regional stock markets during the 12-month reporting period. The Morgan Stanley Capital International (MSCI) World Index,2 a global equity market benchmark, posted a modest gain of 1.7% for the period, despite the vast majority of its constituents recording losses for the period. The U.S. was the lone major developed market to garner a positive return, while European stocks declined and were the weakest performers. Global emerging equity markets, as represented by the MSCI Emerging Markets Index,3 fell 12.2% over the reporting period, hampered by the strengthening U.S. dollar, which weighed on vulnerable economies with substantial foreign debt. The escalating trade tensions between the U.S. and China had a negative impact on Asia-Pacific stock markets, which declined 11.8% for the period, as measured by the MSCI All Country (AC) Asia Pacific ex Japan Index.4
While shares of U.S. companies could not avoid the sell-off in the global financial markets in October 2018, they finished the 12-month reporting period in positive territory. The U.S. market was bolstered for most of the period by generally positive economic data and corporate earnings reports, as well as the tax reform legislation that was enacted in late 2017. Many large-cap companies responded to the reduction of the top U.S. corporate tax rate from 35% to 21% by increasing their dividend payments and accelerating share repurchases. Late in the period, however, as investors worried that rising wage pressure and inflation could force the Fed to tighten monetary policy more aggressively than previously forecast. U.S. large-cap stocks, as represented by the S&P 500 Index, gained 7.4% during the reporting period, substantially outperforming the corresponding 2.8% and 1.9% returns of their mid- and small-cap counterparts, as measured by the Russell Midcap5 and Russell 20006 indices, respectively.
Shares of large-cap companies in the Asia-Pacific region fell sharply over the reporting period, hampered in part by investors’ concerns about a possible U.S.-China trade war. In June 2018, the administration of U.S. President Donald Trump assessed tariffs on US$50 billion in Chinese imports. Three months later, the U.S. placed an additional US$200 billion of levies on Chinese imports. China responded without escalating rhetoric while allowing its currency, the renminbi, to depreciate further against the U.S. dollar. Additionally, the weak investor sentiment in mainland China was compounded by fears over the country’s moderating economic growth.
One of the key reasons for the weakness in emerging-market equities was the liquidity squeeze on the U.S. dollar, stemming from the U.S. tax reforms that encouraged U.S. companies to repatriate7 their cash, as well as the Fed’s hawkish monetary policy stance. Turkey bore the brunt of the downturn amid worries about the central bank’s unwillingness to adopt orthodox economic policies and the government’s deteriorating relations with the U.S. In Mexico, Andres Lopez Obrador, the left-wing candidate, won Mexico’s presidential election in July 2018. While this outcome was expected, the market has become increasingly concerned with his plans to unwind some of the reforms that had occurred under his predecessor, Pena Nieto. Japan’s longest economic growth streak in 28 years stalled in the first quarter of 2018, but the economy subsequently resumed its momentum. An upgrade of second-quarter 2018 gross domestic product (GDP) data was attributable to an increase in capital investments. This was partly the result of the tight Japanese labor market, which saw the unemployment rate reach its lowest since the 1990s, boosting investments in labor-saving technologies.
Regarding the global fixed-income markets during the reporting period, capital outflows from emerging markets quickened due to the Fed’s ongoing rate-hike cycle and rising U.S. Treasury yields. As monetary policy normalization accelerated in the West, the easing cycle also came to an end in most parts of Asia. Indonesia’s central bank led the charge, raising its benchmark interest rate five times over the reporting period in a bid to stem the falling Indonesian rupiah as most emerging-market currencies succumbed to broad U.S.-dollar strength. Central banks in the Philippines and India also increased interest rates, but more in response to rising inflation, given the threat posed by higher global oil prices after U.S. President Trump reimposed economic sanctions on Iran. Yields on U.S. Treasuries rose, with two-, five- and ten year yields increasing by 127, 97 and 77 basis points (bps), respectively, over the reporting period, and this pressured higher-quality, lower-yielding and longer duration8 credit. U.S. and European high-yield markets saw marginal gains over the reporting period. Corporate earnings remained supported by generally positive economic growth, while default rates remained low. Supply was also lower than that in 2017 as companies, faced with rising borrowing costs, responded by reducing new issuance. However, investor sentiment in the U.S. deteriorated towards the end of the reporting period as trade tensions with China worsened and businesses began to forecast more conservative revenues and profitability in the ensuing quarters.
2018 Annual Report | 1 |
Market Review (concluded)
Global real estate equity markets faced a challenging environment during the reporting period. While the Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT) Global Real Estate Index9 ended the period with a modest negative return, there were considerable variations in country-level returns. The performance of real estate markets in developed countries was modestly positive, while emerging markets generally posted negative returns for the reporting period.
Outlook
As we near the end of 2018, global financial markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including Italy’s fiscal problems and political uncertainty in Europe caused by negotiations surrounding the UK’s exit from the EU (“Brexit”), which have yet to provide clarity on what the outcome will be for the UK or Europe.
The UK remains a member of the EU until the legally established departure date of March 29, 2019 and, until such date, all existing EU-derived laws and regulations continue to apply in the UK. Those laws may continue to apply for a transitional period, depending on whether a deal is struck and, if so, what that deal is. In any event, the UK’s on-shoring of EU legislation currently envisages no policy changes to EU law. However, the EU has not yet provided any material cushion from the effects of Brexit for financial services as a matter of EU law. Whether or not a Fund invests in securities of issuers located in Europe (whether the EU, Eurozone or UK) or with significant exposure to European, EU, Eurozone or UK issuers or countries, the unavoidable uncertainties and events related to Brexit could negatively affect the value and liquidity of a Fund’s investments, increase taxes and costs of business and cause volatility in currency exchange rates and interest rates. Brexit could adversely affect the performance of contracts in existence at the date of Brexit and European, UK or worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions, regulatory agencies and financial markets. Brexit could also lead to legal uncertainty and politically divergent national laws and regulations as a new relationship between the UK and EU is defined and the UK determines which EU laws to replace or replicate. Any of these effects of Brexit, and others that cannot be anticipated, could adversely affect a Fund’s business, results of operations and financial condition. In addition, the risk that Standard Life Aberdeen plc, the parent of the companies that provide investment advisory and sub-advisory services to the Funds and which is headquartered in the UK, fails to adequately prepare for Brexit could have significant customer, reputation and capital impacts for Standard Life Aberdeen plc and its subsidiaries, including those providing services to the Funds; however, we have detailed contingency planning in place to seek to manage the consequences of Brexit on the Funds and to avoid any disruption on the Funds and to the services we provide. Given the fluidity and complexity of the situation, however, we cannot assure that the Funds will not be adversely impacted despite our preparations.
We remain cautious on the growing divergence across global markets, with strength in U.S. macroeconomic data contrasting with slowing growth across other economies and markets. With the U.S. economy gradually moving closer towards full capacity, the Federal Reserve maintains its monetary policy tightening stance and is expected to continue to raise interest rates into 2019. In Asia, China continues to balance further trade-related responses towards the U.S. with managing and maintaining its closely monitored economic growth rates.
Aberdeen Standard Investments
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed-market countries. |
3 | The MSCI Emerging Markets Index tracks the performance of large- and mid-cap stocks across 24 emerging-market countries. |
4 | The MSCI AC Asia Pacific ex Japan Index tracks the performance of large and mid-cap representation across two of three developed-market countries (excluding Japan) and nine emerging-market countries in Asia. |
5 | The Russell Midcap Index is an unmanaged index considered representative of U.S. mid-cap stocks. |
6 | The Russell 2000 Index is an unmanaged index considered representative of U.S. small-cap stocks. |
7 | Repatriation refers to a corporation’s conversion of any offshore capital back to the currency of the country in which the corporation is based. |
8 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
9 | The FTSE EPRA/NAREIT Index is an unmanaged index considered representative of real estate companies and REITs outside the U.S. |
2 | Annual Report 2018 |
Aberdeen Asia-Pacific (ex-Japan) Equity Fund (Unaudited)
The Aberdeen Asia-Pacific (ex-Japan) Equity Fund (Institutional Class shares net of fees) returned -11.88% for the 12-month period ended October 31, 2018, versus the -11.84% return of its benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) Asia Pacific ex Japan Index, during the same period. For broader comparison, the average return of the Fund’s category of Pacific ex-Japan Funds (comprising 37 funds), as measured by Lipper, Inc., was -13.95% for the period.
Asian equities declined significantly in a tumultuous market environment over the reporting period. The period started well, as Asian markets ended 2017 on a buoyant note, supported by steady global economic growth, upbeat corporate earnings reports and the passage of U.S. tax reform. However, conditions in 2018 were more daunting. Market volatility spiked on concerns that higher U.S. inflation would spur a quicker pace of interest-rate hikes by the U.S. Federal Reserve. Investors also worried that escalating U.S.-China tensions might spiral into a full-blown trade war, with both sides imposing “tit-for-tat” tariffs on each other’s exports. The weak investor sentiment in mainland China was compounded by fears over the country’s moderating economic growth.
The U.S. dollar strengthened over the reporting period, with many Asian currencies further pressured by fears of contagion from financial turmoil in Turkey and Argentina. Within the region, India, Indonesia and the Philippines also were hampered by rising oil prices, and all three central banks tightened monetary policy to defend their economies from inflation. Across sectors, technology stocks were hurt by the trade-related jitters and investors’ concerns over their more cautious outlooks. Conversely, higher crude prices boosted the energy sector, while defensive sectors proved relatively more resilient amid the heightened risk-aversion.
The Fund performed in line with its benchmark, the MSCI AC Asia Pacific ex Japan Index, over the 12-month period ended October 31, 2018. Weakness in the Fund’s positions in the information technology sector weighed on relative performance for the reporting period, even though the lack of a holding in internet retailing giant Alibaba was a positive contributor. Surveillance-equipment maker Hangzhou Hikvision’s stock price retreated amid investors’ worries that the U.S.-China trade war could hamper its earnings. We maintain our positive view of the company, as the bulk of its revenues are generated from China. Shares of internet giant Tencent Holdings lagged the overall market due to its weaker-than-expected earnings reports and stricter regulations on its core online-games business. Nevertheless, we retain our confidence in the company’s solid business moat,1 given its dominance in online games and massive reach via messaging app WeChat. Tencent Holdings’ other businesses, including cloud services and video, also maintained their rapid growth trajectories.
Stock selection in China significantly boosted the Fund’s relative performance during the period. The Fund’s underweight allocation to that market relative to the benchmark also had a positive impact on performance, as it was hampered by the increasingly protracted trade conflict with the U.S. and signs of a cooling economy. Notable outperformers among individual Fund holdings included China International Travel Services (CITS), due to its consistently positive results over the reporting period and successful bids to operate duty-free services at key airports in Beijing and Shanghai. We believe that CITS is well-placed to capitalize on the growing affluence of China’s middle class, and its enlarged scale may drive higher margins. Anhui Conch Cement’s stock price rose during the period as its earnings improved on the back of higher cement prices, underpinned by industry discipline, supply-side reforms and tighter environmental regulations. Shares of China Resources Land also performed well and, in our opinion, its strong results reaffirmed our investment case that its portfolio of investment properties will drive higher returns.
Over the longer term, we maintain our positive view on China, given its favorable demographics, large consumer market, and ongoing reforms to ensure higher-quality growth and address structural fragilities. Therefore, we took advantage of volatility in the market to initiate holdings in several high-quality companies that we believe are well-placed to capitalize on emerging structural technology trends and the mainland’s growing wealth: Autohome Inc.; Huazhu Hotels Group Ltd.; Sunny Optical Technology Co. Ltd.; and Wuxi Biologics Co. Ltd.
Autohome is the dominant online destination for car buyers in China. The company delivers comprehensive content that attracts high-quality user traffic, and benefits from the powerful network-effect characteristics of a classified-advertising business. Hotel chain operator Huazhu Hotels has a multi-brand portfolio of budget and mid-scale hotels, and we believe that management’s solid track record and its partnership with hotel chain operator Accor S.A. should aid margin improvements. Sunny Optical Technology Co. is an optical-product manufacturer that we believe has a positive long-term outlook, as disruptive trends such as assisted-driving systems and autonomous vehicles could drive demand for its cameras and vehicle lenses. Finally, Wuxi Biologics Co. is a leading contract research organization for biopharmaceutical firms and, in our view, is poised to gain as outsourcing of research and development of biological drugs becomes more common.
The Fund’s Australian holdings also bolstered relative performance for the reporting period. Shares of miner Rio Tinto plc rallied during the period on higher commodity prices, along with improving shareholder returns as it declared a US$3.2 billion share repurchase following the disposal of its coal assets. Biotechnology firm CSL Limited’s stock price also rose on investors’ optimism about its robust product suite.
Conversely, stock selection in Singapore and Korea detracted from the Fund’s relative performance for the reporting period. In Singapore, shares of property developer City Developments Ltd. underperformed those of its peers due to relatively disappointing corporate results and the Singapore government’s harsher-than-expected housing market-cooling measures. We are cautious about City Developments’
1 | A business moat is a competitive advantage that one company has over other companies in the same industry. |
2018 Annual Report | 3 |
Aberdeen Asia-Pacific (ex-Japan) Equity Fund (Unaudited) (continued)
near-term prospects, but we think that it has a healthy balance sheet and relative valuation. Among our Korean holdings, shares of Naver Corp., a provider of internet portal and mobile services, retreated as its earnings were hampered by higher-than-expected operating expenses at its messaging app subsidiary LINE. Finally, cosmetics maker AmorePacific Group was hampered by softening consumer confidence in Korea, weaker tourist volumes from China, and investors’ concerns over tougher competition due to the expansion of e-commerce.
The Fund saw mixed performance from holdings in India over the reporting period. Conglomerate Grasim Industries Ltd.’s stock price declined due to continued difficulties faced by the cement sector, including subdued pricing and rising costs; however, the company continued to post upbeat corporate results and forecasts. Shares of Motorcycle maker Hero MotoCorp also fell during the period amid investors’ fears of slowing auto sales growth. In contrast, shares of Tata Consultancy Services rose on the back of the company’s capital-management efforts and improving demand for IT services, while the Indian rupee’s weakness amplified its foreign-denominated revenues.
Regarding portfolio activity over the repowering period, we established a new holding in LG Chem Ltd., as we believe that it has a distinctive business mix and attractive valuation relative to its growth prospects. At its core, the Korean company’s resilience stems from a robust and cash-generative chemicals business, which in our view serves as a strong base for the company to build on its leading position in the electric-vehicle battery market, where it has already garnered a broad customer base and growing backlog of orders. We also initiated a position in SAIC Motor Corp., China’s largest automaker by capacity that is also renowned for its joint ventures with General Motors and Volkswagen. We believe that the company’s nationwide distribution network is well-entrenched, and is supported by a focus on financing, rentals and after-sales services.
Additionally, we established new positions in two Australian companies: Aristocrat Leisure Ltd. and Woodside Petroleum Ltd. Aristocrat Leisure is a gaming-machine maker that we believe has demonstrated robust operating momentum, given management’s continued investments to maintain its competitive edge. The company has evolved its business model by increasing sales of its participation games, which improves its recurring revenues. We also think that there are good prospects for its digital-games business. Woodside Petroleum is a producer of liquefied natural gas (LNG) that in our opinion has appealing longer-term prospects. Despite the current LNG oversupply, we think that market conditions will improve, as the switch from coal to gas, especially in emerging markets, should drive oil prices and demand higher. In our judgment, Woodside Petroleum also has an attractive production-growth profile, with key projects in the pipeline. Furthermore, we think that the company has a solid balance sheet with low leverage levels, generates healthy cash flows, and has been sensible in reducing spending on exploration activities, given rising capital expenditure from its ongoing projects.
We also initiated a holding in Central Pattana Public Company Ltd., Thailand’s largest mall developer, which has additional interests in office and residential-property development. Part of the Central Group conglomerate, Central Pattana’s management has been adroit in diversifying its assets and expanding abroad, in our opinion. We see potential for further margin improvements, given the positive prospects for domestic retail growth, and rental reversions.2
Conversely, we exited the Fund’s position in Malaysian lender CIMB Group Holdings given our asset-quality concerns at some of its overseas operations. In Hong Kong, we sold the Fund’s shares in rapid transit railway operator MTR Corporation Ltd., as we believed that they had reached fair value. We also exited the position in Singapore-based aerospace and defense company Singapore Technologies Engineering Ltd (ST Engineering), as we thought that it had a high valuation relative to its outlook.
In our opinion, politics and policy will likely continue to hold sway over Asian markets. Investor sentiment has turned more cautious as U.S.-China trade tensions appear to be worsening, and concerns mount over a potential slowdown to consumer spending in China. We believe that this, in turn, could dampen near-term economic growth in the region. Investors are also grappling with issues within the Asian markets. In our view, the Chinese government’s delicate balance between reducing financial risk and sustaining economic growth could have wide-reaching implications. Political risk may be more prominent, given upcoming elections in India, Indonesia and Australia. Central banks in the region also must wrestle with defending their respective currencies and maintain price stability amid rising commodity prices, tightening U.S. monetary policy, and a still-strengthening U.S. dollar.
Nonetheless, we think that there are some silver linings. Many Asian economies are in better shape, with healthy external balances and foreign-currency reserves. We believe that corporate fundamentals also still appear resilient. Despite more cautious forecasts, many of the Fund’s holdings are still seeing decent earnings growth. More broadly, we feel that companies remain well-positioned to benefit from several structural themes, including emerging technological trends and growing demand for better-quality products and services by increasingly affluent populations. We remain focused on seeking to position the Fund with what we believe are high-quality holdings that can weather the current storms and tap into Asia’s rich potential to help drive performance over the long term.
Portfolio Management:
Aberdeen Asia-Pacific Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information
2 | A rental reversion is the adjustment of rentals to market rentals, either on expiration or at predetermined periods as the terms of a lease dictate. |
4 | Annual Report 2018 |
Aberdeen Asia-Pacific (ex-Japan) Equity Fund (Unaudited) (concluded)
current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Concentrating investments in the Asia-Pacific region subjects the Fund to more volatility and greater risk of loss than geographically diverse mutual funds.
Parts of the Asia-Pacific region may be subject to a greater degree of economic, political and social instability than is the case in the United States and Europe. Some Asian countries can be characterized as emerging markets or newly industrialized and may experience more volatile economic cycles than developed countries.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 5 |
Aberdeen Asia-Pacific (ex-Japan) Equity Fund (Unaudited)
Average Annual Total Return (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | Inception1 | |||||||||||
Class A2 | w/o SC | -12.16% | 1.36% | 2.68% | ||||||||||
w/SC3 | -17.22% | 0.17% | 1.78% | |||||||||||
Class C2 | w/o SC | -12.85% | 0.64% | 1.95% | ||||||||||
w/SC4 | -13.71% | 0.64% | 1.95% | |||||||||||
Class R2,5 | w/o SC | -12.31% | 1.11% | 2.44% | ||||||||||
Institutional Service Class5 | w/o SC | -11.99% | 1.55% | 4.39% | ||||||||||
Institutional Class5 | w/o SC | -11.88% | 1.61% | 4.44% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Fund commenced operations on November 16, 2009. |
2 | Returns before the first offering of Class A, Class C and Class R (February 28, 2012) are based on the previous performance of the Institutional Class. Returns of each class have not been adjusted to reflect the expenses applicable to the respective classes. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class A, Class C and Class R would have produced because all classes invest in the same portfolio of securities. Returns for Class A, Class C and Class R shares would only differ to the extent of the difference in expenses of the classes. |
3 | A 5.75% front-end sales charge was deducted. |
4 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
5 | Not subject to any sales charges. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Asia-Pacific (ex-Japan) Equity Fund, the Morgan Stanley Capital International All Country (MSCI AC) Asia Pacific ex-Japan Index and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI AC Asia Pacific ex Japan Index captures large and mid cap representation across 4 of 5 Developed Markets countries (excluding Japan) and 9 Emerging Markets countries in the Asia Pacific region. With 710 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Developed Markets countries in the index are: Australia, Hong Kong, New Zealand and Singapore. Emerging Markets countries in the Index are: China, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Taiwan and Thailand.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
6 | Annual Report 2018 |
Aberdeen Asia-Pacific (ex-Japan) Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 92.2% | |||
Preferred Stocks | 6.4% | |||
Short-Term Investment | 1.9% | |||
Liabilities in Excess of Other Assets | (0.5)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Financials | 28.4% | * | ||
Information Technology | 14.6% | |||
Materials | 10.8% | |||
Communication Services | 10.5% | |||
Consumer Discretionary | 10.2% | |||
Real Estate | 7.4% | |||
Consumer Staples | 6.3% | |||
Industrials | 6.1% | |||
Health Care | 3.8% | |||
Energy | 0.5% | |||
Other | 1.4% | |||
100.0% |
* | As of October 31, 2018, the Fund’s holdings in the Financials sector were allocated to five industries: Banks (15.8%), Insurance (5.1%), Thrifts & Mortgage Finance (3.2%), Diversified Financial Services (2.7%) and Capital Markets (1.6%). |
Top Holdings* | ||||
Samsung Electronics Co. Ltd. | 5.8% | |||
Tencent Holdings Ltd. | 4.6% | |||
Taiwan Semiconductor Manufacturing Co. Ltd. | 4.4% | |||
Jardine Strategic Holdings Ltd. | 3.5% | |||
Housing Development Finance Corp. Ltd. | 3.2% | |||
AIA Group Ltd. | 3.0% | |||
Bank Central Asia Tbk PT | 2.8% | |||
Oversea-Chinese Banking Corp. Ltd. | 2.7% | |||
Ayala Corp. | 2.7% | |||
Astra International Tbk PT | 2.4% | |||
Other | 64.9% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
China | 23.5% | |||
Hong Kong | 14.0% | |||
India | 12.8% | |||
South Korea | 10.2% | |||
Singapore | 10.1% | |||
Indonesia | 5.7% | |||
Taiwan | 5.4% | |||
United Kingdom | 5.1% | |||
Philippines | 3.7% | |||
Thailand | 3.6% | |||
Other | 5.9% | |||
100.0% |
2018 Annual Report | 7 |
Statement of Investments
October 31, 2018
Aberdeen Asia-Pacific (ex-Japan) Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (92.2%) | ||||||||
AUSTRALIA (3.5%) | ||||||||
Consumer Discretionary (0.9%) | ||||||||
Aristocrat Leisure Ltd. (a) | 3,817 | $ | 71,927 | |||||
Energy (0.5%) | ||||||||
Woodside Petroleum Ltd. (a) | 1,600 | 39,392 | ||||||
Health Care (2.1%) | ||||||||
CSL Ltd. (a) | 1,192 | 159,129 | ||||||
270,448 | ||||||||
CHINA (23.5%) | ||||||||
Communication Services (7.1%) | ||||||||
Autohome, Inc., ADR | 1,171 | 84,757 | ||||||
China Mobile Ltd. (a) | 12,000 | 112,415 | ||||||
Tencent Holdings Ltd. (a) | 10,400 | 356,296 | ||||||
553,468 | ||||||||
Consumer Discretionary (5.9%) | ||||||||
China International Travel Service Corp. Ltd., A Shares (Stock Connect) (a)(b) | 19,699 | 152,527 | ||||||
Huazhu Group Ltd., ADR | 2,073 | 54,230 | ||||||
Midea Group Co. Ltd., A Shares (Stock Connect) (a)(b) | 16,799 | 89,931 | ||||||
SAIC Motor Corp. Ltd., A Shares (a)(b) | 9,515 | 37,129 | ||||||
Yum China Holdings, Inc. | 3,424 | 123,538 | ||||||
457,355 | ||||||||
Consumer Staples (1.5%) | ||||||||
Kweichow Moutai Co. Ltd., A Shares (Stock Connect) (a)(b) | 1,500 | 118,816 | ||||||
Financials (2.1%) | ||||||||
Ping An Insurance Group Co. of China Ltd., H Shares (a) | 17,000 | 160,718 | ||||||
Health Care (0.7%) | ||||||||
Wuxi Biologics Cayman, Inc. (a)(c)(d) | 8,000 | 57,239 | ||||||
Industrials (0.9%) | ||||||||
Shanghai International Airport Co. Ltd., A Shares (Stock Connect) (a)(b) | 10,198 | 72,860 | ||||||
Information Technology (1.8%) | ||||||||
Hangzhou Hikvision Digital Technology Co. Ltd., A Shares (Stock Connect) (a)(b) | 29,600 | 103,525 | ||||||
Sunny Optical Technology Group Co. Ltd. (a) | 3,800 | 33,178 | ||||||
136,703 | ||||||||
Materials (1.3%) | ||||||||
Anhui Conch Cement Co. Ltd., H Shares (a) | 19,000 | 98,480 | ||||||
Real Estate (2.2%) | ||||||||
China Resources Land Ltd. (a) | 50,000 | 170,060 | ||||||
1,825,699 | ||||||||
HONG KONG (14.0%) | ||||||||
Financials (6.6%) | ||||||||
AIA Group Ltd. (a) | 30,600 | 232,776 | ||||||
Hong Kong Exchanges & Clearing Ltd. (a) | 4,661 | 124,107 | ||||||
HSBC Holdings PLC (a) | 18,544 | 152,382 | ||||||
509,265 | ||||||||
Industrials (3.5%) | ||||||||
Jardine Strategic Holdings Ltd. (a) | 8,100 | 272,100 | ||||||
Information Technology (0.9%) | ||||||||
ASM Pacific Technology Ltd. (a) | 8,300 | 71,984 | ||||||
Real Estate (3.0%) | ||||||||
Hang Lung Group Ltd. (a) | 16,000 | 39,391 | ||||||
Swire Pacific Ltd., Class B (a) | 22,500 | 36,316 | ||||||
Swire Properties Ltd. (a) | 45,300 | 154,805 | ||||||
230,512 | ||||||||
1,083,861 | ||||||||
INDIA (12.8%) | ||||||||
Consumer Discretionary (1.0%) | ||||||||
Hero MotoCorp Ltd. (a) | 2,025 | 75,345 | ||||||
Consumer Staples (2.6%) | ||||||||
Hindustan Unilever Ltd. (a) | 1,894 | 41,461 | ||||||
ITC Ltd. (a) | 43,910 | 165,686 | ||||||
207,147 | ||||||||
Financials (5.5%) | ||||||||
HDFC Bank Ltd. (a) | 3,005 | 77,792 | ||||||
Housing Development Finance Corp. Ltd. (a) | 10,369 | 247,776 | ||||||
Kotak Mahindra Bank Ltd. (a) | 6,780 | 102,411 | ||||||
427,979 | ||||||||
Information Technology (1.8%) | ||||||||
Tata Consultancy Services Ltd. (a) | 5,259 | 137,614 | ||||||
Materials (1.9%) | ||||||||
Grasim Industries Ltd. (a) | 13,258 | 149,129 | ||||||
997,214 | ||||||||
INDONESIA (5.7%) | ||||||||
Consumer Discretionary (2.4%) | ||||||||
Astra International Tbk PT (a) | 356,000 | 185,178 | ||||||
Consumer Staples (0.5%) | ||||||||
Unilever Indonesia Tbk PT (a) | 13,600 | 38,739 | ||||||
Financials (2.8%) | ||||||||
Bank Central Asia Tbk PT (a) | 142,200 | 221,414 | ||||||
445,331 | ||||||||
MALAYSIA (1.0%) | ||||||||
Financials (1.0%) | ||||||||
Public Bank Bhd (a) | 13,100 | 77,060 |
See accompanying Notes to Financial Statements.
8 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Asia-Pacific (ex-Japan) Equity Fund
Shares or Principal Amount | Value | |||||||
PHILIPPINES (3.7%) | ||||||||
Financials (3.7%) | ||||||||
Ayala Corp. (a) | 12,060 | $ | 207,615 | |||||
Bank of the Philippine Islands (a) | 51,975 | 79,915 | ||||||
287,530 | ||||||||
SINGAPORE (10.1%) | ||||||||
Communication Services (1.0%) | ||||||||
Singapore Telecommunications Ltd. (a) | 34,500 | 78,805 | ||||||
Financials (5.7%) | ||||||||
DBS Group Holdings Ltd. (a) | 8,915 | 151,265 | ||||||
Oversea-Chinese Banking Corp. Ltd. (a) | 27,374 | 212,654 | ||||||
United Overseas Bank Ltd. (a) | 4,274 | 75,566 | ||||||
439,485 | ||||||||
Industrials (1.7%) | ||||||||
Keppel Corp. Ltd. (a) | 29,100 | 130,381 | ||||||
Real Estate (1.7%) | ||||||||
City Developments Ltd. (a) | 23,900 | 136,586 | ||||||
785,257 | ||||||||
SOUTH KOREA (3.8%) | ||||||||
Communication Services (1.3%) | ||||||||
NAVER Corp. (a) | 1,005 | 101,208 | ||||||
Consumer Staples (1.1%) | ||||||||
Amorepacific Group (a) | 126 | 6,906 | ||||||
E-MART, Inc. (a) | 438 | 78,795 | ||||||
85,701 | ||||||||
Materials (1.4%) | ||||||||
LG Chem Ltd. (a) | 356 | 108,785 | ||||||
295,694 | ||||||||
TAIWAN (5.4%) | ||||||||
Communication Services (1.1%) | ||||||||
Taiwan Mobile Co. Ltd. (a) | 23,100 | 82,544 | ||||||
Information Technology (4.3%) | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (a) | 45,000 | 337,832 | ||||||
420,376 | ||||||||
THAILAND (3.6%) | ||||||||
Health Care (1.0%) | ||||||||
Bangkok Dusit Medical Services PCL, Foreign Shares (a) | 103,800 | 76,983 | ||||||
Materials (2.1%) | ||||||||
Siam Cement PCL (The), Foreign Shares (a) | 13,100 | 162,715 | ||||||
Real Estate (0.5%) | ||||||||
Central Pattana PCL, Foreign Shares (a) | 16,200 | 38,606 | ||||||
278,304 | ||||||||
UNITED KINGDOM (5.1%) | ||||||||
Financials (1.0%) | ||||||||
Standard Chartered PLC (a) | 10,696 | 74,965 | ||||||
Materials (4.1%) | ||||||||
BHP Billiton PLC — London Listing (a) | 7,573 | 151,071 | ||||||
Rio Tinto PLC — London Listing (a) | 3,424 | 166,238 | ||||||
317,309 | ||||||||
392,274 | ||||||||
Total Common Stocks | 7,159,048 | |||||||
PREFERRED STOCKS (6.4%) | ||||||||
SOUTH KOREA (6.4%) | ||||||||
Consumer Staples (0.6%) | ||||||||
Amorepacific Corp., Preferred Shares (a) | 539 | 42,794 | ||||||
Information Technology (5.8%) | ||||||||
Samsung Electronics Co. Ltd. (a) | 14,273 | 450,324 | ||||||
493,118 | ||||||||
Total Preferred Stocks | 493,118 | |||||||
SHORT-TERM INVESTMENT (1.9%) | ||||||||
UNITED STATES (1.9%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (e) | 150,821 | 150,821 | ||||||
Total Short-Term Investment | 150,821 | |||||||
Total Investments | 7,802,987 | |||||||
Liabilities in Excess of Other Assets—(0.5)% | (42,628 | ) | ||||||
Net Assets—100.0% | $ | 7,760,359 |
(a) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(b) | China A Shares. These shares are issued in local currency, traded in the local stock markets and are held through either a Qualified Foreign Institutional Investor (QFII) license or the Shanghai or Shenzhen Hong-Kong Stock Connect program. |
(c) | Non-income producing security. |
(d) | Denotes a security issued under Regulation S or Rule 144A. |
(e) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
2018 Annual Report | 9 |
Aberdeen China Opportunities Fund (Unaudited)
The Aberdeen China Opportunities Fund (Institutional Class shares net of fees) returned -10.46% for the 12-month period ended October 31, 2018, versus the -14.82% return of its benchmark, the Morgan Stanley Capital International (MSCI) Zhong Hua Index, during the same period. For broader comparison, the average return of the Fund’s peer category of China Region Funds (comprising 53 funds), as measured by Lipper, Inc., was -18.55% for the period.
Equities in China and Hong Kong struggled over the reporting period, hurt by investors’ growing trade and macroeconomic worries. The period began on a positive note, with the markets buoyed by steady growth and upbeat corporate earnings. Hong Kong was additionally boosted by sustained fund inflows from mainland China.
However, investor sentiment soured in 2018, as escalating China-U.S. trade tensions spiraled into “tit-for-tat” tariffs on each other’s exports. Concerns also grew as China’s economic growth moderated due to slowing fixed-asset investment. This compelled the Chinese government to introduce various expansionary measures, including increasing infrastructure spending, guidelines to boost domestic consumption, and reductions to banks’ reserve requirement ratios. While these factors dampened the mainland China market, including the previously strong-performing technology sector, we remain optimistic about the prospects for the Fund’s holdings as most of their businesses are primarily linked to domestic demand, rather than exposed to the worsening tariffs.
Investors in Hong Kong also grappled with tightening monetary conditions. The Hong Kong Monetary Authority, the de facto central bank, tracked the U.S. Federal Reserve’s interest-rate hikes over the reporting period, while the market’s commercial lenders raised lending rates for the first time since 2006.
The Fund outperformed its benchmark, the MSCI Zhong Hua Index, for the reporting period. Positive stock selection significantly offset the overall negative impact of sector allocation.
The Fund’s positions in the industrials sector contributed positively to relative performance for the reporting period. The strong performance of shares of China Conch Venture Holdings Ltd. was underpinned by its sizable holding in Anhui Conch Cement, while its environmental-protection business began to bear fruit. Shanghai International Airport Co. Ltd.’s stock price was propelled higher by improving passenger traffic and expectations of higher non-aeronautical1 income following revisions to its duty-free revenue-sharing terms. Shares of Kerry Logistics Network Ltd. also performed well due to unexpectedly robust corporate results attributable to rising intra-Asia region trade as companies looked to diversify away from mainland China amid the increasingly protracted U.S.-China trade war. The company has benefited from its efforts to develop its regional business over the past several years, and we are confident about its growth trajectory following a meeting with management. In contrast, the Fund’s position in Hong Kong conglomerate Jardine Strategic Holdings Ltd. offset some of the gains in the industrials sector over the reporting period, as the company was hampered by weakness at some of its overseas associates.
The Fund’s exposure to the consumer discretionary sector also boosted relative performance for the reporting period, as the holdings generally outperformed their peers. China International Travel Services (CITS) was the Fund’s strongest-performing stock over the period, driven by positive results and successful bids to operate duty-free services at key airports in Beijing and Shanghai. We remain positive on the outlook for CITS, as we believe that it is well-positioned to capitalize on the growing affluence of China’s middle class, while its enlarged scale should support higher margins.
Conversely, the Fund’s exposure to the information technology sector weighed on relative performance, as the sector bore the brunt of the trade conflict and succumbed to profit-taking after a lengthy rally. At the stock level, shares of surveillance-equipment maker Hangzhou Hikvision retreated on investors’ worries that the trade war could hamper its earnings. However, we maintain our positive view of the company, as the bulk of its revenues are generated domestically. Hong Kong exchange-listed semiconductor company ASM Pacific Technology’s stock price moved lower over the reporting period due to investors’ concerns over demand in the memory industry. In our opinion, the company remains well-placed to capitalize on the trend of hardware specification-upgrades across a range of applications. Shares of the Fund’s position in internet giant Tencent Holdings also declined over the period due to its generally weaker-than-expected corporate earnings and stricter regulations on its core online-games business. Nevertheless, we retain our confidence in the company’s solid business moat,2 given its dominance in online games and massive reach via messaging app WeChat. The company’s other businesses, including cloud services and video, also maintained their rapid growth trajectories over the reporting period.
The volatility in the technology sector provided us with the opportunity to invest in several high-quality companies that we believe are benefiting from emerging structural trends. Therefore, we initiated a holding in Autohome Inc., the leading online portal for mainland China car buyers. The company delivers comprehensive content that attracts high-quality user traffic, and benefits from the powerful network-effect characteristics of a classified-advertising business. Another new addition was Sunny Optical Technology Co. Ltd., an optical-product manufacturer that we believe has a compelling long-term outlook, as disruptive trends such as assisted-driving systems and autonomous vehicles should drive demand for its cameras and vehicle lenses, in our opinion.
In other notable portfolio activity over the reporting period, we initiated positions in Ping An Insurance Company of China Ltd.; China Literature Ltd.; Shenzhou International Group Holdings Ltd.; Wuxi
1 | Non-aeronautical income is derived from sources such as rental of premises. |
2 | A business moat is a competitive advantage that one company has over other companies in the same industry. |
10 | Annual Report 2018 |
Aberdeen China Opportunities Fund (Unaudited) (continued)
Biologics, Techtronic Industries Co. Ltd.; OneSmart International Education Group Ltd.; hotel chain operator Huazhu Hotels Group; and Beijing Tong Ren Tang Chinese Medicine Co. Ltd.
We like Ping An Insurance Company’s insurance agency franchise, as well as its focus on long-term protection products and digital investments. China Literature is a leading online-literature platform with the largest network of writers in China. The company also has a firm distribution network through parent company Tencent, which we believe gives it a strong competitive advantage. Shenzhou International is a leading textile manufacturer and is actively involved in fabric design through research and development conducted in close collaboration with its customers. Wuxi Biologics, a leading contract-research organization for biologics in China, owns a leading platform and benefits from the growing trend of outsourcing research and development of biologic drugs. Techtronic Industries manufactures and sells power tools, outdoor products and floor care products in the U.S. and European Union. Management has a solid track record and has delivered consistent returns to shareholders. OneSmart International Education Group is a provider of after-school tutoring services. In our view, the company’s ability to crack the Shanghai market reflects the management’s capabilities, which we believe will help it expand into other Chinese cities. Huazhu Hotels Group has a multi-brand portfolio of budget and mid-scale hotels. In our view, management’s solid track record and its partnership with hotel chain operator Accor should aid margin improvements. Beijing Tong Ren Tang Chinese Medicine is a market-leader in traditional Chinese medicine with robust brand equity. We think that its products should benefit from sustainable demand growth in the long term.
Conversely, we exited the Fund’s positions in specialty apparel retailer Global Brands Group Holding Ltd. due to our concerns over its business prospects, and China Biologic Products Holdings Inc., given our wariness over corporate governance following changes in its shareholding and what we believed was a questionable acquisition in early 2018. We also sold the Fund’s shares in diversified retailer Dairy Farm International Holdings Ltd., due to the changes in the competitive landscape. We exited the positions in financial services company Dah Sing Financial Holdings Ltd., specialty apparel retailers Giordano International Ltd. and Global Brands Group Holding Ltd., specialized gas-drilling services company Greka Drilling Ltd., and telecom Hong Kong Broadband Network Ltd. (HKBN), as we think that they face more challenging business prospects. We exited the Fund’s holding in in biopharmaceutical firm China Biologic Products Holdings Inc. due to our corporate governance-related concerns.
We believe that markets in greater China are likely to remain volatile, given the ill-timed confluence of still-heightened trade tensions and economic moderation. The U.S.-China trade spat is forcing investor sentiment to turn cautious, with some companies beginning to delay their capital expenditures. We think that this, in turn, could exacerbate near-term growth pressures, as the Chinese government continues to balance between financial de-risking and maintaining economic momentum. While we remain cautious, we still see reasons for optimism. The deleveraging campaign to curb shadow banking3 helps to temper systemic risks.4 In our view, efforts to rebalance the economy towards more sustainable growth, powered by domestic consumption, are already becoming visible, with increased demand in segments, such as internet technology, healthcare and travel. We think that these trends may continue, given the large consumer market and rising income levels. In our opinion, broadening foreign participation in stock markets, driven by the inclusion of A-shares5 into Morgan Stanley Capital International’s global market indices, should be positive for governance standards. We are focused on seeking to ensure that the Fund’s holdings have the quality to tap into the market’s rich potential to help deliver positive performance over the long term.
Portfolio Management:
Aberdeen Asia-Pacific Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Concentrating investments in China and Hong Kong subjects the Fund to more volatility and greater risk of loss than geographically diverse mutual funds.
Additional risks associated with investments in China and Hong Kong include exposure to currency fluctuations, less liquidity, expropriation, confiscatory taxation, nationalization, exchange control regulations (including currency blockage) and differing legal standards.
3 | A shadow banking system comprises financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions. |
4 | Systemic risk represents the possibility that an event at the company level could trigger severe instability or collapse an entire industry or economy. |
5 | A-shares trade on the two Chinese stock exchanges, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. |
2018 Annual Report | 11 |
Aberdeen China Opportunities Fund (Unaudited) (concluded)
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk, and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
12 | Annual Report 2018 |
Aberdeen China Opportunities Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | -10.76% | 0.30% | 8.23% | ||||||||||
w/SC2 | -15.89% | -0.88% | 7.59% | |||||||||||
Class C | w/o SC | -11.32% | -0.39% | 7.47% | ||||||||||
w/SC3 | -12.20% | -0.39% | 7.47% | |||||||||||
Class R4 | w/o SC | -11.07% | -0.06% | 7.88% | ||||||||||
Institutional Service Class4 | w/o SC | -10.57% | 0.53% | 8.50% | ||||||||||
Institutional Class4 | w/o SC | -10.46% | 0.59% | 8.51% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Aberdeen Asset Management Asia Limited began sub-advising the fund on January 1, 2009. Performance prior to this date reflects the performance of an unaffiliated sub-adviser. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen China Opportunities Fund, Morgan Stanley Capital International (MSCI) Zhong Hua Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI Zhong Hua Index is a composite index that comprises the MSCI China and MSCI Hong Kong Index. The index captures large and mid cap representation across all China securities (B shares, H shares, Red Chips, P Chips and foreign listed shares) as well as Hong Kong securities.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment returns and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 13 |
Aberdeen China Opportunities Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 98.1% | |||
Short-Term Investment | –% | |||
Other Assets in Excess of Liabilities | 1.9% | |||
100.0% |
Amounts listed as “–” are 0% or round to 0%.
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Financials | 22.6% | |||
Consumer Discretionary | 18.9% | |||
Communication Services | 13.2% | |||
Industrials | 10.0% | |||
Real Estate | 8.8% | |||
Information Technology | 8.2% | |||
Health Care | 6.4% | |||
Consumer Staples | 4.7% | |||
Energy | 3.7% | |||
Utilities | 1.6% | |||
Other | 1.9% | |||
100.0% |
Top Holdings* | ||||
Tencent Holdings Ltd. | 8.6% | |||
AIA Group Ltd. | 6.1% | |||
Ping An Insurance Group Co. of China Ltd., H Shares | 5.1% | |||
China International Travel Service Corp. Ltd., A Shares | 4.0% | |||
China Merchants Bank Co. Ltd., H Shares | 3.7% | |||
China Construction Bank Corp., Class H | 3.6% | |||
Hong Kong Exchanges & Clearing Ltd. | 3.3% | |||
Shanghai International Airport Co. Ltd., A Shares | 3.3% | |||
China Resources Land Ltd. | 3.0% | |||
Hangzhou Hikvision Digital Technology Co. Ltd., A Shares | 3.0% | |||
Other | 56.3% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
China | 68.0% | |||
Hong Kong | 28.2% | |||
United States | 1.9% | |||
Other | 1.9% | |||
100.0% |
14 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen China Opportunities Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (98.1%) | ||||||||
CHINA (68.0%) | ||||||||
Communication Services (12.8%) | ||||||||
Autohome, Inc., ADR | 1,350 | $ | 97,713 | |||||
China Literature Ltd. (a)(b)(c) | 13,800 | 74,852 | ||||||
China Mobile Ltd. (c) | 26,500 | 248,249 | ||||||
Tencent Holdings Ltd. (c) | 25,100 | 859,907 | ||||||
1,280,721 | ||||||||
Consumer Discretionary (13.4%) | ||||||||
China International Travel Service Corp. Ltd., A Shares (c)(d) | 51,800 | 401,080 | ||||||
China International Travel Service Corp. Ltd., A Shares (Stock Connect) (c)(d) | 200 | 1,549 | ||||||
Fuyao Glass Industry Group Co. Ltd., H Shares (a)(c) | 72,000 | 212,824 | ||||||
Huazhu Group Ltd., ADR | 3,700 | 96,792 | ||||||
Midea Group Co. Ltd., A Shares (Stock Connect) (c)(d) | 9,000 | 48,180 | ||||||
Nexteer Automotive Group Ltd. (c) | 90,000 | 126,907 | ||||||
OneSmart International Education Group Ltd., ADR (b) | 13,000 | 105,950 | ||||||
Shenzhou International Group Holdings Ltd. (c) | 15,000 | 166,299 | ||||||
Yum China Holdings, Inc. | 5,174 | 186,678 | ||||||
1,346,259 | ||||||||
Consumer Staples (3.4%) | ||||||||
Kweichow Moutai Co. Ltd., A Shares (c)(d) | 2,400 | 190,107 | ||||||
Kweichow Moutai Co. Ltd., A Shares (Stock Connect) (c)(d) | 1,900 | 150,501 | ||||||
340,608 | ||||||||
Energy (3.7%) | ||||||||
CNOOC Ltd. (c) | 173,000 | 294,615 | ||||||
G3 Exploration Ltd. (b)(c) | 53,000 | 32,603 | ||||||
PetroChina Co. Ltd., H Shares (c) | 62,000 | 44,580 | ||||||
371,798 | ||||||||
Financials (12.3%) | ||||||||
China Construction Bank Corp., Class H (c) | 450,000 | 357,096 | ||||||
China Merchants Bank Co. Ltd., H Shares (c) | 96,500 | 372,622 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares (c) | 54,000 | 510,518 | ||||||
1,240,236 | ||||||||
Health Care (6.4%) | ||||||||
Beijing Tong Ren Tang Chinese Medicine Co. Ltd. (c) | 53,000 | 89,305 | ||||||
CSPC Pharmaceutical Group Ltd. (c) | 130,000 | 277,005 | ||||||
Tong Ren Tang Technologies Co. Ltd., H Shares (c) | 126,000 | 180,462 | ||||||
Wuxi Biologics Cayman, Inc. (a)(b)(c) | 14,000 | 100,169 | ||||||
646,941 | ||||||||
Industrials (4.7%) | ||||||||
China Conch Venture Holdings Ltd. (c) | 48,500 | 136,459 | ||||||
Shanghai International Airport Co. Ltd., A Shares (c)(d) | 46,500 | 332,219 | ||||||
468,678 | ||||||||
Information Technology (6.2%) | ||||||||
Hangzhou Hikvision Digital Technology Co. Ltd., A Shares (c)(d) | 87,375 | 305,592 | ||||||
Hangzhou Hikvision Digital Technology Co. Ltd., A Shares (Stock Connect) (c)(d) | 10,150 | 35,499 | ||||||
Sunny Optical Technology Group Co. Ltd. (c) | 8,500 | 74,213 | ||||||
TravelSky Technology Ltd., H Shares (c) | 86,000 | 208,911 | ||||||
624,215 | ||||||||
Real Estate (5.1%) | ||||||||
China Resources Land Ltd. (c) | 90,000 | 306,108 | ||||||
China Vanke Co. Ltd., H Shares (c) | 60,000 | 185,274 | ||||||
Yanlord Land Group Ltd. (c) | 21,600 | 19,699 | ||||||
511,081 | ||||||||
6,830,537 | ||||||||
HONG KONG (28.2%) | ||||||||
Communication Services (0.4%) | ||||||||
Asia Satellite Telecommunications Holdings Ltd. | 63,000 | 42,980 | ||||||
Consumer Discretionary (3.6%) | ||||||||
Aeon Stores (Hong Kong) Co. Ltd. | 159,000 | 83,130 | ||||||
Shangri-La Asia Ltd. (c) | 114,000 | 155,724 | ||||||
Techtronic Industries Co. Ltd. (c) | 25,000 | 117,719 | ||||||
356,573 | ||||||||
Consumer Staples (1.3%) | ||||||||
Convenience Retail Asia Ltd. (c) | 308,000 | 129,700 | ||||||
Financials (10.3%) | ||||||||
AIA Group Ltd. (c) | 80,600 | 613,128 | ||||||
Hong Kong Exchanges & Clearing Ltd. (c) | 12,562 | 334,486 | ||||||
HSBC Holdings PLC (c) | 10,898 | 89,552 | ||||||
1,037,166 | ||||||||
Industrials (5.3%) | ||||||||
Kerry Logistics Network Ltd. (c) | 122,500 | 194,273 | ||||||
MTR Corp. Ltd. (c) | 45,338 | 219,990 | ||||||
Pacific Basin Shipping Ltd. (c) | 543,000 | 118,978 | ||||||
533,241 | ||||||||
Information Technology (2.0%) | ||||||||
ASM Pacific Technology Ltd. (c) | 23,200 | 201,208 | ||||||
Real Estate (3.7%) | ||||||||
Hang Lung Group Ltd. (c) | 52,000 | 128,021 | ||||||
Swire Properties Ltd. (c) | 71,600 | 244,680 | ||||||
372,701 | ||||||||
Utilities (1.6%) | ||||||||
Hong Kong & China Gas Co. Ltd. (c) | 81,017 | 154,754 | ||||||
2,828,323 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 15 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen China Opportunities Fund
Shares or Principal Amount | Value | |||||||
UNITED STATES (1.9%) | ||||||||
Consumer Discretionary (1.9%) | ||||||||
Samsonite International SA (a)(b)(c) | 65,900 | $ | 190,054 | |||||
Total Common Stocks | 9,848,914 | |||||||
SHORT-TERM INVESTMENT (0.0%) | ||||||||
UNITED STATES (0.0%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (e) | 3,543 | 3,543 | ||||||
3,543 | ||||||||
Total Short-Term Investment | 3,543 | |||||||
Total Investments | 9,852,457 | |||||||
Other Assets in Excess of Liabilities—1.9% | 188,321 | |||||||
Net Assets—100.0% | $ | 10,040,778 |
(a) | Denotes a security issued under Regulation S or Rule 144A. |
(b) | Non-income producing security. |
(c) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(d) | China A Shares. These shares are issued in local currency, traded in the local stock markets and are held through either a Qualified Foreign Institutional Investor (QFII) license or the Shanghai or Shenzhen Hong-Kong Stock Connect program. |
(e) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
16 | Annual Report 2018 |
Aberdeen Dynamic Dividend Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine Dynamic Dividend Fund (the “Predecessor Fund”) in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen Dynamic Dividend Fund (Institutional Class shares net of fees) returned 1.02% for the 12-month period ended October 31, 2018, versus the 0.00% return of its benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Global Equity Income Funds (comprising 53 funds), as measured by Lipper, Inc., was -1.65%.
Global equities posted flat returns in aggregate over the reporting period. Investors initially were optimistic towards global economic growth, but investor sentiment turned more negative as the period progressed. Worries that rising inflation could compel more aggressive monetary policy, and a flare-up in trade tensions – especially as U.S.-China trade relations deteriorated amid rounds of brinkmanship – led to higher market volatility. The U.S. broader-market Standard & Poor’s (S&P) 500 Index1 initially shrugged off these concerns to record its longest bull run in history, supported by strong corporate earnings growth and a strengthening U.S. dollar. However, a spike in U.S. Treasury yields towards the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations. Emerging markets also came under pressure due to the appreciating U.S. dollar.
At the individual stock level, the Fund’s holding in TJX Companies Inc., an off-price retailer of apparel and home fashions, was a key contributor to relative performance for the 12-month period ended October 31, 2018. The company reported strong same-store sales growth that has outpaced that of its full-price retailer peer group. Additionally, we think that TJX Companies’ discount business model has been difficult to replicate by online retailers. The Fund’s position in Andeavor Logistics LP also bolstered the Fund’s performance. Marathon Petroleum Corp. (which the Fund does not hold) announced its intention to purchase Andeavor Logistics to form the largest independent refiner in the U.S. The transaction was completed in early October 2018, and we exited the Fund’s position in Andeavor. Shares of the Fund’s holding in Warrior Met Coal Inc., a leading producer and exporter of metallurgical coal for the global steel industry, moved higher over the reporting period. We also took advantage of Warrior Met Coal‘s special cash dividend issued in April 2018, and exited the Fund’s position after the company reported solid quarterly earnings in May.
Conversely, the lack of exposure to internet retailing giant Amazon.com was a key detractor from Fund performance for the reporting period. The Fund does not hold Amazon.com as the company does not pay a dividend. Fund holding Newell Brands Inc. reported declining revenue growth and investor sentiment for the company was dampened by tariff risks with China. Furthermore, lost sales from Newell Brands’ customers that have filed for bankruptcy had a negative impact on its share price, along with slow execution of the company’s divestiture2 plans. Consequently, we exited the Fund’s position in Newell Brands during the reporting period. Vodafone Group plc is a UK-based multinational telecommunications conglomerate. Vodafone’s shares declined over the reporting period due to investors’ concerns of a potential reduction in the company’s dividend and the high amount of debt on its balance sheet. Additionally, Vodafone’s share price was hampered by competitive headwinds and questions over the company’s proposed acquisition of diversified telecommunications firm Liberty Global’s operations in several countries.
In addition to the portfolio activity noted previously, we continued to hedge a portion of the Fund’s currency exposure to the euro during the reporting period. The derivatives positions did not have a significant impact on Fund performance for the reporting period.
Global financial markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including political uncertainty in Europe caused by tumultuous Brexit negotiations and Italy’s fiscal problems.
While the continued health of corporate earnings goes some way in calming investors’ nerves, we think that politics is increasingly overshadowing central bank policy to become the main driving force of market sentiment. In our view, shifting political alliances may keep markets on their toes but, at the same time, may provide discerning investors with opportunities to take advantage of mispricing of stocks. Amid such periods of uncertainty, we think that investors increasingly will seek high-quality stocks that pay dividends and have defensive characteristics, which we believe should bode well for the Fund’s performance.
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | Divestiture is the partial or full disposal of a business unit through sale, exchange, closure or bankruptcy. A divestiture typically results from a management decision to cease operations of a business unit because it is not part of a company’s core competency. |
2018 Annual Report | 17 |
Aberdeen Dynamic Dividend Fund (Unaudited) (concluded)
Portfolio Management:
Aberdeen Global Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
There is no guarantee that the issuers of the stocks held by the Fund will declare dividends in the future or that, if dividends are declared, they will remain at their current levels or increase over time. The Fund’s emphasis on dividend paying stocks could cause the Fund to underperform similar funds that invest without consideration of a company’s track record of paying dividends or ability to pay dividends in the future.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk, and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
18 | Annual Report 2018 |
Aberdeen Dynamic Dividend Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | Inception4 | ||||||||||||||
Class A | w/o SC | 0.79% | 6.65% | N.A. | 8.48% | |||||||||||||
w/SC2 | -5.09% | 5.39% | N.A. | 7.54% | ||||||||||||||
Institutional Class3 | w/o SC | 1.02% | 6.90% | 7.07% | 5.28% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | Not subject to any sales charges. |
4 | Predecessor Fund commenced operations on September 22, 2003. The first offering of Class A shares was December 30, 2011. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Dynamic Dividend Fund, Morgan Stanley Capital International All Country World Index (MSCI ACWI) and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses or sales charges. Investors cannot invest directly in market indexes.
MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,489 constituents, the index covers approximately 85% of the global investable equity opportunity set. DM countries in the Index are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US. EM countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 19 |
Aberdeen Dynamic Dividend Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 95.1% | |||
Exchange-Traded Funds | 1.7% | |||
Preferred Stocks | 1.0% | |||
Short-Term Investment | 0.9% | |||
Other Assets in Excess of Liabilities | 1.3% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Financials | 17.8% | |||
Information Technology | 13.3% | |||
Industrials | 11.6% | |||
Health Care | 11.0% | |||
Consumer Discretionary | 8.4% | |||
Energy | 7.2% | |||
Consumer Staples | 6.9% | |||
Materials | 5.1% | |||
Communication Services | 5.0% | |||
Utilities | 4.6% | |||
Other | 9.1% | |||
100.0% |
Top Holdings* | ||||
Apple, Inc. | 2.5% | |||
Broadcom, Inc. | 1.5% | |||
Leidos Holdings, Inc. | 1.4% | |||
NextEra Energy, Inc. | 1.4% | |||
Enbridge, Inc. | 1.4% | |||
Delta Air Lines, Inc. | 1.4% | |||
Thermo Fisher Scientific, Inc. | 1.3% | |||
Canadian Pacific Railway Ltd. | 1.3% | |||
Intel Corp. | 1.3% | |||
UnitedHealth Group, Inc. | 1.3% | |||
Other | 85.2% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 55.5% | |||
France | 4.8% | |||
Switzerland | 4.7% | |||
Japan | 4.4% | |||
United Kingdom | 4.2% | |||
South Korea | 3.2% | |||
Finland | 2.9% | |||
Germany | 2.9% | |||
Canada | 2.7% | |||
Brazil | 2.3% | |||
Other | 12.4% | |||
100.0% |
20 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Dynamic Dividend Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (95.1%) | ||||||||
Communication Services (5.0%) | ||||||||
Alphabet, Inc., Class C (a) | 1,400 | $ | 1,507,478 | |||||
BT Group PLC, ADR | 48,000 | 731,520 | ||||||
Comcast Corp., Class A | 42,000 | 1,601,880 | ||||||
NOS SGPS SA (b) | 241,093 | 1,352,268 | ||||||
Vodafone Group PLC (b) | 917,700 | 1,725,770 | ||||||
6,918,916 | ||||||||
Consumer Discretionary (8.4%) | ||||||||
Aptiv PLC | 23,100 | 1,774,080 | ||||||
Dollar General Corp. | 13,600 | 1,514,768 | ||||||
Lennar Corp., Class A | 32,500 | 1,396,850 | ||||||
Lowe’s Cos., Inc. | 17,600 | 1,675,872 | ||||||
MGM Resorts International | 56,000 | 1,494,080 | ||||||
Target Corp. | 13,000 | 1,087,190 | ||||||
TJX Cos., Inc. (The) | 12,800 | 1,406,464 | ||||||
Whirlpool Corp. | 13,000 | 1,426,880 | ||||||
11,776,184 | ||||||||
Consumer Staples (6.9%) | ||||||||
Essity AB, Class B (b) | 67,200 | 1,533,602 | ||||||
Japan Tobacco, Inc. (b) | 55,100 | 1,415,811 | ||||||
Kraft Heinz Co. (The) | 30,000 | 1,649,100 | ||||||
Mondelez International, Inc., Class A | 33,800 | 1,418,924 | ||||||
Nestle SA (b) | 21,000 | 1,772,885 | ||||||
Nomad Foods Ltd. (a) | 22,396 | 427,763 | ||||||
Unilever NV, CVA (b) | 27,500 | 1,477,713 | ||||||
9,695,798 | ||||||||
Energy (7.2%) | ||||||||
BP PLC, ADR | 39,100 | 1,695,767 | ||||||
Enbridge, Inc. | 61,200 | 1,903,932 | ||||||
EOG Resources, Inc. | 12,600 | 1,327,284 | ||||||
Helmerich & Payne, Inc. | 15,300 | 953,037 | ||||||
Kinder Morgan, Inc. | 94,000 | 1,599,880 | ||||||
Schlumberger Ltd. | 23,400 | 1,200,654 | ||||||
TOTAL SA, ADR | 24,300 | 1,423,980 | ||||||
10,104,534 | ||||||||
Financials (17.8%) | ||||||||
Allianz SE (b) | 5,400 | 1,124,927 | ||||||
American International Group, Inc. | 29,900 | 1,234,571 | ||||||
Ares Capital Corp. | 41,700 | 715,572 | ||||||
AXA SA (b) | 54,200 | 1,356,446 | ||||||
Banco Bilbao Vizcaya Argentaria SA (b) | 206,500 | 1,139,692 | ||||||
Bank of America Corp. | 51,000 | 1,402,500 | ||||||
Blackstone Group LP (The) | 22,300 | 721,628 | ||||||
Citigroup, Inc. | 21,100 | 1,381,206 | ||||||
Deutsche Boerse AG (b) | 11,700 | 1,478,558 | ||||||
Discover Financial Services | 9,984 | 695,585 | ||||||
Evercore, Inc., Class A | 14,700 | 1,200,843 | ||||||
Huntington Bancshares, Inc. | 95,300 | 1,365,649 | ||||||
Intesa Sanpaolo SpA (b) | 468,800 | 1,038,427 | ||||||
Mediobanca Banca di Credito Finanziario SpA (b) | 106,500 | 932,703 | ||||||
Mitsubishi UFJ Financial Group, Inc. (b) | 263,900 | 1,597,252 | ||||||
Oversea-Chinese Banking Corp. Ltd. (b) | 183,500 | 1,425,511 | ||||||
Swedbank AB, A Shares (b) | 60,700 | 1,365,418 | ||||||
UBS Group AG (a)(b) | 101,200 | 1,414,484 | ||||||
Wells Fargo & Co. | 32,900 | 1,751,267 | ||||||
Zurich Insurance Group AG (b) | 5,000 | 1,552,406 | ||||||
24,894,645 | ||||||||
Health Care (11.0%) | ||||||||
Aetna, Inc. | 7,000 | 1,388,800 | ||||||
Allergan PLC | 8,300 | 1,311,483 | ||||||
Bayer AG (b) | 17,500 | 1,341,417 | ||||||
Medtronic PLC | 18,800 | 1,688,616 | ||||||
Novartis AG, ADR | 20,000 | 1,749,200 | ||||||
Pfizer, Inc. | 31,300 | 1,347,778 | ||||||
Shire PLC, ADR | 7,800 | 1,418,040 | ||||||
Thermo Fisher Scientific, Inc. | 8,000 | 1,869,200 | ||||||
UnitedHealth Group, Inc. | 7,000 | 1,829,450 | ||||||
Universal Health Services, Inc., Class B | 11,400 | 1,385,784 | ||||||
15,329,768 | ||||||||
Industrials (11.6%) | ||||||||
Alstom SA (b) | 32,300 | 1,410,627 | ||||||
Bouygues SA (b) | 26,100 | 950,841 | ||||||
Canadian Pacific Railway Ltd. | 9,100 | 1,865,500 | ||||||
CCR SA | 527,300 | 1,554,341 | ||||||
Cosan Logistica SA (a) | 475,000 | 1,626,092 | ||||||
CRRC Corp. Ltd., Class H (b) | 894,950 | 786,009 | ||||||
Delta Air Lines, Inc. | 34,700 | 1,899,131 | ||||||
FedEx Corp. | 7,700 | 1,696,618 | ||||||
Ferrovial SA (b) | 84,482 | 1,691,416 | ||||||
Melrose Industries PLC (b) | 649,474 | 1,398,056 | ||||||
Raytheon Co. | 7,800 | 1,365,312 | ||||||
16,243,943 | ||||||||
Information Technology (13.3%) | ||||||||
Amdocs Ltd. | 24,000 | 1,518,480 | ||||||
Apple, Inc. | 15,800 | 3,457,988 | ||||||
Broadcom, Inc. | 9,700 | 2,167,853 | ||||||
Cisco Systems, Inc. | 38,000 | 1,738,500 | ||||||
Intel Corp. | 39,500 | 1,851,760 | ||||||
Leidos Holdings, Inc. | 30,500 | 1,975,790 | ||||||
Microsoft Corp. | 16,000 | 1,708,960 | ||||||
Nokia OYJ (b) | 282,400 | 1,595,160 | ||||||
SK Hynix, Inc. (b) | 21,700 | 1,306,890 | ||||||
TE Connectivity Ltd. | 16,400 | 1,236,888 | ||||||
18,558,269 | ||||||||
Materials (5.1%) | ||||||||
ArcelorMittal | 47,400 | 1,179,786 | ||||||
LG Chem Ltd. (b) | 5,700 | 1,741,781 | ||||||
Randgold Resources Ltd., ADR | 21,000 | 1,649,340 | ||||||
Stora Enso OYJ, R Shares (b) | 90,900 | 1,365,791 | ||||||
UPM-Kymmene OYJ (b) | 36,000 | 1,157,354 | ||||||
7,094,052 | ||||||||
Real Estate (4.2%) | ||||||||
Daito Trust Construction Co. Ltd. (b) | 12,600 | 1,661,163 | ||||||
Digital Realty Trust, Inc., REIT | 12,700 | 1,311,402 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 21 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Dynamic Dividend Fund
Shares or Principal Amount | Value | |||||||
GEO Group, Inc. (The), REIT | 65,000 | $ | 1,437,150 | |||||
LaSalle Logiport REIT (b) | 1,600 | 1,473,342 | ||||||
5,883,057 | ||||||||
Utilities (4.6%) | ||||||||
Clearway Energy, Inc. | 47,400 | 920,508 | ||||||
CMS Energy Corp. | 22,700 | 1,124,104 | ||||||
FirstEnergy Corp. | 26,700 | 995,376 | ||||||
NextEra Energy, Inc. | 11,200 | 1,932,000 | ||||||
Veolia Environnement SA (b) | 75,400 | 1,502,684 | ||||||
6,474,672 | ||||||||
Total Common Stocks | 132,973,838 | |||||||
EXCHANGE-TRADED FUNDS (1.7%) | ||||||||
Equity Funds (1.7%) | ||||||||
iShares Nasdaq Biotechnology ETF | 13,200 | 1,373,724 | ||||||
SPDR S&P Oil & Gas Exploration & Production ETF | 25,700 | 926,999 | ||||||
2,300,723 | ||||||||
Total Exchange-Traded Funds | 2,300,723 | |||||||
PREFERRED STOCKS (1.0%) | ||||||||
Information Technology (1.0%) | ||||||||
Samsung Electronics Co. Ltd. (b) | 46,000 | 1,451,333 | ||||||
Total Preferred Stocks | 1,451,333 | |||||||
SHORT-TERM INVESTMENT (0.9%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 1,249,260 | 1,249,260 | ||||||
Total Short-Term Investment | 1,249,260 | |||||||
Total Investments | 137,975,154 | |||||||
Other Assets in Excess of Liabilities—1.3% | 1,792,134 | |||||||
Net Assets—100.0% | $ | 139,767,288 |
(a) | Non-income producing security. |
(b) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the current yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
CVA | Dutch Certificate |
ETF | Exchange-Traded Fund |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
At October 31, 2018, the Fund’s open forward foreign currency exchange contracts were as follows:
Sale Contracts Settlement Date | Counterparty | Amount Purchased | Amount Sold | Fair Value | Unrealized Appreciation | |||||||||||||||||||||
United States Dollar/Euro 01/10/2019 | UBS AG | USD | 3,012,854 | EUR | 2,600,000 | $ | 2,964,089 | $ | 48,765 |
See accompanying Notes to Financial Statements.
22 | Annual Report 2018 |
Aberdeen Emerging Markets Fund (Unaudited)
The Aberdeen Emerging Markets Fund (Institutional Class shares net of fees) returned -15.38% for the 12-month period ended October 31, 2018, versus the -12.19% return of its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, during the same period. For broader comparison, the average return of the Fund’s peer category of Emerging Markets Funds (comprising 384 funds), as measured by Lipper, Inc., was -13.06% for the period.
Emerging-market equities retreated during the reporting period amid bouts of volatility triggered by tightening monetary conditions, rising trade tensions and worries over slowing global economic growth.
One of the key reasons for the weakness in emerging-market equities was the liquidity squeeze on the U.S. dollar, stemming from the U.S. tax reforms that encouraged U.S. companies to repatriate1 their cash, as well as the U.S. Federal Reserve’s hawkish monetary policy stance. As a result, the U.S. dollar strengthened, putting additional pressure on vulnerable economies with substantial foreign debt. Bearing the brunt of the sell-off was Turkey, where investors were concerned about the central bank’s unwillingness to adopt orthodox economic policies and the government’s worsening relations with the United States. Against this backdrop, we exited the Fund’s positions in Turkish lenders Akbank and Garanti Bank. Elsewhere, Indonesia and the Philippines were also hampered by fiscal imbalances, but Thailand registered solid gains, thanks to its healthy foreign-exchange reserves and current account surplus.
Global trade tensions also weighed on investor sentiment, as U.S. President Donald Trump took an aggressive stance against the country’s major trading allies. China was among the hardest-hit markets. The Trump administration imposed additional duties of at least 10% on US$250 billion in exports to the U.S., with a potential increase to 25% in 2019. Signs of a moderating Chinese economy rattled investors, despite the government’s fiscal stimulus measures. Equity markets in Korea and Taiwan, which are skewed towards technology-related companies, including exporters and manufacturers of electronic components, also posted negative returns over the period.
Commodity prices came under pressure from the trade woes, but remained elevated. Russia benefited from firming oil prices on the back of the Organization of the Petroleum Exporting Countries’ (OPEC) pledge to curb production, the resumption of U.S. sanctions on Iran, and several supply disruptions elsewhere.
The bulk of the Fund’s underperformance versus its benchmark, the MSCI Emerging Markets Index, for the reporting period emanated from stock selection in Brazil, which saw its currency, the real, tumble on the back of election jitters and fiscal concerns before staging a solid recovery in October 2018, following right-wing candidate Jair Bolsonaro’s presidential victory. Shares of fuel distributor Ultrapar Participações S.A. sold off on expectations of weaker quarterly profits amid intensifying competition. Food producer BRF S.A. was hampered by relatively weak earnings, leadership uncertainty, and ongoing investigations into its alleged provision of substandard meat. However, we were heartened by the new CEO’s appointment at BRF, which we believe should bring much-needed leadership to steer the company forward. More positively, the Fund’s holding in Brazilian miner Vale S.A. remained a bright spot, with consistently good results over the reporting period, attributable to higher iron-ore prices.
In the Europe, Middle East and Africa (EMEA) region, the Fund’s underweight allocation to Russia relative to the benchmark hampered performance, as the market was buoyed by higher energy prices. This was compounded by the Fund’s lack of exposure to several state-owned oil companies, such as Gazprom and Novatek. We prefer to hold Lukoil as we like its integrated business model, strategic consistency, and focus on cash-generation and shareholder returns. Shares of the Fund’s holding in Magnit declined as the retailer was pressured by a weak retail environment, while its extended store-refurbishment program dented like-for-like sales.2 Investors were additionally caught off-guard by the resignation of CEO Sergey Galitsky and the subsequent sale of most of his stake. The Fund’s position in Turkey weighed on relative performance due to the sharp depreciation in its currency, the lira, and worries about the central bank’s unorthodox economic policies.
Stock selection in Mexico had a positive impact on the Fund’s relative performance for the reporting period. The Fund’s holdings in airport operator Grupo Aeroportuario del Sureste (Asur) and lender Banorte benefited from improving economic conditions and easing political uncertainty. In Hong Kong, shares of insurer AIA Group Ltd. performed well due to healthy corporate results, while China Resources Land was buoyed by steady returns from its portfolio of investment properties. In India, shares of Tata Consultancy Services bucked the general downtrend, thanks to improving demand for IT services, its capital management efforts, and rupee weakness that amplified its foreign-denominated revenues. The Fund’s holdings in companies that benefit from rural consumption also enhanced performance, with shares of consumer products maker Hindustan Unilever advancing on good results and healthy demand.
The Fund’s underweight allocation to technology companies bolstered relative performance as the sector succumbed to bouts of sell-offs during a volatile period. The lack of exposure to Taiwanese chipmaker Hon Hai Precision and internet giant Alibaba aided the Fund’s relative performance, but the holding in Tencent Holdings was a detractor, as the internet giant was pressured by a lower earnings forecast for its gaming segment and stricter regulations for online games.
Regarding portfolio activity over the reporting period, we initiated holdings in three companies: LG Chem Ltd., CITS, and Ping An Insurance Company of China Ltd. In our view, Korean chemicals producer LG Chem has a distinctive business mix and an attractive
1 | Repatriation refers to a corporation’s conversion of any offshore capital back to the currency of the country in which the corporation is based. |
2 | Like-for-like sales comprise a comparison of current and prior period sales which takes into consideration only those activities that were in effect during both time periods. |
2018 Annual Report | 23 |
Aberdeen Emerging Markets Fund (Unaudited) (concluded)
valuation. We believe that its cash-generative chemicals business serves as a solid base for the company to build on its current market-leading position in the electric vehicle battery market. In our judgment, CITS has a positive business outlook, as we believe it is poised to capitalize on rising consumer spending and growing demand for domestic travel in China. Finally, Ping An Insurance Company of China is one of the mainland’s leading life-insurance franchises, and has leveraged its technological capabilities to create a robust financial ecosystem in China.
Additionally, we initiated a holding in Chinese contract research organization Wuxi Biologics, which we believe has an attractive growth outlook. Other initiations included Autohome, Inc., China’s dominant online automobile portal with significant pricing power and a competitive moat3; Huazhu Hotels Group, a hotel-chain operator that we believe has substantial growth capacity over the long term; Sunny Optical Technology Co. Ltd., a market-leading lens and camera module manufacturer with considerable barriers to entry; and 58.com, a company in internet giant Tencent Holdings’ ecosystem that in our view has positive profit-growth potential. We also established a new position in South African technology and media holding company Naspers Ltd., which we think demonstrated proof of value creation from its underlying businesses and a widening discount relative to its stake in Tencent Holdings. Finally, we initiated a holding in Italy-listed steel pipe-maker Tenaris, which we believe should be a beneficiary of the recovering capital expenditure cycle for the oil industry. We think that the company also has significant operating leverage.
Conversely, we exited the Fund’s positions in several companies in favor of what we believed were better opportunities elsewhere: miner BHP Billiton, Mexican retailer Soriana, Hong Kong exchange-listed conglomerate Swire Pacific Ltd., and telecom Taiwan Mobile Co. Ltd. Additionally, we sold the Fund’s shares in Jeronimo Martins SGPS SA, a food distributor and producer, given the increased pressure on its margins.
In our view, the outlook for emerging markets remains cautious, given the contagion risks that could afflict the asset class and trigger further sell-offs. While global trade relations improved in some areas, tensions between the U.S. and China persist, threatening to upend the integrated global supply chain. We think that tightening monetary conditions in major economies and the rising U.S. dollar, along with domestic political developments, could add to the uncertainty. Nevertheless, we anticipate that the recovery across markets is will stabilize, as central banks tread lightly to keep inflation in check and ease currency pressures, while still supporting economic expansion. We believe that China’s shifting focus towards sustainable growth and recent loosening of monetary policy should bolster its ability to weather external shocks and avoid a hard landing. Meanwhile, rebounding domestic consumption remains a key driver for Brazil and India, in our view. Against this backdrop, we think that corporate earnings appear resilient, with many of the Fund’s holdings possessing healthier balance sheets and intact long-term drivers. Looking beyond the short-term volatility, we remain confident in the potential of the Fund’s holdings, as we believe that their solid fundamentals should allow them to withstand future challenges and sustain their earnings momentum.
Portfolio Management:
Aberdeen Global Emerging Markets Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk, and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
3 | A business moat is a competitive advantage that one company has over other companies in the same industry. |
24 | Annual Report 2018 |
Aberdeen Emerging Markets Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A2 | w/o SC | -15.80% | -1.31% | 8.78% | ||||||||||
w/SC3 | -20.64% | -2.47% | 8.15% | |||||||||||
Class C2 | w/o SC | -16.20% | -1.90% | 8.35% | ||||||||||
w/SC4 | -17.03% | -1.90% | 8.35% | |||||||||||
Class R2,5 | w/o SC | -15.93% | -1.60% | 8.58% | ||||||||||
Institutional Service Class5,6 | w/o SC | -15.48% | -1.10% | 8.88% | ||||||||||
Institutional Class5 | w/o SC | -15.38% | -0.92% | 9.05% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to November 23, 2009 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | Returns before the first offering of Class A, Class C and Class R (May 21, 2012) are based on the previous performance of the Institutional Class. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class A, Class C and Class R would have produced because all classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses of the classes. |
3 | A 5.75% front-end sales charge was deducted. |
4 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
5 | Not subject to any sales charges. |
6 | Returns before the first offering of the Institutional Service Class (November 23, 2009) are based on the previous performance of the Institutional Class. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Institutional Service Class would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses of the two classes. |
Performance of a $1,000,000* Investment (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Emerging Markets Fund, Morgan Stanley Capital International (MSCI) Emerging Markets Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. With more than 1,100 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. EM countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 25 |
Aberdeen Emerging Markets Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 90.6% | |||
Preferred Stocks | 9.6% | |||
Rights | –% | |||
Liabilities in Excess of Other Assets | (0.2)% | |||
100.0% |
Amounts listed as “–” are 0% or round to 0%.
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Financials | 26.3% | * | ||
Information Technology | 14.5% | |||
Communication Services | 13.0% | |||
Consumer Staples | 12.1% | |||
Consumer Discretionary | 11.7% | |||
Materials | 9.6% | |||
Real Estate | 5.3% | |||
Energy | 3.7% | |||
Industrials | 3.2% | |||
Health Care | 0.8% | |||
Other | (0.2)% | |||
100.0% |
* | As of October 31, 2018, the Fund’s holdings in the Financials sector were allocated to five industries: Banks (14.2%), Insurance (5.5%), Thrifts & Mortgage Finance (3.6%), Capital Markets (1.5%) and Diversified Financial Services (1.5%). |
Top Holdings | ||||
Samsung Electronics Co. Ltd. | 6.2% | |||
Tencent Holdings Ltd. | 6.2% | |||
Taiwan Semiconductor Manufacturing Co. Ltd. | 5.1% | |||
Housing Development Finance Corp. Ltd. | 3.6% | |||
Banco Bradesco SA, ADR, Preferred Shares, 1.94% | 3.1% | |||
Ping An Insurance Group Co. of China Ltd., H Shares | 3.0% | |||
Vale SA, ADR | 2.9% | |||
AIA Group Ltd. | 2.5% | |||
LUKOIL PJSC, ADR | 2.2% | |||
Astra International Tbk PT | 2.2% | |||
Other | 63.0% | |||
100.0% |
Top Countries | ||||
China | 25.5% | |||
India | 13.4% | |||
Brazil | 11.3% | |||
South Korea | 9.7% | |||
Indonesia | 5.4% | |||
Mexico | 5.4% | |||
Hong Kong | 5.2% | |||
Taiwan | 5.1% | |||
Philippines | 3.9% | |||
South Africa | 3.8% | |||
Other | 11.3% | |||
100.0% |
26 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Emerging Markets Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (90.6%) | ||||||||
BRAZIL (8.2%) | ||||||||
Consumer Discretionary (1.2%) | ||||||||
Lojas Renner SA | 6,992,904 | $ | 70,652,476 | |||||
Consumer Staples (2.1%) | ||||||||
Ambev SA | 20,010,600 | 87,860,595 | ||||||
BRF SA (a) | 6,247,669 | 36,765,807 | ||||||
124,626,402 | ||||||||
Energy (1.0%) | ||||||||
Ultrapar Participacoes SA | 5,007,928 | 59,546,101 | ||||||
Materials (2.9%) | ||||||||
Vale SA, ADR (b) | 11,116,300 | 167,856,130 | ||||||
Real Estate (1.0%) | ||||||||
Multiplan Empreendimentos Imobiliarios SA | 10,027,500 | 61,972,995 | ||||||
484,654,104 | ||||||||
CHILE (2.0%) | ||||||||
Consumer Discretionary (1.0%) | ||||||||
S.A.C.I. Falabella (c) | 7,622,599 | 57,502,732 | ||||||
Financials (1.0%) | ||||||||
Banco Santander Chile, ADR (b) | 2,027,746 | 59,737,397 | ||||||
117,240,129 | ||||||||
CHINA (25.5%) | ||||||||
Communication Services (9.8%) | ||||||||
58.com, Inc. (a), ADR | 918,355 | 60,234,905 | ||||||
Autohome, Inc. (b), ADR | 940,834 | 68,097,565 | ||||||
China Mobile Ltd. (c) | 9,198,100 | 86,166,680 | ||||||
Tencent Holdings Ltd. (c) | 10,590,900 | 362,836,398 | ||||||
577,335,548 | ||||||||
Consumer Discretionary (5.3%) | ||||||||
China International Travel Service Corp. Ltd., A Shares (Stock Connect) (c)(d) | 10,382,141 | 80,387,418 | ||||||
Huazhu Group Ltd.(b), ADR | 2,180,146 | 57,032,619 | ||||||
Midea Group Co. Ltd., A Shares (Stock Connect) (c)(d) | 12,055,092 | 64,535,515 | ||||||
Yum China Holdings, Inc. | 2,978,180 | 107,452,735 | ||||||
309,408,287 | ||||||||
Consumer Staples (2.0%) | ||||||||
Kweichow Moutai Co. Ltd., A Shares (Stock Connect) (c)(d) | 1,516,918 | 120,156,624 | ||||||
Financials (3.0%) | ||||||||
Ping An Insurance Group Co. of China Ltd., H Shares (c) | 18,418,000 | 174,124,288 | ||||||
Health Care (0.4%) | ||||||||
Wuxi Biologics Cayman, Inc. (a)(c)(e) | 3,587,500 | 25,668,354 | ||||||
Industrials (1.5%) | ||||||||
Shanghai International Airport Co. Ltd., A Shares (Stock Connect) (c)(d) | 12,402,992 | 88,613,233 | ||||||
Information Technology (1.5%) | ||||||||
Hangzhou Hikvision Digital Technology Co. Ltd., A Shares (Stock Connect) (c)(d) | 18,244,547 | 63,809,898 | ||||||
Sunny Optical Technology Group Co. Ltd. (c) | 2,814,000 | 24,568,709 | ||||||
88,378,607 | ||||||||
Real Estate (2.0%) | ||||||||
China Resources Land Ltd. (c) | 34,118,000 | 116,042,105 | ||||||
1,499,727,046 | ||||||||
HONG KONG (5.2%) | ||||||||
Financials (4.0%) | ||||||||
AIA Group Ltd. (c) | 19,401,000 | 147,584,239 | ||||||
Hong Kong Exchanges & Clearing Ltd. (c) | 3,181,274 | 84,707,048 | ||||||
232,291,287 | ||||||||
Real Estate (1.2%) | ||||||||
Hang Lung Group Ltd. (c) | 21,463,000 | 52,840,573 | ||||||
Hang Lung Properties Ltd. (c) | 10,380,000 | 18,815,533 | ||||||
71,656,106 | ||||||||
303,947,393 | ||||||||
HUNGARY (0.4%) | ||||||||
Health Care (0.4%) | ||||||||
Richter Gedeon Nyrt (c) | 1,387,240 | 25,768,645 | ||||||
INDIA (13.4%) | ||||||||
Consumer Discretionary (0.9%) | ||||||||
Hero MotoCorp Ltd. (c) | 1,384,135 | 51,500,172 | ||||||
Consumer Staples (3.1%) | ||||||||
Hindustan Unilever Ltd. (c) | 3,682,415 | 80,611,273 | ||||||
ITC Ltd. (c) | 27,528,214 | 103,872,177 | ||||||
184,483,450 | ||||||||
Financials (5.4%) | ||||||||
Aditya Birla Capital Ltd. (a)(c) | 10,955,084 | 15,522,221 | ||||||
Housing Development Finance Corp. Ltd. (c) | 8,817,060 | 210,690,778 | ||||||
Kotak Mahindra Bank Ltd. (c) | 6,035,900 | 91,171,897 | ||||||
317,384,896 | ||||||||
Information Technology (1.6%) | ||||||||
Tata Consultancy Services Ltd. (c) | 3,579,886 | 93,676,395 | ||||||
Materials (2.4%) | ||||||||
Grasim Industries Ltd. (c) | 4,052,083 | 45,578,763 | ||||||
UltraTech Cement Ltd. (c) | 1,993,150 | 93,659,443 | ||||||
139,238,206 | ||||||||
786,283,119 | ||||||||
INDONESIA (5.4%) | ||||||||
Consumer Discretionary (2.2%) | ||||||||
Astra International Tbk PT (c) | 251,791,300 | 130,972,968 | ||||||
Financials (2.2%) | ||||||||
Bank Central Asia Tbk PT (c) | 83,354,900 | 129,788,632 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 27 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Emerging Markets Fund
Shares or Principal Amount | Value | |||||||
Materials (1.0%) | ||||||||
Indocement Tunggal Prakarsa Tbk PT (c) | 50,685,400 | $ | 57,833,253 | |||||
318,594,853 | ||||||||
ITALY (0.5%) | ||||||||
Energy (0.5%) | ||||||||
Tenaris SA, ADR | 946,300 | 27,660,349 | ||||||
MALAYSIA (1.4%) | ||||||||
Financials (1.4%) | ||||||||
Public Bank Bhd (c) | 14,283,100 | 84,019,260 | ||||||
MEXICO (5.4%) | ||||||||
Consumer Staples (1.9%) | ||||||||
Fomento Economico Mexicano SAB de CV, ADR | 1,323,601 | 112,598,737 | ||||||
Financials (1.8%) | ||||||||
Grupo Financiero Banorte SAB de CV, Class O | 18,531,639 | 102,167,711 | ||||||
Industrials (1.7%) | ||||||||
Grupo Aeroportuario del Sureste SAB de CV, Class B | 6,164,150 | 101,690,685 | ||||||
316,457,133 | ||||||||
PHILIPPINES (3.9%) | ||||||||
Financials (2.8%) | ||||||||
Ayala Corp. (c) | 3,915,200 | 67,401,027 | ||||||
Bank of the Philippine Islands (c) | 61,471,804 | 94,516,868 | ||||||
161,917,895 | ||||||||
Real Estate (1.1%) | ||||||||
Ayala Land, Inc. (c) | 91,061,800 | 67,568,196 | ||||||
229,486,091 | ||||||||
POLAND (0.8%) | ||||||||
Financials (0.8%) | ||||||||
Bank Polska Kasa Opieki SA (c) | 1,748,541 | 47,669,203 | ||||||
RUSSIA (2.8%) | ||||||||
Consumer Staples (0.6%) | ||||||||
Magnit PJSC (c) | 624,065 | 34,128,715 | ||||||
Energy (2.2%) | ||||||||
LUKOIL PJSC, ADR | 1,762,836 | 131,578,079 | ||||||
165,706,794 | ||||||||
SOUTH AFRICA (3.8%) | ||||||||
Communication Services (1.9%) | ||||||||
MTN Group Ltd. (c) | 8,531,578 | 49,542,271 | ||||||
Naspers Ltd., N Shares (c) | 361,000 | 63,319,704 | ||||||
112,861,975 | ||||||||
Consumer Discretionary (1.1%) | ||||||||
Truworths International Ltd. (c) | 11,238,963 | 61,564,236 | ||||||
Consumer Staples (0.8%) | ||||||||
Massmart Holdings Ltd. | 7,112,393 | 46,302,269 | ||||||
220,728,480 | ||||||||
SOUTH KOREA (3.2%) | ||||||||
Communication Services (1.3%) | ||||||||
NAVER Corp. (c) | 742,660 | 74,789,081 | ||||||
Consumer Staples (0.4%) | ||||||||
Amorepacific Group (c) | 390,805 | 21,420,177 | ||||||
Materials (1.5%) | ||||||||
LG Chem Ltd. (c) | 291,873 | 89,189,264 | ||||||
185,398,522 | ||||||||
TAIWAN (5.1%) | ||||||||
Information Technology (5.1%) | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (c) | 39,851,117 | 299,177,565 | ||||||
THAILAND (2.5%) | ||||||||
Financials (0.7%) | ||||||||
Siam Commercial Bank PCL (The), Foreign Shares (c) | 9,814,600 | 40,730,156 | ||||||
Materials (1.8%) | ||||||||
Siam Cement PCL (The), Foreign Shares (c) | 8,736,400 | 108,514,810 | ||||||
149,244,966 | ||||||||
TURKEY (1.0%) | ||||||||
Consumer Staples (1.0%) | ||||||||
BIM Birlesik Magazalar A.S. (c) | 4,356,036 | 61,922,885 | ||||||
UNITED KINGDOM (0.1%) | ||||||||
Financials (0.1%) | ||||||||
Standard Chartered PLC (c) | 897,710 | 6,291,786 | ||||||
Total Common Stocks | 5,329,978,323 | |||||||
PREFERRED STOCKS (9.6%) | ||||||||
BRAZIL (3.1%) | ||||||||
Financials (3.1%) | ||||||||
Banco Bradesco SA, ADR, Preferred Shares, 1.94% | 20,061,762 | 183,966,358 | ||||||
SOUTH KOREA (6.5%) | ||||||||
Consumer Staples (0.2%) | ||||||||
Amorepacific Corp., Preferred Shares (c) | 150,747 | 11,968,569 | ||||||
Information Technology (6.3%) | ||||||||
Samsung Electronics Co. Ltd. (c) | 11,649,667 | 367,555,474 | ||||||
379,524,043 | ||||||||
Total Preferred Stocks | 563,490,401 |
See accompanying Notes to Financial Statements.
28 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Emerging Markets Fund
Shares or Principal Amount | Value | |||||||
RIGHTS (0.0%) | ||||||||
CHILE (0.0%) | ||||||||
Consumer Discretionary (0.0%) | ||||||||
SACI Falabella (a) | 290,342 | $ | 29,201 | |||||
Total Rights | 29,201 | |||||||
Total Investments | 5,893,497,925 | |||||||
Liabilities in Excess of Other Assets—(0.2)% | (14,342,292 | ) | ||||||
Net Assets—100.0% | $ | 5,879,155,633 |
(a) | Non-income producing security. |
(b) | All or a portion of the securities are on loan. The total value of all securities on loan is $87,856,797. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(l) for additional information. |
(c) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(d) | China A Shares. These shares are issued in local currency, traded in the local stock markets and are held through either a Qualified Foreign Institutional Investor (QFII) license or the Shanghai or Shenzhen Hong-Kong Stock Connect program. |
(e) | Denotes a security issued under Regulation S or Rule 144A. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
2018 Annual Report | 29 |
Aberdeen Focused U.S. Equity Fund (Unaudited)
Effective November 15, 2017, the Aberdeen Equity Long-Short Fund changed its name to Aberdeen Focused U.S. Equity Fund and changed its principal investment strategies. The Fund is managed pursuant to a “focused” strategy whereby the Fund’s investment adviser typically invests the Fund’s assets in a small number of issuers. The Fund generally expects to hold approximately 20 to 30 issuers. The Fund may invest in securities of any market capitalization and the amount of small-, mid- and large-capitalization companies will vary based on market conditions. The Fund may also invest in securities of any market sector and, from time to time, may hold a significant amount of securities from companies within a single sector.
The Aberdeen Focused U.S. Equity Fund (Institutional Class shares net of fees) returned 8.69% for the 12-month period ended October 31, 2018, versus 7.35% for its benchmark, the U.S. broader-market Standard & Poor’s (S&P) 500 Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Multi-Cap Core Funds (comprising 396 funds), as measured by Lipper, Inc., was 5.86% for the period.
Major U.S. equity market indices moved higher over the period ended October 31, 2018, supported by generally positive economic data and corporate earnings reports. These offset investors’ concerns about rising interest rates and U.S. trade policy under the administration of President Donald Trump. However, the equity markets declined sharply in October 2018, amid investors’ worries that U.S. Federal Reserve (Fed) interest-rate hikes could slow a strong U.S. economy and about decelerating corporate profit growth. U.S. large-cap stocks, as measured by the U.S. broader-market S&P 500 Index, gained 7.35% for the reporting period, outperforming the corresponding 2.80% and 1.85% returns of their mid- and small-cap counterparts, as represented by the Russell Mid Cap1 and Russell 20003 indices, respectively. The consumer discretionary, information technology and healthcare sectors garnered double-digit gains and were the top performers within the S&P 500 Index for the period ended October 31, 2018. Conversely, the materials and industrials sectors recorded negative returns and were the primary market laggards.
U.S. economic news was generally positive over the reporting period:
• | The U.S. Department of Commerce reported that the nation’s economy expanded by a robust annualized rate of 3.5% in the third quarter of 2018, though the growth rate was somewhat lower than the 4.2% rise in the second quarter. The year-over-year upturn was attributable mainly to notable increases in consumer spending and private inventory investment, which offset declines in exports and residential fixed investment. |
• | U.S. payrolls expanded by a monthly average of 210,000 during the 12-month reporting period, and the unemployment rate dipped 0.4 percentage point to 3.7% – its lowest level since December 1969.1 The labor force participation rate2 rose 0.2 percentage point, ending the reporting period at 62.9%.3 |
• | The Fed raised its benchmark interest rate by a full percentage point in four increments of 25 basis points (bps) to a range of 2.00% to 2.25% following its meetings in December 2017, and March, June and September 2018. In its statement following the September rate increase, the Fed noted that “the unemployment rate has stayed low” and “household spending and business fixed investment have grown strongly.” The central bank projected one more 25-bps policy rate increase for the remainder of 2018, and incremental rate hikes totaling one percentage point over the 2019 calendar year. |
The Fund’s performance relative to its benchmark, the S&P 500 Index, benefited primarily from both stock selection and overweight allocations in the industrials and consumer discretionary sectors. The largest contributors among individual positions were discount apparel retailer The TJX Companies Inc.; data analytics services provider Verisk Analytics Inc.; and electronic payment processor Visa Inc.
The TJX Companies garnered healthy revenue and earnings growth during the reporting period. The company benefited primarily from higher same-store sales in its Marmaxx and TJX Canada segments. Additionally, management raised its earnings guidance for the remainder of its 2019 fiscal year. We believe that the company’s distinctive sourcing process should continue to help it compete well in the rapidly changing global business environment. Verisk Analytics posted substantial increases in revenue and earnings per share (EPS) over the reporting period. The company benefited mainly from solid organic growth in its insurance unit and higher demand in its energy segment. Over the reporting period, Visa continued to benefit from an increase in transaction volumes amid the upturn in consumer spending in the U.S., as well as the conversion of more transactions to digital from cash.
In contrast, the Fund’s relative performance was hampered by stock selection in the healthcare and consumer staples sectors. The most notable individual stock detractors included brewer Molson Coors Brewing Co. and Alberta-based financial services company Canadian Western Bank, as well as the absence of a position in tech giant Apple Inc.
Molson Coors Brewing Co. saw declines in volumes over the period, most notably in the key U.S. market, which management attributed to lower overall industry demand. We subsequently exited the Fund’s position in the company in October 2018. Canadian Western Bank’s fundamental performance remained relatively strong during the reporting period as the company posted robust loan growth and well-managed credit costs. However, we think that there may be some uncertainty regarding the strength of the Canadian economy, which
1 | Source: U.S. Department of Labor, November 2018. |
2 | The labor force participation rate comprises the percentage of the U.S. population aged 16 years and older working or actively seeking work. |
3 | Source: U.S. Department of Labor, November 2018. |
30 | Annual Report 2018 |
Aberdeen Focused U.S. Equity Fund (Unaudited) (concluded)
recently has been sluggish. We maintain the Fund’s holding in the company as we believe that it has solid fundamentals and a relatively attractive valuation. The lack of exposure to Apple Inc. also weighed on the Fund’s relative performance as the stock price moved higher over the reporting period. While we acknowledge Apple’s innovations, we historically have had concerns with the lack of visibility into its business and its high dependence on a single product. We also have questioned the sustainability of the company’s revenue growth and margin profile over longer periods.
During the reporting period, we initiated holdings in IT software and hardware company Microsoft Corp.; California-based diversified financial services company First Republic Bank; Florida-based electric utility company NextEra Energy; defense contractor Raytheon Co.; and diversified healthcare services provider UnitedHealth Group Inc.
In addition to Molson Coors Brewing Co., we exited the Fund’s positions in real estate management and development company Jones Lang LaSalle Inc.; healthcare services provider Aetna Inc.; IT services provider Cognizant Technology Solutions Corp.; enterprise software company Oracle Corp.; and commercial bank Regions Financial Corp.
We that strong fundamentals across the U.S. equity market are sustainable only if they are supported by a positive macroeconomic backdrop. We have seen little evidence that would dampen our view that macroeconomic conditions remain conducive to broad-based corporate growth, notwithstanding some emerging “yellow flags.” This concern is particularly acute within the housing sector, where a combination of tight supply and higher interest rates has curtailed demand. Within the banking sector, accelerating funding costs are at risk of eroding net interest margins and many are sounding caution on the ability to grow loans at the same cadence while maintaining credit quality. Furthermore, semiconductor companies have been warning about waning demand amid their customers’ inventory build-up. While each issue in isolation may not be cause for serious alarm, taken collectively, they lead us to question how long the tail of the current recovery will stretch and whether we are closer to the economy slowing than most market observers believe.
On the positive side, industrial demand remains resilient and firming commodity prices have recently buoyed the materials and energy sectors. This has come at the expense of higher input costs for businesses – much of which is being passed onto consumers in an effort to protect margins for producers. Additionally, the retail industry appears to have recovered following a period of weak brick-and-mortar demand that caused most companies within the industry to adjust their business models to take advantage of changing shopping habits – a process that is easier for some and has caused others significant financial distress. Finally, outside of semiconductors, most technology companies are seeing robust revenue growth as businesses across industries feel the need to invest aggressively in software in a bid to keep pace with competition and the shifting demands of younger consumers.
Although we believe that most people expected the legislative branch to be split politically following the U.S. midterm elections, U.S. equities rallied, particularly those of healthcare-oriented companies as the risks of a sharply negative agenda were taken off the table. Key points between the two political parties are around prescription drug-pricing and the need for healthcare reform, which we think should remain in the headlines for the foreseeable future. Other potential consequences of the election include risks of hurdles to business-friendly legislation.
Portfolio Management:
Aberdeen North American Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Because the Fund invests a greater proportion of its assets in the securities of a smaller number of issuers, the Fund will be subject to greater volatility with respect to its investments than a fund that invests in a larger number of securities.
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 31 |
Aberdeen Focused U.S. Equity Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | 8.32% | 4.00% | 3.70% | ||||||||||
w/SC2 | 2.09% | 2.77% | 3.09% | |||||||||||
Class C | w/o SC | 7.45% | 3.27% | 2.98% | ||||||||||
w/SC3 | 6.93% | 3.27% | 2.98% | |||||||||||
Class R4 | w/o SC | 7.89% | 3.60% | 3.35% | ||||||||||
Institutional Service Class4,5 | w/o SC | 8.50% | 4.13% | 3.75% | ||||||||||
Institutional Class4 | w/o SC | 8.69% | 4.35% | 4.02% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund changed its investment strategies effective November 15, 2017. Performance information for periods prior to November 15, 2017 does not reflect the current investment strategy. In connection with the change in investment strategy, the Fund changed its name from Aberdeen Equity Long-Short Fund to Aberdeen Focused U.S. Equity Fund. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the first offering of the Institutional Service Class (November 1, 2009) are based on the previous performance of the Class C. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of differences in expenses of the two classes. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class C shares of the Aberdeen Focused U.S. Equity Fund, the S&P 500® Index, and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The S&P 500® Index represents large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available U.S. market capitalization.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
32 | Annual Report 2018 |
Aberdeen Focused U.S. Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 99.6% | |||
Short-Term Investment | 0.6% | |||
Liabilities in Excess of Other Assets | (0.2)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Financials | 17.1% | |||
Information Technology | 15.4% | |||
Industrials | 14.7% | |||
Consumer Discretionary | 13.6% | |||
Health Care | 12.9% | |||
Communication Services | 8.0% | |||
Consumer Staples | 7.5% | |||
Energy | 4.0% | |||
Materials | 3.3% | |||
Utilities | 3.1% | |||
Other | 0.4% | |||
100.0% |
Top Holdings* | ||||
Microsoft Corp. | 6.6% | |||
Amazon.com, Inc. | 6.1% | |||
Visa, Inc., Class A | 6.0% | |||
Verisk Analytics, Inc. | 4.7% | |||
Intercontinental Exchange, Inc. | 4.6% | |||
Baxter International, Inc. | 4.6% | |||
Johnson & Johnson | 4.5% | |||
Alphabet, Inc., Class A | 4.4% | |||
Costco Wholesale Corp. | 4.2% | |||
TJX Cos., Inc. (The) | 4.1% | |||
Other | 50.2% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 90.5% | |||
Canada | 6.4% | |||
United Kingdom | 3.3% | |||
Other | (0.2)% | |||
100.0% |
2018 Annual Report | 33 |
Statement of Investments
October 31, 2018
Aberdeen Focused U.S. Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (99.6%) | ||||||||
Communication Services (8.0%) | ||||||||
Alphabet, Inc., Class A (a) | 691 | $ | 753,591 | |||||
Comcast Corp., Class A | 15,777 | 601,735 | ||||||
1,355,326 | ||||||||
Consumer Discretionary (13.6%) | ||||||||
Amazon.com, Inc. (a) | 652 | 1,041,903 | ||||||
Starbucks Corp. | 9,744 | 567,783 | ||||||
TJX Cos., Inc. (The) | 6,406 | 703,891 | ||||||
2,313,577 | ||||||||
Consumer Staples (7.5%) | ||||||||
Costco Wholesale Corp. | 3,117 | 712,640 | ||||||
Philip Morris International, Inc. | 6,290 | 553,960 | ||||||
1,266,600 | ||||||||
Energy (4.0%) | ||||||||
EOG Resources, Inc. | 6,499 | 684,605 | ||||||
Financials (17.1%) | ||||||||
Canadian Western Bank | 20,628 | 479,797 | ||||||
Charles Schwab Corp. (The) | 10,999 | 508,594 | ||||||
First Republic Bank | 5,825 | 530,017 | ||||||
Intercontinental Exchange, Inc. | 10,110 | 778,874 | ||||||
M&T Bank Corp. | 3,646 | 603,085 | ||||||
2,900,367 | ||||||||
Health Care (12.9%) | ||||||||
Baxter International, Inc. | 12,428 | 776,874 | ||||||
Johnson & Johnson | 5,435 | 760,846 | ||||||
UnitedHealth Group, Inc. | 2,476 | 647,102 | ||||||
2,184,822 | ||||||||
Industrials (14.7%) | ||||||||
Canadian National Railway Co. | 7,166 | 612,550 | ||||||
Raytheon Co. | 3,113 | 544,899 | ||||||
Snap-on, Inc. | 3,502 | 539,098 | ||||||
Verisk Analytics, Inc. (a) | 6,654 | 797,415 | ||||||
2,493,962 | ||||||||
Information Technology (15.4%) | ||||||||
Microsoft Corp. | 10,422 | 1,113,174 | ||||||
Texas Instruments, Inc. | 5,306 | 492,556 | ||||||
Visa, Inc., Class A | 7,333 | 1,010,854 | ||||||
2,616,584 | ||||||||
Materials (3.3%) | ||||||||
Linde PLC | 3,346 | 553,663 | ||||||
Utilities (3.1%) | ||||||||
NextEra Energy, Inc. | 3,026 | 521,985 | ||||||
Total Common Stocks | 16,891,491 | |||||||
SHORT-TERM INVESTMENT (0.6%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (b) | 108,942 | 108,942 | ||||||
Total Short-Term Investment | 108,942 | |||||||
Total Investments | 17,000,433 | |||||||
Liabilities in Excess of Other Assets—(0.2)% | (31,917 | ) | ||||||
Net Assets—100.0% | $ | 16,968,516 |
(a) | Non-income producing security. |
(b) | Registered investment company advised by State Street Global Advisors. The rate shown is the current yield as of October 31, 2018. |
(c) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
34 | Annual Report 2018 |
Aberdeen Global Equity Fund (Unaudited)
The Aberdeen Global Equity Fund (Institutional Class shares net of fees) returned -4.63% for the 12-month period ended October 31, 2018, versus the 1.71% return of its benchmark, the Morgan Stanley Capital International (MSCI) World Index, and the 0.00% return of its secondary benchmark, the MSCI All Country (AC) World Index, during the same period. For broader comparison, the average return of the Fund’s peer category of Global Large-Cap Core Funds (comprising 34 funds), as measured by Lipper, Inc., was -1.30% for the period.
Global equities inched higher over the reporting period. Investors were initially optimistic towards global economic growth, but investor sentiment turned more negative as the period progressed. Worries that rising inflation could compel more aggressive monetary policy, and a flare-up in trade tensions – especially as U.S.-China trade relations deteriorated amid rounds of brinkmanship – led to higher market volatility. The U.S. broader-market Standard and Poor’s (S&P) 500 Index1 initially shrugged off these concerns to record its longest bull run in history, supported by strong corporate earnings growth and a strengthening U.S. dollar. However, a spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations. Emerging markets also came under pressure due to the appreciating U.S. dollar.
The Fund underperformed its benchmark, the MSCI World Index, over the reporting period due to negative asset allocation and stock selection.
At the stock level, shares of the Fund’s holding in UK-based telecom Vodafone Group declined after sales weakened due to competitive pressures in Italy and Spain, and the company’s warning of slower growth ahead. Vodafone’s new CEO has prioritized improving its asset returns, as well as accelerating cost-cutting. The Fund’s lack of exposure to tech giant Apple Inc. also weighed on relative performance as its stock price surged over the reporting period as investors believed that the company will see continued high growth. We prefer other technology stocks such as Google’s parent, Alphabet Inc., and enterprise software firm Oracle Corp. Meanwhile, British American Tobacco plc’s shares moved lower due to the continued uncertainty around the evolution of next-generation products. We still favor the company for its strong brands and we believe it has good management and resilient growth in earnings and dividends.
On the flipside, the Fund’s holdings in the U.S. generally performed well over the reporting period. Shares of discount apparel retailer TJX Companies advanced after its revenues were buoyed by higher customer traffic and the company issued a positive business outlook. The Fund’s holding in financial services firm Visa Inc. was similarly boosted by better-than-expected corporate results and its higher target for full-year 2018 earnings. Shares of Italy-listed Tenaris S.A., which supplies steel pipes for the energy industry, rose in tandem with the oil price over the 12-month period.
Regarding portfolio activity during the reporting period, we initiated positions in several companies, including Singapore-based Oversea-Chinese Banking Corporation (OCBC), as we believe that it is well run and has prudent management. In our view, the lender is well-capitalized, has an attractive dividend yield, and provides good growth opportunities, both in the region as well as in wealth management. We also established a new position in Yum China, a leading restaurant-chain operator, as we like its mix of brands and we believe that it may potentially benefit from attractive business prospects in China. We trimmed the Fund’s position in enterprise software company Oracle Corp. to fund the initiation of a holding in Alphabet Inc., the parent company of Google. The world leader in digital advertising platforms has a wide competitive moat2 as well as a cash-rich balance sheet, and is gaining scale in its cloud offering. We also reduced the holdings in Shin-Etsu Chemical Co. and Taiwan Semiconductor Manufacturing Co. in an effort to diversify3 the Fund’s exposure to the semiconductor industry by reinvesting the proceeds into a new position in Infineon Technologies. We believe that Infineon Technologies is a high-quality business with a net-cash balance sheet that is well-established in automotive end-markets, and also serves the industrial automation market.
Other new positions established during the reporting period were Chinese internet giant Tencent Holdings, as we think that the business offers good long-term growth opportunities and brings further diversification3 to the Fund. We initiated a holding in U.S. derivatives exchange operator CME Group as we believe that it has attractive fundamentals, including a wide range of products and an established network, and is poised to benefit from increased market volatility. We also established a new holding in U.S.-based online travel service provider Booking Holdings, which in our view has a dominant market position and is a reliable cash-generator. We believe that the company’s revenue should continue to grow as such platforms win market share. Other new positions included British speciality chemicals company Croda, a high-quality business that we think is well-positioned to benefit from increasing demand for natural ingredients; global beauty products company Estee Lauder as we believe that it has a well-diversified brand portfolio and attractive long-term growth opportunities; and First Republic Bank, a domestically focused U.S. lender with a healthy capital position and attractive growth prospects, in our view.
Conversely, we exited the Fund’s positions in Tenaris, as we considered the stock fully valued, and drug-maker Perrigo, which faced potential litigation and challenges at its Omega Pharma division. We also sold the Fund’s shares in South African telecom MTN Group, given the rising political risk attributable to a proposed fine by the Nigerian government, which alleged that the company illegally moved funds out of that country. We believe that this compromises the quality threshold required for inclusion in the Fund.
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. |
2 | A business moat is a competitive advantage that one company has over other companies in the same industry. |
3 | Diversification does not ensure a profit or protect against a loss in a declining market. |
2018 Annual Report | 35 |
Aberdeen Global Equity Fund (Unaudited) (concluded)
We exited the Fund’s position in U.S.-based tobacco company Philip Morris International, given its recent share-price outperformance and as part of our effort to manage the Fund’s tobacco industry exposure. Finally, we sold the Fund’s shares in Australia-based global mining giant BHP Billiton to fund what we believed were better opportunities elsewhere.
Global markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including political uncertainty in Europe caused by tumultuous Brexit negotiations and Italy’s fiscal problems.
While the continued health of corporate earnings goes some way in calming investors’ nerves, we think that politics is increasingly overshadowing central bank policy to become the main driving force of market sentiment. In our view, shifting political alliances may keep markets on their toes but, at the same time, may provide discerning investors with opportunities to take advantage of mispricing of stocks. Amid such periods of uncertainty, we think that investors increasingly will seek high-quality stocks with defensive characteristics, which we believe should bode well for the Fund’s performance.
Portfolio Management:
Aberdeen Global Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
36 | Annual Report 2018 |
Aberdeen Global Equity Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | -4.97% | 1.31% | 6.53% | ||||||||||
w/SC2 | -10.41% | 0.12% | 5.90% | |||||||||||
Class C | w/o SC | -5.53% | 0.68% | 5.84% | ||||||||||
w/SC3 | -6.40% | 0.68% | 5.84% | |||||||||||
Class R4 | w/o SC | -5.27% | 0.99% | 6.25% | ||||||||||
Institutional Service Class4,5 | w/o SC | 4.65% | 1.66% | 6.78% | ||||||||||
Institutional Class4 | w/o SC | -4.63% | 1.65% | 6.85% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Aberdeen Asset Management Asia Limited began sub-advising the fund on January 1, 2009. Performance prior to this date reflects the performance of an unaffiliated sub-adviser. Please see footnotes for the relevant classes and consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the first offering of the Institutional Service Class (December 19, 2011) are based on the previous performance of the Fund’s Class A shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses of the classes. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen Global Equity Fund, Morgan Stanley Capital International (MSCI) World Index, MSCI All Country World Index (ACWI) and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses or sales charges. Investors cannot invest directly in market indexes.
The MSCI World Index captures large and mid cap representation across 23 Developed Markets (DM) countries. With 1,644 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. DM countries in the Index are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US.
MSCI ACWI captures large and mid cap representation across 23 DM and 24 Emerging Markets (EM) countries. With 2,489 constituents, the index covers approximately 85% of the global investable equity opportunity set. DM countries in the Index are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US. EM countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 37 |
Aberdeen Global Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 91.1% | |||
Preferred Stocks | 7.3% | |||
Short-Term Investment | 2.0% | |||
Liabilities in Excess of Other Assets | (0.4)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Information Technology | 19.4% | |||
Financials | 17.6% | |||
Consumer Staples | 17.4% | |||
Health Care | 10.7% | |||
Industrials | 8.2% | |||
Materials | 6.7% | |||
Communication Services | 5.7% | |||
Consumer Discretionary | 5.5% | |||
Energy | 5.2% | |||
Real Estate | 2.0% | |||
Other | 1.6% | |||
100.0% |
Top Holdings* | ||||
Visa, Inc., Class A | 3.8% | |||
Novartis AG | 3.5% | |||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 2.7% | |||
Banco Bradesco SA, ADR, Preferred Shares, 1.94% | 2.6% | |||
Amdocs Ltd. | 2.6% | |||
Henkel AG & Co. KGaA, Preferred Shares, 1.33% | 2.4% | |||
Linde PLC | 2.3% | |||
Samsung Electronics Co. Ltd., GDR | 2.3% | |||
PepsiCo, Inc. | 2.3% | |||
Schlumberger Ltd. | 2.3% | |||
Other | 73.2% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 32.3% | |||
United Kingdom | 14.5% | |||
Japan | 9.5% | |||
Switzerland | 7.7% | |||
Germany | 5.5% | |||
Hong Kong | 4.4% | |||
China | 3.9% | |||
India | 3.6% | |||
Taiwan | 2.7% | |||
Brazil | 2.6% | |||
Other | 13.3% | |||
100.0% |
38 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Global Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (91.1%) | ||||||||
AUSTRALIA (0.1%) | ||||||||
Consumer Staples (0.1%) | ||||||||
Treasury Wine Estates Ltd. | 1,753 | $ | 18,770 | |||||
CANADA (1.7%) | ||||||||
Materials (1.7%) | ||||||||
Nutrien Ltd. | 11,240 | 595,021 | ||||||
CHINA (3.9%) | ||||||||
Communication Services (1.7%) | ||||||||
Tencent Holdings Ltd. (a) | 16,800 | 575,556 | ||||||
Consumer Discretionary (2.2%) | ||||||||
Yum China Holdings, Inc. | 20,600 | 743,248 | ||||||
1,318,804 | ||||||||
GERMANY (3.1%) | ||||||||
Health Care (1.8%) | ||||||||
Fresenius Medical Care AG & Co. KGaA (a) | 7,700 | 604,577 | ||||||
Information Technology (1.3%) | ||||||||
Infineon Technologies AG (a) | 22,600 | 452,834 | ||||||
1,057,411 | ||||||||
HONG KONG (4.4%) | ||||||||
Financials (1.9%) | ||||||||
AIA Group Ltd. (a) | 84,100 | 639,752 | ||||||
Industrials (1.5%) | ||||||||
Jardine Matheson Holdings Ltd. (a) | 8,600 | 496,593 | ||||||
Real Estate (1.0%) | ||||||||
Swire Pacific Ltd., Class A (a) | 34,300 | 356,332 | ||||||
1,492,677 | ||||||||
INDIA (3.6%) | ||||||||
Consumer Staples (1.6%) | ||||||||
ITC Ltd. (a) | 140,650 | 530,714 | ||||||
Financials (2.0%) | ||||||||
Housing Development Finance Corp. Ltd. (a) | 28,700 | 685,810 | ||||||
1,216,524 | ||||||||
ISRAEL (2.0%) | ||||||||
Information Technology (2.0%) | ||||||||
Check Point Software Technologies Ltd. (b) | 6,200 | 688,200 | ||||||
JAPAN (9.5%) | ||||||||
Consumer Staples (2.1%) | ||||||||
Japan Tobacco, Inc. (a) | 27,100 | 696,343 | ||||||
Health Care (1.7%) | ||||||||
Sysmex Corp. (a) | 8,200 | 575,144 | ||||||
Industrials (1.4%) | ||||||||
FANUC Corp. (a) | 2,810 | 488,847 | ||||||
Information Technology (1.7%) | ||||||||
Keyence Corp. (a) | 1,200 | 586,223 | ||||||
Materials (1.6%) | ||||||||
Shin-Etsu Chemical Co. Ltd. (a) | 6,400 | 534,787 | ||||||
Real Estate (1.0%) | ||||||||
Daito Trust Construction Co. Ltd. (a) | 2,600 | 342,780 | ||||||
3,224,124 | ||||||||
MEXICO (1.8%) | ||||||||
Consumer Staples (1.8%) | ||||||||
Fomento Economico Mexicano SAB de CV, ADR | 7,100 | 603,997 | ||||||
SINGAPORE (1.4%) | ||||||||
Financials (1.4%) | ||||||||
Oversea-Chinese Banking Corp. Ltd. (a) | 61,896 | 480,836 | ||||||
SWEDEN (2.4%) | ||||||||
Industrials (2.4%) | ||||||||
Atlas Copco AB, A Shares (a) | 19,500 | 482,074 | ||||||
Epiroc AB, Class A (b) | 36,400 | 319,643 | ||||||
801,717 | ||||||||
SWITZERLAND (7.7%) | ||||||||
Consumer Staples (2.1%) | ||||||||
Nestle SA (a) | 8,700 | 734,481 | ||||||
Health Care (5.6%) | ||||||||
Novartis AG (a) | 13,600 | 1,190,983 | ||||||
Roche Holding AG (a) | 2,900 | 705,751 | ||||||
1,896,734 | ||||||||
2,631,215 | ||||||||
TAIWAN (2.7%) | ||||||||
Information Technology (2.7%) | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 23,800 | 906,780 | ||||||
THAILAND (2.0%) | ||||||||
Financials (2.0%) | ||||||||
Kasikornbank PCL (a) | 114,400 | 688,871 | ||||||
UNITED KINGDOM (14.5%) | ||||||||
Communication Services (2.0%) | ||||||||
Vodafone Group PLC (a) | 371,300 | 698,244 | ||||||
Consumer Staples (3.4%) | ||||||||
British American Tobacco PLC (a) | 14,100 | 611,239 | ||||||
Diageo PLC (a) | 15,500 | 535,858 | ||||||
1,147,097 | ||||||||
Energy (1.6%) | ||||||||
Royal Dutch Shell PLC, B Shares (a) | 16,700 | 544,636 | ||||||
Financials (1.2%) | ||||||||
Standard Chartered PLC (a) | 57,030 | 399,706 | ||||||
Industrials (2.9%) | ||||||||
Experian PLC (a) | 23,100 | 531,281 | ||||||
Rolls-Royce Holdings PLC (a) | 44,027 | 472,154 | ||||||
1,003,435 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 39 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Global Equity Fund
Shares or Principal Amount | Value | |||||||
Materials (3.4%) | ||||||||
Croda International PLC (a) | 5,653 | $ | 348,200 | |||||
Linde PLC | 4,800 | 794,256 | ||||||
1,142,456 | ||||||||
4,935,574 | ||||||||
UNITED STATES (30.3%) | ||||||||
Communication Services (2.0%) | ||||||||
Alphabet, Inc., Class A (b) | 620 | 676,160 | ||||||
Consumer Discretionary (3.3%) | ||||||||
Booking Holdings, Inc. (b) | 200 | 374,916 | ||||||
TJX Cos., Inc. (The) | 6,800 | 747,184 | ||||||
1,122,100 | ||||||||
Consumer Staples (3.9%) | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 4,000 | 549,760 | ||||||
PepsiCo, Inc. | 6,850 | 769,803 | ||||||
1,319,563 | ||||||||
Energy (3.6%) | ||||||||
EOG Resources, Inc. | 4,300 | 452,962 | ||||||
Schlumberger Ltd. | 14,900 | 764,519 | ||||||
1,217,481 | ||||||||
Financials (6.5%) | ||||||||
CME Group, Inc. | 2,300 | 421,452 | ||||||
First Republic Bank | 3,800 | 345,762 | ||||||
Intercontinental Exchange, Inc. | 9,500 | 731,880 | ||||||
M&T Bank Corp. | 4,200 | 694,722 | ||||||
2,193,816 | ||||||||
Health Care (1.6%) | ||||||||
Johnson & Johnson | 3,800 | 531,962 | ||||||
Information Technology (9.4%) | ||||||||
Amdocs Ltd. | 14,000 | 885,780 | ||||||
Cognizant Technology Solutions Corp., Class A | 4,800 | 331,344 | ||||||
Oracle Corp. | 14,300 | 698,412 | ||||||
Visa, Inc., Class A | 9,400 | 1,295,790 | ||||||
3,211,326 | ||||||||
10,272,408 | ||||||||
Total Common Stocks | 30,932,929 | |||||||
PREFERRED STOCKS (7.3%) | ||||||||
BRAZIL (2.6%) | ||||||||
Financials (2.6%) | ||||||||
Banco Bradesco SA, ADR, Preferred Shares, 1.94% | 97,140 | 890,774 | ||||||
GERMANY (2.4%) | ||||||||
Consumer Staples (2.4%) | ||||||||
Henkel AG & Co. KGaA, Preferred Shares, 1.33% (a) | 7,300 | 797,559 | ||||||
SOUTH KOREA (2.3%) | ||||||||
Information Technology (2.3%) | ||||||||
Samsung Electronics Co. Ltd., GDR | 1,000 | 782,000 | ||||||
UNITED KINGDOM (0.0%) | ||||||||
Industrials (0.0%) | ||||||||
Rolls-Royce Holdings PLC, C Shares (b) | 2,025,242 | 2,589 | ||||||
Total Preferred Stocks | 2,472,922 | |||||||
SHORT-TERM INVESTMENT (2.0%) | ||||||||
UNITED STATES (2.0%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 672,465 | 672,465 | ||||||
Total Short-Term Investment | 672,465 | |||||||
Total Investments | 34,078,316 | |||||||
Liabilities in Excess of Other Assets—(0.4)% | (150,903 | ) | ||||||
Net Assets—100.0% | $ | 33,927,413 |
(a) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements |
(b) | Non-income producing security. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
GDR | Global Depositary Receipt |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
40 | Annual Report 2018 |
Aberdeen Global Infrastructure Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine Global Infrastructure Fund (the “Predecessor Fund”) in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen Global Infrastructure Fund (Institutional Class shares net of fees) returned -5.13% for the 12-month period ended October 31, 2018, versus the -7.57% return of its benchmark, the Standard & Poor’s (S&P) Global Infrastructure Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Global Infrastructure Funds (comprising 35 funds), as measured by Lipper, Inc., was -5.37%.
Global equities, as measured by the Morgan Stanley Capital International (MSCI) World Index,1 posted flat returns in aggregate over the reporting period. Investors were initially optimistic towards global economic growth, but investor sentiment turned more negative as the period progressed. Worries that rising inflation could compel more aggressive monetary policy, and a flare-up in trade tensions – especially as U.S.-China trade relations deteriorated amid rounds of brinkmanship – led to higher market volatility. The U.S. broader-market S&P 500 Index initially shrugged off these concerns to record its longest bull run in history, supported by strong corporate earnings growth and a strengthening U.S. dollar. However, a spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations. Emerging markets also came under pressure due to the appreciating U.S. dollar.
At the stock level, the Fund’s underweight allocation to Atlantia SpA relative to its benchmark was a key contributor to performance for the 12-month reporting period. Atlantia is an Italian holding company operating toll motorways and airports. The company’s primary asset is Autostrade per l’Italia, the largest concessionaire in the Italian auto network. The company’s shares declined following a deadly bridge collapse in Genoa and the subsequent threat from the Italian government of revoking the company’s concession on the Autostrade per l’Italia. The Fund’s holding in Norfolk Southern Corp., which is not a constituent of the benchmark, enhanced performance. The company, which is one of the largest railroad operators in the U.S., reported increased carload growth and improving operational ratios over the reporting period. Additionally, Norfolk Southern is in the process of implementing precision scheduled railroading, which we believe may further improve its operational results. Shares of the Fund’s holding in Cosan Logistica S.A., which also is not represented in the benchmark index, rallied over the reporting period. Cosan Logistica is a holding company whose sole asset is shares of Rumo, a railway concession operator in Brazil. Following the 2015 merger between Rumo and Latin American Logistics, the combined company has instituted a significant capital expenditure plan in a bid to take market share away from higher-cost truck operators. In our view, this initiative appears to be bearing fruit, as demonstrated by recently improving earnings growth and rising volumes.
Conversely, the absence of a holding in Oneok Inc., a diversified energy company, was a key detractor from the Fund’s relative performance for the reporting period. Oneok’s shares moved higher as the company announced strong earnings before interest, tax, depreciation and amortization (EBITDA) and dividend growth during the reporting period. Shares of Fund holding CCR S.A., a Brazilian toll road operator, remained weak as corruption allegations against the company have not been resolved. Additionally, investors were frustrated that the capital raised in the company’s secondary offering in February 2017, has not been invested. Shares of the Fund holding in Tower Bersama Infrastructure, which is not a constituent of the benchmark index, declined during the period. The Indonesian cell tower operator faced investors’ fears over pricing pressures on new leases. In particular, concerns arose that some customers may not renew their leases if pricing concessions are not made.
During the reporting period, we continued to hedge a portion of the Fund’s currency exposure to the euro and the Hong Kong dollar. The derivatives positions did not have a significant impact on Fund performance for the reporting period.
We maintain our view that there are numerous opportunities to invest in infrastructure globally. Now that the November 2018 Congressional midterm elections in the U.S. are behind us, we believe that infrastructure spending may increase, as it is an initiative that both Republicans and Democrats support. In particular, the incoming head of the Transportation and Infrastructure Committee in the U.S. House of Representatives is looking for the White House to back substantial additional funds to rebuild U.S. roads, bridges and airports, and President Donald Trump has suggested that there could be a deal on infrastructure spending. In terms of timing, key Democratic Party leaders have expressed an interest to move a bill out of the House early in 2019 before Washington becomes consumed by the 2020 presidential campaign. Meanwhile, according to Oxford Economics, Global Infrastructure Hub, China, the U.S. and Brazil have infrastructure investment gaps of US$1.9 trillion, US$3.8 trillion, and US$1.2 trillion, respectively.2 China is in the midst of investing US$1 trillion in its “One Belt, One Road” project. Furthermore, the urban population of the world has grown from 751 million in 1950 to 4.2 billion in 2018. Fifty-five percent of the world’s population now lives in urban areas, a proportion that is
1 | The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed-market countries and 24 emerging-market countries.. |
2 | Source: Oxford Economics, Global Infrastructure Hub, July 2017. |
2018 Annual Report | 41 |
Aberdeen Global Infrastructure Fund (Unaudited) (concluded)
expected to increase to 68% by 2050.3 Projections show that urbanization, combined with the overall growth of the world’s population, could add another 2.5 billion people to urban areas by 2050.3 We believe that cities will need to invest in their infrastructure in an effort to accommodate that growth.
Portfolio Management:
Aberdeen Global Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Because the Fund concentrates its investments in infrastructure-related entities, the Fund has greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. Infrastructure related entities are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, costs associated with environmental and other regulations, the effects of economic slowdown and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
3 | Source: 2018 Revision of World Urbanization Prospects, produced by the Population Division of the United Nations Department of Economic and Social Affairs. |
42 | Annual Report 2018 |
Aberdeen Global Infrastructure Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | Inception4 | |||||||||||
Class A | w/o SC | -5.39% | 3.95% | 8.88% | ||||||||||
w/SC2 | -10.83% | 2.73% | 7.94% | |||||||||||
Institutional Class3 | w/o SC | -5.13% | 4.22% | 11.93% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | Not subject to any sales charges. |
4 | Predecessor Fund commenced operations on November 3, 2008. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Global Infrastructure Fund, S&P Global Infrastructure Index, Morgan Stanley Capital International All Country World Index (MSCI ACWI) and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses or sales charges. Investors cannot invest directly in market indexes.
The S&P Global Infrastructure Index is a total return index that is designed to track 75 companies from around the world chosen to represent the listed infrastructure industry while maintaining liquidity and tradability. To create diversified exposure, the index includes three distinct infrastructure clusters: energy, transportation, and utilities. Net Total Return (NTR) indexes include reinvestments of all dividends minus taxes.
The MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,787 constituents, the index covers approximately 85% of the global investable equity opportunity set. DM countries in the Index are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US. EM countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 43 |
Aberdeen Global Infrastructure Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 97.7% | |||
Exchange-Traded Funds | 1.1% | |||
Short-Term Investment | 0.5% | |||
Other Assets in Excess of Liabilities | 0.7% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Industrials | 41.3% | * | ||
Utilities | 22.5% | |||
Communication Services | 14.0% | |||
Energy | 8.2% | |||
Real Estate | 7.0% | |||
Materials | 3.8% | |||
Consumer Discretionary | 1.0% | |||
Other | 2.2% | |||
100.0% |
* | As of October 31, 2018, the Fund’s holdings in the Industrials sector were allocated to five industries: Road & Rail (14.9%), Transportation Infrastructure (13.8%), Construction & Engineering (9.5%), Commercial Services & Supplies (1.9%) and Machinery (1.2%). |
Top Holdings* | ||||
Cosan Logistica SA | 2.9% | |||
Ferrovial SA | 2.9% | |||
Canadian Pacific Railway Ltd. | 2.7% | |||
Kinder Morgan, Inc. | 2.5% | |||
Enbridge, Inc. | 2.5% | |||
Williams Cos., Inc. | 2.5% | |||
NextEra Energy, Inc. | 2.4% | |||
Veolia Environnement SA | 2.4% | |||
Norfolk Southern Corp. | 2.3% | |||
American Tower Corp., REIT | 2.3% | |||
Other | 74.6% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 45.2% | |||
Spain | 8.2% | |||
China | 8.0% | |||
France | 6.9% | |||
Canada | 5.2% | |||
Brazil | 5.0% | |||
Italy | 4.2% | |||
Indonesia | 3.8% | |||
Mexico | 3.4% | |||
Japan | 2.1% | |||
Other | 8.0% | |||
100.0% |
44 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Global Infrastructure Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (97.7%) | ||||||||
ARGENTINA (1.1%) | ||||||||
Industrials (0.6%) | ||||||||
Corp. America Airports SA (a) | 78,000 | $ | 618,540 | |||||
Materials (0.5%) | ||||||||
Loma Negra Cia Industrial Argentina SA, ADR (a) | 60,000 | 540,600 | ||||||
1,159,140 | ||||||||
BRAZIL (5.0%) | ||||||||
Industrials (5.0%) | ||||||||
CCR SA | 780,000 | 2,299,234 | ||||||
Cosan Logistica SA (a) | 905,000 | 3,098,133 | ||||||
5,397,367 | ||||||||
CANADA (5.2%) | ||||||||
Energy (2.5%) | ||||||||
Enbridge, Inc. | 86,400 | 2,692,186 | ||||||
Industrials (2.7%) | ||||||||
Canadian Pacific Railway Ltd. | 13,900 | 2,849,500 | ||||||
5,541,686 | ||||||||
CHINA (8.0%) | ||||||||
Communication Services (0.9%) | ||||||||
China Unicom Hong Kong Ltd., ADR | 95,000 | 990,850 | ||||||
Industrials (6.2%) | ||||||||
China Everbright International Ltd. (b) | 1,048,333 | 838,662 | ||||||
China Merchants Port Holdings Co. Ltd. (b) | 595,000 | 1,013,481 | ||||||
China Railway Construction Corp. Ltd., Class H (b) | 997,000 | 1,266,197 | ||||||
COSCO SHIPPING Ports Ltd. (b) | 1,099,227 | 1,123,452 | ||||||
CRRC Corp. Ltd., Class H (b) | 1,448,200 | 1,271,913 | ||||||
Zhejiang Expressway Co. Ltd., Class H (b) | 1,300,100 | 1,093,239 | ||||||
6,606,944 | ||||||||
Utilities (0.9%) | ||||||||
Beijing Enterprises Water Group Ltd. (b) | 2,000,000 | 1,021,318 | ||||||
8,619,112 | ||||||||
FRANCE (6.9%) | ||||||||
Industrials (4.6%) | ||||||||
Aeroports de Paris (b) | 7,600 | 1,589,562 | ||||||
Bouygues SA (b) | 29,500 | 1,074,705 | ||||||
Vinci SA (b) | 25,200 | 2,242,785 | ||||||
4,907,052 | ||||||||
Utilities (2.3%) | ||||||||
Veolia Environnement SA (b) | 127,400 | 2,539,018 | ||||||
7,446,070 | ||||||||
GERMANY (0.8%) | ||||||||
Industrials (0.8%) | ||||||||
Fraport AG Frankfurt Airport Services Worldwide (b) | 11,300 | 872,649 | ||||||
INDONESIA (3.8%) | ||||||||
Communication Services (2.8%) | ||||||||
Sarana Menara Nusantara Tbk PT (b) | 16,565,200 | 527,483 | ||||||
Tower Bersama Infrastructure Tbk PT (b) | 5,104,100 | 1,571,270 | ||||||
XL Axiata Tbk PT (a)(b) | 5,071,800 | 876,448 | ||||||
2,975,201 | ||||||||
Industrials (1.0%) | ||||||||
Jasa Marga Persero Tbk PT (b) | 3,850,000 | 1,052,455 | ||||||
4,027,656 | ||||||||
ITALY (4.2%) | ||||||||
Industrials (1.2%) | ||||||||
Atlantia SpA (b) | 64,200 | 1,290,027 | ||||||
Materials (1.6%) | ||||||||
Buzzi Unicem SpA (b) | 88,100 | 1,691,714 | ||||||
Utilities (1.4%) | ||||||||
Enel SpA (b) | 319,600 | 1,567,020 | ||||||
4,548,761 | ||||||||
JAPAN (2.1%) | ||||||||
Industrials (2.1%) | ||||||||
East Japan Railway Co. (b) | 25,400 | 2,218,377 | ||||||
MEXICO (3.4%) | ||||||||
Industrials (1.9%) | ||||||||
Promotora y Operadora de Infraestructura SAB de CV | 228,400 | 2,073,936 | ||||||
Utilities (1.5%) | ||||||||
Infraestructura Energetica Nova SAB de CV | 397,000 | 1,548,072 | ||||||
3,622,008 | ||||||||
NETHERLANDS (1.0%) | ||||||||
Communication Services (1.0%) | ||||||||
Koninklijke KPN NV (b) | 400,000 | 1,055,410 | ||||||
PHILIPPINES (1.7%) | ||||||||
Industrials (1.7%) | ||||||||
International Container Terminal Services, Inc. | 1,063,000 | 1,797,991 | ||||||
PORTUGAL (1.4%) | ||||||||
Communication Services (1.4%) | ||||||||
NOS SGPS SA (b) | 275,900 | 1,547,497 | ||||||
SPAIN (8.2%) | ||||||||
Communication Services (2.3%) | ||||||||
Cellnex Telecom SA (b)(c) | 99,000 | 2,462,752 | ||||||
Industrials (2.9%) | ||||||||
Ferrovial SA (b) | 154,010 | 3,083,438 | ||||||
Utilities (3.0%) | ||||||||
Atlantica Yield PLC | 75,000 | 1,470,750 | ||||||
EDP Renovaveis SA | 200,000 | 1,798,649 | ||||||
3,269,399 | ||||||||
8,815,589 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 45 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Infrastructure Fund
Shares or Principal Amount | Value | |||||||
UNITED KINGDOM (1.3%) | ||||||||
Communication Services (1.3%) | ||||||||
Vodafone Group PLC (b) | 744,900 | $ | 1,400,813 | |||||
UNITED STATES (43.6%) | ||||||||
Communication Services (4.3%) | ||||||||
Comcast Corp., Class A | 39,500 | 1,506,530 | ||||||
DISH Network Corp., Class A (a) | 31,000 | 952,940 | ||||||
T-Mobile US, Inc. (a) | 30,800 | 2,111,340 | ||||||
4,570,810 | ||||||||
Consumer Discretionary (1.0%) | ||||||||
TravelCenters of America LLC (a) | 236,100 | 1,100,226 | ||||||
Energy (5.6%) | ||||||||
Kinder Morgan, Inc. (d) | 159,500 | 2,714,690 | ||||||
SemGroup Corp., Class A | 37,700 | 697,073 | ||||||
Williams Cos., Inc. | 108,800 | 2,647,104 | ||||||
6,058,867 | ||||||||
Industrials (10.6%) | ||||||||
Dycom Industries, Inc. (a) | 15,300 | 1,038,564 | ||||||
Genesee & Wyoming, Inc., Class A (a)(d) | 25,300 | 2,004,519 | ||||||
Kansas City Southern | 12,400 | 1,264,304 | ||||||
MasTec, Inc. (a)(d) | 31,500 | 1,370,565 | ||||||
Norfolk Southern Corp. | 15,000 | 2,517,450 | ||||||
Union Pacific Corp. | 13,300 | 1,944,726 | ||||||
Waste Connections, Inc. | 15,600 | 1,192,464 | ||||||
11,332,592 | ||||||||
Materials (1.7%) | ||||||||
Vulcan Materials Co. | 18,000 | 1,820,520 | ||||||
Real Estate (7.0%) | ||||||||
American Tower Corp., REIT | 15,900 | 2,477,379 | ||||||
CoreCivic, Inc., REIT | 61,100 | 1,372,306 | ||||||
Crown Castle International Corp., REIT | 22,500 | 2,446,650 | ||||||
GEO Group, Inc. (The), REIT | 53,200 | 1,176,252 | ||||||
7,472,587 | ||||||||
Utilities (13.4%) | ||||||||
American Electric Power Co., Inc. | 18,000 | 1,320,480 | ||||||
Clearway Energy, Inc. | 98,100 | 1,923,741 | ||||||
CMS Energy Corp. | 39,300 | 1,946,136 | ||||||
DTE Energy Co. | 16,300 | 1,832,120 | ||||||
Evergy, Inc. | 30,756 | 1,722,028 | ||||||
FirstEnergy Corp. | 51,500 | 1,919,920 | ||||||
NextEra Energy, Inc. | 15,000 | 2,587,500 | ||||||
Vistra Energy Corp. (a) | 52,200 | 1,181,286 | ||||||
14,433,211 | ||||||||
46,788,813 | ||||||||
Total Common Stocks | 104,858,939 | |||||||
EXCHANGE-TRADED FUNDS (1.1%) | ||||||||
UNITED STATES (1.1%) | ||||||||
Alerian MLP ETF (d) | 116,000 | 1,139,120 | ||||||
Total Exchange-Traded Funds | 1,139,120 | |||||||
SHORT-TERM INVESTMENT (0.5%) | ||||||||
UNITED STATES (0.5%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (e) | 593,256 | 593,256 | ||||||
Total Short-Term Investment | 593,256 | |||||||
Total Investments | 106,591,315 | |||||||
Other Assets in Excess of Liabilities—0.7% | 743,561 | |||||||
Net Assets—100.0% | $ | 107,334,876 |
(a) | Non-income producing security. |
(b) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(c) | Denotes a security issued under Regulation S or Rule 144A. |
(d) | All or a portion of the securities are on loan. The total value of all securities on loan is $5,311,809. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(l) for additional information. |
(e) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
ETF | Exchange-Traded Fund |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements.
46 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Global Infrastructure Fund
At October 31, 2018, the Fund’s open forward foreign currency exchange contracts were as follows:
Purchase Contracts Settlement Date* | Counterparty | Amount Purchased | Amount Sold | Fair Value | Unrealized Depreciation | |||||||||||||||||||||||
Hong Kong Dollar/United States Dollar 11/06/2018 | | State Street Bank and Trust | | HKD | 20,000,000 | USD | 2,564,571 | $ | 2,550,804 | $ | (13,767 | ) | ||||||||||||||||
$ | 2,550,804 | $ | (13,767 | ) |
Sale Contracts Settlement Date* | Counterparty | Amount Purchased | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||
United States Dollar/Hong Kong Dollar 11/06/2018 | | State Street Bank and Trust | | USD | 11,601,601 | HKD | 90,000,000 | $ | 11,478,619 | $ | 122,982 | |||||||||||||||||
United States Dollar/Euro 01/10/2019 | UBS AG | USD | 4,635,160 | EUR | 4,000,000 | 4,560,137 | 75,023 | |||||||||||||||||||||
United States Dollar/Hong Kong Dollar 01/10/2019 | | State Street Bank and Trust | | USD | 7,660,882 | HKD | 60,000,000 | 7,664,475 | (3,593 | ) | ||||||||||||||||||
$ | 23,703,231 | $ | 194,412 |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 47 |
Aberdeen Income Builder Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine Income Builder Fund (the “Predecessor Fund”) in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5, 2018 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen Income Builder Fund (Institutional Class shares net of fees) returned 4.38% for the 12-month period ended October 31, 2018, versus the 7.35% return of its benchmark, the Standard & Poor’s (S&P) 500 Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Equity Income Funds (comprising 225 funds), as measured by Lipper, Inc., was 3.00%.
Global equities, as measured by the Morgan Stanley Capital International (MSCI) World Index,1 posted flat returns in aggregate over the reporting period. Investors were initially optimistic towards global economic growth, but investor sentiment turned more negative as the period progressed. Worries that rising inflation could compel more aggressive monetary policy, and a flare-up in trade tensions – especially as U.S.-China trade relations deteriorated amid rounds of brinkmanship – led to higher market volatility. The U.S. broader-market S&P 500 Index initially shrugged off these concerns to record its longest bull run in history, supported by strong corporate earnings growth and a strengthening U.S. dollar. However, a spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations. Emerging markets also came under pressure due to the appreciating U.S. dollar.
The overall U.S. fixed income market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index, declined 2.05% during the reporting period as both short- and long-term Treasury yields moved sharply higher and the Federal Reserve (Fed) remained committed to tightening monetary policy. One notable exception was the high-yield corporate bond sector, which generated a modest gain of 0.21% over the period as measured by the ICE Bank of America Merrill Lynch Global High Yield Constrained Index.2
For the period from November 1, 2017 through May 4, 2018, the underperformance of the Predecessor Fund’s equity portfolio relative to its benchmark, the S&P 500 Index, was attributable mainly to stock selection in the consumer discretionary, real estate and information technology sectors. The largest detractors from relative performance among individual holdings were global real estate and investment management firm Colony NorthStar Inc., diversified media company Comcast Corp., and enterprise software company Oracle Corp. Shares of Colony NorthStar Inc. fell sharply in March 2018, when the company announced a surprisingly large dividend cut as well as generally disappointing earnings for the fourth quarter of its 2017 fiscal year. It appears that the tri-party merger with NorthStar Asset Management and NorthStar Realty Finance has been more challenging than management had anticipated. Fears of “cord-cutting,” along with an unexpected unsolicited offer to acquire Sky PLC, pressured shares of Comcast Corp. during the reporting period. Sky had previously received a merger offer from Twenty-First Century Fox, which subsequently agreed to be acquired by Disney. Oracle Corp.’s stock price declined in March 2018, after the company’s fourth-quarter 2017 results generally did not meet the market’s expectations. Oracle Corp. reported year-over-year deceleration in cloud revenue growth; the company’s cloud business appears to be growing more slowly than that of its larger competitors.
On the positive side, the Predecessor Fund’s relative performance was bolstered by holdings in the consumer staples, industrials, and materials sectors. The primary individual stock contributors included networking equipment manufacturer Cisco Systems Inc., IT services provider CSRA Inc., and hardware and software company Microsoft Corp. Cisco Systems Inc. reported largely better-than-expected results and a positive business outlook during the reporting period. Shares of CSRA Inc. rose sharply after it was acquired by General Dynamics Corp. in early April 2018. Microsoft Corp.’s stock price rallied during the reporting period along with its peers in the technology sector as its revitalization plan under its new chief executive officer continued to take hold and its cloud-computing business continued to show significant growth.
From May 5, 2018 through October 31, 2018, the performance of the Fund’s equity portfolio relative to the S&P 500 Index was supported by positions in the health care and consumer discretionary sectors. The primary individual stock contributors included technology company Apple Inc., off-price retailer TJX Companies and pharmaceutical firm Pfizer Inc. Apple benefited from the anticipation of a new iPhone launch and growth of their services business. The latter is a key business for Apple because it provides a recurring revenue stream with higher margins and, therefore, reduces the company’s reliance on hardware sales. Disruption in the retail industry from e-commerce growth and the mismanagement of inventories at full-price retailers creates excess supply of goods in the marketplace. TJX Companies is the beneficiary of this market disorder. Additionally, the company gained significant market share over the reporting period and is a destination for value-seeking consumers. While there was no specific product news attributed to Pfizer’s outperformance during the period, the company was largely
1 | The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed market countries. |
2 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. |
3 | The ICE Bank of America Merrill Lynch Global High Yield Constrained Index tracks the performance of U.S. dollar-, Canadian dollar-, British sterling- and euro-denominated publicly issued non-investment grade corporate debt. |
48 | Annual Report 2018 |
Aberdeen Income Builder Fund (Unaudited) (continued)
viewed as an offset to the volatility in the marketplace. Specifically, investors appeared to reward the company’s steady cash flow profile.
Conversely, stock selection in the information technology and financials sectors hampered the Fund’s relative performance for the period of May 5, 2018 through October 31, 2018. The largest detractors among individual holdings were semiconductor company Applied Materials, Inc., software company Symantec Corp. and technology company TE Connectivity Ltd. Given the global slowdown in the semiconductor industry, sales of Applied Materials’ equipment used in the production of semiconductors has decelerated, which hindered its stock price. Shares of Symantec Corp.’s share price moved lower following management’s announcement regarding an audit investigation into its historical financial results. The impact was expected to be non-material, but management’s method of conveying this information to investors caused the company share price to fall. TE Connectivity has substantial exposure to the auto industry. Fear of a North American slowdown in auto sales, combined with declining auto sales in China, weighed on the company’s share price during the reporting period.
The U.S. high-yield corporate bond market lagged the positive returns of the U.S. broader equity market S&P 500 Index for the period of May 5, 2018 through October 31, 2018. This occurred as rising interest rates and investor outflows kept the high-yield market fairly flat in total return terms. However, as investors adopted a risk-off tone towards the end of the reporting period in October 2018, high-yield bonds outperformed equities, underlining the benefits of both diversification and income in a volatile market. Regarding the Fund’s individual high-yield bond holdings, Welltec A/S was a leading contributor to relative performance. The company develops and provides well technologies and solutions for the oil and gas industry. The bonds performed relatively well over the period despite a volatile price environment for oil, as the company has seen activity levels in its market improve and demand for its niche products increase. Bonds issued by Pitney Bowes Inc., an integrated mail and document management company, were downgraded to below investment-grade in early May 2018 by the major credit rating agencies.3 Following the move, we saw the reset in valuations as an attractive entry point and established a position in the Fund. The company’s earnings stabilized over the reporting period and investors became more comfortable with the bonds given what they viewed as the company’s attractive cash-flow profile.
The Fund’s high-yield corporate bond holding in retail drugstore and pharmacy operator Rite Aid Corp. weighed on the relative performance for the reporting period. This occurred as its scheduled merger with Albertson’s was unexpectedly cancelled in August 2018. As Rite Aid’s bonds were trading with a high probability of being tendered at a premium given restrictive covenants4 that would be enacted had the merger been successful, the price of its bonds declined on the news of the cancellation as investors reassessed standalone Rite Aid credit risk. Another Fund holding, Weatherford International Ltd., is an international oilfield services company that is the product of numerous acquisitions over the course of several years. New management has been installed and a restructuring of the business, which includes significant cost-savings goals and divestitures,5 has begun, with the goal of reducing leverage. However, the progress of the restructuring generally has not met the market’s expectations as free cash-flow and announced divestitures has been delayed.
The Fund had no significant exposure to derivatives during the reporting period.
Global markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including political uncertainty in Europe caused by tumultuous Brexit negotiations and Italy’s fiscal problems.
While the continued health of corporate earnings goes some way in calming investors’ nerves, we think that politics is increasingly overshadowing central bank policy to become the main driving force of market sentiment. In our view, shifting political alliances may keep markets on their toes but, at the same time, may provide discerning investors with opportunities to take advantage of mispricing of stocks. Amid such periods of uncertainty, we think that investors increasingly will seek high-quality stocks that pay dividends and have defensive characteristics, which we believe should bode well for the Fund’s performance.
Portfolio Management:
North American Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
4 | S&P Global Ratings, Moody’s Investor Services and Fitch Ratings Inc.’s credit ratings express the respective agencies’ opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from AAA to D (Aaa to C for Moody’s) to communicate the agency’s opinion of relative level of credit risk. Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. |
5 | A bond covenant is a legally binding term of agreement between a bond issuer and a bondholder that is designed to protect the interests of both parties. |
6 | Divestiture comprises the partial or full disposal of a business unit through sale, exchange, closure or bankruptcy. A divestiture typically results from a management decision to cease operations of a business unit because it is not part of a company’s core competency. |
2018 Annual Report | 49 |
Aberdeen Income Builder Fund (Unaudited) (concluded)
Investing in mutual funds involves risk, including possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
50 | Annual Report 2018 |
Aberdeen Income Builder Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | Inception3 | |||||||||||
Class A | w/o SC | 4.04% | 7.78% | 10.78% | ||||||||||
w/SC2 | -1.96% | 6.51% | 9.83% | |||||||||||
Institutional Class4 | w/o SC | 4.38% | 8.04% | 11.35% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | Predecessor Fund commenced operations on November 5, 2008. |
4 | Not subject to any sales charges. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum initial investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Income Builder Fund, the S&P 500® Index, the Dow Jones Industrial Average and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The S&P 500® Index represents large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available U.S. market capitalization.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 51 |
Aberdeen Income Builder Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 55.0% | |||
Corporate Bonds | 39.5% | |||
Short-Term Investment | 7.3% | |||
Liabilities in Excess of Other Assets | (1.8)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Information Technology | 20.5% | |||
Health Care | 16.0% | |||
Consumer Discretionary | 12.7% | |||
Industrials | 11.7% | |||
Financials | 11.4% | |||
Energy | 6.3% | |||
Communication Services | 5.8% | |||
Consumer Staples | 4.2% | |||
Utilities | 2.5% | |||
Materials | 1.8% | |||
Other | 7.1% | |||
100.0% |
Top Holdings* | ||||
Apple, Inc. | 4.3% | |||
Microsoft Corp. | 3.5% | |||
Johnson & Johnson | 2.9% | |||
Pfizer, Inc. | 2.6% | |||
Texas Instruments, Inc. | 2.4% | |||
TJX Cos., Inc. (The) | 2.4% | |||
Aetna, Inc. | 2.2% | |||
JPMorgan Chase & Co. | 2.1% | |||
Cisco Systems, Inc. | 2.1% | |||
CSX Corp. | 1.8% | |||
Other | 73.7% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 98.9% | |||
Canada | 1.5% | |||
Netherlands | 0.9% | |||
Denmark | 0.5% | |||
Other | (1.8)% | |||
100.0% |
52 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Income Builder Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (55.0%) | ||||||||
Communication Services (5.8%) | ||||||||
Alphabet, Inc., Class A (a) | 1,400 | $ | 1,526,812 | |||||
Alphabet, Inc., Class C (a) | 1,400 | 1,507,478 | ||||||
Comcast Corp., Class A | 45,000 | 1,716,300 | ||||||
Verizon Communications, Inc. | 15,000 | 856,350 | ||||||
5,606,940 | ||||||||
Consumer Discretionary (2.4%) | ||||||||
TJX Cos., Inc. (The) | 21,000 | 2,307,480 | ||||||
Consumer Staples (3.1%) | ||||||||
Constellation Brands, Inc., Class A | 5,000 | 996,150 | ||||||
PepsiCo, Inc. | 13,000 | 1,460,940 | ||||||
Walgreens Boots Alliance, Inc. | 7,500 | 598,275 | ||||||
3,055,365 | ||||||||
Energy (1.1%) | ||||||||
Helmerich & Payne, Inc. | 8,000 | 498,320 | ||||||
Marathon Petroleum Corp. | 8,000 | 563,600 | ||||||
1,061,920 | ||||||||
Financials (9.1%) | ||||||||
Bank of America Corp. | 61,000 | 1,677,500 | ||||||
Citigroup, Inc. | 22,000 | 1,440,120 | ||||||
CME Group, Inc. | 8,000 | 1,465,920 | ||||||
Discover Financial Services | 16,000 | 1,114,720 | ||||||
JPMorgan Chase & Co. | 19,000 | 2,071,380 | ||||||
PNC Financial Services Group, Inc. (The) | 8,000 | 1,027,920 | ||||||
8,797,560 | ||||||||
Health Care (11.2%) | ||||||||
Aetna, Inc. | 11,000 | 2,182,400 | ||||||
Becton Dickinson and Co. | 7,000 | 1,613,500 | ||||||
Johnson & Johnson | 20,000 | 2,799,800 | ||||||
Pfizer, Inc. | 60,000 | 2,583,600 | ||||||
UnitedHealth Group, Inc. | 6,500 | 1,698,775 | ||||||
10,878,075 | ||||||||
Industrials (5.1%) | ||||||||
CSX Corp. | 25,000 | 1,721,500 | ||||||
Raytheon Co. | 9,000 | 1,575,360 | ||||||
Snap-on, Inc. | 11,000 | 1,693,340 | ||||||
4,990,200 | ||||||||
Information Technology (13.6%) | ||||||||
Apple, Inc. | 19,000 | 4,158,340 | ||||||
Broadcom, Inc. | 6,000 | 1,340,940 | ||||||
Cisco Systems, Inc. | 44,000 | 2,013,000 | ||||||
Microsoft Corp. | 32,000 | 3,417,920 | ||||||
Texas Instruments, Inc. | 25,000 | 2,320,750 | ||||||
13,250,950 | ||||||||
Materials (1.3%) | ||||||||
Air Products & Chemicals, Inc. | 8,000 | 1,234,800 | ||||||
Real Estate (0.5%) | ||||||||
Boston Properties, Inc., REIT | 4,000 | 483,040 | ||||||
Utilities (1.8%) | ||||||||
CMS Energy Corp. | 17,000 | 841,840 | ||||||
NextEra Energy, Inc. | 5,500 | 948,750 | ||||||
1,790,590 | ||||||||
Total Common Stocks | 53,456,920 | |||||||
CORPORATE BONDS (39.5%) | ||||||||
Aerospace & Defense (1.7%) | ||||||||
Bombardier, Inc., 7.50%, 12/01/2024 (b) | 968,000 | 983,730 | ||||||
TransDigm, Inc., 6.00%, 07/15/2022 | 675,000 | 678,375 | ||||||
1,662,105 | ||||||||
Commercial Services & Supplies (2.4%) | ||||||||
Cimpress NV, 7.00%, 06/15/2026 (b) | 850,000 | 848,937 | ||||||
Graham Holdings Co., 5.75%, 06/01/2026 (b) | 363,000 | 365,723 | ||||||
Iron Mountain, Inc., 6.00%, 08/15/2023 | 1,070,000 | 1,095,412 | ||||||
2,310,072 | ||||||||
Computers & Peripherals (3.3%) | ||||||||
Banff Merger Sub, Inc., 9.75%, 09/01/2026 (b) | 1,017,000 | 976,320 | ||||||
Dell International LLC / EMC Corp., 5.88%, 06/15/2021 (b) | 445,000 | 451,128 | ||||||
Exela Intermediate LLC / Exela Finance, Inc., 10.00%, 07/15/2023 (b) | 950,000 | 987,715 | ||||||
Harland Clarke Holdings Corp., 8.38%, 08/15/2022 (b) | 900,000 | 812,250 | ||||||
3,227,413 | ||||||||
Diversified Financial Services (2.3%) | ||||||||
Alliance Data Systems Corp., 5.38%, 08/01/2022 (b) | 1,169,000 | 1,173,384 | ||||||
Navient Corp., 4.88%, 06/17/2019 | 600,000 | 602,250 | ||||||
Tempo Acquisition LLC / Tempo Acquisition Finance Corp., 6.75%, 06/01/2025 (b) | 436,000 | 415,159 | ||||||
2,190,793 | ||||||||
Diversified Telecommunication Services (2.0%) |
| |||||||
Consolidated Communications, Inc., 6.50%, 10/01/2022 | 750,000 | 690,375 | ||||||
Frontier Communications Corp., 10.50%, 09/15/2022 | 363,000 | 302,198 | ||||||
Sprint Corp., 7.88%, 09/15/2023 | 900,000 | 960,750 | ||||||
1,953,323 | ||||||||
Electric Utilities (0.7%) | ||||||||
Calpine Corp., 5.75%, 01/15/2025 | 500,000 | 446,775 | ||||||
NRG Energy, Inc., 6.25%, 05/01/2024 | 232,000 | 236,844 | ||||||
683,619 | ||||||||
Energy Equipment & Services (1.2%) | ||||||||
Cheniere Corpus Christi Holdings LLC, 7.00%, 06/30/2024 | 1,081,000 | 1,168,831 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 53 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Income Builder Fund
Shares or Principal Amount | Value | |||||||
Engineering & Construction (0.6%) | ||||||||
TopBuild Corp., 5.63%, 05/01/2026 (b) | 559,000 | $ | 532,448 | |||||
Entertainment (0.9%) | ||||||||
Rivers Pittsburgh Borrower LP / Rivers Pittsburgh Finance Corp., 6.13%, 08/15/2021 (b) | 863,000 | 858,685 | ||||||
Food Products (1.1%) | ||||||||
Clearwater Seafoods, Inc., 6.88%, 05/01/2025 (b) | 506,000 | 484,495 | ||||||
Post Holdings, Inc., 5.00%, 08/15/2026 (b) | 657,000 | 606,083 | ||||||
1,090,578 | ||||||||
Health Care Equipment & Supplies (0.6%) | ||||||||
Avantor, Inc., 6.00%, 10/01/2024 (b) | 600,000 | 598,500 | ||||||
Healthcare Providers & Services (3.2%) | ||||||||
Centene Corp., 4.75%, 01/15/2025 | 550,000 | 543,240 | ||||||
DaVita, Inc., 5.13%, 07/15/2024 | 544,000 | 519,520 | ||||||
Encompass Health Corp., 5.75%, 11/01/2024 | 600,000 | 598,500 | ||||||
HCA, Inc., 4.75%, 05/01/2023 | 900,000 | 909,000 | ||||||
Tenet Healthcare Corp., 5.13%, 05/01/2025 | 600,000 | 577,500 | ||||||
3,147,760 | ||||||||
Home Builders (1.7%) | ||||||||
Century Communities, Inc., 5.88%, 07/15/2025 | 750,000 | 678,750 | ||||||
Lennar Corp., 4.75%, 11/29/2027 | 600,000 | 561,000 | ||||||
MDC Holdings, Inc., 6.00%, 01/15/2043 | 550,000 | 440,000 | ||||||
1,679,750 | ||||||||
Internet (0.5%) | ||||||||
Netflix, Inc., 5.38%, 02/01/2021 | 499,000 | 508,356 | ||||||
Leisure Time (0.5%) | ||||||||
Viking Cruises Ltd., 5.88%, 09/15/2027 (b) | 500,000 | 473,750 | ||||||
Lodging (0.7%) | ||||||||
Wyndham Destinations, Inc., 6.35%, 10/01/2025 | 686,000 | 682,570 | ||||||
Machinery-Diversified (1.0%) | ||||||||
Apergy Corp., 6.38%, 05/01/2026 (b) | 968,000 | 980,100 | ||||||
Media (4.9%) | ||||||||
Cablevision Systems Corp., 5.88%, 09/15/2022 | 500,000 | 502,500 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp., 5.88%, 04/01/2024 (b) | 1,013,000 | 1,021,864 | ||||||
CSC Holdings LLC, 10.13%, 01/15/2023 (b) | 1,383,000 | 1,504,566 | ||||||
Meredith Corp., 6.88%, 02/01/2026 (b) | 900,000 | 900,000 | ||||||
Radiate Holdco LLC / Radiate Finance, Inc., 6.63%, 02/15/2025 (b) | 600,000 | 561,000 | ||||||
Sirius XM Radio, Inc., 6.00%, 07/15/2024 (b) | 251,000 | 256,597 | ||||||
4,746,527 | ||||||||
Metal Fabricate/Hardware (0.5%) | ||||||||
Novelis Corp., 5.88%, 09/30/2026 (b) | 500,000 | 471,250 | ||||||
Office/Business Equipment (0.9%) | ||||||||
Pitney Bowes, Inc., 3.88%, 10/01/2021 | 926,000 | 879,700 | ||||||
Oil & Gas Services (1.1%) | ||||||||
Nine Energy Service, Inc., 8.75%, 11/01/2023 (b) | 91,000 | 92,479 | ||||||
Weatherford International Ltd., 9.88%, 02/15/2024 | 600,000 | 468,000 | ||||||
Welltec AS, 9.50%, 12/01/2022 (b) | 500,000 | 515,000 | ||||||
1,075,479 | ||||||||
Oil, Gas & Consumable Fuels (4.0%) | ||||||||
Bruin E&P Partners LLC, 8.88%, 08/01/2023 (b) | 658,000 | 648,130 | ||||||
Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp., 6.00%, 08/01/2026 (b) | 287,000 | 283,413 | ||||||
Moss Creek Resources Holdings, Inc., 7.50%, 01/15/2026 (b) | 500,000 | 481,100 | ||||||
Oasis Petroleum, Inc., 6.25%, 05/01/2026 (b) | 727,000 | 714,277 | ||||||
Sanchez Energy Corp., 7.25%, 02/15/2023 (b) | 500,000 | 458,125 | ||||||
SM Energy Co., 6.75%, 09/15/2026 | 500,000 | 501,250 | ||||||
WPX Energy, Inc., 8.25%, 08/01/2023 | 750,000 | 842,812 | ||||||
3,929,107 | ||||||||
Pharmaceutical (1.0%) | ||||||||
Bausch Health Cos, Inc., 7.00%, 03/15/2024 (b) | 900,000 | 942,471 | ||||||
Retail (1.1%) | ||||||||
Rite Aid Corp., 6.13%, 04/01/2023 (b) | 600,000 | 509,625 | ||||||
Staples, Inc., 8.50%, 09/15/2025 (b) | 600,000 | 543,000 | ||||||
1,052,625 | ||||||||
Software (1.6%) | ||||||||
ACI Worldwide, Inc., 5.75%, 08/15/2026 (b) | 447,000 | 447,000 | ||||||
Change Healthcare Holdings LLC / Change Healthcare Finance, Inc., 5.75%, 03/01/2025 (b) | 500,000 | 488,750 | ||||||
First Data Corp., 5.75%, 01/15/2024 (b) | 603,000 | 606,769 | ||||||
1,542,519 | ||||||||
Total Corporate Bonds | 38,388,331 | |||||||
SHORT-TERM INVESTMENT (7.3%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 7,039,177 | 7,039,177 | ||||||
Total Short-Term Investment | 7,039,177 | |||||||
Total Investments | 98,884,428 | |||||||
Liabilities in Excess of Other Assets—(1.8)% | (1,701,501 | ) | ||||||
Net Assets—100.0% | $ | 97,182,927 |
(a) | Non-income producing security. |
(b) | Denotes a security issued under Regulation S or Rule 144A. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the current yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements.
54 | Annual Report 2018 |
Aberdeen International Equity Fund (Unaudited)
The Aberdeen International Equity Fund (Institutional Class shares net of fees) returned -10.56% for the 12-month period ended October 31, 2018, versus the -7.80% return of its benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World ex USA Index, during the same period. For broader comparison, the average return of the Fund’s peer category of International Large-Cap Growth Funds (comprising 71 funds), as measured by Lipper, Inc., was 8.01%
International equities declined over the reporting period. Investors were initially optimistic towards global economic growth, but investor sentiment turned more negative as the period progressed. Worries that rising inflation could compel more aggressive monetary policy, and a flare-up in trade tensions – especially as U.S.-China trade relations deteriorated amid rounds of brinkmanship – led to higher market volatility. The U.S. broader-market S&P 500 Index initially shrugged off these concerns to record its longest bull run in history, supported by strong corporate earnings growth and a strengthening U.S. dollar. However, a spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations. Emerging markets also came under pressure due to the appreciating U.S. dollar.
The Fund underperformed its benchmark, the MSCI AC World ex USA Index, for the reporting period due to negative stock selection.
At the stock level, South Korean beauty and cosmetics firm AmorePacific Group was a key detractor from the Fund’s relative performance, as the company’s shares declined after its results generally missed the market’s expectations. We are monitoring the stock’s performance. In Hong Kong, the Fund’s holding in luggage-maker Samsonite was pressured by a short-seller’s accusations of accounting lapses and poor corporate governance, as well as concerns over the impact of U.S.-China trade tensions. We believe that the Hong Kong-listed company remains better positioned than its competitors given its larger scale and solid brands. Shares of Brazilian fuel distributor Ultrapar Participacoes S.A. moved lower in tandem with the broader Brazilian equity market, which fell in response to an extended strike by truckers and concerns over economic reforms.
On the flipside, the Fund’s position in German industrial gas supplier Linde plc was a key contributor to relative performance for the reporting period. The company’s stock price advanced on its positive operating profits as well as progress towards the completion of its US$45 billion merger with rival Praxair. Shares of UK exchange-listed consumer credit information services company Experian plc rose on robust results for its 2017 fiscal year and a favorable outlook for 2018. The stock price of Italy-listed Tenaris S.A., which supplies steel pipes for the energy industry, was buoyed by the rising oil price.
Regarding portfolio activity over the period, we initiated positions in several companies including Yum China, a leading restaurant-chain operator, as we like its mix of brands and believe that it may potentially benefit from attractive business prospects in China. We trimmed the Fund’s holdings in Shin-Etsu Chemical Co. and Taiwan Semiconductor Manufacturing Co. in an effort to diversify* the Fund’s exposure to the semiconductor industry by reinvesting the sales proceeds into a new position in Infineon Technologies. We believe that Infineon Technologies is a high-quality business with a net-cash balance sheet that is well-established in automotive end-markets, and also serves the industrial automation market. Additionally, we initiated holdings in Chinese internet giant Tencent Holdings, as we think that the business offers good long-term growth opportunities and brings further diversification to the Fund, and Deutsche Boerse, as we believe that it is a well-managed securities exchange trading at an attractive valuation. We also established new positions in Swiss security group Dormakaba, which in our view possesses solid presence in various global markets and good financial metrics; Auckland International Airport, the largest airport in New Zealand, which we believe has a solid regional position and an effective strategy for medium- and long-term growth; Australia-based wine-maker Treasury Wine Estates, as we believe that it is well-positioned to benefit from growth internationally and its expansion of the premium range; British speciality chemicals company Croda, which in our view is a high-quality business poised to benefit from increasing demand for natural ingredients; and luxury products maker LVMH Moët Hennessy Louis Vuitton S.E., which as we think that it has a healthy diversified portfolio of brands and a good track record.
In contrast, we exited the Fund’s positions in Tenaris, as we considered the stock to be fully valued; hospitality chain Whitbread following its plans to sell its Costa Coffee business; and Ultrapar due to its deteriorating fundamentals and increased regulatory constraint. Furthermore, we sold the Fund’s shares in South African telecom MTN Group given rising political risk attributable to a proposed fine by the Nigerian government, which alleged that the company illegally moved funds out of that country. Finally, we exited the positions in Singapore telecom Singtel due to the intense competition that the company faces, and Australia-based global mining giant BHP Billiton, as we believed that there were better opportunities elsewhere.
Global markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including political uncertainty in Europe caused by tumultuous Brexit negotiations and Italy’s fiscal problems.
While the continued health of corporate earnings goes some way in calming investors’ nerves, we think that politics is increasingly overshadowing central bank policy to become the main driving force of market sentiment. In our view, shifting political alliances may keep markets on their toes but, at the same time, may provide discerning
* | Diversification does not ensure a profit or protect against a loss in a declining market. |
2018 Annual Report | 55 |
Aberdeen International Equity Fund (Unaudited) (concluded)
investors with opportunities to take advantage of mispricing of stocks. Amid such periods of uncertainty, we think that investors increasingly will seek high-quality stocks with defensive characteristics, which we believe should bode well for the Fund’s performance.
Portfolio Management:
Aberdeen Global Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
56 | Annual Report 2018 |
Aberdeen International Equity Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | -10.93% | -1.23% | 5.43% | ||||||||||
w/SC2 | -16.06% | -2.39% | 4.80% | |||||||||||
Class C | w/o SC | -11.54% | -1.92% | 4.70% | ||||||||||
w/SC3 | -12.42% | -1.92% | 4.70% | |||||||||||
Class R4 | w/o SC | -11.14% | -1.51% | 5.17% | ||||||||||
Institutional Service Class4 | w/o SC | -10.58% | -0.97% | 5.67% | ||||||||||
Institutional Class4 | w/o SC | -10.56% | -0.89% | 5.78% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Aberdeen Asset Management Asia Limited began sub-advising the fund on January 1, 2009. Performance prior to this date reflects the performance of an unaffiliated sub-adviser. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen International Equity Fund, the Morgan Stanley Capital International All Country World (MSCI ACWI) ex-US Index and the Consumer Price Index (CPI) over a 10-year period ending October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI ACWI ex-US Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 24 Emerging Markets (EM) countries. With 2,163 constituents, the index covers approximately 85% of the global equity opportunity set outside the US. DM countries in the Index are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK. EM countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 57 |
Aberdeen International Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 105.7% | |||
Preferred Stocks | 9.9% | |||
Short-Term Investment | 2.0% | |||
Liabilities in Excess of Other Assets | (17.6)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Consumer Staples | 21.8% | |||
Financials | 21.1% | |||
Industrials | 15.4% | |||
Health Care | 14.9% | |||
Information Technology | 13.2% | |||
Consumer Discretionary | 7.9% | |||
Materials | 7.5% | |||
Communication Services | 6.6% | |||
Real Estate | 4.2% | |||
Energy | 3.0% | |||
Other | (15.6)% | |||
100.0% |
Top Holdings* | ||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 3.6% | |||
AIA Group Ltd. | 3.6% | |||
Samsung Electronics Co. Ltd., GDR | 3.5% | |||
Banco Bradesco SA, ADR, Preferred Shares, 1.94% | 3.4% | |||
Japan Tobacco, Inc. | 3.3% | |||
Roche Holding AG | 3.2% | |||
Royal Dutch Shell PLC, B Shares | 3.0% | |||
Henkel AG & Co. KGaA, Preferred Shares, 1.33% | 3.0% | |||
Novartis AG | 3.0% | |||
Fomento Economico Mexicano SAB de CV, ADR | 2.8% | |||
Other | 67.6% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United Kingdom | 20.6% | |||
Japan | 16.5% | |||
Germany | 12.6% | |||
Switzerland | 10.0% | |||
Hong Kong | 6.9% | |||
South Korea | 4.8% | |||
China | 4.6% | |||
United States | 4.1% | |||
India | 4.1% | |||
Canada | 4.0% | |||
Other | 11.8% | |||
100.0% |
58 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen International Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (105.7%) | ||||||||
AUSTRALIA (2.8%) | ||||||||
Consumer Staples (1.1%) | ||||||||
Treasury Wine Estates Ltd. (a) | 409,645 | $ | 4,409,239 | |||||
Health Care (1.7%) | ||||||||
CSL Ltd. (a) | 49,800 | 6,648,157 | ||||||
11,057,396 | ||||||||
CANADA (4.0%) | ||||||||
Industrials (1.6%) | ||||||||
Ritchie Bros Auctioneers, Inc. | 185,400 | 6,236,099 | ||||||
Materials (2.4%) | ||||||||
Nutrien Ltd. | 181,360 | 9,600,804 | ||||||
15,836,903 | ||||||||
CHINA (4.6%) | ||||||||
Communication Services (2.0%) | ||||||||
Tencent Holdings Ltd. (a) | 231,100 | 7,917,315 | ||||||
Consumer Discretionary (2.6%) | ||||||||
Yum China Holdings, Inc. | 279,300 | 10,077,144 | ||||||
17,994,459 | ||||||||
FRANCE (3.3%) | ||||||||
Consumer Discretionary (1.2%) | ||||||||
LVMH Moet Hennessy Louis Vuitton SA (a) | 15,600 | 4,733,125 | ||||||
Consumer Staples (2.1%) | ||||||||
L’Oreal SA (a) | 36,200 | 8,156,085 | ||||||
12,889,210 | ||||||||
GERMANY (9.6%) | ||||||||
Financials (1.2%) | ||||||||
Deutsche Boerse AG (a) | 38,600 | 4,877,979 | ||||||
Health Care (4.7%) | ||||||||
Bayer AG (a) | 107,452 | 8,236,457 | ||||||
Fresenius Medical Care AG & Co. KGaA (a) | 130,700 | 10,262,106 | ||||||
18,498,563 | ||||||||
Information Technology (1.6%) | ||||||||
Infineon Technologies AG (a) | 310,400 | 6,219,451 | ||||||
Materials (2.1%) | ||||||||
Linde PLC (b) | 49,896 | 8,186,157 | ||||||
37,782,150 | ||||||||
HONG KONG (6.9%) | ||||||||
Financials (3.6%) | ||||||||
AIA Group Ltd. (a) | 1,840,300 | 13,999,241 | ||||||
Industrials (2.2%) | ||||||||
Jardine Matheson Holdings Ltd. (a) | 151,500 | 8,748,127 | ||||||
Real Estate (1.1%) | ||||||||
Swire Pacific Ltd., Class A (a) | 431,500 | 4,482,718 | ||||||
27,230,086 | ||||||||
INDIA (4.1%) | ||||||||
Consumer Staples (1.6%) | ||||||||
ITC Ltd. (a) | 1,611,100 | 6,079,162 | ||||||
Financials (2.5%) | ||||||||
Housing Development Finance Corp. Ltd. (a) | 418,100 | 9,990,837 | ||||||
16,069,999 | ||||||||
ISRAEL (2.4%) | ||||||||
Information Technology (2.4%) | ||||||||
Check Point Software Technologies Ltd. (b)(c) | 85,900 | 9,534,900 | ||||||
JAPAN (16.5%) | ||||||||
Consumer Discretionary (2.0%) | ||||||||
Shimano, Inc. (a) | 58,400 | 7,975,992 | ||||||
Consumer Staples (3.2%) | ||||||||
Japan Tobacco, Inc. (a) | 500,100 | 12,850,222 | ||||||
Financials (2.1%) | ||||||||
Japan Exchange Group, Inc. (a) | 465,700 | 8,341,019 | ||||||
Health Care (2.3%) | ||||||||
Sysmex Corp. (a) | 130,400 | 9,146,190 | ||||||
Industrials (1.7%) | ||||||||
FANUC Corp. (a) | 37,600 | 6,541,156 | ||||||
Information Technology (2.1%) | ||||||||
Keyence Corp. (a) | 17,000 | 8,304,832 | ||||||
Materials (1.9%) | ||||||||
Shin-Etsu Chemical Co. Ltd. (a) | 87,600 | 7,319,899 | ||||||
Real Estate (1.2%) | ||||||||
Daito Trust Construction Co. Ltd. (a) | 35,600 | 4,693,445 | ||||||
65,172,755 | ||||||||
MEXICO (2.8%) | ||||||||
Consumer Staples (2.8%) | ||||||||
Fomento Economico Mexicano SAB de CV, ADR | 131,500 | 11,186,705 | ||||||
NEW ZEALAND (1.2%) | ||||||||
Industrials (1.2%) | ||||||||
Auckland International Airport Ltd. (a) | 1,047,200 | 4,788,918 | ||||||
PHILIPPINES (1.9%) | ||||||||
Real Estate (1.9%) | ||||||||
Ayala Land, Inc. (a) | 10,350,900 | 7,680,407 | ||||||
SINGAPORE (2.1%) | ||||||||
Financials (2.1%) | ||||||||
Oversea-Chinese Banking Corp. Ltd. (a) | 1,041,118 | 8,087,874 | ||||||
SOUTH KOREA (1.3%) | ||||||||
Consumer Staples (1.3%) | ||||||||
Amorepacific Group (a) | 90,700 | 4,971,303 | ||||||
SWEDEN (3.3%) | ||||||||
Industrials (3.3%) | ||||||||
Atlas Copco AB, A Shares (a) | 355,000 | 8,776,222 | ||||||
Epiroc AB, Class A (b) | 495,900 | 4,354,701 | ||||||
13,130,923 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 59 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen International Equity Fund
Shares or Principal Amount | Value | |||||||
SWITZERLAND (10.0%) | ||||||||
Consumer Staples (2.6%) | ||||||||
Nestle SA (a) | 122,300 | $ | 10,324,943 | |||||
Health Care (6.2%) | ||||||||
Novartis AG (a) | 134,800 | 11,804,746 | ||||||
Roche Holding AG (a) | 51,900 | 12,630,509 | ||||||
24,435,255 | ||||||||
Industrials (1.2%) | ||||||||
dormakaba Holding AG (a)(b) | 6,774 | 4,887,042 | ||||||
39,647,240 | ||||||||
TAIWAN (3.6%) | ||||||||
Information Technology (3.6%) | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (a) | 1,906,000 | 14,309,070 | ||||||
THAILAND (2.6%) | ||||||||
Financials (2.6%) | ||||||||
Kasikornbank PCL (a) | 1,673,400 | 10,076,539 | ||||||
UNITED KINGDOM (20.6%) | ||||||||
Communication Services (4.6%) | ||||||||
Inmarsat PLC (a) | 1,478,300 | 8,596,951 | ||||||
Vodafone Group PLC (a) | 5,048,400 | 9,493,708 | ||||||
18,090,659 | ||||||||
Consumer Staples (4.1%) | ||||||||
British American Tobacco PLC (a) | 186,000 | 8,063,149 | ||||||
Diageo PLC (a) | 231,800 | 8,013,678 | ||||||
16,076,827 | ||||||||
Energy (3.0%) | ||||||||
Royal Dutch Shell PLC, B Shares (a) | 367,500 | 11,985,250 | ||||||
Financials (3.6%) | ||||||||
Prudential PLC (a) | 450,100 | 9,012,635 | ||||||
Standard Chartered PLC (a) | 770,157 | 5,397,805 | ||||||
14,410,440 | ||||||||
Industrials (4.2%) | ||||||||
Experian PLC (a) | 402,900 | 9,266,375 | ||||||
Rolls-Royce Holdings PLC (a) | 673,100 | 7,218,450 | ||||||
16,484,825 | ||||||||
Materials (1.1%) | ||||||||
Croda International PLC (a) | 73,560 | 4,530,971 | ||||||
81,578,972 | ||||||||
UNITED STATES (2.1%) | ||||||||
Consumer Discretionary (2.1%) | ||||||||
Samsonite International SA (a)(b)(d) | 2,934,000 | 8,461,599 | ||||||
Total Common Stocks | 417,487,408 | |||||||
PREFERRED STOCKS (9.9%) | ||||||||
BRAZIL (3.4%) | ||||||||
Financials (3.4%) | ||||||||
Banco Bradesco SA, ADR, Preferred Shares, 1.94% | 1,473,583 | 13,512,756 | ||||||
GERMANY (3.0%) | ||||||||
Consumer Staples (3.0%) | ||||||||
Henkel AG & Co. KGaA, Preferred Shares, 1.33% (a) | 108,400 | 11,843,214 | ||||||
SOUTH KOREA (3.5%) | ||||||||
Information Technology (3.5%) | ||||||||
Samsung Electronics Co. Ltd., GDR | 17,800 | 13,919,600 | ||||||
UNITED KINGDOM (0.0%) | ||||||||
Industrials (0.0%) | ||||||||
Rolls-Royce Holdings PLC, C Shares (b) | 30,962,600 | 39,576 | ||||||
Total Preferred Stocks | 39,315,146 | |||||||
SHORT-TERM INVESTMENT (2.0%) | ||||||||
UNITED STATES (2.0%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (e) | 7,797,556 | 7,797,556 | ||||||
Total Short-Term Investment | 7,797,556 | |||||||
Total Investments | 464,600,110 | |||||||
Liabilities in Excess of Other Assets—(17.6)% | (69,472,670 | ) | ||||||
Net Assets—100.0% | $ | 395,127,440 |
(a) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(b) | Non-income producing security. |
(c) | All or a portion of the securities are on loan. The total value of all securities on loan is $3,614,662. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(l) for additional information. |
(d) | Denotes a security issued under Regulation S or Rule 144A. |
(e) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ADR | American Depositary Receipt |
GDR | Global Depositary Receipt |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
60 | Annual Report 2018 |
Aberdeen International Small Cap Fund (Unaudited)
The Aberdeen International Small Cap Fund (Institutional Class shares net of fees) returned -3.34 % for the 12-month period ended October 31, 2018, versus the -9.39% return of its benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World ex USA Small Cap Index, during the same period. For broader comparison, the average return of the Fund’s peer category of International Small/Mid-Cap Growth Funds (comprising 88 funds), as measured by Lipper, Inc., was -8.95% for the period.
International small-cap equities declined during the reporting period, as volatile market conditions curbed investors’ risk appetite. Investors were initially optimistic towards global economic growth, but investor sentiment turned more negative as the period progressed. Worries that rising inflation could compel more aggressive monetary policy, and a flare-up in trade tensions – especially as U.S.-China trade relations deteriorated amid rounds of brinkmanship – led to higher market volatility. The U.S. broader-market Standard & Poor’s (S&P) 500 Index* initially shrugged off these concerns to record its longest bull run in history, supported by strong corporate earnings growth and a strengthening U.S. dollar. However, a spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations. Emerging markets also came under pressure due to the appreciating U.S. dollar.
The Fund’s outperformance relative to its benchmark, the MSCI All Country AC World ex USA Small Cap Index, for the reporting period was attributable primarily to positive stock selection.
At the stock level, the Fund’s holding in Aveva Group was a key contributor to relative performance. Shares of the UK engineering software developer rallied as investors warmed to the potential synergy benefits from its merger with Schneider Electric’s software business. We took some profits from the stock on the share-price strength. Chocolate and cocoa company Barry Callebaut’s stock price rose on sales that generally exceeded the market’s expectations and a positive growth outlook. The Fund’s position in Asahi Intecc benefited relative performance as the Japanese medical device maker posted good results over the period boosted by its rival’s production issues. Asahi Intecc subsequently unveiled a five-year plan aimed at pursuing rapid market-share gains in existing markets, while adopting a direct-sales model in the U.S. and parts of Asia and Europe.
On the flipside, the Fund’s holding in UK funeral service provider Dignity plc was hampered by investors’ concerns about its uncertain outlook and a change in its business model. The company had been compelled to cut prices to remain competitive, and was undergoing a strategic review to reduce costs and improve efficiencies; we have since exited the position in the company. The holding in Japanese industrial equipment producer Nabtesco also detracted from the Fund’s relative performance. Its stock price fell as demand slowed for its precision-reduction gears, a main component used in industrial robots. With factory-automation demand expected to rise structurally over the medium to long term, we maintain a positive view about the firm’s prospects, particularly as it holds 60% of the global market precision-reduction gear. Shares of Chilean beverage firm Embotelladora Andina declined over the reporting period on weak quarterly results due to lower-than-expected sales in Brazil and Paraguay. However, we believe that Embotelladora Andina is well positioned to capture the growth in still drinks (i.e., ready-to-drink tea, bottled water and sports drinks) as consumers switch from carbonated beverages. Additionally, the company still generates good cash flow.
Regarding portfolio activity over the reporting period, we initiated a holding in Tecan Group, a Swiss medical equipment manufacturer and provider of solutions for pharmaceutical and biotechnology companies and diagnostic laboratories. In our opinion, the company has a favorable market position and good growth potential. We also initiated a position in UK-based telecommunications company Inmarsat, as we believe that it maintains a solid global position with growth opportunities in aviation, which should help drive long-term earnings and cash-generation. We also established new positions in Swiss high-quality vacuum-valve supplier VAT Group as we believe that it has robust long-term prospects and an attractive valuation, and Vietnamese lender Techcombank following its recent initial public offering. In our opinion, the bank has a solid franchise in a rapidly developing country, low cost-income ratio and disciplined management.
In addition to Dignity as previously noted, we exited the Fund’s positions in agricultural products maker KWS Saat, as we believed that it had reached its full valuation. We sold two UK-based companies, asset manager Rathbone Brothers and engineered products and services company The Weir Group, as well as Japanese hotel, golf and medical business firm Resorttrust, to fund what we believed were better opportunities elsewhere. We also exited the positions in Japanese healthcare equipment firm Sysmex and German flavors and fragrances firm Symrise as their market capitalizations had increased. We sold the Fund’s shares in Israeli flavor manufacturer Frutarom following its takeover by New York rival International Flavors & Fragrances.
Global markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including political uncertainty in Europe caused by tumultuous Brexit negotiations and Italy’s fiscal problems.
While the continued health of corporate earnings goes some way in calming investors’ nerves, we think that politics is increasingly overshadowing central bank policy to become the main driving force of market sentiment. In our view, shifting political alliances may keep markets on their toes but, at the same time, may provide discerning investors with opportunities to take advantage of mispricing of
* | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. |
2018 Annual Report | 61 |
Aberdeen International Small Cap Fund (Unaudited) (concluded)
stocks. Amid such periods of uncertainty, we think that investors increasingly will seek high-quality stocks with defensive characteristics, which we believe should bode well for the Fund’s performance.
Portfolio Management:
Aberdeen Global Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Smaller company stocks are usually less stable in price and less liquid than those of larger, more established companies, and therefore carry greater risk to investors.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
62 | Annual Report 2018 |
Aberdeen International Small Cap Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A2 | w/o SC | -3.68% | 5.33% | 11.37% | ||||||||||
w/SC3 | -9.21% | 4.09% | 10.72% | |||||||||||
Class C | w/o SC | -4.31% | 4.62% | 10.60% | ||||||||||
w/SC4 | -5.23% | 4.62% | 10.60% | |||||||||||
Class R5,6 | w/o SC | -3.98% | 5.00% | 11.06% | ||||||||||
Institutional Service Class5,7 | w/o SC | -3.50% | 5.44% | 11.52% | ||||||||||
Institutional Class5,8 | w/o SC | -3.34% | 5.67% | 11.67% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund changed its investment strategy effective February 29, 2016. Performance information for periods prior to February 29, 2016 does not reflect the current investment strategy. Returns prior to July 20, 2009 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. Prior to the change of investment strategy of the Fund effective February 29, 2016, the Fund and the Predecessor Fund had substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | Class A returns prior to July 20, 2009, are based on the previous performance of Common Class shares of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class A shares would have produced because both classes invest in the same portfolio of securities. Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. |
3 | A 5.75% front-end sales charge was deducted. |
4 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
5 | Not subject to any sales charges. |
6 | Returns for Class R shares prior to July 20, 2009 are based on the previous performance of Adviser Class shares of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. |
7 | Returns before the first offering of Institutional Service Class shares (September 16, 2009) are based on the previous performance of the Fund’s Class A shares. This performance is substantially similar to what Institutional Service Class shares would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses between the two classes. |
8 | Returns before the first offering of Institutional Class shares (July 20, 2009) are based on the previous performance of Common Class shares of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns have been adjusted to eliminate sales charges that do not apply to Institutional Class shares, but have not been adjusted to reflect its lower expenses. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen International Small Cap Fund, Morgan Stanley Capital Index (MSCI) All Country World (ACWI) ex-US Small Cap Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI ACWI ex-US Small Cap Index captures small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 24 Emerging Markets (EM) countries. With 4,284 constituents, the index covers approximately 14% of the global equity opportunity set outside the US. DM countries in the Index are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK. EM countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 63 |
Aberdeen International Small Cap Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 96.0% | |||
Short-Term Investment | 4.0% | |||
Other Assets in Excess of Liabilities | –% | |||
100.0% |
Amounts listed as “–” are 0% or round to 0%.
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Industrials | 23.8% | |||
Consumer Staples | 17.6% | |||
Health Care | 16.1% | |||
Consumer Discretionary | 15.8% | |||
Materials | 9.1% | |||
Information Technology | 5.6% | |||
Real Estate | 5.0% | |||
Financials | 1.7% | |||
Communication Services | 1.3% | |||
Other | 4.0% | |||
100.0% |
Top Holdings* | ||||
Barry Callebaut AG | 3.1% | |||
Kerry Logistics Network Ltd. | 3.1% | |||
Grupo Aeroportuario del Sureste SAB de CV, Class B | 3.1% | |||
Embotelladora Andina SA | 3.0% | |||
Odontoprev SA | 2.7% | |||
AVEVA Group PLC | 2.7% | |||
dormakaba Holding AG | 2.6% | |||
Tecan Group AG | 2.6% | |||
Dechra Pharmaceuticals PLC | 2.6% | |||
ARB Corp. Ltd. | 2.6% | |||
Other | 71.9% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United Kingdom | 19.5% | |||
Switzerland | 11.9% | |||
Brazil | 8.8% | |||
Japan | 6.1% | |||
Chile | 5.9% | |||
United States | 5.6% | |||
India | 4.5% | |||
Indonesia | 4.4% | |||
Germany | 3.9% | |||
Canada | 3.1% | |||
Other | 26.3% | |||
100.0% |
64 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen International Small Cap Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (96.0%) | ||||||||
AUSTRALIA (2.6%) | ||||||||
Consumer Discretionary (2.6%) | ||||||||
ARB Corp. Ltd. (a) | 136,400 | $ | 1,677,753 | |||||
BRAZIL (8.8%) | ||||||||
Consumer Discretionary (2.2%) | ||||||||
Arezzo Industria e Comercio SA | 109,100 | 1,389,585 | ||||||
Health Care (2.7%) | ||||||||
Odontoprev SA | 491,000 | 1,744,195 | ||||||
Industrials (2.3%) | ||||||||
Wilson Sons Ltd., BDR | 136,686 | 1,505,878 | ||||||
Real Estate (1.6%) | ||||||||
Iguatemi Empresa de Shopping Centers SA | 101,200 | 1,056,733 | ||||||
5,696,391 | ||||||||
CANADA (3.1%) | ||||||||
Financials (1.3%) | ||||||||
Canadian Western Bank | 36,400 | 846,646 | ||||||
Industrials (1.8%) | ||||||||
Ritchie Bros Auctioneers, Inc. | 34,800 | 1,170,530 | ||||||
2,017,176 | ||||||||
CHILE (5.9%) | ||||||||
Consumer Staples (5.0%) | ||||||||
Embotelladora Andina SA (a) | 624,900 | 1,932,407 | ||||||
Vina Concha y Toro SA | 681,800 | 1,283,264 | ||||||
3,215,671 | ||||||||
Real Estate (0.9%) | ||||||||
Parque Arauco SA | 270,300 | 613,608 | ||||||
3,829,279 | ||||||||
GERMANY (3.9%) | ||||||||
Consumer Discretionary (1.7%) | ||||||||
Fielmann AG (a) | 17,500 | 1,085,516 | ||||||
Materials (2.2%) | ||||||||
FUCHS PETROLUB SE (a) | 32,900 | 1,424,506 | ||||||
2,510,022 | ||||||||
HONG KONG (3.1%) | ||||||||
Industrials (3.1%) | ||||||||
Kerry Logistics Network Ltd. (a) | 1,256,700 | 1,993,006 | ||||||
INDIA (4.5%) | ||||||||
Consumer Staples (1.6%) | ||||||||
Jyothy Laboratories Ltd. (a) | 417,400 | 1,062,872 | ||||||
Health Care (1.3%) | ||||||||
Sanofi India Ltd. (a) | 10,700 | 839,085 | ||||||
Materials (1.6%) | ||||||||
Castrol (India) Ltd. (a) | 521,600 | 1,043,832 | ||||||
2,945,789 | ||||||||
INDONESIA (4.4%) | ||||||||
Consumer Discretionary (2.5%) | ||||||||
Ace Hardware Indonesia Tbk PT | 18,055,900 | 1,627,139 | ||||||
Materials (1.9%) | ||||||||
Indocement Tunggal Prakarsa Tbk PT (a) | 1,046,400 | 1,193,968 | ||||||
2,821,107 | ||||||||
ISRAEL (1.5%) | ||||||||
Information Technology (1.5%) | ||||||||
NICE Ltd. (a)(b) | 9,300 | 986,797 | ||||||
ITALY (2.1%) | ||||||||
Consumer Discretionary (2.1%) | ||||||||
Brunello Cucinelli SpA (a) | 39,400 | 1,348,649 | ||||||
JAPAN (6.1%) | ||||||||
Consumer Staples (1.6%) | ||||||||
Calbee, Inc. (a) | 31,400 | 1,041,764 | ||||||
Health Care (2.4%) | ||||||||
Asahi Intecc Co. Ltd. (a) | 37,000 | 1,515,311 | ||||||
Industrials (2.1%) | ||||||||
Nabtesco Corp. (a) | 62,900 | 1,380,708 | ||||||
3,937,783 | ||||||||
MALAYSIA (1.6%) | ||||||||
Consumer Staples (1.6%) | ||||||||
Carlsberg Brewery Malaysia Bhd (a) | 236,200 | 1,005,426 | ||||||
MEXICO (3.1%) | ||||||||
Industrials (3.1%) | ||||||||
Grupo Aeroportuario del Sureste SAB de CV, Class B | 120,400 | 1,986,253 | ||||||
NEW ZEALAND (2.1%) | ||||||||
Industrials (2.1%) | ||||||||
Auckland International Airport Ltd. (a) | 303,600 | 1,388,384 | ||||||
SINGAPORE (2.6%) | ||||||||
Health Care (2.6%) | ||||||||
Raffles Medical Group Ltd. (a) | 2,208,944 | 1,677,522 | ||||||
SOUTH AFRICA (1.4%) | ||||||||
Consumer Staples (1.4%) | ||||||||
Clicks Group Ltd. | 73,000 | 930,283 | ||||||
SPAIN (1.8%) | ||||||||
Consumer Staples (1.8%) | ||||||||
Viscofan SA (a) | 19,900 | 1,190,343 | ||||||
SWITZERLAND (11.9%) | ||||||||
Consumer Staples (3.1%) | ||||||||
Barry Callebaut AG (a) | 1,040 | 2,032,759 | ||||||
Health Care (2.6%) | ||||||||
Tecan Group AG (a) | 7,500 | 1,691,908 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 65 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen International Small Cap Fund
Shares or Principal Amount | Value | |||||||
Industrials (4.8%) | ||||||||
dormakaba Holding AG (a)(b) | 2,370 | $ | 1,709,816 | |||||
VAT Group AG (a)(b)(c), 144A | 13,600 | 1,364,655 | ||||||
3,074,471 | ||||||||
Information Technology (1.4%) | ||||||||
Temenos AG (a)(b) | 6,800 | 934,571 | ||||||
7,733,709 | ||||||||
THAILAND (2.5%) | ||||||||
Real Estate (2.5%) | ||||||||
Tesco Lotus Retail Growth Freehold & Leasehold Property Fund (a)(d) | 2,772,000 | 1,597,140 | ||||||
TURKEY (1.5%) | ||||||||
Consumer Staples (1.5%) | ||||||||
BIM Birlesik Magazalar A.S. (a) | 67,300 | 956,698 | ||||||
UNITED KINGDOM (19.5%) | ||||||||
Communication Services (1.3%) | ||||||||
Inmarsat PLC (a) | 149,200 | 867,662 | ||||||
Consumer Discretionary (3.1%) | ||||||||
Fuller Smith & Turner PLC, Class A | 84,700 | 1,039,330 | ||||||
Millennium & Copthorne Hotels PLC (a) | 156,800 | 949,859 | ||||||
1,989,189 | ||||||||
Health Care (4.5%) | ||||||||
Dechra Pharmaceuticals PLC (a) | 57,800 | 1,688,805 | ||||||
Genus PLC (a) | 44,100 | 1,245,955 | ||||||
2,934,760 | ||||||||
Industrials (4.5%) | ||||||||
Rotork PLC (a) | 355,200 | 1,360,103 | ||||||
Ultra Electronics Holdings PLC | 85,200 | 1,566,020 | ||||||
2,926,123 | ||||||||
Information Technology (2.7%) | ||||||||
AVEVA Group PLC (a) | 51,300 | 1,715,992 | ||||||
Materials (3.4%) | ||||||||
Croda International PLC (a) | 21,000 | 1,293,507 | ||||||
Victrex PLC (a) | 26,200 | 886,247 | ||||||
2,179,754 | ||||||||
12,613,480 | ||||||||
UNITED STATES (1.6%) | ||||||||
Consumer Discretionary (1.6%) | ||||||||
Samsonite International SA (a)(b)(c) | 367,800 | 1,060,728 | ||||||
VIETNAM (0.4%) | ||||||||
Financials (0.4%) | ||||||||
Vietnam Technological & Commercial Joint Stock Bank (b) | 209,250 | 241,110 | ||||||
Total Common Stocks | 62,144,828 | |||||||
SHORT-TERM INVESTMENT (4.0%) | ||||||||
UNITED STATES (4.0%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (e) | 2,550,930 | 2,550,930 | ||||||
Total Short-Term Investment | 2,550,930 | |||||||
Total Investments | 64,695,758 | |||||||
Other Assets in Excess of Liabilities—0.0% | 25,422 | |||||||
Net Assets—100.0% | $ | 64,721,180 |
(a) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(b) | Non-income producing security. |
(c) | Denotes a security issued under Regulation S or Rule 144A. |
(d) | As of October 31, 2018, security is a closed-end fund incorporated in Thailand. |
(e) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
BDR | Brazilian Depositary Receipt |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
66 | Annual Report 2018 |
Aberdeen Japanese Equities Fund (Unaudited)
The Aberdeen Japanese Equities Fund (Institutional Class shares net of fees) returned -13.16% for the 12-month period ended October 31, 2018, versus the -3.24% return of its benchmark, the Morgan Stanley Capital International (MSCI) Japan Index, and the -4.13% return of the Tokyo Stock Price Index (TOPIX)1 during the same period. For broader comparison, the average return of the Fund’s peer category of Japanese Funds (comprising 28 funds), as measured by Lipper, Inc., was -4.98% for the period.
Japanese equities faced increasing volatility during the reporting period, particularly in the latter half as U.S. President Donald Trump’s “America First” rhetoric grew more strident. Both the investment landscape, as well as the real economy, was marred by the trade rift between the U.S. and China. Consequently, emerging markets suffered from investors’ fears of contagion. Aggravating the situation was a liquidity squeeze on the U.S. dollar that stemmed from U.S. tax reforms that forced U.S. companies to repatriate2 their earnings, as well as the Federal Reserve’s monetary policy tightening. Rising oil prices also filtered through to inflation rates in both the developed and developing worlds. In Japan, the longest economic growth streak in 28 years had a hiccup in the first quarter of 2018. However, the Japanese economy subsequently resumed its upward trajectory. An upgrade of second-quarter gross 2018 domestic product (GDP) data was attributable to an increase in capital investments. This was partly the result of the tight labor market, which saw the unemployment rate reach its lowest since the 1990s, boosting investments in labor-saving technologies.
At the fundamental level, we are most concerned with the uncertainty amid the rising intensity of trade disputes and the Chinese economy’s slowdown, which could disproportionately hurt Japanese companies, given their growing mainland China presence in recent years. Notably, in our view, orders of capital goods in China have almost ground to a halt since early summer of 2018, as manufacturers sit out the uncertainty, while consumption of larger ticket items slowed on the back of a tightening of peer-to-peer lending. Against that backdrop, the share prices of many Japanese companies operating in China have been punished; these are the same companies that have performed well in the past on the back of their successful expansion plans.
At the stock level, the Fund’s holding in industrial equipment producer Nabtesco Corp. detracted from performance for the reporting period, as its shares fell due to a decline in orders and a softer outlook for the robotics industry. The company also posted relatively lackluster corporate results that contrasted with robust results in 2017. Exacerbating the pressure on its stock price was a downgrade of its earnings forecast, attributable mainly to a goodwill impairment stemming from its acquisition of a German industrial equipment company in 2017. The write-down caused much confusion, particularly when the relatively insignificant numbers were due to a postponement of orders rather than an outright cancellation. We have engaged with Nabtesco’s management about our dissatisfaction with the explanation provided and urged the company to appoint an experienced chief financial officer to manage corporate finance and acquisition-related issues. Nevertheless, with factory-automation demand expected to rise structurally over the medium to long term, we maintain our positive view about Nabtesco’s prospects, particularly as it holds a 60% global share for precision-reduction gears used in the manufacture of industrial robots. Additionally, the Fund’s holding in Renesas Electronics Corp., a supplier of semiconductors used in automobiles, weighed on relative performance due to investors’ worries that it had overpaid to acquire U.S.-based Integrated Device Technology (IDT). After speaking with management, we are comfortable with the purchase. While inventory adjustments may continue in the short term, we believe that the company’s medium-term prospects appear firm, given its wide technological moat3 and market-leading technology, backed by favorable longer-term trends. Finally, the position in Suruga Bank Ltd. was also a notable detractor from the Fund’s relative performance, as its shares declined amid reports about its approval of loans based on falsified applications and accompanying regulatory attention. We subsequently exited the Fund’s position in Suruga Bank in May 2018.
The Fund’s relative performance was bolstered by the holding in cosmetics company Shiseido Co. Ltd., which continued to benefit from its successful restructuring and strong demand for its high-end cosmetics among Asian consumers. The position in Shionogi also contributed to the Fund’s relative performance, as its flu drug Xofluza received U.S. regulatory approval two months ahead of expectations. The company also reported positive phase 3 trial4 results for its once-a-month HIV treatment. Finally, the holding in baby care products maker Pigeon Corp. had a positive impact on performance, as its shares moved higher on good corporate results that were lifted by healthy sales. The company also benefited from robust demand from China, which we believe should continue, given the country’s burgeoning middle class and its growing desire for premium products.
Regarding portfolio activity during the reporting period, we initiated positions in Start Today Co. Ltd., Yamaha Corp., Misumi Group Inc., and Coca-Cola Bottlers Japan Holdings Inc. Start Today Co. is a market leader in the fashion industry, with a sizable user base and a broad range of brands. We like the company’s asset-light business model that generates revenue from commissions based on sales that the brands make through its e-commerce platform. We are confident in Start Today Co.’s ability to continue growing both its user base and
1 | The Tokyo Stock Price Index (TOPIX) is a market capitalization–weighted index of large and mid-sized companies listed on the Tokyo Stock Exchange. |
2 | Repatriation refers to a corporation’s conversion of any offshore capital back to the currency of the country in which the corporation is based. |
3 | A business moat is a competitive advantage that one company has over other companies in the same industry. |
4 | A phase 3 clinical trial is conducted to confirm and expand on safety and effectiveness results from the first two phases to compare the drug to standard therapies for the disease or condition being studied, and to evaluate the overall risks and benefits of the drug. |
2018 Annual Report | 67 |
Aberdeen Japanese Equities Fund (Unaudited) (continued)
transaction volumes, as we believe that the rising penetration of e-commerce in the Japanese market could serve as a tailwind. Yamaha Corp. has narrowed its business focus to only musical instruments, where it has a solid global market share, and audio equipment, given its competitive edge in sound-synthesis technology, after years of difficult restructuring. We anticipate that Yamaha Corp. should be in a good position to benefit from healthy market growth in developed and emerging markets, even as it continues to restructure its production facilities. Additionally, the company has been gradually unwinding its cross-shareholdings5 and returning the proceeds to shareholders. Misumi Group is a producer and distributor of industrial components. The company offers shorter lead times for custom-made products as part of a logistics-driven manufacturing process, with finishing factories close to customers. This has allowed it to outpace rivals in a fragmented market and generate repeat orders and cross-selling opportunities for its standardized-components catalog business. Coca-Cola Bottlers Japan Holdings Inc. was formed from the merger between the country’s two largest bottlers in 2017. The company has introduced international “best practices” to its operations. This included streamlining its logistics footprint to increase profitability, while also prioritizing shareholder returns.
Other new positions established over the period included Otsuka, a systems integrator and office-goods supplier, with a network of more than a million small- and medium-sized enterprises (SMEs), which it has cultivated over decades, creating a high barrier of entry for competitors. With rising resources constraints at SMEs and their greater adoption of technology, we believe that there is still much room for Otsuka to expand its network and its cross-selling opportunities. We also initiated a holding in drugstore operator Welcia Holdings, a subsidiary of retail group Aeon. Welcia has continually posted above-industry average growth rates for both customer spending and traffic through its tailored stores, the use of promotions, and a dedicated focus on in-store pharmacies, a structural trend stemming from Japan’s aging society. The company also has a strong track record in mergers and acquisitions and subsequently, in improving the profitability of acquired stores. With the drugstore segment still comparatively more fragmented than other retail formats in Japan, we think that more dominant players, such as Welcia, are able to target opportunistic acquisitions. We believe that this should continue to complement its organic growth.
Conversely, we exited the Fund’s positions in sporting-goods retailer ASICS Corp., pharmaceutical firm Astellas Pharma Inc., property development and management company Mitsubishi Estate Co. Ltd., construction company Sekisui House Ltd., financial services company Concordia Financial Group Inc., and real estate developer Daito Trust Construction Co., Ltd., in favor of what we believed were better opportunities elsewhere.
In our view, global markets are likely to continue to be swayed by macroeconomic events in the near term, especially in the wake of recent volatility, dampened by trade tensions, a strengthening U.S. dollar, and tighter monetary policies. Other threats, such as political uncertainty in Europe, linger, while the technology sector rally in the U.S. appears to have lost momentum.
At this juncture, we believe that it is important to distinguish between shorter-term cyclical issues and the prospects of medium- to longer-term structural growth. While we are cautious about the Japanese market’s prospects in 2019, we strongly believe that long-term investment themes are still intact and the Fund is fundamentally solid and well-positioned. We think that the Japanese stock market will be reactive to shorter-term newsflow and dismissive of the longer-term prospects. Against this backdrop, we remain vigilant in our assessment of the fundamentals of the Fund’s holdings, and we are particularly mindful of their balance-sheet health should there be a prolonged period of uncertainty.
Portfolio Management:
Aberdeen Asia-Pacific Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Concentrating investments in the Japan region subjects the Fund to more volatility and greater risk of loss than geographically diverse mutual funds.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Equity stocks of small- and mid-cap companies carry greater risk, and more volatility than equity stocks of larger, more established companies.
5 | Cross-shareholding refers to two or more publicly traded corporations owning stock in each other. |
68 | Annual Report 2018 |
Aberdeen Japanese Equities Fund (Unaudited) (concluded)
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 69 |
Aberdeen Japanese Equities Fund (Unaudited)
Average Annual Total Return (For periods ended October 31, 2018) | 1 Yr. | Inception1 | ||||||||
Class A | w/o SC | -13.46% | 2.17% | |||||||
w/SC2 | -18.42% | 0.13% | ||||||||
Class C | w/o SC | -14.07% | 1.44% | |||||||
w/SC3 | -14.92% | 1.44% | ||||||||
Class R4 | w/o SC | -13.61% | 1.96% | |||||||
Institutional Service Class4 | w/o SC | -13.16% | 2.46% | |||||||
Institutional Class4 | w/o SC | -13.16% | 2.46% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Fund commenced operations on November 30, 2015. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Japanese Equities Fund, the Morgan Stanley Capital International (MSCI) Japan Index and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese market. With 322 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Japan.
TOPIX is a free-float adjusted market capitalization-weighted index that is calculated based on all the domestic common stocks listed on the Tokyo Stock Exchange First Section. TOPIX shows the measure of current market capitalization assuming that market capitalization as of the base date (January 4, 1968) is 100 points. Indexes are unmanaged and have been provided for comparison purposes only.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment returns and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
70 | Annual Report 2018 |
Aberdeen Japanese Equities Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 96.8% | |||
Short-Term Investment | 0.5% | |||
Other Assets in Excess of Liabilities | 2.7% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Industrials | 20.2% | |||
Consumer Discretionary | 17.7% | |||
Consumer Staples | 17.3% | |||
Health Care | 12.4% | |||
Information Technology | 9.8% | |||
Materials | 9.1% | |||
Communication Services | 5.7% | |||
Financials | 4.6% | |||
Other | 3.2% | |||
100.0% |
Top Holdings* | ||||
Shin-Etsu Chemical Co. Ltd. | 5.3% | |||
Keyence Corp. | 4.8% | |||
Shionogi & Co. Ltd. | 4.3% | |||
Daikin Industries Ltd. | 3.9% | |||
Seven & i Holdings Co. Ltd. | 3.9% | |||
Pigeon Corp. | 3.8% | |||
KDDI Corp. | 3.8% | |||
Sysmex Corp. | 3.6% | |||
Shiseido Co. Ltd. | 3.5% | |||
Yamaha Corp. | 3.4% | |||
Other | 59.7% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
Japan | 96.8% | |||
United States | 0.5% | |||
Other | 2.7% | |||
100.0% |
2018 Annual Report | 71 |
Statement of Investments
October 31, 2018
Aberdeen Japanese Equities Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (96.8%) (a) | ||||||||
JAPAN (96.8%) | ||||||||
Communication Services (5.7%) | ||||||||
KDDI Corp. | 2,205 | $ | 53,361 | |||||
Yahoo Japan Corp. | 8,660 | 27,018 | ||||||
80,379 | ||||||||
Consumer Discretionary (17.7%) | ||||||||
Denso Corp. | 950 | 42,375 | ||||||
Honda Motor Co. Ltd. | 640 | 18,269 | ||||||
Nitori Holdings Co. Ltd. | 160 | 20,892 | ||||||
Shimano, Inc. | 110 | 15,023 | ||||||
Stanley Electric Co. Ltd. | 1,290 | 38,159 | ||||||
Toyota Motor Corp. | 370 | 21,675 | ||||||
USS Co. Ltd. | 1,080 | 19,474 | ||||||
Yamaha Corp. | 1,080 | 47,460 | ||||||
ZOZO, Inc. | 1,080 | 25,914 | ||||||
249,241 | ||||||||
Consumer Staples (17.3%) | ||||||||
Calbee, Inc. | 540 | 17,916 | ||||||
Coca-Cola Bottlers Japan Holdings, Inc. | 420 | 10,992 | ||||||
Japan Tobacco, Inc. | 1,450 | 37,258 | ||||||
Pigeon Corp. | 1,270 | 53,711 | ||||||
Seven & i Holdings Co. Ltd. | 1,260 | 54,558 | ||||||
Shiseido Co. Ltd. | 780 | 49,214 | ||||||
Welcia Holdings Co. Ltd. | 400 | 20,407 | ||||||
244,056 | ||||||||
Financials (4.6%) | ||||||||
AEON Financial Service Co. Ltd. | 1,210 | 23,682 | ||||||
Japan Exchange Group, Inc. | 2,250 | 40,299 | ||||||
63,981 | ||||||||
Health Care (12.4%) | ||||||||
Asahi Intecc Co. Ltd. | 580 | 23,754 | ||||||
Chugai Pharmaceutical Co. Ltd. | 690 | 40,397 | ||||||
Shionogi & Co. Ltd. | 950 | 60,746 | ||||||
Sysmex Corp. | 717 | 50,290 | ||||||
175,187 | ||||||||
Industrials (20.2%) | ||||||||
Amada Holdings Co. Ltd. | 4,180 | 39,379 | ||||||
Daikin Industries Ltd. | 474 | 54,942 | ||||||
East Japan Railway Co. | 345 | 30,131 | ||||||
FANUC Corp. | 219 | 38,099 | ||||||
Hoshizaki Corp. | 150 | 12,108 | ||||||
Komatsu Ltd. | 560 | 14,584 | ||||||
Makita Corp. | 1,270 | 43,907 | ||||||
MISUMI Group, Inc. | 650 | 13,027 | ||||||
Nabtesco Corp. | 1,740 | 38,194 | ||||||
284,371 | ||||||||
Information Technology (9.8%) | ||||||||
Keyence Corp. | 138 | 67,416 | ||||||
Otsuka Corp. | 680 | 22,555 | ||||||
Renesas Electronics Corp. (b) | 3,500 | 18,438 | ||||||
SCSK Corp. | 700 | 29,663 | ||||||
138,072 | ||||||||
Materials (9.1%) | ||||||||
Kansai Paint Co. Ltd. | 1,000 | 14,776 | ||||||
Nippon Paint Holdings Co. Ltd. | 1,205 | 37,640 | ||||||
Shin-Etsu Chemical Co. Ltd. | 902 | 75,372 | ||||||
127,788 | ||||||||
1,363,075 | ||||||||
Total Common Stocks | 1,363,075 | |||||||
SHORT-TERM INVESTMENT (0.5%) | ||||||||
UNITED STATES (0.5%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 6,800 | 6,800 | ||||||
Total Short-Term Investment | 6,800 | |||||||
Total Investments | 1,369,875 | |||||||
Other Assets in Excess of Liabilities—2.7% | 38,360 | |||||||
Net Assets—100.0% | $ | 1,408,235 |
(a) | All securities are fair valued. Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(b) | Non-income producing security. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
See accompanying Notes to Financial Statements.
72 | Annual Report 2018 |
Aberdeen U.S. Mid Cap Equity Fund (Unaudited)
The Aberdeen U.S. Mid Cap Equity Fund (Institutional Class shares net of fees) returned 0.12% for the 12-month period ended October 31, 2018, versus 2.80% for its benchmark, the Russell Midcap Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Mid-Cap Core Funds (comprising 185 funds), as measured by Lipper, Inc., was 1.00% for the period.
Major U.S. equity market indices moved higher over the period ended October 31, 2018, supported by generally positive economic data and corporate earnings reports. These offset investors’ concerns about rising interest rates and U.S. trade policy under the administration of President Donald Trump. However, the equity markets declined sharply in October 2018, amid investors’ worries that U.S. Federal Reserve (Fed) interest-rate hikes could slow a strong U.S. economy and about decelerating corporate profit growth. U.S. large-cap stocks, as measured by the broader-market Standard and Poor’s (S&P) 500 Index,1 gained 7.35% for the reporting period, outperforming the corresponding 2.80% and 1.85% returns of their mid- and small-cap counterparts, as represented by the Russell Midcap and Russell 20002 indices, respectively. The telecommunication services and consumer discretionary sectors garnered double-digit gains and were the top performers within the Russell Midcap Index for the 12-month period. Conversely, the materials and consumer staples sectors recorded negative returns and were the primary market laggards.
U.S. economic news was generally positive over the reporting period:
• | The U.S. Department of Commerce reported that the nation’s economy expanded by a robust annualized rate of 3.5% in the third quarter of 2018, though the growth rate was somewhat lower than the 4.2% rise in the second quarter. The year-over-year upturn was attributable mainly to notable increases in consumer spending and private inventory investment, which offset declines in exports and residential fixed investment. |
• | U.S. payrolls expanded by a monthly average of 210,000 during the 12-month reporting period, and the unemployment rate dipped 0.4 percentage point to 3.7% – its lowest level since December 1969.3 The labor force participation rate4 rose 0.2 percentage point, ending the reporting period at 62.9%.5 |
• | The Fed raised its benchmark interest rate by a full percentage point in four increments of 25 basis points (bps) to a range of 2.00% to 2.25% following its meetings in December 2017, and March, June and September 2018. In its statement following the September rate increase, the Fed noted that “the unemployment rate has stayed low” and “household spending and business fixed investment have grown strongly.” The central bank projected one more 25-bps policy rate increase for the remainder of 2018, and incremental rate hikes totaling one percentage point over the 2019 calendar year. |
The Fund’s performance relative to its benchmark, the Russell Midcap Index, for the reporting period was hampered mainly by stock selection in the information technology and consumer discretionary sectors. The most notable detractors from performance among individual holdings included roofing products distributor Beacon Roofing Supply Inc.; Axalta Coating Systems Ltd., a manufacturer and distributor of coatings primarily for the transportation industry; and brewer Molson Coors Brewing Co.
Shares of Beacon Roofing Supply declined over the reporting period due to higher crude oil-based raw materials input costs and freight costs which pressured its margins. Additionally, investors were concerned about the potential for weaker housing demand due to rising interest rates and limited inventory of homes. On the positive side, we think that the company’s recent acquisition of a large competitor should improve pricing power in a fragmented industry and the company is on track to achieve significant cost synergies. We retain confidence in the business and in the management team given its strong track record of successfully managing integrations and the likelihood of delivering on pricing initiatives which we believe may drive higher earnings power. Similarly, Axalta Coating Systems also experienced margin pressure due to higher crude oil-based raw materials costs. Strength in the company’s performance coatings segment was offset by weakness in its transportation segment However, coatings manufacturers have demonstrated the ability to pass through costs to consumers over time and we believe that this should benefit Axalta Coatings Systems. Molson Coors Brewing Co. also experienced a rise in raw materials and transportation costs that it was not immediately able to pass through to customers. Additionally, there were some execution problems with a transformational enterprise resource planning (ERP)6 system integration at one of its largest breweries which reduced sales temporarily in early 2018. The company acquired the reminder of its interest in its Miller-Coors joint venture, which we believe will deliver significant synergies.
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. |
2 | The Russell 2000 Index is an unmanaged index considered representative of U.S. small-cap stocks. |
3 | Source: U.S. Department of Labor, November 2018. |
4 | The labor force participation rate comprises the percentage of the U.S. population aged 16 years and older working or actively seeking work. |
5 | Source: U.S. Department of Labor, November 2018. |
6 | An enterprise resource planning (ERP) system is used by manufacturers to manage and integrate the significant parts of its business. An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance and human resources. |
2018 Annual Report | 73 |
Aberdeen U.S. Mid Cap Equity Fund (Unaudited) (continued)
The Fund’s relative performance benefited from both an overweight allocation and stock selection in the healthcare sector, as well as stock selection in the information technology sector. The largest individual stock contributors to performance were apparel retailer Burlington Stores Inc.; medical device maker Globus Medical Inc.; and data analytics services provider Verisk Analytics Inc.
Burlington Stores garnered healthy revenue and earnings per share (EPS) growth over the reporting period. The company’s results were bolstered primarily by higher same-store sales and margins, as well as a reduction in expenses. Globus Medical benefited from an acceleration in “core” spine implant sales and a successful launch of its robotic product – all while maintaining strong earnings before interest, taxes, depreciation and amortization (EBITDA) margins. Verisk Analytics reported generally positive results over the reporting period, bolstered mainly by strong organic growth in its insurance unit and higher demand in its energy segment. These factors more than offset relative weakness in its financial services business.
Regarding portfolio activity over the reporting period, we initiated holdings in A.O. Smith Corp., a manufacturer of residential and commercial gas and electric water heaters and water treatment products; diversified financial services company First Republic Bank; payment-processing services provider Global Payments Inc.; contract research organization PRA Health Sciences Inc.; Hologic Inc., a manufacturer of diagnostic products, medical imaging systems, and surgical products for women; and quick-service restaurant chain operator Dunkin’ Brands Group Inc. We believe that A.O. Smith Corp., First Republic Bank, Global Payments Inc. and PRA Health Sciences Inc. all have strong long-term growth drivers that could outperform the overall economy and their peers. In our view, Hologic Inc. and Dunkin’ Brands Group Inc., are high-quality franchises that have dealt effectively with recent temporary, company-specific issues, and we believe that the stocks will provide above-average returns over time.
We also established new positions in Allegion plc, a manufacturer and distributor of mechanical and electronic security products and solutions; Maxim Integrated Products Inc., a manufacturer of analog chips; and customer relationship management (CRM) software provider Pegasystems Inc. We think that Allegion has a strong market position, pricing power and effective business mix as more security locks incorporate digital access. Maxim Integrated Products has benefited from rising content in automobiles and industrial automation. CRM software company Pegasystems is transitioning to a software as a service (SaaS) business model.
In addition to Molson Coors Brewing Co., we exited the Fund’s positions in industrial and consumer packaging products maker Sonoco Products Co. due to the company’s exposure to an increasingly volatile raw materials input costs and its willingness to continue to pursue expensive mergers and acquisitions; healthcare-related real estate investment trust (REIT) Healthcare Realty Trust Inc., as we believed that it had a high valuation and lacked growth opportunities; and specialty egg producer Cal-Maine Foods Inc., as we thought that there were better long-term opportunities for the companies in which we initiated positions during the reporting period.
Other sales of existing holdings over the reporting period included Alberta-based Canadian Western Bank, as we found what we believed were better opportunities, such as First Republic Bank; IT security services provider Check Point Software Technologies Ltd., as the company was losing market share; convenience-store operator Casey’s General Stores, which in our view faced a difficult growth path as its core agriculture-driven customers continue to struggle financially; and home appliance manufacturer Whirlpool Corp., as the company failed to deliver synergies from its acquisition of Italy-based home appliance manufacturer Indesit.
We think that strong fundamentals across the U.S. equity market are sustainable only if they are supported by a positive macroeconomic backdrop. We have seen little evidence that would dampen our view that macroeconomic conditions remain conducive to broad-based corporate growth, notwithstanding some emerging “yellow flags.” This concern is particularly acute within the housing sector, where a combination of tight supply and higher interest rates has curtailed demand. Within the banking sector, accelerating funding costs are at risk of eroding net interest margins and many are sounding caution on the ability to grow loans at the same cadence while maintaining credit quality. Furthermore, semiconductor companies have been warning about waning demand amid their customers’ inventory build-up. While each issue in isolation may not be cause for serious alarm, taken collectively, they lead us to question how long the tail of the current recovery will stretch and whether we are closer to the economy slowing than most market observers believe.
On the positive side, industrial demand remains resilient and firming commodity prices have recently buoyed the materials and energy sectors. This has come at the expense of higher input costs for businesses – much of which is being passed onto consumers in an effort to protect margins for producers. Additionally, the retail industry appears to have recovered following a period of weak brick-and-mortar demand that caused most companies within the industry to adjust their business models to take advantage of changing shopping habits – a process that is easier for some and has caused others significant financial distress. Finally, outside of semiconductors, most technology companies are seeing robust revenue growth as businesses across industries feel the need to invest aggressively in software in a bid to keep pace with competition and the shifting demands of younger consumers.
Although we believe that most people expected the legislative branch to be split politically following the U.S. midterm elections, U.S. equities rallied, particularly those of healthcare-oriented companies as the risks of a sharply negative agenda were taken off the table. Key points between the two political parties are around prescription drug-pricing and the need for healthcare reform, which we think should remain in the headlines for the foreseeable future. Other potential consequences of the election include risks of hurdles to business-friendly legislation.
74 | Annual Report 2018 |
Aberdeen U.S. Mid Cap Equity Fund (Unaudited) (concluded)
Portfolio Management:
Aberdeen North American Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Equity stocks of mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 75 |
Aberdeen U.S. Mid Cap Equity Fund (Unaudited)
Average Annual Total Return (For periods ended October 31, 2018) | 1 Yr. | Inception1 | ||||||||
Class A | w/o SC | -0.09% | 12.22% | |||||||
w/SC2 | -5.81% | 9.76% | ||||||||
Class C | w/o SC | -0.87% | 11.38% | |||||||
w/SC3 | -1.78% | 11.38% | ||||||||
Class R4 | w/o SC | -0.38% | 11.93% | |||||||
Institutional Service Class4 | w/o SC | 0.12% | 12.48% | |||||||
Institutional Class4 | w/o SC | 0.12% | 12.50% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not isnclude the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Fund commenced operations on February 29, 2016. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen U.S. Mid Cap Equity Fund, Russell Midcap® Index and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The Russell Midcap® Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap® Index is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap® Index represents approximately 31% of the total market capitalization of the Russell 1000 companies. The Russell 1000® Index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap opportunity set.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
76 | Annual Report 2018 |
Aberdeen U.S. Mid Cap Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 96.7% | |||
Short-Term Investment | 3.8% | |||
Liabilities in Excess of Other Assets | (0.5)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Industrials | 20.4% | |||
Information Technology | 16.9% | |||
Consumer Discretionary | 14.5% | |||
Health Care | 14.3% | |||
Financials | 11.0% | |||
Materials | 7.8% | |||
Utilities | 4.4% | |||
Real Estate | 4.0% | |||
Consumer Staples | 2.4% | |||
Energy | 1.0% | |||
Other | 3.3% | |||
100.0% |
Top Holdings* | ||||
Burlington Stores, Inc. | 3.3% | |||
CDW Corp. | 3.3% | |||
Verisk Analytics, Inc. | 3.3% | |||
Littelfuse, Inc. | 3.2% | |||
International Flavors & Fragrances, Inc. | 3.0% | |||
Cboe Global Markets, Inc. | 3.0% | |||
Digital Realty Trust, Inc., REIT | 2.9% | |||
Service Corp. International | 2.9% | |||
First Republic Bank | 2.8% | |||
Teleflex, Inc. | 2.8% | |||
Other | 69.5% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 98.4% | |||
Canada | 2.1% | |||
Other | (0.5)% | |||
100.0% |
2018 Annual Report | 77 |
Statement of Investments
October 31, 2018
Aberdeen U.S. Mid Cap Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (96.7%) | ||||||||
CANADA (2.1%) | ||||||||
Industrials (2.1%) | ||||||||
Ritchie Bros Auctioneers, Inc. | 951 | $ | 31,963 | |||||
UNITED STATES (94.6%) | ||||||||
Consumer Discretionary (14.5%) | ||||||||
BorgWarner, Inc. | 845 | 33,301 | ||||||
Burlington Stores, Inc. (a) | 293 | 50,247 | ||||||
Dunkin’ Brands Group, Inc. | 237 | 17,197 | ||||||
PVH Corp. | 305 | 36,841 | ||||||
Service Corp. International | 1,039 | 43,087 | ||||||
Tiffany & Co. | 350 | 38,955 | ||||||
219,628 | ||||||||
Consumer Staples (2.4%) | ||||||||
Molson Coors Brewing Co., Class B | 567 | 36,288 | ||||||
Energy (1.0%) | ||||||||
Core Laboratories NV | 175 | 14,917 | ||||||
Financials (11.0%) | ||||||||
Cboe Global Markets, Inc. | 402 | 45,366 | ||||||
First Republic Bank | 472 | 42,947 | ||||||
M&T Bank Corp. | 231 | 38,210 | ||||||
Regions Financial Corp. | 2,321 | 39,387 | ||||||
165,910 | ||||||||
Health Care (14.3%) | ||||||||
Cerner Corp. (a) | 505 | 28,927 | ||||||
Globus Medical, Inc., Class A (a) | 596 | 31,499 | ||||||
Henry Schein, Inc. (a) | 407 | 33,781 | ||||||
Hologic, Inc. (a) | 1,072 | 41,797 | ||||||
PRA Health Sciences, Inc. (a) | 397 | 38,457 | ||||||
Teleflex, Inc. | 176 | 42,370 | ||||||
216,831 | ||||||||
Industrials (18.3%) | ||||||||
Allegion PLC | 185 | 15,860 | ||||||
AO Smith Corp. | 681 | 31,006 | ||||||
Beacon Roofing Supply, Inc. (a) | 915 | 25,538 | ||||||
CH Robinson Worldwide, Inc. | 457 | 40,687 | ||||||
Equifax, Inc. | 301 | 30,533 | ||||||
Kansas City Southern | 414 | 42,211 | ||||||
Snap-on, Inc. | 272 | 41,872 | ||||||
Verisk Analytics, Inc. (a) | 413 | 49,494 | ||||||
277,201 | ||||||||
Information Technology (16.9%) | ||||||||
CDW Corp. | 557 | 50,136 | ||||||
Ellie Mae, Inc. (a) | 310 | 20,547 | ||||||
Genpact Ltd. | 1,219 | 33,413 | ||||||
Global Payments, Inc. | 272 | 31,070 | ||||||
Littelfuse, Inc. | 264 | 47,826 | ||||||
Manhattan Associates, Inc. (a) | 669 | 31,938 | ||||||
Maxim Integrated Products, Inc. | 385 | 19,258 | ||||||
Pegasystems, Inc. | 416 | 22,264 | ||||||
256,452 | ||||||||
Materials (7.8%) | ||||||||
Avery Dennison Corp. | 381 | 34,564 | ||||||
Axalta Coating Systems Ltd. (a) | 1,510 | 37,267 | ||||||
International Flavors & Fragrances, Inc. | 318 | 46,002 | ||||||
117,833 | ||||||||
Real Estate (4.0%) | ||||||||
Digital Realty Trust, Inc., REIT | 426 | 43,989 | ||||||
Jones Lang LaSalle, Inc. | 130 | 17,194 | ||||||
61,183 | ||||||||
Utilities (4.4%) | ||||||||
American Water Works Co., Inc. | 453 | 40,104 | ||||||
CMS Energy Corp. | 518 | 25,651 | ||||||
65,755 | ||||||||
1,431,998 | ||||||||
Total Common Stocks | 1,463,961 | |||||||
SHORT-TERM INVESTMENT (3.8%) | ||||||||
UNITED STATES (3.8%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier | 57,101 | 57,101 | ||||||
Total Short-Term Investment | 57,101 | |||||||
Total Investments | 1,521,062 | |||||||
Liabilities in Excess of Other Assets—(0.5)% | (7,422 | ) | ||||||
Net Assets—100.0% | $ | 1,513,640 |
(a) | Non-income producing security. |
(b) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(c) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements.
78 | Annual Report 2018 |
Aberdeen U.S. Multi-Cap Equity Fund (Unaudited)
The Aberdeen U.S. Multi-Cap Equity Fund (Institutional Class shares net of fees) returned 6.99% for the 12-month period ended October 31, 2018, versus the 6.60% return of its benchmark, the Russell 3000 Index, and 7.35% for the broader-market Standard and Poor’s (S&P) 500 Index,1 for the same period. For broader comparison, the average return of the Fund’s peer category of Multi-Cap Core Funds (comprising 375 funds), as measured by Lipper, Inc., was 3.65% for the period.
Major U.S. equity market indices moved higher over the period ended October 31, 2018, supported by generally positive economic data and corporate earnings reports. These offset investors’ concerns about rising interest rates and U.S. trade policy under the administration of President Donald Trump. However, the equity markets declined sharply in October 2018, amid investors’ worries that U.S. Federal Reserve (Fed) interest-rate hikes could slow a strong U.S. economy and about decelerating corporate profit growth. U.S. large-cap stocks, as measured by the U.S. broader-market S&P 500 Index, gained 7.35% for the reporting period, outperforming the corresponding 2.80% and 1.85% returns of their mid- and small-cap counterparts, as represented by the Russell Midcap2 and Russell 20003 indices, respectively. The consumer discretionary, information technology and healthcare sectors garnered double-digit gains and were the top performers within the Russell 3000 Index for the 12-month period. Conversely, the materials and industrials sectors recorded negative returns and were the primary market laggards.
U.S. economic news was generally positive over the reporting period:
• | The U.S. Department of Commerce reported that the nation’s economy expanded by a robust annualized rate of 3.5% in the third quarter of 2018, though the growth rate was somewhat lower than the 4.2% rise in the second quarter. The year-over-year upturn was attributable mainly to notable increases in consumer spending and private inventory investment, which offset declines in exports and residential fixed investment. |
• | U.S. payrolls expanded by a monthly average of 210,000 during the 12-month reporting period, and the unemployment rate dipped 0.4 percentage point to 3.7% – its lowest level since December 1969.4 The labor force participation rate5 rose 0.2 percentage point, ending the reporting period at 62.9%.6 |
• | The Fed raised its benchmark interest rate by a full percentage point in four increments of 25 basis points (bps) to a range of 2.00% to 2.25% following its meetings in December 2017, and March, June and September 2018. In its statement following the September rate increase, the Fed noted that “the unemployment rate has stayed low” and “household spending and business fixed investment have grown strongly.” The central projected one more 25-bps policy rate increase for the remainder of 2018, and incremental rate hikes totaling one percentage point over the 2019 calendar year. |
The Fund’s performance relative to its benchmark, the Russell 3000 Index, for the reporting period was bolstered by stock selection in the materials and consumer discretionary sectors, as well as an underweight allocation to the healthcare sector. The primary contributors to performance among individual positions were discount apparel retailer The TJX Companies Inc.; medical device maker Globus Medical Inc.; and membership warehouse operator Costco Wholesale Corp.
The TJX Companies garnered healthy revenue and earnings growth during the reporting period. The company benefited primarily from higher same-store sales in its Marmaxx and TJX Canada segments. Additionally, management raised its earnings guidance for the remainder of its 2019 fiscal year. We believe that the company’s distinctive sourcing process should continue to help it compete well in the rapidly changing global business environment. Globus Medical benefited from an acceleration in “core” spine implant sales and a successful launch of its robotic product – all while maintaining strong earnings before interest, taxes, depreciation, and amortization (EBITDA) margins. Costco Wholesale Corp.’s results over then reporting period were bolstered by higher same-store sales in the U.S. and Canada. The company also benefited from a significant increase in revenue in its e-commerce business.
In contrast, the Fund’s relative performance was hampered by overweight allocations to the materials and consumer discretionary sectors and stock selection in the healthcare sector. The largest individual stock detractors from relative performance included roofing products distributor Beacon Roofing Supply Inc., and brewer Molson Coors Brewing Co., along with the lack of exposure to technology giant Apple Inc.
Shares of Beacon Roofing Supply declined over the reporting period due to higher input/freight costs pressuring its margins. Furthermore, investors were concerned about the potential for weaker housing demand due to rising interest rates and limited inventory of homes. On the positive side, we think that Beacon Roofing’s recent acquisition of a large competitor should improve pricing power in a
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. |
2 | The Russell Midcap Index is an unmanaged index considered representative of U.S. mid-cap stocks. |
3 | The Russell 2000 Index is an unmanaged index considered representative of U.S. small-cap stocks. |
4 | Source: U.S. Department of Labor, November 2018. |
5 | The labor force participation rate comprises the percentage of the U.S. population aged 16 years and older working or actively seeking work. |
6 | Source: U.S. Department of Labor, November 2018. |
2018 Annual Report | 79 |
Aberdeen U.S. Multi-Cap Equity Fund (Unaudited) (concluded)
fragmented industry and the company is on track to achieve significant cost synergies. We retain confidence in the business and in the management team given its strong track record of successfully managing integrations and the likelihood of delivering on pricing initiatives which we feel should drive significantly higher earnings power. Molson Coors Brewing Co. saw declines in volumes over the period, most notably in the key U.S. market, which management attributed to lower overall industry demand. We subsequently exited the Fund’s position in the company in October 2018. The absence of a position in Apple Inc. also weighed on the Fund’s relative performance as the stock price moved higher over the reporting period. While we acknowledge Apple’s innovations, we historically have had concerns with the lack of visibility into its business and its high dependence on a single product. We also have questioned the sustainability of the company’s revenue growth and margin profile over longer periods.
Regarding portfolio activity over the reporting period, we initiated positions in internet retailing giant Amazon.com Inc.; specialty coffee chain operator Starbucks Corp.; Alberta-based Canadian Western Bank; IT software and hardware company Microsoft Corp.; contract research organization PRA Health Sciences Inc.; customer relationship management (CRM) software provider Pegasystems Inc.; defense contractor Raytheon Co.; funeral services provider Service Corp. International; and diversified healthcare services provider UnitedHealth Group Inc.
In addition to Molson Coors Brewing Co., we exited the Fund’s positions in cosmetics maker The Estee Lauder Companies Inc.; convenience-store chain operator Casey’s General Stores Inc.; biopharmaceutical firm Gilead Sciences Inc.; healthcare services provider Aetna Inc.; insurer American International Group (AIG); credit reporting services company Equifax Inc.; real estate and investment management company Jones Lang LaSalle Inc.; enterprise software company Oracle Corp.; and commercial bank Regions Financial Corp. Additionally, we sold the Fund’s shares in industrial automation power company Rockwell Automation following a significant run-up in its share price after Emerson Electric Co. (which the Fund does not hold) made a bid for the company, which it subsequently withdrew.
We think that strong fundamentals across the U.S. equity market are sustainable only if they are supported by a positive macroeconomic backdrop. We have seen little evidence that would dampen our view that macroeconomic conditions remain conducive to broad-based corporate growth, notwithstanding some emerging “yellow flags.” This concern is particularly acute within the housing sector, where a combination of tight supply and higher interest rates has curtailed demand. Within the banking sector, accelerating funding costs are at risk of eroding net interest margins and many are sounding caution on the ability to grow loans at the same cadence while maintaining credit quality. Furthermore, semiconductor companies have been warning about waning demand amid their customers’ inventory build-up. While each issue in isolation may not be cause for serious alarm, taken collectively, they lead us to question how long the tail of the current recovery will stretch and whether we are closer to the economy slowing than most market observers believe.
On the positive side, industrial demand remains resilient and firming commodity prices have recently buoyed the materials and energy sectors. This has come at the expense of higher input costs for businesses – much of which is being passed onto consumers in an effort to protect margins for producers. Additionally, the retail industry appears to have recovered following a period of weak brick-and-mortar demand that caused most companies within the industry to adjust their business models to take advantage of changing shopping habits – a process that is easier for some and has caused others significant financial distress. Finally, outside of semiconductors, most technology companies are seeing robust revenue growth as businesses across industries feel the need to invest aggressively in software in a bid to keep pace with competition and the shifting demands of younger consumers.
Although we believe that most people expected the legislative branch to be split politically following the U.S. midterm elections, U.S. equities rallied, particularly those of healthcare-oriented companies as the risks of a sharply negative agenda were taken off the table. Key points between the two political parties are around prescription drug-pricing and the need for healthcare reform, which we think should remain in the headlines for the foreseeable future. Other potential consequences of the election include risks of hurdles to business-friendly legislation.
Portfolio Management:
Aberdeen North American Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Equity stocks of small- and mid-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Please read the prospectus for more detailed information regarding these and other risks.
80 | Annual Report 2018 |
Aberdeen U.S. Multi-Cap Equity Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | 6.63% | 7.84% | 10.97% | ||||||||||
w/SC2 | 0.47% | 6.56% | 10.31% | |||||||||||
Class C | w/o SC | 5.88% | 7.06% | 10.22% | ||||||||||
w/SC3 | 4.93% | 7.06% | 10.22% | |||||||||||
Class R4 | w/o SC | 6.10% | 7.47% | 10.73% | ||||||||||
Institutional Service Class4,5 | w/o SC | 6.90% | 8.05% | 11.27% | ||||||||||
Institutional Class4 | w/o SC | 6.99% | 8.16% | 11.34% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to October 9, 2011 reflect the performance of a predecessor fund (the “Predecessor Fund”). In addition, after February 28, 2009, the Predecessor Fund changed its investment style and became diversified. Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. Please consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the first offering of the Institutional Service Class (October 10, 2011) are based on the previous performance of the Institutional Class of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses of the two classes. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen U.S. Multi-Cap Equity Fund, Russell 3000® Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000® Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 81 |
Aberdeen U.S. Multi-Cap Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 98.4% | |||
Short-Term Investment | 1.2% | |||
Other Assets in Excess of Liabilities | 0.4% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Information Technology | 19.3% | |||
Consumer Discretionary | 15.1% | |||
Industrials | 13.1% | |||
Health Care | 13.0% | |||
Financials | 12.2% | |||
Materials | 7.6% | |||
Consumer Staples | 5.5% | |||
Energy | 5.3% | |||
Communication Services | 5.3% | |||
Utilities | 2.0% | |||
Other | 1.6% | |||
100.0% |
Top Holdings* | ||||
Microsoft Corp. | 5.0% | |||
Amazon.com, Inc. | 4.2% | |||
Visa, Inc., Class A | 4.1% | |||
Intercontinental Exchange, Inc. | 3.3% | |||
Costco Wholesale Corp. | 3.3% | |||
Linde PLC | 3.2% | |||
UnitedHealth Group, Inc. | 3.1% | |||
TJX Cos., Inc. (The) | 3.1% | |||
Alphabet, Inc., Class A | 3.1% | |||
Verisk Analytics, Inc. | 2.9% | |||
Other | 64.7% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 89.5% | |||
Canada | 6.9% | |||
United Kingdom | 3.2% | |||
Other | 0.4% | |||
100.0% |
82 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen U.S. Multi-Cap Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (98.4%) | ||||||||
CANADA (6.9%) | ||||||||
Financials (2.3%) | ||||||||
Canadian Western Bank | 344,941 | $ | 8,023,164 | |||||
Industrials (4.6%) | ||||||||
Canadian National Railway Co. | 104,847 | 8,962,321 | ||||||
Ritchie Bros Auctioneers, Inc. | 212,270 | 7,134,395 | ||||||
16,096,716 | ||||||||
24,119,880 | ||||||||
UNITED KINGDOM (3.2%) | ||||||||
Materials (3.2%) | ||||||||
Linde PLC | 68,017 | 11,254,773 | ||||||
UNITED STATES (88.3%) | ||||||||
Communication Services (5.3%) | ||||||||
Alphabet, Inc., Class A (a) | 9,865 | 10,758,572 | ||||||
Comcast Corp., Class A | 206,562 | 7,878,274 | ||||||
18,636,846 | ||||||||
Consumer Discretionary (15.1%) | ||||||||
Amazon.com, Inc. (a) | 9,252 | 14,784,789 | ||||||
BorgWarner, Inc. | 169,649 | 6,685,867 | ||||||
PVH Corp. | 69,450 | 8,388,866 | ||||||
Service Corp. International | 122,867 | 5,095,294 | ||||||
Starbucks Corp. | 119,296 | 6,951,378 | ||||||
TJX Cos., Inc. (The) | 98,414 | 10,813,730 | ||||||
52,719,924 | ||||||||
Consumer Staples (5.5%) | ||||||||
Costco Wholesale Corp. | 50,478 | 11,540,785 | ||||||
Philip Morris International, Inc. | 85,895 | 7,564,773 | ||||||
19,105,558 | ||||||||
Energy (5.3%) | ||||||||
ConocoPhillips | 81,438 | 5,692,516 | ||||||
EOG Resources, Inc. | 65,023 | 6,849,523 | ||||||
Schlumberger Ltd. | 120,608 | 6,188,397 | ||||||
18,730,436 | ||||||||
Financials (9.9%) | ||||||||
Charles Schwab Corp. (The) | 151,684 | 7,013,868 | ||||||
First Republic Bank (b) | 96,168 | 8,750,326 | ||||||
Intercontinental Exchange, Inc. | 151,208 | 11,649,065 | ||||||
M&T Bank Corp. | 44,819 | 7,413,511 | ||||||
34,826,770 | ||||||||
Health Care (13.0%) | ||||||||
Baxter International, Inc. | 128,538 | 8,034,911 | ||||||
Cerner Corp. (a)(b) | 90,138 | 5,163,105 | ||||||
Globus Medical, Inc., Class A (a)(b) | 123,711 | 6,538,126 | ||||||
Hologic, Inc. (a)(b) | 215,068 | 8,385,501 | ||||||
PRA Health Sciences, Inc. (a)(b) | 65,753 | 6,369,493 | ||||||
UnitedHealth Group, Inc. | 41,980 | 10,971,473 | ||||||
45,462,609 | ||||||||
Industrials (8.5%) | ||||||||
Beacon Roofing Supply, Inc. (a) | 191,650 | 5,348,951 | ||||||
Raytheon Co. | 45,474 | 7,959,769 | ||||||
Snap-on, Inc. (b) | 41,077 | 6,323,393 | ||||||
Verisk Analytics, Inc. (a)(b) | 83,390 | 9,993,458 | ||||||
29,625,571 | ||||||||
Information Technology (19.3%) | ||||||||
CDW Corp. | 102,107 | 9,190,651 | ||||||
Cognizant Technology Solutions Corp., Class A | 74,484 | 5,141,631 | ||||||
Manhattan Associates, Inc. (a)(b) | 155,195 | 7,409,009 | ||||||
Microsoft Corp. | 164,575 | 17,578,256 | ||||||
Pegasystems, Inc. (b) | 133,060 | 7,121,371 | ||||||
Texas Instruments, Inc. (b) | 72,352 | 6,716,436 | ||||||
Visa, Inc., Class A (b) | 104,290 | 14,376,376 | ||||||
67,533,730 | ||||||||
Materials (4.4%) | ||||||||
Ecolab, Inc. | 52,921 | 8,104,851 | ||||||
Sensient Technologies Corp. (b) | 113,319 | 7,349,870 | ||||||
15,454,721 | ||||||||
Utilities (2.0%) | ||||||||
NextEra Energy, Inc. | 41,055 | 7,081,988 | ||||||
309,178,153 | ||||||||
Total Common Stocks | 344,552,806 | |||||||
SHORT-TERM INVESTMENT (1.2%) | ||||||||
UNITED STATES (1.2%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 4,063,908 | 4,063,908 | ||||||
Total Short-Term Investment | 4,063,908 | |||||||
Total Investments | 348,616,714 | |||||||
Other Assets in Excess of Liabilities—0.4% | 1,328,993 | |||||||
Net Assets—100.0% | $ | 349,945,707 |
(a) | Non-income producing security. |
(b) | All or a portion of the securities are on loan. The total value of all securities on loan is $64,143,374. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(l) for additional information. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
PLC | Public Limited Company |
See accompanying Notes to Financial Statements.
2018 Annual Report | 83 |
Aberdeen U.S. Small Cap Equity Fund (Unaudited)
The Aberdeen U.S. Small Cap Equity Fund (Institutional Class shares net of fees) returned -0.32% for the 12-month period ended October 31, 2018, versus 1.85% for its benchmark, the Russell 2000 Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Small-Cap Core Funds (comprising 439 funds), as measured by Lipper, Inc., was 0.12% for the period.
Major U.S. equity market indices moved higher over the 12-month period ended 30 September 2018, supported by generally positive economic data and corporate earnings reports. These offset investors’ concerns about rising interest rates and U.S. trade policy under the administration of President Donald Trump. However, the equity markets declined sharply in October 2018, amid investors’ worries that U.S. Federal Reserve (Fed) interest-rate hikes could slow a strong U.S. economy and about decelerating corporate profit growth. U.S. large-cap stocks, as measured by the U.S. broader-market Standard & Poor’s (S&P) 500 Index,1 gained 7.35% for the reporting period, outperforming 1.85% return of their small-cap counterparts, as represented by the Russell 2000 Index. The healthcare and telecommunication services sectors garnered double-digit gains and were the top performers within the Russell 2000 Index for the 12-month period. Conversely, the materials, industrials and financials sectors recorded negative returns and were the most notable market laggards.
U.S. economic news was generally positive over the reporting period:
• | The U.S. Department of Commerce reported that the nation’s economy expanded by a robust annualized rate of 3.5% in the third quarter of 2018, though the growth rate was somewhat lower than the 4.2% rise in the second quarter. The year-over-year upturn was attributable mainly to notable increases in consumer spending and private inventory investment, which offset declines in exports and residential fixed investment. |
• | U.S. payrolls expanded by a monthly average of 210,000 during the 12-month reporting period, and the unemployment rate dipped 0.4 percentage point to 3.7% – its lowest level since December 1969.2 The labor force participation rate3 rose 0.2 percentage point, ending the reporting period at 62.9%.4 |
• | The Fed raised its benchmark interest rate by a full percentage point in four increments of 25 basis points (bps) to a range of 2.00% to 2.25% following its meetings in December 2017, and March, June and September 2018. In its statement following the September rate increase, the Fed noted that “the unemployment rate has stayed low” and “household spending and business fixed investment have grown strongly.” The central bank projected one more 25-bps policy rate increase for the remainder of 2018, and incremental rate hikes totaling one percentage point over the 2019 calendar year. |
The Fund underperformed versus its benchmark, the Russell 2000 Index, for the 12-month period ended October 31, 2018. However, while we hesitate to measure the Fund’s performance over short time frames given our long-term focus, following its performance challenges for the first half of 2018, we feel that it is important to note that the Fund outperformed the benchmark over the last four months of the reporting period. The Fund accomplished this amid an environment in which there was a strong investor preference for growth at the expense of valuation, a situation that typically works against the Fund’s performance given our quality bias and valuation discipline.
The Fund’s relative performance over the 12-month period was hampered by both stock selection and an underweight position in the consumer discretionary sector, as well as stock selection in the information technology and financials sectors. The largest detractors from relative performance among individual holdings included roofing products distributor Beacon Roofing Supply Inc.; LCI Industries, a manufacturer of components for recreational vehicles (RVs) and related industries; and convenience-store distributor Core-Mark Holding Co. Inc.
Shares of Beacon Roofing Supply declined over the reporting period due to higher input/freight costs pressuring its margins. Additionally, investors were concerned about the potential for weaker housing demand due to rising interest rates and limited inventory of homes. On the positive side, we think that the company’s recent acquisition of a large competitor should improve pricing power in a fragmented industry and the company is on track to achieve significant cost synergies. We retain confidence in the business and in the management team given its strong track record of successfully managing integrations and the likelihood of delivering on pricing initiatives which we believe may drive significantly higher earnings power. The Fund’s holding in LCI Industries also weighed on performance. While demand for RVs has remained strong and is now above its previous peak levels, investors appear to be increasingly concerned about the potential for rising input and labor costs reducing LCI’s margins. Nonetheless, we have a reasonable degree of confidence in management’s ability to push price increases through as the demand environment remains relatively strong. We exited the position in Core-Mark Holding Co. in May 2018. We had decreased conviction in the fundamental trajectory of the convenience-store distributor’s business, as the company struggled with higher-than-expected costs related to new contracts and lower-than-anticipated cigarette sales volumes.
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. |
2 | Source: U.S. Department of Labor, November 2018. |
3 | The labor force participation rate comprises the percentage of the U.S. population aged 16 years and older working or actively seeking work. |
4 | Source: U.S. Department of Labor, November 2018. |
84 | Annual Report 2018 |
Aberdeen U.S. Small Cap Equity Fund (Unaudited) (continued)
The Fund’s relative performance for the reporting period was bolstered by an overweight allocation to the information technology sector, as well as both stock selection and an overweight position in the consumer staples sector. The primary individual stock contributors to relative performance were integrated waste management services provider Casella Waste Systems Inc.; life sciences company Emergent Biosolutions Inc.; and medical device maker Globus Medical Inc.
Casella Waste Systems posted healthy year-over-year revenue growth in the first and second quarters of its 2018 fiscal year mainly on pricing strength in its solid waste business. Following the release of its second-quarter results, management increased its revenue guidance for the full 2018 fiscal year. Emergent Biosolutions, the Fund’s lone biotechnology holding, contributed to performance as the company posted generally strong earnings over the reporting period. Additionally, late in the period, investors reacted favorably to the company’s announcements of two sizeable acquisitions. The deals broadened the company’s commercial product suite into growing markets and are expected to help the company to achieve its 2020 goals. Globus Medical benefited from an acceleration in “core” spine implant sales and a successful launch of its robotic product – all while maintaining strong earnings before interest, taxes, depreciation, and amortization (EBITDA) margins.
We initiated several holdings during the reporting period. Richelieu Hardware, based near Montreal, Quebec, Canada, is a leading distributor of specialty hardware products. We first met with the company’s management in the summer of 2016, and were impressed with its high and relatively stable returns on capital and steady revenue growth. We believe that Richelieu Hardware ultimately will show gross and operating margin improvement that the market will reward. Rogers Corp. manufactures an array of specialty high-performance materials and components for a wide range of industries. In our opinion, the company should continue to see strong revenue growth supplemented by acquisitions and more margin leverage. Casella Waste Systems is an integrated waste management company based in Rutland, Vermont. We first met with the management team in June 2016, and found a company that, in our view, had a history of mismanagement and, therefore, had a significant opportunity for improvement. Companies in similar situations have been some of the Fund’s strongest-performing investments over time. We established a new position in human resource-related IT software services-provider Paylocity Holding Corp., which we believe may continue to take market share from its major competitors while continuing to improve its profitability. Cabot Microelectronics Corp., a manufacturer of specialty materials used in semiconductor manufacturing, has long been the dominant supplier of slurries used in chemical mechanical planarization, a process that smooths and flattens the multiple layers of material that are deposited on silicon wafers. We believe that the company will put its strong net-cash balance sheet to work to add capabilities within its core competencies or may make acquisitions into adjacent chemical businesses. Heska Corp. provides veterinary point-of-care diagnostic instrumentation and related services. Demand for veterinary services recently has seen strong growth, and the company has a differentiated subscription strategy for its products, which has allowed it to take significant market share from its two larger competitors. The market’s concerns about the inability of Heska Corp. to maintain its market-share gains provided us with the opportunity to purchase the stock after it had declined over 45% from its peak price. Welbilt Inc. designs and manufactures equipment for the global commercial food-service market. The company was recently spun off from crane manufacturer Manitowoc. The transition has allowed Welbilt to place greater focus on its business and sales execution, thereby enhancing revenue growth. Furthermore, we established new positions in Florida-based commercial bank CenterState Bank Corp. and Echo Global Logistics Inc., a provider of transportation and supply chain management solutions.
Conversely, in addition to Core-Mark Holding Co., we also exited the Fund’s position in hazardous waste disposal company US Ecology. We had maintained the Fund’s holding in the company since April 2013, with the original thesis built around the high barriers to entry in the business attributable to the irreplaceable nature of hazardous waste disposal sites. While that aspect of the business remains, we had become increasingly frustrated with management’s lack of capital discipline, namely making acquisitions into lower-margin, lower-return areas of waste disposal. This factor, coupled with weaker disposal volumes due to a tepid industrial recovery, led us to believe that we could find better investment opportunities elsewhere. We also sold the Fund’s shares in OSI Systems Inc., a California-based electronics manufacturer. Shares of the company fell following the publication of a research report by a well-known short-seller. The information in the report was largely provided by former employees of the company. The report speculated that OSI’s large turnkey security contract with Mexico was at risk of not being renewed and also represented a larger proportion of profitability than management had previously indicated to us, which would have a significant negative financial impact. There were additional allegations that the company won a security contract with Albania through bribery. Despite the stock’s more attractive valuation following the share price decline, we believed that we could find more attractive opportunities elsewhere. We also exited the Fund’s positions in industrial products and systems manufacturer Actuant Corp. and Silgan Holdings Inc., a supplier of packaging for consumer goods products, for fundamental reasons. Silgan Holdings’ business had been pressured by lower volumes as consumers purchase less at the “center of the store” and instead prefer more fresh offerings, which do not require the company’s packaging. Despite strong share-price gains during 2017 tied to an acquisition the company was undertaking, Silgan Holdings had seen its returns on capital consistently erode over the past several years, given pricing pressure and higher capital requirements as it invested ahead of customer demand. Consequently, we no longer believed that the company met the Fund’s “quality” threshold and used the share-price strength at that time to fund want we viewed as better opportunities. The same rationale could be applied to the sale of the Fund’s position in Actuant. The company was hampered by its exposure to more cyclical end-markets such as energy, but also had made some questionable capital-allocation decisions in its efforts to diversify its
2018 Annual Report | 85 |
Aberdeen U.S. Small Cap Equity Fund (Unaudited) (concluded)
business. There had been significant turnover in management, which appears to be a recurrent theme over the past several years; therefore, we felt that we could deploy the Fund’s capital more effectively elsewhere. We sold the Fund’s holding in label manufacturer Multi-Color Corp. due to our decreased conviction in the fundamental trajectory of its business. Finally, we exited the position in the integrated facility solutions provider ABM Industries.
We think that strong fundamentals across the U.S. equity market are sustainable only if they are supported by a positive macroeconomic backdrop. We have seen little evidence that would dampen our view that macroeconomic conditions remain conducive to broad-based corporate growth, notwithstanding some emerging “yellow flags.” This concern is particularly acute within the housing sector, where a combination of tight supply and higher interest rates has curtailed demand. Within the banking sector, accelerating funding costs are at risk of eroding net interest margins and many are sounding caution on the ability to grow loans at the same cadence while maintaining credit quality. Furthermore, semiconductor companies have been warning about waning demand amid their customers’ inventory build-up. While each issue in isolation may not be cause for serious alarm, taken collectively, they lead us to question how long the tail of the current recovery will stretch and whether we are closer to the economy slowing than most market observers believe.
On the positive side, industrial demand remains resilient and firming commodity prices have recently buoyed the materials and energy sectors. This has come at the expense of higher input costs for businesses – much of which is being passed onto consumers in an effort to protect margins for producers. Additionally, the retail industry appears to have recovered following a period of weak brick-and-mortar demand that caused most companies within the industry to adjust their business models to take advantage of changing shopping habits – a process that is easier for some and has caused others significant financial distress. Finally, outside of semiconductors, most technology companies are seeing robust revenue growth as businesses across industries feel the need to invest aggressively in software in a bid to keep pace with competition and the shifting demands of younger consumers.
Although we believe that most people expected the legislative branch to be split politically following the U.S. midterm elections, U.S. equities rallied, particularly those of healthcare-oriented companies as the risks of a sharply negative agenda were taken off the table. Key points between the two political parties are around prescription drug-pricing and the need for healthcare reform, which we think should remain in the headlines for the foreseeable future. Other potential consequences of the election include risks of hurdles to business-friendly legislation.
Portfolio Management:
Aberdeen North American Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Equity stocks of small-cap companies carry greater risk and more volatility than equity stocks of larger, more established companies.
Investing a significant portion of the Fund’s assets in securities of companies conducting business in a broadly related group of industries within an economic sector may make the Fund more vulnerable to unfavorable developments in that sector.
Please read the prospectus for more detailed information regarding these and other risks.
86 | Annual Report 2018 |
Aberdeen U.S. Small Cap Equity Fund (Unaudited)
Average Annual Total Return (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | -0.62% | 10.11% | 13.99% | ||||||||||
w/SC1 | -6.33% | 8.82% | 13.31% | |||||||||||
Class C | w/o SC | -1.33% | 9.35% | 13.22% | ||||||||||
w/SC2 | -2.31% | 9.35% | 13.22% | |||||||||||
Class R3 | w/o SC | -1.00% | 9.81% | 13.72% | ||||||||||
Institutional Service Class3 | w/o SC | -0.32% | 10.44% | 14.36% | ||||||||||
Institutional Class3 | w/o SC | -0.32% | 10.45% | 14.34% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | A 5.75% front-end sales charge was deducted. |
2 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
3 | Not subject to any sales charges. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen U.S. Small Cap Equity Fund, the Russell 2000® Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The Russell 2000® Index measures performance of the small-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and it represents approximately 8% of the U.S. market. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000® Index is constructed to provide a comprehensive and unbiased barometer for the small-cap segment and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 87 |
Aberdeen U.S. Small Cap Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 98.6% | |||
Short-Term Investment | 1.5% | |||
Liabilities in Excess of Other Assets | (0.1)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any single industry or industry group. The sectors as classified by GICS, are comprised of several industries.
Top Sectors | ||||
Information Technology | 20.6% | |||
Industrials | 17.2% | |||
Financials | 15.2% | |||
Consumer Discretionary | 10.7% | |||
Health Care | 10.6% | |||
Materials | 9.1% | |||
Consumer Staples | 5.3% | |||
Real Estate | 5.1% | |||
Communication Services | 3.3% | |||
Energy | 1.5% | |||
Other | 1.4% | |||
100.0% |
Top Holdings* | ||||
Glacier Bancorp, Inc. | 2.8% | |||
WSFS Financial Corp. | 2.7% | |||
Emergent BioSolutions, Inc. | 2.7% | |||
Pegasystems, Inc. | 2.6% | |||
Paylocity Holding Corp. | 2.6% | |||
Casella Waste Systems, Inc., Class A | 2.6% | |||
ExlService Holdings, Inc. | 2.6% | |||
G-III Apparel Group Ltd. | 2.5% | |||
Neenah, Inc. | 2.5% | |||
Sensient Technologies Corp. | 2.4% | |||
Other | 74.0% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 94.4% | |||
Canada | 5.7% | |||
Other | (0.1)% | |||
100.0% |
88 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen U.S. Small Cap Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (98.6%) | ||||||||
CANADA (5.7%) | ||||||||
Financials (1.9%) | ||||||||
Canadian Western Bank | 1,290,634 | $ | 30,019,532 | |||||
Industrials (3.8%) | ||||||||
Richelieu Hardware Ltd. | 1,310,048 | 25,137,159 | ||||||
Ritchie Bros Auctioneers, Inc. | 1,100,784 | 36,997,350 | ||||||
62,134,509 | ||||||||
92,154,041 | ||||||||
UNITED STATES (92.9%) | ||||||||
Communication Services (3.3%) | ||||||||
Meredith Corp. (a) | 679,584 | 35,039,351 | ||||||
Shenandoah Telecommunications Co. | 493,782 | 18,773,592 | ||||||
53,812,943 | ||||||||
Consumer Discretionary (10.7%) | ||||||||
Culp, Inc. | 1,092,395 | 25,288,944 | ||||||
Fox Factory Holding Corp. (b) | 677,312 | 36,391,974 | ||||||
G-III Apparel Group Ltd. (a)(b) | 1,032,854 | 41,169,560 | ||||||
Helen of Troy Ltd. (b) | 84,564 | 10,496,084 | ||||||
LCI Industries (a) | 441,162 | 30,594,585 | ||||||
Lithia Motors, Inc., Class A (a) | 333,391 | 29,698,470 | ||||||
173,639,617 | ||||||||
Consumer Staples (5.3%) | ||||||||
Cal-Maine Foods, Inc. (a) | 764,537 | 37,210,016 | ||||||
J&J Snack Foods Corp. | 179,814 | 28,079,754 | ||||||
WD-40 Co. (a) | 125,342 | 20,942,141 | ||||||
86,231,911 | ||||||||
Energy (1.5%) | ||||||||
Forum Energy Technologies, Inc. (a)(b) | 2,646,970 | 23,716,851 | ||||||
Financials (13.3%) | ||||||||
AMERISAFE, Inc. (a) | 320,894 | 20,886,990 | ||||||
Boston Private Financial Holdings, Inc. | 2,554,082 | 34,480,107 | ||||||
CenterState Bank Corp. | 892,646 | 21,941,239 | ||||||
Glacier Bancorp, Inc. (a) | 1,063,895 | 45,109,148 | ||||||
Univest Corp. of Pennsylvania | 974,354 | 24,319,876 | ||||||
WisdomTree Investments, Inc. (a) | 3,210,274 | 24,943,821 | ||||||
WSFS Financial Corp. | 1,050,184 | 44,664,326 | ||||||
216,345,507 | ||||||||
Health Care (10.6%) | ||||||||
AMN Healthcare Services, Inc. (a)(b) | 560,433 | 28,369,119 | ||||||
Emergent BioSolutions, Inc. (a)(b) | 720,549 | 44,090,393 | ||||||
Globus Medical, Inc., Class A (b) | 659,246 | 34,841,151 | ||||||
Heska Corp. (b) | 195,517 | 19,594,714 | ||||||
Prestige Consumer Healthcare, Inc. (a)(b) | 489,839 | 17,712,578 | ||||||
US Physical Therapy, Inc. (a) | 257,223 | 27,656,617 | ||||||
172,264,572 | ||||||||
Industrials (13.4%) | ||||||||
Beacon Roofing Supply, Inc. (a)(b) | 1,121,164 | 31,291,687 | ||||||
Casella Waste Systems, Inc., Class A (b) | 1,286,632 | 41,892,738 | ||||||
Echo Global Logistics, Inc. (a)(b) | 1,101,905 | 28,329,978 | ||||||
Gibraltar Industries, Inc. (a)(b) | 893,845 | 31,856,636 | ||||||
Heartland Express, Inc. (a) | 1,180,072 | 22,976,002 | ||||||
RBC Bearings, Inc. (a)(b) | 194,834 | 28,773,085 | ||||||
Welbilt, Inc. (a)(b) | 1,695,302 | 31,736,053 | ||||||
216,856,179 | ||||||||
Information Technology (20.6%) | ||||||||
Cabot Microelectronics Corp. | 291,776 | 28,483,173 | ||||||
Ellie Mae, Inc. (a)(b) | 340,508 | 22,568,870 | ||||||
ExlService Holdings, Inc. (b) | 653,411 | 41,883,645 | ||||||
Fair Isaac Corp. (b) | 139,361 | 26,856,258 | ||||||
Insight Enterprises, Inc. (b) | 738,044 | 38,149,494 | ||||||
Littelfuse, Inc. (a) | 138,441 | 25,079,972 | ||||||
Manhattan Associates, Inc. (a)(b) | 799,113 | 38,149,655 | ||||||
Paylocity Holding Corp. (b) | 637,464 | 41,938,757 | ||||||
Pegasystems, Inc. | 792,638 | 42,421,986 | ||||||
Rogers Corp. (a)(b) | 228,984 | 28,178,771 | ||||||
333,710,581 | ||||||||
Materials (9.1%) | ||||||||
Kaiser Aluminum Corp. | 341,381 | 32,557,506 | ||||||
Neenah, Inc. (a) | 507,086 | 40,800,140 | ||||||
Quaker Chemical Corp. (a) | 201,497 | 36,249,310 | ||||||
Sensient Technologies Corp. (a) | 598,501 | 38,818,775 | ||||||
148,425,731 | ||||||||
Real Estate (5.1%) | ||||||||
Healthcare Realty Trust, Inc. (a), REIT | 677,489 | 18,874,844 | ||||||
Marcus & Millichap, Inc. (b) | 1,047,834 | 36,380,796 | ||||||
Physicians Realty Trust (a), REIT | 1,685,363 | 27,943,318 | ||||||
83,198,958 | ||||||||
1,508,202,850 | ||||||||
Total Common Stocks | 1,600,356,891 | |||||||
SHORT-TERM INVESTMENT (1.5%) | ||||||||
UNITED STATES (1.5%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 25,083,957 | 25,083,957 | ||||||
Total Short-Term Investment | 25,083,957 | |||||||
Total Investments | 1,625,440,848 | |||||||
Liabilities in Excess of Other Assets—(0.1)% | (2,223,456 | ) | ||||||
Net Assets—100.0% | $ | 1,623,217,392 |
(a) | All or a portion of the securities are on loan. The total value of all securities on loan is $500,408,239. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(l) for additional information. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 89 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen U.S. Small Cap Equity Fund
(b) | Non-income producing security. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements.
90 | Annual Report 2018 |
Statements of Assets and Liabilities
October 31, 2018
Aberdeen Asia-Pacific (ex-Japan) Equity Fund | Aberdeen China Opportunities Fund | Aberdeen Dynamic Dividend Fund | Aberdeen Emerging Markets Fund | Aberdeen Focused U.S. Equity Fund | ||||||||||||||||
Assets: | ||||||||||||||||||||
Investments, at value | $ | 7,652,166 | $ | 9,848,914 | $ | 136,725,894 | $ | 5,893,497,925 | $ | 16,891,491 | ||||||||||
Short-term investments, at value | 150,821 | 3,543 | 1,249,260 | – | 108,942 | |||||||||||||||
Foreign currency, at value | 17,743 | 184,427 | 72,237 | 19,902,695 | – | |||||||||||||||
Cash at broker for China A shares | – | 1,288 | – | – | – | |||||||||||||||
Cash | – | – | 10 | – | – | |||||||||||||||
Receivable for investments sold | – | 12,444 | 5,722,478 | 157,787,505 | – | |||||||||||||||
Interest and dividends receivable | 10,080 | 7,061 | 448,317 | 5,328,047 | 7,900 | |||||||||||||||
Receivable for capital shares issued | – | 227 | 10,072 | 4,580,083 | 309 | |||||||||||||||
Receivable from Adviser | 16,106 | 19,359 | 27,956 | – | 11,976 | |||||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts | – | – | 48,765 | – | – | |||||||||||||||
Tax reclaim receivable | – | – | 135,941 | 193,495 | – | |||||||||||||||
Other receivables | – | – | 7,698 | – | – | |||||||||||||||
Securities lending income receivable | – | – | – | 14,018 | – | |||||||||||||||
Prepaid expenses | 29,512 | 31,336 | – | 212,340 | 28,688 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | 7,876,428 | 10,108,599 | 144,448,628 | 6,081,516,108 | 17,049,306 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities: | ||||||||||||||||||||
Due to custodian | – | – | – | 6,034,810 | – | |||||||||||||||
Payable for investments purchased | 39,236 | – | 4,412,626 | – | – | |||||||||||||||
Payable for capital shares redeemed | – | 659 | 31,882 | 129,811,691 | 12,608 | |||||||||||||||
Accrued foreign capital gains tax | 2,857 | – | – | 9,635,148 | – | |||||||||||||||
Payable for borrowing on line of credit | – | – | – | 49,136,396 | – | |||||||||||||||
Accrued expenses and other payables: | ||||||||||||||||||||
Investment advisory fees | 7,174 | 11,341 | 122,967 | 4,923,111 | 11,230 | |||||||||||||||
Custodian fees | 9,811 | 6,659 | 5,328 | 1,086,579 | 1,885 | |||||||||||||||
Administration fees | 574 | 726 | 9,110 | 429,686 | 1,198 | |||||||||||||||
Sub-transfer agent and administrative services fees | 1,007 | 1,290 | 9,105 | 408,414 | 4,334 | |||||||||||||||
Fund accounting fees | 2,471 | 2,599 | 13,300 | 263,243 | 666 | |||||||||||||||
Audit fees | 36,150 | 35,150 | 35,000 | 37,150 | 38,150 | |||||||||||||||
Printing fees | 451 | 625 | – | 146,434 | 1,186 | |||||||||||||||
Legal fees | 136 | 171 | 2,283 | 111,348 | 347 | |||||||||||||||
Transfer agent fees | 3,911 | 4,904 | 8,891 | 82,226 | 5,068 | |||||||||||||||
Distribution fees | 247 | 3,554 | 787 | 84,481 | 3,655 | |||||||||||||||
Other | 12,044 | 143 | 30,061 | 169,758 | 463 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 116,069 | 67,821 | 4,681,340 | 202,360,475 | 80,790 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Assets | $ | 7,760,359 | $ | 10,040,778 | $ | 139,767,288 | $ | 5,879,155,633 | $ | 16,968,516 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cost: | ||||||||||||||||||||
Investments | $ | 8,140,858 | $ | 10,468,773 | $ | 123,185,740 | $ | 6,051,031,460 | $ | 14,630,696 | ||||||||||
Short-term investment | 150,821 | 3,543 | 1,249,260 | – | 108,942 | |||||||||||||||
Foreign currency | 17,761 | 186,467 | 72,237 | 19,901,963 | – | |||||||||||||||
Represented by: | ||||||||||||||||||||
Capital | $ | 209,547,731 | $ | 12,011,397 | $ | 130,917,982 | $ | 5,991,161,543 | $ | 13,133,884 | ||||||||||
Distributable earnings (accumulated loss) | (201,787,372 | ) | (1,970,619 | ) | 8,849,306 | (112,005,910 | ) | 3,834,632 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Assets | $ | 7,760,359 | $ | 10,040,778 | $ | 139,767,288 | $ | 5,879,155,633 | $ | 16,968,516 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Assets: | ||||||||||||||||||||
Class A Shares | $ | 853,458 | $ | 5,978,347 | $ | 4,504,897 | $ | 143,297,192 | $ | 7,466,208 | ||||||||||
Class C Shares | 62,473 | 1,568,104 | – | 15,885,608 | 1,345,044 | |||||||||||||||
Class R Shares | 11,742 | 1,663,816 | – | 89,874,200 | 1,895,288 | |||||||||||||||
Institutional Service Class Shares | 1,609,579 | 531,595 | – | 118,917,087 | 678,979 | |||||||||||||||
Institutional Class Shares | 5,223,107 | 298,916 | 135,262,391 | 5,511,181,546 | 5,582,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 7,760,359 | $ | 10,040,778 | $ | 139,767,288 | $ | 5,879,155,633 | $ | 16,968,516 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 91 |
Statements of Assets and Liabilities (continued)
October 31, 2018
Aberdeen Asia-Pacific (ex-Japan) Equity Fund | Aberdeen China Opportunities Fund | Aberdeen Dynamic Dividend Fund | Aberdeen Emerging Markets Fund | Aberdeen Focused U.S. Equity Fund | ||||||||||||||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||||||||||||||
Class A Shares | 73,368 | 300,957 | 1,171,360 | 10,921,752 | 1,090,240 | |||||||||||||||
Class C Shares | 5,497 | 82,033 | – | 1,225,228 | 618,987 | |||||||||||||||
Class R Shares | 1,016 | 85,396 | – | 6,913,708 | 309,188 | |||||||||||||||
Institutional Service Class Shares | 137,541 | 26,603 | – | 9,014,719 | 95,458 | |||||||||||||||
Institutional Class Shares | 445,310 | 14,924 | 35,154,116 | 417,549,655 | 761,034 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 662,732 | 509,913 | 36,325,476 | 445,625,062 | 2,874,907 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||||||||||||||
Class A Shares | $ | 11.63 | $ | 19.86 | $ | 3.85 | $ | 13.12 | $ | 6.85 | ||||||||||
Class C Shares (a) | $ | 11.36 | $ | 19.12 | $ | – | $ | 12.97 | $ | 2.17 | ||||||||||
Class R Shares | $ | 11.56 | $ | 19.48 | $ | – | $ | 13.00 | $ | 6.13 | ||||||||||
Institutional Service Class Shares | $ | 11.70 | $ | 19.98 | $ | – | $ | 13.19 | $ | 7.11 | ||||||||||
Institutional Class Shares | $ | 11.73 | $ | 20.03 | $ | 3.85 | $ | 13.20 | $ | 7.34 | ||||||||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||||||||||||||
Class A Shares | $ | 12.34 | $ | 21.07 | $ | 4.08 | $ | 13.92 | $ | 7.27 | ||||||||||
Maximum Sales Charge: | ||||||||||||||||||||
Class A Shares | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % |
(a) | For Class C Shares, the redemption price per share is reduced by 1.00% for shares held less than one year. |
See accompanying Notes to Financial Statements.
92 | Annual Report 2018 |
Statements of Assets and Liabilities (continued)
October 31, 2018
Aberdeen Global Equity Fund | Aberdeen Global Infrastructure Fund | Aberdeen Income Builder Fund | Aberdeen International Equity Fund | Aberdeen International Small Cap Fund | ||||||||||||||||
Assets: | ||||||||||||||||||||
Investments, at value | $ | 33,405,851 | $ | 105,998,059 | $ | 91,845,251 | $ | 456,802,554 | $ | 62,144,828 | ||||||||||
Short-term investments, at value | 672,465 | 593,256 | 7,039,177 | 7,797,556 | 2,550,930 | |||||||||||||||
Foreign currency, at value | – | 546,574 | – | 16,160 | 481,417 | |||||||||||||||
Cash | – | 41 | – | – | – | |||||||||||||||
Interest and dividends receivable | 41,843 | 87,514 | 759,324 | 670,835 | 25,639 | |||||||||||||||
Receivable for investments sold | – | 1,437,611 | – | – | – | |||||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts | – | 198,005 | – | – | – | |||||||||||||||
Receivable from Adviser | 14,201 | 9,975 | – | – | 21,662 | |||||||||||||||
Receivable for capital shares issued | 3,035 | 19,943 | – | 14,058 | 3,923 | |||||||||||||||
Tax reclaim receivable | 153,372 | 76,586 | – | 1,185,357 | 24,594 | |||||||||||||||
Securities lending income receivable | 22 | 1,946 | 53 | 402 | – | |||||||||||||||
Prepaid expenses | 33,433 | – | – | 42,084 | 37,405 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | 34,324,222 | 108,969,510 | 99,643,805 | 466,529,006 | 65,290,398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities: | ||||||||||||||||||||
Payable for investments purchased | 147,883 | 879,940 | 2,287,101 | 577,301 | 178,028 | |||||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts | – | 17,360 | – | – | – | |||||||||||||||
Payable for capital shares redeemed | 144,542 | 537,106 | – | 70,282,748 | 43,887 | |||||||||||||||
Accrued foreign capital gains tax | 574 | – | – | 10,766 | 186,979 | |||||||||||||||
Accrued expenses and other payables: | ||||||||||||||||||||
Investment advisory fees | 26,674 | 94,400 | 103,335 | 325,034 | 56,418 | |||||||||||||||
Audit fees | 35,150 | 38,750 | 35,250 | 35,150 | 37,150 | |||||||||||||||
Custodian fees | 5,747 | 4,117 | 3,469 | 29,719 | 12,435 | |||||||||||||||
Administration fees | 2,371 | 7,191 | 6,450 | 32,486 | 4,513 | |||||||||||||||
Transfer agent fees | 10,240 | 6,687 | 1,845 | 21,182 | 11,697 | |||||||||||||||
Fund accounting fees | 3,390 | 15,257 | 5,970 | 19,514 | 4,652 | |||||||||||||||
Distribution fees | 8,429 | 1,800 | 782 | 14,896 | 12,248 | |||||||||||||||
Sub-transfer agent and administrative services fees | 2,858 | 5,968 | 518 | 20,257 | 5,991 | |||||||||||||||
Printing fees | 3,499 | – | – | 8,618 | 4,616 | |||||||||||||||
Legal fees | 633 | 1,652 | 1,580 | 8,520 | 1,138 | |||||||||||||||
Other | 4,819 | 24,406 | 14,578 | 15,375 | 9,466 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 396,809 | 1,634,634 | 2,460,878 | 71,401,566 | 569,218 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Assets | $ | 33,927,413 | $ | 107,334,876 | $ | 97,182,927 | $ | 395,127,440 | $ | 64,721,180 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cost: | ||||||||||||||||||||
Investments | $ | 30,855,495 | $ | 108,250,317 | $ | 73,965,336 | $ | 456,894,895 | $ | 55,376,720 | ||||||||||
Short-term investment | 672,465 | 593,256 | 7,039,177 | 7,797,556 | 2,550,930 | |||||||||||||||
Foreign currency | – | 546,574 | – | 16,325 | 481,376 | |||||||||||||||
Represented by: | ||||||||||||||||||||
Capital | $ | 34,041,752 | $ | 110,440,159 | $ | 73,160,215 | $ | 420,126,507 | $ | 49,791,388 | ||||||||||
Distributable earnings (accumulated loss) | (114,339 | ) | (3,105,283 | ) | 24,022,712 | (24,999,067 | ) | 14,929,792 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Assets | $ | 33,927,413 | $ | 107,334,876 | $ | 97,182,927 | $ | 395,127,440 | $ | 64,721,180 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Assets: | ||||||||||||||||||||
Class A Shares | $ | 27,529,959 | $ | 12,309,884 | $ | 1,207,387 | $ | 24,957,267 | $ | 49,391,318 | ||||||||||
Class C Shares | 1,712,741 | – | – | 8,074,283 | 564,916 | |||||||||||||||
Class R Shares | 2,120,043 | – | – | 5,041,223 | 2,308,567 | |||||||||||||||
Institutional Service Class Shares | 460,222 | – | – | 84,902,425 | 38,059 | |||||||||||||||
Institutional Class Shares | 2,104,448 | 95,024,992 | 95,975,540 | 272,152,242 | 12,418,320 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 33,927,413 | $ | 107,334,876 | $ | 97,182,927 | $ | 395,127,440 | $ | 64,721,180 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 93 |
Statements of Assets and Liabilities (continued)
October 31, 2018
Aberdeen Global Equity Fund | Aberdeen Global Infrastructure Fund | Aberdeen Income Builder Fund | Aberdeen International Equity Fund | Aberdeen International Small Cap Fund | ||||||||||||||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||||||||||||||
Class A Shares | 2,158,486 | 654,257 | 71,716 | 1,878,919 | 1,690,008 | |||||||||||||||
Class C Shares | 143,587 | – | – | 649,141 | 21,135 | |||||||||||||||
Class R Shares | 174,538 | – | – | 398,470 | 83,216 | |||||||||||||||
Institutional Service Class Shares | 35,569 | – | – | 6,254,243 | 1,293 | |||||||||||||||
Institutional Class Shares | 164,733 | 5,042,161 | 5,700,818 | 19,974,167 | 423,354 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 2,676,913 | 5,696,418 | 5,772,534 | 29,154,940 | 2,219,006 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||||||||||||||
Class A Shares | $ | 12.75 | $ | 18.82 | $ | 16.84 | $ | 13.28 | $ | 29.23 | ||||||||||
Class C Shares (a) | $ | 11.93 | $ | – | $ | – | $ | 12.44 | $ | 26.73 | ||||||||||
Class R Shares | $ | 12.15 | $ | – | $ | – | $ | 12.65 | $ | 27.74 | ||||||||||
Institutional Service Class Shares | $ | 12.94 | $ | – | $ | – | $ | 13.58 | $ | 29.43 | ||||||||||
Institutional Class Shares | $ | 12.77 | $ | 18.85 | $ | 16.84 | $ | 13.63 | $ | 29.33 | ||||||||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||||||||||||||
Class A Shares | $ | 13.53 | $ | 19.97 | $ | 17.87 | $ | 14.09 | $ | 31.01 | ||||||||||
Maximum Sales Charge: | ||||||||||||||||||||
Class A Shares | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % |
(a) | For Class C Shares, the redemption price per share is reduced by 1.00% for shares held less than one year. |
See accompanying Notes to Financial Statements.
94 | Annual Report 2018 |
Statements of Assets and Liabilities (continued)
October 31, 2018
Aberdeen Japanese Equities Fund | Aberdeen U.S. Mid Cap Equity Fund | Aberdeen U.S. Multi-Cap Equity Fund | Aberdeen U.S. Small Cap Equity Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments, at value | $ | 1,363,075 | $ | 1,463,961 | $ | 344,552,806 | $ | 1,600,356,891 | ||||||||
Short-term investments, at value | 6,800 | 57,101 | 4,063,908 | 25,083,957 | ||||||||||||
Foreign currency, at value | 6,467 | – | – | – | ||||||||||||
Receivable for investments sold | 10,249 | – | 1,652,576 | 1,429,268 | ||||||||||||
Receivable for capital shares issued | 3,000 | – | 4,414 | 890,455 | ||||||||||||
Interest and dividends receivable | 8,581 | 403 | 141,901 | 344,104 | ||||||||||||
Receivable from Adviser | 16,428 | 13,380 | 18,550 | – | ||||||||||||
Securities lending income receivable | – | – | 4,382 | 48,148 | ||||||||||||
Prepaid expenses | 39,106 | 17,615 | 49,296 | 70,803 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | 1,453,706 | 1,552,460 | 350,487,833 | 1,628,223,626 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Payable for investments purchased | – | – | – | 1,069,902 | ||||||||||||
Payable for capital shares redeemed | – | – | 109,735 | 1,938,551 | ||||||||||||
Accrued expenses and other payables: | ||||||||||||||||
Investment advisory fees | 823 | 985 | 229,735 | 1,152,826 | ||||||||||||
Sub-transfer agent and administrative services fees | 6 | 17 | 17,193 | 233,669 | ||||||||||||
Distribution fees | 92 | 37 | 53,838 | 119,244 | ||||||||||||
Printing fees | 7 | 2 | 12,764 | 132,115 | ||||||||||||
Administration fees | 101 | 105 | 24,505 | 114,009 | ||||||||||||
Audit fees | 36,650 | 31,650 | 34,150 | 35,150 | ||||||||||||
Transfer agent fees | 3,196 | 4,222 | 29,060 | 60,427 | ||||||||||||
Fund accounting fees | 2,162 | 52 | 12,582 | 61,874 | ||||||||||||
Legal fees | 27 | 28 | 6,495 | 32,457 | ||||||||||||
Custodian fees | 2,378 | 1,693 | 4,981 | 20,785 | ||||||||||||
Other | 29 | 29 | 7,088 | 35,225 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 45,471 | 38,820 | 542,126 | 5,006,234 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets | $ | 1,408,235 | $ | 1,513,640 | $ | 349,945,707 | $ | 1,623,217,392 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cost: | ||||||||||||||||
Investments | $ | 1,376,369 | $ | 1,319,084 | $ | 289,785,620 | $ | 1,521,512,102 | ||||||||
Short-term investment | 6,800 | 57,101 | 4,063,908 | 25,083,957 | ||||||||||||
Foreign currency | 6,472 | – | – | – | ||||||||||||
Represented by: | ||||||||||||||||
Capital | $ | 1,403,121 | $ | 1,301,752 | $ | 257,898,865 | $ | 1,389,706,105 | ||||||||
Distributable earnings | 5,114 | 211,888 | 92,046,842 | 233,511,287 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets | $ | 1,408,235 | $ | 1,513,640 | $ | 349,945,707 | $ | 1,623,217,392 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Class A Shares | $ | 345,613 | $ | 90,661 | $ | 233,717,091 | $ | 224,803,957 | ||||||||
Class C Shares | 10,429 | 13,335 | 2,963,161 | 75,913,135 | ||||||||||||
Class R Shares | 10,583 | 13,514 | 127,717 | 8,430,350 | ||||||||||||
Institutional Service Class Shares | 10,737 | 42,699 | 106,336,900 | 50,162,551 | ||||||||||||
Institutional Class Shares | 1,030,873 | 1,353,431 | 6,800,838 | 1,263,907,399 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,408,235 | $ | 1,513,640 | $ | 349,945,707 | $ | 1,623,217,392 | ||||||||
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 95 |
Statements of Assets and Liabilities (concluded)
October 31, 2018
Aberdeen Japanese Equities Fund | Aberdeen U.S. Mid Cap Equity Fund | Aberdeen U.S. Multi-Cap Equity Fund | Aberdeen U.S. Small Cap Equity Fund | |||||||||||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||||||||||
Class A Shares | 33,315 | 7,439 | 18,654,188 | 6,351,467 | ||||||||||||
Class C Shares | 1,021 | 1,115 | 272,608 | 2,486,458 | ||||||||||||
Class R Shares | 1,022 | 1,115 | 10,912 | 258,255 | ||||||||||||
Institutional Service Class Shares | 1,029 | 3,492 | 7,979,763 | 1,341,701 | ||||||||||||
Institutional Class Shares | 98,822 | 110,667 | 508,846 | 33,818,483 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 135,209 | 123,828 | 27,426,317 | 44,256,364 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||||||||||
Class A Shares | $ | 10.37 | $ | 12.19 | $ | 12.53 | $ | 35.39 | ||||||||
Class C Shares (a) | $ | 10.21 | $ | 11.96 | $ | 10.87 | $ | 30.53 | ||||||||
Class R Shares | $ | 10.36 | $ | 12.12 | $ | 11.70 | $ | 32.64 | ||||||||
Institutional Service Class Shares | $ | 10.43 | $ | 12.23 | $ | 13.33 | $ | 37.39 | ||||||||
Institutional Class Shares | $ | 10.43 | $ | 12.23 | $ | 13.37 | $ | 37.37 | ||||||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||||||||||
Class A Shares | $ | 11.00 | $ | 12.93 | $ | 13.29 | $ | 37.55 | ||||||||
Maximum Sales Charge: | ||||||||||||||||
Class A Shares | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % |
(a) | For Class C Shares, the redemption price per share is reduced by 1.00% for shares held less than one year. |
See accompanying Notes to Financial Statements.
96 | Annual Report 2018 |
Statements of Operations
For the Year Ended October 31, 2018
Aberdeen Asia-Pacific (ex-Japan) Equity Fund | Aberdeen China Opportunities Fund | Aberdeen Dynamic Dividend Fund | Aberdeen Emerging Markets Fund | Aberdeen Focused U.S. Equity Fund | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Dividend income | $ | 256,741 | $ | 311,909 | $ | 9,413,007 | $ | 189,662,969 | $ | 300,737 | ||||||||||
Interest income | 3,648 | 2,894 | 26,325 | 1,008,723 | 5,307 | |||||||||||||||
Securities lending income, net | – | 1,412 | – | 79,972 | 633 | |||||||||||||||
Foreign tax withholding | (15,547 | ) | (13,872 | ) | (255,681 | ) | (20,723,704 | ) | (4,673 | ) | ||||||||||
Other income | 800 | 300 | 4,844 | 10 | 39,081 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Income | 245,642 | 302,643 | 9,188,495 | 170,027,970 | 341,085 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fees | 107,348 | 169,359 | 1,607,293 | 72,894,250 | 160,710 | |||||||||||||||
Administration fees | 8,588 | 10,839 | 78,705 | 6,479,489 | 16,673 | |||||||||||||||
Distribution fees Class A | 2,799 | 19,201 | 10,385 | 462,396 | 20,368 | |||||||||||||||
Distribution fees Class C | 2,232 | 23,386 | – | 256,360 | 15,483 | |||||||||||||||
Distribution fees Class R | 68 | 10,990 | – | 455,192 | 10,773 | |||||||||||||||
Sub-transfer agent and administrative service fees Institutional Class | 6,441 | 644 | 45,179 | 3,929,458 | 11,527 | |||||||||||||||
Sub-transfer agent and administrative service fees Class A | 472 | 6,092 | 1,335 | 462,396 | 8,445 | |||||||||||||||
Sub-transfer agent and administrative service fees Class C | 77 | 2,885 | – | 32,122 | 1,401 | |||||||||||||||
Sub-transfer agent and administrative service fees Class R | – | 3,332 | – | 140,305 | 4,937 | |||||||||||||||
Sub-transfer agent and administrative service fees Institutional Service Class | 1,717 | 602 | – | 109,737 | 944 | |||||||||||||||
Fund accounting fees | 7,355 | 7,667 | 38,556 | 819,499 | 1,991 | |||||||||||||||
Transfer agent fees | 7,594 | 22,344 | 162,359 | 701,355 | 24,881 | |||||||||||||||
Trustee fees | 632 | 794 | 10,492 | 475,730 | 1,213 | |||||||||||||||
Legal fees | 623 | 773 | 23,412 | 457,994 | 1,386 | |||||||||||||||
Compliance fees | – | – | 6,648 | – | – | |||||||||||||||
Printing fees | 9,039 | 11,256 | 44,488 | 332,975 | 10,699 | |||||||||||||||
Custodian fees | 33,998 | 24,905 | 15,305 | 4,664,936 | 6,354 | |||||||||||||||
Registration and filing fees | 67,462 | 72,268 | 29,827 | 174,846 | 69,813 | |||||||||||||||
Audit fees | 36,150 | 35,150 | 36,644 | 37,150 | 38,150 | |||||||||||||||
Dividend expense for securities sold short | �� | – | – | – | – | 10,238 | ||||||||||||||
Other | 27,070 | 8,403 | 26,411 | 1,135,086 | 7,819 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses before reimbursed/waived expenses | 319,665 | 430,890 | 2,137,039 | 94,021,276 | 423,805 | |||||||||||||||
Interest expense (Note 9) | 559 | 341 | 40,796 | 28,290 | 701 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total operating expenses before reimbursed/waived expenses | 320,224 | 431,231 | 2,177,835 | 94,049,566 | 424,506 | |||||||||||||||
Expenses reimbursed | (178,193 | ) | (147,796 | ) | – | (3,091,591 | ) | (159,543 | ) | |||||||||||
Expenses waived by investment adviser | – | – | (117,539 | ) | – | – | ||||||||||||||
Broker related expenses for securities sold short reduced by Adviser | – | – | – | – | (1,652 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net expenses | 142,031 | 283,435 | 2,060,296 | 90,957,975 | 263,311 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Investment Income | 103,611 | 19,208 | 7,128,199 | 79,069,995 | 77,774 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||||||||||||||
Realized gain on investment transactions | 1,192,897 | 205,979 | 11,503,999 | 163,998,682 | 3,264,169 | |||||||||||||||
Realized gain/(loss) on forward foreign currency exchange contracts | – | – | 47,715 | – | – | |||||||||||||||
Realized gain/(loss) on foreign currency transactions | (1,887 | ) | (3,797 | ) | (32,453 | ) | (3,755,103 | ) | (1,122 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gain from investments and foreign currency transactions | 1,191,010 | 202,182 | 11,519,261 | 160,243,579 | 3,263,047 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/(depreciation) on investment transactions (including $3,604, $0, $0, $4,160,863 and $0 change in deferred capital gains tax, respectively) | (2,383,807 | ) | (1,423,257 | ) | (16,342,590 | ) | (1,438,054,073 | ) | (2,753,895 | ) | ||||||||||
Net change in unrealized appreciation/(depreciation) on securities sold short | – | – | – | – | 1,350,716 | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange rate contracts | – | – | 128,168 | – | – | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities denominated in foreign currencies | (217 | ) | (2,154 | ) | (7,202 | ) | (415,027 | ) | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/(depreciation) from investments and translation of assets and liabilities denominated in foreign currencies | (2,384,024 | ) | (1,425,411 | ) | (16,221,624 | ) | (1,438,469,100 | ) | (1,403,179 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized/unrealized gain/(loss) from investments and foreign currency transactions | (1,193,014 | ) | (1,223,229 | ) | (4,702,363 | ) | (1,278,225,521 | ) | 1,859,868 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (1,089,403 | ) | $ | (1,204,021 | ) | $ | 2,425,836 | $ | (1,199,155,526 | ) | $ | 1,937,642 | |||||||
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 97 |
Statements of Operations (continued)
For the Year Ended October 31, 2018
Aberdeen Global Equity Fund | Aberdeen Global Infrastructure Fund | Aberdeen Income Builder Fund | Aberdeen International Equity Fund | Aberdeen International Small Cap Fund | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Dividend income | $ | 912,870 | $ | 5,062,494 | $ | 2,202,140 | $ | 13,310,733 | $ | 2,401,048 | ||||||||||
Interest income | 6,615 | 18,869 | 904,174 | 165,463 | 23,981 | |||||||||||||||
Securities lending income, net | 563 | 2,130 | 53 | 11,523 | 3,345 | |||||||||||||||
Foreign tax withholding | (61,596 | ) | (223,533 | ) | (5,482 | ) | (1,013,504 | ) | (109,485 | ) | ||||||||||
Other income | 15,952 | 145 | 703 | 20,287 | 219 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Income | 874,404 | 4,860,105 | 3,101,588 | 12,494,502 | 2,319,108 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fees | 357,211 | 1,251,778 | 1,018,189 | 4,192,750 | 836,926 | |||||||||||||||
Administration fees | 31,752 | 60,299 | 50,724 | 419,275 | 61,666 | |||||||||||||||
Distribution fees Class A | 79,732 | 41,403 | 3,371 | 84,174 | 143,264 | |||||||||||||||
Distribution fees Class C | 20,729 | – | – | 108,471 | 9,360 | |||||||||||||||
Distribution fees Class R | 13,530 | – | – | 33,394 | 11,440 | |||||||||||||||
Sub-transfer agent and administrative service fees Class A | 29,095 | 5,075 | 432 | 43,951 | 43,581 | |||||||||||||||
Sub-transfer agent and administrative service fees Institutional Class | 1,109 | 22,964 | 1,434 | 71,651 | 9,877 | |||||||||||||||
Sub-transfer agent and administrative service fees Class C | 3,991 | – | – | 11,454 | 897 | |||||||||||||||
Sub-transfer agent and administrative service fees Class R | 6,765 | – | – | 9,416 | 3,489 | |||||||||||||||
Sub-transfer agent and administrative service fees Institutional Service Class | 371 | – | – | 66,237 | 48 | |||||||||||||||
Fund accounting fees | 8,524 | 45,680 | 10,939 | 57,663 | 13,968 | |||||||||||||||
Transfer agent fees | 57,546 | 102,896 | 19,714 | 152,332 | 71,472 | |||||||||||||||
Trustee fees | 2,355 | 8,181 | 6,686 | 30,495 | 4,503 | |||||||||||||||
Legal fees | 2,600 | 14,427 | 13,027 | 30,632 | 5,636 | |||||||||||||||
Compliance fees | – | 5,150 | 4,115 | – | – | |||||||||||||||
Printing fees | 14,794 | 26,855 | 9,033 | 28,102 | 17,473 | |||||||||||||||
Custodian fees | 21,310 | 11,859 | 9,557 | 124,000 | 47,442 | |||||||||||||||
Registration and filing fees | 66,139 | 34,913 | 31,185 | 73,690 | 72,229 | |||||||||||||||
Audit fees | 42,650 | 38,530 | 36,927 | 35,150 | 37,150 | |||||||||||||||
Other | 21,815 | 23,271 | 15,571 | 86,102 | 26,632 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses before reimbursed/waived expenses | 782,018 | 1,693,281 | 1,230,904 | 5,658,939 | 1,417,053 | |||||||||||||||
Interest expense (Note 9) | – | – | – | – | 1,122 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total operating expenses before reimbursed/waived expenses | 782,018 | 1,693,281 | 1,230,904 | 5,658,939 | 1,418,175 | |||||||||||||||
Expenses reimbursed | (159,483 | ) | – | – | (217 | ) | (279,762 | ) | ||||||||||||
Expenses waived by investment adviser | – | (149,744 | ) | (1,026 | ) | – | – | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net expenses | 622,535 | 1,543,537 | 1,229,878 | 5,658,722 | 1,138,413 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Investment Income | 251,869 | 3,316,568 | 1,871,710 | 6,835,780 | 1,180,695 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||||||||||||||
Realized gain on investment transactions | 3,120,368 | 357,895 | 6,999,020 | 9,122,647 | 8,262,247 | |||||||||||||||
Written options | – | – | (36,017 | ) | – | – | ||||||||||||||
Realized gain/(loss) on forward foreign currency exchange contracts | – | 115,523 | – | – | – | |||||||||||||||
Realized gain/(loss) on foreign currency transactions | (7,554 | ) | (13,462 | ) | 2,084 | (153,200 | ) | (22,459 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gain from investments and foreign currency transactions | 3,112,814 | 459,956 | 6,965,087 | 8,969,447 | 8,239,788 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/(depreciation) on investment transactions (including $31,015, $0, $0, $10,766 and $186,979 change in deferred capital gains tax, respectively) | (4,969,303 | ) | (10,586,593 | ) | (4,510,894 | ) | (70,473,779 | ) | (11,412,586 | ) | ||||||||||
Written options | – | – | (18,491 | ) | – | – | ||||||||||||||
Purchased options | – | – | 52,508 | – | – | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange rate contracts | – | 224,440 | – | – | – | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities denominated in foreign currencies | (2,094 | ) | (377 | ) | 6 | (25,270 | ) | 922 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/(depreciation) from investments and translation of assets and liabilities denominated in foreign currencies | (4,971,397 | ) | (10,362,530 | ) | (4,476,871 | ) | (70,499,049 | ) | (11,411,664 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized/unrealized gain/(loss) from investments and foreign currency transactions | (1,858,583 | ) | (9,902,574 | ) | 2,488,216 | (61,529,602 | ) | (3,171,876 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (1,606,714 | ) | $ | (6,586,006 | ) | $ | 4,359,926 | $ | (54,693,822 | ) | $ | (1,991,181 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
98 | Annual Report 2018 |
Statements of Operations (concluded)
For the Year Ended October 31, 2018
Aberdeen Japanese Equities Fund | Aberdeen U.S. Mid Cap Equity Fund | Aberdeen U.S. Multi-Cap Equity Fund | Aberdeen U.S. Small Cap Equity Fund | |||||||||||||
INVESTMENT INCOME: | ||||||||||||||||
Dividend income | $ | 27,267 | $ | 17,460 | $ | 4,935,792 | $ | 19,815,396 | ||||||||
Interest income | 239 | 747 | 76,205 | 538,161 | ||||||||||||
Securities lending income, net | 11 | – | 49,926 | 649,434 | ||||||||||||
Foreign tax withholding | (2,956 | ) | (316 | ) | (81,865 | ) | (348,420 | ) | ||||||||
Other income | – | – | 3,008 | 79,998 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Income | 24,561 | 17,891 | 4,983,066 | 20,734,569 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EXPENSES: | ||||||||||||||||
Investment advisory fees | 10,028 | 11,537 | 2,802,705 | 15,063,789 | ||||||||||||
Administration fees | 1,234 | 1,231 | 298,955 | 1,491,379 | ||||||||||||
Distribution fees Class A | 782 | 164 | 624,934 | 725,345 | ||||||||||||
Distribution fees Class C | 123 | 141 | 33,919 | 883,401 | ||||||||||||
Distribution fees Class R | 61 | 71 | 1,038 | 60,800 | ||||||||||||
Sub-transfer agent and administrative service fees Institutional Class | – | – | 3,073 | 1,350,957 | ||||||||||||
Sub-transfer agent and administrative service fees Class A | 265 | – | 97,311 | 357,436 | ||||||||||||
Sub-transfer agent and administrative service fees Class C | – | – | 3,768 | 78,366 | ||||||||||||
Sub-transfer agent and administrative service fees Class R | – | – | 422 | 30,400 | ||||||||||||
Sub-transfer agent and administrative service fees Institutional Service Class | 1 | – | 80,164 | 62,491 | ||||||||||||
Fund accounting fees | 6,423 | 148 | 36,063 | 184,343 | ||||||||||||
Transfer agent fees | 9,067 | 16,842 | 203,305 | 389,431 | ||||||||||||
Trustee fees | 90 | 89 | 21,645 | 109,088 | ||||||||||||
Legal fees | – | 92 | 22,289 | 110,526 | ||||||||||||
Printing fees | 7,829 | 5,644 | 30,901 | 306,839 | ||||||||||||
Custodian fees | 8,128 | 5,724 | 21,392 | 81,058 | ||||||||||||
Registration and filing fees | 65,730 | 73,070 | 75,424 | 146,857 | ||||||||||||
Audit fees | 37,150 | 35,150 | 34,150 | 35,150 | ||||||||||||
Other | 3,984 | 3,893 | 54,034 | 243,694 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses before reimbursed/waived expenses | 150,895 | 153,796 | 4,445,492 | 21,711,350 | ||||||||||||
Interest expense (Note 9) | – | – | 20 | 4,905 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses before reimbursed/waived expenses | 150,895 | 153,796 | 4,445,512 | 21,716,255 | ||||||||||||
Expenses reimbursed | (134,235 | ) | (138,037 | ) | (244,458 | ) | – | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net expenses | 16,660 | 15,759 | 4,201,054 | 21,716,255 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Investment Income/(Loss) | 7,901 | 2,132 | 782,012 | (981,686 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||||||||||
Realized gain on investment transactions | 12,654 | 66,124 | 36,707,432 | 163,188,196 | ||||||||||||
Realized gain/(loss) on foreign currency transactions | (189 | ) | 56 | (28,744 | ) | (10,408 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized gain from investments and foreign currency transactions | 12,465 | 66,180 | 36,678,688 | 163,177,788 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net change in unrealized appreciation/(depreciation) on investment transactions | (234,262 | ) | (72,266 | ) | (12,659,503 | ) | (161,881,938 | ) | ||||||||
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities denominated in foreign currencies | 73 | – | – | (928 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net change in unrealized appreciation/(depreciation) from investments and translation of assets and liabilities denominated in foreign currencies | (234,189 | ) | (72,266 | ) | (12,659,503 | ) | (161,882,866 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized/unrealized gain/(loss) from investments and foreign currency transactions | (221,724 | ) | (6,086 | ) | 24,019,185 | 1,294,922 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (213,823 | ) | $ | (3,954 | ) | $ | 24,801,197 | $ | 313,236 | ||||||
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 99 |
Statements of Changes in Net Assets
Aberdeen Asia-Pacific (ex-Japan) Equity Fund | Aberdeen China Opportunities Fund | Aberdeen Dynamic Dividend Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 103,611 | $ | 121,806 | $ | 19,208 | $ | 102,144 | $ | 7,128,199 | $ | 9,502,803 | ||||||||||||
Net realized gain/(loss) from investments and foreign currency transactions | 1,191,010 | 100,517 | 202,182 | (859,703 | ) | 11,519,261 | 3,487,767 | |||||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (2,384,024 | ) | 2,553,163 | (1,425,411 | ) | 3,398,896 | (16,221,624 | ) | 20,254,586 | |||||||||||||||
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Changes in net assets resulting from operations | (1,089,403 | ) | 2,775,486 | (1,204,021 | ) | 2,641,337 | 2,425,836 | 33,245,156 | ||||||||||||||||
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Distributions to Shareholders(a): | ||||||||||||||||||||||||
Class A | (13,599 | ) | – | (77,459 | ) | (72,703 | ) | (230,301 | ) | (221,848 | ) | |||||||||||||
Class C | (3,170 | ) | – | (3,351 | ) | – | – | – | ||||||||||||||||
Class R | (149 | ) | – | (13,319 | ) | (10,909 | ) | – | – | |||||||||||||||
Institutional Service Class | (28,197 | ) | – | (7,909 | ) | (8,632 | ) | – | – | |||||||||||||||
Institutional Class | (113,566 | ) | – | (11,540 | ) | (10,628 | ) | (8,892,016 | ) | (9,421,392 | ) | |||||||||||||
Tax return of capital: | ||||||||||||||||||||||||
Class A | – | – | – | – | (4,631 | ) | (7,361 | ) | ||||||||||||||||
Institutional Class | – | – | – | – | (174,550 | ) | (301,575 | ) | ||||||||||||||||
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Change in net assets from shareholder distributions | (158,681 | ) | – | (113,578 | ) | (102,872 | ) | (9,301,498 | ) | (9,952,176 | ) | |||||||||||||
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Change in net assets from capital transactions | (2,287,648 | ) | (6,143,973 | ) | (1,968,051 | ) | (3,809,988 | ) | (17,431,963 | ) | (14,282,338 | ) | ||||||||||||
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Change in net assets | (3,535,732 | ) | (3,368,487 | ) | (3,285,650 | ) | (1,271,523 | ) | (24,307,625 | ) | 9,010,642 | |||||||||||||
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Net Assets: | ||||||||||||||||||||||||
Beginning of year | 11,296,091 | 14,664,578 | 13,326,428 | 14,597,951 | 164,074,913 | 155,064,271 | ||||||||||||||||||
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End of year | $ | 7,760,359 | $ | 11,296,091 | $ | 10,040,778 | $ | 13,326,428 | $ | 139,767,288 | $ | 164,074,913 | ||||||||||||
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(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
100 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen Asia-Pacific (ex-Japan) Equity Fund | Aberdeen China Opportunities Fund | Aberdeen Dynamic Dividend Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 187,057 | $ | 189,725 | $ | 1,687,711 | $ | 1,152,279 | $ | 2,351,462 | $ | 794,860 | ||||||||||||
Dividends reinvested | 12,292 | – | 53,773 | 52,296 | 158,800 | 105,024 | ||||||||||||||||||
Cost of shares redeemed | (248,026 | ) | (108,493 | ) | (2,469,404 | ) | (2,440,453 | ) | (1,108,828 | ) | (1,952,066 | ) | ||||||||||||
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Total Class A | (48,677 | ) | 81,232 | (727,920 | ) | (1,235,878 | ) | 1,401,434 | (1,052,182 | ) | ||||||||||||||
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Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 20,574 | 215,826 | 158,230 | 228,665 | – | – | ||||||||||||||||||
Dividends reinvested | 2,596 | – | 2,975 | – | – | – | ||||||||||||||||||
Cost of shares redeemed | (209,269 | ) | (29,512 | ) | (827,287 | ) | (1,908,843 | ) | – | – | ||||||||||||||
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Total Class C | (186,099 | ) | 186,314 | (666,082 | ) | (1,680,178 | ) | – | – | |||||||||||||||
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Class R Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | 1,591,191 | 602,537 | – | – | ||||||||||||||||||
Dividends reinvested | 149 | – | 10,953 | 8,749 | – | – | ||||||||||||||||||
Cost of shares redeemed | – | – | (1,514,800 | ) | (454,181 | ) | – | – | ||||||||||||||||
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Total Class R | 149 | – | 87,344 | 157,105 | – | – | ||||||||||||||||||
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Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 17,869 | 84,651 | 72,118 | 41,047 | – | – | ||||||||||||||||||
Dividends reinvested | 27,904 | – | 7,713 | 8,463 | – | – | ||||||||||||||||||
Cost of shares redeemed | (231,938 | ) | (2,785,936 | ) | (98,416 | ) | (286,571 | ) | – | – | ||||||||||||||
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Total Institutional Service Class | (186,165 | ) | (2,701,285 | ) | (18,585 | ) | (237,061 | ) | – | – | ||||||||||||||
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Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 6,804,781 | 834,777 | 47,937 | 1,399,308 | 9,753,961 | 6,641,231 | ||||||||||||||||||
Dividends reinvested | 65,508 | – | 7,895 | 6,680 | 7,165,849 | 7,213,282 | ||||||||||||||||||
Cost of shares redeemed | (8,737,145 | ) | (4,545,011 | ) | (698,640 | ) | (2,219,964 | ) | (35,753,207 | ) | (27,084,669 | ) | ||||||||||||
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Total Institutional Class | (1,866,856 | ) | (3,710,234 | ) | (642,808 | ) | (813,976 | ) | (18,833,397 | ) | (13,230,156 | ) | ||||||||||||
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Change in net assets from capital transactions: | $ | (2,287,648 | ) | $ | (6,143,973 | ) | $ | (1,968,051 | ) | $ | (3,809,988 | ) | $ | (17,431,963 | ) | $ | (14,282,338 | ) | ||||||
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Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 101 |
Statements of Changes in Net Assets (continued)
Aberdeen Asia-Pacific (ex-Japan) Equity Fund | Aberdeen China Opportunities Fund | Aberdeen Dynamic Dividend Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 13,426 | 15,917 | 70,856 | 55,342 | 568,239 | 203,272 | ||||||||||||||||||
Reinvested | 917 | – | 2,338 | 3,012 | 38,850 | 27,400 | ||||||||||||||||||
Redeemed | (18,586 | ) | (9,623 | ) | (105,495 | ) | (120,690 | ) | (271,534 | ) | (501,738 | ) | ||||||||||||
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Total Class A Shares | (4,243 | ) | 6,294 | (32,301 | ) | (62,336 | ) | 335,555 | (271,066 | ) | ||||||||||||||
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Class C Shares | ||||||||||||||||||||||||
Issued | 1,464 | 17,639 | 6,735 | 11,471 | – | – | ||||||||||||||||||
Reinvested | 197 | – | 134 | – | – | – | ||||||||||||||||||
Redeemed | (16,396 | ) | (2,980 | ) | (37,674 | ) | (103,192 | ) | – | – | ||||||||||||||
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Total Class C Shares | (14,735 | ) | 14,659 | (30,805 | ) | (91,721 | ) | – | – | |||||||||||||||
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Class R Shares | ||||||||||||||||||||||||
Issued | – | – | 67,537 | 30,329 | – | – | ||||||||||||||||||
Reinvested | 12 | – | 484 | 512 | – | – | ||||||||||||||||||
Redeemed | – | – | (66,494 | ) | (22,985 | ) | – | – | ||||||||||||||||
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Total Class R Shares | 12 | – | 1,527 | 7,856 | – | – | ||||||||||||||||||
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Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | 1,361 | 7,176 | 2,991 | 2,039 | – | – | ||||||||||||||||||
Reinvested | 2,073 | – | 334 | 485 | – | – | ||||||||||||||||||
Redeemed | (16,978 | ) | (263,641 | ) | (4,146 | ) | (14,724 | ) | – | – | ||||||||||||||
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Total Institutional Service Class Shares | (13,544 | ) | (256,465 | ) | (821 | ) | (12,200 | ) | – | – | ||||||||||||||
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Institutional Class Shares | ||||||||||||||||||||||||
Issued | 547,129 | 67,265 | 1,978 | 73,512 | 2,327,152 | 1,707,241 | ||||||||||||||||||
Reinvested | 4,860 | – | 342 | 383 | 1,744,889 | 1,883,528 | ||||||||||||||||||
Redeemed | (694,789 | ) | (386,939 | ) | (28,316 | ) | (117,761 | ) | (8,694,861 | ) | (7,163,846 | ) | ||||||||||||
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Total Institutional Class Shares | (142,800 | ) | (319,674 | ) | (25,996 | ) | (43,866 | ) | (4,622,820 | ) | (3,573,077 | ) | ||||||||||||
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Total change in shares: | (175,310 | ) | (555,186 | ) | (88,396 | ) | (202,267 | ) | (4,287,265 | ) | (3,844,143 | ) | ||||||||||||
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Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
102 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen Emerging Markets Fund | Aberdeen Focused U.S. Equity Fund | Aberdeen Global Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income/(loss) | $ | 79,069,995 | $ | 95,620,933 | $ | 77,774 | $ | (544,434 | ) | $ | 251,869 | $ | 727,759 | |||||||||||
Net realized gain from investments and foreign currency transactions | 160,243,579 | 6,653,200 | 3,263,047 | 7,961,932 | 3,112,814 | 9,103,022 | ||||||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (1,438,469,100 | ) | 1,304,751,654 | (1,403,179 | ) | (3,377,808 | ) | (4,971,397 | ) | 7,256,847 | ||||||||||||||
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Changes in net assets resulting from operations | (1,199,155,526 | ) | 1,407,025,787 | 1,937,642 | 4,039,690 | (1,606,714 | ) | 17,087,628 | ||||||||||||||||
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Distributions to Shareholders From(a): | ||||||||||||||||||||||||
Class A | (2,033,400 | ) | (1,481,671 | ) | (2,185,025 | ) | (1,313,126 | ) | (2,893,919 | ) | (409,109 | ) | ||||||||||||
Class C | (133,381 | ) | (51,789 | ) | (901,896 | ) | (710,750 | ) | (184,263 | ) | (13,245 | ) | ||||||||||||
Class R | (798,320 | ) | (348,298 | ) | (616,821 | ) | (329,447 | ) | (262,184 | ) | (27,516 | ) | ||||||||||||
Institutional Service Class | (1,962,131 | ) | (3,210,803 | ) | (241,404 | ) | (80,401 | ) | (48,090 | ) | (6,791 | ) | ||||||||||||
Institutional Class | (110,259,968 | ) | (84,335,789 | ) | (2,610,765 | ) | (5,697,016 | ) | (253,129 | ) | (364,408 | ) | ||||||||||||
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Change in net assets from shareholder distributions | (115,187,200 | ) | (89,428,350 | ) | (6,555,911 | ) | (8,130,740 | ) | (3,641,585 | ) | (821,069 | ) | ||||||||||||
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Change in net assets from capital transactions | (1,508,721,069 | ) | (575,877,933 | ) | (5,251,610 | ) | (39,750,103 | ) | (3,678,076 | ) | (60,773,721 | ) | ||||||||||||
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Change in net assets | (2,823,063,795 | ) | 741,719,504 | (9,869,879 | ) | (43,841,153 | ) | (8,926,375 | ) | (44,507,162 | ) | |||||||||||||
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Net Assets: | ||||||||||||||||||||||||
Beginning of year | 8,702,219,428 | 7,960,499,924 | 26,838,395 | 70,679,548 | 42,853,788 | 87,360,950 | ||||||||||||||||||
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End of year | $ | 5,879,155,633 | $ | 8,702,219,428 | $ | 16,968,516 | $ | 26,838,395 | $ | 33,927,413 | $ | 42,853,788 | ||||||||||||
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(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 103 |
Statements of Changes in Net Assets (continued)
Aberdeen Emerging Markets Fund | Aberdeen Focused U.S. Equity Fund | Aberdeen Global Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 50,547,938 | $ | 52,739,091 | $ | 1,344,852 | $ | 1,638,105 | $ | 1,030,603 | $ | 2,972,034 | ||||||||||||
Proceeds of shares issued in connection with fund merger | – | – | – | – | – | 8,732,862 | ||||||||||||||||||
Dividends reinvested | 1,610,943 | 1,185,696 | 1,640,101 | 1,085,391 | 2,512,455 | 376,258 | ||||||||||||||||||
Cost of shares redeemed | (87,528,649 | ) | (62,742,101 | ) | (3,540,762 | ) | (4,269,568 | ) | (6,115,180 | ) | (35,583,933 | ) | ||||||||||||
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Total Class A | (35,369,768 | ) | (8,817,314 | ) | (555,809 | ) | (1,546,072 | ) | (2,572,122 | ) | (23,502,779 | ) | ||||||||||||
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Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 3,567,219 | 6,990,946 | 393,587 | 323,903 | 108,778 | 77,042 | ||||||||||||||||||
Proceeds of shares issued in connection with fund merger | – | – | – | – | – | 1,432,891 | ||||||||||||||||||
Dividends reinvested | 104,126 | 35,609 | 678,836 | 400,441 | 147,825 | 7,308 | ||||||||||||||||||
Cost of shares redeemed | (12,485,274 | ) | (7,356,666 | ) | (791,077 | ) | (1,833,234 | ) | (448,446 | ) | (1,312,269 | ) | ||||||||||||
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Total Class C | (8,813,929 | ) | (330,111 | ) | 281,346 | (1,108,890 | ) | (191,843 | ) | 204,972 | ||||||||||||||
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Class R Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 32,113,866 | 26,866,922 | 130,408 | 370,353 | 695,978 | 593,383 | ||||||||||||||||||
Proceeds of shares issued in connection with fund merger | – | – | – | – | – | 2,166,589 | ||||||||||||||||||
Dividends reinvested | 750,126 | 314,211 | 616,821 | 329,447 | 139,402 | 13,090 | ||||||||||||||||||
Cost of shares redeemed | (5,508,831 | ) | (5,003,437 | ) | (687,472 | ) | (952,724 | ) | (1,462,279 | ) | (1,621,041 | ) | ||||||||||||
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Total Class R | 27,355,161 | 22,177,696 | 59,757 | (252,924 | ) | (626,899 | ) | 1,152,021 | ||||||||||||||||
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Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 11,500,772 | 28,706,149 | 198,189 | 281,733 | – | – | ||||||||||||||||||
Proceeds of shares issued in connection with fund merger | – | – | – | – | – | 624,420 | ||||||||||||||||||
Dividends reinvested | 1,961,264 | 3,210,247 | 241,404 | 80,401 | 48,090 | 6,781 | ||||||||||||||||||
Cost of shares redeemed | (77,126,520 | ) | (203,993,186 | ) | (435,883 | ) | (209,619 | ) | (89,495 | ) | (180,620 | ) | ||||||||||||
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Total Institutional Service Class | (63,664,484 | ) | (172,076,790 | ) | 3,710 | 152,515 | (41,405 | ) | 450,581 | |||||||||||||||
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Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 1,319,201,606 | 1,713,068,009 | 2,955,514 | 8,412,055 | 725,407 | 7,518,659 | ||||||||||||||||||
Proceeds of shares issued in connection with fund merger | – | – | – | – | – | 582,702 | ||||||||||||||||||
Dividends reinvested | 86,989,913 | 64,624,339 | 2,427,578 | 5,503,242 | 225,818 | 359,934 | ||||||||||||||||||
Cost of shares redeemed | (2,834,419,568 | ) | (2,194,523,762 | ) | (10,423,706 | ) | (50,910,029 | ) | (1,197,032 | ) | (47,539,811 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class | (1,428,228,049 | ) | (416,831,414 | ) | (5,040,614 | ) | (36,994,732 | ) | (245,807 | ) | (39,078,516 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions: | $ | (1,508,721,069 | ) | $ | (575,877,933 | ) | $ | (5,251,610 | ) | $ | (39,750,103 | ) | $ | (3,678,076 | ) | $ | (60,773,721 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
104 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen Emerging Markets Fund | Aberdeen Focused U.S. Equity Fund | Aberdeen Global Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 3,296,888 | 3,732,112 | 192,257 | 200,699 | 74,076 | 223,492 | ||||||||||||||||||
Issued in connection with fund merger | – | – | – | – | – | 728,321 | ||||||||||||||||||
Reinvested | 102,282 | 96,713 | 246,632 | 136,527 | 182,724 | 30,917 | ||||||||||||||||||
Redeemed | (5,696,461 | ) | (4,529,942 | ) | (461,286 | ) | (518,277 | ) | (438,127 | ) | (2,559,089 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A Shares | (2,297,291 | ) | (701,117 | ) | (22,397 | ) | (181,051 | ) | (181,327 | ) | (1,576,359 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Issued | 226,731 | 489,143 | 176,834 | 78,073 | 8,230 | 6,167 | ||||||||||||||||||
Issued in connection with fund merger | – | – | – | – | – | 126,679 | ||||||||||||||||||
Reinvested | 6,662 | 2,926 | 320,205 | 101,121 | 11,433 | 636 | ||||||||||||||||||
Redeemed | (848,246 | ) | (528,671 | ) | (313,422 | ) | (441,456 | ) | (34,376 | ) | (103,517 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C Shares | (614,853 | ) | (36,602 | ) | 183,617 | (262,262 | ) | (14,713 | ) | 29,965 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Issued | 2,119,000 | 1,913,112 | 19,776 | 48,890 | 53,060 | 46,518 | ||||||||||||||||||
Issued in connection with fund merger | – | – | – | – | – | 187,862 | ||||||||||||||||||
Reinvested | 48,024 | 25,797 | 103,320 | 44,701 | 10,609 | 1,120 | ||||||||||||||||||
Redeemed | (362,881 | ) | (360,090 | ) | (101,953 | ) | (124,605 | ) | (110,440 | ) | (127,659 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R Shares | 1,804,143 | 1,578,819 | 21,143 | (31,014 | ) | (46,771 | ) | 107,841 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | 753,015 | 1,952,623 | 24,934 | 34,118 | – | – | ||||||||||||||||||
Issued in connection with fund merger | – | – | – | – | – | 51,283 | ||||||||||||||||||
Reinvested | 124,367 | 261,847 | 35,037 | 9,865 | 3,457 | 551 | ||||||||||||||||||
Redeemed | (4,911,948 | ) | (13,812,530 | ) | (60,545 | ) | (24,918 | ) | (6,239 | ) | (13,571 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class Shares | (4,034,566 | ) | (11,598,060 | ) | (574 | ) | 19,065 | (2,782 | ) | 38,263 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Issued | 85,567,150 | 122,237,902 | 406,850 | 976,594 | 52,003 | 569,806 | ||||||||||||||||||
Issued in connection with fund merger | – | – | – | – | – | 48,395 | ||||||||||||||||||
Reinvested | 5,512,669 | 5,266,857 | 341,912 | 661,447 | 16,447 | 29,551 | ||||||||||||||||||
Redeemed | (190,866,640 | ) | (152,745,541 | ) | (1,375,324 | ) | (5,977,260 | ) | (87,407 | ) | (3,381,873 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class Shares | (99,786,821 | ) | (25,240,782 | ) | (626,562 | ) | (4,339,219 | ) | (18,957 | ) | (2,734,121 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total change in shares: | (104,929,388 | ) | (35,997,742 | ) | (444,773 | ) | (4,794,481 | ) | (264,550 | ) | (4,134,411 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 105 |
Statements of Changes in Net Assets (continued)
Aberdeen Global Infrastructure Fund | Aberdeen Income Builder Fund | Aberdeen International Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 3,316,568 | $ | 5,092,658 | $ | 1,871,710 | $ | 3,453,914 | $ | 6,835,780 | $ | 6,592,458 | ||||||||||||
Net realized gain from investments and foreign currency transactions | 459,956 | 16,157,065 | 6,965,087 | 2,967,215 | 8,969,447 | 3,308,873 | ||||||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (10,362,530 | ) | 8,317,649 | (4,476,871 | ) | 11,268,486 | (70,499,049 | ) | 81,658,606 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in net assets resulting from operations | (6,586,006 | ) | 29,567,372 | 4,359,926 | 17,689,615 | (54,693,822 | ) | 91,559,937 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders From(a): | ||||||||||||||||||||||||
Class A | (625,920 | ) | (648,032 | ) | (81,569 | ) | (44,606 | ) | (326,763 | ) | (594,323 | ) | ||||||||||||
Class C | – | – | – | – | (23,529 | ) | (85,811 | ) | ||||||||||||||||
Class R | – | – | – | – | (48,077 | ) | (81,487 | ) | ||||||||||||||||
Institutional Service Class | – | – | – | – | (1,273,030 | ) | (1,623,239 | ) | ||||||||||||||||
Institutional Class | (4,305,398 | ) | (5,038,382 | ) | (6,179,148 | ) | (3,215,271 | ) | (4,625,167 | ) | (5,095,583 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from shareholder distributions | (4,931,318 | ) | (5,686,414 | ) | (6,260,717 | ) | (3,259,877 | ) | (6,296,566 | ) | (7,480,443 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions | (16,846,000 | ) | (38,507,425 | ) | (930,461 | ) | 43,204 | (76,975,923 | ) | (9,083,114 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets | (28,363,324 | ) | (14,626,467 | ) | (2,831,252 | ) | 14,472,942 | (137,966,311 | ) | 74,996,380 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 135,698,200 | 150,324,667 | 100,014,179 | 85,541,237 | 533,093,751 | 458,097,371 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
End of year | $ | 107,334,876 | $ | 135,698,200 | $ | 97,182,927 | $ | 100,014,179 | $ | 395,127,440 | $ | 533,093,751 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
106 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen Global Infrastructure Fund | Aberdeen Income Builder Fund | Aberdeen International Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 2,153,523 | $ | 5,948,282 | $ | 106,990 | $ | 117,272 | $ | 3,210,201 | $ | 9,090,986 | ||||||||||||
Dividends reinvested | 446,727 | 495,589 | 64,853 | 31,069 | 273,406 | 514,894 | ||||||||||||||||||
Cost of shares redeemed | (8,961,244 | ) | (5,206,468 | ) | (287,972 | ) | (285,071 | ) | (14,751,140 | ) | (24,986,938 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A | (6,360,994 | ) | 1,237,403 | (116,129 | ) | (136,730 | ) | (11,267,533 | ) | (15,381,058 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | – | – | 493,197 | 621,287 | ||||||||||||||||||
Dividends reinvested | – | – | – | – | 19,695 | 63,239 | ||||||||||||||||||
Cost of shares redeemed | – | – | – | – | (3,703,265 | ) | (4,988,505 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C | – | – | – | – | (3,190,373 | ) | (4,303,979 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | – | – | 855,689 | 1,557,602 | ||||||||||||||||||
Dividends reinvested | – | – | – | – | 36,811 | 63,546 | ||||||||||||||||||
Cost of shares redeemed | – | – | – | – | (2,488,670 | ) | (3,191,931 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R | – | – | – | – | (1,596,170 | ) | (1,570,783 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | – | – | 2,528,693 | 5,183,873 | ||||||||||||||||||
Dividends reinvested | – | – | – | – | 1,218,598 | 1,555,578 | ||||||||||||||||||
Cost of shares redeemed | – | – | – | – | (14,018,416 | ) | (19,212,691 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class | – | – | – | – | (10,271,125 | ) | (12,473,240 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 6,812,497 | 8,526,701 | 877,889 | 414,180 | 60,626,112 | 65,995,458 | ||||||||||||||||||
Dividends reinvested | 3,751,714 | 3,469,124 | 6,088,305 | 3,164,714 | 4,599,171 | 5,052,139 | ||||||||||||||||||
Cost of shares redeemed | (21,049,217 | ) | (51,740,653 | ) | (7,780,526 | ) | (3,398,960 | ) | (115,876,005 | ) | (46,401,651 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class | (10,485,006 | ) | (39,744,828 | ) | (814,332 | ) | 179,934 | (50,650,722 | ) | 24,645,946 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions: | $ | (16,846,000 | ) | $ | (38,507,425 | ) | $ | (930,461 | ) | $ | 43,204 | $ | (76,975,923 | ) | $ | (9,083,114 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 107 |
Statements of Changes in Net Assets (continued)
Aberdeen Global Infrastructure Fund | Aberdeen Income Builder Fund | Aberdeen International Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year��Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 104,459 | 305,947 | 6,192 | 7,122 | 215,116 | 685,812 | ||||||||||||||||||
Reinvested | 22,524 | 26,049 | 3,758 | 1,896 | 18,095 | 42,308 | ||||||||||||||||||
Redeemed | (447,726 | ) | (274,615 | ) | (16,457 | ) | (17,175 | ) | (988,468 | ) | (1,853,771 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A Shares | (320,743 | ) | 57,381 | (6,507 | ) | (8,157 | ) | (755,257 | ) | (1,125,651 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Issued | – | – | – | – | 34,959 | 47,715 | ||||||||||||||||||
Reinvested | – | – | – | – | 1,384 | 5,514 | ||||||||||||||||||
Redeemed | – | – | – | – | (265,443 | ) | (385,680 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C Shares | – | – | – | – | (229,100 | ) | (332,451 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Issued | – | – | – | – | 59,827 | 117,324 | ||||||||||||||||||
Reinvested | – | – | – | – | 2,553 | 5,464 | ||||||||||||||||||
Redeemed | – | – | – | – | (175,695 | ) | (242,496 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R Shares | – | – | – | – | (113,315 | ) | (119,708 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | – | – | – | – | 164,999 | 372,391 | ||||||||||||||||||
Reinvested | – | – | – | – | 79,130 | 125,348 | ||||||||||||||||||
Redeemed | – | – | – | – | (912,422 | ) | (1,404,687 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class Shares | – | – | – | – | (668,293 | ) | (906,948 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Issued | 333,957 | 453,031 | 50,965 | 25,492 | 3,975,504 | 4,740,246 | ||||||||||||||||||
Reinvested | 189,285 | 181,971 | 352,755 | 193,130 | 297,681 | 405,794 | ||||||||||||||||||
Redeemed | (1,068,640 | ) | (2,683,067 | ) | (451,500 | ) | (202,782 | ) | (8,103,275 | ) | (3,332,221 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class Shares | (545,398 | ) | (2,048,065 | ) | (47,780 | ) | 15,840 | (3,830,090 | ) | 1,813,819 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total change in shares: | (866,141 | ) | (1,990,684 | ) | (54,287 | ) | 7,683 | (5,596,055 | ) | (670,939 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
108 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen International Small Cap Fund | Aberdeen Japanese Equities Fund | Aberdeen U.S. Mid Cap Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 1,180,695 | $ | 337,781 | $ | 7,901 | $ | 5,918 | $ | 2,132 | $ | 2,841 | ||||||||||||
Net realized gain from investments and foreign currency transactions | 8,239,788 | 2,673,748 | 12,465 | 14,670 | 66,180 | 127,337 | ||||||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (11,411,664 | ) | 11,818,012 | (234,189 | ) | 130,078 | (72,266 | ) | 144,525 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in net assets resulting from operations | (1,991,181 | ) | 14,829,541 | (213,823 | ) | 150,666 | (3,954 | ) | 274,703 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders From(a): | ||||||||||||||||||||||||
Class A | (1,952,986 | ) | (416,238 | ) | (4,143 | ) | (247 | ) | (4,160 | ) | (254 | ) | ||||||||||||
Class C | (36,944 | ) | (3,656 | ) | (143 | ) | (95 | ) | (1,220 | ) | (212 | ) | ||||||||||||
Class R | (52,236 | ) | (7,383 | ) | (143 | ) | (95 | ) | (1,221 | ) | (221 | ) | ||||||||||||
Institutional Service Class | (1,607 | ) | (245 | ) | (187 | ) | (135 | ) | (1,248 | ) | (255 | ) | ||||||||||||
Institutional Class | (602,294 | ) | (207,449 | ) | (17,933 | ) | (12,966 | ) | (122,061 | ) | (24,492 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from shareholder distributions | (2,646,067 | ) | (634,971 | ) | (22,549 | ) | (13,538 | ) | (129,910 | ) | (25,434 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions | (10,609,304 | ) | (7,781,845 | ) | 142,990 | 248,338 | 222,592 | 78,207 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets | (15,246,552 | ) | 6,412,725 | (93,382 | ) | 385,466 | 88,728 | 327,476 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 79,967,732 | 73,555,007 | 1,501,617 | 1,116,151 | 1,424,912 | 1,097,436 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
End of year | $ | 64,721,180 | $ | 79,967,732 | $ | 1,408,235 | $ | 1,501,617 | $ | 1,513,640 | $ | 1,424,912 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 109 |
Statements of Changes in Net Assets (continued)
Aberdeen International Small Cap Fund | Aberdeen Japanese Equities Fund | Aberdeen U.S. Mid Cap Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 2,023,590 | $ | 8,666,909 | $ | 203,617 | $ | 239,852 | $ | 64,091 | $ | 28,765 | ||||||||||||
Dividends reinvested | 1,880,760 | 399,285 | 4,142 | 247 | 4,160 | 254 | ||||||||||||||||||
Cost of shares redeemed | (10,541,165 | ) | (11,268,150 | ) | (83,176 | ) | (5,052 | ) | (16,685 | ) | – | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A | (6,636,815 | ) | (2,201,956 | ) | 124,583 | 235,047 | 51,566 | 29,019 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 24,464 | 1,792,572 | 11,948 | – | 14,455 | – | ||||||||||||||||||
Dividends reinvested | 34,906 | 3,468 | 143 | 95 | 1,220 | 212 | ||||||||||||||||||
Cost of shares redeemed | (1,053,902 | ) | (1,741,386 | ) | (11,948 | ) | – | (14,455 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C | (994,532 | ) | 54,654 | 143 | 95 | 1,220 | 212 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 1,347,361 | 811,598 | 12,115 | – | 14,644 | – | ||||||||||||||||||
Dividends reinvested | 35,282 | 5,036 | 143 | 95 | 1,221 | 221 | ||||||||||||||||||
Cost of shares redeemed | (592,666 | ) | (339,379 | ) | (12,115 | ) | – | (14,643 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R | 789,977 | 477,255 | 143 | 95 | 1,222 | 221 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 146,380 | 9,530 | 12,291 | – | 45,847 | – | ||||||||||||||||||
Dividends reinvested | 1,607 | 245 | 187 | 135 | 1,248 | 255 | ||||||||||||||||||
Cost of shares redeemed | (152,908 | ) | (30,673 | ) | (12,291 | ) | – | (14,839 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class | (4,921 | ) | (20,898 | ) | 187 | 135 | 32,256 | 255 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 1,153,676 | 3,086,912 | 1,179,930 | – | 1,446,735 | 24,031 | ||||||||||||||||||
Dividends reinvested | 595,871 | 186,470 | 17,933 | 12,966 | 122,061 | 24,492 | ||||||||||||||||||
Cost of shares redeemed | (5,512,560 | ) | (9,364,282 | ) | (1,179,929 | ) | – | (1,432,468 | ) | (23 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class | (3,763,013 | ) | (6,090,900 | ) | 17,934 | 12,966 | 136,328 | 48,500 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions: | $ | (10,609,304 | ) | $ | (7,781,845 | ) | $ | 142,990 | $ | 248,338 | $ | 222,592 | $ | 78,207 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
110 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen International Small Cap Fund | Aberdeen Japanese Equities Fund | Aberdeen U.S. Mid Cap Equity Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 64,051 | 320,012 | 16,929 | 21,263 | 4,922 | 2,348 | ||||||||||||||||||
Reinvested | 60,709 | 16,398 | 338 | 23 | 325 | 22 | ||||||||||||||||||
Redeemed | (332,157 | ) | (423,079 | ) | (6,821 | ) | (431 | ) | (1,265 | ) | – | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A Shares | (207,397 | ) | (86,669 | ) | 10,446 | 20,855 | 3,982 | 2,370 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Issued | 837 | 69,769 | 1,021 | – | 1,115 | – | ||||||||||||||||||
Reinvested | 1,225 | 154 | 12 | 9 | 97 | 19 | ||||||||||||||||||
Redeemed | (36,219 | ) | (63,826 | ) | (1,021 | ) | – | (1,116 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C Shares | (34,157 | ) | 6,097 | 12 | 9 | 96 | 19 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Issued | 44,609 | 31,315 | 1,022 | – | 1,115 | – | ||||||||||||||||||
Reinvested | 1,197 | 217 | 12 | 10 | 96 | 19 | ||||||||||||||||||
Redeemed | (19,843 | ) | (12,508 | ) | (1,022 | ) | – | (1,115 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R Shares | 25,963 | 19,024 | 12 | 10 | 96 | 19 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | 4,666 | 308 | 1,029 | – | 3,492 | – | ||||||||||||||||||
Reinvested | 52 | 10 | 15 | 13 | 97 | 22 | ||||||||||||||||||
Redeemed | (5,053 | ) | (1,155 | ) | (1,029 | ) | – | (1,119 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class Shares | (335 | ) | (837 | ) | 15 | 13 | 2,470 | 22 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Issued | 36,323 | 112,417 | 98,823 | – | 109,243 | 1,867 | ||||||||||||||||||
Reinvested | 19,216 | 7,658 | 1,459 | 1,277 | 9,536 | 2,151 | ||||||||||||||||||
Redeemed | (177,505 | ) | (336,755 | ) | (98,822 | ) | – | (108,128 | ) | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class Shares | (121,966 | ) | (216,680 | ) | 1,460 | 1,277 | 10,651 | 4,016 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total change in shares: | (337,892 | ) | (279,065 | ) | 11,945 | 22,164 | 17,295 | 6,446 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 111 |
Statements of Changes in Net Assets (continued)
Aberdeen U.S. Multi-Cap Equity Fund | Aberdeen U.S. Small Cap Equity Fund | |||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income/(loss) | $ | 782,012 | $ | 1,239,926 | $ | (981,686 | ) | $ | (3,039,782 | ) | ||||||
Net realized gain from investments and foreign currency transactions | 36,678,688 | 38,843,861 | 163,177,788 | 115,723,157 | ||||||||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (12,659,503 | ) | 28,261,064 | (161,882,866 | ) | 224,842,396 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Changes in net assets resulting from operations | 24,801,197 | 68,344,851 | 313,236 | 337,525,771 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders From(a): | ||||||||||||||||
Class A | (25,129,284 | ) | (26,476,714 | ) | – | – | ||||||||||
Class C | (399,312 | ) | (739,985 | ) | – | – | ||||||||||
Class R | (17,226 | ) | (33,344 | ) | – | – | ||||||||||
Institutional Service Class | (10,886,203 | ) | (11,568,923 | ) | – | – | ||||||||||
Institutional Class | (652,072 | ) | (780,092 | ) | – | – | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from shareholder distributions | (37,084,097 | ) | (39,599,058 | ) | – | – | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from capital transactions | 516,221 | (7,197,173 | ) | (340,052,278 | ) | 480,510,982 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets | (11,766,679 | ) | 21,548,620 | (339,739,042 | ) | 818,036,753 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 361,712,386 | 340,163,766 | 1,962,956,434 | 1,144,919,681 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of year | $ | 349,945,707 | $ | 361,712,386 | $ | 1,623,217,392 | $ | 1,962,956,434 | ||||||||
|
|
|
|
|
|
|
|
(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
112 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen U.S. Multi-Cap Equity Fund | Aberdeen U.S. Small Cap Equity Fund | |||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||
Class A Shares | ||||||||||||||||
Proceeds from shares issued | $ | 2,005,763 | $ | 3,928,729 | $ | 64,163,593 | $ | 191,289,180 | ||||||||
Dividends reinvested | 22,908,926 | 24,007,105 | – | – | ||||||||||||
Cost of shares redeemed | (24,613,195 | ) | (30,332,254 | ) | (158,789,517 | ) | (195,976,089 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class A | 301,494 | (2,396,420 | ) | (94,625,924 | ) | (4,686,909 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Proceeds from shares issued | 235,279 | 430,378 | 8,593,198 | 35,506,760 | ||||||||||||
Dividends reinvested | 342,668 | 404,673 | – | – | ||||||||||||
Cost of shares redeemed | (983,473 | ) | (3,413,355 | ) | (27,940,283 | ) | (35,730,729 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class C | (405,526 | ) | (2,578,304 | ) | (19,347,085 | ) | (223,969 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R Shares | ||||||||||||||||
Proceeds from shares issued | 177,191 | 53,756 | 4,238,759 | 10,098,588 | ||||||||||||
Dividends reinvested | 29 | 28 | – | – | ||||||||||||
Cost of shares redeemed | (200,031 | ) | (176,583 | ) | (16,587,607 | ) | (6,938,875 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class R | (22,811 | ) | (122,799 | ) | (12,348,848 | ) | 3,159,713 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Service Class Shares | ||||||||||||||||
Proceeds from shares issued | 1,125,961 | 952,791 | 17,046,161 | 36,790,412 | ||||||||||||
Dividends reinvested | 10,647,373 | 11,275,476 | – | – | ||||||||||||
Cost of shares redeemed | (11,611,381 | ) | (13,475,239 | ) | (28,785,565 | ) | (34,169,491 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Institutional Service Class | 161,953 | (1,246,972 | ) | (11,739,404 | ) | 2,620,921 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Class Shares | ||||||||||||||||
Proceeds from shares issued | 1,911,678 | 2,681,977 | 504,210,170 | 889,508,996 | ||||||||||||
Dividends reinvested | 571,317 | 722,772 | – | – | ||||||||||||
Cost of shares redeemed | (2,001,884 | ) | (4,257,427 | ) | (706,201,187 | ) | (409,867,770 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Institutional Class | 481,111 | (852,678 | ) | (201,991,017 | ) | 479,641,226 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from capital transactions: | $ | 516,221 | $ | (7,197,173 | ) | $ | (340,052,278 | ) | $ | 480,510,982 | ||||||
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 113 |
Statements of Changes in Net Assets (concluded)
Aberdeen U.S. Multi-Cap Equity Fund | Aberdeen U.S. Small Cap Equity Fund | |||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||
Class A Shares | ||||||||||||||||
Issued | 156,173 | 319,724 | 1,767,921 | 5,853,236 | ||||||||||||
Reinvested | 1,846,005 | 2,082,143 | – | – | ||||||||||||
Redeemed | (1,896,517 | ) | (2,463,388 | ) | (4,312,208 | ) | (5,997,812 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class A Shares | 105,661 | (61,521 | ) | (2,544,287 | ) | (144,576 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Issued | 21,090 | 41,110 | 272,512 | 1,243,834 | ||||||||||||
Reinvested | 31,641 | 39,480 | – | – | ||||||||||||
Redeemed | (87,409 | ) | (311,583 | ) | (886,359 | ) | (1,252,586 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class C Shares | (34,678 | ) | (230,993 | ) | (613,847 | ) | (8,752 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R Shares | ||||||||||||||||
Issued | 14,735 | 4,807 | 126,933 | 333,805 | ||||||||||||
Reinvested | 3 | 2 | – | – | ||||||||||||
Redeemed | (16,739 | ) | (15,003 | ) | (493,404 | ) | (223,666 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class R Shares | (2,001 | ) | (10,194 | ) | (366,471 | ) | 110,139 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Service Class Shares | ||||||||||||||||
Issued | 81,750 | 73,719 | 441,933 | 1,067,698 | ||||||||||||
Reinvested | 808,457 | 927,260 | – | – | ||||||||||||
Redeemed | (843,596 | ) | (1,041,741 | ) | (750,218 | ) | (989,421 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Institutional Service Class Shares | 46,611 | (40,762 | ) | (308,285 | ) | 78,277 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Class Shares | ||||||||||||||||
Issued | 139,151 | 206,077 | 12,958,645 | 26,250,509 | ||||||||||||
Reinvested | 43,282 | 59,341 | – | – | ||||||||||||
Redeemed | (144,257 | ) | (323,215 | ) | (18,286,393 | ) | (11,856,653 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Institutional Class Shares | 38,176 | (57,797 | ) | (5,327,748 | ) | 14,393,856 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total change in shares: | 153,769 | (401,267 | ) | (9,160,638 | ) | 14,428,944 | ||||||||||
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
114 | Annual Report 2018 |
This page intentionally left blank.
Financial Highlights
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Asia-Pacific (ex-Japan) Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 13.41 | $ | 0.11 | $ | (1.72 | ) | $ | (1.61 | ) | $ | (0.17 | ) | $ | – | $ | (0.17 | ) | $ | 11.63 | ||||||||||||
Year Ended October 31, 2017 | 10.49 | 0.12 | 2.80 | 2.92 | – | – | – | 13.41 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.04 | 0.18 | (f) | 0.48 | 0.66 | (0.21 | ) | – | (0.21 | ) | 10.49 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.08 | 0.14 | (1.68 | ) | (1.54 | ) | (0.30 | ) | (0.20 | ) | (0.50 | ) | 10.04 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.01 | 0.14 | 0.15 | 0.29 | (0.15 | ) | (0.07 | ) | (0.22 | ) | 12.08 | |||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.19 | – | (g) | (1.67 | ) | (1.67 | ) | (0.16 | ) | – | (0.16 | ) | 11.36 | |||||||||||||||||||
Year Ended October 31, 2017 | 10.38 | 0.03 | 2.78 | 2.81 | – | – | – | 13.19 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.01 | 0.12 | (f) | 0.44 | 0.56 | (0.19 | ) | – | (0.19 | ) | 10.38 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.05 | 0.07 | (1.67 | ) | (1.60 | ) | (0.24 | ) | (0.20 | ) | (0.44 | ) | 10.01 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.00 | 0.05 | 0.15 | 0.20 | (0.08 | ) | (0.07 | ) | (0.15 | ) | 12.05 | |||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.33 | 0.08 | (1.70 | ) | (1.62 | ) | (0.15 | ) | – | (0.15 | ) | 11.56 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.45 | 0.09 | 2.79 | 2.88 | – | – | – | 13.33 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.02 | 0.16 | (f) | 0.48 | 0.64 | (0.21 | ) | – | (0.21 | ) | 10.45 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.07 | 0.15 | (1.72 | ) | (1.57 | ) | (0.28 | ) | (0.20 | ) | (0.48 | ) | 10.02 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.02 | 0.05 | 0.20 | 0.25 | (0.13 | ) | (0.07 | ) | (0.20 | ) | 12.07 | |||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.48 | 0.13 | (1.72 | ) | (1.59 | ) | (0.19 | ) | – | (0.19 | ) | 11.70 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.53 | 0.07 | 2.88 | 2.95 | – | – | – | 13.48 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.06 | 0.21 | (f) | 0.47 | 0.68 | (0.21 | ) | – | (0.21 | ) | 10.53 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.10 | 0.17 | (1.69 | ) | (1.52 | ) | (0.32 | ) | (0.20 | ) | (0.52 | ) | 10.06 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.03 | 0.17 | 0.14 | 0.31 | (0.17 | ) | (0.07 | ) | (0.24 | ) | 12.10 | |||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.50 | 0.14 | (1.72 | ) | (1.58 | ) | (0.19 | ) | – | (0.19 | ) | 11.73 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.53 | 0.13 | 2.84 | 2.97 | – | – | – | 13.50 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.07 | 0.05 | (f) | 0.62 | 0.67 | (0.21 | ) | – | (0.21 | ) | 10.53 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.11 | 0.21 | (1.72 | ) | (1.51 | ) | (0.33 | ) | (0.20 | ) | (0.53 | ) | 10.07 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.04 | 0.16 | 0.16 | 0.32 | (0.18 | ) | (0.07 | ) | (0.25 | ) | 12.11 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
116 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Asia-Pacific (ex-Japan) Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(12.16 | %) | $ | 853 | 1.55 | %(e) | 3.15 | %(e) | 0.83 | % | 69.85 | % | |||||||||||
27.84 | % | 1,041 | 1.55 | %(e) | 3.46 | %(e) | 1.01 | % | 20.14 | % | ||||||||||||
6.86 | %(f) | 748 | 1.54 | %(e) | 1.70 | %(e) | 1.88 | %(f) | 39.84 | % | ||||||||||||
(12.94 | %) | 815 | 1.51 | %(e) | 1.52 | %(e) | 1.21 | % | 58.06 | % | ||||||||||||
2.43 | % | 1,173 | 1.50 | % | 1.52 | % | 1.21 | % | 36.48 | % | ||||||||||||
(12.85 | %) | 62 | 2.26 | %(e) | 3.89 | %(e) | – | (h) | 69.85 | % | ||||||||||||
27.07 | % | 267 | 2.26 | %(e) | 4.22 | %(e) | 0.28 | % | 20.14 | % | ||||||||||||
5.90 | %(f) | 58 | 2.26 | %(e) | 2.44 | %(e) | 1.24 | %(f) | 39.84 | % | ||||||||||||
(13.42 | %) | 280 | 2.26 | %(e) | 2.27 | %(e) | 0.66 | % | 58.06 | % | ||||||||||||
1.67 | % | 288 | 2.25 | % | 2.27 | % | 0.46 | % | 36.48 | % | ||||||||||||
(12.31 | %) | 12 | 1.76 | %(e) | 3.36 | %(e) | 0.58 | % | 69.85 | % | ||||||||||||
27.56 | % | 13 | 1.76 | %(e) | 3.67 | %(e) | 0.81 | % | 20.14 | % | ||||||||||||
6.63 | %(f) | 10 | 1.76 | %(e) | 1.92 | %(e) | 1.68 | %(f) | 39.84 | % | ||||||||||||
(13.17 | %) | 10 | 1.76 | %(e) | 1.77 | %(e) | 1.30 | % | 58.06 | % | ||||||||||||
2.06 | % | 11 | 1.76 | % | 1.78 | % | 0.40 | % | 36.48 | % | ||||||||||||
(11.99 | %) | 1,610 | 1.34 | %(e) | 2.94 | %(e) | 0.96 | % | 69.85 | % | ||||||||||||
28.02 | % | 2,036 | 1.33 | %(e) | 3.24 | %(e) | 0.65 | % | 20.14 | % | ||||||||||||
7.08 | %(f) | 4,291 | 1.28 | %(e) | 1.44 | %(e) | 2.14 | %(f) | 39.84 | % | ||||||||||||
(12.73 | %) | 4,017 | 1.29 | %(e) | 1.30 | %(e) | 1.54 | % | 58.06 | % | ||||||||||||
2.59 | % | 3,950 | 1.30 | % | 1.32 | % | 1.45 | % | 36.48 | % | ||||||||||||
(11.88 | %) | 5,223 | 1.26 | %(e) | 2.95 | %(e) | 1.02 | % | 69.85 | % | ||||||||||||
28.21 | % | 7,939 | 1.26 | %(e) | 3.24 | %(e) | 1.15 | % | 20.14 | % | ||||||||||||
6.97 | %(f) | 9,558 | 1.26 | %(e) | 1.43 | %(e) | 0.57 | %(f) | 39.84 | % | ||||||||||||
(12.68 | %) | 263,176 | 1.26 | %(e) | 1.27 | %(e) | 1.83 | % | 58.06 | % | ||||||||||||
2.64 | % | 1,069,989 | 1.25 | % | 1.27 | % | 1.32 | % | 36.48 | % |
(e) | Includes interest expense that amounts to 0.01% for Class A, Class C, Class R, Institutional Service Class and Institutional Class for the years ended October 31, 2018 and October 31, 2017. Includes interest expense that amounts to less than 0.01% for Class A, Class C, Class R, Institutional Service Class and Institutional Class for the years ended October 31, 2016 and October 31, 2015. |
(f) | Included within Net Investment Income per share, Total Return and Ratio of Net Investment Income to Average Net Assets are the effects of a one-time reimbursement for overbilling of prior years’ custodian out-of-pocket fees. If such amounts were excluded, Net Investment Income per share would be reduced by $0.02, $0.01, $0.01, $0.02 and $0.02, Total Return would be reduced by 0.21%, 0.10%, 0.10%, 0.20% and 0.20% and Ratio of Net Investment Income to Average Net Assets would be reduced by 0.14%, 0.05%, 0.16%, 0.16% and 0.02% for Class A, Class C, Class R, Institutional Service Class and Institutional Class, respectively. |
(g) | Less than $0.005 per share. |
(h) | Amount is less than 0.005%. |
2018 Annual Report | 117 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen China Opportunities Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | Net Asset Value, End of Period | ||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 22.48 | $ | 0.06 | $ | (2.45 | ) | $ | (2.39 | ) | $ | (0.23 | ) | $ | (0.23 | ) | $ | 19.86 | ||||||||||
Year Ended October 31, 2017 | 18.46 | 0.20 | 4.02 | 4.22 | (0.20 | ) | (0.20 | ) | 22.48 | |||||||||||||||||||
Year Ended October 31, 2016 | 17.94 | 0.19 | 0.33 | 0.52 | – | – | 18.46 | |||||||||||||||||||||
Year Ended October 31, 2015 | 20.19 | 0.22 | (2.14 | ) | (1.92 | ) | (0.33 | ) | (0.33 | ) | 17.94 | |||||||||||||||||
Year Ended October 31, 2014 | 20.54 | 0.16 | (0.33 | ) | (0.17 | ) | (0.18 | ) | (0.18 | ) | 20.19 | |||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 21.59 | (0.09 | ) | (2.35 | ) | (2.44 | ) | (0.03 | ) | (0.03 | ) | 19.12 | ||||||||||||||||
Year Ended October 31, 2017 | 17.64 | 0.03 | 3.92 | 3.95 | – | – | 21.59 | |||||||||||||||||||||
Year Ended October 31, 2016 | 17.26 | 0.06 | 0.32 | 0.38 | – | – | 17.64 | |||||||||||||||||||||
Year Ended October 31, 2015 | 19.50 | 0.18 | (2.17 | ) | (1.99 | ) | (0.25 | ) | (0.25 | ) | 17.26 | |||||||||||||||||
Year Ended October 31, 2014 | 19.87 | 0.01 | (0.32 | ) | (0.31 | ) | (0.06 | ) | (0.06 | ) | 19.50 | |||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 22.07 | 0.04 | (2.46 | ) | (2.42 | ) | (0.17 | ) | (0.17 | ) | 19.48 | |||||||||||||||||
Year Ended October 31, 2017 | 18.13 | 0.15 | 3.94 | 4.09 | (0.15 | ) | (0.15 | ) | 22.07 | |||||||||||||||||||
Year Ended October 31, 2016 | 17.68 | 0.16 | 0.29 | 0.45 | – | – | 18.13 | |||||||||||||||||||||
Year Ended October 31, 2015 | 19.92 | 0.23 | (2.19 | ) | (1.96 | ) | (0.28 | ) | (0.28 | ) | 17.68 | |||||||||||||||||
Year Ended October 31, 2014 | 20.29 | 0.10 | (0.35 | ) | (0.25 | ) | (0.12 | ) | (0.12 | ) | 19.92 | |||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 22.62 | 0.11 | (2.46 | ) | (2.35 | ) | (0.29 | ) | (0.29 | ) | 19.98 | |||||||||||||||||
Year Ended October 31, 2017 | 18.55 | 0.22 | 4.08 | 4.30 | (0.23 | ) | (0.23 | ) | 22.62 | |||||||||||||||||||
Year Ended October 31, 2016 | 18.00 | 0.22 | 0.33 | 0.55 | – | – | 18.55 | |||||||||||||||||||||
Year Ended October 31, 2015 | 20.28 | 0.30 | (2.18 | ) | (1.88 | ) | (0.40 | ) | (0.40 | ) | 18.00 | |||||||||||||||||
Year Ended October 31, 2014 | 20.62 | 0.21 | (0.33 | ) | (0.12 | ) | (0.22 | ) | (0.22 | ) | 20.28 | |||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 22.65 | 0.05 | (2.38 | ) | (2.33 | ) | (0.29 | ) | (0.29 | ) | 20.03 | |||||||||||||||||
Year Ended October 31, 2017 | 18.58 | 0.19 | 4.13 | 4.32 | (0.25 | ) | (0.25 | ) | 22.65 | |||||||||||||||||||
Year Ended October 31, 2016 | 18.00 | 0.26 | 0.32 | 0.58 | – | – | 18.58 | |||||||||||||||||||||
Year Ended October 31, 2015 | 20.28 | 0.35 | (2.23 | ) | (1.88 | ) | (0.40 | ) | (0.40 | ) | 18.00 | |||||||||||||||||
Year Ended October 31, 2014 | 20.64 | 0.25 | (0.38 | ) | (0.13 | ) | (0.23 | ) | (0.23 | ) | 20.28 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
118 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen China Opportunities Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income (Loss) to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(10.76 | %) | $ | 5,978 | 1.95 | %(e) | 3.01 | %(e) | 0.27 | % | 26.13 | % | |||||||||||
23.15 | % | 7,492 | 1.97 | %(e) | 3.04 | %(e) | 0.98 | % | 23.58 | % | ||||||||||||
2.90 | % | 7,301 | 1.95 | %(e) | 2.84 | %(e) | 1.10 | % | 15.75 | % | ||||||||||||
(9.50 | %) | 8,221 | 1.89 | %(e) | 2.48 | %(e) | 1.12 | % | 10.48 | % | ||||||||||||
(0.82 | %) | 19,425 | 1.89 | % | 2.30 | % | 0.79 | % | 30.61 | % | ||||||||||||
(11.32 | %) | 1,568 | 2.62 | %(e) | 3.81 | %(e) | (0.42 | %) | 26.13 | % | ||||||||||||
22.39 | % | 2,437 | 2.62 | %(e) | 3.83 | %(e) | 0.14 | % | 23.58 | % | ||||||||||||
2.20 | % | 3,609 | 2.62 | %(e) | 3.60 | %(e) | 0.37 | % | 15.75 | % | ||||||||||||
(10.18 | %) | 4,711 | 2.62 | %(e) | 3.21 | %(e) | 0.95 | % | 10.48 | % | ||||||||||||
(1.57 | %) | 6,064 | 2.62 | % | 3.03 | % | 0.04 | % | 30.61 | % | ||||||||||||
(11.07 | %) | 1,664 | 2.27 | %(e) | 3.33 | %(e) | 0.18 | % | 26.13 | % | ||||||||||||
22.77 | % | 1,851 | 2.31 | %(e) | 3.38 | %(e) | 0.74 | % | 23.58 | % | ||||||||||||
2.55 | % | 1,378 | 2.28 | %(e) | 3.17 | %(e) | 0.95 | % | 15.75 | % | ||||||||||||
(9.83 | %) | 1,293 | 2.29 | %(e) | 2.88 | %(e) | 1.20 | % | 10.48 | % | ||||||||||||
(1.25 | %) | 1,495 | 2.27 | % | 2.68 | % | 0.50 | % | 30.61 | % | ||||||||||||
(10.57 | %) | 532 | 1.72 | %(e) | 2.78 | %(e) | 0.49 | % | 26.13 | % | ||||||||||||
23.54 | % | 620 | 1.71 | %(e) | 2.78 | %(e) | 1.12 | % | 23.58 | % | ||||||||||||
3.06 | % | 735 | 1.79 | %(e) | 2.68 | %(e) | 1.29 | % | 15.75 | % | ||||||||||||
(9.30 | %) | 825 | 1.63 | %(e) | 2.22 | %(e) | 1.53 | % | 10.48 | % | ||||||||||||
(0.56 | %) | 1,778 | 1.64 | % | 2.05 | % | 1.05 | % | 30.61 | % | ||||||||||||
(10.46 | %) | 299 | 1.62 | %(e) | 2.78 | %(e) | 0.21 | % | 26.13 | % | ||||||||||||
23.62 | % | 927 | 1.62 | %(e) | 2.78 | %(e) | 0.94 | % | 23.58 | % | ||||||||||||
3.22 | % | 1,575 | 1.62 | %(e) | 2.56 | %(e) | 1.47 | % | 15.75 | % | ||||||||||||
(9.27 | %) | 1,804 | 1.63 | %(e) | 2.22 | %(e) | 1.80 | % | 10.48 | % | ||||||||||||
(0.65 | %) | 1,604 | 1.62 | % | 2.03 | % | 1.23 | % | 30.61 | % |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(e) | Includes interest expense that amounts to less than 0.01% |
2018 Annual Report | 119 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Dynamic Dividend Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Tax Return of Capital | Total Distributions | Redemption Fees | Net Asset Value, End of Period | |||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 4.04 | $ | 0.17 | (e) | $ | (0.13 | ) | $ | 0.04 | $ | (0.23 | ) | $ | – | $ | (0.00 | )(f) | $ | (0.23 | ) | $ | 0.00 | (f) | $ | 3.85 | ||||||||||||||
Year Ended October 31, 2017 | 3.49 | 0.22 | 0.56 | 0.78 | (0.22 | ) | – | (0.01 | ) | (0.23 | ) | 0.00 | (f) | 4.04 | ||||||||||||||||||||||||||
Year Ended October 31, 2016 | 3.73 | 0.18 | (0.19 | ) | (0.01 | ) | (0.21 | ) | – | (0.02 | ) | (0.23 | ) | 0.00 | (f) | 3.49 | ||||||||||||||||||||||||
Year Ended October 31, 2015 | 3.83 | 0.24 | (0.11 | ) | 0.13 | (0.23 | ) | (0.00 | )(f) | – | (0.23 | ) | 0.00 | (f) | 3.73 | |||||||||||||||||||||||||
Year Ended October 31, 2014 | 3.77 | 0.17 | 0.12 | 0.29 | (0.23 | ) | – | – | (0.23 | ) | 0.00 | (f) | 3.83 | |||||||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 4.04 | 0.18 | (e) | (0.13 | ) | 0.05 | (0.24 | ) | – | (0.00 | )(f) | (0.24 | ) | 0.00 | (f) | 3.85 | ||||||||||||||||||||||||
Year Ended October 31, 2017 | 3.49 | 0.22 | 0.57 | 0.79 | (0.23 | ) | – | (0.01 | ) | (0.24 | ) | 0.00 | (f) | 4.04 | ||||||||||||||||||||||||||
Year Ended October 31, 2016 | 3.73 | 0.21 | (0.21 | ) | 0.00 | (0.22 | ) | – | (0.02 | ) | (0.24 | ) | 0.00 | (f) | 3.49 | |||||||||||||||||||||||||
Year Ended October 31, 2015 | 3.83 | 0.25 | (0.11 | ) | 0.14 | (0.24 | ) | (0.00 | )(f) | – | (0.24 | ) | 0.00 | (f) | 3.73 | |||||||||||||||||||||||||
Year Ended October 31, 2014 | 3.77 | 0.21 | 0.09 | 0.30 | (0.24 | ) | – | – | (0.24 | ) | 0.00 | (f) | 3.83 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
120 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Dynamic Dividend Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
0.79 | % | $ | 4,505 | 1.52 | %(g) | 1.60 | %(g) | 4.17 | % | 66.16 | % | |||||||||||
22.92 | % | 3,379 | 1.54 | %(g) | 1.58 | %(g) | 6.14 | % | 82.00 | % | ||||||||||||
(0.06 | %) | 3,865 | 1.55 | %(g) | 1.56 | %(g) | 5.02 | % | 88.00 | % | ||||||||||||
3.34 | % | 4,010 | 1.52 | %(g) | 1.52 | %(g) | 5.95 | % | 111.00 | % | ||||||||||||
7.83 | % | 4,219 | 1.63 | %(g) | 1.69 | %(g) | 4.51 | % | 81.00 | % | ||||||||||||
1.02 | % | 135,262 | 1.28 | %(g) | 1.35 | %(g) | 4.44 | % | 66.16 | % | ||||||||||||
23.22 | % | 160,696 | 1.29 | %(g) | 1.33 | %(g) | 5.95 | % | 82.00 | % | ||||||||||||
0.18 | % | 151,200 | 1.30 | %(g) | 1.31 | %(g) | 6.13 | % | 88.00 | % | ||||||||||||
3.59 | % | 182,039 | 1.27 | %(g) | 1.27 | %(g) | 6.28 | % | 111.00 | % | ||||||||||||
8.09 | % | 210,436 | 1.38 | %(g) | 1.44 | %(g) | 5.30 | % | 81.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Less than $0.005 per share. |
(g) | Includes interest expense that amounts to 0.03%, 0.04%, 0.01%, 0.03% and 0.03% for Class A and Institutional Class for the years ended October 31, 2018, October 31, 2017, 0ctober 31, 2016, October 31, 2015 and October 31, 2014, respectively. |
2018 Annual Report | 121 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Emerging Markets Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 15.74 | $ | 0.07 | $ | (2.53 | ) | $ | (2.46 | ) | $ | (0.16 | ) | $ | – | $ | (0.16 | ) | $ | 13.12 | ||||||||||||
Year Ended October 31, 2017 | 13.53 | 0.10 | 2.22 | 2.32 | (0.11 | ) | – | (0.11 | ) | 15.74 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.22 | 0.11 | 1.33 | 1.44 | – | (f) | (0.13 | ) | (0.13 | ) | 13.53 | |||||||||||||||||||||
Year Ended October 31, 2015 | 14.88 | 0.11 | (2.20 | ) | (2.09 | ) | (0.13 | ) | (0.44 | ) | (0.57 | ) | 12.22 | |||||||||||||||||||
Year Ended October 31, 2014 | 15.30 | 0.16 | (0.37 | ) | (0.21 | ) | (0.21 | ) | – | (0.21 | ) | 14.88 | ||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 15.55 | – | (f) | (2.51 | ) | (2.51 | ) | (0.07 | ) | – | (0.07 | ) | 12.97 | |||||||||||||||||||
Year Ended October 31, 2017 | 13.35 | 0.02 | 2.21 | 2.23 | (0.03 | ) | – | (0.03 | ) | 15.55 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.14 | 0.03 | 1.31 | 1.34 | – | (0.13 | ) | (0.13 | ) | 13.35 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 14.79 | 0.02 | (2.17 | ) | (2.15 | ) | (0.06 | ) | (0.44 | ) | (0.50 | ) | 12.14 | |||||||||||||||||||
Year Ended October 31, 2014 | 15.23 | 0.05 | (0.36 | ) | (0.31 | ) | (0.13 | ) | – | (0.13 | ) | 14.79 | ||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 15.61 | 0.06 | (2.52 | ) | (2.46 | ) | (0.15 | ) | – | (0.15 | ) | 13.00 | ||||||||||||||||||||
Year Ended October 31, 2017 | 13.43 | 0.08 | 2.19 | 2.27 | (0.09 | ) | – | (0.09 | ) | 15.61 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.17 | 0.08 | 1.31 | 1.39 | – | (0.13 | ) | (0.13 | ) | 13.43 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 14.83 | 0.06 | (2.19 | ) | (2.13 | ) | (0.09 | ) | (0.44 | ) | (0.53 | ) | 12.17 | |||||||||||||||||||
Year Ended October 31, 2014 | 15.27 | 0.11 | (0.38 | ) | (0.27 | ) | (0.17 | ) | – | (0.17 | ) | 14.83 | ||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 15.78 | 0.14 | (2.55 | ) | (2.41 | ) | (0.18 | ) | – | (0.18 | ) | 13.19 | ||||||||||||||||||||
Year Ended October 31, 2017 | 13.55 | 0.14 | 2.23 | 2.37 | (0.14 | ) | – | (0.14 | ) | 15.78 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.22 | 0.14 | 1.33 | 1.47 | (0.01 | ) | (0.13 | ) | (0.14 | ) | 13.55 | |||||||||||||||||||||
Year Ended October 31, 2015 | 14.89 | 0.18 | (2.25 | ) | (2.07 | ) | (0.16 | ) | (0.44 | ) | (0.60 | ) | 12.22 | |||||||||||||||||||
Year Ended October 31, 2014 | 15.30 | 0.13 | (0.33 | ) | (0.20 | ) | (0.21 | ) | – | (0.21 | ) | 14.89 | ||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 15.81 | 0.15 | (2.55 | ) | (2.40 | ) | (0.21 | ) | – | (0.21 | ) | 13.20 | ||||||||||||||||||||
Year Ended October 31, 2017 | 13.58 | 0.17 | 2.22 | 2.39 | (0.16 | ) | – | (0.16 | ) | 15.81 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.24 | 0.16 | 1.33 | 1.49 | (0.02 | ) | (0.13 | ) | (0.15 | ) | 13.58 | |||||||||||||||||||||
Year Ended October 31, 2015 | 14.90 | 0.16 | (2.20 | ) | (2.04 | ) | (0.18 | ) | (0.44 | ) | (0.62 | ) | 12.24 | |||||||||||||||||||
Year Ended October 31, 2014 | 15.31 | 0.20 | (0.35 | ) | (0.15 | ) | (0.26 | ) | – | (0.26 | ) | 14.90 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
122 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Emerging Markets Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(15.80 | %) | $ | 143,297 | 1.59 | %(e) | 1.59 | %(e) | 0.49 | % | 20.39 | % | |||||||||||
17.39 | % | 208,084 | 1.56 | % | 1.56 | % | 0.70 | % | 16.55 | % | ||||||||||||
12.04 | % | 188,315 | 1.48 | %(e) | 1.49 | %(e) | 0.91 | % | 9.19 | % | ||||||||||||
(14.28 | %) | 192,039 | 1.44 | %(e) | 1.47 | %(e) | 0.81 | % | 11.58 | % | ||||||||||||
(1.37 | %) | 341,483 | 1.41 | % | 1.43 | % | 1.05 | % | 5.00 | % | ||||||||||||
(16.20 | %) | 15,886 | 2.10 | %(e) | 2.21 | %(e) | – | (g) | 20.39 | % | ||||||||||||
16.75 | % | 28,618 | 2.10 | % | 2.28 | % | 0.16 | % | 16.55 | % | ||||||||||||
11.26 | % | 25,054 | 2.10 | %(e) | 2.20 | %(e) | 0.28 | % | 9.19 | % | ||||||||||||
(14.80 | %) | 30,850 | 2.10 | %(e) | 2.13 | %(e) | 0.17 | % | 11.58 | % | ||||||||||||
(2.04 | %) | 45,077 | 2.10 | % | 2.12 | % | 0.36 | % | 5.00 | % | ||||||||||||
(15.93 | %) | 89,874 | 1.75 | %(e) | 1.75 | %(e) | 0.40 | % | 20.39 | % | ||||||||||||
17.13 | % | 79,767 | 1.78 | % | 1.78 | % | 0.55 | % | 16.55 | % | ||||||||||||
11.65 | % | 47,410 | 1.77 | %(e) | 1.78 | %(e) | 0.69 | % | 9.19 | % | ||||||||||||
(14.59 | %) | 33,881 | 1.83 | %(e) | 1.86 | %(e) | 0.46 | % | 11.58 | % | ||||||||||||
(1.76 | %) | 31,720 | 1.79 | % | 1.81 | % | 0.76 | % | 5.00 | % | ||||||||||||
(15.48 | %) | 118,917 | 1.16 | %(e) | 1.16 | %(e) | 0.89 | % | 20.39 | % | ||||||||||||
17.75 | % | 205,880 | 1.28 | % | 1.28 | % | 0.96 | % | 16.55 | % | ||||||||||||
12.25 | % | 333,964 | 1.28 | %(e) | 1.29 | %(e) | 1.13 | % | 9.19 | % | ||||||||||||
(14.20 | %) | 409,406 | 1.32 | %(e) | 1.35 | %(e) | 1.35 | % | 11.58 | % | ||||||||||||
(1.29 | %) | 234,846 | 1.34 | % | 1.36 | % | 0.90 | % | 5.00 | % | ||||||||||||
(15.38 | %) | 5,511,182 | 1.10 | %(e) | 1.14 | %(e) | 1.00 | % | 20.39 | % | ||||||||||||
17.89 | % | 8,179,870 | 1.10 | % | 1.13 | % | 1.17 | % | 16.55 | % | ||||||||||||
12.41 | %(h) | 7,365,757 | 1.10 | %(e) | 1.14 | %(e) | 1.32 | % | 9.19 | % | ||||||||||||
(13.98 | %)(h) | 6,963,195 | 1.10 | %(e) | 1.13 | %(e) | 1.15 | % | 11.58 | % | ||||||||||||
(1.01 | %) | 9,389,216 | 1.10 | % | 1.12 | % | 1.35 | % | 5.00 | % |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | Less than $0.005 per share. |
(g) | Amount is less than 0.005%. |
(h) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
2018 Annual Report | 123 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Focused U.S. Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | ||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 8.52 | $ | 0.02 | $ | 0.62 | $ | 0.64 | $ | (2.31 | ) | $ | (2.31 | ) | $ | 6.85 | ||||||||||||
Year Ended October 31, 2017 | 8.81 | (0.12 | ) | 0.90 | 0.78 | (1.07 | ) | (1.07 | ) | 8.52 | ||||||||||||||||||
Year Ended October 31, 2016 | 10.30 | (0.15 | ) | (0.04 | ) | (0.19 | ) | (1.30 | ) | (1.30 | ) | 8.81 | ||||||||||||||||
Year Ended October 31, 2015 | 12.26 | (0.13 | ) | 0.26 | 0.13 | (2.09 | ) | (2.09 | ) | 10.30 | ||||||||||||||||||
Year Ended October 31, 2014 | 12.12 | (0.13 | ) | 0.48 | 0.35 | (0.21 | ) | (0.21 | ) | 12.26 | ||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 4.22 | (0.01 | ) | 0.27 | 0.26 | (2.31 | ) | (2.31 | ) | 2.17 | ||||||||||||||||||
Year Ended October 31, 2017 | 4.92 | (0.09 | ) | 0.46 | 0.37 | (1.07 | ) | (1.07 | ) | 4.22 | ||||||||||||||||||
Year Ended October 31, 2016 | 6.38 | (0.12 | ) | (0.04 | ) | (0.16 | ) | (1.30 | ) | (1.30 | ) | 4.92 | ||||||||||||||||
Year Ended October 31, 2015 | 8.43 | (0.13 | ) | 0.17 | 0.04 | (2.09 | ) | (2.09 | ) | 6.38 | ||||||||||||||||||
Year Ended October 31, 2014 | 8.45 | (0.15 | ) | 0.34 | 0.19 | (0.21 | ) | (0.21 | ) | 8.43 | ||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 7.88 | – | (h) | 0.56 | 0.56 | (2.31 | ) | (2.31 | ) | 6.13 | ||||||||||||||||||
Year Ended October 31, 2017 | 8.25 | (0.13 | ) | 0.83 | 0.70 | (1.07 | ) | (1.07 | ) | 7.88 | ||||||||||||||||||
Year Ended October 31, 2016 | 9.76 | (0.17 | ) | (0.04 | ) | (0.21 | ) | (1.30 | ) | (1.30 | ) | 8.25 | ||||||||||||||||
Year Ended October 31, 2015 | 11.77 | (0.16 | ) | 0.24 | 0.08 | (2.09 | ) | (2.09 | ) | 9.76 | ||||||||||||||||||
Year Ended October 31, 2014 | 11.69 | (0.18 | ) | 0.47 | 0.29 | (0.21 | ) | (0.21 | ) | 11.77 | ||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 8.75 | 0.04 | 0.63 | 0.67 | (2.31 | ) | (2.31 | ) | 7.11 | |||||||||||||||||||
Year Ended October 31, 2017 | 9.00 | (0.10 | ) | 0.92 | 0.82 | (1.07 | ) | (1.07 | ) | 8.75 | ||||||||||||||||||
Year Ended October 31, 2016 | 10.48 | (0.14 | ) | (0.04 | ) | (0.18 | ) | (1.30 | ) | (1.30 | ) | 9.00 | ||||||||||||||||
Year Ended October 31, 2015 | 12.44 | (0.12 | ) | 0.25 | 0.13 | (2.09 | ) | (2.09 | ) | 10.48 | ||||||||||||||||||
Year Ended October 31, 2014 | 12.28 | (0.12 | ) | 0.49 | 0.37 | (0.21 | ) | (0.21 | ) | 12.44 | ||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 8.95 | 0.05 | 0.65 | 0.70 | (2.31 | ) | (2.31 | ) | 7.34 | |||||||||||||||||||
Year Ended October 31, 2017 | 9.17 | (0.10 | ) | 0.95 | 0.85 | (1.07 | ) | (1.07 | ) | 8.95 | ||||||||||||||||||
Year Ended October 31, 2016 | 10.64 | �� | (0.13 | ) | (0.04 | ) | (0.17 | ) | (1.30 | ) | (1.30 | ) | 9.17 | |||||||||||||||
Year Ended October 31, 2015 | 12.56 | (0.10 | ) | 0.27 | 0.17 | (2.09 | ) | (2.09 | ) | 10.64 | ||||||||||||||||||
Year Ended October 31, 2014 | 12.37 | (0.10 | ) | 0.50 | 0.40 | (0.21 | ) | (0.21 | ) | 12.56 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Indicates the dividend expense charged for the period to average net assets. |
(e) | Dividend expense ratio includes broker related expenses for securities sold short. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
124 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Focused U.S. Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (c) | Ratio of Net Investment Income (Loss) to Average Net Assets | Dividend (d)(e) | Portfolio Turnover (f) | ||||||||||||||||||||
8.32 | % | $ | 7,466 | 1.32 | %(g) | 2.03 | %(g) | 0.34 | % | 0.04 | % | 112.97 | % | |||||||||||||
9.69 | % | 9,479 | 2.80 | %(g) | 3.22 | %(g) | (1.39 | %) | 1.18 | % | 35.38 | % | ||||||||||||||
(1.68 | %) | 11,397 | 3.04 | % | 3.28 | % | (1.70 | %) | 1.45 | % | 36.34 | % | ||||||||||||||
1.18 | % | 16,869 | 2.93 | %(g) | 3.12 | %(g) | (1.21 | %) | 1.36 | % | 14.04 | % | ||||||||||||||
2.90 | % | 30,368 | 2.64 | % | 2.79 | % | (1.09 | %) | 1.08 | % | 31.13 | % | ||||||||||||||
7.45 | % | 1,345 | 1.97 | %(g) | 2.77 | %(g) | (0.32 | %) | 0.04 | % | 112.97 | % | ||||||||||||||
8.89 | % | 1,837 | 3.47 | %(g) | 4.09 | %(g) | (2.05 | %) | 1.21 | % | 35.38 | % | ||||||||||||||
(2.35 | %) | 3,430 | 3.69 | % | 4.02 | % | (2.33 | %) | 1.44 | % | 36.34 | % | ||||||||||||||
0.51 | % | 7,480 | 3.61 | %(g) | 3.80 | %(g) | (1.90 | %) | 1.35 | % | 14.04 | % | ||||||||||||||
2.26 | % | 10,162 | 3.36 | % | 3.51 | % | (1.81 | %) | 1.11 | % | 31.13 | % | ||||||||||||||
7.89 | % | 1,895 | 1.69 | %(g) | 2.40 | %(g) | (0.04 | %) | 0.04 | % | 112.97 | % | ||||||||||||||
9.35 | % | 2,269 | 3.14 | %(g) | 3.56 | %(g) | (1.72 | %) | 1.18 | % | 35.38 | % | ||||||||||||||
(2.01 | %) | 2,633 | 3.34 | % | 3.58 | % | (2.01 | %) | 1.44 | % | 36.34 | % | ||||||||||||||
0.74 | % | 3,202 | 3.35 | %(g) | 3.54 | %(g) | (1.65 | %) | 1.34 | % | 14.04 | % | ||||||||||||||
2.49 | % | 3,437 | 3.12 | % | 3.27 | % | (1.56 | %) | 1.12 | % | 31.13 | % | ||||||||||||||
8.50 | % | 679 | 1.07 | %(g) | 1.79 | %(g) | 0.55 | % | 0.04 | % | 112.97 | % | ||||||||||||||
9.96 | % | 840 | 2.62 | %(g) | 3.04 | %(g) | (1.21 | %) | 1.17 | % | 35.38 | % | ||||||||||||||
(1.54 | %) | 693 | 2.85 | % | 3.10 | % | (1.54 | %) | 1.43 | % | 36.34 | % | ||||||||||||||
1.16 | % | 789 | 2.86 | %(g) | 3.05 | %(g) | (1.13 | %) | 1.35 | % | 14.04 | % | ||||||||||||||
3.03 | % | 1,871 | 2.59 | % | 2.75 | % | (1.02 | %) | 1.09 | % | 31.13 | % | ||||||||||||||
8.69 | % | 5,583 | 0.98 | %(g) | 1.83 | %(g) | 0.63 | % | 0.06 | % | 112.97 | % | ||||||||||||||
10.12 | % | 12,413 | 2.56 | %(g) | 3.07 | %(g) | (1.13 | %) | 1.30 | % | 35.38 | % | ||||||||||||||
(1.40 | %) | 52,527 | 2.71 | % | 3.01 | % | (1.36 | %) | 1.46 | % | 36.34 | % | ||||||||||||||
1.52 | % | 92,887 | 2.61 | %(g) | 2.80 | %(g) | (0.89 | %) | 1.36 | % | 14.04 | % | ||||||||||||||
3.26 | % | 303,638 | 2.33 | % | 2.49 | % | (0.78 | %) | 1.08 | % | 31.13 | % |
(f) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(g) | Includes interest expense that amounts to less than 0.01% for Class A, Class C, Class R, Institutional Service Class and Institutional Class for the year ended October 31, 2018 and October 31, 2015. Includes interest expense that amounts to 0.01% for Class A, Class C, Class R, Institutional Service Class and Institutional Class for the year ended October 31, 2017. |
(h) | Less than $0.005 per share. |
2018 Annual Report | 125 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Global Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 14.66 | $ | 0.09 | $ | (0.72 | ) | $ | (0.63 | ) | $ | (0.10 | ) | $ | (1.18 | ) | $ | (1.28 | ) | $ | 12.75 | |||||||||||
Year Ended October 31, 2017 | 12.35 | 0.10 | 2.30 | 2.40 | (0.09 | ) | – | (0.09 | ) | 14.66 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.15 | 0.10 | 0.13 | 0.23 | (0.03 | ) | – | (0.03 | ) | 12.35 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 13.83 | 0.17 | (1.66 | ) | (1.49 | ) | (0.19 | ) | – | (0.19 | ) | 12.15 | ||||||||||||||||||||
Year Ended October 31, 2014 | 13.83 | 0.45 | 0.01 | 0.46 | (0.46 | ) | – | (0.46 | ) | 13.83 | ||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.78 | – | (f) | (0.67 | ) | (0.67 | ) | – | (1.18 | ) | (1.18 | ) | 11.93 | |||||||||||||||||||
Year Ended October 31, 2017 | 11.65 | 0.01 | 2.18 | 2.19 | (0.06 | ) | – | (0.06 | ) | 13.78 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.52 | 0.02 | 0.12 | 0.14 | (0.01 | ) | – | (0.01 | ) | 11.65 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 13.13 | 0.06 | (1.55 | ) | (1.49 | ) | (0.12 | ) | – | (0.12 | ) | 11.52 | ||||||||||||||||||||
Year Ended October 31, 2014 | 13.15 | 0.33 | 0.03 | 0.36 | (0.38 | ) | – | (0.38 | ) | 13.13 | ||||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 14.04 | 0.03 | (0.68 | ) | (0.65 | ) | (0.06 | ) | (1.18 | ) | (1.24 | ) | 12.15 | |||||||||||||||||||
Year Ended October 31, 2017 | 11.88 | 0.04 | 2.22 | 2.26 | (0.10 | ) | – | (0.10 | ) | 14.04 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.71 | 0.08 | 0.11 | 0.19 | (0.02 | ) | – | (0.02 | ) | 11.88 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 13.34 | 0.12 | (1.59 | ) | (1.47 | ) | (0.16 | ) | – | (0.16 | ) | 11.71 | ||||||||||||||||||||
Year Ended October 31, 2014 | 13.36 | 0.40 | – | (f) | 0.40 | (0.42 | ) | – | (0.42 | ) | 13.34 | |||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 14.87 | 0.13 | (0.73 | ) | (0.60 | ) | (0.15 | ) | (1.18 | ) | (1.33 | ) | 12.94 | |||||||||||||||||||
Year Ended October 31, 2017 | 12.53 | 0.13 | 2.34 | 2.47 | (0.13 | ) | – | (0.13 | ) | 14.87 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.30 | 0.14 | 0.13 | 0.27 | (0.04 | ) | – | (0.04 | ) | 12.53 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 13.86 | 0.31 | (1.78 | ) | (1.47 | ) | (0.09 | ) | – | (0.09 | ) | 12.30 | ||||||||||||||||||||
Year Ended October 31, 2014 | 13.88 | 0.44 | 0.05 | 0.49 | (0.51 | ) | – | (0.51 | ) | 13.86 | ||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 14.69 | 0.14 | (0.73 | ) | (0.59 | ) | (0.15 | ) | (1.18 | ) | (1.33 | ) | 12.77 | |||||||||||||||||||
Year Ended October 31, 2017 | 12.40 | 0.16 | 2.26 | 2.42 | (0.13 | ) | – | (0.13 | ) | 14.69 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.16 | 0.14 | 0.14 | 0.28 | (0.04 | ) | – | (0.04 | ) | 12.40 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 13.84 | 0.14 | (1.59 | ) | (1.45 | ) | (0.23 | ) | – | (0.23 | ) | 12.16 | ||||||||||||||||||||
Year Ended October 31, 2014 | 13.84 | 0.47 | 0.04 | 0.51 | (0.51 | ) | – | (0.51 | ) | 13.84 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
126 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Global Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(4.97 | %) | $ | 27,530 | 1.53 | % | 1.92 | % | 0.67 | % | 22.06 | % | |||||||||||
19.58 | % | 34,296 | 1.56 | %(e) | 1.68 | %(e) | 0.71 | % | 24.98 | % | ||||||||||||
1.93 | % | 48,350 | 1.56 | %(e) | 1.63 | %(e) | 0.82 | % | 21.59 | % | ||||||||||||
(10.85 | %) | 58,730 | 1.55 | %(e) | 1.61 | %(e) | 1.33 | % | 31.45 | % | ||||||||||||
3.37 | % | 73,230 | 1.56 | % | 1.56 | % | 3.22 | % | 24.09 | % | ||||||||||||
(5.53 | %) | 1,713 | 2.19 | % | 2.77 | % | 0.02 | % | 22.06 | % | ||||||||||||
18.85 | % | 2,181 | 2.19 | %(e) | 2.51 | %(e) | 0.06 | % | 24.98 | % | ||||||||||||
1.24 | % | 1,495 | 2.19 | %(e) | 2.36 | %(e) | 0.20 | % | 21.59 | % | ||||||||||||
(11.43 | %) | 1,729 | 2.20 | %(e) | 2.26 | %(e) | 0.45 | % | 31.45 | % | ||||||||||||
2.78 | % | 4,165 | 2.19 | % | 2.19 | % | 2.50 | % | 24.09 | % | ||||||||||||
(5.27 | %) | 2,120 | 1.94 | % | 2.33 | % | 0.26 | % | 22.06 | % | ||||||||||||
19.15 | % | 3,107 | 1.90 | %(e) | 2.02 | %(e) | 0.31 | % | 24.98 | % | ||||||||||||
1.64 | % | 1,348 | 1.84 | %(e) | 1.91 | %(e) | 0.66 | % | 21.59 | % | ||||||||||||
(11.13 | %) | 1,457 | 1.88 | %(e) | 1.94 | %(e) | 0.96 | % | 31.45 | % | ||||||||||||
3.06 | % | 1,986 | 1.85 | % | 1.85 | % | 2.96 | % | 24.09 | % | ||||||||||||
(4.65 | %) | 460 | 1.26 | % | 1.65 | % | 0.94 | % | 22.06 | % | ||||||||||||
19.97 | % | 570 | 1.29 | %(e) | 1.41 | %(e) | 0.94 | % | 24.98 | % | ||||||||||||
2.26 | % | 1 | 1.19 | %(e) | 1.26 | %(e) | 1.17 | % | 21.59 | % | ||||||||||||
(10.60 | %) | 1 | 1.26 | %(e) | 1.33 | %(e) | 2.29 | % | 31.45 | % | ||||||||||||
3.62 | %(g) | 2 | 1.19 | % | 1.19 | % | 3.12 | % | 24.09 | % | ||||||||||||
(4.63 | %) | 2,104 | 1.19 | % | 1.62 | % | 1.01 | % | 22.06 | % | ||||||||||||
19.75 | % | 2,699 | 1.19 | %(e) | 1.32 | %(e) | 1.21 | % | 24.98 | % | ||||||||||||
2.36 | % | 36,167 | 1.19 | %(e) | 1.27 | %(e) | 1.19 | % | 21.59 | % | ||||||||||||
(10.55 | %) | 30,678 | 1.19 | %(e) | 1.25 | %(e) | 1.08 | % | 31.45 | % | ||||||||||||
3.77 | %(g) | 78,381 | 1.19 | % | 1.19 | % | 3.36 | % | 24.09 | % |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | Less than $0.005 per share. |
(g) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
2018 Annual Report | 127 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Global Infrastructure Fund
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Tax Return of Capital | Total Distributions | Redemption Fees | Net Asset Value, End of Period | |||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 20.65 | $ | 0.46 | (e) | $ | (1.54 | ) | $ | (1.08 | ) | $ | (0.71 | ) | $ | (0.04 | ) | $ | – | $ | (0.75 | ) | $ | 0.00 | (f) | $ | 18.82 | |||||||||||||
Year Ended October 31, 2017 | 17.55 | 0.66 | 3.15 | 3.81 | (0.71 | ) | – | – | (0.71 | ) | 0.00 | (f) | 20.65 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 17.63 | 0.76 | (0.12 | ) | 0.64 | (0.72 | ) | – | – | (0.72 | ) | 0.00 | (f) | 17.55 | ||||||||||||||||||||||||||
Year Ended October 31, 2015 | 20.11 | 0.61 | (2.21 | ) | (1.60 | ) | (0.63 | ) | (0.21 | ) | (0.04 | ) | (0.88 | ) | 0.00 | (f) | 17.63 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 19.22 | 0.57 | 1.34 | 1.91 | (0.67 | ) | (0.35 | ) | – | (1.02 | ) | 0.00 | (f) | 20.11 | ||||||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 20.68 | 0.54 | (e) | (1.57 | ) | (1.03 | ) | (0.76 | ) | (0.04 | ) | – | (0.80 | ) | 0.00 | (f) | 18.85 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 17.58 | 0.70 | 3.16 | 3.86 | (0.76 | ) | – | – | (0.76 | ) | 0.00 | (f) | 20.68 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 17.66 | 0.81 | (0.13 | ) | 0.68 | (0.76 | ) | – | – | (0.76 | ) | 0.00 | (f) | 17.58 | ||||||||||||||||||||||||||
Year Ended October 31, 2015 | 20.14 | 0.71 | (2.25 | ) | (1.54 | ) | (0.71 | ) | (0.19 | ) | (0.04 | ) | (0.94 | ) | 0.00 | (f) | 17.66 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 19.24 | 0.60 | 1.36 | 1.96 | (0.71 | ) | (0.35 | ) | – | (1.06 | ) | 0.00 | (f) | 20.14 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
128 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Global Infrastructure Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
(5.39 | %) | $ | 12,310 | 1.45 | % | 1.58 | % | 2.29 | % | 48.54 | % | |||||||||||
22.13 | % | 20,132 | 1.46 | %(g) | 1.58 | %(g) | 3.48 | % | 77.00 | % | ||||||||||||
3.75 | % | 16,105 | 1.46 | %(g) | 1.54 | %(g) | 4.34 | % | 58.00 | % | ||||||||||||
(8.15 | %) | 21,822 | 1.50 | %(g) | 1.52 | %(g) | 3.47 | % | 116.00 | % | ||||||||||||
10.22 | % | 27,200 | 1.46 | %(g) | 1.46 | %(g) | 2.92 | % | 109.00 | % | ||||||||||||
(5.13 | %) | 95,025 | 1.20 | % | 1.32 | %(g) | 2.70 | % | 48.54 | % | ||||||||||||
22.39 | % | 115,567 | 1.21 | %(g) | 1.33 | %(g) | 3.56 | % | 77.00 | % | ||||||||||||
4.01 | % | 134,220 | 1.21 | %(g) | 1.29 | %(g) | 4.56 | % | 58.00 | % | ||||||||||||
(7.90 | %) | 207,034 | 1.26 | %(g) | 1.28 | %(g) | 3.60 | % | 116.00 | % | ||||||||||||
10.52 | % | 185,904 | 1.21 | %(g) | 1.21 | %(g) | 3.14 | % | 109.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Less than 0.005 per share. |
(g) | Includes interest expense that amounts to less than 0.01% for Class A and Institutional Class for the years ended October 31, 2017, October 31, 2016, October 31, 2015 and October 31, 2014. |
2018 Annual Report | 129 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Income Builder Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Redemption Fees | Net Asset Value, End of Period | ||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 17.16 | $ | 0.27 | (e) | $ | 0.43 | $ | 0.70 | $ | (0.55 | ) | $ | (0.47 | ) | $ | (1.02 | ) | $ | – | $ | 16.84 | ||||||||||||||
Year Ended October 31, 2017 | 14.70 | 0.55 | 2.43 | 2.98 | (0.52 | ) | – | (0.52 | ) | 0.00 | (f) | 17.16 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 15.05 | 0.68 | (0.44 | ) | 0.24 | (0.49 | ) | (0.10 | ) | (0.59 | ) | 0.00 | (f) | 14.70 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 15.88 | 0.43 | (0.10 | ) | 0.33 | (0.47 | ) | (0.69 | ) | (1.16 | ) | – | 15.05 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 15.18 | 0.38 | 1.37 | 1.75 | (0.47 | ) | (0.59 | ) | (1.06 | ) | 0.01 | 15.88 | ||||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 17.16 | 0.32 | (e) | 0.43 | 0.75 | (0.60 | ) | (0.47 | ) | (1.07 | ) | – | 16.84 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 14.70 | 0.57 | 2.45 | 3.02 | (0.56 | ) | – | (0.56 | ) | 0.00 | (f) | 17.16 | ||||||||||||||||||||||||
Year Ended October 31, 2016 | 15.05 | 0.63 | (0.35 | ) | 0.28 | (0.53 | ) | (0.10 | ) | (0.63 | ) | 0.00 | (f) | 14.70 | ||||||||||||||||||||||
Year Ended October 31, 2015 | 15.88 | 0.38 | (0.02 | ) | 0.36 | (0.50 | ) | (0.69 | ) | (1.19 | ) | – | 15.05 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 15.19 | 0.49 | 1.29 | 1.78 | (0.51 | ) | (0.59 | ) | (1.10 | ) | 0.01 | 15.88 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
130 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Income Builder Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
4.04 | % | $ | 1,207 | 1.46 | % | 1.48 | % | 1.59 | % | 88.50 | % | |||||||||||
20.50 | % | 1,342 | 1.44 | %(g) | 1.44 | %(g) | 3.37 | % | 69.00 | % | ||||||||||||
1.59 | % | 1,270 | 1.41 | %(g) | 1.41 | %(g) | 4.46 | % | 93.00 | % | ||||||||||||
1.93 | % | 2,358 | 1.60 | %(g) | 2.18 | %(g) | 2.65 | % | 97.00 | % | ||||||||||||
12.04 | % | 865 | 1.60 | %(g) | 2.50 | %(g) | 2.41 | % | 78.00 | % | ||||||||||||
4.38 | % | 95,976 | 1.20 | % | 1.21 | % | 1.84 | % | 88.50 | % | ||||||||||||
20.75 | % | 98,672 | 1.19 | %(g) | 1.19 | %(g) | 3.59 | % | 69.00 | % | ||||||||||||
1.86 | % | 84,271 | 1.18 | %(g) | 1.18 | %(g) | 4.24 | % | 93.00 | % | ||||||||||||
2.16 | % | 90,126 | 1.35 | %(g) | 1.93 | %(g) | 2.14 | % | 97.00 | % | ||||||||||||
12.25 | % | 4,486 | 1.35 | %(g) | 2.25 | %(g) | 3.33 | % | 78.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Less than $0.005 per share. |
(g) | Includes interest expense that amounts to 0.01%, for Class A and Institutional Class for the years ended October 31, 2017, October 31, 2016, and October 31, 2015. Includes interest expense that amounts to less than 0.01%, for Class A and Institutional Class for the year ended October 31, 2014. |
2018 Annual Report | 131 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen International Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | Net Asset Value, End of Period | ||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 15.04 | $ | 0.15 | $ | (1.78 | ) | $ | (1.63 | ) | $ | (0.13 | ) | $ | (0.13 | ) | $ | 13.28 | ||||||||||
Year Ended October 31, 2017 | 12.70 | 0.15 | 2.36 | 2.51 | (0.17 | ) | (0.17 | ) | 15.04 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.52 | 0.18 | 0.04 | 0.22 | (0.04 | ) | (0.04 | ) | 12.70 | |||||||||||||||||||
Year Ended October 31, 2015 | 14.85 | 0.23 | (2.29 | ) | (2.06 | ) | (0.27 | ) | (0.27 | ) | 12.52 | |||||||||||||||||
Year Ended October 31, 2014 | 15.34 | 0.50 | (0.42 | ) | 0.08 | (0.57 | ) | (0.57 | ) | 14.85 | ||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 14.09 | 0.04 | (1.66 | ) | (1.62 | ) | (0.03 | ) | (0.03 | ) | 12.44 | |||||||||||||||||
Year Ended October 31, 2017 | 11.89 | 0.04 | 2.23 | 2.27 | (0.07 | ) | (0.07 | ) | 14.09 | |||||||||||||||||||
Year Ended October 31, 2016 | 11.79 | 0.08 | 0.03 | 0.11 | (0.01 | ) | (0.01 | ) | 11.89 | |||||||||||||||||||
Year Ended October 31, 2015 | 14.01 | 0.13 | (2.16 | ) | (2.03 | ) | (0.19 | ) | (0.19 | ) | 11.79 | |||||||||||||||||
Year Ended October 31, 2014 | 14.51 | 0.39 | (0.42 | ) | (0.03 | ) | (0.47 | ) | (0.47 | ) | 14.01 | |||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 14.33 | 0.10 | (1.68 | ) | (1.58 | ) | (0.10 | ) | (0.10 | ) | 12.65 | |||||||||||||||||
Year Ended October 31, 2017 | 12.11 | 0.10 | 2.25 | 2.35 | (0.13 | ) | (0.13 | ) | 14.33 | |||||||||||||||||||
Year Ended October 31, 2016 | 11.97 | 0.12 | 0.05 | 0.17 | (0.03 | ) | (0.03 | ) | 12.11 | |||||||||||||||||||
Year Ended October 31, 2015 | 14.22 | 0.18 | (2.20 | ) | (2.02 | ) | (0.23 | ) | (0.23 | ) | 11.97 | |||||||||||||||||
Year Ended October 31, 2014 | 14.71 | 0.46 | (0.42 | ) | 0.04 | (0.53 | ) | (0.53 | ) | 14.22 | ||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 15.37 | 0.20 | (1.80 | ) | (1.60 | ) | (0.19 | ) | (0.19 | ) | 13.58 | |||||||||||||||||
Year Ended October 31, 2017 | 12.98 | 0.19 | 2.41 | 2.60 | (0.21 | ) | (0.21 | ) | 15.37 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.77 | 0.20 | 0.05 | 0.25 | (0.04 | ) | (0.04 | ) | 12.98 | |||||||||||||||||||
Year Ended October 31, 2015 | 15.16 | 0.27 | (2.36 | ) | (2.09 | ) | (0.30 | ) | (0.30 | ) | 12.77 | |||||||||||||||||
Year Ended October 31, 2014 | 15.64 | 0.56 | (0.44 | ) | 0.12 | (0.60 | ) | (0.60 | ) | 15.16 | ||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 15.43 | 0.21 | (1.82 | ) | (1.61 | ) | (0.19 | ) | (0.19 | ) | 13.63 | |||||||||||||||||
Year Ended October 31, 2017 | 13.04 | 0.20 | 2.42 | 2.62 | (0.23 | ) | (0.23 | ) | 15.43 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.82 | 0.22 | 0.05 | 0.27 | (0.05 | ) | (0.05 | ) | 13.04 | |||||||||||||||||||
Year Ended October 31, 2015 | 15.21 | 0.29 | (2.36 | ) | (2.07 | ) | (0.32 | ) | (0.32 | ) | 12.82 | |||||||||||||||||
Year Ended October 31, 2014 | 15.70 | 0.58 | (0.45 | ) | 0.13 | (0.62 | ) | (0.62 | ) | 15.21 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
132 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen International Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(10.93 | %) | $ | 24,957 | 1.38 | % | 1.38 | % | 0.99 | % | 20.75 | % | |||||||||||
20.05 | % | 39,619 | 1.39 | % | 1.39 | % | 1.09 | % | 13.11 | % | ||||||||||||
1.76 | % | 47,736 | 1.39 | %(e) | 1.39 | %(e) | 1.49 | % | 27.99 | % | ||||||||||||
(14.02 | %) | 91,902 | 1.32 | %(e)(f) | 1.35 | %(e) | 1.65 | %(f) | 14.52 | % | ||||||||||||
0.49 | % | 148,018 | 1.33 | % | 1.33 | % | 3.30 | % | 10.08 | % | ||||||||||||
(11.54 | %) | 8,074 | 2.10 | % | 2.10 | % | 0.27 | % | 20.75 | % | ||||||||||||
19.27 | % | 12,375 | 2.10 | % | 2.18 | % | 0.35 | % | 13.11 | % | ||||||||||||
0.97 | % | 14,400 | 2.10 | %(e) | 2.12 | %(e) | 0.70 | % | 27.99 | % | ||||||||||||
(14.61 | %) | 22,999 | 2.01 | %(e)(f) | 2.04 | %(e) | 0.97 | %(f) | 14.52 | % | ||||||||||||
(0.24 | %) | 35,696 | 2.03 | % | 2.03 | % | 2.68 | % | 10.08 | % | ||||||||||||
(11.14 | %) | 5,041 | 1.64 | % | 1.64 | % | 0.74 | % | 20.75 | % | ||||||||||||
19.70 | % | 7,335 | 1.70 | % | 1.70 | % | 0.75 | % | 13.11 | % | ||||||||||||
1.42 | % | 7,647 | 1.67 | %(e) | 1.67 | %(e) | 1.08 | % | 27.99 | % | ||||||||||||
(14.32 | %) | 14,095 | 1.62 | %(e)(f) | 1.65 | %(e) | 1.34 | %(f) | 14.52 | % | ||||||||||||
0.26 | % | 16,938 | 1.62 | % | 1.62 | % | 3.13 | % | 10.08 | % | ||||||||||||
(10.58 | %) | 84,902 | 1.06 | % | 1.06 | % | 1.31 | % | 20.75 | % | ||||||||||||
20.46 | % | 106,424 | 1.08 | % | 1.08 | % | 1.35 | % | 13.11 | % | ||||||||||||
2.01 | % | 101,655 | 1.14 | %(e) | 1.14 | %(e) | 1.62 | % | 27.99 | % | ||||||||||||
(13.97 | %) | 156,489 | 1.15 | %(e)(f) | 1.18 | %(e) | 1.89 | %(f) | 14.52 | % | ||||||||||||
0.75 | % | 185,166 | 1.16 | % | 1.16 | % | 3.57 | % | 10.08 | % | ||||||||||||
(10.56 | %) | 272,152 | 1.02 | % | 1.02 | % | 1.37 | % | 20.75 | % | ||||||||||||
20.47 | % | 367,341 | 1.02 | % | 1.02 | % | 1.43 | % | 13.11 | % | ||||||||||||
2.14 | % | 286,659 | 1.04 | %(e) | 1.04 | %(e) | 1.75 | % | 27.99 | % | ||||||||||||
(13.80 | %) | 332,542 | 1.01 | %(e)(f) | 1.04 | %(e) | 2.04 | %(f) | 14.52 | % | ||||||||||||
0.81 | % | 496,344 | 1.03 | % | 1.03 | % | 3.73 | % | 10.08 | % |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | Includes 0.03% reimbursement from Aberdeen relating to certain transfer agent expenses paid by the Fund that are not attributable to the Fund. |
2018 Annual Report | 133 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen International Small Cap Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 31.35 | $ | 0.47 | $ | (1.56 | ) | $ | (1.09 | ) | $ | (0.17 | ) | $ | (0.86 | ) | $ | (1.03 | ) | $ | 29.23 | |||||||||||
Year Ended October 31, 2017 | 25.97 | 0.11 | 5.49 | 5.60 | (0.14 | ) | (0.08 | ) | (0.22 | ) | 31.35 | |||||||||||||||||||||
Year Ended October 31, 2016 | 26.87 | 0.13 | 1.61 | 1.74 | (0.12 | ) | (2.52 | ) | (2.64 | ) | 25.97 | |||||||||||||||||||||
Year Ended October 31, 2015 | 29.64 | 0.48 | (1.17 | ) | (0.69 | ) | (0.52 | ) | (1.56 | ) | (2.08 | ) | 26.87 | |||||||||||||||||||
Year Ended October 31, 2014 | 28.71 | 0.19 | 1.32 | 1.51 | (0.27 | ) | (0.31 | ) | (0.58 | ) | 29.64 | |||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 28.78 | 0.20 | (1.39 | ) | (1.19 | ) | – | (0.86 | ) | (0.86 | ) | 26.73 | ||||||||||||||||||||
Year Ended October 31, 2017 | 23.88 | (0.04 | ) | 5.02 | 4.98 | – | (0.08 | ) | (0.08 | ) | 28.78 | |||||||||||||||||||||
Year Ended October 31, 2016 | 25.04 | (0.05 | ) | 1.50 | 1.45 | (0.09 | ) | (2.52 | ) | (2.61 | ) | 23.88 | ||||||||||||||||||||
Year Ended October 31, 2015 | 27.81 | 0.27 | (1.11 | ) | (0.84 | ) | (0.37 | ) | (1.56 | ) | (1.93 | ) | 25.04 | |||||||||||||||||||
Year Ended October 31, 2014 | 26.97 | (0.01 | ) | 1.24 | 1.23 | (0.08 | ) | (0.31 | ) | (0.39 | ) | 27.81 | ||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 29.82 | 0.30 | (1.43 | ) | (1.13 | ) | (0.09 | ) | (0.86 | ) | (0.95 | ) | 27.74 | |||||||||||||||||||
Year Ended October 31, 2017 | 24.77 | 0.04 | 5.20 | 5.24 | (0.11 | ) | (0.08 | ) | (0.19 | ) | 29.82 | |||||||||||||||||||||
Year Ended October 31, 2016 | 25.81 | 0.05 | 1.53 | 1.58 | (0.10 | ) | (2.52 | ) | (2.62 | ) | 24.77 | |||||||||||||||||||||
Year Ended October 31, 2015 | 28.57 | 0.37 | (1.13 | ) | (0.76 | ) | (0.44 | ) | (1.56 | ) | (2.00 | ) | 25.81 | |||||||||||||||||||
Year Ended October 31, 2014 | 27.68 | 0.09 | 1.30 | 1.39 | (0.19 | ) | (0.31 | ) | (0.50 | ) | 28.57 | |||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 31.54 | 0.40 | (1.45 | ) | (1.05 | ) | (0.20 | ) | (0.86 | ) | (1.06 | ) | 29.43 | |||||||||||||||||||
Year Ended October 31, 2017 | 26.00 | 0.14 | 5.53 | 5.67 | (0.05 | ) | (0.08 | ) | (0.13 | ) | 31.54 | |||||||||||||||||||||
Year Ended October 31, 2016 | 26.87 | 0.06 | 1.71 | 1.77 | (0.12 | ) | (2.52 | ) | (2.64 | ) | 26.00 | |||||||||||||||||||||
Year Ended October 31, 2015 | 29.64 | 0.48 | (1.17 | ) | (0.69 | ) | (0.52 | ) | (1.56 | ) | (2.08 | ) | 26.87 | |||||||||||||||||||
Year Ended October 31, 2014 | 28.72 | 0.23 | 1.31 | 1.54 | (0.31 | ) | (0.31 | ) | (0.62 | ) | 29.64 | |||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 31.43 | 0.58 | (1.57 | ) | (0.99 | ) | (0.25 | ) | (0.86 | ) | (1.11 | ) | 29.33 | |||||||||||||||||||
Year Ended October 31, 2017 | 26.04 | 0.19 | 5.49 | 5.68 | (0.21 | ) | (0.08 | ) | (0.29 | ) | 31.43 | |||||||||||||||||||||
Year Ended October 31, 2016 | 26.87 | 0.18 | 1.65 | 1.83 | (0.14 | ) | (2.52 | ) | (2.66 | ) | 26.04 | |||||||||||||||||||||
Year Ended October 31, 2015 | 29.66 | 0.36 | (0.99 | ) | (0.63 | ) | (0.60 | ) | (1.56 | ) | (2.16 | ) | 26.87 | |||||||||||||||||||
Year Ended October 31, 2014 | 28.74 | 0.29 | 1.32 | 1.61 | (0.38 | ) | (0.31 | ) | (0.69 | ) | 29.66 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
134 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen International Small Cap Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income (Loss) to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(3.68 | %) | $ | 49,391 | 1.53 | %(e) | 1.88 | %(e) | 1.48 | % | 18.07 | % | |||||||||||
21.79 | % | 59,477 | 1.63 | %(e) | 2.07 | %(e) | 0.40 | % | 20.60 | % | ||||||||||||
7.53 | %(f) | 51,530 | 1.63 | %(e) | 2.09 | %(e) | 0.53 | % | 36.40 | % | ||||||||||||
(2.39 | %)(f) | 53,726 | 1.61 | %(e) | 1.84 | %(e) | 1.70 | % | 12.11 | % | ||||||||||||
5.32 | % | 64,189 | 1.60 | % | 1.73 | % | 0.65 | % | 12.93 | % | ||||||||||||
(4.31 | %) | 565 | 2.22 | %(e) | 2.65 | %(e) | 0.69 | % | 18.07 | % | ||||||||||||
20.94 | % | 1,591 | 2.30 | %(e) | 2.84 | %(e) | (0.17 | %) | 20.60 | % | ||||||||||||
6.85 | % | 1,175 | 2.30 | %(e) | 2.86 | %(e) | (0.20 | %) | 36.40 | % | ||||||||||||
(3.10 | %) | 1,404 | 2.30 | %(e) | 2.53 | %(e) | 1.03 | % | 12.11 | % | ||||||||||||
4.60 | % | 1,646 | 2.30 | % | 2.43 | % | (0.03 | %) | 12.93 | % | ||||||||||||
(3.98 | %) | 2,309 | 1.84 | %(e) | 2.19 | %(e) | 1.02 | % | 18.07 | % | ||||||||||||
21.34 | % | 1,707 | 1.99 | %(e) | 2.43 | %(e) | 0.14 | % | 20.60 | % | ||||||||||||
7.20 | %(f) | 947 | 1.95 | %(e) | 2.41 | %(e) | 0.20 | % | 36.40 | % | ||||||||||||
(2.74 | %)(f) | 623 | 1.91 | %(e) | 2.14 | %(e) | 1.38 | % | 12.11 | % | ||||||||||||
5.07 | % | 866 | 1.86 | % | 1.99 | % | 0.32 | % | 12.93 | % | ||||||||||||
(3.50 | %) | 38 | 1.28 | %(e) | 1.63 | %(e) | 1.27 | % | 18.07 | % | ||||||||||||
21.93 | % | 51 | 1.52 | %(e) | 1.96 | %(e) | 0.52 | % | 20.60 | % | ||||||||||||
7.65 | % | 64 | 1.52 | %(e) | 1.98 | %(e) | 0.24 | % | 36.40 | % | ||||||||||||
(2.38 | %) | 1,359 | 1.55 | %(e) | 1.78 | %(e) | 1.71 | % | 12.11 | % | ||||||||||||
5.41 | % | 2,201 | 1.54 | % | 1.67 | % | 0.78 | % | 12.93 | % | ||||||||||||
(3.34 | %) | 12,418 | 1.20 | %(e) | 1.61 | %(e) | 1.84 | % | 18.07 | % | ||||||||||||
22.14 | % | 17,141 | 1.30 | %(e) | 1.79 | %(e) | 0.69 | % | 20.60 | % | ||||||||||||
7.92 | % | 19,840 | 1.30 | %(e) | 1.79 | %(e) | 0.71 | % | 36.40 | % | ||||||||||||
(2.16 | %) | 48,927 | 1.30 | %(e) | 1.53 | %(e) | 1.27 | % | 12.11 | % | ||||||||||||
5.67 | % | 189,864 | 1.30 | % | 1.43 | % | 0.99 | % | 12.93 | % |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
2018 Annual Report | 135 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Japanese Equities Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 12.15 | $ | 0.04 | $ | (1.65 | ) | $ | (1.61 | ) | $ | (0.03 | ) | $ | (0.14 | ) | $ | (0.17 | ) | $ | 10.37 | |||||||||||
Year Ended October 31, 2017 | 11.02 | 0.03 | 1.23 | 1.26 | (0.03 | ) | (0.10 | ) | (0.13 | ) | 12.15 | |||||||||||||||||||||
Year Ended October 31, 2016(g) | 10.00 | 0.06 | 0.97 | 1.03 | (0.01 | ) | – | (0.01 | ) | 11.02 | ||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.02 | (0.05 | ) | (1.62 | ) | (1.67 | ) | – | (0.14 | ) | (0.14 | ) | 10.21 | |||||||||||||||||||
Year Ended October 31, 2017 | 10.95 | (0.05 | ) | 1.22 | 1.17 | – | (0.10 | ) | (0.10 | ) | 12.02 | |||||||||||||||||||||
Year Ended October 31, 2016(g) | 10.00 | (0.02 | ) | 0.97 | 0.95 | – | (h) | – | – | (h) | 10.95 | |||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.13 | 0.01 | (1.64 | ) | (1.63 | ) | – | (0.14 | ) | (0.14 | ) | 10.36 | ||||||||||||||||||||
Year Ended October 31, 2017 | 11.00 | – | (h) | 1.23 | 1.23 | – | (0.10 | ) | (0.10 | ) | 12.13 | |||||||||||||||||||||
Year Ended October 31, 2016(g) | 10.00 | 0.03 | 0.97 | 1.00 | – | (h) | – | – | (h) | 11.00 | ||||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.19 | 0.07 | (1.65 | ) | (1.58 | ) | (0.04 | ) | (0.14 | ) | (0.18 | ) | 10.43 | |||||||||||||||||||
Year Ended October 31, 2017 | 11.04 | 0.06 | 1.23 | 1.29 | (0.04 | ) | (0.10 | ) | (0.14 | ) | 12.19 | |||||||||||||||||||||
Year Ended October 31, 2016(g) | 10.00 | 0.07 | 0.98 | 1.05 | (0.01 | ) | – | (0.01 | ) | 11.04 | ||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.19 | 0.07 | (1.65 | ) | (1.58 | ) | (0.04 | ) | (0.14 | ) | (0.18 | ) | 10.43 | |||||||||||||||||||
Year Ended October 31, 2017 | 11.04 | 0.06 | 1.23 | 1.29 | (0.04 | ) | (0.10 | ) | (0.14 | ) | 12.19 | |||||||||||||||||||||
Year Ended October 31, 2016(g) | 10.00 | 0.07 | 0.98 | 1.05 | (0.01 | ) | – | (0.01 | ) | 11.04 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | Not annualized for periods less than one year. |
(d) | Annualized for periods less than one year. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
136 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Japanese Equities Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b)(c) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets (d) | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (d)(e) | Ratio of Net Investment Income (Loss) to Average Net Assets (d) | Portfolio Turnover (c)(f) | |||||||||||||||||
(13.46 | %) | $ | 346 | 1.34 | % | 10.04 | % | 0.33 | % | 29.77 | % | |||||||||||
11.58 | % | 278 | 1.30 | % | 11.96 | % | 0.31 | % | 19.81 | % | ||||||||||||
10.27 | % | 22 | 1.25 | % | 19.03 | % | 0.67 | % | 8.21 | % | ||||||||||||
(14.07 | %) | 10 | 2.00 | % | 10.70 | % | (0.43 | %) | 29.77 | % | ||||||||||||
10.81 | % | 12 | 2.00 | % | 12.66 | % | (0.48 | %) | 19.81 | % | ||||||||||||
9.50 | % | 11 | 2.00 | % | 19.78 | % | (0.22 | %) | 8.21 | % | ||||||||||||
(13.61 | %) | 11 | 1.50 | % | 10.20 | % | 0.07 | % | 29.77 | % | ||||||||||||
11.31 | % | 12 | 1.50 | % | 12.16 | % | 0.02 | % | 19.81 | % | ||||||||||||
10.05 | % | 11 | 1.50 | % | 19.28 | % | 0.28 | % | 8.21 | % | ||||||||||||
(13.16 | %) | 11 | 1.01 | % | 9.71 | % | 0.56 | % | 29.77 | % | ||||||||||||
11.89 | % | 12 | 1.00 | % | 11.66 | % | 0.52 | % | 19.81 | % | ||||||||||||
10.50 | % | 11 | 1.00 | % | 18.78 | % | 0.78 | % | 8.21 | % | ||||||||||||
(13.16 | %) | 1,031 | 1.00 | % | 9.70 | % | 0.57 | % | 29.77 | % | ||||||||||||
11.88 | % | 1,187 | 1.00 | % | 11.66 | % | 0.52 | % | 19.81 | % | ||||||||||||
10.50 | % | 1,061 | 1.00 | % | 18.78 | % | 0.79 | % | 8.21 | % |
(e) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(f) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(g) | For the period from November 30, 2015 (commencement of operations) through October 31, 2016. |
(h) | Less than $0.005 per share. |
2018 Annual Report | 137 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen U.S. Mid Cap Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 13.35 | $ | (0.01 | ) | $ | 0.06 | $ | 0.05 | $ | (0.01 | ) | $ | (1.20 | ) | $ | (1.21 | ) | $ | 12.19 | ||||||||||||
Year Ended October 31, 2017 | 10.95 | – | (g) | 2.63 | 2.63 | (0.02 | ) | (0.21 | ) | (0.23 | ) | 13.35 | ||||||||||||||||||||
Year Ended October 31, 2016(h) | 10.00 | 0.01 | 0.94 | 0.95 | – | – | – | 10.95 | ||||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.21 | (0.11 | ) | 0.06 | (0.05 | ) | – | (1.20 | ) | (1.20 | ) | 11.96 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.89 | (0.09 | ) | 2.62 | 2.53 | – | (0.21 | ) | (0.21 | ) | 13.21 | |||||||||||||||||||||
Year Ended October 31, 2016(h) | 10.00 | (0.05 | ) | 0.94 | 0.89 | – | – | – | 10.89 | |||||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.31 | (0.04 | ) | 0.05 | 0.01 | – | (1.20 | ) | (1.20 | ) | 12.12 | |||||||||||||||||||||
Year Ended October 31, 2017 | 10.93 | (0.03 | ) | 2.63 | 2.60 | (0.01 | ) | (0.21 | ) | (0.22 | ) | 13.31 | ||||||||||||||||||||
Year Ended October 31, 2016(h) | 10.00 | (0.01 | ) | 0.94 | 0.93 | – | – | – | 10.93 | |||||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.38 | 0.02 | 0.05 | 0.07 | (0.02 | ) | (1.20 | ) | (1.22 | ) | 12.23 | |||||||||||||||||||||
Year Ended October 31, 2017 | 10.97 | 0.03 | 2.63 | 2.66 | (0.04 | ) | (0.21 | ) | (0.25 | ) | 13.38 | |||||||||||||||||||||
Year Ended October 31, 2016(h) | 10.00 | 0.02 | 0.95 | 0.97 | – | – | – | 10.97 | ||||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.38 | 0.02 | 0.05 | 0.07 | (0.02 | ) | (1.20 | ) | (1.22 | ) | 12.23 | |||||||||||||||||||||
Year Ended October 31, 2017 | 10.97 | 0.03 | 2.63 | 2.66 | (0.04 | ) | (0.21 | ) | (0.25 | ) | 13.38 | |||||||||||||||||||||
Year Ended October 31, 2016(h) | 10.00 | 0.02 | 0.95 | 0.97 | – | – | – | 10.97 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | Not annualized for periods less than one year. |
(d) | Annualized for periods less than one year. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
138 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen U.S. Mid Cap Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b)(c) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets (d) | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (d)(e) | Ratio of Net Investment Income (Loss) to Average Net Assets (d) | Portfolio Turnover (c)(f) | |||||||||||||||||
(0.09 | %) | $ | 91 | 1.25 | % | 10.22 | % | (0.08 | %) | 25.45 | % | |||||||||||
24.41 | % | 46 | 1.25 | % | 12.12 | % | (0.01 | %) | 42.92 | % | ||||||||||||
9.50 | % | 12 | 1.25 | % | 15.77 | % | 0.09 | % | 18.10 | % | ||||||||||||
(0.87 | %) | 13 | 2.00 | % | 10.97 | % | (0.84 | %) | 25.45 | % | ||||||||||||
23.57 | % | 13 | 2.00 | % | 12.87 | % | (0.75 | %) | 42.92 | % | ||||||||||||
8.90 | % | 11 | 2.00 | % | 16.52 | % | (0.67 | %) | 18.10 | % | ||||||||||||
(0.38 | %) | 14 | 1.50 | % | 10.47 | % | (0.34 | %) | 25.45 | % | ||||||||||||
24.14 | % | 14 | 1.50 | % | 12.37 | % | (0.25 | %) | 42.92 | % | ||||||||||||
9.30 | % | 11 | 1.50 | % | 16.02 | % | (0.17 | %) | 18.10 | % | ||||||||||||
0.12 | % | 43 | 1.00 | % | 9.97 | % | 0.19 | % | 25.45 | % | ||||||||||||
24.70 | % | 14 | 1.00 | % | 11.87 | % | 0.25 | % | 42.92 | % | ||||||||||||
9.70 | % | 11 | 1.00 | % | 15.52 | % | 0.33 | % | 18.10 | % | ||||||||||||
0.12 | % | 1,353 | 1.00 | % | 9.97 | % | 0.16 | % | 25.45 | % | ||||||||||||
24.70 | % | 1,338 | 1.00 | % | 11.87 | % | 0.25 | % | 42.92 | % | ||||||||||||
9.70 | % | 1,053 | 1.00 | % | 15.52 | % | 0.33 | % | 18.10 | % |
(e) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(f) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(g) | Less than $0.005 per share. |
(h) | For the period from February 29, 2016 (commencement of operations) through October 31, 2016. |
2018 Annual Report | 139 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen U.S. Multi-Cap Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 13.05 | $ | 0.02 | $ | 0.83 | $ | 0.85 | $ | (0.04 | ) | $ | (1.33 | ) | $ | (1.37 | ) | $ | 12.53 | |||||||||||||
Year Ended October 31, 2017 | 12.13 | 0.04 | 2.34 | 2.38 | (0.02 | ) | (1.44 | ) | (1.46 | ) | 13.05 | |||||||||||||||||||||
Year Ended October 31, 2016 | 12.52 | 0.03 | 0.21 | 0.24 | (0.02 | ) | (0.61 | ) | (0.63 | ) | 12.13 | |||||||||||||||||||||
Year Ended October 31, 2015 | 13.40 | 0.11 | (0.02 | ) | 0.09 | (0.12 | ) | (0.85 | ) | (0.97 | ) | 12.52 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.41 | 0.12 | 1.09 | 1.21 | (0.13 | ) | (0.09 | ) | (0.22 | ) | 13.40 | |||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 11.53 | (0.06 | ) | 0.73 | 0.67 | – | (1.33 | ) | (1.33 | ) | 10.87 | |||||||||||||||||||||
Year Ended October 31, 2017 | 10.93 | (0.04 | ) | 2.08 | 2.04 | – | (1.44 | ) | (1.44 | ) | 11.53 | |||||||||||||||||||||
Year Ended October 31, 2016 | 11.40 | (0.05 | ) | 0.19 | 0.14 | – | (0.61 | ) | (0.61 | ) | 10.93 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.29 | 0.02 | (0.02 | ) | – | (f) | (0.04 | ) | (0.85 | ) | (0.89 | ) | 11.40 | |||||||||||||||||||
Year Ended October 31, 2014 | 11.40 | 0.02 | 1.00 | 1.02 | (0.04 | ) | (0.09 | ) | (0.13 | ) | 12.29 | |||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.29 | (0.03 | ) | 0.77 | 0.74 | – | (1.33 | ) | (1.33 | ) | 11.70 | |||||||||||||||||||||
Year Ended October 31, 2017 | 11.53 | (0.01 | ) | 2.21 | 2.20 | – | (1.44 | ) | (1.44 | ) | 12.29 | |||||||||||||||||||||
Year Ended October 31, 2016 | 11.96 | (0.01 | ) | 0.20 | 0.19 | (0.01 | ) | (0.61 | ) | (0.62 | ) | 11.53 | ||||||||||||||||||||
Year Ended October 31, 2015 | 12.85 | 0.08 | (0.02 | ) | 0.06 | (0.10 | ) | (0.85 | ) | (0.95 | ) | 11.96 | ||||||||||||||||||||
Year Ended October 31, 2014 | 11.91 | 0.09 | 1.04 | 1.13 | (0.10 | ) | (0.09 | ) | (0.19 | ) | 12.85 | |||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.79 | 0.05 | 0.88 | 0.93 | (0.06 | ) | (1.33 | ) | (1.39 | ) | 13.33 | |||||||||||||||||||||
Year Ended October 31, 2017 | 12.74 | 0.06 | 2.46 | 2.52 | (0.03 | ) | (1.44 | ) | (1.47 | ) | 13.79 | |||||||||||||||||||||
Year Ended October 31, 2016 | 13.09 | 0.05 | 0.24 | 0.29 | (0.03 | ) | (0.61 | ) | (0.64 | ) | 12.74 | |||||||||||||||||||||
Year Ended October 31, 2015 | 13.98 | 0.14 | (0.03 | ) | 0.11 | (0.15 | ) | (0.85 | ) | (1.00 | ) | 13.09 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.93 | 0.15 | 1.14 | 1.29 | (0.15 | ) | (0.09 | ) | (0.24 | ) | 13.98 | |||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.82 | 0.06 | 0.89 | 0.95 | (0.07 | ) | (1.33 | ) | (1.40 | ) | 13.37 | |||||||||||||||||||||
Year Ended October 31, 2017 | 12.76 | 0.08 | 2.46 | 2.54 | (0.04 | ) | (1.44 | ) | (1.48 | ) | 13.82 | |||||||||||||||||||||
Year Ended October 31, 2016 | 13.10 | 0.06 | 0.24 | 0.30 | (0.03 | ) | (0.61 | ) | (0.64 | ) | 12.76 | |||||||||||||||||||||
Year Ended October 31, 2015 | 13.99 | 0.15 | (0.03 | ) | 0.12 | (0.16 | ) | (0.85 | ) | (1.01 | ) | 13.10 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.94 | 0.16 | 1.15 | 1.31 | (0.17 | ) | (0.09 | ) | (0.26 | ) | 13.99 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
140 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen U.S. Multi-Cap Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income (Loss) to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
6.63 | % | $ | 233,717 | 1.19 | %(e) | 1.25 | %(e) | 0.14 | % | 38.68 | % | |||||||||||
21.13 | % | 242,085 | 1.19 | %(e) | 1.26 | %(e) | 0.29 | % | 33.79 | % | ||||||||||||
2.25 | % | 225,723 | 1.19 | %(e) | 1.28 | %(e) | 0.21 | % | 63.11 | % | ||||||||||||
0.50 | % | 247,549 | 1.17 | %(e) | 1.25 | %(e) | 0.87 | % | 16.92 | % | ||||||||||||
9.87 | % | 276,861 | 1.17 | % | 1.25 | % | 0.92 | % | 20.60 | % | ||||||||||||
5.88 | % | 2,963 | 1.90 | %(e) | 2.07 | %(e) | (0.56 | %) | 38.68 | % | ||||||||||||
20.26 | % | 3,544 | 1.90 | %(e) | 2.09 | %(e) | (0.40 | %) | 33.79 | % | ||||||||||||
1.56 | % | 5,883 | 1.90 | %(e) | 2.08 | %(e) | (0.50 | %) | 63.11 | % | ||||||||||||
(0.27 | %) | 7,134 | 1.90 | %(e) | 1.98 | %(e) | 0.15 | % | 16.92 | % | ||||||||||||
9.07 | % | 8,469 | 1.90 | % | 1.98 | % | 0.19 | % | 20.60 | % | ||||||||||||
6.10 | % | 128 | 1.60 | %(e) | 1.66 | %(e) | (0.27 | %) | 38.68 | % | ||||||||||||
20.64 | % | 159 | 1.58 | %(e) | 1.65 | %(e) | (0.05 | %) | 33.79 | % | ||||||||||||
1.95 | % | 266 | 1.51 | %(e) | 1.60 | %(e) | (0.12 | %) | 63.11 | % | ||||||||||||
0.23 | % | 458 | 1.40 | %(e) | 1.48 | %(e) | 0.62 | % | 16.92 | % | ||||||||||||
9.62 | % | 351 | 1.40 | % | 1.48 | % | 0.69 | % | 20.60 | % | ||||||||||||
6.90 | % | 106,337 | 0.97 | %(e) | 1.03 | %(e) | 0.36 | % | 38.68 | % | ||||||||||||
21.33 | % | 109,418 | 0.98 | %(e) | 1.05 | %(e) | 0.49 | % | 33.79 | % | ||||||||||||
2.52 | % | 101,549 | 1.00 | %(e) | 1.09 | %(e) | 0.40 | % | 63.11 | % | ||||||||||||
0.59 | % | 109,288 | 0.99 | %(e) | 1.07 | %(e) | 1.06 | % | 16.92 | % | ||||||||||||
10.13 | % | 128,283 | 0.96 | % | 1.07 | % | 1.12 | % | 20.60 | % | ||||||||||||
6.99 | % | 6,801 | 0.90 | %(e) | 1.01 | %(e) | 0.43 | % | 38.68 | % | ||||||||||||
21.45 | % | 6,507 | 0.90 | %(e) | 1.01 | %(e) | 0.59 | % | 33.79 | % | ||||||||||||
2.63 | % | 6,742 | 0.90 | %(e) | 1.02 | %(e) | 0.50 | % | 63.11 | % | ||||||||||||
0.68 | % | 7,059 | 0.90 | %(e) | 0.98 | %(e) | 1.13 | % | 16.92 | % | ||||||||||||
10.23 | % | 3,437 | 0.90 | % | 0.98 | % | 1.18 | % | 20.60 | % |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | Less than $0.005 per share. |
2018 Annual Report | 141 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen U.S. Small Cap Equity Fund
Investment Activities | ||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Asset Value, End of Period | ||||||||||||||||
Class A Shares | ||||||||||||||||||||
Year Ended October 31, 2018 | $ | 35.61 | $ | (0.08 | ) | $ | (0.14 | ) | $ | (0.22 | ) | $ | 35.39 | |||||||
Year Ended October 31, 2017 | 28.71 | (0.11 | ) | 7.01 | 6.90 | 35.61 | ||||||||||||||
Year Ended October 31, 2016 | 26.62 | (0.09 | ) | 2.18 | 2.09 | 28.71 | ||||||||||||||
Year Ended October 31, 2015 | 23.90 | (0.08 | ) | 2.80 | 2.72 | 26.62 | ||||||||||||||
Year Ended October 31, 2014 | 21.86 | 0.01 | 2.03 | 2.04 | 23.90 | |||||||||||||||
Class C Shares | ||||||||||||||||||||
Year Ended October 31, 2018 | 30.94 | (0.30 | ) | (0.11 | ) | (0.41 | ) | 30.53 | ||||||||||||
Year Ended October 31, 2017 | 25.12 | (0.30 | ) | 6.12 | 5.82 | 30.94 | ||||||||||||||
Year Ended October 31, 2016 | 23.46 | (0.24 | ) | 1.90 | 1.66 | 25.12 | ||||||||||||||
Year Ended October 31, 2015 | 21.20 | (0.23 | ) | 2.49 | 2.26 | 23.46 | ||||||||||||||
Year Ended October 31, 2014 | 19.53 | (0.14 | ) | 1.81 | 1.67 | 21.20 | ||||||||||||||
Class R Shares | ||||||||||||||||||||
Year Ended October 31, 2018 | 32.97 | (0.18 | ) | (0.15 | ) | (0.33 | ) | 32.64 | ||||||||||||
Year Ended October 31, 2017 | 26.67 | (0.21 | ) | 6.51 | 6.30 | 32.97 | ||||||||||||||
Year Ended October 31, 2016 | 24.78 | (0.13 | ) | 2.02 | 1.89 | 26.67 | ||||||||||||||
Year Ended October 31, 2015 | 22.30 | (0.14 | ) | 2.62 | 2.48 | 24.78 | ||||||||||||||
Year Ended October 31, 2014 | 20.44 | (0.04 | ) | 1.90 | 1.86 | 22.30 | ||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||
Year Ended October 31, 2018 | 37.51 | 0.01 | (0.13 | ) | (0.12 | ) | 37.39 | |||||||||||||
Year Ended October 31, 2017 | 30.17 | (0.03 | ) | 7.37 | 7.34 | 37.51 | ||||||||||||||
Year Ended October 31, 2016 | 27.90 | (0.02 | ) | 2.29 | 2.27 | 30.17 | ||||||||||||||
Year Ended October 31, 2015 | 24.96 | (1.71 | ) | 4.65 | 2.94 | 27.90 | ||||||||||||||
Year Ended October 31, 2014 | 22.76 | 0.08 | 2.12 | 2.20 | 24.96 | |||||||||||||||
Institutional Class Shares | ||||||||||||||||||||
Year Ended October 31, 2018 | 37.49 | 0.02 | (0.14 | ) | (0.12 | ) | 37.37 | |||||||||||||
Year Ended October 31, 2017 | 30.14 | (0.02 | ) | 7.37 | 7.35 | 37.49 | ||||||||||||||
Year Ended October 31, 2016 | 27.87 | – | (g) | 2.27 | 2.27 | 30.14 | ||||||||||||||
Year Ended October 31, 2015 | 24.93 | – | (g) | 2.94 | 2.94 | 27.87 | ||||||||||||||
Year Ended October 31, 2014 | 22.73 | 0.07 | 2.13 | 2.20 | 24.93 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
142 | Annual Report 2018 |
Financial Highlights (concluded)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen U.S. Small Cap Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income (Loss) to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(0.62 | %) | $ | 224,804 | 1.35 | %(e) | 1.35 | %(e) | (0.23 | %) | 38.28 | % | |||||||||||
24.03 | % | 316,766 | 1.38 | % | 1.38 | % | (0.33 | %) | 42.71 | % | ||||||||||||
7.85 | % | 259,556 | 1.46 | % | 1.39 | % | (0.33 | %) | 32.20 | % | ||||||||||||
11.38 | % | 75,005 | 1.46 | % | 1.53 | % | (0.33 | %) | 29.43 | % | ||||||||||||
9.33 | % | 72,790 | 1.47 | % | 1.59 | % | 0.03 | % | 29.32 | % | ||||||||||||
(1.33 | %) | 75,913 | 2.06 | %(e) | 2.06 | %(e) | (0.95 | %) | 38.28 | % | ||||||||||||
23.17 | % | 95,913 | 2.10 | % | 2.10 | % | (1.05 | %) | 42.71 | % | ||||||||||||
7.08 | % | 78,109 | 2.15 | % | 2.12 | % | (0.96 | %) | 32.20 | % | ||||||||||||
10.66 | % | 35,665 | 2.15 | % | 2.22 | % | (1.02 | %) | 29.43 | % | ||||||||||||
8.55 | % | 31,346 | 2.15 | % | 2.27 | % | (0.66 | %) | 29.32 | % | ||||||||||||
(1.00 | %) | 8,430 | 1.72 | %(e) | 1.72 | %(e) | (0.55 | %) | 38.28 | % | ||||||||||||
23.62 | %(f) | 20,595 | 1.72 | % | 1.72 | % | (0.67 | %) | 42.71 | % | ||||||||||||
7.63 | %(f) | 13,722 | 1.68 | % | 1.65 | % | (0.49 | %) | 32.20 | % | ||||||||||||
11.12 | % | 4,601 | 1.71 | % | 1.78 | % | (0.59 | %) | 29.43 | % | ||||||||||||
9.10 | % | 1,152 | 1.70 | % | 1.82 | % | (0.19 | %) | 29.32 | % | ||||||||||||
(0.32 | %) | 50,163 | 1.08 | %(e) | 1.08 | %(e) | 0.03 | % | 38.28 | % | ||||||||||||
24.33 | %(f) | 61,897 | 1.13 | % | 1.13 | % | (0.08 | %) | 42.71 | % | ||||||||||||
8.14 | % | 47,421 | 1.14 | % | 1.13 | % | (0.06 | %) | 32.20 | % | ||||||||||||
11.78 | % | 9,101 | 1.18 | % | 1.25 | % | (6.38 | %) | 29.43 | % | ||||||||||||
9.67 | % | 1,626 | 1.15 | % | 1.27 | % | 0.33 | % | 29.32 | % | ||||||||||||
(0.32 | %) | 1,263,907 | 1.07 | %(e) | 1.07 | %(e) | 0.04 | % | 38.28 | % | ||||||||||||
24.39 | % | 1,467,787 | 1.10 | % | 1.10 | % | (0.06 | %) | 42.71 | % | ||||||||||||
8.15 | %(f) | 746,112 | 1.14 | % | 1.12 | % | 0.01 | % | 32.20 | % | ||||||||||||
11.79 | % | 235,400 | 1.15 | % | 1.22 | % | 0.02 | % | 29.43 | % | ||||||||||||
9.68 | % | 27,404 | 1.15 | % | 1.27 | % | 0.30 | % | 29.32 | % |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
(g) | Less than $0.005 per share. |
2018 Annual Report | 143 |
October 31, 2018
1. Organization
Aberdeen Funds (the “Trust”) was organized as a statutory trust under the laws of the state of Delaware by a Certificate of Trust filed on September 27, 2007 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. As of October 31, 2018, the Trust had authorized an unlimited number of shares of beneficial interest (“shares”) without par value. As of October 31, 2018, the Trust operated twenty five (25) separate series, or mutual funds, each with its own investment objective(s) and strategies. This report contains the financial statements and financial highlights of the fourteen (14) funds listed below (each a “Fund”; collectively, the “Funds”):
– | Aberdeen Asia-Pacific (ex-Japan) Equity Fund (“Asia-Pacific (ex-Japan) Equity Fund”) |
– | Aberdeen China Opportunities Fund (“China Opportunities Fund”) |
– | Aberdeen Dynamic Dividend Fund (“Dynamic Dividend Fund”) |
– | Aberdeen Emerging Markets Fund (“Emerging Markets Fund”) |
– | Aberdeen Focused U.S. Equity Fund (“Focused U.S. Equity Fund”) |
– | Aberdeen Global Equity Fund (“Global Equity Fund”) |
– | Aberdeen Global Infrastructure Fund (“Global Infrastructure Fund”) |
– | Aberdeen Income Builder Fund (“Income Builder Fund”) |
– | Aberdeen International Equity Fund (“International Equity Fund”) |
– | Aberdeen International Small Cap Fund (“International Small Cap Fund”) |
– | Aberdeen Japanese Equities Fund (“Japanese Equities Fund”) |
– | Aberdeen U.S. Mid Cap Equity Fund (“U.S. Mid Cap Equity Fund”) |
– | Aberdeen U.S. Multi-Cap Equity Fund (“U.S. Multi-Cap Equity Fund”) |
– | Aberdeen U.S. Small Cap Equity Fund (“U.S. Small Cap Equity Fund”) |
On December 14, 2017, at a meeting of the boards of trustees (the “Alpine Boards”) of Alpine Series Trust and Alpine Equity Trust (the “Predecessor Trusts”), the Alpine Boards each considered and unanimously approved an agreement and plan of reorganization with respect to Alpine Dynamic Dividend Fund, Alpine Global Infrastructure Fund and Alpine Rising Dividend Fund (each, a “Predecessor Fund” and collectively, the “Predecessor Funds”) whereby each Predecessor Fund would participate in a reorganization that would allow it to continue to operate as a corresponding new series of the Trust (the “Acquiring Funds”). Aberdeen Asset Management Inc. (“Aberdeen” or the “Adviser”) would serve as the investment adviser to the Acquiring Funds and Aberdeen Asset Managers Limited would serve as the subadviser to each of the Dynamic Dividend Fund and the Global Infrastructure Fund. Following approval by Predecessor Fund shareholders, each Predecessor Fund transferred all of its assets and liabilities as of the close of business May 4, 2018. The Predecessor Funds are the accounting and performance survivors of the reorganizations, and each Acquiring Fund adopted the corresponding Predecessor Fund’s performance history as of the close of business May 4, 2018; accordingly, information for the fiscal year ended October 31, 2018 includes the performance and accounting information of the Predecessor Funds.
The Acquiring Funds and corresponding Predecessor Funds are shown in the chart below.
Acquiring Fund | Corresponding Predecessor Fund | |
Dynamic Dividend Fund | Alpine Dynamic Dividend Fund, a series of Alpine Series Trust | |
Global Infrastructure Fund | Alpine Global Infrastructure Fund, a series of Alpine Equity Trust | |
Income Builder Fund | Alpine Rising Dividend Fund, a series of Alpine Series Trust |
Prior to the close of business May 4, 2018, Alpine Woods Capital Investors, LLC (the “Predecessor Adviser”) had been the investment adviser of the Predecessor Funds.
2. Summary of Significant Accounting Policies
The Trust is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies conform to generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Funds are maintained in U.S. Dollars.
144 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
a. | Security Valuation |
The Funds value their securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Funds’ Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date.
Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the “Valuation Time” subject to application, when appropriate, of the valuation factors described in the paragraph below. Under normal circumstances, the Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask price quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Funds disclose the fair value of their investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. Open-end mutual funds are valued at the respective net asset value (“NAV”) as reported by such company. The prospectuses for the registered open-end management investment companies in which a Fund invests explain the circumstances under which those companies will use fair value pricing and the effects of using fair value pricing. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time. A security using any of these pricing methodologies is determined to be a Level 1 investment.
Foreign equity securities that are traded on foreign exchanges that close prior to Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service provider approved by the Board. These valuation factors are used when pricing a Fund’s portfolio holdings to estimate market movements between the time foreign markets close and the time a Fund values such foreign securities. These valuation factors are based on inputs such as depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as quoted or published prices of the securities on their primary markets. A security that applies a valuation factor is determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.
Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider approved by the Board of Trustees of the Trust (the “Board”). If there are no current-day bids, the security is valued at the previously applied bid. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size, and the strategies employed by Aberdeen generally trade in round lot sizes. In certain circumstances, fixed income securities may be held or transactions may be conducted in smaller, “odd lot” sizes. Odd lots may trade at lower or, occasionally, higher prices than institutional round lot trades. Short-term debt securities (such as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service, or on the basis of amortized cost if it represents the best approximation for fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.
Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The Funds sweep available cash into the State Street Institutional U.S. Government Money Market Fund, which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 NAV. Generally, these investment types are categorized as Level 1 investments.
Forward foreign currency contracts are generally valued based on the bid price of the forward rates and the current spot rate. Forward exchange rate quotations are available for scheduled settlement dates, such as 1-, 3-, 6-, 9- and 12-month periods. An interpolated valuation
2018 Annual Report | 145 |
Notes to Financial Statements (continued)
October 31, 2018
is derived based on the actual settlement dates of the forward contracts held. Futures contracts are valued at the settlement price or at the last bid price if no settlement price is available. Interest rate swaps agreements are generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows).
In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closed before the Valuation Time), the security is valued at fair value as determined by the Funds’ pricing committee (the “Pricing Committee”), taking into account the relevant factors and surrounding circumstances using Valuation and Liquidity Procedures approved by the Board. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs.
The three-level hierarchy of inputs is summarized below:
• | Level 1- quoted prices in active markets for identical investments; |
• | Level 2- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or |
• | Level 3- significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments). |
A summary of standard inputs is listed below:
Security Type | Standard Inputs | |
Foreign equities utilizing a fair value factor | Depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. |
The following is a summary of the inputs used as of October 31, 2018 in valuing the Funds’ investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Please refer to the Statements of Investments for a detailed breakout of the security types:
Investments, at Value | LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | ||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 262,525 | 6,896,523 | – | 7,159,048 | ||||||||||||
Preferred Stocks | – | 493,118 | – | 493,118 | ||||||||||||
Short-Term Investment | 150,821 | – | – | 150,821 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
413,346 | 7,389,641 | – | 7,802,987 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
China Opportunities Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 613,243 | 9,235,671 | – | 9,848,914 | ||||||||||||
Short-Term Investment | 3,543 | – | – | 3,543 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
616,786 | 9,235,671 | – | 9,852,457 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Dynamic Dividend Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 89,887,434 | 43,086,404 | – | 132,973,838 | ||||||||||||
Exchange-Traded Funds | 2,300,723 | – | – | 2,300,723 | ||||||||||||
Preferred Stocks | – | 1,451,333 | – | 1,451,333 | ||||||||||||
Short-Term Investment | 1,249,260 | – | – | 1,249,260 |
146 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Investments, at Value | LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | ||||||||||||
Dynamic Dividend Fund (continued) | ||||||||||||||||
Other Financial Instruments | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | – | 48,765 | – | 48,765 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
93,437,417 | 44,586,502 | – | 138,023,919 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Emerging Markets Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 1,359,207,155 | 3,970,771,168 | – | 5,329,978,323 | ||||||||||||
Preferred Stocks | 183,966,358 | 379,524,043 | – | 563,490,401 | ||||||||||||
Rights | 29,201 | – | – | 29,201 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,543,202,714 | 4,350,295,211 | – | 5,893,497,925 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Focused U.S. Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 16,891,491 | – | – | 16,891,491 | ||||||||||||
Short-Term Investment | 108,942 | – | – | 108,942 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
17,000,433 | – | – | 17,000,433 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Global Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 14,923,553 | 16,009,376 | – | 30,932,929 | ||||||||||||
Preferred Stocks | 1,675,363 | 797,559 | – | 2,472,922 | ||||||||||||
Short-Term Investment | 672,465 | – | – | 672,465 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
17,271,381 | 16,806,935 | – | 34,078,316 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Global Infrastructure Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 68,567,254 | 36,291,685 | – | 104,858,939 | ||||||||||||
Exchange-Traded Funds | 1,139,120 | – | – | 1,139,120 | ||||||||||||
Short-Term Investment | 593,256 | – | – | 593,256 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | – | 198,005 | – | 198,005 | ||||||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | – | (17,360 | ) | – | (17,360 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
70,299,630 | 36,472,330 | – | 106,771,960 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income Builder Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 53,456,920 | – | – | 53,456,920 | ||||||||||||
Corporate Bonds | – | 38,388,331 | – | 38,388,331 | ||||||||||||
Short-Term Investment | 7,039,177 | – | – | 7,039,177 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
60,496,097 | 38,388,331 | – | 98,884,428 | |||||||||||||
|
|
|
|
|
|
|
|
2018 Annual Report | 147 |
Notes to Financial Statements (continued)
October 31, 2018
Investments, at Value | LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | ||||||||||||
International Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 59,176,510 | 358,310,898 | – | 417,487,408 | ||||||||||||
Preferred Stocks | 27,471,932 | 11,843,214 | – | 39,315,146 | ||||||||||||
Short-Term Investment | 7,797,556 | – | – | 7,797,556 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
94,445,998 | 370,154,112 | – | 464,600,110 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
International Small Cap Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 17,000,574 | 45,144,254 | – | 62,144,828 | ||||||||||||
Short-Term Investment | 2,550,930 | – | – | 2,550,930 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
19,551,504 | 45,144,254 | – | 64,695,758 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Japanese Equities Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | – | 1,363,075 | – | 1,363,075 | ||||||||||||
Short-Term Investment | 6,800 | – | – | 6,800 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
6,800 | 1,363,075 | – | 1,369,875 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
U.S. Mid Cap Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 1,463,961 | – | – | 1,463,961 | ||||||||||||
Short-Term Investment | 57,101 | – | – | 57,101 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,521,062 | – | – | 1,521,062 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
U.S. Multi-Cap Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 344,552,806 | – | – | 344,552,806 | ||||||||||||
Short-Term Investment | 4,063,908 | – | – | 4,063,908 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
348,616,714 | – | – | 348,616,714 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
U.S. Small Cap Equity Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 1,600,356,891 | – | – | 1,600,356,891 | ||||||||||||
Short-Term Investment | 25,083,957 | – | – | 25,083,957 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,625,440,848 | – | – | 1,625,440,848 | |||||||||||||
|
|
|
|
|
|
|
|
b. | Restricted Securities |
Restricted securities are privately-placed securities whose resale is restricted under U.S. securities laws. The Funds may invest in restricted securities, including unregistered securities eligible for resale without registration pursuant to Rule 144A and privately-placed securities of U.S. and non-U.S. issuers offered outside the U.S. without registration pursuant to Regulation S under the Securities Act of 1933, as amended (the “1933 Act”). Rule 144A securities may be freely traded among certain qualified institutional investors, such as the Funds, but resale of such securities in the U.S. is permitted only in limited circumstances.
c. | Foreign Currency Translation |
Foreign securities, currency and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate of said currencies against the U.S. dollar, at Valuation Time, as provided by an independent pricing service. Purchases and sales of
148 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
securities, and income and expenses are translated at the prevailing rate of exchange on the respective date of these transactions. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. These fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currencies within the Statements of Operations.
d. | Rights Issues and Warrants |
Rights issues give the right, normally to existing shareholders, to buy a proportional number of additional securities at a given price (generally at a discount) within a fixed period (generally a short-term period) and are offered at the company’s discretion. Warrants are securities that give the holder the right to buy common stock at a specified price for a specified period of time. Rights issues and warrants are speculative and have no value if they are not exercised before the expiration date. Rights issues and warrants are valued at the last sale price on the exchange on which they are traded.
e. | Short Sales |
During the period, and prior to changing its principal investment strategies and name from Aberdeen Equity Long-Short Fund to Aberdeen Focused U.S. Equity Fund (which occurred on November 15, 2017), the Aberdeen Focused U.S. Equity Fund engaged in short-selling of portfolio securities, which obligates the Fund to replace any security that it has borrowed by purchasing the security at current market value sometime in the future. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund generally will realize a gain if the price of the security declines between these dates. Until the Fund replaces the borrowed security, the Fund will segregate or earmarks cash, other liquid assets and/or securities held long to sufficiently cover the Fund’s short position on a daily basis. Dividends declared on securities sold short are recorded as an expense on the ex-dividend date and paid to the counterparty on the dividend pay date. The collateral for securities sold short includes the deposits with brokers and securities held long as shown in the Statement of Investments for the Fund.
f. | Derivative Financial Instruments |
Certain Funds are authorized to use derivatives to manage currency risk, credit risk, and interest rate risk and to replicate, or use as a substitute for, physical securities. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of Assets and Liabilities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward contract”) involves an obligation to purchase and sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward contracts are used to manage a Fund’s currency exposure in an efficient manner. They are used to sell unwanted currency exposure that comes with holding securities in a market, or to buy currency exposure where the exposure from holding securities is insufficient to give the desired currency exposure either in absolute terms or relative to the benchmark. The use of forward contracts allows the separation of decision-making between markets and their currencies. The forward contract is marked-to market daily and the change in market value is recorded by a Fund as unrealized appreciation/(depreciation). Forward contracts’ prices are received daily from an independent pricing provider. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. These realized and unrealized gains and losses are reported on the Statements of Operations. During the year, the Funds used forward contracts for the purposes of efficient portfolio management and managing active currency risk relative to the benchmark, the latter of which involves both hedging currency risk and adding currency risk in excess of underlying bond positions.
While a Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. A Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while a Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for a Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent a Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risk that the counterparties to such contracts may default on their obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force a Fund to cover its purchase or sale commitments, if any, at the market price at the time of the default.
2018 Annual Report | 149 |
Notes to Financial Statements (continued)
October 31, 2018
Summary of Derivative Instruments
Certain Funds may use derivatives for various purposes as noted above. The following is a summary of the location of fair value amounts of derivatives, not accounted for as hedging instruments, as of October 31, 2018:
Location on the Statement of Assets and Liabilities | ||||
Derivative Instrument Risk Type | Asset Derivatives | Liability Derivatives | ||
Foreign Exchange Risk | Unrealized appreciation on forward foreign currency exchange contracts | Unrealized depreciation on forward foreign currency exchange contracts |
The following is a summary of the fair value of derivative instruments, not accounted for as hedging instruments, as of October 31, 2018:
Asset Derivatives | ||||||||||||||||||||||||
Funds | Total Value at October 31, 2018 | Over-the-Counter Credit Default Swaps (Credit risk) | Centrally Cleared Credit Default Swaps (Credit Risk) | Centrally Cleared Interest Rate Swaps (Interest Rate Risk) | Forward Foreign Currency Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk) | ||||||||||||||||||
Aberdeen Dynamic Dividend Fund | $ | 48,765 | $ | – | $ | – | $ | – | $ | 48,765 | $ | – | ||||||||||||
Aberdeen Global Infrastructure Fund | 198,005 | – | – | – | 198,005 | – |
Liabilities Derivatives | ||||||||||||||||||||||||
Funds | Total Value at October 31, 2018 | Over-the-Counter Credit Default Swaps (Credit risk) | Centrally Cleared Credit Default Swaps (Credit Risk) | Centrally Cleared Interest Rate Swaps (Interest Rate Risk) | Forward Foreign Currency Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk) | ||||||||||||||||||
Aberdeen Global Infrastructure Fund | $ | 17,360 | – | – | – | $ | 17,360 | – |
Certain funds have transactions that may be subject to enforceable master netting arrangements. A reconciliation of the gross amounts on the Statements of Assets and Liabilities as of October 31, 2018 to the net amounts by broker and derivative type, including any collateral received or pledged, is included in the following tables:
Gross Amounts Not Offset in Statement of Assets & Liabilities | Gross Amounts Not Offset in Statement of Assets and Liabilities | |||||||||||||||||||||||||||||||
Description | Gross Amounts of Assets Presented in Statement of Financial Position | Financial Instruments | Collateral Received (1) | Net Amount (3) | Gross Amounts of Liabilities Presented in Statement of Financial Position | Financial Instruments | Collateral Pledged (1) | Net Amount (3) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||||||||||
Dynamic Dividend Fund | ||||||||||||||||||||||||||||||||
Forward foreign currency (2) | ||||||||||||||||||||||||||||||||
UBS AG | $ | 48,765 | $ | – | $ | – | $ | 48,765 | $ | – | $ | – | $ | – | $ | – |
1. | In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization. |
2. | Includes financial instruments which are not subject to a master netting arrangement across funds, or another similar arrangement. |
3. | Net amounts represent the net receivables/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity. |
150 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Gross Amounts Not Offset in Statement of Assets & Liabilities | Gross Amounts Not Offset in Statement of Assets and Liabilities | |||||||||||||||||||||||||||||||
Description | Gross Amounts of Assets Presented in Statement of Financial Position | Financial Instruments | Collateral Received (1) | Net Amount (3) | Gross Amounts of Liabilities Presented in Statement of Financial Position | Financial Instruments | Collateral Pledged (1) | Net Amount (3) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||||||||||
Global Infrastructure Fund | ||||||||||||||||||||||||||||||||
Forward foreign currency (2) | ||||||||||||||||||||||||||||||||
State Street Bank and Trust | $ | 122,982 | $ | (17,360 | ) | $ | – | $ | 105,622 | $ | 17,360 | $ | (17,360 | ) | $ | – | $ | – | ||||||||||||||
UBS AG | 75,023 | – | – | 75,023 | – | – | – | – |
1. | In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization. |
2. | Includes financial instruments which are not subject to a master netting arrangement across funds, or another similar arrangement. |
3. | Net amounts represent the net receivables/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity. |
The following is a summary of the location of realized gain/(loss) and net change in unrealized appreciation/(depreciation) on derivatives in the Statement of Operations for the fiscal year ended October 31, 2018:
Derivative Instrument Risk Type | Location on the Statement of Operations | |
Foreign Exchange Risk | Realized gain/(loss) on forward foreign currency exchange contracts/Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange contracts |
The following is a summary of the effect of derivative instruments on the Statement of Operations for the fiscal year ended October 31, 2018:
Realized Gain or (Loss) on Derivatives Recognized in the Statement of Operations | ||||||||||||||||||||
Funds | Total | Credit Default Swaps (Credit Risk) | Interest Rate Swaps (Interest Rate Risk) | Forward Foreign Currency Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk) | |||||||||||||||
Aberdeen Dynamic Dividend Fund | $ | 47,715 | $ | – | $ | – | $ | 47,715 | $ | – | ||||||||||
Aberdeen Global Infrastructure Fund | 115,523 | – | – | 115,523 | – |
Change in Unrealized Appreciation/ Recognized in the Statement of Operations | ||||||||||||||||
Funds | Total | Credit Default Swaps (Credit Risk) | Forward Foreign Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk) | ||||||||||||
Aberdeen Dynamic Dividend Fund | $ | 128,168 | $ | – | $ | 128,168 | $ | – | ||||||||
Aberdeen Global Infrastructure Fund | 224,440 | – | 224,440 | – |
2018 Annual Report | 151 |
Notes to Financial Statements (continued)
October 31, 2018
Information about derivatives reflected as of the date of this report is generally indicative of the type of activity for the fiscal year ended October 31, 2018. The table below summarizes the weighted average values of derivatives holdings by the Funds during the fiscal year ended October 31, 2018.
Fund | Purchase Forward Foreign Currency Contracts (Average Notional Value) | Sale Forward Foreign Currency Contracts (Average Notional Value) | ||||||
Dynamic Dividend Fund | $ | – | $ | 3,877,358 | ||||
Global Infrastructure Fund | 1,711,855 | 16,977,313 |
g. | Security Transactions, Investment Income and Expenses |
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income and corporate actions are recorded generally on the ex-date, except for certain dividends and corporate actions which may be recorded after the ex-date, as soon as a Fund acquires information regarding such dividends or corporate actions.
Interest income and expenses are recorded on an accrual basis. Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among the relevant Funds based on net assets of each. For each of the Funds, the method for allocating income, fund level expenses, and realized and unrealized gains or losses to a class is based on the average net asset value of that class’ shares in proportion to the average net assets of the relevant Fund when incurred. Expenses specific to a class (such as Rule 12b-1 and administrative services fees) are charged to that class.
h. | Distributions |
Distributions from net investment income, if any, are declared and paid annually for all Funds except the Dynamic Dividend Fund, which declares and pays monthly, and the Global Infrastructure Fund and Income Builder Fund, which declare and pay quarterly. The Funds will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date. The Funds will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies and loss deferrals.
i. | Federal Income Taxes |
Each Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Funds from all federal income taxes. Therefore, no federal income tax provision is required. Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Funds’ U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31 are subject to such review.
j. | Foreign Withholding Tax |
Dividend and interest income from non-U.S. sources received by the Funds are generally subject to non-U.S. withholding taxes. In addition, the Funds may be subject to capital gains tax in certain countries in which they invest. The above taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties with some of these countries. The Funds accrue such taxes when the related income is earned.
In addition, when the Fund sells securities within certain countries in which it invests, the capital gains realized may be subject to tax. Based on these market requirements and as required under GAAP, the Fund accrues deferred capital gains tax on securities currently held that have unrealized appreciation within these countries. The amount of deferred capital gains tax accrued is reported on the Statement of Operations as part of the Net Change in Unrealized Appreciation/Depreciation on Investments.
152 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
k. | Repurchase Agreements |
The Funds may enter into a repurchase agreement under the terms of a Master Repurchase Agreement. It is each Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by a Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. If the counterparty to a repurchase agreement defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Funds may be delayed or limited. Repurchase agreements are subject to contractual netting arrangements with the Fund’s repurchase agreement counterparty, Fixed Income Clearing Corp. To the extent the Funds enter into repurchase agreements, additional information on individual repurchase agreements is included in the Statements of Investments. As of and during the fiscal year ended, October 31, 2018 the Funds did not hold any repurchase agreements.
l. | Securities Lending |
Through an agreement with BNP Paribas as the Lending Agent and State Street Bank and Trust Company (the Funds’ custodian), the Funds may lend their portfolio securities to brokers, dealers and other financial institutions that pay a negotiated fee in order to generate additional income. The Funds receive non-cash collateral in the form of U.S. Government Securities, with respect to each loan of U.S. securities, typically equal to at least 102% of the value of the portfolio securities loaned, and, with respect to each loan of non-U.S. securities, typically equal to at least 105% of the value of the portfolio securities loaned, and at all times thereafter shall require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned.
The Funds continue to own the loaned securities. However, securities lending involves certain risks including the event of default or insolvency of the borrower and possible delays or restrictions upon a Fund’s ability to recover the loaned securities or dispose of the collateral for the loan. Securities on loan are noted within the Statement of Investments. Non-cash securities lending collateral held by the Lending Agent on behalf of the Funds cannot be sold or repledged by the Funds and, therefore, this amount is not presented on the Funds’ Statements of Investments.
At October 31, 2018, the market value of loaned securities and collateral received were as follows:
Fund | Value of Securities Loaned | Value of Cash Collateral | Value of Non-cash Collateral | |||||||||
Emerging Markets Fund | $ | 87,856,797 | $ | 89,964,145 | $ | – | ||||||
Global Infrastructure Fund | 5,311,809 | 5,419,073 | – | |||||||||
International Equity Fund | 3,614,662 | 3,687,654 | – | |||||||||
U.S. Multi-Cap Equity Fund | 64,143,374 | 65,467,069 | – | |||||||||
U.S. Small Cap Equity Fund | 500,408,239 | 510,664,785 | – |
3. Agreements and Transactions with Affiliates
a. | Investment Adviser |
Under the Investment Advisory Agreement with the Trust, Aberdeen manages the Funds in accordance with the policies and procedures established by the Board.
2018 Annual Report | 153 |
Notes to Financial Statements (continued)
October 31, 2018
For services provided under the terms of the current Investment Advisory Agreement, each Fund pays the Adviser an annual management fee (as a percentage of its average daily net assets) paid monthly according to the following schedule:
Fund | Fee Schedule | |||||||
Asia-Pacific (ex-Japan) Equity Fund | On all assets | 1.00% | ||||||
China Opportunities Fund | Up to $500 million | 1.25% | ||||||
$500 million up to $2 billion | 1.20% | |||||||
On $2 billion and more | 1.15% | |||||||
Dynamic Dividend Fund* | Up to $250 million | 1.00% | ||||||
On $250 million and more | 0.95% | |||||||
Emerging Markets Fund | On all assets | 0.90% | ||||||
Focused U.S. Equity Fund** | Up to $500 million | 0.75% | ||||||
$500 million up to $2 billion | 0.70% | |||||||
On $2 billion and more | 0.65% | |||||||
Global Equity Fund | Up to $500 million | 0.90% | ||||||
$500 million up to $2 billion | 0.85% | |||||||
On $2 billion and more | 0.80% | |||||||
Global Infrastructure Fund*** | Up to $250 Million | 1.00% | ||||||
$250 million up to $750 | 0.95% | |||||||
$750 million to $1 billion | 0.90% | |||||||
On $1 billion and more | 0.80% | |||||||
Income Builder Fund* | Up to $250 million | 1.00% | ||||||
On $250 million and more | 0.95% | |||||||
International Equity Fund | On all assets | 0.80% | ||||||
International Small Cap Fund (effective 2/28/18)**** | Up to $100 million | 1.00% | ||||||
On $100 million and more | 0.90% | |||||||
Japanese Equities Fund | On all assets | 0.65% | ||||||
U.S. Mid Cap Equity Fund | Up to $500 million | 0.75% | ||||||
$500 million up to $2 billion | 0.70% | |||||||
On $2 billion and more | 0.65% | |||||||
U.S. Multi-Cap Equity Fund | Up to $500 million | 0.75% | ||||||
$500 million up to $2 billion | 0.70% | |||||||
On $2 billion and more | 0.65% | |||||||
U.S. Small Cap Equity Fund | Up to $100 million | 0.95% | ||||||
On $100 million and more | 0.80% |
* | Prior to May 7, 2018, pursuant to the prior advisory agreement with the Alpine Dynamic Dividend Fund and Alpine Rising Dividend Fund, the Predecessor Adviser was entitled to an annual advisory fee of 1.00% on assets up to $250 million and 0.95% on assets in excess of $250 million, with respect to each Predecessor Fund. |
** | Prior to November 15, 2017, the management fee rate for the Fund was 1.15% on assets up to $1 billion and 1.00% on assets in excess of $1 billion. |
*** | Prior to May 7, 2018, pursuant to the prior advisory agreement with the Global Infrastructure Fund, the Predecessor Adviser was entitled to an annual advisory fee of 1.00% on assets up to $250 million, 0.95% on assets between $250 million and $500 million, 0.90% on assets of between $750 million and $1 billion and 0.80% on assets in excess of $1 billion. |
**** | Prior to February 28, 2018, the management fee rate for the Fund was 1.25% on assets up to $100 million and 1.00% on assets in excess of $100 million. |
The Adviser has engaged the services of affiliates Aberdeen Standard Investments (Asia) Limited (formerly known as Aberdeen Asset Management Asia Limited) (“ASIAL”) and Aberdeen Asset Managers Limited (“AAML”) as subadvisers (the “Subadvisers”) pursuant to subadvisory agreements. The Subadvisers manage a portion of certain Funds’ investments and have the responsibility for making all investment decisions for the portion of a Fund’s assets they manage. Pursuant to the subadvisory agreements, the Adviser pays fees to the Subadvisers.
The Trust and Aberdeen have entered into written contracts (“Expense Limitation Agreements”) limiting operating expenses for all classes of the Funds from exceeding the amounts listed in the tables below. For each Fund except the Dynamic Dividend Fund, Global Infrastructure Fund and Income Builder Fund, this contractual limitation may not be terminated before February 28, 2019 without the approval of the Trustees who are not “interested persons” of the Funds, as such term is defined by the 1940 Act (the “Independent Trustees”). The Expense Limitation Agreement with respect to the Dynamic Dividend Fund, Global Infrastructure Fund and Income Builder Fund may not be
154 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
terminated before May 4, 2020 without the approval of the Independent Trustees. For each Fund except the Dynamic Dividend Fund, Global Infrastructure Fund and Income Builder Fund, this limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, acquired fund fees and expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A shares, Class R shares, and Institutional Service Class shares and extraordinary expenses. The Expense Limitation Agreement with respect to the Dynamic Dividend Fund, Global Infrastructure Fund and Income Builder Fund excludes certain expenses, including any interest, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses.
Fund | Limit | |||
Asia-Pacific (ex-Japan) Equity Fund | 1.25% | |||
China Opportunities Fund | 1.62% | |||
Emerging Markets Fund | 1.10% | |||
Focused U.S. Equity Fund* | 0.90% | |||
Global Equity Fund | 1.19% | |||
International Equity Fund | 1.10% | |||
International Small Cap Fund (effective 2/28/18)** | 1.15% | |||
Japanese Equities Fund | 1.00% | |||
U.S. Mid Cap Equity Fund | 1.00% | |||
U.S. Multi-Cap Equity Fund | 0.90% | |||
U.S. Small Cap Equity Fund | 1.15% |
* | Prior to the change in the Fund’s name, strategy and fee structure on November 15, 2017, this limit was 1.40%. |
** | Prior to the change in limit on February 28, 2018, the limit was 1.30%. |
Fund | Class A Limit | Institutional Class Limit | ||||||
Dynamic Dividend Fund | 1.50% | 1.25% | ||||||
Global Infrastructure Fund | 1.45% | 1.20% | ||||||
Income Builder Fund* | 1.43% | 1.18% |
* | Prior to May 7, 2018, the limit was 1.50% for Class A and 1.25% for Institutional Class. |
Effective as of November 15, 2017, in connection with the change in the Focused U.S. Equity Fund’s name, strategy and fee structure, the Adviser terminated, with the approval of the Board and the Independent Trustees, the written contract to reimburse the Fund for short-sale brokerage expenses at an annual rate of up to 0.15% of the Fund’s average daily net assets. Amounts reimbursed by the Adviser for short sale brokerage expenses are not subject to recoupment at a later date.
Aberdeen may request and receive reimbursement from a Fund of the advisory fees waived and other expenses reimbursed pursuant to the Expense Limitation Agreement as of a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements do not cause a class to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser, and the payment of such reimbursement is approved by the Board on a quarterly basis (the “Reimbursement Requirements”). Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by Aberdeen is not permitted.
As of October 31, 2018, to the extent the Reimbursement Requirements are met, the cumulative potential reimbursements to Aberdeen for each Fund, based on expenses reimbursed by Aberdeen, including adjustments described above, would be:
Fund | Amount Fiscal Year 2016 (Expires 10/31/19) | Amount Fiscal Year 2017 (Expires 10/31/20) | Amount Fiscal Year 2018 (Expires 10/31/21) | Total* | ||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | 89,826 | $ | 230,842 | $ | 178,193 | $ | 498,861 | ||||||||
China Opportunities Fund | 136,771 | 144,211 | 147,796 | 428,778 | ||||||||||||
Dynamic Dividend Fund* | – | – | 78,360 | 78,360 |
2018 Annual Report | 155 |
Notes to Financial Statements (continued)
October 31, 2018
Fund | Amount Fiscal Year 2016 (Expires 10/31/19) | Amount Fiscal Year 2017 (Expires 10/31/20) | Amount Fiscal Year 2018 (Expires 10/31/21) | Total* | ||||||||||||
Emerging Markets Fund | $ | 2,402,413 | $ | 2,698,121 | $ | 3,091,591 | $ | 8,192,125 | ||||||||
Focused U.S. Equity Fund | 132,760 | 144,234 | 159,543 | 436,537 | ||||||||||||
Global Equity Fund | 67,616 | 110,176 | 159,483 | 337,275 | ||||||||||||
Global Infrastructure Fund** | – | – | 72,598 | 72,598 | ||||||||||||
Income Builder Fund** | – | – | 1,026 | 1,026 | ||||||||||||
International Equity Fund | 4,248 | 11,298 | 217 | 15,763 | ||||||||||||
International Small Cap Fund | 366,445 | 338,671 | 279,762 | 984,878 | ||||||||||||
Japanese Equities Fund | 165,646 | 128,431 | 134,235 | 428,312 | ||||||||||||
U.S. Mid Cap Equity Fund | 103,780 | 137,558 | 138,037 | 379,375 | ||||||||||||
U.S. Multi-Cap Equity Fund | 329,278 | 250,349 | 244,458 | 824,085 | ||||||||||||
U.S. Small Cap Equity Fund | – | – | – | – |
* | Amounts reported are due to expire throughout the respective 3-year expiration period presented above. |
** | Prior to May 7, 2018, amounts that were waived by the Predessor Adviser will not be recaptured by Aberdeen. |
Amounts listed as “–” are $0 or round to $0.
b. | Fund Administration |
Under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including daily valuation of the Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to the Board. For services provided pursuant to the Fund Administration Agreement, the Trust pays Aberdeen an annual fee of 0.08% based on the Trust’s average daily net assets. The fee is then allocated proportionately among all funds within the Trust (including the Funds) in relation to the average daily net assets of each fund. This asset-based fee is subject to an annual minimum fee based on the number of funds served. Pursuant to a sub-administration agreement with Aberdeen, State Street Bank and Trust Company (“State Street”) provides sub-administration services with respect to the Funds. Aberdeen pays State Street for such services.
Prior to May 7, 2018, State Street served as the custodian, fund accounting agent and administrator to the Predecessor Funds. Effective May 7, 2018, under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including oversight of the daily valuation of the Acquiring Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to the Board.
c. | Distributor and Shareholder Servicing |
The Trust and Aberdeen Fund Distributors, LLC (the “Distributor”) are parties to the current Underwriting Agreement (the “Underwriting Agreement”) whereby the Distributor acts as principal underwriter for the Trust’s shares.
The Trust has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act with respect to certain classes of shares. The Plan permits the Funds to compensate the Distributor, for expenses associated with the distribution-related and/or shareholder services provided by such entities. These fees are paid to the Distributor and are either kept or paid to shareholders’ financial advisors or other intermediaries for distribution and shareholder services. Although actual distribution expenses may be more or less, under the Plan, the Funds pay the Distributor an annual fee of the following amounts:
Fund | Class A Shares | Class C Shares (a) | Class R Shares (a) | |||||||||
Asia-Pacific (ex-Japan) Equity Fund | 0.25% | 1.00% | 0.50% | |||||||||
China Opportunities Fund | 0.25% | 1.00% | 0.50% | |||||||||
Dynamic Dividend Fund | 0.25% | – | – | |||||||||
Emerging Markets Fund | 0.25% | 1.00% | 0.50% | |||||||||
Focused U.S. Equity Fund | 0.25% | 1.00% | 0.50% | |||||||||
Global Equity Fund | 0.25% | 1.00% | 0.50% | |||||||||
Global Infrastructure Fund | 0.25% | – | – | |||||||||
Income Builder Fund | 0.25% | – | – | |||||||||
International Equity Fund | 0.25% | 1.00% | 0.50% |
156 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Fund | Class A Shares | Class C Shares (a) | Class R Shares (a) | |||||||||
International Small Cap Fund | 0.25% | 1.00% | 0.50% | |||||||||
Japanese Equities Fund | 0.25% | 1.00% | 0.50% | |||||||||
U.S. Mid Cap Equity Fund | 0.25% | 1.00% | 0.50% | |||||||||
U.S. Multi-Cap Equity Fund | 0.25% | 1.00% | 0.50% | |||||||||
U.S. Small Cap Equity Fund | 0.25% | 1.00% | 0.50% |
(a) | 0.25% of which is service fees. |
The Adviser or an affiliate of the Adviser may pay additional amounts from its own resources to dealers or other financial intermediaries, for aid in distribution or for aid in providing administrative services to shareholders.
Pursuant to the current Underwriting Agreement, the Distributor will also receive the proceeds of contingent deferred sales charges (“CDSCs”) of 1% imposed on certain redemptions of Class C (and up to 1% for certain Class A) shares.
In addition, the Distributor will re-allow to dealers 5.00% of sales charges on Class A shares of the Funds, which have a maximum front-end sales charge of 5.75% and the Distributor or the Adviser may compensate broker dealers or financial intermediaries from its own resources at the rate of 1.00% on sales of Class C shares of the Funds, which have a maximum CDSC of 1.00% (the CDSC assessed on sales within one year of purchase). For the fiscal year ended October 31, 2018, the Distributor retained commissions of $383,852 from front-end sales charges of Class A shares and $36,075 from CDSC fees from Class C (and certain Class A) shares of the Funds.
Prior to May 7, 2018, Quasar Distributors, LLC served each Predecessor Fund’s distributor. Each of the Predecessor Funds had adopted a distribution and servicing plan (the “Quasar Plan”) for their Class A shares as allowed by Rule 12b-1 under the 1940 Act. The Quasar Plan authorized payments by the Predecessor Funds in connection with the distribution and servicing of their Class A shares at an annual rate, as determined from time to time by the Alpine Boards, of up to 0.25% of the average daily net assets of the Class A shares of the Predecessor Funds. Amounts paid under the Quasar Plan by the Predecessor Funds could be spent by the Predecessor Funds on any activities or expenses primarily intended to result in the sale of Class A shares of the Predecessor Funds, including but not limited to advertising, compensation for sales and marketing activities of financial institutions and others such as dealers and distributors, shareholder account servicing, the printing and mailing of prospectuses to other than current shareholders and the printing and mailing of sales literature. Alpine Dynamic Dividend Fund, Alpine Global Infrastructure Fund and Alpine Rising Dividend Fund incurred $4,758, $24,057 and $1,760 respectively, pursuant to the Quasar Plan for the period from November 1, 2017 to May 4, 2018.
d. | Administrative Services Fees/Transfer Agent Out-of-Pocket Expenses |
The Funds may pay and/or reimburse administrative services fees/transfer agent out-of-pocket expenses to certain broker-dealers and financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds (sometimes referred to as “sub-transfer agency fees”), subject to certain limitations approved by the Board. These fees may be in addition to Rule 12b-1 fees. Sub-transfer agency fees generally include, but are not limited to, costs associated with omnibus accounting, recordkeeping, networking, sub-transfer agency or other administrative or shareholder services.
Class A, Class R and Institutional Services Class shares of the Funds pay for such services pursuant to an Administrative Services Plan adopted by the Board. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual administrative services fee of 0.25% for Class A, Class R and Institutional Services Class shares. Under an amendment to the Administrative Services Plan that is in effect until at least February 28, 2019, a Fund may pay a maximum of 0.15% for contracts with fees that are calculated as a percentage of Fund assets and a maximum of $16 per account for contracts with fees that are calculated on a dollar per account basis. Class C and Institutional Class shares may also pay for the services described above directly, as these classes are not subject to an Administrative Services Plan.
The aggregate amount of sub-transfer agent and administrative service fees paid during the period ended October 31, 2018 was as follows:
Fund | Class A | Class C | Class R | Institutional Service | Institutional | |||||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | 472 | $ | 77 | $ | – | $ | 1,717 | $ | 6,441 | ||||||||||
China Opportunities Fund | 6,092 | 2,885 | 3,332 | 602 | 644 | |||||||||||||||
Dynamic Dividend Fund | 1,335 | – | – | – | 45,179 | |||||||||||||||
Emerging Markets Fund | 462,396 | 32,122 | 140,305 | 109,737 | 3,929,458 |
2018 Annual Report | 157 |
Notes to Financial Statements (continued)
October 31, 2018
Fund | Class A | Class C | Class R | Institutional Service | Institutional | |||||||||||||||
Focused U.S. Equity Fund | $ | 8,445 | $ | 1,401 | $ | 4,937 | $ | 944 | $ | 11,527 | ||||||||||
Global Equity Fund | 29,095 | 3,991 | 6,765 | 371 | 1,109 | |||||||||||||||
Global Infrastructure Fund | 5,075 | – | – | – | 22,964 | |||||||||||||||
Income Builder Fund | 432 | – | – | – | 1,434 | |||||||||||||||
International Equity Fund | 43,951 | 11,454 | 9,416 | 66,237 | 71,651 | |||||||||||||||
International Small Cap Fund | 43,581 | 897 | 3,489 | 48 | 9,877 | |||||||||||||||
Japanese Equities Fund | 265 | – | – | 1 | ||||||||||||||||
U.S. Mid Cap Equity Fund | – | – | – | – | – | |||||||||||||||
U.S. Multi-Cap Equity Fund | 97,311 | 3,768 | 422 | 80,164 | 3,073 | |||||||||||||||
U.S. Small Cap Equity Fund | 357,436 | 78,366 | 30,400 | 62,491 | 1,350,957 |
e. | Purchase/Sale Transactions Between Affiliates |
The Funds are permitted to buy or sell securities with funds that have a common investment adviser (or investment advisers which are affiliates) under specific procedures which have been approved by the Board. The procedures are designed to satisfy the requirements of Rule 17a-7 of the Investment Company Act of 1940 (“Rule 17a-7”). During the year ended October 31, 2018, the Funds did not engage in any of these trades.
4. Investment Transactions
Purchases and sales of securities (excluding short-term securities) for the fiscal year ended October 31, 2018, were as follows:
Fund | Purchases | Sales | ||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | 7,323,087 | $ | 9,614,960 | ||||
China Opportunities Fund | 3,436,971 | 5,526,793 | ||||||
Dynamic Dividend Fund | 105,268,465 | 125,113,070 | ||||||
Emerging Markets Fund | 1,627,839,334 | 3,045,795,872 | ||||||
Focused U.S. Equity Fund | 13,299,261 | 23,068,041 | ||||||
Global Equity Fund | 8,591,521 | 15,770,229 | ||||||
Global Infrastructure Fund | 60,027,895 | 75,773,890 | ||||||
Income Builder Fund | 87,526,264 | 93,758,291 | ||||||
International Equity Fund | 114,804,240 | 105,732,901 | ||||||
International Small Cap Fund | 13,616,598 | 28,106,753 | ||||||
Japanese Equities Fund | 586,274 | 445,913 | ||||||
U.S. Mid Cap Equity Fund | 502,205 | 372,210 | ||||||
U.S. Multi-Cap Equity Fund | 141,726,284 | 173,024,564 | ||||||
U.S. Small Cap Equity Fund | 698,612,493 | 993,170,117 |
5. | Portfolio Investment Risks |
a. | Call and Redemption Risk |
The Income Builder Fund is subject to call and redemption risk. Some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
b. | Concentration Risk |
The Global Infrastructure Fund’s strategy of concentrating in companies in a specific industry means that its performance will be closely tied to the performance of a particular market segment. The Fund’s concentration in these companies may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. A downturn in these companies would have a larger impact on the Fund than on a mutual fund that does not concentrate in such companies. At times, the performance of these companies will lag the performance of other industries or the broader market as a whole.
158 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
c. | Corporate Bonds |
The Income Builder Fund may invest in corporate bonds. Corporate bonds are debt instruments issued by domestic or foreign corporations or similar entities. Corporate bonds can decline in value in response to changes in the financial condition of the issuer and involve a risk of loss in case of issuer default or insolvency.
d. | Credit Risk |
The Dynamic Dividend Fund and Income Builder Fund are subject to credit risk. Credit risk refers to the possibility that the issuer of a security will not be able to make payments of interest and principal when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation.
e. | Cybersecurity Risk |
Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser and/or its service providers (including, but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption or lose operational functionality.
f. | Dividend Strategy Risk |
The Dynamic Dividend Fund and Income Builder Fund are subject to dividend strategy risk. There is no guarantee that the issuers of the stocks held by the Fund will declare dividends in the future or that, if dividends are declared, they will remain at their current levels or increase over time. The Fund’s emphasis on dividend paying stocks could cause the Fund to underperform similar funds that invest without consideration of a company’s track record of paying dividends or ability to pay dividends in the future. Dividend-paying stocks may not participate in a broad market advance to the same degree as other stocks, and a sharp rise in interest rates or economic downturn could cause a company to unexpectedly reduce or eliminate its dividend. The Fund may hold securities for short periods of time related to the dividend payment periods and may experience loss during these periods.
g. | Emerging Markets Risk |
This is a magnification of the risks that apply to foreign investments. These risks are greater for securities of companies in emerging markets countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Foreign Securities Risk” below).
h. | Equity-Linked Notes |
The China Opportunities Fund may invest in equity-linked notes, which are generally subject to the same risks as the foreign equity securities or the basket of foreign securities they are linked to. If the linked security(ies) declines in value, the note may return a lower amount at maturity. The trading price of an equity-linked note also depends on the value of the linked security(ies).
i. | Equity Securities Risk |
The stock or other security of a company may not perform as well as expected, and may decrease in value, because of factors related to the company (such as poorer than expected earnings or certain management decisions) or to the industry in which the company is engaged (such as a reduction in the demand for products or services in a particular industry). Holders of common stock generally are subject to more risks than holders of preferred stock or debt securities because the right to repayment of common stockholders’ claims is subordinated to that of preferred stock and debt securities upon the bankruptcy of the issuer.
j. | Extension Risk |
The Income Builder Fund is subject to extension risk. Principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase. Rapidly rising interest rates may cause prepayments to occur more slowly than expected, thereby lengthening the maturity of the securities held by the Fund and making their prices more sensitive to rate changes and more volatile.
k. | Fixed Income Securities Risk |
The Income Builder Fund may invest in fixed income securities. Fixed income securities are subject to, among other risks, credit risk, extension risk, issuer risk, interest rate risk, market risk and prepayment risk.
l. | Focus Risk |
Because certain funds invest a greater proportion of assets in the securities of a smaller number of issuers, such Funds will be subject to greater volatility with respect to its investments than a fund that invests in a larger number of securities.
2018 Annual Report | 159 |
Notes to Financial Statements (continued)
October 31, 2018
m. | Foreign Currency Exposure Risk |
The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact a Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Adviser are unsuccessful.
n. | Foreign Securities Risk |
A Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which a Fund may invest may have markets that are less liquid, less regulated and more volatile than U.S. markets. The value of a Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable or unsuccessful government actions, reduction of government or central bank support and political or financial instability. Lack of information may also affect the value of these securities. To the extent the Fund focuses its investments in a single country or only a few countries in a particular geographic region, economic, political, regulatory or other conditions affecting such country or region may have a greater impact on Fund performance relative to a more geographically diversified fund.
o. | High-Yield Bonds and Other Lower-Rated Securities Risk |
The Income Builder Fund’s investments in high yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. Issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.
p. | Illiquid Securities Risk |
Illiquid securities are assets that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the asset. An inability to sell a portfolio position can adversely affect a Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities. Illiquid securities and relatively less liquid securities may also be difficult to value.
The Adviser employs procedures and tests using third-party and internal data inputs that seek to assess and manage the liquidity of a Fund’s portfolio holdings. These procedures and tests take into account a Fund’s investment strategy and liquidity of portfolio investments during both normal and foreseeable stressed conditions, cash-flow projections during both normal and reasonable foreseeable stressed conditions, relevant market, trading and other factors, and monitor whether liquidity should be adjusted based on changed market conditions. These procedures and tests are designed to assist a Fund in determining its ability to meet redemption requests in various market conditions. In light of the dynamic nature of markets, there can be no assurance that these procedures and tests will enable a Fund to ensure that it has sufficient liquidity to meet redemption requests.
q. | Impact of Large Redemptions and Purchases of Fund Shares |
Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause a Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of a Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.
r. | Infrastructure-Related Investment Risk |
Because the Global Infrastructure Fund concentrates its investments in infrastructure-related entities, the Fund has greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. Infrastructure related entities are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, costs associated with environmental and other regulations, the effects of economic slowdown and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Additionally, infrastructure-related entities may be subject to regulation by various governmental authorities and may also be affected by governmental regulation of rates charged to customers, service interruption due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards.
s. | Initial Public Offerings and Secondary Offerings Risk |
The Dynamic Dividend Fund, Income Builder Fund and Global infrastructure Fund may invest a portion of its assets in shares of IPOs or secondary offerings of an issuer. IPOs and secondary offerings may have a magnified impact on the performance of a fund with a small asset base. The impact of IPOs and secondary offerings on the Fund’s performance likely will decrease as the Fund’s asset size increases, which could reduce the Fund’s returns. IPOs and secondary offerings may not be consistently available to the Fund for investing. IPO and secondary
160 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
offering shares frequently are volatile in price due to the absence of a prior public market, the small number of shares available for trading and limited information about the issuers. Therefore, the Fund may hold IPO and secondary offering shares for a very short period of time. This may increase the turnover of the Fund and may lead to increased expenses for the Fund, such as commissions and transaction costs. In addition, IPO and secondary offering shares can experience an immediate drop in value if the demand for the securities does not continue to support the offering price.
t. | Interest Rate Risk |
The Income Builder Fund’s fixed income investments are subject to interest rate risk, which generally causes the value of a fixed income portfolio to decrease when interest rates rise resulting in a decrease in the Fund’s net assets. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. Interest rate fluctuations tend to have a greater impact on fixed income-securities with a greater time to maturity and/or lower coupon. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. In periods of market volatility, the market values of fixed income securities may be more sensitive to changes in interest rates.
u. | Issuer Risk |
The value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or service.
v. | Management Risk |
Each Fund is subject to the risk that the Adviser may make poor security selections. The Adviser and its portfolio managers apply their own investment techniques and risk analyses in making investment decisions for a Fund and there can be no guarantee that these decisions will achieve the desired results for the Fund. In addition, the Adviser may select securities that underperform the relevant market of other funds with similar investment objectives and strategies.
w. | Market Risk |
Deteriorating market conditions might cause a general weakness in the market that reduces the prices of securities in that market in which a Fund invests.
x. | Mid-Cap Securities Risk |
Securities of medium-sized companies tend to be more volatile and less liquid than securities of larger companies.
y. | Portfolio Turnover Risk |
The Dynamic Dividend Fund, Global Infrastructure Fund and Income Builder Fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. High portfolio turnover necessarily results in greater transaction costs which may reduce Fund performance. It may also result in greater realization of gains, which may include short-term gains taxable at ordinary income tax rates.
z. | Prepayment Risk |
The Income Builder Fund is subject to prepayment risk. As interest rates decline, debt issuers may repay or refinance their loans or obligations earlier than anticipated. The issuers of fixed income securities may, therefore, repay principal in advance. This forces the Fund to reinvest the proceeds from the principal prepayments at lower rates, which reduces the Fund’s income.
aa. | Qualified Dividend Tax Risk |
With respect to the Dynamic Dividend Fund, favorable U.S. federal tax treatment of Fund distributions may be adversely affected, changed or repealed by future changes in tax laws.
ab. | Sector Risk |
To the extent that a Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than a fund that invest more broadly.
Financial Sector Risk. To the extent that the financials sector represents a significant portion of a Fund’s holdings, the Fund will be sensitive to changes in, and its performance may depend to a greater extent on, factors impacting this sector. Performance of companies in the financials sector may be adversely impacted by many factors, including, among others, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. The impact of more stringent capital requirements, recent or future regulation of any individual financial company, or recent or future regulation of the financials sector as a whole cannot be predicted. In recent years, cyber attacks and technology malfunctions and failures have become increasingly frequent in this sector and have caused significant losses.
2018 Annual Report | 161 |
Notes to Financial Statements (continued)
October 31, 2018
Industrials Sector Risk. To the extent that the industrial sector represents a significant portion of a Fund’s holdings, the Fund will be sensitive to changes in, and its performance may be adversely impacted by issues impacting this sector. The value of securities issued by companies in the industrials sector may be adversely affected by supply and demand related to their specific products or services and industrials sector products in general. The products of manufacturing companies may face obsolescence due to rapid technological developments and frequent new product introduction. Government regulations, world events, economic conditions and exchange rates may adversely affect the performance of companies in the industrials sector. Companies in the industrials sector may be adversely affected by liability for environmental damage and product liability claims. The industrials sector may also be adversely affected by changes or trends in commodity prices, which may be influenced by unpredictable factors. Companies in the industrials sector, particularly aerospace and defense companies, may also be adversely affected by government spending policies because companies involved in this sector rely to a significant extent on government demand for their products and services.
ac. | Small-Cap Securities Risk |
Securities of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
ad. | Valuation Risk |
The price a Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third-party service providers.
Please read the prospectus for more detailed information regarding these and other risks.
6. Contingencies
In the normal course of business, the Funds may provide general indemnifications pursuant to certain contracts and organizational documents. The Funds’ maximum exposure under these arrangements is dependent on future claims that may be made against the Funds, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
7. Tax Information
For the year ended October 31, 2017 the breakdown of distributions per class from net investment income and from net realized gains were as follows:
Distributions From Net Investment Income | Distributions From Net Realized | |||||||||||||||||||||||||||||||||||||||
Fund | Class A | Class C | Class R | Institutional Service Class | Institutional Class | Class A | Class C | Class R | Institutional Service Class | Institutional Class | ||||||||||||||||||||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ – | $ | – | $ | – | $ | – | |||||||||||||||||||||
China Opportunities Fund | 72,703 | – | 10,909 | 8,632 | 10,628 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Dynamic Dividend Fund | 221,848 | – | – | – | 9,421,392 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Emerging Markets Fund | 1,481,671 | 51,789 | 348,298 | 3,210,803 | 84,335,789 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Focused U.S. Equity Fund | – | – | – | – | – | 1,313,126 | 710,750 | 329,447 | 80,401 | 5,697,016 | ||||||||||||||||||||||||||||||
Global Equity Fund | 409,109 | 13,245 | 27,516 | 6,791 | 364,408 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Global Infrastructure Fund | 648,032 | – | – | – | 5,038,382 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Income Builder Fund | 44,606 | – | – | – | 3,215,271 | – | – | – | – | – | ||||||||||||||||||||||||||||||
International Equity Fund | 594,323 | 85,811 | 81,487 | 1,623,239 | 5,095,583 | – | – | – | – | – | ||||||||||||||||||||||||||||||
International Small Cap Fund | 266,730 | – | 4,254 | 94 | 152,102 | 149,508 | 3,656 | 3,129 | 151 | 55,347 |
162 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Distributions From Net Investment Income | Distributions From Net Realized | |||||||||||||||||||||||||||||||||||||||
Fund | Class A | Class C | Class R | Institutional Service Class | Institutional Class | Class A | Class C | Class R | Institutional Service Class | Institutional Class | ||||||||||||||||||||||||||||||
Japanese Equities Fund | $ | 55 | $ | – | $ | – | $ | 40 | $ | 3,825 | $ | 192 | $ 95 | $ | 95 | $ | 95 | $ | 9,141 | |||||||||||||||||||||
U.S. Mid Cap Equity Fund | 20 | – | 6 | 40 | 3,884 | 234 | 212 | �� | 215 | 215 | 20,608 | |||||||||||||||||||||||||||||
U.S. Multi-Cap Equity Fund | 287,332 | – | – | 272,427 | 22,533 | 26,189,382 | 739,985 | 33,344 | 11,296,496 | 757,559 | ||||||||||||||||||||||||||||||
U.S. Small Cap Equity Fund | – | – | – | – | – | – | – | – | – | – |
As of October 31, 2018, the tax cost of securities and the breakdown of unrealized appreciation/(depreciation) for each Fund were as follows:
Tax Cost of Securities | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | 8,903,273 | $ | 65,159 | $ | (1,165,446 | ) | $ | (1,100,287 | ) | ||||||
China Opportunities Fund | 10,479,421 | 1,349,166 | (1,976,129 | ) | (626,963 | ) | ||||||||||
Dynamic Dividend Fund | 124,844,231 | 20,446,418 | (7,365,864 | ) | 13,080,554 | |||||||||||
Emerging Markets Fund | 6,078,711,337 | 871,246,656 | (1,056,460,068 | ) | (185,213,412 | ) | ||||||||||
Focused U.S. Equity Fund | 14,787,143 | 2,479,489 | (266,200 | ) | 2,213,289 | |||||||||||
Global Equity Fund | 32,279,576 | 3,456,996 | (1,658,256 | ) | 1,798,740 | |||||||||||
Global Infrastructure Fund | 110,295,793 | 9,379,588 | (13,159,089 | ) | (3,779,501 | ) | ||||||||||
Income Builder Fund | 81,047,355 | 18,721,435 | (884,362 | ) | 17,837,073 | |||||||||||
International Equity Fund | 467,152,671 | 54,991,805 | (57,544,366 | ) | (2,552,561 | ) | ||||||||||
International Small Cap Fund | 58,751,981 | 8,812,581 | (2,868,804 | ) | 5,943,777 | |||||||||||
Japanese Equities Fund | 1,384,271 | 111,125 | (125,521 | ) | (14,396 | ) | ||||||||||
U.S. Mid Cap Equity Fund | 1,376,282 | 212,838 | (68,058 | ) | 144,780 | |||||||||||
U.S. Multi-Cap Equity Fund | 294,190,420 | 66,824,427 | (12,398,133 | ) | 54,426,294 | |||||||||||
U.S. Small Cap Equity Fund | 1,551,913,613 | 198,717,654 | (125,190,418 | ) | 73,527,236 |
The tax character of distributions paid during the fiscal year ended October 31, 2018 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income* | Net Long Term Capital Gains* | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | 158,681 | $ | – | $ | 158,681 | $ | – | $ | – | $ | 158,681 | ||||||||||||
China Opportunities Fund | 113,578 | – | 113,578 | – | – | 113,578 | ||||||||||||||||||
Dynamic Dividend Fund | 9,122,316 | – | 9,122,316 | – | 179,181 | 9,301,497 | ||||||||||||||||||
Emerging Markets Fund | 115,187,200 | – | 115,187,200 | – | – | 115,187,200 | ||||||||||||||||||
Focused U.S. Equity Fund | – | 6,555,911 | 6,555,911 | – | – | 6,555,911 | ||||||||||||||||||
Global Equity Fund | 264,636 | 3,376,949 | 3,641,585 | – | – | 3,641,585 | ||||||||||||||||||
Global Infrastructure Fund | 3,759,615 | 1,171,703 | 4,931,318 | – | – | 4,931,318 | ||||||||||||||||||
Income Builder Fund | 3,516,079 | 2,744,638 | 6,260,717 | – | – | 6,260,717 | ||||||||||||||||||
International Equity Fund | 6,296,566 | – | 6,296,566 | – | – | 6,296,566 | ||||||||||||||||||
International Small Cap Fund | 528,469 | 2,117,598 | 2,646,067 | – | – | 2,646,067 | ||||||||||||||||||
Japanese Equities Fund | 7,371 | 15,177 | 22,548 | – | – | 22,548 | ||||||||||||||||||
U.S. Mid Cap Equity Fund | 53,577 | 76,333 | 129,910 | – | – | 129,910 | ||||||||||||||||||
U.S. Multi-Cap Equity Fund | 1,242,733 | 35,841,364 | 37,084,097 | – | – | 37,084,097 | ||||||||||||||||||
U.S. Small Cap Equity Fund | – | – | – | – | – | – |
2018 Annual Report | 163 |
Notes to Financial Statements (continued)
October 31, 2018
The tax character of distributions paid during the fiscal year ended October 31, 2017 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income* | Net Long Term Capital Gains* | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||||
China Opportunities Fund | 102,872 | – | 102,872 | – | – | 102,872 | ||||||||||||||||||
Dynamic Dividend Fund | 9,643,240 | – | 9,643,240 | – | 308,936 | 9,952,176 | ||||||||||||||||||
Emerging Markets Fund | 89,428,350 | – | 89,428,350 | – | – | 89,428,350 | ||||||||||||||||||
Focused U.S. Equity Fund | – | 8,130,740 | 8,130,740 | – | – | 8,130,740 | ||||||||||||||||||
Global Equity Fund | 821,069 | – | 821,069 | – | – | 821,069 | ||||||||||||||||||
Global Infrastructure Fund | 5,686,414 | – | 5,686,414 | – | – | 5,686,414 | ||||||||||||||||||
Income Builder Fund | 3,259,876 | – | 3,259,876 | – | – | 3,259,876 | ||||||||||||||||||
International Equity Fund | 7,480,443 | – | 7,480,443 | – | – | 7,480,443 | ||||||||||||||||||
International Small Cap Fund | 423,180 | 211,791 | 634,971 | – | – | 634,971 | ||||||||||||||||||
Japanese Equities Fund | 13,538 | – | 13,538 | – | – | 13,538 | ||||||||||||||||||
U.S. Mid Cap Equity Fund | 25,434 | – | 25,434 | – | – | 25,434 | ||||||||||||||||||
U.S. Multi-Cap Equity Fund | 582,292 | 39,016,766 | 39,599,058 | – | – | 39,599,058 | ||||||||||||||||||
U.S. Small Cap Equity Fund | – | – | – | – | – | – |
Amounts listed as “–” are $0 or round to $0.
As of October 31, 2018, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Fund | Undistributed Tax Exempt Income | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Distributions Payable | Late Year Ordinary and Post-October Capital Loss Deferrals | Other Temporary Differences | Unrealized Appreciation/ (Depreciation)* | Accumulated Capital and Other Losses** | Total Accumulated Earnings/ (Deficit) | ||||||||||||||||||||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | – | $ | 91,745 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | (1,103,385 | ) | $ | (200,775,732 | ) | $ | (201,787,372 | ) | |||||||||||||||||
China Opportunities Fund | – | 15,411 | – | – | – | – | – | (629,012 | ) | (1,357,018 | ) | (1,970,619 | ) | |||||||||||||||||||||||||||
Dynamic Dividend Fund | – | – | – | – | – | – | – | 13,068,864 | (4,219,558 | ) | 8,849,306 | |||||||||||||||||||||||||||||
Emerging Markets Fund | – | 83,314,858 | – | – | – | – | – | (195,320,768 | ) | – | (112,005,910 | ) | ||||||||||||||||||||||||||||
Focused U.S. Equity Fund | – | – | 1,621,343 | – | – | – | – | 2,213,289 | – | 3,834,632 | ||||||||||||||||||||||||||||||
Global Equity Fund | – | 374,000 | 2,301,097 | – | – | – | – | 1,795,211 | (4,584,647 | ) | (114,339 | ) | ||||||||||||||||||||||||||||
Global Infrastructure Fund | 310,111 | – | 183,177 | – | – | – | – | (3,598,575 | ) | – | (3,105,287 | ) | ||||||||||||||||||||||||||||
Income Builder Fund | – | – | 6,185,641 | – | – | – | – | 17,837,071 | – | 24,022,712 |
164 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Fund | Undistributed Tax Exempt Income | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Distributions Payable | Late Year Ordinary and Post-October Capital Loss Deferrals | Other Temporary Differences | Unrealized Appreciation/ (Depreciation)* | Accumulated Capital and Other Losses** | Total Accumulated Earnings/ (Deficit) | ||||||||||||||||||||||||||||||
International Equity Fund | $ | – | $ | 6,258,605 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | (2,596,062 | ) | $ | (28,661,610 | ) | $ | (24,999,067 | ) | |||||||||||||||||
International Small Cap Fund | – | 1,561,259 | 7,611,377 | – | – | – | – | 5,757,156 | – | 14,929,792 | ||||||||||||||||||||||||||||||
Japanese Equities Fund | – | 7,711 | 11,795 | – | – | – | – | (14,392 | ) | – | 5,114 | |||||||||||||||||||||||||||||
U.S. Mid Cap Equity Fund | – | 1,113 | 65,995 | – | – | – | – | 144,780 | – | 211,888 | ||||||||||||||||||||||||||||||
U.S. Multi-Cap Equity Fund | – | 6,064,020 | 31,556,528 | – | – | – | – | 54,426,294 | – | 92,046,842 | ||||||||||||||||||||||||||||||
U.S. Small Cap Equity Fund | – | 6,472,908 | 153,511,773 | – | – | – | – | 73,526,608 | – | 233,511,289 |
* | The difference between the book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to passive foreign investment companies and tax deferral of losses on wash sales. |
** | As of October 31, 2018, for federal income tax purposes, these Funds have capital loss carryforwards available to offset capital gains, if any, to the extent provided by the Treasury regulations, with no expiration. |
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards, as shown in the table below, were available to the extent provided by the regulations to offset future realized gains of each respective Fund with no expiration.
Fund | Amount | Expires | ||||
Asia-Pacific (ex-Japan) Equity Fund | $ | 122,866,577 | Unlimited (Short-Term) | |||
Asia-Pacific (ex-Japan) Equity Fund | 77,909,155 | Unlimited (Long-Term) | ||||
China Opportunities Fund | 10,803 | Unlimited (Short-Term) | ||||
China Opportunities Fund | 1,346,215 | Unlimited (Long-Term) | ||||
Dynamic Dividend Fund | 4,219,558 | Unlimited (Short-Term) | ||||
Global Equity Fund | 4,584,647 | Unlimited (Long-Term) | ||||
International Equity Fund | 1,075,064 | Unlimited (Short-Term) | ||||
International Equity Fund | 27,586,546 | Unlimited (Long-Term) |
Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 or on the date of their formation, whichever is later, for an unlimited period. However, any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to foreign currency gain/(loss), ordinary loss netting to reduce short-term capital gains, net operating losses, litigation reclass, non-taxable dividend adjustment to income, partnership adjustments, spinoff adjustment, Indian capital gains tax, non-deductible excise tax, passive foreign investment company gain/(loss), equalization and distribution re-designations. These reclassifications have no effect on net assets or NAVs per share.
2018 Annual Report | 165 |
Notes to Financial Statements (continued)
October 31, 2018
Fund | Paid-in Capital | Distributable (Accumulated | ||||||
Asia-Pacific (ex-Japan) Equity Fund | $ | – | $ | – | ||||
China Opportunities Fund | – | – | ||||||
Dynamic Dividend Fund | (156,499,558 | ) | 156,499,558 | |||||
Emerging Markets Fund | – | – | ||||||
Focused U.S. Equity Fund | (30,914 | ) | 30,914 | |||||
Global Equity Fund | 237,333 | (237,333 | ) | |||||
Global Infrastructure Fund | – | – | ||||||
Income Builder Fund | 138 | (138 | ) | |||||
International Equity Fund | (1,577 | ) | 1,577 | |||||
International Small Cap Fund | – | – | ||||||
Japanese Equities Fund | – | – | ||||||
U.S. Mid Cap Equity Fund | – | – | ||||||
U.S. Multi-Cap Equity Fund | – | – | ||||||
U.S. Small Cap Equity Fund | – | – |
8. Significant Shareholders
As of October 31, 2018, the Funds had shareholders with the percentage ownership indicated, which are considered significant shareholders (holdings greater than 5.0%) for financial reporting purposes:
Fund | Record Ownership % | Number of Account Owners | ||||
Asia-Pacific (ex-Japan) Equity Fund | 72.5 | % | 4 | |||
China Opportunities Fund | 26.6 | 2 | ||||
Dynamic Dividend Fund | 34.2 | 3 | ||||
Emerging Markets Fund | 60.9 | 5 | ||||
Focused U.S. Equity Fund | 42.6 | 6 | ||||
Global Equity Fund | 24.2 | 2 | ||||
Global Infrastructure Fund | 52.3 | 5 | ||||
Income Builder Fund | 77.4 | 1 | ||||
International Equity Fund | 51.9 | 3 | ||||
International Small Cap Fund | 19.5 | 1 | ||||
Japanese Equities Fund | 95.9 | 2 | ||||
U.S. Mid Cap Equity Fund | 86.9 | 1 | ||||
U.S. Multi-Cap Equity Fund | 11.9 | 1 | ||||
U.S. Small Cap Equity Fund | 48.8 | 3 |
9. Line of Credit
The Trust, on behalf of each of the funds of the Trust (including the Funds) (the “Borrowers”), has entered into an agreement (the “Agreement”) with State Street Bank and Trust Company (the “Bank”), subject to annual renewal. The Agreement provides for a revolving credit facility (the “Credit Facility”) in the amount of $250,000,000 to be utilized for temporary or emergency purposes to fund shareholder redemptions or other short-term liquidity purposes.
Principal on each outstanding loan made under the Agreement bears interest at a variable rate per annum equal to the higher of (a) the Federal Funds Rate as in effect on that day (not less than zero) plus 1.25% or (b) the One-Month London Interbank Offered Rate as in effect on that day (not less than zero) plus 1.25%. In addition, the Borrowers shall pay to the Bank a commitment fee at the rate of 0.25% per annum on the daily unused portion of the Credit Facility, as applicable, which is allocated among the Borrowers in such manner as is determined by the Board to be
166 | Annual Report 2018 |
Notes to Financial Statements (concluded)
October 31, 2018
reasonable. For each Fund that borrowed under the Credit Facility during the fiscal year ended October 31, 2018, the following table shows the average outstanding daily balance of the days the Fund utilized the Credit Facility and the average weighted interest rate paid by the Fund during the fiscal year ended October 31, 2018.
Average Outstanding Daily Balance | Average Weighted Interest Rate | Days Utilized | ||||||||||
Asia-Pacific (ex-Japan) Equity Fund | 200,750 | 3.31 | % | 29 | ||||||||
China Opportunities Fund | 175,988 | 3.32 | % | 21 | ||||||||
Dynamic Dividend Fund* | 225,000 | 3.50 | % | 17 | ||||||||
Emerging Markets Fund | 24,304,704 | 3.44 | % | 14 | ||||||||
Focused U.S. Equity Fund | 394,898 | 2.94 | % | 22 | ||||||||
Global Infrastructure Fund* | 645,000 | 3.41 | % | 10 | ||||||||
International Small Cap Fund | 1,778,564 | 3.24 | % | 7 | ||||||||
U.S. Multi-Cap Equity Fund | 225,000 | 3.22 | % | 1 | ||||||||
U.S. Small Cap Equity Fund | 3,459,568 | 3.19 | % | 16 |
* | Prior to May 7, 2018, the Predecessor Funds had entered into a lending agreement with BNP Paribas (the “BNPP NY Agreement”). The amounts in the above table reflect the time period May 7, 2018 to October 31, 2018 and the terms of the State Street Agreement in effect at the time. |
10. Recent Accounting Pronouncements
On August 17, 2018, the SEC voted to adopt amendments to certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The SEC will also be referring certain SEC disclosure requirements that overlap with, but require information incremental to, U.S. GAAP to the Financial Accounting Standards Board (FASB) for potential incorporation into U.S. GAAP. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments became effective November 5, 2018.
On August 28, 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 includes removals, additions and modifications to the disclosure requirements for fair value measurements that are intended to improve the effectiveness of disclosures in the notes to financial statements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. Aberdeen has evaluated ASU 2018-13 and determined that there is no significant impact on the Trust’s financial statements. Aberdeen has early adopted the following ASU 2018-13 guidance in the Trust’s financial statements pertaining to the removal of (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and (ii) the policy for timing of transfers between levels.
11. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures and/or adjustments were required to the financial statements as of October 31, 2018.
2018 Annual Report | 167 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Aberdeen Funds:
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of the Aberdeen Asia Pacific (ex-Japan) Equity Fund, Aberdeen China Opportunities Fund, Aberdeen Dynamic Dividend Fund, Aberdeen Emerging Markets Fund, Aberdeen Focused U.S. Equity Fund, Aberdeen Global Equity Fund, Aberdeen Global Infrastructure Fund, Aberdeen Income Builder Fund, Aberdeen International Equity Fund, Aberdeen International Small Cap Fund, Aberdeen Japanese Equities Fund, Aberdeen U.S. Mid Cap Equity Fund, Aberdeen U.S. Multi-Cap Equity Fund, and Aberdeen U.S. Small Cap Equity Fund, fourteen of the funds comprising Aberdeen Funds (the Funds), including the statements of investments, as of October 31, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two year period then ended except for the Aberdeen Dynamic Dividend Fund, Aberdeen Global Infrastructure Fund and Aberdeen Income Builder Fund, for which the period is the year ended October 31, 2018, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five year period then ended except for the Aberdeen Dynamic Dividend Fund, Aberdeen Global Infrastructure Fund, and Aberdeen Income Builder Fund, for which the period is the year ended October 31, 2018. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of October 31, 2018, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, except for the Aberdeen Dynamic Dividend Fund, Aberdeen Global Infrastructure Fund, and Aberdeen Income Builder Fund for which the period is the year ended October 31, 2018 and the financial highlights for each of the years or periods in the five-year period then ended except for the Aberdeen Dynamic Dividend Fund, Aberdeen Global Infrastructure Fund, and Aberdeen Income Builder Fund, for which the period is the year ended October 31, 2018, in conformity with U.S. generally accepted accounting principles. The statements of changes in net assets for the year ended October 31, 2017 and the financial highlights for each of the years in the three-year period ended October 31, 2017 for Aberdeen Dynamic Dividend Fund, Aberdeen Global Infrastructure Fund, and Aberdeen Income Builder Fund were audited by other independent registered public accountants whose reports, dated December 22, 2017, expressed an unqualified opinion on those changes in net assets and financial highlights. The financial highlights for the year ended October 31, 2014 for Aberdeen Dynamic Dividend Fund, Aberdeen Global Infrastructure Fund, and Aberdeen Income Builder Fund were audited by other independent registered public accountants whose reports, dated December 29, 2014, expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian, brokers, or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Aberdeen investment companies since 2009.
Philadelphia, Pennsylvania
December 27, 2018
168 | Annual Report 2018 |
Other Tax Information (Unaudited)
For the period ended October 31, 2018, certain dividends paid by the Funds may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2018 Form 1099-DIV.
For the year ended October 31, 2018, the following Funds paid qualified dividend income as follows:
Fund | Qualified Dividend Income | |||
Dynamic Dividend Fund | 59.07 | % | ||
Emerging Markets Fund | 100.00 | % | ||
Income Builder Fund | 70.91 | % | ||
Japanese Equities Fund | 100.00 | % | ||
U.S. Multi-Cap Equity Fund | 99.95 | % |
For the taxable year ended October 31, 2018, the following percentage of income dividends paid by the Funds qualify for the dividends received deduction available to corporate shareholders:
Fund | Dividends Received Deduction | |||
Dynamic Dividend Fund | 33.93 | % | ||
Global Equity Fund | 11.70 | % | ||
Global Infrastructure Fund | 29.93 | % | ||
Income Builder Fund | 63.52 | % | ||
U.S. Multi-Cap Equity Fund | 99.92 | % |
The Funds intend to elect to pass through to their shareholders the credit for taxes paid in foreign countries during its fiscal year ended October 31, 2018. In accordance with the current tax laws, the foreign income and foreign tax per share (for a share outstanding as of October 31, 2018) were as follows:
Fund | Foreign Tax | |||
Asia-Pacific (ex-Japan) Equity Fund | $ | 0.0385 | ||
China Opportunities Fund | $ | 0.0272 | ||
Emerging Markets Fund | $ | 0.0465 | ||
Global Equity Fund | $ | 0.0228 | ||
International Equity Fund | $ | 0.0348 | ||
International Small Cap Fund | $ | 0.0495 | ||
Japanese Equities Fund | $ | 0.0219 |
2018 Annual Report | 169 |
Other Tax Information (Unaudited) (concluded)
During the year ended October 31, 2018, the following Funds designated dividends as long-term capital gains:
Fund | Amount | |||
Focused U.S. Equity Fund | $ | 6,833,211 | ||
Global Equity Fund | $ | 3,575,168 | ||
Global Infrastructure Fund | $ | 861,592 | ||
Income Builder Fund | $ | 3,449,015 | ||
International Small Cap Fund | $ | 2,117,598 | ||
Japanese Equities Fund | $ | 15,177 | ||
U.S. Mid Cap Equity Fund | $ | 76,333 | ||
U.S. Multi-Cap Equity Fund | $ | 35,841,364 |
170 | Annual Report 2018 |
Shareholder Expense Examples (Unaudited)
As a shareholder of the Aberdeen Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) paid on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, transfer agent out-of-pocket expenses, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Aberdeen Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples assume that you had a $1,000 investment in the Class at the beginning of the reporting period, May 1, 2018 and continued to hold your shares at the end of the reporting period, October 31, 2018.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Actual Expenses Paid During Period” for the class of a Fund that you own to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of a Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the information for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
Beginning Account Value, May 1, 2018 | Actual Ending Account Value, October 31, 2018 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period*1 | Annualized Expense Ratio** | |||||||||||||||||||||
Asia-Pacific (ex-Japan) Equity Fund | Class A | $ | 1,000.00 | $ | 833.10 | $ | 1,017.34 | $ | 7.21 | $ | 7.93 | 1.56% | ||||||||||||||
Class C | 1,000.00 | 829.20 | 1,013.71 | 10.51 | 11.57 | 2.28% | ||||||||||||||||||||
Class R | 1,000.00 | 832.30 | 1,016.38 | 8.08 | 8.89 | 1.75% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 833.90 | 1,018.40 | 6.24 | 6.87 | 1.35% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 834.30 | 1,018.85 | 5.83 | 6.41 | 1.26% | ||||||||||||||||||||
China Opportunities Fund | Class A | 1,000.00 | 832.40 | 1,015.43 | 8.96 | 9.86 | 1.94% | |||||||||||||||||||
Class C | 1,000.00 | 829.90 | 1,011.95 | 12.13 | 13.34 | 2.63% | ||||||||||||||||||||
Class R | 1,000.00 | 830.70 | 1,013.66 | 10.57 | 11.62 | 2.29% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 833.20 | 1,016.48 | 7.99 | 8.79 | 1.73% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 833.90 | 1,016.99 | 7.53 | 8.29 | 1.63% | ||||||||||||||||||||
Dynamic Dividend Fund | Class A | 1,000.00 | 963.80 | 1,017.64 | 7.42 | 7.63 | 1.50% | |||||||||||||||||||
Institutional Class | 1,000.00 | 962.50 | 1,018.90 | 6.18 | 6.36 | 1.25% | ||||||||||||||||||||
Emerging Markets Fund | Class A | 1,000.00 | 834.10 | 1,017.14 | 7.40 | 8.13 | 1.60% | |||||||||||||||||||
Class C | 1,000.00 | 831.90 | 1,014.57 | 9.74 | 10.71 | 2.11% | ||||||||||||||||||||
Class R | 1,000.00 | 833.30 | 1,016.28 | 8.18 | 9.00 | 1.77% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 835.90 | 1,019.51 | 5.23 | 5.75 | 1.13% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 836.00 | 1,019.66 | 5.09 | 5.60 | 1.10% | ||||||||||||||||||||
Focused U.S. Equity Fund | Class A | 1,000.00 | 1,023.90 | 1,018.90 | 6.38 | 6.36 | 1.25% | |||||||||||||||||||
Class C | 1,000.00 | 1,018.80 | 1,015.63 | 9.67 | 9.65 | 1.90% | ||||||||||||||||||||
Class R | 1,000.00 | 1,021.70 | 1,016.99 | 8.31 | 8.29 | 1.63% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 1,024.50 | 1,020.11 | 5.15 | 5.14 | 1.01% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 1,025.10 | 1,020.67 | 4.59 | 4.58 | 0.90% | ||||||||||||||||||||
Global Equity Fund | Class A | 1,000.00 | 932.70 | 1,017.39 | 7.55 | 7.88 | 1.55% | |||||||||||||||||||
Class C | 1,000.00 | 930.60 | 1,014.17 | 10.66 | 11.12 | 2.19% | ||||||||||||||||||||
Class R | 1,000.00 | 931.70 | 1,015.43 | 9.45 | 9.86 | 1.94% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 935.00 | 1,018.90 | 6.10 | 6.36 | 1.25% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 934.80 | 1,019.21 | 5.80 | 6.06 | 1.19% |
2018 Annual Report | 171 |
Shareholder Expense Examples (Unaudited) (concluded)
Beginning Account Value, May 1, 2018 | Actual Ending Account Value, October 31, 2018 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period*1 | Annualized Expense Ratio** | |||||||||||||||||||||
Global Infrastructure Fund | Class A | $ | 1,000.00 | $ | 977.80 | $ | 1,017.90 | $ | 7.23 | $ | 7.38 | 1.45% | ||||||||||||||
Institutional Class | 1,000.00 | 979.20 | 1,019.16 | 5.99 | 6.11 | 1.20% | ||||||||||||||||||||
Income Builder Fund | Class A | 1,000.00 | 1,019.70 | 1,017.59 | 7.69 | 7.68 | 1.51% | |||||||||||||||||||
Institutional Class | 1,000.00 | 1,021.80 | 1,018.96 | 6.32 | 6.31 | 1.24% | ||||||||||||||||||||
International Equity Fund | Class A | 1,000.00 | 881.20 | 1,018.20 | 6.59 | 7.07 | 1.39% | |||||||||||||||||||
Class C | 1,000.00 | 878.50 | 1,014.62 | 9.94 | 10.66 | 2.10% | ||||||||||||||||||||
Class R | 1,000.00 | 880.30 | 1,016.94 | 7.77 | 8.34 | �� | 1.64% | |||||||||||||||||||
Institutional Service Class | 1,000.00 | 883.00 | 1,019.86 | 5.03 | 5.40 | 1.06% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 883.30 | 1,020.06 | 4.84 | 5.19 | 1.02% | ||||||||||||||||||||
International Small Cap Fund | Class A | 1,000.00 | 915.10 | 1,017.75 | 7.14 | 7.53 | 1.48% | |||||||||||||||||||
Class C | 1,000.00 | 912.00 | 1,014.32 | 10.41 | 10.97 | 2.16% | ||||||||||||||||||||
Class R | 1,000.00 | 913.70 | 1,016.13 | 8.68 | 9.15 | 1.80% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 916.00 | 1,019.26 | 5.70 | 6.01 | 1.18% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 916.60 | 1,019.36 | 5.60 | 5.90 | 1.16% | ||||||||||||||||||||
Japanese Equities Fund | Class A | 1,000.00 | 850.00 | 1,018.40 | 6.30 | 6.87 | 1.35% | |||||||||||||||||||
Class C | 1,000.00 | 847.30 | 1,015.12 | 9.31 | 10.16 | 2.00% | ||||||||||||||||||||
Class R | 1,000.00 | 849.90 | 1,017.64 | 6.99 | 7.63 | 1.50% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 852.10 | 1,020.11 | 4.72 | 5.14 | 1.01% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 852.10 | 1,020.16 | 4.67 | 5.09 | 1.00% | ||||||||||||||||||||
U.S. Mid Cap Equity Fund | Class A | 1,000.00 | 966.70 | 1,018.90 | 6.20 | 6.36 | 1.25% | |||||||||||||||||||
Class C | 1,000.00 | 963.70 | 1,015.12 | 9.90 | 10.16 | 2.00% | ||||||||||||||||||||
Class R | 1,000.00 | 965.70 | 1,017.64 | 7.43 | 7.63 | 1.50% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 968.30 | 1,020.16 | 4.96 | 5.09 | 1.00% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 968.30 | 1,020.16 | 4.96 | 5.09 | 1.00% | ||||||||||||||||||||
U.S. Multi-Cap Equity Fund | Class A | 1,000.00 | 997.60 | 1,019.21 | 5.99 | 6.06 | 1.19% | |||||||||||||||||||
Class C | 1,000.00 | 994.50 | 1,015.63 | 9.55 | 9.65 | 1.90% | ||||||||||||||||||||
Class R | 1,000.00 | 994.90 | 1,016.94 | 8.25 | 8.34 | 1.64% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 999.30 | 1,020.32 | 4.89 | 4.94 | 0.97% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 1,000.00 | 1,020.67 | 4.54 | 4.58 | 0.90% | ||||||||||||||||||||
U.S. Small Cap Equity Fund | Class A | 1,000.00 | 1,010.60 | 1,018.45 | 6.79 | 6.82 | 1.34% | |||||||||||||||||||
Class C | 1,000.00 | 1,006.90 | 1,014.87 | 10.37 | 10.41 | 2.05% | ||||||||||||||||||||
Class R | 1,000.00 | 1,008.30 | 1,016.48 | 8.76 | 8.79 | 1.73% | ||||||||||||||||||||
Institutional Service Class | 1,000.00 | 1,011.90 | 1,019.76 | 5.48 | 5.50 | 1.08% | ||||||||||||||||||||
Institutional Class | 1,000.00 | 1,011.90 | 1,019.81 | 5.43 | 5.45 | 1.07% |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period multiplied by 184/365 (to reflect the one-half year period). |
** | The expense ratio presented represents a six-month, annualized ratio. |
1 | Represents the hypothetical 5% return before expenses. |
172 | Annual Report 2018 |
Supplemental Information (Unaudited)
Board of Trustees’ Consideration of Advisory and Sub-Advisory Agreements
At an in-person meeting of the Board of Trustees (the “Board” or the “Trustees”) of the Aberdeen Funds (the “Trust”) held on June 13, 2018, the Board, including a majority of the Trustees who are not considered to be “interested persons” of the Trust (the “Independent Trustees”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period the continuation of the Trust’s advisory agreement (the “Advisory Agreement”) with Aberdeen Asset Management Inc. (“AAMI”) and the applicable sub-advisory agreements (each a “Sub-Advisory Agreement,” and collectively with the Advisory Agreement, the “Agreements”) between: (i) AAMI and Aberdeen Asset Management Asia Limited (“AAMAL”) and (ii) AAMI and Aberdeen Asset Managers Limited (“AAML”) (each a “Sub-Adviser,” and collectively, the “Sub-Advisers”) for each of the following series of the Trust: Aberdeen Asia-Pacific (ex-Japan) Equity Fund, Aberdeen China Opportunities Fund, Aberdeen Emerging Markets Fund, Aberdeen Focused U.S. Equity Fund, Aberdeen Global Equity Fund, Aberdeen International Equity Fund, Aberdeen International Small Cap Fund, Aberdeen Japanese Equities Fund, Aberdeen Tax-Free Income Fund, Aberdeen U.S. Mid Cap Equity Fund, Aberdeen U.S. Multi-Cap Equity Fund, and Aberdeen U.S. Small Cap Equity Fund (each a “Fund,” and collectively the “Funds”). In addition, the Independent Trustees held a separate telephonic meeting on June 6, 2018 to review the materials provided and the relevant legal considerations (together with the in-person meeting held on June 13, 2018, the “Meetings”). AAMAL and AAML are affiliates of AAMI. AAMI and the Sub-Advisers are sometimes referred to collectively as the “Advisers.”
In connection with the Meetings, the Board reviewed a variety of information provided by the Advisers relating to the Funds, the Agreements and the Advisers, including comparative performance, fee and expense information and other information regarding the nature, extent and quality of services provided by the Advisers under their respective Agreements. The materials provided to the Board generally included, among other items: (i) information on the investment performance of the Funds and the performance of peer groups of funds and the Funds’ performance benchmarks; (ii) information on the Funds’ advisory fees and other expenses, including information comparing each Fund’s expenses to those of a peer group of funds and information about any applicable expense limitations and fee “breakpoints”; (iii) sales and redemption data with respect to each Fund; (iv) information about the profitability of the Agreements to the Advisers; (v) a report prepared by the Advisers in response to a request submitted by the Independent Trustees’ independent legal counsel on behalf of such Trustees; and (vi) a memorandum from the Independent Trustees’ independent legal counsel on the responsibilities of the Board in considering for approval the investment advisory and investment sub-advisory arrangements under the 1940 Act and Delaware law. The Board, including the Independent Trustees, also considered other matters such as: (i) the Advisers’ financial results and financial condition; (ii) each Fund’s investment objective and strategies; (iii) the Advisers’ investment personnel and operations; (iv) arrangements relating to the distribution of the Funds’ shares and the related costs; (v) the procedures employed to determine the value of the Funds’ assets; (vi) the allocation of the Funds’ brokerage, if any, including, if applicable, allocations to brokers affiliated with the Advisers and the use, if any, of “soft” commission dollars to pay Fund expenses and to pay for research and other similar services; (vii) the resources devoted to, and the record of compliance with, the Funds’ investment policies and restrictions, policies on personal securities transactions and other compliance policies; and (viii) possible conflicts of interest. The Board also considered the nature, extent and quality of the services provided to the Funds by AAMI’s affiliates. Throughout the process, the Trustees were afforded the opportunity to ask questions of and request additional materials from AAMI and the Sub-Advisers.
In addition to the materials requested by the Trustees in connection with their annual consideration of the continuation of the Agreements, the Trustees received materials in advance of each regular quarterly meeting of the Board that provide information relating to the services provided by the Advisers, including detailed information about the Funds’ investment performance. This information generally included, among other things, third-party performance rankings for various periods (including prior to the Advisers’ management of the Funds, to the extent applicable) comparing each Fund against its peer group, total return information for various periods, and details of sales and redemptions of Fund shares for the period. The Board also received periodic presentations from the portfolio management teams in connection with the performance of the Funds.
The Independent Trustees were advised by separate independent legal counsel throughout the process. The Independent Trustees also consulted in executive sessions with counsel to the Independent Trustees regarding consideration of the renewal of the Agreements. In considering whether to approve the continuation of the Agreements, the Board of Trustees, including the Independent Trustees, did not identify any single factor as determinative. Individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. Matters considered by the Trustees, including the Independent Trustees, in connection with their approval of the continuation of the Agreements included the factors listed below.
The nature, extent and quality of the services provided to the Funds under the Agreements. The Trustees considered the nature, extent and quality of the services provided by AAMI and the Sub-Advisers, as applicable, to the Funds and the resources dedicated to the Funds by AAMI and its affiliates. The Board considered, among other things, the Advisers’ investment experience. The Board also considered the background and experience of the Advisers’ senior management personnel and the qualifications, background and responsibilities of the portfolio managers that are primarily responsible for the day-to-day portfolio management services for the Funds. The Board also considered the allocation of responsibilities among the Advisers. The Trustees considered not only the advisory services provided by AAMI to the Funds, but also the
2018 Annual Report | 173 |
Supplemental Information (Unaudited) (continued)
administrative services provided by AAMI to the Funds under a separate administration agreement. AAMI’s role in coordinating the activities of the Trust’s other service providers was also considered. The Board also considered that it receives information on a regular basis from the Trust’s Chief Compliance Officer regarding the Advisers’ compliance policies and procedures. The Board also considered the Advisers’ risk management processes. The Board was also mindful of the Advisers’ focus on the monitoring of the performance of the Funds and in addressing performance matters. The Trustees also considered the benefits to shareholders of investing in a mutual fund that is part of a family of funds that offers shareholders the right to exchange shares of one type of fund for shares of another type of fund, and provides a variety of fund and shareholder services. The Board also took into account its knowledge of management and the quality of the performance of management’s duties through Board meetings, discussion and reports during the preceding year.
After reviewing these and related factors, the Board concluded that they were satisfied with the nature, extent and quality of the services provided and supported the renewal of the Agreements.
Investment performance of the Funds and the Advisers. The Trustees received information about the performance of the Funds over various time periods, including information that compared the performance of the Funds to the performance of peer groups of funds and each Fund’s performance benchmark. The Trustees also considered that certain of the Funds had changed their respective performance benchmarks to better reflect the respective Fund’s investment strategy. The Trustees also considered the performance of the Funds compared to the performance of comparable funds or accounts managed by AAMI and its affiliates to the extent available. In addition, the Trustees also reviewed data prepared by an independent third party that analyzed the performance of the Funds using a variety of performance metrics.
The Trustees also considered AAMI’s and the Sub-Advisers’ performance and reputation generally, the performance of the fund family generally, the historical responsiveness of AAMI to Trustee concerns about performance and the willingness of AAMI and the Sub-Advisers to take steps intended to improve performance. The Trustees also considered the performance of the Advisers since they commenced management of the Funds.
Based on these factors, the Board determined that the Advisers are appropriate investment advisers for the Funds.
The Board further noted that it will continue to monitor the Funds’ performance and any actions taken by AAMI and its affiliates relating to performance.
The costs of the services provided and profits realized by the Advisers and their affiliates from their relationships with the Funds. The Trustees considered the fees charged to the Funds for advisory services as well as the total expense levels of the Funds. This information included comparisons provided by an independent third party of each Fund’s net management fee and total expense level to those of its expense peer group and information about the advisory fees charged by AAMI to any separately managed accounts with a similar strategy. In comparing each Fund’s net management fee to that of comparable funds, the Board noted that such fee includes both advisory and administrative fees. In considering the fees charged to any comparable accounts, the Trustees considered, among other things, management’s discussion of the different objectives, policies or restrictions that may be involved in managing the different types of accounts. In evaluating the Funds’ advisory fees, the Trustees also took into account the demands, complexity and quality of the investment management of the Funds.
The Trustees also noted that the sub-advisory fees, as applicable, for the Funds would be paid by AAMI out of its advisory fee, not by the Funds. The Board also considered that AAMI had entered into expense limitation agreements with the Funds, pursuant to which AAMI agreed to waive a portion of its advisory fee and/or reimburse certain expenses as a means of limiting each Fund’s total annual operating expenses for a period of time.
The Trustees also considered the compensation directly or indirectly received by AAMI and its affiliates from their relationships with the Funds. The Trustees reviewed information provided by management as to the profitability of AAMI and its affiliates’ relationships with the Funds, such as the engagement of affiliates of AAMI to provide distribution and administrative services to the Funds. The Trustees also examined the profitability of AAMI and its affiliates on a Fund-by-Fund basis. The Trustees also considered information about the allocation of expenses used to calculate profitability. When reviewing profitability, the Trustees also considered information about court cases regarding adviser profitability, the performance of the Funds, the expense levels of the Funds, and whether AAMI had implemented breakpoints and expense limitations with respect to the Funds.
After reviewing these and related factors, including taking into account management’s discussion regarding Fund expenses, the Board concluded that the advisory fees, and as applicable, the sub-advisory fees, were fair and reasonable, and that the costs of these services generally and the related profitability of AAMI and its affiliates from their relationships with the Funds were reasonable and supported the renewal of the Agreements.
174 | Annual Report 2018 |
Supplemental Information (Unaudited) (concluded)
Economies of Scale. The Trustees considered the existence of any economies of scale in the provision of services by AAMI and the Sub-Advisers and whether those economies would be shared with the Funds through breakpoints in the investment advisory fees or other means, such as expense waivers or limitations. The Trustees noted that each of the Funds was subject to an expense limitation and considered that certain Funds were subject to breakpoints. The Board noted management’s discussion of the Funds’ advisory fee structure. The Trustees also took note of the costs of the services provided and the profitability to AAMI and its affiliates from their relationships with the Funds, as discussed above. The Board also considered the potential effect of each Fund’s growth and size on fees, noting that if a Fund’s assets increase over time, the Fund may realize other economies of scale if assets increase proportionally more than certain expenses.
After reviewing these and related factors, the Board concluded that the advisory fees, and as applicable, sub-advisory fees were reasonable and supported the renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited to the following:
• | the effect of any market and economic volatility on the performance, asset levels and expense ratios of the Funds. |
• | whether the Funds have operated in accordance with their investment objectives and the Funds’ record of compliance with their investment restrictions, and the compliance programs of the Trust and AAMI. The Trustees also considered the compliance-related resources AAMI and its affiliates were providing to the Funds. |
• | the nature, quality, cost and extent of administrative services performed by AAMI under the Advisory Agreement and under a separate agreement covering administrative services. |
• | so-called “fallout benefits” to AAMI, such as the benefits of research made available to AAMI by reason of brokerage commissions generated by the Funds’ securities transactions or reputational and other indirect benefits. The Trustees considered any possible conflicts of interest associated with these fallout and other benefits, and the reporting, disclosure and other processes in place to disclose and monitor such possible conflicts of interest. |
* * *
Based on their evaluation of all factors that they deemed to be material, including those factors described above, and assisted by the advice of independent counsel, the Trustees, including the Independent Trustees, concluded that renewal of the Agreements would be in the best interest of each of the Funds and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Agreements for an additional one-year period.
2018 Annual Report | 175 |
Management of the Funds (Unaudited)
As of October 31, 2018
Board of Trustees and Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are not interested persons (as defined in the 1940 Act) of the trust (“Independent Trustees”) | ||||||||
P. Gerald Malone**** Year of Birth: 1950 | Trustee since December 2007 Chairman of the Board | Mr. Malone is, by profession, a solicitor of over 40 years standing. As a member of the UK House of Commons, he served as a Minister of State in the United Kingdom Government. Currently independent director of Bionik Laboratories Corp., a US healthcare company; Chairman Aberdeen Funds; Aberdeen Global Income Fund, Inc.; Aberdeen Asia-Pacific Income Fund, Inc.; Aberdeen Global Dynamic Dividend Fund; Aberdeen Total Dynamic Dividend Fund; Aberdeen Global Premier Properties Fund; Aberdeen Income Credit Strategies Fund; Director of Aberdeen Australia Equity Fund, Inc. Formerly Chairman of UK companies, Crescent OTC Ltd (pharmaceutical services) until February 2018; and fluidOil Ltd. (oil services) until June 2018; U.S. company Rejuvenan llc (wellbeing services) until September; Chairman of UK company, Ultrasis plc (healthcare software services company) until October 2014. | 32 | None. | ||||
Neville J. Miles**** Year of Birth: 1946 | Trustee since December 2011 | Mr. Miles is, and has been for over ten years, Chairman of Ballyshaw Pty. Ltd. (share trading, real estate development and investment). He is Chairman of the Board of Directors of Aberdeen Australia Equity Fund, Inc. He also is a non-executive director of a number of Australian and overseas companies. | 28 | None. | ||||
Rahn K. Porter**** Year of Birth: 1954 | Trustee since September 2016 | Mr. Porter has been the Chief Financial Officer of The Colorado Health Foundation since 2013. Previously, he was the Interim Chief Executive Officer of the Colorado Health Foundation from 2014 to 2015 and was Senior Vice President and Treasurer, Qwest Communications International Inc. (telecommunications) from 2008 to 2011. | 27 | Director, CenturyLink Investment Management Company, since 2006; Director, BlackRidge Financial Inc., since March, 2005. |
176 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Steven N. Rappaport**** Year of Birth: 1948 | Trustee since September 2016 | Mr. Rappaport has been a Partner of Lehigh Court, LLC (private investment firm) and RZ Capital LLC (private investment firm) since 2004. | 26 | Director of iCAD, Inc., since 2006; Director of Credit Suisse Funds (9) since 1999; Director of Credit Suisse Asset Management Income Fund, Inc. since 2005 and Director of Credit Suisse High Yield Bond Fund, Inc. since 2005. | ||||
Peter D. Sacks**** Year of Birth: 1945 | Trustee since December 2007 | Mr. Sacks was a Director and Founding Partner of Toron AMI International Asset Management (investment management) from 1988 to 2015. He is currently a Director of Aberdeen Asia-Pacific Income Fund Inc., Aberdeen Global Income Fund Inc., Aberdeen Australia Equity Fund Inc. and Tricon Capital Group Inc. | 28 | None. | ||||
Warren C. Smith**** Year of Birth: 1955 | Trustee since December 2007 | Mr. Smith has been a founding partner of MRB Partners Inc. (independent investment research and consultancy firm) since 2010. He has been a Director of Aberdeen Asia-Pacific Income Investment Company Limited (Canadian investment fund) since 1993. Mr. Smith was a Managing Editor with The Bank Credit Analyst Research Group (independent publishers of financial market research and publications, including The Bank Credit Analyst) from 1982 to 2009. | 26 | None. |
2018 Annual Report | 177 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are interested persons (as defined in the 1940 Act) of the trust (“Interested Trustees”) | ||||||||
Martin Gilbert****† Year of Birth: 1955 | Trustee since December 2007 | Martin is the Co-Chief Executive of Standard Life Aberdeen PLC, the company formed as a result of the merger between Aberdeen Asset Management PLC and Standard Life plc in August 2017. Prior to this, Martin was a co-founder and the Chief Executive of Aberdeen Asset Management, which was established as a dedicated asset manager in 1983. | 32 | Chairman, Prudential Regulation Authority’s Practitioner Panel, Director, Institute of International Finance, Non-Executive Director, Glencore plc |
* | Each Trustee holds office for an indefinite term until his successor is elected and qualified. |
** | The Aberdeen Fund Complex consists of the Trust, which currently consists of 25 portfolios, Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Global Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds, which currently consists of 4 portfolios, and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios. |
*** | Directorships held in (1) any other investment companies registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange Act. |
**** | Each Trustee may be contacted by writing to the Trustee c/o Aberdeen Asset Management Inc., 1735 Market Street, 32nd Floor, Philadelphia, Pennsylvania 19103, Attn: Alan Goodson. |
† | Mr. Gilbert is considered to be an “interested person” of the Trust as defined in the 1940 Act because of his affiliation with the Adviser. |
178 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Bev Hendry** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1953 | President, Chief Executive Officer and Principal Executive Officer (Since September 2014) | Currently, Chairman- Americas for Standard Life Aberdeen plc (2018-present). Mr. Hendry was Chief Executive Officer–Americas for Aberdeen Asset Management PLC (2014-2018) and Chief Operating Officer for Hansberger Global Investors (2008-2014). | ||
Jeffrey Cotton** Aberdeen Asset Managers Limited 6 St Andrew Square Edinburgh EH2 2AH Year of Birth: 1977 | Vice President and Chief Compliance Officer (Since March 2011) | Currently, Interim Global Head of Conduct & Compliance for Standard Life Aberdeen plc. Mr. Cotton is also Vice President of Aberdeen Fund Distributors LLC. Mr. Cotton joined Aberdeen in 2010. | ||
Joseph Andolina** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President–Compliance (Since March 2017) | Currently, Head of Conduct & Compliance–Americas/Deputy Chief Risk Officer for Aberdeen Asset Management Inc. Prior to joining the Compliance Department, he was a member of Aberdeen’s Legal Department, where he served as U.S. Counsel and worked primarily on matters relating to Aberdeen’s registered funds. | ||
Andrea Melia** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1969 | Treasurer, Chief Financial Officer, and Principal Accounting Officer (Since September 2009) | Currently, Vice President and Head of Fund Operations, Traditional Assets–Americas for Aberdeen Asset Management Inc. (since 2009). | ||
Megan Kennedy** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Secretary and Vice President (Since September 2009) | Currently, Head of Product Management for Aberdeen Asset Management Inc. Ms. Kennedy joined Aberdeen Asset Management Inc. in 2005 as a Senior Fund Administrator. | ||
Lucia Sitar** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1971 | Vice President (Since December 2008) | Currently, Vice President and Managing U.S. Counsel for Aberdeen Asset Management Inc. Ms. Sitar joined Aberdeen Asset Management Inc. in July 2007. | ||
Alan Goodson** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Vice President (Since March 2009) | Currently, Director, Vice President and Head of Product–Americas for Aberdeen Asset Management Inc., overseeing Product Management and Product Development for Aberdeen’s registered and unregistered investment companies in the U.S. and Canada. Mr. Goodson is Director and Vice President of Aberdeen Asset Management Inc. and joined Aberdeen in 2000. |
2018 Annual Report | 179 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Adam McCabe** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1979 | Vice President (Since March 2010) | Currently, Head of Asian Fixed Income. Mr. McCabe joined Aberdeen Asset Management via the acquisition of certain asset management businesses from Credit Suisse in 2009. | ||
Jennifer Nichols** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President (Since December 2007) | Currently, Head of Legal–Americas for Aberdeen Asset Management Inc. Director and Vice President for Aberdeen Asset Management Inc. (since October 2006). | ||
Hugh Young** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1958 | Vice President (Since June 2011) | Currently, Managing Director of Aberdeen Standard Investments (Asia) Limited (since 1991) and member of the Executive Management Committee and Director of Standard Life Aberdeen plc (since 1991 and 2011, respectively). Mr. Young joined Aberdeen in 1991. | ||
Ben Moser** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1979 | Vice President (Since September 2018) | Currently, Head of Investor Services–US. Mr. Moser joined Aberdeen Asset Management in July 2008. | ||
Brian O’Neill** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1968 | Assistant Treasurer (Since September 2008) | Currently, Senior Fund Administration Manager–U.S. for Aberdeen Asset Management Inc. Mr. O’Neill joined Aberdeen Asset Management Inc. in 2008. | ||
Eric Olsen** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1970 | Assistant Treasurer (Since December 2013) | Currently, Deputy Head of Fund Administration–U.S. for Aberdeen Asset Management Inc. Mr. Olsen joined Aberdeen Asset Management Inc. in August 2013. | ||
Andrew Kim** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1983 | Assistant Secretary (Since March 2017) | Currently, Senior Product Manager. Mr. Kim joined Aberdeen Asset Management Inc. in August 2013. | ||
Stephen Varga** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1985 | Assistant Secretary (Since March 2017) | Currently, Product Manager. Mr. Varga joined Aberdeen Asset Management Inc. in 2011. |
180 | Annual Report 2018 |
Management of the Funds (Unaudited) (concluded)
As of October 31, 2018
* | Each officer holds office for an indefinite term at the pleasure of the Board of Trustees and until his or her successor is elected and qualified. |
** | Mr. Hendry, Ms. Melia, Ms. Kennedy, Mr. Goodson, Ms. Nichols, Mr. Cotton, Mr. McCabe, Mr. Young, Ms. Sitar, Mr. Andolina, Mr. Moser, Mr. Olsen, Mr. O’Neill, Mr. Kim and Mr. Varga hold officer position(s) in one or more of the following: Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Global Income Fund, Inc., Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds (consisting of 4 portfolios) and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios, each of which may also be deemed to be a part of the same “Fund Complex” as the Trust. |
2018 Annual Report | 181 |
Management Information
Trustees
P. Gerald Malone, Chairman
Martin J. Gilbert
Neville J. Miles
Rahn K. Porter
Steven N. Rappaport
Peter D. Sacks
Warren C. Smith
Officers
Bev Hendry, President and Chief Executive Officer
Jeffrey Cotton, Chief Compliance Officer and Vice President
Joseph Andolina, Vice President – Compliance
Andrea Melia, Treasurer and Chief Financial Officer
Megan Kennedy, Secretary and Vice President
Lucia Sitar, Vice President
Alan Goodson, Vice President
Adam McCabe, Vice President
Ben Moser, Vice President
Jennifer Nichols, Vice President
Hugh Young, Vice President
Eric Olsen, Assistant Treasurer
Brian O’Neill, Assistant Treasurer
Andrew Kim, Assistant Secretary
Stephen Varga, Assistant Secretary
Investment Manager
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Fund Administrator
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Transfer Agent
DST Asset Manager Solutions, Inc.
333 West 11th Street
Kansas City, MO 64105
Distributor
Aberdeen Fund Distributors LLC
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Sub-Administrator, Custodian & Fund Accountant
State Street Bank and Trust Company
1 Heritage Drive, 3rd Floor
North Quincy, MA 02171
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Fund Counsel
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Aberdeen Asset Management Inc. 1735 Market Street, 32nd Floor Philadelphia, PA 19103 aberdeen-asset.us |
AOE-0140-AR
Aberdeen Funds
Fixed Income Series
Annual Report
October 31, 2018
Aberdeen Asia Bond Fund
Aberdeen Emerging Markets Debt Fund
Aberdeen Global Unconstrained Fixed Income Fund
Aberdeen High Yield Managed Duration Municipal Fund
Aberdeen Tax-Free Income Fund
Aberdeen Ultra Short Municipal Income Fund
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Investors should carefully consider a fund’s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a prospectus, or download a prospectus at www.aberdeen-asset.us. Please read it carefully before investing any money.
Investing in mutual funds involves risk, including possible loss of principal.
Aberdeen Funds is distributed by Aberdeen Fund Distributors, LLC, Member FINRA, 1735 Market Street, 32nd Floor, Philadelphia, PA 19103.
Aberdeen Asset Management Inc. (AAMI) has been registered as an investment adviser under the Investment Advisers Act of 1940 since August 23, 1995.
Statement Regarding Availability of Quarterly Portfolio Schedule.
The complete schedule of portfolio holdings for each fund of Aberdeen Funds (each, a “Fund” and collectively, the “Funds”) is included in the Funds’ semi-annual and annual reports to shareholders. Aberdeen Funds also files complete schedules of portfolio holdings for each Fund with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q filings are available on the Commission’s website at http://www.sec.gov. The Funds’ Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330; and the Funds make the information on Form N-Q available to shareholders on www.aberdeen-asset.us or upon request without charge.
Statement Regarding Availability of Proxy Voting Record.
Information regarding the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-866-667-9231. The information is also included in the Funds’ Statement of Additional Information, which is available on the Funds’ website at www.aberdeen-asset.us and on the Commission’s website at www.sec.gov.
Information relating to how each Fund voted proxies relating to portfolio securities held during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling 1-866-667-9231; and (ii) on the Commission’s website at www.sec.gov.
Global financial markets weathered numerous bouts of significant volatility during the 12-month period ended October 31, 2018, capped off by a major downturn in October 2018. Global stock markets in aggregate gained ground for the first few months of the period, as generally upbeat corporate earnings reports, tax reform in the U.S., and relatively steady economic growth buoyed investors’ confidence. However, market sentiment soon turned negative amid concerns that rising inflation could lead to more aggressive global central bank monetary policy, as well as fears of a possible global trade war spurred by tensions between the U.S and China. Global equities recovered during the third quarter of 2018, led by the U.S., with the broader-market Standard and Poor’s (S&P) 500 Index1 climbing 7.7% – its strongest quarterly performance since 2013. Nonetheless, in an apparent case of “financial whiplash,” global markets declined sharply towards the end of the reporting period in October. Investors were rattled by concerns ranging from lower corporate earnings estimates to the impact of continued monetary policy normalization. There also was a spike in U.S. Treasury yields during the month, triggered by expectations of further U.S. Federal Reserve (Fed) interest-rate increases. Shares of technology companies tumbled as higher interest rates led to investors’ apprehension about the rising valuations in the sector.
There was divergent performance among the regional stock markets during the 12-month reporting period. The Morgan Stanley Capital International (MSCI) World Index,2 a global equity market benchmark, posted a modest gain of 1.7% for the period, despite the vast majority of its constituents recording losses for the period. The U.S. was the lone major developed market to garner a positive return, while European stocks declined and were the weakest performers. Global emerging equity markets, as represented by the MSCI Emerging Markets Index,3 fell 12.2% over the reporting period, hampered by the strengthening U.S. dollar, which weighed on vulnerable economies with substantial foreign debt. The escalating trade tensions between the U.S. and China had a negative impact on Asia-Pacific stock markets, which declined 11.8% for the period, as measured by the MSCI All Country (AC) Asia Pacific ex Japan Index.4
While shares of U.S. companies could not avoid the sell-off in the global financial markets in October 2018, they finished the 12-month reporting period in positive territory. The U.S. market was bolstered for most of the period by generally positive economic data and corporate earnings reports, as well as the tax reform legislation that was enacted in late 2017. Many large-cap companies responded to the reduction of the top U.S. corporate tax rate from 35% to 21% by increasing their dividend payments and accelerating share repurchases. Late in the period, however, as investors worried that rising wage pressure and inflation could force the Fed to tighten monetary policy more aggressively than previously forecast. U.S. large-cap stocks, as represented by the S&P 500 Index, gained 7.4% during the reporting period, substantially outperforming the corresponding 2.8% and 1.9% returns of their mid- and small-cap counterparts, as measured by the Russell Midcap5 and Russell 20006 indices, respectively.
Shares of large-cap companies in the Asia-Pacific region fell sharply over the reporting period, hampered in part by investors’ concerns about a possible U.S.-China trade war. In June 2018, the administration of U.S. President Donald Trump assessed tariffs on US$50 billion in Chinese imports. Three months later, the U.S. placed an additional US$200 billion of levies on Chinese imports. China responded without escalating rhetoric while allowing its currency, the renminbi, to depreciate further against the U.S. dollar. Additionally, the weak investor sentiment in mainland China was compounded by fears over the country’s moderating economic growth.
One of the key reasons for the weakness in emerging-market equities was the liquidity squeeze on the U.S. dollar, stemming from the U.S. tax reforms that encouraged U.S. companies to repatriate7 their cash, as well as the Fed’s hawkish monetary policy stance. Turkey bore the brunt of the downturn amid worries about the central bank’s unwillingness to adopt orthodox economic policies and the government’s deteriorating relations with the U.S. In Mexico, Andres Lopez Obrador, the left-wing candidate, won Mexico’s presidential election in July 2018. While this outcome was expected, the market has become increasingly concerned with his plans to unwind some of the reforms that had occurred under his predecessor, Pena Nieto. Japan’s longest economic growth streak in 28 years stalled in the first quarter of 2018, but the economy subsequently resumed its momentum. An upgrade of second-quarter 2018 gross domestic product (GDP) data was attributable to an increase in capital investments. This was partly the result of the tight Japanese labor market, which saw the unemployment rate reach its lowest since the 1990s, boosting investments in labor-saving technologies.
Regarding the global fixed-income markets during the reporting period, capital outflows from emerging markets quickened due to the Fed’s ongoing rate-hike cycle and rising U.S. Treasury yields. As monetary policy normalization accelerated in the West, the easing cycle also came to an end in most parts of Asia. Indonesia’s central bank led the charge, raising its benchmark interest rate five times over the reporting period in a bid to stem the falling Indonesian rupiah as most emerging-market currencies succumbed to broad U.S.-dollar strength. Central banks in the Philippines and India also increased interest rates, but more in response to rising inflation, given the threat posed by higher global oil prices after U.S. President Trump reimposed economic sanctions on Iran. Yields on U.S. Treasuries rose, with two-, five- and ten year yields increasing by 127, 97 and 77 basis points (bps), respectively, over the reporting period, and this pressured higher-quality, lower-yielding and longer duration8 credit. U.S. and European high-yield markets saw marginal gains over the reporting period. Corporate earnings remained supported by generally positive economic growth, while default rates remained low. Supply was also lower than that in 2017 as companies, faced with rising borrowing costs, responded by reducing new issuance. However, investor sentiment in the U.S. deteriorated towards the end of the reporting period as trade tensions with China worsened and businesses began to forecast more conservative revenues and profitability in the ensuing quarters.
2018 Annual Report | 1 |
Market Review (concluded)
Global real estate equity markets faced a challenging environment during the reporting period. While the Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT) Global Real Estate Index9 ended the period with a modest negative return, there were considerable variations in country-level returns. The performance of real estate markets in developed countries was modestly positive, while emerging markets generally posted negative returns for the reporting period.
Outlook
As we near the end of 2018, global financial markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including Italy’s fiscal problems and political uncertainty in Europe caused by negotiations surrounding the UK’s exit from the EU (“Brexit”), which have yet to provide clarity on what the outcome will be for the UK or Europe.
The UK remains a member of the EU until the legally established departure date of March 29, 2019 and, until such date, all existing EU-derived laws and regulations continue to apply in the UK. Those laws may continue to apply for a transitional period, depending on whether a deal is struck and, if so, what that deal is. In any event, the UK’s on-shoring of EU legislation currently envisages no policy changes to EU law. However, the EU has not yet provided any material cushion from the effects of Brexit for financial services as a matter of EU law. Whether or not a Fund invests in securities of issuers located in Europe (whether the EU, Eurozone or UK) or with significant exposure to European, EU, Eurozone or UK issuers or countries, the unavoidable uncertainties and events related to Brexit could negatively affect the value and liquidity of a Fund’s investments, increase taxes and costs of business and cause volatility in currency exchange rates and interest rates. Brexit could adversely affect the performance of contracts in existence at the date of Brexit and European, UK or worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions, regulatory agencies and financial markets. Brexit could also lead to legal uncertainty and politically divergent national laws and regulations as a new relationship between the UK and EU is defined and the UK determines which EU laws to replace or replicate. Any of these effects of Brexit, and others that cannot be anticipated, could adversely affect a Fund’s business, results of operations and financial condition. In addition, the risk that Standard Life Aberdeen plc, the parent of the companies that provide investment advisory and sub-advisory services to the Funds and which is headquartered in the UK, fails to adequately prepare for Brexit could have significant customer, reputation and capital impacts for Standard Life Aberdeen plc and its subsidiaries, including those providing services to the Funds; however, we have detailed contingency planning in place to seek to manage the consequences of Brexit on the Funds and to avoid any disruption on the Funds and to the services we provide. Given the fluidity and complexity of the situation, however, we cannot assure that the Funds will not be adversely impacted despite our preparations.
We remain cautious on the growing divergence across global markets, with strength in U.S. macroeconomic data contrasting with slowing growth across other economies and markets. With the U.S. economy gradually moving closer towards full capacity, the Federal Reserve maintains its monetary policy tightening stance and is expected to continue to raise interest rates into 2019. In Asia, China continues to balance further trade-related responses towards the U.S. with managing and maintaining its closely monitored economic growth rates.
Aberdeen Standard Investments
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed-market countries. |
3 | The MSCI Emerging Markets Index tracks the performance of large- and mid-cap stocks across 24 emerging-market countries. |
4 | The MSCI AC Asia Pacific ex Japan Index tracks the performance of large and mid-cap representation across two of three developed-market countries (excluding Japan) and nine emerging-market countries in Asia. |
5 | The Russell Midcap Index is an unmanaged index considered representative of U.S. mid-cap stocks. |
6 | The Russell 2000 Index is an unmanaged index considered representative of U.S. small-cap stocks. |
7 | Repatriation refers to a corporation’s conversion of any offshore capital back to the currency of the country in which the corporation is based. |
8 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
9 | The FTSE EPRA/NAREIT Index is an unmanaged index considered representative of real estate companies and REITs outside the U.S. |
2 | Annual Report 2018 |
Aberdeen Asia Bond Fund (Unaudited)
The Aberdeen Asia Bond Fund (Institutional Class shares net of fees) returned -5.98% for the 12-month period ended October 31, 2018, versus the -2.01% return of its benchmark, the Markit iBoxx® Asia Government Index, during the same period. For broader comparison, the average return of the Fund’s peer category of International Income Funds (comprising 42 funds), as measured by Lipper, Inc., was -1.75% for the period.
Asia-Pacific bonds endured significant bouts of volatility during the 12-month period ended October 31, 2018, as capital outflows from emerging markets quickened due to the U.S. Federal Reserve’s ongoing rate-hike cycle and rising U.S. Treasury yields. As monetary policy normalization accelerated in the West, the easing cycle also came to an end in most parts of Asia. Indonesia’s central bank led the charge, raising its benchmark interest rate five times over the reporting period in a bid to stem the falling rupiah as most emerging-market currencies succumbed to broad U.S.-dollar strength. Central banks in the Philippines and India also hiked interest rates but more in response to rising inflation, given the threat posed by higher global oil prices after U.S. President Donald Trump reimposed sanctions on Iran. Weakness in the Indonesian rupiah, Philippine peso and Indian rupee weighed on total returns in their respective local-currency government bond markets, although Indian bonds recouped losses after oil prices stabilized, inflationary pressures moderated and the central bank announced more bond-buying through open-market operations. In Sri Lanka, bond markets were hampered by volatile foreign-exchange movements, concerns over the country’s large borrowing needs, and a constitutional crisis after Prime Minister Ranil Wickremesinghe was ousted.
The Chinese yuan languished over the reporting period as the Chinese central bank infused the banking system with liquidity and China-U.S. trade tensions ratcheted higher. However, mainland China bonds rallied on the back of their highly anticipated inclusion in the Bloomberg Barclays Global Aggregate Bond Index.1 Unlike most of its regional peers, the Chinese central bank also continued with targeted policy easing measures in an effort to cushion the economy against the impact of the trade war, which generally benefited local markets. Despite the Korean won’s weakness, Korean bonds strengthened as domestic growth forecasts were downgraded. Elsewhere, the Malaysian ringgit bucked the regional currency sell-off and this aided the Malaysian bond market’s performance despite concerns over the country’s fiscal deficit.
Asian credit markets also declined on a total-return basis over the reporting period due to wider spreads and higher U.S. Treasury yields. High-yield credits underperformed their investment-grade2 counterparts as risk-aversion spiked and liquidity tightened amid worsening global trade tensions. Investor sentiment was further dampened by looming Chinese debt maturities due for refinancing, as well as alleged fraud and rare defaults in the Indian banking sector. All this overshadowed a generally buoyant primary bond market, which saw regional borrowers step up debt sales to avoid higher funding costs expected in a rising-rate environment.
The Fund’s underperformance versus its benchmark, the Markit iBoxx® Asia Government Index, over the reporting period was attributable mainly to the strategy in Asian local-currency markets, which weathered substantial volatility. The main detractors from the Fund’s relative performance were the underweight positions in Chinese onshore and Korean bonds as both markets strengthened and outperformed their regional peers. The overweight to the Indian rupee also weighed on the Fund’s relative performance as the currency weakened against the U.S. dollar, although the losses were mitigated by the positioning in high-yielding Indian bonds. The overweight to Sri Lankan bonds also benefited relative performance mainly because of positive duration3 effects.
The Fund’s strategy in Asian U.S.-dollar credit bolstered relative performance mainly because of the positioning in lower-rated quasi-sovereign bonds. Conversely, security selection in Chinese investment-grade corporate bonds (excluding real estate and financial bonds) was the key detractor.
The Fund’s use of derivatives recorded mixed results over the reporting period. The use of interest-rate futures to hedge U.S. interest-rate exposure in the overlay4 and short positioning in G10 nation currencies, such as the Australian dollar and euro, contributed positively to performance. Conversely, currency forwards5 used to rebalance Asian currency risk, largely to add Asian currency exposure, had a negative impact on the Fund’s relative performance. Overall, the use of derivatives contributed approximately 1% to the Fund’s absolute return for the reporting period.
Global events continue to unfold. We now see the possibility of the U.S. Federal Reserve taking a breather in its policy normalization cycle in the second half of 2019. In China, we are mindful of the slowdown in the domestic economy but are encouraged that the authorities appear committed to providing support for the private sector, which may not halt the slowdown but should diminish its magnitude. Furthermore, we would not rule out the possibility of the U.S. and China finding ways to temper the trade dispute. This could
1 | The Bloomberg Barclays Global Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | Companies whose bonds are rated as “investment grade” have a lower chance of defaulting on their debt than those rated as “non-investment grade.” Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB- or above are known as investment-grade bonds. S&P Global Ratings’ credit ratings communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The investment-grade category is a rating from AAA to BBB- |
3 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
4 | A currency overlay seeks to separate the management of currency risk from the asset allocation and security selection decisions of the investor’s money managers. |
5 | A foreign exchange forward is a binding contract in the foreign exchange market that locks in the exchange rate for the purchase or sale of a currency on a future date. |
2018 Annual Report | 3 |
Aberdeen Asia Bond Fund (Unaudited) (concluded)
occur in 2019 when the Democratic Party, which secured the takes control of the House of Representatives, in which it secured a majority in the midterm elections held in early November 2018.
While we think that we may see further pressure on emerging-market currencies and capital flows, we believe that investors have priced in the risks to a large degree, with trade friction and higher oil prices dominating discussions. The overall market’s positioning has also shifted from a short-U.S. dollar stance to one that is long U.S. dollar. At this stage, what investors are not positioned for is a de-escalation of risks, in our view. Some investors already have been forced to unwind their long speculative positions in oil as the demand outlook softens, inventories increase and countries negotiate waivers to the U.S. sanctions on Iran. The resultant sharp correction in the oil price has reduced one of the key risks for many Asian economies, while providing support for oil-importing nations such as India and Indonesia. This backdrop, along with the prospect of a high-level meeting between U.S. President Trump and his Chinese counterpart Xi Jinping, have allowed regional currencies to stabilize somewhat.
Asia-Pacific economies generally have healthy external balances and solid foreign-currency reserves, while institutional frameworks are noticeably more robust than a decade ago. We believe that volatility will persist, but we intend to take advantage of opportunities to add exposure to the Fund where we think that valuations look compelling, particularly issuers which we feel will cope well in a lower-growth environment.
Portfolio Management:
Aberdeen Asian Fixed Income Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A shares have up to a 4.25% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Concentrating investments in the Asian region subjects the Fund to more volatility and greater risk of loss than geographically diverse mutual funds.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, and political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
The Fund’s performance may be more volatile than a diversified fund because it may invest a greater percentage of its total assets in the securities of single issuer.
Derivatives are speculative and may hurt the Fund’s performance. They present the risk of disproportionately increased losses and/or reduced gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
Please read the prospectus for more detailed information regarding these and other risks.
4 | Annual Report 2018 |
Aberdeen Asia Bond Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A2 | w/o SC | (6.29% | ) | 0.54% | 5.12% | |||||||||
w/SC3 | (10.24% | ) | (0.32% | ) | 4.67% | |||||||||
Class C2 | w/o SC | (6.90% | ) | (0.19% | ) | 4.61% | ||||||||
w/SC4 | (7.79% | ) | (0.19% | ) | 4.61% | |||||||||
Class R2,6 | w/o SC | (6.44% | ) | 0.31% | 4.95% | |||||||||
Institutional Service Class5,6 | w/o SC | (5.93% | ) | 0.78% | 5.22% | |||||||||
Institutional Class6 | w/o SC | (5.98% | ) | 0.82% | 5.31% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns presented for the Fund for periods prior to July 20, 2009 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | Returns before the first offering of Class A, Class C and Class R (February 27, 2012) are based on the previous performance of the Institutional Class shares. Returns of each class have not been adjusted to reflect the expenses applicable to the respective classes. Excluding the effect of any fee waivers or reimbursements, this performance of Class A, Class C and Class R is substantially similar to what the Institutional Class would have produced because all classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses of the classes. |
3 | A 4.25% front-end sales charge was deducted. |
4 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
5 | Returns before the first offering of the Institutional Service Class (January 4, 2010) are based on the previous performance of the Institutional Class shares. These returns have not been adjusted to reflect the expenses applicable to the Institutional Service Class. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses of the two classes. |
6 | Not subject to any sales charges. |
Performance of a $1,000,000* Investment (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Asia Bond Fund, the Markit iBoxx® Asia Government Index (USD Unhedged), the Custom Asian Local Bond Index and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses or sales charges. Investors cannot invest directly in market indexes.
The Markit iBoxx® Asia Government Index (USD Unhedged) is part of the Markit iBoxx® ex-Japan Index family. The Markit iBoxx® Asia ex-Japan Index family covers local currency sovereign and quasi-sovereign debt from 10 Asian markets. The 10 Asian markets are China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. The indices serve as benchmarks for asset managers and investors and may form the basis for traded products, such as ETFs. Multiple-source pricing ensures that they are an accurate reflection of the underlying markets.
The Custom Asian Local Bond Index reflects the returns of the HSBC Asian Bond IndexTM for periods prior to April 1, 2016 and the returns of the Markit iBoxx® Asian Local Bond Index for periods subsequent to March 31, 2016.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 5 |
Aberdeen Asia Bond Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Government Bonds | 44.8% | |||
Corporate Bonds | 42.9% | |||
Short-Term Investment | 8.8% | |||
Other Assets in Excess of Liabilities | 3.5% | |||
100.0% |
The following chart summarizes the composition of the Fund’s portfolio, expressed as a percentage of net assets. The industries listed below may include more than one industry group. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any industry group.
Top Industries | ||||
Commercial Banks | 12.0% | |||
Electric Utilities | 9.0% | |||
Commercial Services & Supplies | 7.0% | |||
Real Estate | 4.8% | |||
Diversified Telecommunication Services | 4.3% | |||
Auto Manufacturers | 2.3% | |||
Chemicals | 1.8% | |||
Diversified Financial Services | 1.7% | |||
Other | 57.1% | |||
100.0% | �� |
Top Holdings* | ||||
China Government Bond 11/30/2020 | 6.6% | |||
ICICI Bank Ltd. 08/06/2024 | 6.3% | |||
India Government Bond 01/11/2026 | 5.4% | |||
India Government Bond 12/01/2044 | 5.0% | |||
China Overseas Finance Cayman III Ltd. 10/29/2023 | 4.8% | |||
State Grid Overseas Investment 2016 Ltd. 05/04/2027 | 4.8% | |||
Indonesia Government International Bond 01/08/2047 | 4.5% | |||
Malaysia Government Bond, Series 0317 04/07/2037 | 4.4% | |||
Indonesia Treasury Bond, Series FR63 05/15/2023 | 4.4% | |||
Royal Capital BV 05/05/2024 | 4.3% | |||
Other | 49.5% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
China | 20.5% | |||
Indonesia | 16.8% | |||
India | 16.7% | |||
Malaysia | 10.6% | |||
United States | 8.8% | |||
Thailand | 7.5% | |||
Hong Kong | 6.9% | |||
Philippines | 6.4% | |||
South Korea | 2.3% | |||
Other | 3.5% | |||
100.0% |
6 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Asia Bond Fund
Shares or Principal Amount | Value (US$) | |||||||
CORPORATE BONDS (42.9%) | ||||||||
CHINA (13.9%) | ||||||||
Diversified Telecommunication Services (4.3%) |
| |||||||
Proven Honour Capital Ltd. (USD), 4.13%, 05/19/2025 (a) | $ | 200,000 | $ | 185,258 | ||||
Electric Utilities (4.8%) | ||||||||
State Grid Overseas Investment 2016 Ltd. (USD), 3.50%, 05/04/2027 (a) | 219,000 | 205,153 | ||||||
Real Estate (4.8%) | ||||||||
China Overseas Finance Cayman III Ltd. (USD), 5.38%, 10/29/2023 (a) | 200,000 | 207,574 | ||||||
597,985 | ||||||||
HONG KONG (6.9%) | ||||||||
Commercial Services & Supplies (2.7%) | ||||||||
HPHT Finance 15 Ltd. (USD), 2.88%, 03/17/2020 (a) | 118,000 | 116,749 | ||||||
Electric Utilities (4.2%) | ||||||||
Hongkong Electric Finance Ltd. (USD), 2.88%, 05/03/2026 (a) | 200,000 | 181,535 | ||||||
298,284 | ||||||||
INDIA (6.3%) | ||||||||
Commercial Banks (6.3%) | ||||||||
ICICI Bank Ltd. (INR), 9.15%, 08/06/2024 | 20,000,000 | 273,366 | ||||||
MALAYSIA (1.7%) | ||||||||
Diversified Financial Services (1.7%) | ||||||||
Cagamas Bhd, Series IMTN (MYR), 4.05%, 12/20/2018 | 300,000 | 71,721 | ||||||
PHILIPPINES (4.3%) | ||||||||
Commercial Services & Supplies (4.3%) | ||||||||
Royal Capital BV (USD), (fixed rate to 05/05/2024, variable rate thereafter), 4.88% (a)(b) | 200,000 | 185,839 | ||||||
SOUTH KOREA (2.3%) | ||||||||
Auto Manufacturers (2.3%) | ||||||||
Hyundai Capital Services, Inc. (USD), 2.63%, 09/29/2020 (a) | 100,000 | 97,602 | ||||||
THAILAND (7.5%) | ||||||||
Chemicals (1.8%) | ||||||||
PTT Global Chemical PCL (USD), 4.25%, 09/19/2022 (a) | 80,000 | 80,016 | ||||||
Commercial Banks (5.7%) | ||||||||
Bangkok Bank PCL (USD), 9.03%, 03/15/2029 (a) | 50,000 | 64,910 | ||||||
Krung Thai Bank PCL (USD), (fixed rate to 12/26/2024, variable rate thereafter), 5.20% (a) | 179,000 | 180,488 | ||||||
245,398 | ||||||||
325,414 | ||||||||
Total Corporate Bonds | 1,850,211 | |||||||
GOVERNMENT BONDS (44.8%) | ||||||||
CHINA (6.6%) | ||||||||
China Government Bond (CNH), 3.40%, 11/30/2020 | $ | 2,000,000 | $ | 284,645 | ||||
INDIA (10.4%) | ||||||||
India Government Bond | ||||||||
(INR), 7.59%, 01/11/2026 | 17,500,000 | 232,663 | ||||||
(INR), 8.17%, 12/01/2044 | 15,800,000 | 213,223 | ||||||
445,886 | ||||||||
INDONESIA (16.8%) | ||||||||
Indonesia Government International Bond (USD), 5.25%, 01/08/2047 (a) | 200,000 | 191,995 | ||||||
Indonesia Treasury Bond | ||||||||
Series FR63 (IDR), 5.63%, 05/15/2023 | 3,200,000,000 | 188,811 | ||||||
Series FR64 (IDR), 6.13%, 05/15/2028 | 3,326,000,000 | 183,775 | ||||||
Series FR65 (IDR), 6.63%, 05/15/2033 | 875,000,000 | 47,427 | ||||||
Series FR75 (IDR), 7.50%, 05/15/2038 | 2,000,000,000 | 113,139 | ||||||
725,147 | ||||||||
MALAYSIA (8.9%) | ||||||||
Malaysia Government Bond | ||||||||
Series 0517 (MYR), 3.44%, 02/15/2021 | 300,000 | 71,460 | ||||||
Series 0416 (MYR), 3.62%, 11/30/2021 | 400,000 | 95,423 | ||||||
Series 0317 (MYR), 4.76%, 04/07/2037 | 810,000 | 191,545 | ||||||
Series 0216 (MYR), 4.74%, 03/15/2046 | 100,000 | 23,035 | ||||||
381,463 | ||||||||
PHILIPPINES (2.1%) | ||||||||
Philippine Government Bond, Series 1063 (PHP), 6.25%, 03/22/2028 | 5,500,000 | 91,389 | ||||||
Total Government Bonds | 1,928,530 | |||||||
SHORT-TERM INVESTMENT (8.8%) | ||||||||
UNITED STATES (8.8%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 377,435 | 377,434 | ||||||
Total Short-Term Investment | 377,434 | |||||||
Total Investments | 4,156,175 | |||||||
Other Assets in Excess of Liabilities—3.5% | 151,142 | |||||||
Net Assets—100.0% | $ | 4,307,317 |
(a) | Denotes a security issued under Regulation S or Rule 144A. |
(b) | Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely. The maturity date presented for these instruments represents the next call/put date. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 7 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Asia Bond Fund
AUD | Australian Dollar |
CNH | Chinese Yuan Renminbi Offshore |
CNY | Chinese Yuan Renminbi |
EUR | Euro Currency |
HKD | Hong Kong Dollar |
IDR | Indonesian Rupiah |
INR | Indian Rupee |
KRW | South Korean Won |
MYR | Malaysian Ringgit |
PHP | Philippine Peso |
SGD | Singapore Dollar |
THB | Thai Baht |
TWD | New Taiwan Dollar |
USD | U.S. Dollar |
At October 31, 2018, the Fund held the following futures contracts:
Futures Contracts | Number of Contracts Long/(Short) | Expiration Date | Notional Amount | Market Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
LONG CONTRACT POSITIONS | ||||||||||||||||||||
United States Treasury Note 6%-2 year | 1 | 12/31/2018 | $ | 211,375 | $ | 210,656 | $ | (719 | ) | |||||||||||
United States Treasury Note 6%-5 year | 5 | 12/31/2018 | 567,304 | 561,914 | (5,390 | ) | ||||||||||||||
$ | (6,109 | ) | ||||||||||||||||||
SHORT CONTRACT POSITIONS (24.7%) | ||||||||||||||||||||
United States Treasury Note 6%-10 year | (9 | ) | 12/19/2018 | $ | (1,079,562 | ) | $ | (1,065,938 | ) | $ | 13,624 | |||||||||
$ | 7,515 |
At October 31, 2018, the Fund’s open forward foreign currency exchange contracts were as follows:
Purchase Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||
Chinese Yuan Renminbi/United States Dollar 01/11/2019 | HSBC Bank USA | CNY | 3,487,450 | USD | 500,000 | $ | 498,524 | $ | (1,476 | ) | ||||||||||||||||||
Chinese Yuan Renminbi Offshore/United States Dollar 01/11/2019 | UBS AG | CNH | 2,150,000 | USD | 308,432 | 307,247 | (1,185 | ) | ||||||||||||||||||||
Indian Rupee/United States Dollar 11/30/2018 | UBS AG | INR | 33,255,270 | USD | 450,000 | 447,702 | (2,298 | ) | ||||||||||||||||||||
Indonesian Rupiah/United States Dollar 01/24/2019 | HSBC Bank USA | IDR | 771,450,000 | USD | 50,000 | 49,998 | (2 | ) | ||||||||||||||||||||
Philippine Peso/United States Dollar 01/31/2019 | HSBC Bank USA | PHP | 10,784,800 | USD | 200,000 | 200,993 | 993 | |||||||||||||||||||||
Singapore Dollar/United States Dollar 11/02/2018 | UBS AG | SGD | 510,000 | USD | 374,324 | 368,191 | (6,133 | ) | ||||||||||||||||||||
12/03/2018 | UBS AG | SGD | 520,000 | USD | 375,499 | 375,655 | 156 | |||||||||||||||||||||
South Korean Won/United States Dollar 12/07/2018 | HSBC Bank USA | KRW | 852,725,700 | USD | 760,000 | 748,114 | (11,886 | ) | ||||||||||||||||||||
Thai Baht/United States Dollar 12/21/2018 | Goldman Sachs & Co. | THB | 16,600,000 | USD | 513,376 | 501,861 | (11,515 | ) | ||||||||||||||||||||
$ | 3,498,285 | $ | (33,346 | ) |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
See accompanying Notes to Financial Statements.
8 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Asia Bond Fund
Sale Contracts Settlement Date* | Counterparty | Amount | Amount | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||
United States Dollar/Australian Dollar 11/29/2018 | Citibank N.A. | USD | 75,229 | AUD | 102,392 | $ | 72,528 | $ | 2,701 | |||||||||||||||||||
United States Dollar/Chinese Yuan Renminbi Offshore 01/11/2019 | UBS AG | USD | 322,778 | CNH | 2,250,000 | 321,538 | 1,240 | |||||||||||||||||||||
United States Dollar/Euro 11/21/2018 | ROYAL BANK OF CANADA (UK) | USD | 75,000 | EUR | 64,063 | 72,667 | 2,333 | |||||||||||||||||||||
United States Dollar/Hong Kong Dollar 12/21/2018 | UBS AG | USD | 448,293 | HKD | 3,500,000 | 446,955 | 1,338 | |||||||||||||||||||||
United States Dollar/Indian Rupee 11/30/2018 | HSBC Bank USA | USD | 200,000 | INR | 14,707,000 | 197,994 | 2,006 | |||||||||||||||||||||
11/30/2018 | UBS AG | USD | 250,000 | INR | 18,475,150 | 248,723 | 1,277 | |||||||||||||||||||||
United States Dollar/Malaysian Ringgit 12/14/2018 | BNP Paribas S.A. | USD | 50,000 | MYR | 208,175 | 49,715 | 285 | |||||||||||||||||||||
12/14/2018 | HSBC Bank USA | USD | 100,000 | MYR | 414,760 | 99,050 | 950 | |||||||||||||||||||||
United States Dollar/New Taiwan Dollar 01/04/2019 | UBS AG | USD | 450,000 | TWD | 13,695,750 | 444,612 | 5,388 | |||||||||||||||||||||
United States Dollar/Singapore Dollar 11/02/2018 | UBS AG | USD | 368,045 | SGD | 510,000 | 368,191 | (146 | ) | ||||||||||||||||||||
$ | 2,321,973 | $ | 17,372 | |||||||||||||||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts |
| $ | 18,667 | |||||||||||||||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts |
| (34,641 | ) |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 9 |
Aberdeen Emerging Markets Debt Fund (Unaudited)
The Aberdeen Emerging Markets Debt Fund (Institutional Class shares net of fees) returned -7.58% for the 12-month period ended October 31, 2018, versus the -4.39% return of its benchmark, the J.P. Morgan Emerging Markets Bond (EMBI) Global Diversified Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Emerging Markets Hard Currency Debt Funds (comprising 99 funds), as measured by Lipper, Inc., was -5.27% for the period.
Emerging-market debt recorded positive performance at the beginning of the reporting period, with all components of the asset class performing well, capping a 12-month period in which numerous idiosyncratic events failed to derail the prevailing positive investor sentiment. However, the first half of 2018 brought periods of market volatility and weakness – particularly in the emerging-market economies. This was most pronounced between April and June, caused largely by increased rhetoric around trade wars and investors’ worries about their possible negative impact on China’s economy. Investors were also concerned about the future path of interest-rate increases by the U.S. Federal Reserve. The U.S. dollar saw strong performance during the reporting period; this historically has had a negative impact on emerging markets.
Over the first half of 2018, elections in large emerging-market countries – notably Mexico and Turkey – caused further market weakness, resulting in investor uncertainty. Turkish President Recep Tayyip Erdogan won another term as expected; however, his economic policies and unorthodox approach to monetary policy has been a concern for investors in Turkey. In Mexico, Andres Lopez Obrador, the left-wing candidate, won Mexico’s presidential election. This outcome was also expected, but the market has become increasingly concerned with his plans to unwind some of the reforms that had occurred under his predecessor, Enrique Peña Nieto.
Emerging-market debt then experienced mixed performance towards the end to the reporting period, with posting negative returns in August (typically a stable month), balanced by positive returns in July and September – the first monthly gains for the asset class in 2018. Increased financial support from the International Monetary Fund (IMF) for Argentina, monetary policy tightening from the Central Bank of the Republic of Turkey, and a North America Free Trade Agreement (NAFTA) accord among the US, Mexico and Canada helped to partly restore investor confidence and risk appetite. However, EM debt then weakened in October, led by a stronger U.S. dollar and compression1 in U.S. Treasury yields towards the end of the month.
During the 12-month reporting period, the Fund’s performance relative to its benchmark, the J.P. Morgan EMBI Global Diversified Index, was bolstered by an overweight allocation to Georgia, as well as an underweight to Sri Lanka. Both an overweight position and security selection in Ecuador also benefited the Fund’s relative performance, along with holdings in the United Arab Emirates and Rwanda, which are not represented in the benchmark index. Conversely, the Fund’s relative performance was hampered mainly by positions in hard and local currency debt in Argentina, a slightly overweight allocation to Venezuela, and overall positioning in Zambia. Local currency holdings in India, South Africa and Indonesia also weighed on the Fund’s relative performance.
During the reporting period, we gradually increased the Fund’s underweight duration2 position relative to the benchmark to a one-year short. We trimmed the Fund’s exposure to Turkey, Paraguay, Azerbaijan and Bahrain, and added to the holdings in Egypt, the United Arab Emirates and Saudi Arabia. On aggregate, we reduced the Fund’s overweight allocation to frontier markets in favor of exposure to the Middle East, which is not represented in the benchmark index. In the local currency markets, we decreased the Fund’s emerging-market exposure, specifically in Brazil and Uruguay.
The Fund may invest in derivatives for hedging purposes and to gain risk exposure to countries, currencies and securities in which the Fund is permitted to invest. The derivatives positions did not have a significant impact on Fund performance for the reporting period.
Looking ahead, we believe that the U.S. midterm election results will have an impact on the direction of U.S. foreign policy going forward. The Democratic Party won enough seats in the election to regain control of the House of Representatives–but not the Senate–and we believe that this could have an effect on President Donald Trump and his policy agenda. The oil price decline has been rapid and although Brent crude at the end of the reporting period was at a higher level than it was at the beginning of 2018, much of the gains have eroded. In our opinion, how Saudi Arabia and the other key Organization of Petroleum Exporting Countries (OPEC) members react to this will be important given how emerging markets historically have benefited to a greater degree from higher oil prices. However, we think that countries such as Turkey and India will welcome lower energy costs.
Portfolio Management:
Aberdeen Emerging Markets Debt Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 4.25% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
1 | Yield compression occurs when the yield on a previously higher-yielding bond declines due to strong demand. Bond prices move inversely to yields. |
2 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
10 | Annual Report 2018 |
Aberdeen Emerging Markets Debt Fund (Unaudited) (concluded)
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase). The Fund’s investments in high yield bonds and other lower-rated securities will subject the Fund to substantial risk of loss.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, and political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
The Fund’s performance may be more volatile than a diversified fund because it may invest a greater percentage of its total assets in the securities of single issuer.
Derivatives are speculative and may hurt the Fund’s performance. They present the risk of disproportionately increased losses and/or reduced gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 11 |
Aberdeen Emerging Markets Debt Fund (Unaudited)
Average Annual Total Return (For periods ended October 31, 2018) | 1 Yr. | 5Yr. | Inception1 | |||||||||||
Class A | w/o SC | (7.91% | ) | 2.43% | 1.60% | |||||||||
w/SC2 | (11.86% | ) | 1.55% | 0.88% | ||||||||||
Class C | w/o SC | (8.58% | ) | 1.71% | 0.89% | |||||||||
w/SC3 | (9.45% | ) | 1.71% | 0.89% | ||||||||||
Class R4 | w/o SC | (8.25% | ) | 2.17% | 1.35% | |||||||||
Institutional Service Class4 | w/o SC | (7.63% | ) | 2.75% | 1.91% | |||||||||
Institutional Class4 | w/o SC | (7.58% | ) | 2.73% | 1.89% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund commenced operations on November 1, 2012. |
2 | A 4.25% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
Performance of a $1,000,000* Investment (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Emerging Markets Debt Fund, the J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified Index and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The J.P. Morgan EMBI Global Diversified Index is an alternatively weighted index that assigns a larger weight to less liquid issues from countries with smaller debt stocks and limits the weights of those index countries with larger debt stocks by only including a specified portion of these countries’ eligible current face amounts of debt outstanding. The index consists of U.S. dollar-denominated Brady bonds, Eurobonds, and traded loans issued by sovereign and quasi-sovereign entities issued in emerging markets countries.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
12 | Annual Report 2018 |
Aberdeen Emerging Markets Debt Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Government Bonds | 66.0% | |||
Corporate Bonds | 26.8% | |||
Short-Term Investment | 5.0% | |||
Government Agencies | 0.9% | |||
Other Assets in Excess of Liabilities | 1.3% | |||
100.0% |
The following chart summarizes the composition of the Fund’s portfolio, expressed as a percentage of net assets. The industries listed below may include more than one industry group. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any industry group.
Top Industries | ||||
Oil, Gas & Consumable Fuels | 7.3% | |||
Commercial Banks | 3.0% | |||
Electric Utilities | 2.3% | |||
Real Estate | 2.3% | |||
Transportation | 1.8% | |||
Energy Equipment & Services | 1.6% | |||
Lodging | 1.6% | |||
Chemicals | 0.9% | |||
Investment Companies | 0.8% | |||
Diversified Financial Services | 0.8% | |||
Other | 77.6% | |||
100.0% |
Top Holdings* | ||||
Brazil Notas do Tesouro Nacional, Series F 01/01/2023 | 3.7% | |||
Argentine Republic Government International Bond 04/22/2026 | 2.9% | |||
Ukraine Government International Bond 09/01/2024 | 2.8% | |||
Turkey Government International Bond 02/05/2025 | 2.0% | |||
Turkey Government International Bond 10/09/2026 | 1.9% | |||
Pertamina Persero PT 05/03/2042 | 1.9% | |||
Petroleos Mexicanos 09/21/2047 | 1.9% | |||
Indonesia Government International Bond 01/15/2024 | 1.8% | |||
Georgian Railway JSC 07/11/2022 | 1.8% | |||
Republic of South Africa Government International Bond 05/30/2022 | 1.7% | |||
Other | 77.6% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
Indonesia | 7.3% | |||
Argentina | 5.7% | |||
United States | 5.0% | |||
Mexico | 4.9% | |||
Ukraine | 4.8% | |||
Brazil | 4.7% | |||
Dominican Republic | 4.0% | |||
Turkey | 4.0% | |||
Ecuador | 3.4% | |||
United Arab Emirates | 3.2% | |||
Other | 53.0% | |||
100.0% |
2018 Annual Report | 13 |
Statement of Investments
October 31, 2018
Aberdeen Emerging Markets Debt Fund
Shares or Principal Amount | Value (US$) | |||||||
CORPORATE BONDS (26.8%) | ||||||||
BRAZIL (0.2%) | ||||||||
Engineering & Construction (0.0%) | ||||||||
OAS Investments GmbH (USD), 8.25%, 10/19/2019 (a)(b)(c) | $ | 200,000 | $ | 5,250 | ||||
Oil, Gas & Consumable Fuels (0.2%) | ||||||||
Petrobras Global Finance BV (USD), 6.25%, 03/17/2024 | 52,000 | 52,598 | ||||||
57,848 | ||||||||
CHILE (1.2%) | ||||||||
Airlines (0.4%) | ||||||||
Latam Airlines 2015-1 Pass Through Trust A (USD), 4.20%, 08/15/2029 (d) | 102,672 | 98,948 | ||||||
Electric Utilities (0.8%) | ||||||||
Empresa Electrica Angamos SA (USD), 4.88%, 05/25/2029 (a)(d) | 191,300 | 186,317 | ||||||
285,265 | ||||||||
CHINA (0.7%) | ||||||||
Real Estate (0.7%) | ||||||||
Country Garden Holdings Co. Ltd. (USD), 5.13%, 01/17/2025 (a) | 200,000 | 156,486 | ||||||
COLOMBIA (0.8%) | ||||||||
Commercial Banks (0.8%) | ||||||||
Bancolombia SA (USD), (fixed rate to 10/18/2027, variable rate thereafter) 4.88% | 200,000 | 192,460 | ||||||
GEORGIA (2.6%) | ||||||||
Energy Equipment & Services (0.8%) | ||||||||
Georgian Oil and Gas Corp. JSC (USD), 6.75%, 04/26/2021 (a) | 200,000 | 203,487 | ||||||
Transportation (1.8%) | ||||||||
Georgian Railway JSC (USD), 7.75%, 07/11/2022 (a) | 400,000 | 422,240 | ||||||
625,727 | ||||||||
INDIA (2.7%) | ||||||||
Commercial Banks (0.6%) | ||||||||
HDFC Bank Ltd. (INR), 8.10%, 03/22/2025 (a) | 10,000,000 | 127,548 | ||||||
Electric Utilities (0.5%) | ||||||||
NTPC Ltd. (INR), 7.25%, 05/03/2022 (a) | 10,000,000 | 126,689 | ||||||
Sovereign Agency (1.6%) | ||||||||
National Highways Authority of India (INR), 7.30%, 05/18/2022 (a) | 30,000,000 | 379,525 | ||||||
633,762 | ||||||||
INDONESIA (2.9%) | ||||||||
Electric Utilities (1.0%) | ||||||||
Perusahaan Listrik Negara PT (USD), 6.25%, 01/25/2049 (a) | 240,000 | 235,352 | ||||||
Oil, Gas & Consumable Fuels (1.9%) | ||||||||
Pertamina Persero PT (USD), 6.00%, 05/03/2042 (a) | 490,000 | 464,699 | ||||||
700,051 | ||||||||
KAZAKHSTAN (0.8%) | ||||||||
Oil, Gas & Consumable Fuels (0.8%) | ||||||||
Tengizchevroil Finance Co. International Ltd. (USD), 4.00%, 08/15/2026 (a)(d) | 200,000 | 186,198 | ||||||
MALAYSIA (1.6%) | ||||||||
Lodging (1.6%) | ||||||||
Gohl Capital Ltd. (USD), 4.25%, 01/24/2027 (a) | 400,000 | 374,031 | ||||||
MEXICO (3.4%) | ||||||||
Oil, Gas & Consumable Fuels (3.4%) | ||||||||
Petroleos Mexicanos | ||||||||
(USD), 5.98%, 03/11/2022 (e) | 100,000 | 103,750 | ||||||
(USD), 6.38%, 01/23/2045 | 70,000 | 58,276 | ||||||
(USD), 5.63%, 01/23/2046 | 240,000 | 185,952 | ||||||
(USD), 6.75%, 09/21/2047 | 540,000 | 463,482 | ||||||
811,460 | ||||||||
MOROCCO (0.9%) | ||||||||
Chemicals (0.9%) | ||||||||
OCP SA (USD), 6.88%, 04/25/2044 (a) | 200,000 | 208,700 | ||||||
NIGERIA (0.8%) | ||||||||
Commercial Banks (0.8%) | ||||||||
Zenith Bank PLC (USD), 7.38%, 05/30/2022 (a) | 200,000 | 202,346 | ||||||
PANAMA (0.8%) | ||||||||
Commercial Banks (0.8%) | ||||||||
Global Bank Corp. (USD), 4.50%, 10/20/2021 (a) | 200,000 | 198,120 | ||||||
PERU (0.8%) | ||||||||
Metals & Mining (0.8%) | ||||||||
Nexa Resources SA (USD), 5.38%, 05/04/2027 (a) | 200,000 | 194,502 | ||||||
RUSSIA (1.6%) | ||||||||
Diversified Financial Services (0.8%) | ||||||||
GTLK Europe DAC (USD), 5.95%, 07/19/2021 (a) | 200,000 | 195,726 | ||||||
Diversified Telecommunication Services (0.8%) | ||||||||
VEON Holdings BV (USD), 4.95%, 06/16/2024 (a) | 200,000 | 189,314 | ||||||
385,040 | ||||||||
UKRAINE (0.8%) | ||||||||
Iron/Steel (0.8%) | ||||||||
Metinvest BV (USD), 8.50%, 04/23/2026 (a) | 200,000 | 190,500 | ||||||
UNITED ARAB EMIRATES (3.2%) | ||||||||
Energy Equipment & Services (0.8%) | ||||||||
Abu Dhabi Crude Oil Pipeline LLC (USD), 4.60%, 11/02/2047 (a)(d) | 200,000 | 189,088 | ||||||
Investment Companies (0.8%) | ||||||||
ICD Sukuk Co. Ltd. (USD), 5.00%, 02/01/2027 (a) | 200,000 | 196,596 |
See accompanying Notes to Financial Statements.
14 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Emerging Markets Debt Fund
Shares or Principal Amount | Value (US$) | |||||||
Real Estate (1.6%) | ||||||||
MAF Global Securities Ltd. (USD), (fixed rate to 09/07/2022, variable rate thereafter) 5.50% (a)(f) | $ | 400,000 | $ | 379,624 | ||||
765,308 | ||||||||
VENEZUELA (1.0%) | ||||||||
Oil, Gas & Consumable Fuels (1.0%) | ||||||||
Petroleos de Venezuela SA | ||||||||
(USD), 6.00%, 05/16/2024 (a)(b)(c)(d) | 1,057,234 | 181,316 | ||||||
(USD), 6.00%, 11/15/2026 (a)(b)(c)(d) | 312,022 | 53,824 | ||||||
235,140 | ||||||||
Total Corporate Bonds | 6,402,944 | |||||||
GOVERNMENT BONDS (66.0%) | ||||||||
ALBANIA (0.5%) | ||||||||
Republic of Albania (EUR), 3.50%, 10/09/2025 (a) | 100,000 | 112,755 | ||||||
ARGENTINA (5.7%) | ||||||||
Argentina POM Politica Monetaria, Argentina Central Bank 7-day Repo Reference Rate (ARS), 67.49%, 06/21/2020 (e) | 11,500,000 | 360,896 | ||||||
Argentine Bonos del Tesoro (ARS), 18.20%, 10/03/2021 | 1,050,000 | 24,008 | ||||||
Argentine Republic Government International Bond | ||||||||
(USD), 5.63%, 01/26/2022 | 128,000 | 114,880 | ||||||
(USD), 7.50%, 04/22/2026 | 790,000 | 689,275 | ||||||
(EUR), 7.82%, 12/31/2033 (d) | 86,694 | 88,674 | ||||||
(USD), 8.28%, 12/31/2033 (d) | 82,290 | 70,564 | ||||||
(USD), 0.00%, 12/15/2035 (e) | 600,000 | 19,800 | ||||||
1,368,097 | ||||||||
ARMENIA (0.9%) | ||||||||
Republic of Armenia International Bond (USD), 7.15%, 03/26/2025 (a) | 200,000 | 208,340 | ||||||
BAHAMAS (0.8%) | ||||||||
Bahamas Government International Bond (USD), 6.00%, 11/21/2028 (a) | 200,000 | 203,000 | ||||||
BRAZIL (4.5%) | ||||||||
Brazil Notas do Tesouro Nacional | ||||||||
Series F (BRL), 10.00%, 01/01/2023 | 3,180,000 | 877,074 | ||||||
Series F (BRL), 10.00%, 01/01/2025 | 700,000 | 191,144 | ||||||
1,068,218 | ||||||||
COSTA RICA (1.0%) | ||||||||
Costa Rica Government International Bond (USD), 4.25%, 01/26/2023 (a) | 270,000 | 235,575 | ||||||
CROATIA (0.4%) | ||||||||
Croatia Government International Bond (USD), 6.63%, 07/14/2020 (a) | 100,000 | 104,369 | ||||||
DOMINICAN REPUBLIC (4.0%) | ||||||||
Dominican Republic International Bond | ||||||||
(USD), 5.88%, 04/18/2024 (a)(d) | 200,000 | 202,740 | ||||||
(USD), 6.88%, 01/29/2026 (a) | 290,000 | 304,500 | ||||||
(USD), 7.45%, 04/30/2044 (a) | 100,000 | 104,500 | ||||||
(USD), 6.85%, 01/27/2045 (a) | 360,000 | 354,600 | ||||||
966,340 | ||||||||
ECUADOR (3.4%) | ||||||||
Ecuador Government International Bond | ||||||||
(USD), 10.75%, 03/28/2022 (a) | 420,000 | 432,600 | ||||||
(USD), 8.75%, 06/02/2023 (a) | 200,000 | 191,000 | ||||||
(USD), 8.88%, 10/23/2027 (a) | 220,000 | 193,380 | ||||||
816,980 | ||||||||
EGYPT (2.7%) | ||||||||
Egypt Government International Bond | ||||||||
(EUR), 5.63%, 04/16/2030 (a) | 230,000 | 236,999 | ||||||
(USD), 8.50%, 01/31/2047 (a) | 200,000 | 188,730 | ||||||
(USD), 7.90%, 02/21/2048 (a) | 250,000 | 223,583 | ||||||
649,312 | ||||||||
EL SALVADOR (1.6%) | ||||||||
El Salvador Government International Bond | ||||||||
(USD), 5.88%, 01/30/2025 (a) | 419,000 | 375,005 | ||||||
(USD), 6.38%, 01/18/2027 (a) | 16,000 | 14,300 | ||||||
389,305 | ||||||||
GABON (0.9%) | ||||||||
Gabon Government International Bond (USD), 6.38%, 12/12/2024 (a)(d) | 240,000 | 218,050 | ||||||
GHANA (0.8%) | ||||||||
Ghana Government International Bond (USD), 8.63%, 06/16/2049 (a)(d) | 200,000 | 187,610 | ||||||
INDONESIA (4.4%) | ||||||||
Indonesia Government International Bond | ||||||||
(USD), 5.88%, 01/15/2024 (a) | 410,000 | 431,280 | ||||||
(USD), 4.10%, 04/24/2028 | 200,000 | 187,862 | ||||||
Indonesia Treasury Bond, Series FR63 (IDR), 5.63%, 05/15/2023 | 4,000,000,000 | 236,014 | ||||||
Perusahaan Penerbit SBSN Indonesia III (USD), 3.40%, 03/29/2022 (a) | 200,000 | 194,900 | ||||||
1,050,056 | ||||||||
IVORY COAST (1.7%) | ||||||||
Ivory Coast Government International Bond | ||||||||
(EUR), 5.25%, 03/22/2030 (a)(d) | 320,000 | 331,444 | ||||||
(USD), 5.75%, 12/31/2032 (a)(g) | 92,500 | 83,737 | ||||||
415,181 | ||||||||
KENYA (1.8%) | ||||||||
Kenya Government International Bond | ||||||||
(USD), 6.88%, 06/24/2024 (a) | 240,000 | 233,498 | ||||||
(USD), 7.25%, 02/28/2028 (a) | 200,000 | 188,620 | ||||||
422,118 | ||||||||
LEBANON (2.2%) | ||||||||
Lebanon Government International Bond | ||||||||
(USD), 6.10%, 10/04/2022 (a) | 443,000 | 386,128 | ||||||
(USD), 6.00%, 01/27/2023 (a) | 160,000 | 137,705 | ||||||
523,833 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 15 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Emerging Markets Debt Fund
Shares or Principal Amount | Value (US$) | |||||||
MEXICO (1.5%) | ||||||||
Mexico Government International Bond (USD), 6.05%, 01/11/2040 | $ | 340,000 | $ | 352,750 | ||||
NAMIBIA (0.7%) | ||||||||
Namibia International Bonds | 200,000 | 180,016 | ||||||
NIGERIA (1.6%) | ||||||||
Nigeria Government International Bond | ||||||||
(USD), 7.88%, 02/16/2032 (a) | 200,000 | 192,236 | ||||||
(USD), 7.63%, 11/28/2047 (a) | 220,000 | 193,961 | ||||||
386,197 | ||||||||
OMAN (1.9%) | ||||||||
Oman Government International Bond (USD), 6.75%, 01/17/2048 (a) | 240,000 | 219,000 | ||||||
Oman Sovereign Sukuk SAOC (USD), 5.93%, 10/31/2025 (a) | 240,000 | 239,231 | ||||||
458,231 | ||||||||
PAPUA N.GUINEA (0.8%) | ||||||||
Papua New Guinea Government International Bond (USD), 8.38%, 10/04/2028 (a) | 200,000 | 198,250 | ||||||
PARAGUAY (0.8%) | ||||||||
Paraguay Government International Bond (USD), 6.10%, 08/11/2044 (a) | 200,000 | 201,000 | ||||||
PERU (1.3%) | ||||||||
Peru Government Bond (PEN), 6.15%, 08/12/2032 (a) | 360,000 | 106,159 | ||||||
Peruvian Government International Bond (PEN), 6.95%, 08/12/2031 (a) | 630,000 | 199,474 | ||||||
305,633 | ||||||||
QATAR (0.8%) | ||||||||
Qatar Government International Bond (USD), 5.10%, 04/23/2048 (a) | 200,000 | 203,000 | ||||||
RUSSIA (1.2%) | ||||||||
Russian Federal Bond — OFZ | ||||||||
Series 6205 (RUB), 7.60%, 04/14/2021 | 7,800,000 | 117,579 | ||||||
Series 6218 (RUB), 8.50%, 09/17/2031 | 11,600,000 | 176,102 | ||||||
293,681 | ||||||||
RWANDA (1.0%) | ||||||||
Rwanda International Government Bond (USD), 6.63%, 05/02/2023 (a) | 250,000 | 251,463 | ||||||
SAUDI ARABIA (1.7%) | ||||||||
Saudi Government International Bond | ||||||||
(USD), 4.00%, 04/17/2025 (a) | 200,000 | 196,385 | ||||||
(USD), 5.00%, 04/17/2049 (a) | 210,000 | 201,397 | ||||||
397,782 | ||||||||
SENEGAL (1.3%) | ||||||||
Senegal Government International Bond | ||||||||
(USD), 6.25%, 07/30/2024 (a) | 200,000 | 195,016 | ||||||
(EUR), 4.75%, 03/13/2028 (a)(d) | 100,000 | 105,574 | ||||||
300,590 | ||||||||
SOUTH AFRICA (2.6%) | ||||||||
Republic of South Africa Government Bond, Series 2023 (ZAR), 7.75%, 02/28/2023 | 3,250,000 | 213,186 | ||||||
Republic of South Africa Government International Bond (USD), 5.88%, 05/30/2022 | 390,000 | 397,917 | ||||||
611,103 | ||||||||
SRI LANKA (0.4%) | ||||||||
Sri Lanka Government International Bond (USD), 6.25%, 10/04/2020 (a) | 100,000 | 96,497 | ||||||
TANZANIA (0.3%) | ||||||||
Tanzania Government International Bond (USD), 6M USD LIBOR + 6.000%, 8.54%, 03/09/2020 (a)(d)(e) | 66,667 | 68,015 | ||||||
TUNISIA (1.2%) | ||||||||
Banque Centrale de Tunisie International Bond (EUR), 6.75%, 10/31/2023 (a) | 260,000 | 289,777 | ||||||
TURKEY (4.0%) | ||||||||
Turkey Government International Bond | ||||||||
(USD), 7.38%, 02/05/2025 | 495,000 | 490,622 | ||||||
(USD), 4.88%, 10/09/2026 | 550,000 | 464,895 | ||||||
955,517 | ||||||||
UKRAINE (4.0%) | ||||||||
Ukraine Government International Bond | ||||||||
(USD), 7.75%, 09/01/2021 (a) | 200,000 | 196,742 | ||||||
(USD), 7.75%, 09/01/2024 (a) | 710,000 | 665,625 | ||||||
(USD), 0.00%, 05/31/2040 (a)(e) | 165,000 | 84,356 | ||||||
946,723 | ||||||||
URUGUAY (0.8%) | ||||||||
Uruguay Government International Bond (USD), 5.10%, 06/18/2050 (d) | 200,000 | 189,500 | ||||||
VENEZUELA (0.2%) | ||||||||
Venezuela Government International Bond (USD), 9.25%, 05/07/2028 (a)(b) | 165,000 | 41,250 | ||||||
ZAMBIA (0.6%) | ||||||||
Zambia Government International Bond (USD), 8.97%, 07/30/2027 (a)(d) | 200,000 | 135,800 | ||||||
Total Government Bonds | 15,801,914 | |||||||
GOVERNMENT AGENCIES (0.9%) | ||||||||
TUNISIA (0.9%) | ||||||||
Banque Centrale de Tunisie International Bond (USD), 5.75%, 01/30/2025 (a) | 260,000 | 220,419 | ||||||
Total Government Agencies | 220,419 |
See accompanying Notes to Financial Statements.
16 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Emerging Markets Debt Fund
Shares or Principal Amount | Value (US$) | |||||||
SHORT-TERM INVESTMENT (5.0%) | ||||||||
UNITED STATES (5.0%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (h) | $ | 1,187,484 | $ | 1,187,484 | ||||
Total Short-Term Investment | 1,187,484 | |||||||
Total Investments | 23,612,761 | |||||||
Other Assets in Excess of Liabilities—1.3% | 306,256 | |||||||
Net Assets—100.0% | $ | 23,919,017 |
(a) | Denotes a security issued under Regulation S or Rule 144A. |
(b) | Security is in default. |
(c) | Illiquid security. |
(d) | Sinkable security. |
(e) | Variable rate instrument. The rate shown is based on the latest available information as of October 31, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(f) | Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely. The maturity date presented for these instruments represents the next call/put date. |
(g) | Indicates a stepped coupon bond. This bond was issued with a low coupon that gradually increases over the life of the bond. |
(h) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(i) | See accompanying Notes to Financial Statements for tax unrealized appreciation/depreciation of securities. |
ARS | Argentine Peso |
BRL | Brazilian Real |
EUR | Euro Currency |
HUF | Hungarian Forint |
IDR | Indonesian Rupiah |
INR | Indian Rupee |
KRW | South Korean Won |
PEN | Peruvian Sol |
PLC | Public Limited Company |
RUB | New Russian Ruble |
USD | U.S. Dollar |
ZAR | South African Rand |
At October 31, 2018, the Fund’s open forward foreign currency exchange contracts were as follows:
Purchase Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
Brazilian Real/United States Dollar 11/27/2018 | UBS | BRL | 1,131,000 | USD | 306,944 | $ | 303,258 | $ | (3,686 | ) | ||||||||||||||||
Euro/United States Dollar 01/10/2019 | UBS | EUR | 21,000 | USD | 24,287 | 23,940 | (347 | ) | ||||||||||||||||||
Indonesian Rupiah/United States Dollar 11/27/2018 | Deutsche Bank | IDR | 3,517,976,000 | USD | 233,753 | 230,464 | (3,289 | ) | ||||||||||||||||||
South African Rand/United States Dollar 01/10/2019 | UBS | ZAR | 206,000 | USD | 13,786 | 13,844 | 58 | |||||||||||||||||||
$ | 571,506 | $ | (7,264 | ) |
Sale Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
United States Dollar/Brazilian Real 11/27/2018 | Citibank | USD | 1,275,747 | BRL | 4,992,000 | $ | 1,338,520 | $ | (62,773 | ) | ||||||||||||||||
11/27/2018 | UBS | USD | 55,958 | BRL | 209,000 | 56,040 | (82 | ) | ||||||||||||||||||
United States Dollar/Euro 01/10/2019 | Morgan Stanley & Co. | USD | 112,791 | EUR | 99,000 | 112,859 | (68 | ) | ||||||||||||||||||
01/10/2019 | UBS | USD | 1,118,584 | EUR | 967,000 | 1,102,372 | 16,212 | |||||||||||||||||||
United States Dollar/Hungarian Forint 01/10/2019 | Barclays Bank plc | USD | 217,795 | HUF | 61,142,000 | 214,635 | 3,160 | |||||||||||||||||||
United States Dollar/Indian Rupee 11/27/2018 | Deutsche Bank | USD | 450,928 | INR | 32,426,000 | 436,714 | 14,214 | |||||||||||||||||||
United States Dollar/South African Rand 01/10/2019 | UBS | USD | 229,301 | ZAR | 3,412,000 | 229,304 | (3 | ) | ||||||||||||||||||
United States Dollar/South Korean Won 11/27/2018 | Deutsche Bank | USD | 256,368 | KRW | 287,286,000 | 251,953 | 4,415 | |||||||||||||||||||
$ | 3,742,397 | $ | (24,925 | ) | ||||||||||||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts |
| $ | 38,059 | |||||||||||||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts |
| (70,248 | ) |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 17 |
Aberdeen Global Unconstrained Fixed Income Fund (Unaudited)
The Aberdeen Global Unconstrained Fixed Income Fund (Institutional Class shares net of fees) returned 2.47% for the 12-month period ended October 31, 2018, versus the 1.72% return for its primary benchmark, the ICE Bank of America Merrill Lynch (BofA ML) 3-Month U.S. Treasury Bill Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Alternative Credit Focus Funds (comprising 69 funds), as measured by Lipper, Inc., was 0.37% for the period.
Global government bond yields rose over the reporting period, led by the U.S. as the Federal Reserve (Fed) continued to tighten monetary policy and the administration of U.S. President Donald Trump announced fiscal expansion plans which exceeded market expectations. Geopolitics, particularly that stemming from the U.S., was a key focus for markets, as President Trump signed executive orders to impose tariffs on China, and renegotiated the North American Free Trade Agreement (NAFTA) to form the new United States-Mexico-Canada Agreement (USMCA). Spreads in peripheral Europe1 widened amid investors’ growing concerns over the new Italian government’s fiscal plans. UK yields closed the reporting period higher despite uncertainties around Brexit negotiations, reflecting positive domestic data.
U.S. economic data continued to indicate solid growth momentum, with employment and survey data reaching cyclical highs. The nation’s unemployment rate reached 3.7% in October 2018 – its lowest level since 1969 – while third-quarter 2018 gross domestic product (GDP) growth grew by an annualized rate of 3.5% after reaching a four-year high of 4.2%, in the second quarter. The Fed raised its benchmark interest rate in four increments of 25 basis points (bps) over the 12-month reporting period, with a further hike priced in for December 2018. According to the Fed’s updated interest-rate projections, the median view is that the target rate will peak at 3.4%, 0.4 percentage point above the 3.0% estimate for the longer-run natural rate.2
The European Central Bank (ECB) announced a reduction in monthly asset purchases to €30 billion (roughly US$34 billion) beginning in January 2018, and the program continued for a further nine months. The ECB also maintained its forward guidance3 policy for interest rates to remain on hold at least through the summer of 2019. Economic data in Europe remained soft throughout the period, as rising protectionism and weaker global trade began to take its toll on the manufacturing sector, with the effects beginning to spill over to the services sector.
European politics were a persistent concern for markets over the period, with the Italian elections in March 2018, resulting in a populist coalition of the Five Star Movement and the League. Tensions continued to rise as the newly formed government reported a target deficit of 2.4% of GDP in 2019, substantially above the 0.8% deficit under European Union (EU) rules. Italian assets sold off on the news, with the budget plan putting the government at loggerheads with the European Commission.
In the UK, British and EU negotiators approved details of the Brexit transition proposal. The UK will formally leave the EU in March 2019, but will be bound by its regulations until the end of 2020. The UK will also be able to negotiate trade deals with other countries during the transition period. Uncertainties around the Irish border, however, remain, with the backstop solution that Northern Ireland stays in the customs union4 being maintained in the proposal for now. However, the sterling weakened towards the end of the reporting period as EU negotiators pushed back on the Chequers plan for a future relationship with the EU. UK Prime Minister Theresa May subsequently responded that relations with the EU had reached an “impasse” and that the government would be prepared not to accept a deal. The October 2018 summit failed to achieve a breakthrough with the deadline to reach a deal fast approaching.
UK economic data remained generally positive over the reporting period despite uncertainties over Brexit, with improving unemployment and wage data. GDP growth was lackluster, although this was discounted by the Bank of England (BoE), which cited weather disruptions as a factor driving softness. The BoE hiked its benchmark interest rate in two increments of 25 bps in November 2017 and August 2018, in response to gradually improving economic data, and maintained its pledge to continue with “ongoing tightening of monetary policy” while acknowledging uncertainties around Brexit negotiations.
The Bank of Japan maintained its targets for short-term and 10-year interest rates at -0.1% and around 0%, respectively. However, the central bank disclosed that it would tolerate wider fluctuations around the 10-year yield target depending on inflation and economic conditions, with the threshold for intervention now perceived by the market to be +/-20 bps versus the previous estimate of +/- 10 bps.
In emerging markets, China’s GDP grew at its slowest pace in nearly a decade as U.S. trade tensions and disappointing economic survey data weighed on the economy. China recorded growth of 6.5% year-over-year for the third quarter of 2018, marginally below consensus expectations of 6.6%. The People’s Bank of China responded to the apparent slowdown by cutting its reserve requirement ratio further and the government announced a RMB435 billion (approximately US$63 billion) personal income tax in an effort to cushion the slowing economy. Elsewhere, Brazilian assets rallied sharply following the perceived market-friendly presidential election victory for the far-right former army captain, Jair Bolsanaro, in October 2018. We believe that the performance of the Brazilian market will now depend on Bolsanaro’s ability to implement change, with pension reform and ongoing fiscal discipline deemed critical to medium-term fiscal sustainability in Brazil.
1 | The peripheral European markets include Greece, Spain, Italy, Ireland, Portugal, Poland, Hungary, Romania, Bulgaria, Turkey, Slovenia, Croatia, Estonia, Latvia, Lithuania and Albania. |
2 | The natural rate is the rate at which real GDP is growing at its historical trend rate, and inflation is stable. |
3 | Central banks’ forward guidance communicates the direction of their future monetary policy. Banks use forward guidance to seek to calm uncertainty in financial markets. |
4 | A custom union comprises an agreement between two or more (usually neighboring) countries to remove trade barriers, and reduce or eliminate customs duty on mutual trade. |
18 | Annual Report 2018 |
Aberdeen Global Unconstrained Fixed Income Fund (Unaudited) (continued)
Interest-rate strategies contributed positively to Fund performance for the reporting period, as our U.S. front-end duration5 short positons performed well in an environment of continued robust domestic data and hawkish Fed rhetoric. The Fund’s short position in Italy also bolstered performance as uncertainties associated with the Italian government’s fiscal plans, and whether it would be in breach of the EU budgetary framework, pushed yields higher and spreads wider. Inflation strategies detracted from performance as both UK and European inflation was stronger than anticipated.
Active currency management enhanced Fund performance for the reporting period, predominantly driven by an overweight to the U.S. dollar – particularly against the South African rand and the Polish zloty – as divergent growth rates between the U.S. and the remainder of the world and expectations of higher Fed policy rates supported the currency. An overweight allocation to the Japanese yen versus the Australian dollar further benefited Fund performance as weak economic data domestically and in China, a significant importer of Australian goods, hurt the Australian currency, while a ”flight to safety” bid supported the yen. Fund performance also was hampered by an overweight bias to the Swedish Krona, which declined over the period on disappointing domestic economic data and dovish communication from the Riksbank, Sweden’s central bank.
The Fund’s holdings in the credit sector had a positive impact on performance for the reporting period. Within the financial sector, positions in short-dated, subordinated insurance and banking credits contributed to Fund performance. However, despite posting strong third-quarter 2018 results, Intesa Sanpaolo’s bonds recorded relatively weak performance in line with the negative investor sentiment surrounding the Italian budget negotiations. The Fund’s holding in Aviva PLC weighed on performance as the UK-based life insurance company was hindered by the uncertainty surrounding the Brexit situation.
The Fund’s positions in the industrials, energy and consumer non-cyclicals sectors contributed to performance during the reporting period. More recently, however, U.S. automakers, such as Fund holding Ford Motor Co., have been impeded by a combination of slowing Chinese car sales, trade risks and the changeover to a new emissions testing regime in Europe. Within the energy sector, the oil price had a positive impact on the valuations of the Fund’s energy/pipeline positions, including Continental Resources and Marathon Oil. Third-quarter 2018 earnings for these companies were strong, and we still view energy as an improving sector, given these companies’ lower cost basis and focus on deleveraging their balance sheets.
Regarding the use of derivatives in the Fund over the reporting period, we employed bond futures in a bid to achieve efficient portfolio management and to hedge interest-rate risk. We employed interest rate swaps6 in an effort to efficiently gain or hedge interest-rate risk. We also used credit default swaps7 as part of the Fund’s hedging strategy to reduce the Fund’s exposure to the performance of the credit market. Finally, we employed foreign exchange forwards8 as a hedging strategy to manage currency exposure. The derivatives positions contributed approximately 5.5% to the Fund’s absolute return for the reporting period.
While the U.S. remains an economy with a relatively strong structural growth rate, we think that the pace of growth may decelerate as we enter 2019. In our view, rising interest rates, higher costs for businesses, and an amount of fiscal stimulus that is no longer growing, all point to growth falling back towards trend – although we believe that the U.S. will remain the strongest of the major global economies. Nevertheless, we think the Fed is taking a more pragmatic approach to monetary policy normalization. We also believe that, as the central bank is conscious of the inflationary pressures growing when the unemployment rate approaches its cyclical bottom, it will keep raising interest rates until major cracks appear in U.S. markets.
There recently have been several relatively disappointing economic data reports in Europe, and we think that there likely will be a period of stabilization in growth, albeit at a weak level. Italy has been considerably underperforming the overall European fixed income market, just as the government seeks to secure concessions from the European Commission. In our opinion, this divergence in performance always has been – and remains – the “Achilles heel” of the European market.
While we believe that variations in global economic growth rates continue to support policy divergence, we think that a downward convergence in growth will alter the macroeconomic backdrop as we move into 2019.
We continue to see the global economic environment as being unsupportive for risk assets, as Fed monetary policy tightens and global central banks continue to remove liquidity from the markets. We think that quantitative tightening and Fed policy normalization will remain dominant market drivers into the end of 2018, and their impact may be compounded by a global growth slowdown.
As the global markets recently have encountered a significant correction, we believe that this volatility affords us tactical opportunities to hold risk in an environment where our strategic view is more cautious. Our medium-term views remain negative on emerging markets, relatively neutral on the credit sector, and positive on global interest rates.
5 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
6 | An interest rate swap is an agreement between two parties in which one stream of future interest payments is exchanged for another based on a specified principal amount. |
7 | A credit default swap is a contract that transfers the credit exposure of fixed-income products between two or more parties. |
8 | A foreign exchange forward is a binding contract in the foreign exchange market that locks in the exchange rate for the purchase or sale of a currency on a future date. |
2018 Annual Report | 19 |
Aberdeen Global Unconstrained Fixed Income Fund (Unaudited) (concluded)
Portfolio Management:
Aberdeen Global Fixed Income Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 4.25% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, currency exchange rates, and political and economic risks. Fluctuation in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. The foregoing risks are enhanced in emerging market countries.
Derivatives are speculative and may hurt the Fund’s performance. They present the risk of disproportionately increased losses and/or reduced gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
Please read the prospectus for more detailed information regarding these and other risks.
20 | Annual Report 2018 |
Aberdeen Global Unconstrained Fixed Income Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | 2.10% | 1.11% | 3.68% | ||||||||||
w/SC2 | (2.20% | ) | 0.24% | 3.23% | ||||||||||
Class C | w/o SC | 1.35% | 0.39% | 2.92% | ||||||||||
w/SC3 | 0.35% | 0.39% | 2.92% | |||||||||||
Institutional Service Class4,5 | w/o SC | 2.29% | 1.25% | 3.83% | ||||||||||
Institutional Class4,6 | w/o SC | 2.47% | 1.39% | 3.96% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund changed its investment objective and strategies effective August 15, 2016. Performance information for periods prior to August 15, 2016 does not reflect the current investment strategy. Returns presented for the Fund prior to July 20, 2009 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The investment objective and strategies of the Fund, prior to the changes noted above, and those of the Predecessor Fund were substantially similar. Please consult the Fund’s prospectus for more detail. |
2 | A 4.25% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the first offering of the Institutional Service Class shares (July 20, 2009) are based on the previous performance of Common Class shares of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Institutional Service Class shares would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses between the two classes. |
6 | Returns before the first offering of the Institutional Class shares (July 20, 2009) are based on the previous performance of the Common Class shares of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns would only differ to the extent of the differences in expenses between the two classes. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Service Class shares of the Aberdeen Global Unconstrained Fixed Income Fund, the ICE Bank of America Merrill Lynch 3-Month U.S. Treasury Note Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 21 |
Aberdeen Global Unconstrained Fixed Income Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Corporate Bonds | 78.9% | |||
Short-Term Investment | 6.2% | |||
U.S. Treasuries | 5.1% | |||
Commercial Mortgage-Backed Securities | 1.9% | |||
Government Agencies | 1.2% | |||
Government Bonds | 1.2% | |||
Residential Mortgage-Backed Securities | –% | |||
Other Assets in Excess of Liabilities | 5.5% | |||
100.0% |
Amounts listed as “–” are 0% or round to 0%.
The following chart summarizes the composition of the Fund’s portfolio, expressed as a percentage of net assets. The industries listed below may include more than one industry group. As of October 31, 2018, the Fund did not have more than 25% of its assets invested in any industry group.
Top Industries | ||||
Commercial Banks | 20.7% | |||
Media | 6.0% | |||
Diversified Telecommunication Services | 5.0% | |||
Pharmaceutical | 5.1% | |||
Oil, Gas & Consumable Fuels | 5.0% | |||
Insurance | 4.1% | |||
Energy Equipment & Services | 4.1% | |||
Auto Manufacturers | 3.8% | |||
Electric Utilities | 3.3% | |||
Food Products | 3.2% | |||
Other | 39.7% | |||
100.0% |
Top Holdings* | ||||
U.S. Treasury Note 01/31/2019 | 5.1% | |||
CSC Holdings LLC 10/15/2025 | 1.4% | |||
SELP Finance Sarl 10/25/2023 | 1.4% | |||
ICICI Bank Ltd., REGS 11/16/2020 | 1.2% | |||
Ford Motor Credit Co. LLC 02/01/2021 | 1.2% | |||
Pertamina Persero PT 05/23/2021 | 1.2% | |||
UBS Group Funding Switzerland AG 02/19/2020 | 1.2% | |||
Shimao Property Holdings Ltd. 02/10/2022 | 1.2% | |||
Marfrig Holdings Europe BV 06/24/2019 | 1.2% | |||
Friends Life Holdings PLC 11/08/2018 | 1.2% | |||
Other | 83.7% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 49.2% | |||
United Kingdom | 8.7% | |||
Germany | 4.9% | |||
Luxembourg | 4.0% | |||
Switzerland | 3.7% | |||
France | 3.6% | |||
Italy | 2.6% | |||
India | 2.4% | |||
China | 2.2% | |||
Mexico | 2.0% | |||
Other | 16.7% | |||
100.0% |
22 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Shares or Principal Amount | Value (US$) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (1.9%) |
| |||||||
UNITED STATES (1.9%) | ||||||||
JP Morgan Mortgage Trust 2018-6, Series 2018-6, Class 1A3 (USD), 3.50%, 12/25/2048 (a)(b) | $ | 86,745 | $ | 84,980 | ||||
JP Morgan Mortgage Trust 2018-9, Series 2018-9, Class A3 (USD), 4.00%, 02/25/2049 (a)(b) | 24,871 | 24,538 | ||||||
Sequoia Mortgage Trust, Series 2018-6, Class A4 (USD), 4.00%, 07/25/2048 (a)(b) | 94,498 | 94,630 | ||||||
SFAVE Commercial Mortgage Securities Trust, Series 2015-5AVE, Class D (USD), 4.39%, 01/05/2043 (a)(b) | 138,000 | 108,812 | ||||||
312,960 | ||||||||
Total Commercial Mortgage-Backed Securities | 312,960 | |||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES (0.0%) |
| |||||||
UNITED STATES (0.0%) | ||||||||
BCAP LLC Trust, Series 2009-RR6, Class 3A1 (USD), 4.11%, 12/26/2037 (a)(b) | 295 | 294 | ||||||
JP Morgan Resecuritization Trust, Series 2009-7, Class 2A1 (USD), 6.00%, 02/27/2037 (a)(b) | 1,068 | 1,066 | ||||||
1,360 | ||||||||
Total Residential Mortgage-Backed Securities | 1,360 | |||||||
CORPORATE BONDS (78.9%) | ||||||||
ARGENTINA (0.2%) | ||||||||
Media (0.2%) | ||||||||
Cablevision SA (USD), 6.50%, 06/15/2021 (a) | 30,000 | 29,325 | ||||||
AUSTRALIA (0.7%) | ||||||||
Metals & Mining (0.7%) | ||||||||
BHP Billiton Finance Ltd. (EUR), (fixed rate to 04/22/2076, variable rate thereafter), 4.75% (a) | 100,000 | 123,029 | ||||||
BRAZIL (1.2%) | ||||||||
Food Products (1.2%) | ||||||||
Marfrig Holdings Europe BV (USD), 6.88%, 06/24/2019 (a) | 200,000 | 202,500 | ||||||
CANADA (0.8%) | ||||||||
Oil, Gas & Consumable Fuels (0.8%) | ||||||||
Cenovus Energy, Inc. (USD), 3.00%, 08/15/2022 | 137,000 | 130,905 | ||||||
CHINA (2.2%) | ||||||||
Chemicals (1.0%) | ||||||||
CNAC HK Finbridge Co. Ltd. (EUR), 1.75%, 06/14/2022 (a) | 150,000 | 168,962 | ||||||
Real Estate (1.2%) | ||||||||
Shimao Property Holdings Ltd. (USD), 8.38%, 02/10/2022 (a) | 200,000 | 202,779 | ||||||
371,741 | ||||||||
FINLAND (1.2%) | ||||||||
Commercial Banks (1.2%) | ||||||||
Nordea Bank AB (USD), (fixed rate to 09/23/2019, variable rate thereafter), 5.50% (a)(c) | 200,000 | 198,000 | ||||||
FRANCE (3.6%) | ||||||||
Auto Manufacturers (0.2%) | ||||||||
RCI Banque SA (EUR), 0.75%, 09/26/2022 (a) | $ | 30,000 | $ | 33,611 | ||||
Commercial Banks (1.5%) | ||||||||
Credit Agricole SA (GBP), (fixed rate to 10/26/2019, variable rate thereafter), 8.13% (a)(c) | 50,000 | 67,141 | ||||||
Societe Generale SA (EUR), (fixed rate to 09/04/2019, variable rate thereafter), 9.38% (a)(c) | 150,000 | 182,040 | ||||||
249,181 | ||||||||
Insurance (1.2%) | ||||||||
AXA SA (GBP), (fixed rate to 10/16/2019, variable rate thereafter), 6.77% (c) | 50,000 | 65,584 | ||||||
CNP Assurances (GBP), (fixed rate to 09/30/2041, variable rate thereafter), 7.38% (a) | 100,000 | 141,241 | ||||||
206,825 | ||||||||
Oil, Gas & Consumable Fuels (0.7%) | ||||||||
TOTAL SA (EUR), (fixed rate to 02/26/2021, variable rate thereafter), 2.25% (a)(c) | 100,000 | 115,700 | ||||||
605,317 | ||||||||
GERMANY (4.9%) | ||||||||
Auto Manufacturers (0.3%) | ||||||||
Volkswagen International Finance (EUR), (fixed rate to 09/04/2023, variable rate thereafter), 5.13% (a)(c) | 40,000 | 48,987 | ||||||
Commercial Banks (1.0%) | ||||||||
Deutsche Bank AG | ||||||||
(USD), 4.25%, 10/14/2021 | 50,000 | 49,590 | ||||||
(GBP), 1.75%, 12/16/2021 (a) | 100,000 | 124,232 | ||||||
173,822 | ||||||||
Diversified Telecommunication Services (1.0%) | ||||||||
Deutsche Telekom International Finance BV (USD), 2.82%, 01/19/2022 (a) | 170,000 | 165,169 | ||||||
Media (0.7%) | ||||||||
Unitymedia Hessen GmbH & Co. KG / Unitymedia NRW GmbH (EUR), 4.00%, 01/15/2025 (a) | 100,000 | 118,758 | ||||||
Pharmaceutical (1.2%) | ||||||||
Bayer US Finance II LLC (USD), 3.88%, 12/15/2023 (a) | 200,000 | 196,954 | ||||||
Real Estate (0.7%) | ||||||||
Vonovia Finance BV (EUR), (fixed rate to 12/17/2021, variable rate thereafter), 4.00% (a)(c) | 100,000 | 119,194 | ||||||
822,884 | ||||||||
ICELAND (0.7%) | ||||||||
Commercial Banks (0.7%) | ||||||||
Arion Banki HF (EUR), 1.00%, 03/20/2023 (a) | 100,000 | 110,609 | ||||||
INDIA (2.4%) | ||||||||
Commercial Banks (1.2%) | ||||||||
ICICI Bank Ltd., REGS (USD), 5.75%, 11/16/2020 (a) | 200,000 | 206,512 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 23 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Sovereign Agency (1.2%) | ||||||||
Export-Import Bank of India (USD), 2.75%, 04/01/2020 (a) | $ | 200,000 | $ | 197,325 | ||||
403,837 | ||||||||
ISRAEL (0.7%) | ||||||||
Pharmaceutical (0.7%) | ||||||||
Teva Pharmaceutical Finance Netherlands II BV, REGS (EUR), 0.38%, 07/25/2020 (a) | 100,000 | 111,397 | ||||||
ITALY (2.6%) | ||||||||
Commercial Banks (1.8%) | ||||||||
Intesa Sanpaolo SpA | ||||||||
(EUR), (fixed rate to 10/14/2019, variable rate thereafter), 8.38% (a)(c) | 50,000 | 59,546 | ||||||
(USD), 6.50%, 02/24/2021 (a) | 120,000 | 122,724 | ||||||
UniCredit SpA (EUR), (fixed rate to 01/03/2027, variable rate thereafter), 4.38% (a) | 100,000 | 112,129 | ||||||
294,399 | ||||||||
Diversified Telecommunication Services (0.8%) | ||||||||
Telecom Italia SpA (GBP), 6.38%, 06/24/2019 (a) | 100,000 | 131,046 | ||||||
425,445 | ||||||||
LUXEMBOURG (4.0%) | ||||||||
Iron/Steel (0.7%) | ||||||||
ArcelorMittal (EUR), 3.13%, 01/14/2022 (a) | 100,000 | 119,338 | ||||||
Media (1.1%) | ||||||||
Altice Luxembourg SA (USD), 7.75%, 05/15/2022 (a) | 200,000 | 186,250 | ||||||
Oil, Gas & Consumable Fuels (0.9%) | ||||||||
DEA Finance SA (EUR), 7.50%, 10/15/2022 (a) | 120,000 | 144,087 | ||||||
Real Estate Investment Trust (REIT) (1.3%) | ||||||||
SELP Finance Sarl (EUR), 1.25%, 10/25/2023 (a) | 200,000 | 224,987 | ||||||
674,662 | ||||||||
MEXICO (2.0%) | ||||||||
Chemicals (1.2%) | ||||||||
Mexichem SAB de CV, REGS (USD), 4.88%, 09/19/2022 (a) | 200,000 | 198,974 | ||||||
Oil, Gas & Consumable Fuels (0.8%) | ||||||||
Petroleos Mexicanos (EUR), 2.50%, 08/21/2021 (a) | 110,000 | 125,455 | ||||||
324,429 | ||||||||
NETHERLANDS (1.3%) | ||||||||
Commercial Banks (1.3%) | ||||||||
Cooperatieve Rabobank UA | ||||||||
(USD), (fixed rate to 06/30/2019, variable rate thereafter), 11.00% (a)(c) | 140,000 | 146,440 | ||||||
(AUD), 4.25%, 10/13/2021 (a) | 100,000 | 73,613 | ||||||
220,053 | ||||||||
RUSSIA (0.6%) | ||||||||
Oil, Gas & Consumable Fuels (0.6%) | ||||||||
Lukoil International Finance BV, REGS (USD), 7.25%, 11/05/2019 (a) | 100,000 | 103,281 | ||||||
SPAIN (0.7%) | ||||||||
Diversified Telecommunication Services (0.7%) | ||||||||
Telefonica Europe BV, Series NC5 (EUR), (fixed rate to 12/04/2023, variable rate thereafter), 3.00% (a)(c) | 100,000 | 108,593 | ||||||
SWEDEN (0.7%) | ||||||||
Auto Manufacturers (0.7%) | ||||||||
Volvo Treasury AB (EUR), (fixed rate to 06/10/2075, variable rate thereafter), 4.20% (a) | 100,000 | 117,843 | ||||||
SWITZERLAND (3.7%) | ||||||||
Commercial Banks (2.4%) | ||||||||
UBS AG (USD), 2.45%, 12/01/2020 (a) | 200,000 | 195,645 | ||||||
UBS Group Funding Switzerland AG (USD), (fixed rate to 02/19/2020, variable rate thereafter), 7.13% (a)(c) | 200,000 | 203,468 | ||||||
399,113 | ||||||||
Insurance (0.5%) | ||||||||
Zurich Finance UK PLC (GBP), (fixed rate to 10/02/2022, variable rate thereafter), 6.63% (c) | 57,000 | 80,042 | ||||||
Metals & Mining (0.8%) | ||||||||
Glencore Canada Financial Corp. (GBP), 7.38%, 05/27/2020 (a) | 100,000 | 138,446 | ||||||
617,601 | ||||||||
UNITED KINGDOM (8.7%) | ||||||||
Commercial Banks (4.9%) | ||||||||
Barclays PLC (EUR), (fixed rate to 11/11/2025, variable rate thereafter), 2.63% (a) | 100,000 | 114,643 | ||||||
CYBG PLC (GBP), (fixed rate to 02/09/2026, variable rate thereafter), 5.00% (a) | 100,000 | 130,363 | ||||||
HBOS Capital Funding LP (GBP), (fixed rate to 11/30/2018, variable rate thereafter), 6.46% (a)(c) | 50,000 | 64,144 | ||||||
HSBC Holdings PLC | ||||||||
(USD), (fixed rate to 03/13/2023, variable rate thereafter), 3.26% | 200,000 | 195,366 | ||||||
(GBP), (fixed rate to 06/27/2023, variable rate thereafter), 2.18% | 100,000 | 127,077 | ||||||
National Westminster Bank PLC (GBP), 6.50%, 09/07/2021 | 80,000 | 113,782 | ||||||
Royal Bank of Scotland Group PLC (USD), 6.10%, 06/10/2023 | 70,000 | 72,098 | ||||||
817,473 | ||||||||
Diversified Telecommunication Services (0.3%) | ||||||||
Vodafone Group PLC (USD), 2.50%, 09/26/2022 | �� | 63,000 | 59,908 | |||||
Electric Utilities (0.8%) | ||||||||
SSE PLC (GBP), (fixed rate to 09/10/2020, variable rate thereafter), 3.88% (a)(c) | 100,000 | 128,475 |
See accompanying Notes to Financial Statements.
24 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Insurance (2.0%) | ||||||||
Aviva PLC (GBP), (fixed rate to 11/21/2019, variable rate thereafter), 6.88% (c) | $ | 40,000 | $ | 52,508 | ||||
Friends Life Holdings PLC (USD), (fixed rate to 11/08/2018, variable rate thereafter), 7.88% (a)(c) | 200,000 | 200,131 | ||||||
Legal & General Group PLC (GBP), (fixed rate to 07/23/2041, variable rate thereafter), 10.00% (a) | 50,000 | 76,148 | ||||||
328,787 | ||||||||
Paper & Forest Products (0.7%) | ||||||||
Mondi Finance PLC, REGS (EUR), 3.38%, 09/28/2020 (a) | 100,000 | 120,230 | ||||||
1,454,873 | ||||||||
UNITED STATES (36.0%) | ||||||||
Advertising (0.3%) | ||||||||
Interpublic Group of Cos., Inc. (USD), 3.50%, 10/01/2020 | 51,000 | 50,944 | ||||||
Aerospace & Defense (0.3%) | ||||||||
United Technologies Corp., FRN (USD), | 48,000 | 48,052 | ||||||
Auto Manufacturers (2.6%) | ||||||||
Ford Motor Credit Co. LLC (USD), 5.75%, 02/01/2021 | 200,000 | 205,245 | ||||||
General Motors Financial Co., Inc., 3M USD LIBOR + 0.540% (USD), 2.88%, 11/06/2020 (b) | 154,000 | 153,521 | ||||||
General Motors Financial of Canada Ltd. (CAD), 3.00%, 02/26/2021 | 100,000 | 75,019 | ||||||
433,785 | ||||||||
Beverages (0.6%) | ||||||||
Keurig Dr Pepper, Inc. (USD), 4.06%, 05/25/2023 (a) | 25,000 | 24,866 | ||||||
Molson Coors International LP, Series 2 (CAD), | 100,000 | 75,373 | ||||||
100,239 | ||||||||
Chemicals (0.6%) | ||||||||
Blue Cube Spinco LLC (USD), 9.75%, 10/15/2023 | 70,000 | 77,875 | ||||||
International Flavors & Fragrances, Inc. (USD), | 15,000 | 14,994 | ||||||
92,869 | ||||||||
COMMERCIAL BANKS (4.7%) | ||||||||
Bank of America Corp. (USD), 3M USD LIBOR + 1.180%, 3.65%, 10/21/2022 (b) | 120,000 | 121,848 | ||||||
Citigroup, Inc., Series MPLE (CAD), | 100,000 | 76,186 | ||||||
JPMorgan Chase & Co. | ||||||||
Series V (USD), (fixed rate to 07/01/2019, variable rate thereafter), 5.00% (c) | 170,000 | 170,000 | ||||||
(USD), (fixed rate to 04/25/2023, variable rate thereafter), 2.78% | 160,000 | 154,826 | ||||||
Morgan Stanley | ||||||||
(USD), 3M USD LIBOR + 1.400%, | 150,000 | 152,740 | ||||||
(EUR), (fixed rate to 10/23/2026, variable rate thereafter), 1.34% | 100,000 | 110,592 | ||||||
786,192 | ||||||||
Computers & Peripherals (1.7%) | ||||||||
Dell International LLC / EMC Corp. (USD), | 280,000 | 280,351 | ||||||
Diversified Telecommunication Services (2.2%) | ||||||||
AT&T, Inc. | ||||||||
(USD), 3.20%, 03/01/2022 | 100,000 | 98,250 | ||||||
(EUR), 0.53%, 09/05/2023 (a)(b) | 100,000 | 115,614 | ||||||
Verizon Communications, Inc. (USD), 3M USD LIBOR + 1.000%, 3.33%, 03/16/2022 (b) | 159,000 | 161,552 | ||||||
375,416 | ||||||||
Electric Utilities (2.5%) | ||||||||
Dominion Energy, Inc. (USD), 2.96%, 07/01/2019 (d) | 155,000 | 154,346 | ||||||
DTE Energy Co., Series D (USD), 3.70%, 08/01/2023 | 75,000 | 74,455 | ||||||
Exelon Corp. (USD), 3.50%, 06/01/2022 | 69,000 | 67,292 | ||||||
Mississippi Power Co. (USD), 3.03%, 03/27/2020 (b) | 89,000 | 89,009 | ||||||
Sempra Energy (USD), 2.40%, 02/01/2020 | 41,000 | 40,504 | ||||||
425,606 | ||||||||
Energy Equipment & Services (4.1%) | ||||||||
Energy Transfer LP (USD), 7.50%, 10/15/2020 | 50,000 | 52,937 | ||||||
Energy Transfer Partners LP (USD), | 50,000 | 51,704 | ||||||
Kinder Morgan Energy Partners LP (USD), | 152,000 | 151,429 | ||||||
MPLX LP | ||||||||
(USD), 3.38%, 03/15/2023 | 100,000 | 97,454 | ||||||
(USD), 4.50%, 07/15/2023 | 55,000 | 55,825 | ||||||
Plains All American Pipeline LP / PAA Finance Corp. (USD), 3.65%, 06/01/2022 | 150,000 | 147,015 | ||||||
Sabine Pass Liquefaction LLC | ||||||||
(USD), 5.75%, 05/15/2024 | 100,000 | 105,904 | ||||||
(USD), 5.63%, 03/01/2025 | 25,000 | 26,099 | ||||||
688,367 | ||||||||
Food Products (2.0%) | ||||||||
Kraft Heinz Foods Co. (USD), 2.91%, 02/10/2021 (b) | 140,000 | 140,257 | ||||||
Nestle Holdings, Inc. (USD), 3.35%, 09/24/2023 (a) | 195,000 | 193,689 | ||||||
333,946 | ||||||||
Healthcare Providers & Services (0.9%) | ||||||||
Centene Corp. (USD), 5.63%, 02/15/2021 | 70,000 | 71,050 | ||||||
HCA, Inc. (USD), 5.25%, 04/15/2025 | 50,000 | 51,062 | ||||||
Tenet Healthcare Corp. (USD), 4.38%, 10/01/2021 | 35,000 | 34,563 | ||||||
156,675 | ||||||||
Home Builders (0.5%) | ||||||||
Lennar Corp. (USD), 4.75%, 04/01/2021 | 80,000 | 80,200 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 25 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Insurance (0.4%) | ||||||||
American International Group, Inc. (USD), | $ | 50,000 | $ | 49,802 | ||||
AXA Equitable Holdings, Inc. (USD), | 24,000 | 23,724 | ||||||
73,526 | ||||||||
Lodging (0.2%) | ||||||||
MGM Resorts International (USD), | 30,000 | 31,416 | ||||||
Media (4.0%) | ||||||||
CCO Holdings LLC / CCO Holdings Capital Corp. (USD), 5.13%, 02/15/2023 | 90,000 | 89,550 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital (USD), | 150,000 | 151,758 | ||||||
Comcast Corp. (USD), 3.70%, 04/15/2024 | 48,000 | 47,806 | ||||||
CSC Holdings LLC (USD), 10.88%, 10/15/2025 (a) | 200,000 | 230,750 | ||||||
Walt Disney Co. (The) | ||||||||
Series MPLE (CAD), 2.76%, 10/07/2024 | 170,000 | 124,694 | ||||||
(USD), 7.55%, 07/15/2093 | 25,000 | 29,308 | ||||||
673,866 | ||||||||
Oil & Gas Services (0.6%) | ||||||||
Halliburton Co. (USD), 3.50%, 08/01/2023 | 98,000 | 96,462 | ||||||
Oil, Gas & Consumable Fuels (1.2%) | ||||||||
Anadarko Petroleum Corp. (USD), | 70,000 | 71,516 | ||||||
Continental Resources, Inc. | ||||||||
(USD), 5.00%, 09/15/2022 | 100,000 | 100,983 | ||||||
(USD), 4.50%, 04/15/2023 | 30,000 | 30,053 | ||||||
202,552 | ||||||||
Packaging & Containers (0.2%) | ||||||||
Ball Corp. (USD), 5.00%, 03/15/2022 | 28,000 | 28,420 | ||||||
Pharmaceutical (3.2%) | ||||||||
CVS Health Corp. | ||||||||
(USD), 3.05%, 03/09/2021 (b) | 128,000 | 128,681 | ||||||
(USD), 3.50%, 07/20/2022 | 43,000 | 42,520 | ||||||
Express Scripts Holding Co. | ||||||||
(USD), 2.25%, 06/15/2019 | 70,000 | 69,742 | ||||||
(USD), 3.06%, 11/30/2020 (b) | 150,000 | 150,039 | ||||||
Shire Acquisitions Investments Ireland DAC (USD), 1.90%, 09/23/2019 | 140,000 | 138,269 | ||||||
529,251 | ||||||||
Real Estate Investment Trust (REIT) (0.7%) |
| |||||||
Crown Castle International Corp. (USD), | 47,000 | 45,076 | ||||||
Welltower, Inc. (USD), 3.75%, 03/15/2023 | 65,000 | 64,269 | ||||||
109,345 | ||||||||
Retail (1.0%) | ||||||||
Dollar Tree, Inc. (USD), 3.70%, 05/15/2023 | 48,000 | 46,782 | ||||||
Walmart, Inc. (USD), 3.40%, 06/26/2023 | 115,000 | 114,612 | ||||||
161,394 | ||||||||
Semiconductors (0.6%) | ||||||||
Texas Instruments, Inc. (USD), | 106,000 | 100,852 | ||||||
Transportation (0.9%) | ||||||||
Penske Truck Leasing Co. LP / PTL Finance Corp. (USD), 3.38%, 02/01/2022 (a) | 150,000 | 147,493 | ||||||
6,007,219 | ||||||||
Total Corporate Bonds | 13,163,543 | |||||||
GOVERNMENT BONDS (1.2%) | ||||||||
SWEDEN (1.2%) | ||||||||
Svensk Exportkredit AB (USD), (fixed rate to 11/14/2023, variable rate thereafter), 2.88% (a) | 200,000 | 199,940 | ||||||
Total Government Bonds | 199,940 | |||||||
GOVERNMENT AGENCIES (1.2%) | ||||||||
INDONESIA (1.2%) | ||||||||
Pertamina Persero PT (USD), | 200,000 | 204,956 | ||||||
Total Government Agencies | 204,956 | |||||||
U.S. TREASURIES (5.1%) | ||||||||
U.S. Treasury Note (USD), 1.50%, 01/31/2019 | 850,000 | 848,289 | ||||||
Total U.S. Treasuries | 848,289 | |||||||
SHORT-TERM INVESTMENT (6.2%) | ||||||||
UNITED STATES (6.2%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (e) | 1,032,167 | 1,032,167 | ||||||
Total Short-Term Investment | 1,032,167 | |||||||
Total Investments | 15,763,215 | |||||||
Other Assets in Excess of Liabilities—5.5% | 922,891 | |||||||
Net Assets—100.0% | $ | 16,686,106 |
(a) | Denotes a security issued under Regulation S or Rule 144A. |
(b) | Variable rate instrument. The rate shown is based on the latest available information as of October 31, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(c) | Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely. The maturity date presented for these instruments represents the next call/put date. |
(d) | Indicates a stepped coupon bond. This bond was issued with a low coupon that gradually increases over the life of the bond. |
(e) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(f) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
See accompanying Notes to Financial Statements.
26 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
AUD | Australian Dollar |
BRL | Brazilian Real |
CAD | Canadian Dollar |
CHF | Swiss Franc |
CZK | Czech Koruna |
EUR | Euro Currency |
GBP | British Pound Sterling |
JPY | Japanese Yen |
NOK | Norwegian Krone |
NZD | New Zealand Dollar |
PLC | Public Limited Company |
PLN | Polish Zloty |
SEK | Swedish Krona |
USD | U.S. Dollar |
ZAR | South African Rand |
At October 31, 2018, the Fund held the following futures contracts:
Futures Contracts | Number of Contracts Long/(Short) | Expiration Date | Notional Amount | Market Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
SHORT CONTRACT POSITIONS |
| |||||||||||||||||||
Australian 3 Year Bond | (2 | ) | 12/17/2018 | $ | (157,888 | ) | $ | (157,827 | ) | $ | 61 | |||||||||
Canadian Government Bond-10 year | (1 | ) | 12/18/2018 | (102,106 | ) | (100,384 | ) | 1,722 | ||||||||||||
Euro Bobl Futures | (7 | ) | 12/06/2018 | (1,041,891 | ) | (1,042,129 | ) | (238 | ) | |||||||||||
Euro BTP Futures | (4 | ) | 12/06/2018 | (552,366 | ) | (551,102 | ) | 1,264 | ||||||||||||
Euro Bund Futures | (6 | ) | 12/06/2018 | (1,077,536 | ) | (1,089,111 | ) | (11,575 | ) | |||||||||||
Euro Schatz Futures | (1 | ) | 12/06/2018 | (126,642 | ) | (126,829 | ) | (187 | ) | |||||||||||
Japan Government 10 Year Bond Mini Futures | (5 | ) | 12/12/2018 | (665,742 | ) | (667,036 | ) | (1,294 | ) | |||||||||||
Long Gilt Futures | (3 | ) | 12/27/2018 | (469,624 | ) | (469,394 | ) | 230 | ||||||||||||
United States Treasury Note 6%-Long Bond | (1 | ) | 12/19/2018 | (143,614 | ) | (138,125 | ) | 5,489 | ||||||||||||
United States Treasury Note 6%-10 year | (14 | ) | 12/19/2018 | (1,676,014 | ) | (1,658,125 | ) | 17,889 | ||||||||||||
United States Treasury Note 6%-2 year | (8 | ) | 12/31/2018 | (1,686,604 | ) | (1,685,250 | ) | 1,354 | ||||||||||||
United States Treasury Note 6%-5 year | (47 | ) | 12/31/2018 | (5,315,100 | ) | (5,281,992 | ) | 33,108 | ||||||||||||
$ | 47,823 |
At October 31, 2018, the Fund’s open forward foreign currency exchange contracts were as follows:
Purchase Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
Australian Dollar/United States Dollar 11/27/2018 | Barclays Bank | AUD | 17,000 | USD | 12,504 | $ | 12,042 | $ | (462 | ) | ||||||||||||||||
11/27/2018 | Deutsche Bank | AUD | 126,000 | USD | 91,639 | 89,249 | (2,390 | ) | ||||||||||||||||||
11/27/2018 | JPMorgan Chase | AUD | 42,000 | USD | 30,615 | 29,750 | (865 | ) | ||||||||||||||||||
11/27/2018 | Morgan Stanley | AUD | 212,000 | USD | 153,071 | 150,165 | (2,906 | ) | ||||||||||||||||||
11/27/2018 | Royal Bank of Canada | AUD | 189,000 | USD | 134,499 | 133,874 | (625 | ) | ||||||||||||||||||
Brazilian Real/United States Dollar 11/27/2018 | Citibank | BRL | 265,000 | USD | 65,822 | 71,055 | 5,233 | |||||||||||||||||||
11/27/2018 | UBS | BRL | 306,000 | USD | 73,638 | 82,049 | 8,411 | |||||||||||||||||||
British Pound/United States Dollar 11/27/2018 | Morgan Stanley | GBP | 12,000 | USD | 15,651 | 15,355 | (296 | ) | ||||||||||||||||||
11/27/2018 | UBS | GBP | 108,000 | USD | 137,901 | 138,191 | 290 | |||||||||||||||||||
01/10/2019 | UBS | GBP | 10,000 | USD | 13,201 | 12,829 | (372 | ) | ||||||||||||||||||
01/15/2019 | Royal Bank of Canada | GBP | 9,000 | USD | 11,903 | 11,549 | (354 | ) | ||||||||||||||||||
Canadian Dollar/United States Dollar 11/27/2018 | Deutsche Bank | CAD | 14,000 | USD | 10,652 | 10,639 | (13 | ) | ||||||||||||||||||
11/27/2018 | UBS | CAD | 15,000 | USD | 11,577 | 11,399 | (178 | ) |
See accompanying Notes to Financial Statements.
2018 Annual Report | 27 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Purchase Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
Crech Koruna/United States Dollar 11/27/2018 | Citibank | CZK | 6,722,000 | USD | 298,472 | $ | 293,714 | $ | (4,758 | ) | ||||||||||||||||
Euro/United States Dollar 11/27/2018 | Barclays Bank | EUR | 147,000 | USD | 167,288 | 166,819 | (469 | ) | ||||||||||||||||||
11/27/2018 | Deutsche Bank | EUR | 132,000 | USD | 154,892 | 149,797 | (5,095 | ) | ||||||||||||||||||
11/27/2018 | Morgan Stanley | EUR | 41,000 | USD | 47,633 | 46,528 | (1,105 | ) | ||||||||||||||||||
11/27/2018 | UBS | EUR | 32,000 | USD | 37,199 | 36,314 | (885 | ) | ||||||||||||||||||
01/09/2019 | Deutsche Bank | EUR | 10,000 | USD | 11,574 | 11,399 | (175 | ) | ||||||||||||||||||
01/10/2019 | JPMorgan Chase | EUR | 9,000 | USD | 10,314 | 10,260 | (54 | ) | ||||||||||||||||||
01/16/2019 | UBS | EUR | 16,000 | USD | 18,676 | 18,249 | (427 | ) | ||||||||||||||||||
Japanese Yen/United States Dollar 11/27/2018 | Deutsche Bank | JPY | 33,359,000 | USD | 303,192 | 296,165 | (7,027 | ) | ||||||||||||||||||
New Zealand Dollar/United States Dollar 11/27/2018 | Barclays Bank | NZD | 366,000 | USD | 245,133 | 238,887 | (6,246 | ) | ||||||||||||||||||
11/27/2018 | Citibank | NZD | 568,000 | USD | 374,195 | 370,732 | (3,463 | ) | ||||||||||||||||||
11/27/2018 | Deutsche Bank | NZD | 50,000 | USD | 32,537 | 32,635 | 98 | |||||||||||||||||||
11/27/2018 | Morgan Stanley | NZD | 17,000 | USD | 11,244 | 11,096 | (148 | ) | ||||||||||||||||||
South African Rand/United States Dollar 11/27/2018 | Barclays Bank | ZAR | 3,152,000 | USD | 208,904 | 213,027 | 4,123 | |||||||||||||||||||
Swedish Krona/United States Dollar 11/27/2018 | Morgan Stanley | SEK | 2,104,000 | USD | 230,596 | 230,388 | (208 | ) | ||||||||||||||||||
11/27/2018 | UBS | SEK | 69,000 | USD | 7,741 | 7,555 | (186 | ) | ||||||||||||||||||
Swiss Franc/United States Dollar 11/27/2018 | UBS | CHF | 296,000 | USD | 300,818 | 294,547 | (6,271 | ) | ||||||||||||||||||
$ | 3,196,258 | $ | (26,823 | ) |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
Sale Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
United States Dollar/Australian Dollar 11/27/2018 | Barclays Bank | USD | 181,312 | AUD | 252,000 | $ | 178,499 | $ | 2,813 | |||||||||||||||||
11/27/2018 | Deutsche Bank | USD | 332,998 | AUD | 463,000 | 327,956 | 5,042 | |||||||||||||||||||
11/27/2018 | JPMorgan Chase | USD | 16,316 | AUD | 23,000 | 16,292 | 24 | |||||||||||||||||||
11/27/2018 | Morgan Stanley | USD | 334,617 | AUD | 460,000 | 325,831 | 8,786 | |||||||||||||||||||
11/27/2018 | Royal Bank of Canada | USD | 21,118 | AUD | 29,000 | 20,541 | 577 | |||||||||||||||||||
01/10/2019 | Deutsche Bank | USD | 77,102 | AUD | 109,000 | 77,248 | (146 | ) | ||||||||||||||||||
United States Dollar/Brazilian Real 11/27/2018 | Citibank | USD | 145,924 | BRL | 571,000 | 153,104 | (7,180 | ) | ||||||||||||||||||
11/27/2018 | UBS | USD | 232,090 | BRL | 936,000 | 250,973 | (18,883 | ) | ||||||||||||||||||
United States Dollar/British Pound 11/27/2018 | Deutsche Bank | USD | 24,973 | GBP | 19,000 | 24,311 | 662 | |||||||||||||||||||
01/10/2019 | Barclays Bank | USD | 1,678,340 | GBP | 1,281,000 | 1,643,432 | 34,908 | |||||||||||||||||||
United States Dollar/Canadian Dollar 11/27/2018 | Citibank | USD | 16,002 | CAD | 21,000 | 15,959 | 43 | |||||||||||||||||||
11/27/2018 | Morgan Stanley | USD | 12,489 | CAD | 16,000 | 12,159 | 330 | |||||||||||||||||||
11/27/2018 | UBS | USD | 308,383 | CAD | 404,000 | 307,020 | 1,363 | |||||||||||||||||||
01/10/2019 | UBS | USD | 368,181 | CAD | 475,000 | 361,366 | 6,815 |
See accompanying Notes to Financial Statements.
28 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Sale Contracts Settlement Date* | Counterparty | Amount | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
United States Dollar/Euro 11/27/2018 | Deutsche Bank | USD | 167,002 | EUR | 144,000 | $ | 163,415 | $ | 3,587 | |||||||||||||||||
11/27/2018 | JPMorgan Chase | USD | 41,690 | EUR | 36,000 | 40,854 | 836 | |||||||||||||||||||
11/27/2018 | Morgan Stanley | USD | 969,311 | EUR | 845,000 | 958,927 | 10,384 | |||||||||||||||||||
11/27/2018 | Royal Bank of Canada | USD | 246,739 | EUR | 214,000 | 242,852 | 3,887 | |||||||||||||||||||
11/27/2018 | UBS | USD | 34,470 | EUR | 30,000 | 34,045 | 425 | |||||||||||||||||||
01/10/2019 | UBS | USD | 2,881,910 | EUR | 2,487,000 | 2,835,158 | 46,752 | |||||||||||||||||||
United States Dollar/New Zealand Dollar 11/27/2018 | Deutsche Bank | USD | 82,699 | NZD | 127,000 | 82,893 | (194 | ) | ||||||||||||||||||
United States Dollar/Polish Zloty 11/27/2018 | Citibank | USD | 520,995 | PLN | 1,969,000 | 513,382 | 7,613 | |||||||||||||||||||
United States Dollar/South African Rand 11/27/2018 | Barclays Bank | USD | 76,601 | ZAR | 1,109,000 | 74,952 | 1,649 | |||||||||||||||||||
11/27/2018 | JPMorgan Chase | USD | 242,768 | ZAR | 3,538,000 | 239,115 | 3,653 | |||||||||||||||||||
11/27/2018 | Morgan Stanley | USD | 67,196 | ZAR | 985,000 | 66,571 | 625 | |||||||||||||||||||
$ | 8,966,855 | $ | 114,371 |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
At October 31, 2018, the Fund’s open forward foreign cross currency contracts were as follows:
Purchase / Sale Settlement Date | Counterparty | Amount | Amount | Contract Value | Fair Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Australian Dollar/Japanese Yen 11/27/2018 | Deutsche Bank | AUD | 329,000 | JPY | 26,752,912 | 239,635 | $ | 235,159 | $ | (4,476 | ) | |||||||||||||||||||
11/27/2018 | Royal Bank of Canada | AUD | 356,000 | JPY | 28,301,038 | 251,959 | 252,864 | 905 | ||||||||||||||||||||||
Australian Dollar/New Zealand Dollar 11/27/2018 | Royal Bank of Canada | AUD | 234,000 | NZD | 252,518 | 165,871 | 166,802 | 931 | ||||||||||||||||||||||
British Pound/Japanese Yen 11/27/2018 | Morgan Stanley | GBP | 130,000 | JPY | 19,267,006 | 171,041 | 166,328 | (4,713 | ) | |||||||||||||||||||||
Canadian Dollar / Swiss Franc 11/27/2018 | Royal Bank of Canada | CAD | 400,049 | CHF | 296,000 | 307,147 | 316,617 | 9,470 | ||||||||||||||||||||||
Euro/Japanese Yen 11/27/2018 | Deutsche Bank | EUR | 101,000 | JPY | 12,737,958 | 115,054 | 116,582 | 1,528 | ||||||||||||||||||||||
Euro/New Zealand Dollar 11/27/2018 | Deutsche Bank | EUR | 145,000 | NZD | 252,947 | 166,692 | 166,144 | (548 | ) | |||||||||||||||||||||
Japanese Yen/Australian Dollar 11/27/2018 | Deutsche Bank | JPY | 46,147,474 | AUD | 566,000 | 407,805 | 416,594 | 8,789 | ||||||||||||||||||||||
Japanese Yen/British Pound 11/27/2018 | Royal Bank of Canada | JPY | 18,082,143 | GBP | 123,000 | 160,680 | 163,831 | 3,151 | ||||||||||||||||||||||
Japanese Yen/Euro 11/27/2018 | Deutsche Bank | JPY | 12,950,000 | EUR | 100,496 | 116,435 | 117,362 | 927 | ||||||||||||||||||||||
New Zealand Dollar/Euro 11/27/2018 | Royal Bank of Canada | NZD | $ | 124,000 | EUR | 69,505 | 81,635 | 83,694 | 2,059 | |||||||||||||||||||||
Norwegian Krone/Canadian Dollar 11/27/2018 | Morgan Stanley | NOK | 1,412,505 | CAD | 220,000 | 168,057 | 168,601 | 544 | ||||||||||||||||||||||
11/27/2018 | Deutsche Bank | NOK | 1,964,000 | CAD | 309,096 | 234,421 | 232,746 | (1,675 | ) |
See accompanying Notes to Financial Statements.
2018 Annual Report | 29 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
Purchase / Sale Settlement Date | Counterparty | Amount | Amount | Contract Value | Fair Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||
Norwegian Krone/Israeli Shekel 11/27/2018 | UBS | NOK | 1,328,000 | ILS | 580,236 | 162,916 | $ | 164,315 | $ | 1,399 | ||||||||||||||||||||||
Polish Zloty/Crech Koruna 11/27/2018 | UBS | PLN | 1,131,847 | CZK | 6,720,000 | 294,940 | 296,422 | 1,482 | ||||||||||||||||||||||||
Polish Zloty/Swedish Krona 11/27/2018 | JPMorgan Chase | PLN | 582,934 | SEK | 1,420,000 | 156,890 | 153,390 | (3,500 | ) | |||||||||||||||||||||||
11/27/2018 | Deutsche Bank | PLN | 580,974 | SEK | 1,410,000 | 156,038 | 153,122 | (2,916 | ) | |||||||||||||||||||||||
Swedish Krona/Polish Zloty 11/27/2018 | Deutsche Bank | SEK | 704,000 | PLN | 288,686 | 77,263 | 79,081 | 1,818 | ||||||||||||||||||||||||
$ | 3,449,654 | $ | 15,175 | |||||||||||||||||||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts |
| 191,932 | ||||||||||||||||||||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts |
| (89,209 | ) |
At October 31, 2018, the Fund held the following over-the-counter credit default swaps:
Expiration Date | Notional Amount | Counterparty/Reference Entity | Fixed Rate | Frequency of Payments Made | Implied Credit Spread* | Premiums Paid (Received) | Value | Unrealized Depreciation | ||||||||||||||||||||
Buy Protection: | ||||||||||||||||||||||||||||
06/20/2022 | 400,000 | Barclays Bank/Vodafone Group PLC, 5%, 6/4/18 | Equal to 1.00% | Quarterly | 0.84% | $ | (2,673 | ) | $ | (7,989 | ) | $ | (5,316 | ) | ||||||||||||||
Sell Protection: | ||||||||||||||||||||||||||||
06/20/2022 | 200,000 | Barclays Bank/Virgin Media Finance PLC, 7%, 4/15/23 | Equal to 5.00% | Quarterly | 2.05% | $ | 30,823 | $ | 30,545 | $ | (278 | ) |
At October 31, 2018, the Fund held the following centrally cleared credit default swaps:
Expiration Date | Notional Amount | Credit Index | Fixed Rate | Frequency of Payments Made | Implied Credit Spread* | Premiums Paid (Received) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||
Buy Protection: | ||||||||||||||||||||||||||||
06/20/2023 | 3,850,000 | iTRAXX-Crossover 5-year | Equal to 1.00% | Quarterly | 1.06% | $ | (67,112 | ) | $ | (66,144 | ) | $ | 968 | |||||||||||||||
06/20/2023 | 300,000 | iTRAXX-Crossover 5-year | Equal to 5.00% | Quarterly | 0.63% | (20,424 | ) | (19,966 | ) | 458 | ||||||||||||||||||
12/20/2021 | 400,000 | iTRAXX-Europe 5-year | Equal to 1.00% | Quarterly | 0.39% | (5,355 | ) | (9,492 | ) | (4,137 | ) | |||||||||||||||||
12/20/2021 | 900,000 | iTRAXX-Crossover 5-year | Equal to 5.00% | Quarterly | 1.00% | (92,775 | ) | (90,324 | ) | 2,451 | ||||||||||||||||||
$ | (185,666 | ) | $ | (185,926 | ) | $ | (260 | ) |
* | Implied credit spreads, represented in absolute terms, are utilized in determining the market value of credit default swap agreements on corporate issues or sovereign issues and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made prior to entering into the agreement. For credit default swaps with asset-backed securities or credit indices as the underlying assets, the quoted market prices and resulting market values serve as an indicator of the current status of the payment/performance risk. Wider credit spreads and increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
See accompanying Notes to Financial Statements.
30 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Global Unconstrained Fixed Income Fund
At October 31, 2018, the Fund’s centrally cleared interest rate swaps were as follows:
Currency | Notional Amount | Expiration Date | Receive/Pay Floating Rate | Floating Rate Index | Fixed Rate | Frequency of Payments Made | Premiums Paid (Received) | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||
CAD | $ | 5,040,000 | 01/03/2020 | Pay | 3-month BA CDOR | 2.27% | Quarterly | $ | 12,581 | $ | 13,285 | $ | 704 | |||||||||||||||||||
CAD | 380,000 | 01/03/2020 | Pay | 3-month BA CDOR | 2.27% | Quarterly | – | 1,006 | 1,006 | |||||||||||||||||||||||
CAD | 1,950,000 | 01/03/2020 | Pay | 3-month BA CDOR | 2.27% | Quarterly | (673 | ) | 5,140 | 5,813 | ||||||||||||||||||||||
CAD | 1,960,000 | 01/03/2020 | Pay | 3-month BA CDOR | 2.27% | Quarterly | (676 | ) | 5,166 | 5,842 | ||||||||||||||||||||||
CAD | 1,190,000 | 10/05/2023 | Pay | 3-month BA CDOR | 2.84% | Quarterly | – | (2,041 | ) | (2,041 | ) | |||||||||||||||||||||
GBP | 910,000 | 08/01/2023 | Pay | 6-month LIBOR BBA | 1.38% | Quarterly | – | (2,122 | ) | (2,122 | ) | |||||||||||||||||||||
GBP | 1,430,000 | 09/12/2023 | Pay | 6-month LIBOR BBA | 1.38% | Semiannually | 25 | (1,263 | ) | (1,288 | ) | |||||||||||||||||||||
GBP | 80,000 | 06/18/2028 | Pay | 6-month LIBOR BBA | 1.56% | Semiannually | 631 | (116 | ) | (747 | ) | |||||||||||||||||||||
GBP | 490,000 | 06/18/2028 | Pay | 6-month LIBOR BBA | 1.56% | Semiannually | – | (713 | ) | (713 | ) | |||||||||||||||||||||
GBP | 80,000 | 06/18/2028 | Pay | 6-month LIBOR BBA | 1.56% | Semiannually | 8 | (119 | ) | (127 | ) | |||||||||||||||||||||
NZD | 2,390,000 | 10/05/2023 | Pay | 3-month BBR FRA | 2.59% | Quarterly | – | (20,702 | ) | (20,702 | ) | |||||||||||||||||||||
SEK | 6,790,000 | 09/18/2028 | Pay | 3-month STIBOR | 1.28% | Quarterly | – | (4,090 | ) | (4,090 | ) | |||||||||||||||||||||
USD | 310,000 | 08/10/2022 | Pay | 3-month LIBOR BBA | 1.90% | Quarterly | 11,355 | 13,782 | 2,427 | |||||||||||||||||||||||
USD | 1,150,000 | 08/10/2022 | Pay | 3-month LIBOR BBA | 1.90% | Quarterly | 42,123 | 51,125 | 9,002 | |||||||||||||||||||||||
USD | 670,000 | 07/02/2023 | Pay | 3-month LIBOR BBA | 2.74% | Quarterly | – | 6,426 | 6,426 | |||||||||||||||||||||||
USD | 810,000 | 09/19/2023 | Pay | 3-month LIBOR BBA | 2.96% | Quarterly | – | 5,566 | 5,566 | |||||||||||||||||||||||
USD | 1,480,000 | 09/19/2023 | Pay | 3-month LIBOR BBA | 3.02% | Quarterly | 730 | 6,221 | 5,491 | |||||||||||||||||||||||
USD | 1,480,000 | 09/19/2023 | Pay | 3-month LIBOR BBA | 3.02% | Quarterly | – | 6,195 | 6,195 | |||||||||||||||||||||||
USD | 1,750,000 | 09/27/2023 | Pay | 3-month LIBOR BBA | 3.10% | Quarterly | – | 1,357 | 1,357 | |||||||||||||||||||||||
USD | 1,140,000 | 10/15/2023 | Pay | 12-month CPI | 2.26% | At maturity | – | (4,742 | ) | (4,742 | ) | |||||||||||||||||||||
USD | 220,000 | 08/10/2027 | Pay | 3-month LIBOR BBA | 2.24% | Quarterly | 1,167 | 16,479 | 15,312 | |||||||||||||||||||||||
USD | 1,190,000 | 08/10/2027 | Pay | 3-month LIBOR BBA | 2.24% | Quarterly | – | 89,129 | 89,129 | |||||||||||||||||||||||
USD | 720,000 | 09/04/2028 | Pay | 3-month LIBOR BBA | 2.93% | Quarterly | – | 17,410 | 17,410 | |||||||||||||||||||||||
USD | 40,000 | 08/10/2047 | Pay | 3-month LIBOR BBA | 2.53% | Quarterly | 3,508 | 5,901 | 2,393 | |||||||||||||||||||||||
USD | 250,000 | 08/10/2047 | Pay | 3-month LIBOR BBA | 2.53% | Quarterly | 21,928 | 36,883 | 14,955 | |||||||||||||||||||||||
$ | 92,707 | $ | 245,163 | $ | 152,456 | |||||||||||||||||||||||||||
AUD | 2,150,000 | 10/05/2023 | Receive | 6-month BBR BBSW | 2.51% | Semiannually | $ | – | $ | 6,019 | $ | 6,019 | ||||||||||||||||||||
CAD | 7,110,000 | 01/03/2020 | Receive | 3-month BA CDOR | 2.27% | Quarterly | – | (18,740 | ) | (18,740 | ) | |||||||||||||||||||||
CAD | 5,040,000 | 01/03/2020 | Receive | 3-month BA CDOR | 2.27% | Quarterly | (1,603 | ) | (13,284 | ) | (11,681 | ) | ||||||||||||||||||||
CAD | 1,530,000 | 07/26/2020 | Receive | 3-month BA CDOR | 2.59% | Quarterly | – | (2,574 | ) | (2,574 | ) | |||||||||||||||||||||
CAD | 1,800,000 | 07/26/2020 | Receive | 3-month BA CDOR | 2.59% | Quarterly | (1,037 | ) | (3,029 | ) | (1,992 | ) | ||||||||||||||||||||
CAD | 5,020,000 | 07/26/2020 | Receive | 3-month BA CDOR | 2.59% | Quarterly | – | (8,385 | ) | (8,385 | ) | |||||||||||||||||||||
CAD | 5,450,000 | 10/07/2020 | Receive | 3-month BA CDOR | 2.89% | Quarterly | – | 1,353 | 1,353 | |||||||||||||||||||||||
EUR | 3,240,000 | 06/29/2022 | Receive | 12-month EONIA | 0.20% | Annually | – | (3,332 | ) | (3,332 | ) | |||||||||||||||||||||
EUR | 700,000 | 06/29/2022 | Receive | 12-month EONIA | 0.20% | Annually | (933 | ) | (719 | ) | 214 | |||||||||||||||||||||
EUR | 1,640,000 | 06/29/2022 | Receive | 12-month EONIA | 0.20% | Annually | 816 | (1,686 | ) | (2,502 | ) | |||||||||||||||||||||
EUR | 1,600,000 | 06/29/2022 | Receive | 12-month EONIA | 0.20% | Annually | 1,107 | (1,646 | ) | (2,753 | ) | |||||||||||||||||||||
EUR | 1,580,000 | 06/29/2022 | Receive | 12-month EONIA | 0.20% | Quarterly | (3,502 | ) | (1,625 | ) | 1,877 | |||||||||||||||||||||
EUR | 600,000 | 04/15/2027 | Receive | 12-month CPI | 1.35% | Quarterly | 1,283 | (12,301 | ) | (13,584 | ) | |||||||||||||||||||||
EUR | 650,000 | 09/18/2028 | Receive | 6-month EURIBOR | 1.03% | Semiannually | – | 6,711 | 6,711 | |||||||||||||||||||||||
GBP | 6,260,000 | 09/12/2020 | Receive | 6-month LIBOR BBA | 1.27% | Semiannually | – | 2,621 | 2,621 | |||||||||||||||||||||||
GBP | 950,000 | 07/15/2023 | Receive | 12-month UK RPI | 3.35% | Quarterly | – | (14,813 | ) | (14,813 | ) | |||||||||||||||||||||
GBP | 1,080,000 | 07/15/2023 | Receive | 12-month UK RPI | 3.35% | Quarterly | – | (16,840 | ) | (16,840 | ) | |||||||||||||||||||||
GBP | 180,000 | 08/01/2048 | Receive | 6-month LIBOR BBA | 1.66% | Semiannually | – | (2,549 | ) | (2,549 | ) | |||||||||||||||||||||
PLN | 13,210,000 | 06/11/2020 | Receive | 3-month WIBOR | 2.01% | Quarterly | – | 1,273 | 1,273 | |||||||||||||||||||||||
USD | 3,840,000 | 09/19/2020 | Receive | 3-month LIBOR BBA | 2.95% | Quarterly | 1,299 | (5,339 | ) | (6,638 | ) | |||||||||||||||||||||
USD | 3,840,000 | 09/19/2020 | Receive | 3-month LIBOR BBA | 2.95% | Quarterly | – | (5,272 | ) | (5,272 | ) | |||||||||||||||||||||
USD | 4,200,000 | 09/27/2020 | Receive | 12-month FEDL | 2.89% | Annually | 300 | (437 | ) | (737 | ) | |||||||||||||||||||||
USD | 4,200,000 | 09/27/2020 | Receive | 12-month FEDL | 2.89% | Annually | – | (437 | ) | (437 | ) | |||||||||||||||||||||
USD | 310,000 | 08/10/2022 | Receive | 3-month LIBOR BBA | 1.90% | Quarterly | (1,313 | ) | (13,815 | ) | (12,502 | ) | ||||||||||||||||||||
USD | 1,150,000 | 08/10/2022 | Receive | 3-month LIBOR BBA | 1.90% | Quarterly | – | (51,208 | ) | (51,208 | ) | |||||||||||||||||||||
USD | 1,350,000 | 09/04/2023 | Receive | 3-month LIBOR BBA | 2.82% | Quarterly | – | (17,972 | ) | (17,972 | ) | |||||||||||||||||||||
USD | 220,000 | 08/10/2027 | Receive | 3-month LIBOR BBA | 2.24% | Quarterly | (12,002 | ) | (16,461 | ) | (4,459 | ) | ||||||||||||||||||||
USD | 1,190,000 | 08/10/2027 | Receive | 3-month LIBOR BBA | 2.24% | Quarterly | (64,926 | ) | (89,037 | ) | (24,111 | ) | ||||||||||||||||||||
USD | 100,000 | 06/20/2028 | Receive | 3-month LIBOR BBA | 2.87% | Quarterly | (3,900 | ) | (2,118 | ) | 1,782 | |||||||||||||||||||||
USD | 730,000 | 06/20/2028 | Receive | 3-month LIBOR BBA | 2.87% | Quarterly | – | (15,463 | ) | (15,463 | ) | |||||||||||||||||||||
USD | 40,000 | 08/10/2047 | Receive | 3-month LIBOR BBA | 2.53% | Quarterly | (250 | ) | (5,904 | ) | (5,654 | ) | ||||||||||||||||||||
USD | 250,000 | 08/10/2047 | Receive | 3-month LIBOR BBA | 2.53% | Quarterly | – | (36,904 | ) | (36,904 | ) | |||||||||||||||||||||
$ | (84,661 | ) | $ | (343,913 | ) | $ | (259,252 | ) | ||||||||||||||||||||||||
$ | 8,046 | $ | (98,750 | ) | $ | (106,796 | ) |
See accompanying Notes to Financial Statements.
2018 Annual Report | 31 |
Aberdeen High Yield Managed Duration Municipal Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine High Yield Managed Duration Fund (the “Predecessor Fund”) in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen High Yield Managed Duration Municipal Fund (Institutional Class shares net of fees) returned 1.67% for the 12-month period ended October 31, 2018, versus the respective -0.37% and 4.74% returns of its benchmarks, the Standard & Poor’s (S&P) Municipal Bond Short-Intermediate Index, and the Bloomberg Barclays High Yield Municipal Bond Index. For broader comparison, the average return of the Fund’s peer category of High Yield Municipal Debt Funds (comprising 62 funds), as measured by Lipper, Inc., was 1.59% for the period.
The U.S. Federal Reserve’s (Fed’s) actions remained a key driver of the municipal market performance during the reporting period, as the central bank raised its benchmark interest rate in four 25-basis point (bps) increments to a range of 2.00%-2.25%. Against this backdrop, the U.S. Treasury and the municipal market yield curves moved upward and flattened, with short- and intermediate-duration1 maturities underperforming the most. In turn, higher interest rates resulted in negative returns for the Bloomberg Barclays Municipal Bond Index,2 a broad municipal bond market benchmark, for six out of the twelve months within the reporting period. The municipal bond market outperformed its taxable bond counterpart over the reporting period, as the Bloomberg Barclays U.S. Aggregate Bond Index3 returned -2.05%. Generally solid fundamentals, overall positive investor demand and moderating supply supported the municipal market.
During the reporting period, the Fund’s average weighted maturity and effective duration were shorter than that of the S&P Municipal Bond Short-Intermediate Index. This was advantageous to Fund performance, given continued Fed monetary policy tightening. The Fund had an underweight allocation to lower-quality securities relative to the Bloomberg Barclays High Yield Municipal Bond Index for the period. This hampered the Fund’s relative performance, as lower-credit quality spreads narrowed and outperformed their higher-credit quality counterparts.
Positive contributors to the Fund’s total return during the reporting period included its exposures to charter schools, resource recovery and appropriation debt. This was partially offset by the Fund’s exposures to hospitals, natural gas and education (largely public schools). From a security selection perspective, the Fund’s allocation to high-yield municipal bonds was the largest contributor to the total return, while the holdings in BB rated4 securities had a negative impact. Finally, in terms of the Fund’s positioning among individual states, the allocations to New York, California and Illinois were the largest contributors to the total return, while positions in Ohio, Texas and Puerto Rico hampered the Fund’s performance. We think that it is important to note that 100% of the Fund’s exposure to Puerto Rico is insured by either Assured Guaranty or National Public Finance Guarantee Corporation, both of which have strong claims paying ability, in our opinion.
Throughout the reporting period, the Fund maintained roughly a 60%/40% allocation to high-yield and investment-grade bonds.5 We believed that this positioning was appropriate given our outlook for interest rates and the potential for future spread-widening. From a sector allocation perspective, we maintained the Fund’s overweight allocation to revenue-backed securities, such as those in the education and healthcare sectors, and the underweight to general obligation (GO) bonds. The Fund ended the reporting period with an underweight position in tobacco bonds relative to its benchmark. In our view, the tobacco sector has become less attractive as it has historically been quite volatile and now has become more expensive. Additionally, we think that several macroeconomic factors could hamper tobacco bonds, including less usage, increased age requirements to purchase tobacco products, and rising taxes in certain states, all of which could have a negative impact on future cash flows.
We believe that new municipal issuance will experience an uptick in the fourth quarter of 2018, but generally will be well absorbed by investor demand. The Fed is expected to raise interest rates again at its meeting in December 2018, and an additional three times in 2019, which will likely result in higher municipal yields. Nonetheless, in our view, municipal fundamentals remain strong overall and economic growth in the U.S. is fairly robust. Against this backdrop,
1 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
2 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the performance of the investment -grade, U.S. dollar-denominated, fixed-rate taxable bond market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
3 | The Bloomberg Barclays Municipal Bond Index tracks the performance of investment-grade, tax-exempt bonds with a maturity of at least one year. |
4 | S&P Global Ratings’ credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from AAA to D to communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. |
5 | Companies whose bonds are rated as “investment-grade” usually have a lower chance of defaulting on their debt than those rated as “non-investment grade.” These bonds generally are issued by long-established companies with strong balance sheets. Bonds rated BBB or above by major credit rating agencies are considered investment-grade. |
32 | Annual Report 2018 |
Aberdeen High Yield Managed Duration Municipal Fund (Unaudited) (concluded)
municipalities are looking to strengthen their balance sheets and local defaults remain low. Nevertheless, we are avoiding areas that are experiencing deteriorating fundaments, including Illinois, Connecticut and Michigan, as well as Chicago and the Commonwealth of Puerto Rico. In terms of portfolio positioning, with high-yield municipal spreads near their tightest levels since 2007, we have maintained an overweight allocation to higher-rated securities. We anticipate retaining this stance as we do not see sufficient value in moving down in credit quality, especially given that we are at the later stage of the credit cycle.
Portfolio Management:
U.S. Municipal Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 4.25% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Municipal bonds can be significantly affected by political and economic changes, including inflation, as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 33 |
Aberdeen High Yield Managed Duration Municipal Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5Yr. | Inception2 | |||||||||||
Class A | w/o SC | 1.42% | 3.45% | 3.17% | ||||||||||
w/SC3 | (2.85% | ) | 2.55% | 2.36% | ||||||||||
Institutional Class4 | w/o SC | 1.67% | 3.69% | 3.42% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | Predecessor Fund commenced operations on May 31, 2013. |
3 | A 4.25% front-end sales charge was deducted. |
4 | Not subject to any sales charges. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen High Yield Managed Duration Municipal Fund, the S&P Municipal Bond Short Intermediate Index, the Bloomberg Barclays Municipal Bond: High Yield (Non-Investment Grade) Index and the Consumer Price Index (CPI) since inception. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The S&P Municipal Bond Short Intermediate Index consists of bonds in the S&P Municipal Bond Index with a minimum maturity of one year and a maximum maturity of up to, but not including, eight years as measured from the Rebalancing Date.
The Bloomberg Barclays Municipal Bond: High Yield (Non-Investment Grade) Index is the Municipal High Yield component of the Bloomberg Barclays Municipal Bond Index. The Bloomberg Barclays Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
34 | Annual Report 2018 |
Aberdeen High Yield Managed Duration Municipal Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Municipal Bonds | 98.9% | |||
Mutual Funds | 0.1% | |||
Other Assets in Excess of Liabilities | 1.0% | |||
100.0% |
Top Holdings | ||||
City of Amsterdam General Obligation Limited Bonds, Series C 07/25/2019 | 3.1% | |||
Mississippi Business Finance Corp. Revenue Bonds (PSL-North America), Series A 11/01/2032 | 2.4% | |||
Puerto Rico Public Buildings Authority Revenue Bonds 07/01/2023 | 1.6% | |||
Pennsylvania Economic Development Financing Authority Revenue Bonds (Talen Energy Supply LLC), Series C 12/01/2037 | 1.5% | |||
Texas Municipal Gas Acquisition & Supply Corp. I Revenue Bonds, Series D 12/15/2026 | 1.5% | |||
California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (CalPlant I LLC) 07/01/2022 | 1.5% | |||
Tarrant County Cultural Education Facilities Finance Corp. Revenue Bonds (Buckingham Senior Living Community, Inc.), Series B-1 11/15/2024 | 1.5% | |||
Buckeye Tobacco Settlement Financing Authority Tobacco Settlement Assets-Backed Revenue Bonds, Series A-2 06/01/2024 | 1.3% | |||
Chicago Board of Education Certificate of Particapation, Series A 01/01/2020 | 1.3% | |||
Phoenix Industrial Development Authority Education Facility Revenue Bonds (Legacy Traditional Schools Project), Series A 07/01/2022 | 1.3% | |||
Other | 83.0% | |||
100.0% |
Top States | ||||
New York | 9.8% | |||
Texas | 9.7% | |||
Illinois | 9.4% | |||
Puerto Rico | 7.6% | |||
Pennsylvania | 6.7% | |||
Ohio | 3.7% | |||
Maryland | 3.5% | |||
California | 3.3% | |||
Arizona | 3.3% | |||
Mississippi | 2.9% | |||
Other | 40.1% | |||
100.0% |
2018 Annual Report | 35 |
Statement of Investments
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
MUNICIPAL BONDS (98.9%) | ||||||||
Alabama (1.1%) | ||||||||
Alabama Industrial Development Solid Waste Disposal Revenue Bonds (OfficeMax, Inc.), 6.45%, 12/01/2023 | $ | 750,000 | $ | 749,970 | ||||
Health Care Authority for Baptist Health Revenue Bonds, Series D, 5.00%, 11/15/2021 | 850,000 | 852,439 | ||||||
Jemison Public Building Authority Revenue Bonds, Series B | 70,000 | 70,116 | ||||||
3.00%, 03/01/2020 | 70,000 | 70,381 | ||||||
3.00%, 03/01/2021 | 70,000 | 70,454 | ||||||
Jemison Water & Sewer Revenue Bonds, Series A 3.00%, 03/01/2019 | 50,000 | 49,963 | ||||||
3.00%, 03/01/2020 | 50,000 | 49,772 | ||||||
3.00%, 03/01/2021 | 50,000 | 49,521 | ||||||
3.50%, 03/01/2026 | 290,000 | 277,823 | ||||||
2,240,439 | ||||||||
Arizona (3.3%) | ||||||||
Arizona Industrial Development Authority Revenue Bonds (Kaizen Education Foundation) 5.00%, 07/01/2022 (a) | 385,000 | 394,417 | ||||||
5.00%, 07/01/2023 (a) | 405,000 | 415,980 | ||||||
La Paz County Industrial Development Authority Revenue Bonds (Charter School Solutions), Series A | 725,000 | 742,683 | ||||||
5.00%, 02/15/2026 (a) | 500,000 | 541,060 | ||||||
Maricopa County Industrial Development Authority Revenue Bonds (Paragon Management, Inc.) | 385,000 | 380,365 | ||||||
4.00%, 07/01/2026 (a) | 1,250,000 | 1,251,012 | ||||||
Phoenix Industrial Development Authority Education Facility Revenue Bonds (BASIS Schools, Inc.), 3.00%, 07/01/2020 (a) | 85,000 | 83,844 | ||||||
Phoenix Industrial Development Authority Education Facility Revenue Bonds (Freedom Academy, Inc.), 3.88%, 07/01/2021 (a) | 160,000 | 159,293 | ||||||
Phoenix Industrial Development Authority Education Facility Revenue Bonds (Legacy Traditional Schools Project), Series A 4.75%, 07/01/2019 (a)(e) | 55,000 | 55,575 | ||||||
4.00%, 07/01/2022 (a) | 2,800,000 | 2,722,664 | ||||||
6,746,893 | ||||||||
Arkansas (0.8%) | ||||||||
Arkansas Public Housing Authority Municipal Series 1 LLC Revenue Bonds, 3.75%, 09/01/2026 (a)(b) | 1,420,000 | 1,409,776 | ||||||
County of Boone Hospital Revenue Bonds (North Arkansas Regional Medical Center), 2.95%, 05/01/2019 | 200,000 | 200,052 | ||||||
1,609,828 | ||||||||
California (3.3%) | ||||||||
California Municipal Finance Authority Revenue Bonds (SDORI Charter School Properties LLC), Series A, 5.00%, 03/01/2025 (a) | 250,000 | 248,645 | ||||||
California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds | ||||||||
7.00%, 07/01/2022 (a)(e) | 3,000,000 | 3,076,260 | ||||||
7.50%, 07/01/2032 (a)(e) | 1,500,000 | 1,539,990 | ||||||
Inland Empire Tobacco Securitization Authority Revenue Bonds, Series A | 145,000 | 144,997 | ||||||
5.00%, 06/01/2021 | 110,000 | 110,013 | ||||||
Palomar Pomerado Health Care Certificates of Particpation, 5.50%, 11/01/2019 | 685,000 | 696,145 | ||||||
Tobacco Securitization Authority of Northern California Revenue Bonds, Series A-2, 5.40%, 06/01/2027 | 985,000 | 990,162 | ||||||
6,806,212 | ||||||||
Colorado (0.8%) | ||||||||
Colorado Health Facilities Authority Revenue Bonds (Covenant Retirement Communities Obligated Group), Series B, 3.15%, 12/01/2018 | 110,000 | 110,080 | ||||||
Colorado Health Facilities Authority Revenue Bonds (Frasier Meadows Manor, Inc.), Series B 5.00%, 05/15/2028 | 500,000 | 530,340 | ||||||
5.00%, 05/15/2029 | 585,000 | 618,234 | ||||||
Lambertson Farms Metropolitan District No. 1 General Obligation Limited Bonds, 5.00%, 12/15/2025 | 500,000 | 491,460 | ||||||
1,750,114 | ||||||||
Connecticut (1.8%) | ||||||||
City of West Haven General Obligation Unlimited Bonds | ||||||||
Series A, 3.00%, 11/01/2018 | 215,000 | 215,000 | ||||||
Series A, 5.00%, 11/01/2025 | 325,000 | 342,030 | ||||||
Series B, 5.00%, 11/01/2025 | 240,000 | 252,576 | ||||||
Series A, 5.00%, 11/01/2026 | 325,000 | 342,280 | ||||||
Series B, 5.00%, 11/01/2026 | 200,000 | 210,634 | ||||||
Series B, 5.00%, 11/01/2027 | 200,000 | 210,354 | ||||||
Series A, 5.00%, 11/01/2027 | 310,000 | 326,049 | ||||||
Connecticut State Health & Educational Facility Authority Revenue Bonds (Church Home Of Hartford, Inc.), Series B-1, 3.25%, 09/01/2021 (a) | 505,000 | 505,045 | ||||||
Connecticut State Health & Educational Facility Authority Revenue Bonds (Masonicare Corp. Obligated Group), Series F, 5.00%, 07/01/2024 | 1,000,000 | 1,075,350 | ||||||
Mohegan Tribe of Indians of Connecticut Revenue Bonds, Series C, 4.75%, 02/01/2020 (a) | 290,000 | 293,144 | ||||||
3,772,462 | ||||||||
Delaware (0.2%) | ||||||||
Delaware State Economic Development Authority Revenue Bonds (Delmarva Power & Light Co.), 1.80%, 10/01/2029 (b) | 400,000 | 400,000 | ||||||
District of Columbia (1.8%) | ||||||||
District of Columbia Revenue Bonds (Forest Hills of the District of Columbia), 4.50%, 01/01/2025 | 195,000 | 188,967 |
See accompanying Notes to Financial Statements.
36 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
District of Columbia Revenue Bonds (Howard University), Series A, 5.25%, 10/01/2022 | $ | 475,000 | $ | 495,857 | ||||
District of Columbia Revenue Bonds (Ingleside Presbyterian Retirement Community, Inc.), Series B, 3.88%, 07/01/2024 | 1,500,000 | 1,489,020 | ||||||
District of Columbia Revenue Bonds (National Law Enforcement Officers Memorial Fund, Inc.), Series B, 5.75%, 07/01/2025 | 1,485,000 | 1,467,922 | ||||||
3,641,766 | ||||||||
Florida (2.7%) | ||||||||
Capital Trust Agency, Inc. Revenue Bonds (River City Education Services, Inc.), Series A, 4.63%, 02/01/2025 (e) | 170,000 | 167,498 | ||||||
Capital Trust Agency, Inc. Revenue Bonds (Silver Creek St. Augustine LLLP), Series A, 6.50%, 01/01/2024 (c) | 250,000 | 175,000 | ||||||
Celebration Pointe Community Development District No.1 Special Assessment Revenue Bonds, 4.75%, 05/01/2024 | 80,000 | 80,886 | ||||||
City of Atlantic Beach Health Care Facilities Revenue Bonds (Naval Continuing Care Retirement Foundation, Inc.), Series A, 5.00%, 11/15/2021 | 200,000 | 213,080 | ||||||
Florida Development Finance Corp. Educational Facilities Revenue Bonds (Miami Arts Charter School Project), Series A, 5.00%, 06/15/2024 (a) | 100,000 | 97,416 | ||||||
Florida Development Finance Corp. Solid Waste Revenue Bonds (Waste Pro USA, Inc.), 5.00%, 08/01/2029 (a)(b) | 2,000,000 | 2,049,240 | ||||||
Martin County Industrial Development Authority Revenue Bonds (Indiantown Cogeneration LP), 4.20%, 12/15/2025 (a) | 2,000,000 | 2,027,460 | ||||||
Tampa Solid Waste System Revenue Bonds, 5.00%, 10/01/2020 | 200,000 | 209,704 | ||||||
Village Community Development District #11, Special Assessment Revenue Bonds, 3.25%, 05/01/2019 | 25,000 | 25,185 | ||||||
Village Community Development District #12, Special Assessment Revenue Bonds, 2.88%, 05/01/2021 | 500,000 | 501,735 | ||||||
5,547,204 | ||||||||
Georgia (1.0%) | ||||||||
Morgan County Hospital Authority Revenue Bonds, 2.75%, 09/01/2019 | 1,500,000 | 1,499,070 | ||||||
Turner County School District Revenue Bonds, 4.50%, 12/01/2019 | 480,000 | 479,995 | ||||||
1,979,065 | ||||||||
Guam (0.1%) | ||||||||
Guam International Airport Authority Revenue Bonds (Antonio B. Won Pat International Airport Authority), Series C, 5.00%, 10/01/2021 | 250,000 | 256,610 | ||||||
Hawaii (0.3%) | ||||||||
State of Hawaii Department of Budget & Finance Revenue Bonds (Hawaii Pacific University), Series A, 5.00%, 07/01/2020 | 595,000 | 600,730 | ||||||
Idaho (0.5%) | ||||||||
Idaho Housing & Finance Association Revenue Bonds (Idaho Arts Charter School, Inc.), | 900,000 | 909,585 | ||||||
Idaho Housing & Finance Association Revenue Bonds (Victory Charter School), Series A, 4.00%, 07/01/2026 | 195,000 | 197,305 | ||||||
1,106,890 | ||||||||
Illinois (9.4%) | ||||||||
Chicago Board of Education Certificate of Particapation, Series A, 6.00%, 01/01/2020 | 2,695,000 | 2,733,565 | ||||||
Chicago Board of Education General Obligation Unlimited Bonds | ||||||||
Series A, 5.25%, 12/01/2018 | 75,000 | 75,126 | ||||||
Series C, 5.00%, 12/01/2019 | 1,500,000 | 1,524,255 | ||||||
Series C, 5.00%, 12/01/2022 | 600,000 | 622,362 | ||||||
Series A, 5.00%, 12/01/2028 | 200,000 | 222,774 | ||||||
City of Chicago General Obligation Unlimited Bonds | ||||||||
Series A, 4.00%, 01/01/2019 | 150,000 | 150,497 | ||||||
5.00%, 12/01/2024 | 90,000 | 90,300 | ||||||
Series B, 5.00%, 01/01/2026 | 40,000 | 40,104 | ||||||
Series B, 5.00%, 01/01/2027 | 955,000 | 957,196 | ||||||
Cook County School District No. 144 Prairie Hills General Obligation Unlimited Bonds, Series A, 4.00%, 12/01/2033 | 600,000 | 579,516 | ||||||
Governors State University Certificates of Particpation (Capital Improvement Project), 5.00%, 07/01/2026 | 400,000 | 438,600 | ||||||
Illinois Finance Authority Educational Facility Revenue Bonds (Rogers Park Montessori School), 5.00%, 02/01/2024 | 265,000 | 270,864 | ||||||
Illinois Finance Authority Revenue Bonds (Benedictine University), 5.00%, 10/01/2025 | 1,035,000 | 1,126,929 | ||||||
Illinois Finance Authority Revenue Bonds (CHF-Chicago LLC), Series A | 420,000 | 460,522 | ||||||
5.00%, 02/15/2028 | 400,000 | 438,368 | ||||||
5.00%, 02/15/2029 | 520,000 | 567,024 | ||||||
5.00%, 02/15/2030 | 335,000 | 363,468 | ||||||
5.00%, 02/15/2031 | 370,000 | 399,726 | ||||||
5.00%, 02/15/2032 | 225,000 | 242,035 | ||||||
Illinois Finance Authority Revenue Bonds (Chicago Charter School Foundation) 5.00%, 12/01/2028 | 250,000 | 264,767 | ||||||
5.00%, 12/01/2029 | 315,000 | 331,178 | ||||||
Illinois Finance Authority Revenue Bonds (Intrinsic Schools Belmont Campus Project), Series A, 4.50%, 12/01/2020 (a) | 305,000 | 305,049 | ||||||
Metropolitan Pier & Exposition Authority Revenue Bonds 5.50%, 06/15/2020 | 1,450,000 | 1,460,324 | ||||||
5.00%, 12/15/2025 | 295,000 | 315,559 | ||||||
5.00%, 12/15/2026 | 250,000 | 267,712 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 37 |
Statement of Investments (continued)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
5.00%, 12/15/2027 | $ | 100,000 | $ | 107,495 | ||||
5.00%, 12/15/2028 | 250,000 | 270,922 | ||||||
Public Building Commission of Chicago Revenue Bonds, Series B, 5.25%, 12/01/2018 | 1,000,000 | 1,002,360 | ||||||
Southwestern Development Authority Health Facility Revenue Bonds (Memorial Group Obligated Group), 5.75%, 11/01/2019 | 150,000 | 152,660 | ||||||
State of Illinois General Obligation Unlimited Bonds | 740,000 | 757,220 | ||||||
5.00%, 08/01/2021 | 50,000 | 51,707 | ||||||
4.00%, 02/01/2030 | 745,000 | 752,800 | ||||||
Village of Matteson Revenue Bonds 5.00%, 12/01/2019 | 115,000 | 117,609 | ||||||
5.00%, 12/01/2026 | 150,000 | 162,963 | ||||||
5.00%, 12/01/2027 | 150,000 | 162,750 | ||||||
5.00%, 12/01/2028 | 350,000 | 380,520 | ||||||
Village of Posen General Obligation Unlimited Bonds | 130,000 | 130,029 | ||||||
4.40%, 12/01/2019 | 140,000 | 140,193 | ||||||
Village of Sauk General Obligation Unlimited Bonds | 400,000 | 403,992 | ||||||
4.60%, 12/01/2026 | 300,000 | 303,144 | ||||||
Village of Willow Springs General Obligation Unlimited Bonds, Series C, | 285,000 | 285,442 | ||||||
19,429,626 | ||||||||
Indiana (1.1%) | ||||||||
City of Valparaiso Exempt Facilities Revenue Bonds (Pratt Paper LLC), 5.88%, 01/01/2024 | 180,000 | 196,744 | ||||||
Hammond Local Public Improvement Bond Bank Revenue Bonds, Series B, 4.63%, 07/15/2023 (a) | 1,870,000 | 1,897,115 | ||||||
Indiana Finance Authority Hospital Revenue Bonds (Bethany Circle of King’s Daughters’ of Madison Indiana ,Inc.), 5.00%, 08/15/2020 | 225,000 | 231,178 | ||||||
Indiana Finance Authority Revenue Bonds (United States Steel Corp.), | 50,000 | 51,152 | ||||||
2,376,189 | ||||||||
Iowa (0.1%) | ||||||||
Iowa Higher Education Loan Authority Revenue Bonds (Wartburg College), 2.50%, 10/01/2020 | 225,000 | 220,145 | ||||||
Kansas (1.8%) | ||||||||
City of Derby Sales Tax Special Obligation Revenue Bonds, 4.00%, 03/01/2025 | 1,150,000 | 1,132,256 | ||||||
Kansas Independent College Finance Authority Revenue Bonds (Bethel College), Series A, 5.65%, 05/01/2019 | 1,000,000 | 1,009,230 | ||||||
Kansas Independent College Finance Authority Revenue Bonds (Ottawa University), Series C, 6.30%, 05/01/2019 | 1,500,000 | 1,513,800 | ||||||
Overland Park Development Corp. Revenue Bonds, Series B, 5.13%, 01/01/2022 | 175,000 | 175,250 | ||||||
3,830,536 | ||||||||
Kentucky (1.0%) | ||||||||
Kentucky Economic Development Finance Authority Revenue Bonds (Masonic Homes of Kentucky, Inc.), 3.25%, 05/15/2022 | 500,000 | 500,120 | ||||||
Ohio County Pollution Control Revenue Bonds (Big Rivers Electric Corp.), Series A, | 1,500,000 | 1,509,465 | ||||||
2,009,585 | ||||||||
Louisiana (0.3%) | ||||||||
Louisiana Local Government Environmental Facilities & Community Development Authority Revenue Bonds (St. James Place of Baton Rouge), Series A, 5.50%, 11/15/2025 | 250,000 | 266,570 | ||||||
Parish of St. Charles Gulf Opportunity Zone Revenue Bonds (Valero Project), | 315,000 | 328,006 | ||||||
594,576 | ||||||||
Maryland (3.5%) | ||||||||
Anne Arundel County Consolidated Special Taxing District Bonds (Villages at Two Rivers Project), 4.20%, 07/01/2024 | 110,000 | 108,252 | ||||||
Frederick County Educational Facilties Revenue Bonds (Mount St. Marys University), Series A 5.00%, 09/01/2027 (a) | 1,495,000 | 1,601,489 | ||||||
5.00%, 09/01/2032 (a) | 740,000 | 781,581 | ||||||
Maryland Economic Development Corp. Revenue Bonds (CONSOL Marine Terminal, Inc.), | 1,445,000 | 1,491,962 | ||||||
Maryland Health & Higher Educational Facilities Authority Revenue Bonds (Adventist Healthcare Obligated Group) Series A, | ||||||||
5.00%, 01/01/2020 | 355,000 | 364,571 | ||||||
5.00%, 01/01/2021 | 450,000 | 471,596 | ||||||
The Mayor and Council of Rockville Economic Development Revenue Bonds (King Farm Presbyterian Retirement Community, Inc.) | ||||||||
Series A-2, 5.00%, 11/01/2025 | 705,000 | 762,852 | ||||||
5.00%, 11/01/2025 | 625,000 | 676,288 | ||||||
5.00%, 11/01/2026 | 365,000 | 396,010 | ||||||
5.00%, 11/01/2027 | 600,000 | 650,280 | ||||||
7,304,881 | ||||||||
Massachusetts (2.6%) | ||||||||
Lynn Housing Authority & Neighborhood Development Revenue Bonds, | 790,000 | 793,555 | ||||||
Massachusetts Development Finance Agency Revenue Bonds (Linden Ponds, Inc.), | 1,000,000 | 1,000,000 |
See accompanying Notes to Financial Statements.
38 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
Massachusetts Development Finance Agency Revenue Bonds (NewBridge on The Charles, Inc.) | ||||||||
4.00%, 10/01/2025 (a) | $ | 500,000 | $ | 503,895 | ||||
4.00%, 10/01/2026 (a) | 500,000 | 500,995 | ||||||
4.00%, 10/01/2027 (a) | 450,000 | 445,662 | ||||||
Massachusetts Development Finance Agency Revenue Bonds (Provident Commonwealth Education Resource, Inc.), 5.00%, 10/01/2024 | 1,500,000 | 1,629,225 | ||||||
Massachusetts Port Authority Facilities Revenue Bonds (Delta Air Lines, Inc.), Series A | 450,000 | 453,996 | ||||||
5.50%, 01/01/2022 | 50,000 | 50,619 | ||||||
5,377,947 | ||||||||
Michigan (1.7%) | ||||||||
Calhoun County Hospital Finance Authority Revenue Bonds (Ella E.M. Brown Charitable Circle), 5.00%, 02/15/2024 | 500,000 | 528,955 | ||||||
Charyl Stockwell Academy Revenue Bonds, 4.88%, 10/01/2023 | 85,000 | 84,247 | ||||||
Jackson College Dormitory Housing Revenue Bonds, 5.00%, 05/01/2021 | 245,000 | 247,913 | ||||||
Michigan Municipal Bond Authority Local Government Public Improvement Revenue Bonds, Series A, | 825,000 | 826,790 | ||||||
Michigan State Housing Development Authority Revenue Bonds, Series A, | 500,000 | 500,000 | ||||||
Michigan Strategic Fund Revenue Bonds (Genesee Power Station LP), 7.50%, 01/01/2021 | 540,000 | 530,264 | ||||||
Michigan Strategic Fund Revenue Bonds (United Methodist Retirement Communities, Inc.), 5.13%, 11/15/2025 | 200,000 | 200,280 | ||||||
Michigan Tobacco Settlement Finance Authority Revenue Bonds, Series A, 5.13%, 06/01/2022 | 560,000 | 555,201 | ||||||
3,473,650 | ||||||||
Minnesota (1.6%) | ||||||||
City of Blaine Senior Housing and Health Care Revenue Bonds (Crest View Obligated Group), Series A, 5.13%, 07/01/2025 | 540,000 | 525,852 | ||||||
City of Hugo Charter School Lease Revenue Bonds (CS Property Noble LLC), Series A, | 145,000 | 146,884 | ||||||
City of International Falls Pollution Control Revenue Bonds (Boise Cascade Corp.), | 815,000 | 814,967 | ||||||
City of Sauk Rapids Revenue Bonds (Good Shephard Lutheran Home of Sauk Rapids Minnesota), 5.00%, 01/01/2020 | 420,000 | 428,408 | ||||||
Oak Park Heights Nursing Home Revenue Bonds (VSSA Care Center LLC), 4.00%, 02/01/2020 | 300,000 | 303,450 | ||||||
Rice County Educational Facility Revenue Bonds (Shattuck-St Mary’s School), Series A, | 985,000 | 1,027,621 | ||||||
3,247,182 | ||||||||
Mississippi (2.9%) | ||||||||
Mississippi Business Finance Corp. Revenue Bonds (Huntington Ingalls Industries, Inc.), | 980,000 | 977,609 | ||||||
Mississippi Business Finance Corp. Revenue Bonds (PSL-North America), Series A, | 5,000,000 | 5,000,000 | ||||||
5,977,609 | ||||||||
Missouri (1.9%) | ||||||||
Platte County Industrial Develoment Authority Transportation Revenue Bonds | 685,000 | 684,760 | ||||||
5.00%, 12/01/2019 | 665,000 | 565,323 | ||||||
5.00%, 12/01/2020 | 850,000 | 679,830 | ||||||
5.00%, 12/01/2025 | 675,000 | 505,453 | ||||||
Saint Louis County Missouri Industrial Development Authority Revenue Bonds (Ranken-Jordan Pediatric Specialty Hospital) | 555,000 | 558,308 | ||||||
5.00%, 11/15/2022 | 625,000 | 651,150 | ||||||
5.00%, 11/15/2023 | 350,000 | 366,468 | ||||||
4,011,292 | ||||||||
Montana (0.2%) | ||||||||
Kalispell Housing and Healthcare Facilities Revenue Bonds (Immanuel Lutheran Corp.), Series B, 3.40%, 11/15/2022 | 500,000 | 498,130 | ||||||
Nebraska (0.3%) | ||||||||
Scotts Bluff County Hospital Authority Revenue Bonds (Regional West Medical Center), | 615,000 | 642,281 | ||||||
Nevada (0.9%) | ||||||||
City of Carson Hospital Revenue Bonds (Carson Tahoe Regional Healthcare) | 605,000 | 678,768 | ||||||
5.00%, 09/01/2029 | 620,000 | 680,704 | ||||||
Nevada Department of Business & Industry Revenue Bonds (Doral Academy of Nevada), Series A, 3.13%, 07/15/2022 (a)(e) | 600,000 | 588,552 | ||||||
1,948,024 | ||||||||
New Hampshire (0.1%) | ||||||||
New Hampshire Business Finance Authority Revenue Bonds (Casella Waste Systems, Inc.), 4.00%, 04/01/2029 (a)(b) | 250,000 | 250,372 | ||||||
New Jersey (2.0%) | ||||||||
New Jersey Economic Development Authority Revenue Bonds 5.00%, 06/15/2021 | 2,000,000 | 2,105,140 | ||||||
Series EE, 5.00%, 09/01/2023 | 700,000 | 730,940 | ||||||
New Jersey Economic Development Authority Revenue Bonds (Greater Brunswick Charter School Project), Series A, 4.75%, 08/01/2024 (a) | 90,000 | 90,489 | ||||||
New Jersey Economic Development Authority Revenue Bonds (NYNJ Link Borrower LLC), 5.25%, 01/01/2025 | 125,000 | 138,105 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 39 |
Statement of Investments (continued)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
New Jersey Economic Development Authority Revenue Bonds (United Airlines, Inc.) | $ | 190,000 | $ | 193,276 | ||||
5.50%, 04/01/2028 | 55,000 | 55,091 | ||||||
South Jersey Port Corp. Revenue Bonds, Series B | 300,000 | 326,694 | ||||||
5.00%, 01/01/2027 | 250,000 | 273,077 | ||||||
5.00%, 01/01/2028 | 255,000 | 279,100 | ||||||
4,191,912 | ||||||||
New York (9.8%) | ||||||||
Brookhaven Local Development Corp. Revenue Bonds (Active Retirement Community, Inc.) | 300,000 | 321,258 | ||||||
5.00%, 11/01/2022 | 250,000 | 271,650 | ||||||
Buffalo & Erie County Industrial Land Development Corp. Revenue Bonds (Charter School for Applied Technologies Project), 4.00%, 06/01/2022 | 895,000 | 920,248 | ||||||
Build NYC Resource Corp. Revenue Bonds (Metropolitan College of New York), | 765,000 | 782,350 | ||||||
Build NYC Resource Corp. Revenue Bonds (Metropolitan Lighthouse Charter School Project), Series A 4.00%, 06/01/2022 (a) | 190,000 | 192,400 | ||||||
5.00%, 06/01/2023 (a) | 370,000 | 390,084 | ||||||
5.00%, 06/01/2024 (a) | 390,000 | 413,123 | ||||||
5.00%, 06/01/2025 (a) | 410,000 | 435,941 | ||||||
5.00%, 06/01/2026 (a) | 430,000 | 457,864 | ||||||
5.00%, 06/01/2027 (a) | 450,000 | 479,367 | ||||||
5.00%, 06/01/2032 (a) | 500,000 | 519,780 | ||||||
City of Amsterdam General Obligation Limited Bonds, Series C, 5.50%, 07/25/2019 | 6,520,000 | 6,519,413 | ||||||
City of Ogdensburg General Obligation Limited Bonds, 4.00%, 07/31/2019 | 1,600,000 | 1,599,328 | ||||||
City of Poughkeepsie General Obligation Limited Bonds, Series A, 4.00%, 05/03/2019 | 1,820,000 | 1,827,699 | ||||||
Nassau County Tobacco Settlement Corp. Revenue Bonds, Series A-2, | 1,150,000 | 1,150,092 | ||||||
New York State Dormitory Authority Revenue Bonds (Touro College And University System Obligated Group), Series A, | 445,000 | 457,011 | ||||||
New York State Dormitory Authority Revenue Bonds (Yeshiva University), Series A | 160,000 | 160,000 | ||||||
5.00%, 11/01/2018 | 280,000 | 280,000 | ||||||
5.00%, 11/01/2019 | 95,000 | 96,552 | ||||||
Onondaga Civic Development Corp. Revenue Bonds (St Joseph’s Hospital Health Center), Series A 5.00%, 07/01/2019 | 50,000 | 51,013 | ||||||
4.63%, 07/01/2022 | 100,000 | 101,780 | ||||||
Village of Johnson City General Obligation Limited Bonds 5.00%, 10/01/2019 | 110,000 | 111,289 | ||||||
4.00%, 10/03/2019 | 2,425,000 | 2,434,967 | ||||||
5.00%, 10/01/2020 | 115,000 | 117,371 | ||||||
5.00%, 10/01/2021 | 115,000 | 117,970 | ||||||
5.00%, 10/01/2022 | 115,000 | 117,992 | ||||||
20,326,542 | ||||||||
North Carolina (0.4%) | ||||||||
North Carolina Capital Facilities Finance Agency Revenue Bonds (Johnson & Wales University), Series A, 5.00%, 04/01/2028 | 795,000 | 847,375 | ||||||
Ohio (3.7%) | ||||||||
Buckeye Tobacco Settlement Financing Authority Tobacco Settlement Assets-Backed Revenue Bonds, Series A-2 | 2,865,000 | 2,768,220 | ||||||
5.38%, 06/01/2024 | 2,055,000 | 2,005,166 | ||||||
5.75%, 06/01/2034 | 1,110,000 | 1,068,830 | ||||||
City of Cleveland Airport Special Revenue Bonds (United Airlines, Inc.), 5.38%, 09/15/2027 | 400,000 | 401,192 | ||||||
Cleveland-Cuyahoga County Port Authority Revenue Bonds, 5.00%, 12/01/2028 | 250,000 | 265,903 | ||||||
Licking County Health Care Facilites Revenue Bonds (Kendal at Granville Obligation Group), Series B, 3.75%, 07/01/2020 | 255,000 | 255,107 | ||||||
Ohio Air Quality Development Authority Revenue Bonds (AK Steel Corp.), | 200,000 | 204,106 | ||||||
Ohio Air Quality Development Authority Revenue Bonds (Ohio Valley Electric Corp.) , Series E, 5.63%, 10/01/2019 | 750,000 | 762,878 | ||||||
7,731,402 | ||||||||
Oklahoma (0.7%) | ||||||||
Payne County Economic Development Authority Revenue Bonds (White Woods Retirement Campus, Inc.) | 1,510,000 | 679,500 | ||||||
5.25%, 11/01/2024 (c) | 1,500,000 | 675,000 | ||||||
1,354,500 | ||||||||
Oregon (0.0%) | ||||||||
Multnomah County Hospital Facilities Authority Revenue Bonds (Mirabella At South Waterfront Project), Series A, 5.00%, 10/01/2019 | 20,000 | 20,443 | ||||||
Pennsylvania (6.7%) | ||||||||
Allentown Neighborhood Improvement Zone Development Authority Tax Revenue Bonds, 5.00%, 05/01/2022 (a) | 1,250,000 | 1,309,113 | ||||||
Chester County Health & Education Facilities Authority Revenue Bonds (Immaculate University), 3.00%, 11/01/2018 | 400,000 | 400,000 | ||||||
Dauphin County General Authority Revenue Bonds (Harrisburg University of Science and Technology Project) | 930,000 | 921,267 | ||||||
5.00%, 10/15/2027 (a) | 1,650,000 | 1,665,378 | ||||||
Delaware County Authority Revenue Bonds (Eastern University), 4.00%, 10/01/2019 | 505,000 | 503,192 | ||||||
Indiana County Hospital Authority Revenue Bonds (Indiana Regional Medical Center), | 100,000 | 104,570 | ||||||
Moon Industrial Development Authority Revenue Bonds (Baptist Homes Society), | 875,000 | 891,161 |
See accompanying Notes to Financial Statements.
40 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
Pennsylvania Economic Development Financing Authority Revenue Bonds (Talen Energy Supply LLC), Series C, 5.00%, 12/01/2037 (b) | $ | 3,100,000 | $ | 3,102,480 | ||||
Philadelphia Authority for Industrial Development Revenue Bonds (Discovery Charter School Project), 5.00%, 04/01/2022 | 570,000 | 570,331 | ||||||
Philadelphia Authority for Industrial Development Revenue Bonds (Evangelical Services for the Aging Obligated Group), 5.00%, 07/01/2031 | 500,000 | 519,925 | ||||||
Philadelphia Authority for Industrial Development Revenue Bonds (Kipp Philadelphia Charter School Project), Series A, 4.00%, 04/01/2026 | 800,000 | 779,424 | ||||||
Philadelphia School District General Obligation Limited Bonds, Series F, 5.00%, 09/01/2024 | 2,000,000 | 2,206,800 | ||||||
Pottsville Hospital Facilities Authority Health Center Revenue Bonds (Lehigh Valley Health Network Obligated Group), 5.75%, 07/01/2022 (a) | 100,000 | 106,593 | ||||||
Scranton School District General Obligation Limited Bonds | ||||||||
Series B, 5.00%, 06/01/2023 | 100,000 | 106,950 | ||||||
Series B, 5.00%, 06/01/2024 | 100,000 | 107,647 | ||||||
Series B, 5.00%, 06/01/2025 | 100,000 | 108,379 | ||||||
Series D, 5.00%, 06/01/2027 | 345,000 | 382,874 | ||||||
13,786,084 | ||||||||
Puerto Rico (7.6%) | ||||||||
Commonwealth of Puerto Rico General Obligation Unlimited Bonds, Series A 5.50%, 07/01/2020 | 1,315,000 | 1,356,002 | ||||||
5.50%, 07/01/2020 | 935,000 | 964,153 | ||||||
Commonwealth of Puerto Rico Public Improvement General Obligation Unlimited Bonds | ||||||||
Series A, 5.50%, 07/01/2019 | 885,000 | 897,638 | ||||||
Series A, 5.50%, 07/01/2019 | 860,000 | 872,281 | ||||||
5.50%, 07/01/2019 | 115,000 | 117,069 | ||||||
Series A, 5.50%, 07/01/2021 | 615,000 | 642,011 | ||||||
Series A, 5.00%, 07/01/2027 | 110,000 | 115,269 | ||||||
Puerto Rico Electric Power Authority Revenue Bonds | ||||||||
Series SS, 4.00%, 07/01/2019 | 235,000 | 235,265 | ||||||
Series MM, 5.00%, 07/01/2019 | 360,000 | 363,971 | ||||||
Series NN, 5.25%, 07/01/2019 | 265,000 | 268,352 | ||||||
Series UU, 5.00%, 07/01/2020 | 250,000 | 257,235 | ||||||
Series SS, 5.00%, 07/01/2020 | 155,000 | 156,389 | ||||||
Series SS, 5.00%, 07/01/2022 | 260,000 | 261,784 | ||||||
Series PP, 5.00%, 07/01/2023 | 205,000 | 205,966 | ||||||
Series SS, 5.25%, 07/01/2023 (e) | 1,420,000 | 1,497,830 | ||||||
Series UU, 5.00%, 07/01/2024 | 300,000 | 315,180 | ||||||
Series PP, 5.00%, 07/01/2024 | 835,000 | 838,590 | ||||||
Puerto Rico Highway & Transportation Authority Revenue Bonds | ||||||||
Series L, 5.25%, 07/01/2019 | 225,000 | 228,681 | ||||||
Series AA, 5.50%, 07/01/2019 | 390,000 | 395,569 | ||||||
Series BB, 5.25%, 07/01/2022 | 100,000 | 106,673 | ||||||
Series E, 5.50%, 07/01/2023 | 200,000 | 217,506 | ||||||
Series D, 5.00%, 07/01/2027 | 145,000 | 151,945 | ||||||
Puerto Rico Municipal Finance Agency Revenue Bonds, Series A, 5.00%, 08/01/2020 | 100,000 | 102,980 | ||||||
Puerto Rico Public Buildings Authority Revenue Bonds | ||||||||
Series F, 5.25%, 07/01/2019 | 500,000 | 508,180 | ||||||
Series F, 5.25%, 07/01/2019 | 115,000 | 116,455 | ||||||
Series F, 5.25%, 07/01/2021 | 1,200,000 | 1,264,164 | ||||||
6.00%, 07/01/2023 (e) | 3,000,000 | 3,259,410 | ||||||
15,716,548 | ||||||||
Rhode Island (0.6%) | ||||||||
Rhode Island Health & Educational Building Corp. Revenue Bonds (Care New England Health System Obligated Group), Series B 5.00%, 09/01/2022 | 680,000 | 713,497 | ||||||
5.00%, 09/01/2023 | 500,000 | 528,035 | ||||||
1,241,532 | ||||||||
South Carolina (2.1%) | ||||||||
South Carolina Jobs-Economic Development Authority Revenue Bonds (Palmetto Health Obligated Group), 5.00%, 08/01/2019 | 65,000 | 66,457 | ||||||
South Carolina Jobs-Economic Development Authority Revenue Bonds (RePower South Berkeley LLC) | 2,060,000 | 2,012,702 | ||||||
6.00%, 02/01/2035(a) | 1,000,000 | 989,670 | ||||||
South Carolina Jobs-Economic Development Authority Revenue Bonds (Royal Live Oaks Academy of the Arts & Sciences Charter School), Series A, 3.00%, 08/01/2020(a) | 1,225,000 | 1,218,875 | ||||||
4,287,704 | ||||||||
Texas (9.7%) | ||||||||
Arlington Higher Education Finance Corp. Revenue Bonds (Newman International Academy), Series A, 4.38%, 08/15/2026 | 650,000 | 635,076 | ||||||
Bexar County Health Facilities Development Corp. Revenue Bonds (Army Retirement Residence Obligation Group) 5.00%, 07/15/2023 | 300,000 | 320,952 | ||||||
5.00%, 07/15/2024 | 150,000 | 161,534 | ||||||
Board of Managers Joint Guadalupe County-City of Seguin Hospital Revenue Bonds, 5.00%, 12/01/2021 | 500,000 | 517,420 | ||||||
City of Houston Airport System Revenue Bonds (United Airlines, Inc.) | 200,000 | 204,466 | ||||||
Series C, 5.00%, 07/15/2020 | 150,000 | 154,659 | ||||||
City of Rowlett Bayside Public Improvement District Special Assessment Revenue Bonds, 4.90%, 09/15/2024 | 155,000 | 149,701 | ||||||
Decatur Hospital Authority Revenue Bonds (Wise Regional Health System), Series A, 5.00%, 09/01/2023 | 75,000 | 80,578 | ||||||
Harris County Cultural Education Facilities Finance Corp. Revenue Bonds (Brazos Presbyterian Homes, Inc.), 5.00%, 01/01/2027 | 895,000 | 949,147 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 41 |
Statement of Investments (continued)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
Harris County Cultural Education Facilities Finance Corp. Revenue Bonds (Willow Winds, Inc.), Series A, 5.00%, 10/01/2023 | $ | 115,000 | $ | 122,606 | ||||
Mission Economic Development Corp. Revenue Bonds (Natgasoline LLC), Series B, 5.75%, 10/01/2031 (a) | 500,000 | 515,125 | ||||||
New Hope Cultural Education Facilities Finance Corp. Revenue Bonds (Cardinal Bay, Inc.) | ||||||||
Series C, 4.00%, 07/01/2019 | 255,000 | 257,428 | ||||||
Series C, 4.00%, 07/01/2021 | 275,000 | 282,194 | ||||||
Series C, 5.00%, 07/01/2023 | 300,000 | 322,269 | ||||||
Series B, 4.00%, 07/01/2025 | 675,000 | 692,050 | ||||||
Series C, 5.00%, 07/01/2025 | 330,000 | 354,509 | ||||||
Series B, 4.00%, 07/01/2026 | 500,000 | 508,240 | ||||||
Series D, 6.00%, 07/01/2026 | 140,000 | 138,886 | ||||||
Series B, 4.00%, 07/01/2031 | 500,000 | 489,270 | ||||||
New Hope Cultural Education Facilities Finance Corp. Revenue Bonds (CHF-Collegiate Housing Island Campus LLC), Series A 5.00%, 04/01/2027 | 740,000 | 794,590 | ||||||
5.00%, 04/01/2028 | 550,000 | 587,328 | ||||||
New Hope Cultural Education Facilities Finance Corp. Revenue Bonds (MRC Senior Living), 3.25%, 11/15/2022 | 1,000,000 | 977,390 | ||||||
Port Beaumont Navigation District Revenue Bonds (Jefferson Railport Terminal II LLC), 7.25%, 02/01/2036 (a)(b) | 1,200,000 | 1,238,700 | ||||||
SA Energy Acquisition Public Facility Corp. Revenue Bonds | 80,000 | 87,898 | ||||||
5.50%, 08/01/2023 | 50,000 | 55,654 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. Revenue Bonds (Buckingham Senior Living Community, Inc.) | ||||||||
Series A, 4.50%, 11/15/2021 | 855,000 | 728,075 | ||||||
Series B-1, 5.63%, 11/15/2024 | 3,000,000 | 3,035,550 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. I Revenue Bonds | ||||||||
Series C, 3.01%, 12/15/2026 (b)(e) | 1,500,000 | 1,483,245 | ||||||
Series D, 6.25%, 12/15/2026 | 2,700,000 | 3,078,351 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. III Revenue Bonds, 5.00%, 12/15/2025 | 1,000,000 | 1,081,360 | ||||||
Texas Public Finance Authority Revenue Bonds (TexasSouthern University), 5.00%, 11/01/2021 | 100,000 | 106,579 | ||||||
20,110,830 | ||||||||
U. S. Virgin Islands (0.8%) | ||||||||
Virgin Islands Public Finance Authority Revenue Bonds, Series A, 5.00%, 10/01/2032 | 1,210,000 | 1,281,269 | ||||||
Virgin Islands Public Finance Authority Revenue Bonds (United States Virgin Islands Federal Excise Tax), Series A, 5.00%, 10/01/2020 | 330,000 | 334,950 | ||||||
1,616,219 | ||||||||
Utah (1.4%) | ||||||||
Utah Charter School Finance Authority Revenue Bonds (Esperanza Elementary School), Series A | 500,000 | 485,340 | ||||||
4.63%, 10/15/2048 (a)(b) | 1,000,000 | 948,420 | ||||||
Utah Charter School Finance Authority Revenue Bonds (Freedom Academy Foundation), 3.63%, 06/15/2021 (a)(e) | 385,000 | 379,364 | ||||||
Utah Charter School Finance Authority Revenue Bonds (Wasatch Waldorf Charter School, Inc.), Series A, 4.75%, 05/15/2048 (a)(b) | 1,250,000 | 1,186,625 | ||||||
2,999,749 | ||||||||
Vermont (0.1%) | ||||||||
Vermont Student Assistance Corp. Education Loan Revenue Bonds, Series A, 3.00%, 06/15/2019 (e) | 310,000 | 310,657 | ||||||
Washington (1.6%) | ||||||||
Washington State Housing Finance Commission Revenue Bonds (Bayview Manor Homes Obligated Group), Series B, 2.80%, 07/01/2021 (a)(e) | 390,000 | 385,940 | ||||||
Washington State Housing Finance Commission Revenue Bonds (Heron’s Key Obligated Group), Series B-1, 5.50%, 01/01/2024 (a) | 975,000 | 975,458 | ||||||
Washington State Housing Finance Commission Revenue Bonds (Mirabella), 6.00%, 10/01/2022 (a)(e) | 1,035,000 | 1,101,644 | ||||||
Washington State Housing Finance Commission Revenue Bonds (Presbyterian Retirement Communities Northwest Obligated Group) | 100,000 | 104,242 | ||||||
5.00%, 01/01/2023 | 80,000 | 84,882 | ||||||
Washington State Housing Finance Commission Revenue Bonds (Wesley Homes Lea Hill LLC) | 380,000 | 376,732 | ||||||
3.75%, 07/01/2026 (a) | 250,000 | 242,205 | ||||||
3,271,103 | ||||||||
West Virginia (1.7%) | ||||||||
Glenville State College Board of Governors Revenue Bonds | 500,000 | 492,345 | ||||||
4.00%, 06/01/2027 | 1,250,000 | 1,200,712 | ||||||
Ohio County Development Authority Revenue Bonds, 4.00%, 09/01/2023 | 1,930,000 | 1,937,450 | ||||||
3,630,507 | ||||||||
Wisconsin (2.9%) | ||||||||
Wisconsin Health & Educational Facilities Authority Revenue Bonds (Covenent Communities, Inc.) | 100,000 | 98,381 | ||||||
6.00%, 07/01/2028 | 170,000 | 166,212 | ||||||
6.50%, 07/01/2033 | 300,000 | 287,406 |
See accompanying Notes to Financial Statements.
42 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen High Yield Managed Duration Municipal Fund
Shares or Principal Amount | Value (US$) | |||||||
Wisconsin Public Finance Authority Educational Facilities Revenue Bonds (Barton College), Series A 5.00%, 03/01/2023 | $ | 1,310,000 | $ | 1,345,619 | ||||
5.00%, 03/01/2028 | 1,190,000 | 1,229,353 | ||||||
Wisconsin Public Finance Authority Educational Facilities Revenue Bonds (Guilford College) | 685,000 | 731,662 | ||||||
5.00%, 01/01/2027 | 830,000 | 884,838 | ||||||
Wisconsin Public Finance Authority Revenue Bonds (Denver Great Hall LLC), 5.00%, 09/30/2037 | 250,000 | 268,190 | ||||||
Wisconsin Public Finance Authority Revenue Bonds (Glenridge on Palmer Ranch), Series A, 7.00%, 06/01/2020 (a) | 165,000 | 171,752 | ||||||
Wisconsin Public Finance Authority Revenue Bonds (Roseman University of Health Sciences), 5.00%, 04/01/2022 | 130,000 | 135,710 | ||||||
Wisconsin Public Finance Authority Senior Living Revenue Bonds (Mary’s Woods at Marylhurst, Inc.), Series A, 3.95%, 11/15/2024 (a) | 620,000 | 623,435 | ||||||
5,942,558 | ||||||||
Total Municipal Bonds | 205,035,903 | |||||||
SHORT-TERM INVESTMENT (0.1%) | ||||||||
MUTUAL FUNDS (0.1%) | ||||||||
United States (0.1%) | ||||||||
BlackRock Liquidity Funds MuniCash Portfolio, Institutional Shares | 142,363 | 142,377 | ||||||
Total Mutual Funds | 142,377 | |||||||
Total Investments |
| 205,178,280 | ||||||
Other Assets in Excess of Liabilities—1.0% | 2,064,686 | |||||||
Net Assets—100.0% | $ | 207,242,966 |
(a) | Denotes a security issued under Regulation S or Rule 144A. |
(b) | Variable rate instrument. The rate shown is based on the latest available information as of October 31, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(c) | Security is in default. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
(e) | All or a portion of the security has been designated as collateral for the line of credit. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 43 |
Aberdeen Tax-Free Income Fund (Unaudited)
The Aberdeen Tax-Free Income Fund (Institutional Class shares net of fees) returned -0.39% for the 12-month period ended October 31, 2018, versus the -0.63% return of its benchmark, the ICE Bank of America Merrill Lynch (BofA ML) 1-22 Year U.S. Municipal Securities Index. For broader comparison, the average return of the Fund’s peer category of Morningstar Municipal National Intermediate Funds (comprising 89 funds) was -0.59% for the period.
Over the reporting period, the U.S. Federal Reserve’s (Fed’s) actions were a key driver of the municipal market performance, as the central bank raised its benchmark interest rate four times in 25-basis point (bps) increments to a range of 2.00%-2.25%, reflecting the Fed Board of Governors’ concerns over the inflationary pressures building in the U.S. economy. In response, the U.S. Treasury and the AAA-municipal market (MMD) yield curves1 shifted upward and flattened, resulting in negative returns for the period. Municipal credit spreads concurrently rallied as investors remained constructive about credit risk. However, spread-tightening overall wasn’t enough to fully offset the negative impact from rising interest rates.
The U.S. economy continued to expand at a healthy rate over the 12-month reporting period, with growth accelerating into the second and third quarters of 2018. U.S. gross domestic product (GDP) grew at 4.2% and 3.5% year-over-year during the second and third quarters, respectively, underpinned by robust labor market conditions, rising wages, and strong consumer spending. The U.S. labor market continued to create jobs, with the unemployment rate reaching a multi-decade low of 3.7% in October, while lower taxes continued to add marginally to workers’ paychecks, further bolstering consumer spending. These factors lead us to believe that the U.S. economy should remain on solid footing in 2019; however, we believe that U.S. economic growth will moderate next year relative to 2018, driven in part by the tightening credit conditions as a result of hawkish Fed monetary policy. On our view, the lack of a trade deal with China could also add to marginal slowing in the U.S. economy in 2019. Overall, we believe that the current U.S. expansionary cycle is mature and likely is peaking.
The Fund outperformed its benchmark, the ICE BofA ML 1-22 Year Municipal Securities Index, and its peer Morningstar Municipal National Intermediate category average over the 12-month period ended October 31, 2018. The Fund has performed particularly well during periods of market pullback, such as during the fall of 2018, when it delivered top-quartile performance relative to its Morningstar peer group. This was in line with our expectations, given the Fund’s conservative up-in-credit-quality positioning. The Fund’s shorter average maturity profile, as measured by duration,2 as well as security selection, both contributed significantly to the Fund’s strong relative performance over the reporting period. We continue to focus on adding prudent yield to the Fund without taking on significant duration risk, while we are targeting overall strong credit quality.
Looking ahead, we anticipate two or more additional interest-rate hikes by the Fed over the next 12-month period. Additionally, we believe that moderating U.S. economic growth coupled with tightening credit conditions and increased risk for geopolitical headlines, such as escalating trade tensions with China for example, could lead to higher market volatility over the next year. We believe that the Fund is well-positioned to perform in such an environment. With a significant number of the Fund’s holdings maturing over the next 12 months, we believe that the Fund’s performance can benefit from its ability to reinvest a substantial portion of the maturities at higher yields as the Fed continues to raise interest rates. Furthermore, we will maintain our focus on credit quality as the U.S. economy enters the late stages of the current expansionary cycle and as the risk of potential recession continues to gradually rises over time.
Portfolio Management:
U.S. Municipal Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 4.25% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Municipal bonds can be significantly affected by political and economic changes, including inflation, as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders.
Please read the prospectus for more detailed information regarding these and other risks.
1 | The MMD/Treasury ratio is calculated by dividing the yields on an index of AAA-rated municipal bonds by the yields on comparable-duration Treasuries. The ratio employs indices from Thomson-Reuters Municipal Market Data. |
2 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
44 | Annual Report 2018 |
Aberdeen Tax-Free Income Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | (0.65% | ) | 1.96% | 3.74% | |||||||||
w/SC2 | (4.88% | ) | 1.09% | 3.28% | ||||||||||
Class C | w/o SC | (1.39% | ) | 1.20% | 2.97% | |||||||||
w/SC3 | (2.36% | ) | 1.20% | 2.97% | ||||||||||
Class R4 | w/o SC | (1.00% | ) | 1.70% | 3.71% | |||||||||
Institutional Service Class4 | w/o SC | (0.40% | ) | 2.19% | 3.99% | |||||||||
Institutional Class4,5 | w/o SC | (0.39% | ) | 2.23% | 4.01% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Credit Suisse Asset Management, LLC served as the subadviser for the Fund from June 23, 2008 to February 27, 2011. |
2 | A 4.25% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charge. Returns before the first offering of the Class R, Institutional Class and Institutional Service Class shares (February 25, 2013) are based on the previous performance of Class D shares. Returns of each class have not been adjusted to reflect the expenses applicable to the respective classes. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Class R, Institutional Service Class, and Institutional Class shares would have produced because all classes invest in the same portfolio of securities. Returns for the Class R, Institutional Service Class, and Institutional Class shares would only differ to the extent of the differences in expenses of the classes. |
5 | Effective February 25, 2013, all Class D shares of the Fund were converted into Institutional Class shares of the Fund. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen Tax-Free Income Fund, the ICE BofA Merrill Lynch 1-22 Year U.S. Municipal Securities Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The ICE BofA Merrill Lynch 1-22 Year U.S. Municipal Securities Index is a subset of the ICE BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity less than 22 years, calculated on a total return basis. The ICE BofA Merrill Lynch U.S. Municipal Securities Index tracks the performance of U.S. dollar-denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 45 |
Aberdeen Tax-Free Income Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Municipal Bonds | 97.0% | |||
Short-Term Investment | 1.8% | |||
Other Assets in Excess of Liabilities | 1.2% | |||
100.0% |
Top Holdings* | ||||
Harris County Health Facilities Development Corp. Revenue Bonds (SCH Health Care System), Prerefunded/Escrowed to Maturity, Series B 07/01/2027 | 8.4% | |||
New York State Dormitory Authority Revenue Bonds (State University Dormitory Facilities), Series A 07/01/2039 | 3.5% | |||
Pennsylvania Turnpike Commission Revenue Bonds, Series A 07/15/2029 | 3.0% | |||
New Jersey Economic Development Authority Revenue Bonds (School Facilities Conservation), Series BB 09/01/2024 | 2.8% | |||
State of Washington General Obligation Unlimited Bonds, Series R-2010A 01/01/2022 | 2.8% | |||
Texas Municipal Gas Acquisition & Supply Corp. I Revenue Bonds, Series D 12/15/2026 | 2.3% | |||
City of Houston TX General Obligation Limited Bonds, (Pre-refunded @ $100, 03/01/2019), Series A 03/01/2030 | 1.9% | |||
New York State Dormitory Authority Revenue Bonds (State University Educational Facilities 3rd Generation), Series A 05/15/2023 | 1.8% | |||
Parish of St. Charles Gulf Opportunity Zone Revenue Bonds (Valero Project) 12/01/2040 | 1.8% | |||
Southeast Alabama Gas Supply District Revenue Bonds, Series B 06/01/2049 | 1.7% | |||
Other | 70.0% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top States | ||||
Texas | 21.9% | |||
New York | 15.3% | |||
California | 7.1% | |||
Louisiana | 6.3% | |||
Pennsylvania | 5.2% | |||
New Jersey | 4.9% | |||
Florida | 4.8% | |||
New Hampshire | 3.5% | |||
Alabama | 3.1% | |||
Washington | 2.8% | |||
Other | 25.1% | |||
100.0% |
46 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Tax-Free Income Fund
Shares or Principal Amount | Value (US$) | |||||||
MUNICIPAL BONDS (97.0%) | ||||||||
Alabama (3.1%) | ||||||||
Black Belt Energy Gas District Revenue Bonds, Series A, 4.00%, 08/01/2047 (a) | $ | 1,000,000 | $ | 1,037,940 | ||||
Southeast Alabama Gas Supply District Revenue Bonds, Series B, 2.36%, 06/01/2049 (a) | 1,250,000 | 1,240,775 | ||||||
2,278,715 | ||||||||
Alaska (1.4%) | ||||||||
City of Valdez Revenue Bonds Pipelines Project, Series B, 5.00%, 01/01/2021 | 1,000,000 | 1,052,740 | ||||||
California (7.1%) | ||||||||
Bay Area Toll Authority Revenue Bonds, Series A, 2.95%, 04/01/2047 (a) | 350,000 | 354,816 | ||||||
Brea Redevelopment Agency Tax Allocation Refunding Bonds, Series A, 5.47%, 08/01/2025 (b) | 1,000,000 | 717,270 | ||||||
Los Angeles Community College District General Obligation Unlimited Bonds | ||||||||
Series A, 5.50%, 08/01/2025 | 1,000,000 | 1,028,370 | ||||||
Series I, 4.00%, 08/01/2029 | 400,000 | 427,452 | ||||||
M-S-R Energy Authority Gas Revenue Bonds | ||||||||
Series B, 6.13%, 11/01/2029 | 500,000 | 604,705 | ||||||
Series A, 6.50%, 11/01/2039 | 500,000 | 667,860 | ||||||
San Francisco City & County Public Utilities Commission Revenue Bonds, Series F, | 300,000 | 318,324 | ||||||
Turlock Irrigation District Revenue Bonds, | 1,000,000 | 1,057,520 | ||||||
5,176,317 | ||||||||
District of Columbia (0.8%) | ||||||||
Convention & Sports Authority Revenue Bonds, Series A, 5.00%, 10/01/2030 | 500,000 | 570,970 | ||||||
Florida (4.8%) | ||||||||
City of Tampa Revenue Bonds (Baycare Health Care System), Series A, 4.00%, 11/15/2033 | 1,000,000 | 1,017,150 | ||||||
CityPlace Community Development District, Special Assessment & Revenue Refunding Bonds, | 1,000,000 | 1,014,970 | ||||||
County of Escambia Revenue Bonds , 5.00%, 10/01/2046 | 1,000,000 | 1,086,830 | ||||||
Volusia County Educational Facility Authority Revenue Bonds, Series B, 5.00%, 10/15/2023 | 250,000 | 276,852 | ||||||
Volusia County Educational Facility Authority Revenue Bonds (EMBRY- Riddle Aeronautical University, Inc.), 5.00%, 10/15/2047 | 100,000 | 107,852 | ||||||
3,503,654 | ||||||||
Georgia (2.2%) | ||||||||
Cherokee County General Obligation Unlimited Bonds, 5.00%, 04/01/2021 | 500,000 | 506,475 | ||||||
Forsyth County General Obligation Unlimited Bonds, Series A, 5.00%, 03/01/2028 | 100,000 | 101,040 | ||||||
Monroe Country Development Authority Revenue Bonds, 2.35%, 10/01/2048 (a) | 1,000,000 | 990,840 | ||||||
1,598,355 | ||||||||
Hawaii (0.9%) | ||||||||
City & County Honolulu HI Wastewater System Revenue Bonds, Series A, 5.00%, 07/01/2047 | 560,000 | 621,169 | ||||||
Illinois (1.9%) | �� | |||||||
Illinois Finance Authority Revenue Bonds (Carle Foundation), Series A, 6.00%, 08/15/2041 | 500,000 | 541,035 | ||||||
State of Illinois General Obligation Unlimited Bonds, Series D, 5.00%, 11/01/2021 | 815,000 | 844,560 | ||||||
1,385,595 | ||||||||
Kentucky (0.7%) | ||||||||
Kentucky Public Energy Authority Revenue Bonds, Series A, 4.00%, 04/01/2048 (a) | 500,000 | 519,980 | ||||||
Louisiana (6.3%) | ||||||||
East Baton Rouge Parish Sales Tax Revenue Bonds (Road & Street Improvement), 5.00%, 08/01/2024 | 540,000 | 552,101 | ||||||
Louisiana Public Facilities Authority Revenue Bonds | ||||||||
3.00%, 05/15/2031 | 10,000 | 10,196 | ||||||
3.00%, 05/15/2031 | 990,000 | 913,453 | ||||||
Louisiana Public Facilities Authority Revenue Bonds (Entergy Louisiana LLC), Series B, 3.50%, 06/01/2030 | 1,000,000 | 973,410 | ||||||
New Orleans Aviation Board Revenue Bonds (Louis Armstrong International Airport), 5.00%, 01/01/2028 | 500,000 | 567,150 | ||||||
New Orleans Aviation Board Revenue Bonds (Parking Facilities Corp.), 5.00%, 10/01/2027 | 250,000 | 284,030 | ||||||
Parish of St. Charles Gulf Opportunity Zone Revenue Bonds (Valero Project), 4.00%, 12/01/2040 (a) | 1,250,000 | 1,301,613 | ||||||
4,601,953 | ||||||||
Massachusetts (1.4%) | ||||||||
Commonwealth of Massachusetts General Obligation Limited Bonds, Series D, 5.50%, 08/01/2019 | 1,000,000 | 1,026,400 | ||||||
Michigan (1.3%) | ||||||||
Grand Rapids Building Authority Revenue Bonds, 5.00%, 08/01/2020 | 900,000 | 918,747 | ||||||
Minnesota (0.7%) | ||||||||
University of Minnesota Revenue Bonds, Series A, 5.25%, 04/01/2029 | 500,000 | 506,985 | ||||||
Nebraska (1.1%) | ||||||||
Central Plains Energy Project, Gas Project Revenue Bonds (Project No.3), 5.00%, 09/01/2021 | 750,000 | 799,425 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 47 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Tax-Free Income Fund
Shares or Principal Amount | Value (US$) | |||||||
New Hampshire (3.5%) | ||||||||
New Hampshire Health & Education Facilities Authority Revenue Bonds (Dartmouth College) | ||||||||
5.00%, 08/01/2035 | $ | 250,000 | $ | 273,398 | ||||
5.00%, 08/01/2036 | 245,000 | 266,533 | ||||||
5.25%, 06/01/2039 | 1,000,000 | 1,019,410 | ||||||
New Hampshire Health & Education Facilities Authority Revenue Bonds (University Systems), Series A, 5.00%, 07/01/2023 | 1,000,000 | 1,020,400 | ||||||
2,579,741 | ||||||||
New Jersey (4.9%) | ||||||||
New Jersey Economic Development Authority Revenue Bonds (School Facilities Conservation), Series BB, 5.25%, 09/01/2024 | 2,000,000 | 2,051,880 | ||||||
New Jersey Educational Facilities Authority Revenue Bonds (The College of New Jersey), Series F, 4.00%, 07/01/2033 | 100,000 | 102,116 | ||||||
New Jersey Turnpike Authority Revenue Bonds, Series A, 5.00%, 01/01/2031 | 850,000 | 948,957 | ||||||
Newark Housing Authority Revenue Bonds (Newark Redevelopment Project), 4.00%, 01/01/2037 | 500,000 | 502,530 | ||||||
3,605,483 | ||||||||
New York (15.3%) | ||||||||
City of Yonkers General Obligation Limited Bonds, Series A, 3.00%, 05/15/2019 | 1,000,000 | 1,001,270 | ||||||
Hudson Yards Infrastructure Corp. Revenue Bonds, Series A, 5.00%, 02/15/2042 | 1,000,000 | 1,097,230 | ||||||
Nassau County Local Economic Assistance Corp. Revenue Bonds (Catholic Health Services), | 1,000,000 | 1,078,550 | ||||||
New York City Water & Sewer System Revenue Bonds, Series EE, 5.00%, 06/15/2037 | 295,000 | 328,598 | ||||||
New York State Dormitory Authority Revenue Bonds, Series A, 5.00%, 03/15/2033 | 850,000 | 936,989 | ||||||
New York State Dormitory Authority Revenue Bonds (State University Dormitory Facilities), Series A, 5.00%, 07/01/2039 | 2,500,000 | 2,551,500 | ||||||
New York State Dormitory Authority Revenue Bonds (State University Educational Facilities 3rd Generation), Series A, 5.50%, 05/15/2023 | 1,160,000 | 1,316,879 | ||||||
Oneida County Industrial Development Agency Revenue Bonds (Hamilton College Civic Facilities), 5.00%, 09/15/2027 | 1,000,000 | 1,002,480 | ||||||
Port Authority of New York & New Jersey Revenue Bonds, 5.00%, 10/15/2042 | 560,000 | 619,270 | ||||||
Tompkins County Industrial Development Agency Revenue Bonds (Cornell University Civic Facilities), Series A, 5.25%, 07/01/2030 | 1,000,000 | 1,047,350 | ||||||
Village of Johnson City General Obligation Limited Bonds, 4.00%, 10/03/2019 | 175,000 | 175,719 | ||||||
11,155,835 | ||||||||
North Dakota (1.4%) | ||||||||
City of Grand Forks, Health Care System Revenue Bonds (Altru Health System Obligated Group), 4.50%, 12/01/2032 | 1,000,000 | 1,011,150 | ||||||
Pennsylvania (5.2%) | ||||||||
Lehigh County Industrial Development Authority Revenue Bonds (PPL Electric Utilities Corp.), 1.80%, 02/15/2027 (a) | 800,000 | 770,040 | ||||||
Pennsylvania Higher Educational Facilities Authority Revenue Bonds (University of Pennsylvania), Series A, 5.00%, 09/01/2019 | 800,000 | 820,120 | ||||||
Pennsylvania Turnpike Commission Revenue Bonds, Series A, 5.25%, 07/15/2029 | 1,850,000 | 2,172,973 | ||||||
3,763,133 | ||||||||
Puerto Rico (1.4%) | ||||||||
Commonwealth of Puerto Rico General Obligation Unlimited Bonds, Series A 5.50%, 07/01/2020 | 500,000 | 515,590 | ||||||
5.50%, 07/01/2020 | 500,000 | 515,590 | ||||||
1,031,180 | ||||||||
Rhode Island (1.0%) | ||||||||
Tobacco Settlement Financing Corp. Revenue Bonds, Series B, 4.50%, 06/01/2045 | 750,000 | 739,673 | ||||||
South Carolina (1.6%) | ||||||||
City of Rock Hill SC Combined Utility System Revenue Bonds | ||||||||
5.00%, 01/01/2025 | 500,000 | 565,185 | ||||||
5.00%, 01/01/2026 | 500,000 | 568,850 | ||||||
1,134,035 | ||||||||
Tennessee (1.5%) | ||||||||
Knox County Health Educational & Housing Facilities Board Revenue Bonds (University Health System, Inc.), | ||||||||
5.00%, 09/01/2036 | 500,000 | 535,040 | ||||||
Tennessee Energy Acquisition Corp. Revenue Bonds, Series A, 5.25%, 09/01/2023 | 500,000 | 552,350 | ||||||
1,087,390 | ||||||||
Texas (21.9%) | ||||||||
City of Houston TX General Obligation Limited Bonds (Pre-refunded @ $100, 03/01/2019), | ||||||||
Series A, 5.00%, 03/01/2030 | 1,405,000 | 1,419,275 | ||||||
Series A, 5.00%, 03/01/2030 | 170,000 | 171,562 | ||||||
Dallas/Fort Worth International Airport Revenue Bonds, Joint Revenue Refunding Bonds, Series B, 5.00%, 11/01/2020 | 1,000,000 | 1,053,010 | ||||||
Harris Country Toll Road Authority Revenue Bonds, Series A, 4.00%, 08/15/2048 | 500,000 | 492,265 | ||||||
Harris County Health Facilities Development Corp. Revenue Bonds (SCH Health Care System), Prerefunded/Escrowed to Maturity, Series B, 5.75%, 07/01/2027 | 5,170,000 | 6,111,043 | ||||||
Matagorda County Navigation District No. 1 Revenue Bonds, Series B-1, 4.00%, 06/01/2030 | 1,000,000 | 1,024,400 |
See accompanying Notes to Financial Statements.
48 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Tax-Free Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Tarrant County Cultural Education Facilities Finance Corp. Revenue Bonds (Baylor Scott & White Obligated Group), 5.00%, 11/15/2029 | $ | 800,000 | $ | 897,448 | ||||
Tarrant County Cultural Education Facilities Finance Corp. Revenue Bonds (Texas Health Resources Obligated Group), Series A, 4.00%, 02/15/2036 | 1,000,000 | 1,004,610 | ||||||
Texas A&M University Revenue Bonds (Financing System), Series A, 5.00%, 05/15/2025 | 1,065,000 | 1,082,690 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. I Revenue Bonds, Series D, | 1,500,000 | 1,710,195 | ||||||
University of North Texas Revenue Bonds (Financing System), Series A, | 1,000,000 | 1,014,310 | ||||||
15,980,808 | ||||||||
Utah (0.1%) | ||||||||
Salt Lake City Corp. Airport Revenue Bonds, Series B, 5.00%, 07/01/2042 | 100,000 | 109,324 | ||||||
Virginia (0.8%) | ||||||||
Hampton Roads Transportation Accountability Commission Revenue Bonds, Series A, | 500,000 | 558,755 | ||||||
Washington (2.8%) | ||||||||
State of Washington General Obligation Unlimited Bonds, Series R-2010A, | 2,000,000 | 2,010,360 | ||||||
West Virginia (0.8%) | ||||||||
West Virginia Economic Development Authority Revenue Bonds, Unrefunded, Series A, 1.90%, 03/01/2040 (a) | 550,000 | 548,680 | ||||||
Wisconsin (1.1%) | ||||||||
Wisconsin Health & Educational Facilities Authority Revenue Bonds (Aurora Health Care), Series A, 5.00%, 07/15/2028 | 500,000 | 536,525 | ||||||
Wisconsin Health & Educational Facilities Authority Revenue Bonds (Froedtert Health, Inc. Obligated Group), Series 2017 A, 5.00%, 04/01/2035 | 250,000 | 276,352 | ||||||
812,877 | ||||||||
Total Municipal Bonds | 70,689,429 | |||||||
SHORT-TERM INVESTMENT (1.8%) | ||||||||
UNITED STATES (1.8%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (c) | 1,336,170 | 1,336,170 | ||||||
Total Short-Term Investment | 1,336,170 | |||||||
Total Investments | 72,025,599 | |||||||
Other Assets in Excess of Liabilities—1.2% | 850,646 | |||||||
Net Assets—100.0% | $ | 72,876,245 |
(a) | Variable rate instrument. The rate shown is based on the latest available information as of October 31, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(b) | The rate shown reflects the yield at October 31, 2018. |
(c) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 49 |
Aberdeen Ultra Short Municipal Income Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine Ultra Short Municipal Income Fund (the “Predecessor Fund”) in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen Ultra Short Municipal Income Fund (Institutional Class shares net of fees) returned 1.34% for the 12-month period ended October 31, 2018, versus the 0.65% return of its benchmark, the Bloomberg Barclays 1 Year Municipal Bond (1-2) Index. For broader comparison, the average return of the Fund’s peer category of Short Municipal Debt Funds (comprising 49 funds), as measured by Lipper, Inc., was 0.36% for the period.
The U.S. Federal Reserve’s (Fed’s) actions remained a key driver of the municipal market performance during the reporting period, as the central bank raised its benchmark interest rate in four 25-basis point (bps) increments to a range of 2.00%-2.25%. Against this backdrop, the U.S. Treasury and the municipal market yield curves moved upward and flattened, with short- and intermediate-duration1 maturities underperforming the most. In turn, higher interest rates resulted in negative returns for the Bloomberg Barclays Municipal Bond Index,2 a broad municipal bond market benchmark, for six out of the twelve months within the reporting period. The municipal bond market outperformed its taxable bond counterpart over the reporting period, as the Bloomberg Barclays U.S. Aggregate Bond Index3 returned -2.05%. Generally solid fundamentals, overall positive investor demand and moderating supply supported the municipal market.
Over the reporting period, the Fund’s effective average maturity was less than 30 days versus an average maturity of 32 days on October 31, 2017. Given the municipal market sell-off in the short end of the municipal bond curve, this lower average maturity, compared to an average maturity of more than one-year for its benchmark, the Bloomberg Barclays 1-Year Municipal Bond (1-2) Index, enabled the Fund to maintain a relatively stable net asset value (NAV) over the 12-month period.
The short end of the municipal bond curve saw yields spike throughout the reporting period, given continued Fed monetary policy tightening. Despite the dramatic sell-off at the short end of the municipal bond curve, the Fund experienced relatively low movement in NAV. A major contributor to the stability of the Fund’s NAV was the position in variable-rate demand notes (VRDNs), which comprised 70% of the Fund’s net assets. These securities trade at par value and do not fluctuate. Additionally, their rates reset on a daily or weekly basis, which allowed the Fund to capture incremental yields as the Fed continued to raise interest rates.
The Fund’s performance relative to the benchmark for the reporting period was bolstered mainly by holdings in BBB rated4 and A rated securities, as their spreads compressed5 more than their higher-rated counterparts. Given the outperformance of lower-investment-grade6 securities and the potential for spread-widening, we increased the Fund’s overall credit quality over the reporting period.
Positive contributors to the Fund’s total return during the reporting period included the exposures to manufactured goods (largely metals), resource recovery and hospitals. In terms of the Fund’s positioning among individual states, allocations to Mississippi, New York and California were the largest contributors to the total return. There were no meaningful detractors from the Fund’s total return from either a sector or state perspective.
We believe that new municipal issuance will experience an uptick in the fourth quarter of 2018, but generally will be well absorbed by investor demand. The Fed is expected to raise interest rates again at its meeting in December 2018, and an additional three times in 2019, which will likely result in higher municipal yields. Nonetheless, in our view, municipal fundamentals remain strong overall and economic growth in the U.S. is fairly robust. Against this backdrop, municipalities are looking to strengthen their balance sheets and local defaults remain low. Nevertheless, we are avoiding areas that are experiencing deteriorating fundaments, including Illinois, Connecticut and Michigan, as well as Chicago and the Commonwealth of Puerto Rico.
1 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
2 | The Bloomberg Barclays Municipal Bond Index tracks the performance of investment-grade, tax-exempt bonds with a maturity of at least one year. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
3 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. |
4 | The credit ratings of S&P Global Ratings, Moody’s Corporation and Fitch Ratings express the respective agencies’ opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from AAA to D (Aaa to C for Moody’s) to communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. |
5 | When a bond price rises, its yield declines. The spread on bonds is usually expressed as the difference between bonds of the same maturity but different credit quality. Spread compression occurs when the yield on a previously higher-yielding bond comes down due to strong demand. |
6 | Companies whose bonds are rated as “investment-grade” usually have a lower chance of defaulting on their debt than those rated as “non-investment grade.” These bonds generally are issued by long-established companies with strong balance sheets. Bonds rated BBB or above by major credit rating agencies are considered investment-grade. |
50 | Annual Report 2018 |
Aberdeen Ultra Short Municipal Income Fund (Unaudited) (concluded)
In terms of portfolio positioning, with municipal spreads near their tightest levels since 2007, we have increased the Fund’s allocation to higher-rated securities. We anticipate maintaining this stance as we do not see sufficient value in moving down in credit quality, especially given that we are at a later stage of the credit cycle. Additionally, given our outlook on interest rates, we do not foresee changing the Fund’s duration positioning dramatically in the near future.
Portfolio Management:
U.S. Municipal Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 0.50% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Municipal bonds can be significantly affected by political and economic changes, including inflation, as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 51 |
Aberdeen Ultra Short Municipal Income Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | 1.09% | 0.53% | 0.96% | ||||||||||
w/SC2 | 0.59% | 0.43% | 0.91% | |||||||||||
Institutional Class3 | w/o SC | 1.34% | 0.80% | 1.21% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | A 0.50% front-end sales charge was deducted. |
3 | Not subject to any sales charges. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen Ultra Short Municipal Income Fund, Bloomberg Barclays Municipal Bond: 1 Year (1-2) Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
Bloomberg Barclays Municipal Bond: 1 Year (1-2) Index is a total return benchmark of BAA3 ratings or better designed to measure returns for tax exempt assets.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
52 | Annual Report 2018 |
Aberdeen Ultra Short Municipal Income Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Municipal Bonds | 102.1% | |||
Liabilities in Excess of Other Assets | (2.1)% | |||
100.0% |
Top Holdings | ||||
Mississippi Business Finance Corp. Revenue Bonds (PSL-North America), Series A 11/01/2032 | 6.2% | |||
Chicago Board of Education General Obligation Unlimited Bonds, Series DCL-2012-001 03/01/2034 | 4.3% | |||
Port of Corpus Christi Authority of Nueces County Solid Waste Disposal Revenue Bonds (Flint Hills Resources LP), Series A 07/01/2029 | 4.3% | |||
California Pollution Control Financing Authority Revenue Bonds (Republic Services, Inc.), Series A 08/01/2023 | 3.9% | |||
Iowa Finance Authority Revenue Solid Waste Facilities Revenue Bonds (MidAmerican Energy Co.) 12/01/2047 | 2.9% | |||
Mercer County Pollution Control Revenue Commercial Paper Notes 11/08/2018 | 2.5% | |||
West Virginia Economic Development Authority Revenue Bonds (Appalachian Power Co.), Series A 02/01/2036 | 2.3% | |||
Florida Development Finance Corp. Revenue Bonds (Shands Jacksonville Medical Center Obligated Group), Series B 02/01/2029 | 2.3% | |||
Gainesville & Hall County Hospital Authority Revenue Bonds (Northeast Georgia Health System Obligated Group), Series 2017 02/15/2047 | 2.0% | |||
Hertford County Industrial Facilities & Pollution Control Financing Authority Revenue Bonds (Nucor Corp.), Series A 11/01/2033 | 1.8% | |||
Other | 67.5% | |||
100.0% |
Top States | ||||
California | 10.8% | |||
Mississippi | 10.1% | |||
Alabama | 8.2% | |||
Florida | 7.2% | |||
Pennsylvania | 5.7% | |||
New York | 5.4% | |||
Georgia | 5.2% | |||
Texas | 5.1% | |||
Illinois | 4.4% | |||
Iowa | 4.3% | |||
Other | 33.6% | |||
100.0% |
2018 Annual Report | 53 |
Statement of Investments
October 31, 2018
Aberdeen Ultra Short Municipal Income Fund
Shares or Principal Amount | Value (US$) | |||||||
MUNICIPAL BONDS (102.1%) | ||||||||
Alabama (8.2%) | ||||||||
Alabama Housing Finance Authority Multi-Family Housing Revenue Bonds (Phoenix Apartments Project), Series A, | $ | 3,667,000 | $ | 3,667,000 | ||||
Columbia Industrial Development Board Revenue Bonds (Alabama Power Co.), | 6,300,000 | 6,300,000 | ||||||
Eutaw Industrial Development Board Revenue Bonds (Mission Power Co.), | 6,250,000 | 6,250,000 | ||||||
Health Care Authority for Baptist Health Revenue Bonds, Series B | ||||||||
2.07%, 11/15/2037 (a) | 2,975,000 | 2,975,000 | ||||||
2.19%, 11/01/2042 (a) | 18,200,000 | 18,200,000 | ||||||
Mobile Industrial Development Board Revenue Bonds (Alabama Power Co.), Series A, | 8,800,000 | 8,800,000 | ||||||
Tuscaloosa County Industrial Development Authority Revenue Bonds (Nucor Corp.), Series A, 1.89%, 09/01/2020 (a) | 7,400,000 | 7,400,000 | ||||||
Walker County Economic & Industrial Development Authority Revenue Bonds (Alabama Power Co.), 1.74%, 12/01/2036 (a) | 12,700,000 | 12,700,000 | ||||||
West Jefferson Industrial Development Board Revenue Bonds (Alabama Power Co.), | 18,140,000 | 18,140,000 | ||||||
84,432,000 | ||||||||
Alaska (0.0%) | ||||||||
Alaska Housing Finance Corp. Revenue Bonds, Series A, 1.70%, 06/01/2032 (a) | 175,000 | 175,000 | ||||||
Arizona (2.8%) | ||||||||
Cochise County Pollution Control Corp. Revenue Bonds (Arizona Electric Power Cooperative, Inc.), 1.88%, 09/01/2024 (a) | 11,200,000 | 11,198,208 | ||||||
Phoenix Industrial Development Authority Solid Waste Revenue Bonds (Republic Services, Inc.), 1.85%, 12/01/2035 (a) | 16,500,000 | 16,500,000 | ||||||
Scottsdale Industrial Development Authority Revenue Bonds (Scottsdale Healthcare Hospitals Obligated Group), Series F, | 1,450,000 | 1,450,000 | ||||||
29,148,208 | ||||||||
Arkansas (2.5%) | ||||||||
Arkansas Development Finance Authority Revenue Bonds (Baptist Memorial Health Care Obligated Group), | 17,037,000 | 17,037,000 | ||||||
City of Blytheville Revenue Bonds (Nucor Corp. Project), 1.82%, 01/02/2033 (a) | 8,500,000 | 8,500,000 | ||||||
25,537,000 | ||||||||
California (10.8%) | ||||||||
California Infrastructure & Economic Development Bank Revenue Bonds (Westside Waldorf School Project), | 2,000,000 | 2,000,000 | ||||||
California Pollution Control Financing Authority Revenue Bonds (Republic Services, Inc.) | ||||||||
Series A, 1.85%, 08/01/2023 (a)(b) | 40,000,000 | 40,000,000 | ||||||
Series 2017-A1, 2.08%, 11/01/2042 (a)(b) | 5,000,000 | 4,999,550 | ||||||
California Statewide Communities Development Authority Revenue Bonds (Dignity Health Obligated Group) | ||||||||
Series F, 1.85%, 07/01/2040 (a) | 1,125,000 | 1,125,000 | ||||||
Series D, 1.81%, 07/01/2041 (a) | 3,750,000 | 3,750,000 | ||||||
California Statewide Communities Development Authority Revenue Bonds (Kennerly-Spratling, Inc.), Series A, | 290,000 | 290,000 | ||||||
California Statewide Communities Development Authority Revenue Bonds (Westgate Pasadena Apartments Project), Series B, 2.08%, 04/01/2042 (a) | 8,935,000 | 8,935,000 | ||||||
Palomar Pomerado Health Care Certificates of Particpation | ||||||||
Series C, 2.13%, 11/01/2036 (a) | 18,150,000 | 18,150,000 | ||||||
Series B, 2.14%, 11/01/2036 (a) | 13,750,000 | 13,750,000 | ||||||
Series A, 2.15%, 11/01/2036 (a) | 12,525,000 | 12,525,000 | ||||||
Tender Option Bond Trust Receipts/Certificates, 1.90%, 05/01/2043 (a)(b) | 5,000,000 | 5,000,000 | ||||||
110,524,550 | ||||||||
Colorado (1.6%) | ||||||||
Tender Option Bond Trust Receipts/Certificates | ||||||||
1.90%, 12/01/2043 (a)(b) | 4,000,000 | 4,000,000 | ||||||
1.87%, 12/01/2048 (a)(b) | 12,450,000 | 12,450,000 | ||||||
16,450,000 | ||||||||
Connecticut (2.8%) | ||||||||
Capital City Economic Development Authority Revenue Bonds, Series B | ||||||||
1.70%, 06/15/2024 (a) | 7,250,000 | 7,250,000 | ||||||
1.70%, 06/15/2034 (a) | 15,455,000 | 15,455,000 | ||||||
Long Hill Fire District General Obligation Unlimited Bonds, 2.50%, 11/05/2018 | 6,100,000 | 6,100,366 | ||||||
28,805,366 | ||||||||
Delaware (0.5%) | ||||||||
Delaware State Economic Development Authority Revenue Bonds (Delmarva Power & Light Co.), 1.80%, 10/01/2029 (a) | 2,500,000 | 2,500,000 | ||||||
Sussex County Revenue Bonds (Baywood LLC), Series A, 1.78%, 11/01/2027 (a) | 2,400,000 | 2,400,000 | ||||||
4,900,000 |
See accompanying Notes to Financial Statements.
54 | Annual Report 2018 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Ultra Short Municipal Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Florida (7.2%) | ||||||||
Broward County Industrial Development Revenue Bonds (Florida Power & Light Co.), 1.72%, 06/01/2045 (a) | $ | 4,650,000 | $ | 4,650,000 | ||||
Florida Development Finance Corp. Revenue Bonds (Shands Jacksonville Medical Center Obligated Group), Series B, | 23,800,000 | 23,800,000 | ||||||
Lee County Industrial Development Authority Revenue Bonds (Florida Light & Power Co.) | ||||||||
Series B, 1.72%, 12/01/2046 (a) | 3,210,000 | 3,210,000 | ||||||
Series A, 1.73%, 12/01/2046 (a) | 15,300,000 | 15,300,000 | ||||||
Miami-Dade County Expressway Authority Toll System Revenue Bonds | ||||||||
Series DCL-2012-004, | 10,000,000 | 10,000,000 | ||||||
Series DCL-2012-005, | 11,355,000 | 11,355,000 | ||||||
Miami-Dade County School Board Certifcates of Participation, Series DCL-2013-005, | 2,185,000 | 2,185,000 | ||||||
St. Lucie County Soild Waste Disposal Revenue Bonds (Florida Power & Light Co.), | 3,400,000 | 3,400,000 | ||||||
73,900,000 | ||||||||
Georgia (5.2%) | ||||||||
Burke County Development Authority Revenue Bonds (Georgia Power Co.), | 16,200,000 | 16,200,000 | ||||||
Coweta County Development Authority Revenue Bonds (Georgia Power Co.), | 6,000,000 | 6,000,000 | ||||||
Douglas County Development Authority Revenue Bonds (Electrical Fiber Systems, Inc.), 1.95%, 12/01/2021 (a) | 600,000 | 600,000 | ||||||
Floyd County Development Authority Revenue Bonds (Georgia Power Co.), | 1,800,000 | 1,800,000 | ||||||
Gainesville & Hall County Hospital Authority Revenue Bonds (Northeast Georgia Health System Obligated Group), Series 2017, | 20,000,000 | 20,000,000 | ||||||
Heard County Development Authority Revenue Bonds (Georgia Power Co.), | 1,700,000 | 1,700,000 | ||||||
Monroe County Development Authority Revenue Bonds (Georgia Power Co.), | 2,750,000 | 2,750,000 | ||||||
Puttable Floating Option Tax-Exempt Receipts, Series DCL 2007-4174, | 4,500,000 | 4,500,000 | ||||||
53,550,000 | ||||||||
Illinois (4.4%) | ||||||||
Chicago Board of Education General Obligation Unlimited Bonds, Series DCL-2012-001, | 44,260,000 | 44,260,000 | ||||||
Illinois Finance Authority Revenue Bonds (Chicago Charter School Foundation Project), 3.00%, 12/01/2018 | 125,000 | 125,029 | ||||||
State of Illinois General Obligation Unlimited Bonds, Series A, 5.00%, 04/01/2019 | 1,000,000 | 1,009,450 | ||||||
45,394,479 | ||||||||
Indiana (4.1%) | ||||||||
City of South Bend Economic Development Revenue Bonds (Dynamic R.E.H.C., Inc.), | 85,000 | 85,000 | ||||||
City of Whiting Environmental Facilities Revenue Bonds (BP Products North America, Inc.), 2.35%, 12/01/2044 (a) | 15,000,000 | 15,025,950 | ||||||
County of Jasper Pollution Control Revenue Bonds (Northern Indiana Public Service Co.), Series C, 5.85%, 04/01/2019 | �� | 2,000,000 | 2,029,020 | |||||
Elkhart County Revenue Bonds, 1.88%, 01/01/2035 (a) | 6,493,000 | 6,493,000 | ||||||
Indiana Finance Authority Environmental Improvement Revenue Bonds (ArcelorMittal USA, Inc.), 1.79%, 08/01/2030 (a) | 18,675,000 | 18,675,000 | ||||||
42,307,970 | ||||||||
Iowa (4.3%) | ||||||||
Cirty of Coralville Revenue Bonds, Series D, 3.00%, 05/01/2019 | 500,000 | 498,975 | ||||||
Iowa Finance Authority Midwestern Disaster Area Economic Development Revenue Bonds (CJ Bio America, Inc.), 1.92%, 04/01/2022 (a) | 12,000,000 | 12,000,000 | ||||||
Iowa Finance Authority Revenue Solid Waste Facilities Revenue Bonds (MidAmerican Energy Co.), 1.69%, 12/01/2047 (a) | 30,000,000 | 30,000,000 | ||||||
Iowa Student Loan Liquidity Corp. Revenue Bonds, Senior Series 2011-A1, 4.40%, 12/01/2018 | 1,205,000 | 1,206,964 | ||||||
43,705,939 | ||||||||
Kansas (0.2%) | ||||||||
City of Dodge City Industrial Development Revenue Bonds (National Beef Packing Co. LLC), 1.90%, 03/01/2027 (a) | 1,000,000 | 1,000,000 | ||||||
City of Liberal Industrial Development Revenue Bonds (National Beef Packing Co. LLC), | 1,000,000 | 1,000,000 | ||||||
2,000,000 | ||||||||
Kentucky (0.8%) | ||||||||
Louisville Regional Airport Authority Revenue Bonds (United Parcel Service, Inc.), Series B, 1.75%, 01/01/2029 (a) | 5,000,000 | 5,000,000 | ||||||
Pulaski County Solid Waste Disposal Revenue Bonds (East Kentucky Power Cooperative, Inc.), Series B, 1.88%, 08/15/2023 (a) | 3,300,000 | 3,295,611 | ||||||
8,295,611 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 55 |
Statement of Investments (continued)
October 31, 2018
Aberdeen Ultra Short Municipal Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Louisiana (2.1%) | ||||||||
East Baton Rouge Parish Industrial Development Board Revenue Bonds (Georgia Pacific LLC), 1.77%, 06/01/2029 (a)(b) | $ | 10,200,000 | $ | 10,200,000 | ||||
Louisiana Public Facilities Authority Revenue Bonds (St Mary’s Dominican High School Corp.), Series B, 1.94%, 07/01/2033 (a) | 325,000 | 325,000 | ||||||
North Webster Parish Industrial District Revenue Bonds (Continental Structural Plastics of Louisiana LLC), 3.56%, 09/01/2021 (a) | 705,000 | 705,000 | ||||||
Plaquemines Port Harbor & Terminal District Revenue Bonds (International Marine Terminal Partnership Project), Series A, 1.80%, 03/15/2025 (a) | 10,000,000 | 9,983,300 | ||||||
21,213,300 | ||||||||
Maine (0.7%) | ||||||||
City of Old Town Solid Waste Disposal Revenue Bonds (Georgia-Pacific LLC), 1.75%, 12/01/2024 (a)(b) | 7,000,000 | 7,000,000 | ||||||
Maryland (1.6%) | ||||||||
Maryland Economic Development Corp. Revenue Bonds (Linemark Printing/501 Prince George’s Boulevard Obligated Group), 2.10%, 12/01/2033 (a) | 6,490,000 | 6,490,000 | ||||||
Maryland Economic Development Corp. Revenue Bonds (Redrock LLC Facility), 2.10%, 11/01/2022 (a) | 805,000 | 805,000 | ||||||
Maryland Industrial Development Financing Authority Revenue Bonds (Occidental Petroleum Corp.), 1.75%, 03/01/2030 (a) | 7,550,000 | 7,550,000 | ||||||
Washington County Revenue Bonds (Conservit, Inc.), 2.10%, 02/01/2023 (a) | 1,925,000 | 1,925,000 | ||||||
16,770,000 | ||||||||
Michigan (0.6%) | ||||||||
Michigan State Housing Development Authority Revenue Bonds, Series A, 1.75%, 10/01/2037 (a) | 1,050,000 | 1,050,000 | ||||||
Wayne County Airport Authority Revenue Bonds, Series A, 5.00%, 12/01/2018 | 5,000,000 | 5,011,750 | ||||||
6,061,750 | ||||||||
Mississippi (10.1%) | ||||||||
Mississippi Business Finance Corp. Revenue Bonds (Mississippi Power Co.) | ||||||||
1.95%, 07/01/2025 (a) | 10,600,000 | 10,600,000 | ||||||
1.95%, 12/01/2027 (a) | 9,400,000 | 9,400,000 | ||||||
1.95%, 05/01/2028 (a) | 13,520,000 | 13,520,000 | ||||||
Mississippi Business Finance Corp. Revenue Bonds (PSL-North America), Series A, 4.17%, 11/01/2032 (a) | 63,000,000 | 63,000,000 | ||||||
Mississippi Business Finance Corp. Revenue Bonds (Tri-State Truck Center, Inc.), 1.80%, 03/01/2033 (a) | 3,480,000 | 3,480,000 | ||||||
Mississippi Hospital Equipment & Facilities Authority Revenue Bonds (Baptist Memorial Health Care Obligated Group), Series B2, 2.13%, 09/01/2022 (a) | 3,500,000 | 3,496,640 | ||||||
103,496,640 | ||||||||
Nevada (0.3%) | ||||||||
Director of the State of Nevada Department of Business and Industry Revenue Bonds (Republic Services, Inc.), 2.25%, 12/01/2026 (a)(b) | 3,000,000 | 3,000,330 | ||||||
New Jersey (2.2%) | ||||||||
City of Newark General Obligation Unlimited Bonds, 3.50%, 10/09/2019 | 14,825,000 | 14,958,870 | ||||||
New Jersey Economic Development Authority Revenue Bonds | ||||||||
Series DD-1, 5.00%, 12/15/2018 | 1,500,000 | 1,504,485 | ||||||
1.89%, 12/15/2020 (a)(b) | 4,960,000 | 4,960,000 | ||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series A, 5.00%, 12/15/2018 | 1,360,000 | 1,364,406 | ||||||
22,787,761 | ||||||||
New York (5.4%) | ||||||||
City of Port Jervis General Obligation Limited Bonds, 3.00%, 10/10/2019 | 5,000,000 | 5,028,200 | ||||||
City of Yonkers General Obligation Limited Bonds, Series A | ||||||||
3.00%, 05/15/2019 | 15,000,000 | 15,019,050 | ||||||
3.13%, 05/15/2019 | 2,115,394 | 2,119,477 | ||||||
East Ramapo Central School District General Obligation Unlimited Bonds, 3.00%, 04/26/2019 | 9,798,000 | 9,843,756 | ||||||
New York City General Obligation Unlimited Bonds | ||||||||
Series C-4, 1.92%, 10/01/2027 (a) | 7,650,000 | 7,650,000 | ||||||
Series J-2, 2.01%, 06/01/2036 (a) | 10,525,000 | 10,525,000 | ||||||
New York City Industrial Development Agency Revenue Bonds (Novelty Crystal Corp.), 2.05%, 12/01/2034 (a) | 1,300,000 | 1,300,000 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue Bonds, Series B, 1.73%, 11/01/2022 (a) | 3,500,000 | 3,500,000 | ||||||
54,985,483 | ||||||||
North Carolina (3.1%) | ||||||||
Hertford County Industrial Facilities & Pollution Control Financing Authority Revenue Bonds (Nucor Corp.) | ||||||||
Series B, 1.82%, 11/01/2033 (a) | 13,100,000 | 13,100,000 | ||||||
Series A, 1.82%, 11/01/2033 (a) | 18,900,000 | 18,900,000 | ||||||
32,000,000 | ||||||||
North Dakota (2.5%) | ||||||||
Mercer County Pollution Control Revenue Commercial Paper Notes, 1.78%, 11/08/2018 | 25,860,000 | 25,860,000 |
See accompanying Notes to Financial Statements.
56 | Annual Report 2018 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen Ultra Short Municipal Income Fund
Shares or Principal Amount | Value (US$) | |||||||
Ohio (0.9%) | ||||||||
Ohio Water Development Authority Solid Waste Revenue Bonds (Waste Management, Inc.), | $ | 1,750,000 | $ | 1,750,000 | ||||
State of Ohio Hospital Revenue Bonds (University Hospitals Health System, Inc.), Series B, 1.86%, 01/15/2045 (a) | 7,150,000 | 7,150,000 | ||||||
8,900,000 | ||||||||
Oregon (1.0%) | ||||||||
Gilliam County Solid Waste Disposal Revenue Bonds (Waste Management, Inc.), Series A, 2.25%, 07/01/2038 (a) | 10,000,000 | 9,990,200 | ||||||
Pennsylvania (5.7%) | ||||||||
Allentown City School District General Obligation Limited Bonds, 2.20%, 01/02/2019 | 5,750,000 | 5,747,413 | ||||||
County of Cumberland Municipal Authority Revenue Bonds (Diakon Lutheran Social Ministries Obligated Group), 5.00%, 01/01/2019 | 2,315,000 | 2,324,746 | ||||||
Emmaus General Authority Revenue Bonds, 1.68%, 12/01/2028 (a) | 5,850,000 | 5,850,000 | ||||||
Franklin County Industrial Development Authority Revenue Bonds (Precast System LLC), Series A, 2.10%, 11/01/2021 (a) | 445,000 | 445,000 | ||||||
Pennsylvania Economic Development Financing Authority Solid Waste Disposal Revenue Bonds (Waste Management PA Obligated Group), 1.80%, 08/01/2045 (a) | 14,000,000 | 14,000,000 | ||||||
Philadelphia Authority for Industrial Development Revenue Bonds (Thomas Jefferson University Obligated Group), Series 2017B, 1.87%, 09/01/2050 (a) | 14,000,000 | 14,000,000 | ||||||
Tender Option Bond Trust Receipts/Certificates, Series 2017-XG0159, 1.77%, 07/01/2036 (a)(b) | 16,140,000 | 16,140,000 | ||||||
58,507,159 | ||||||||
Tennessee (0.1%) | ||||||||
Wilson County Industrial Development Board Revenue Bonds (Kenwal Steel Tennessee LLC), 1.93%, 06/01/2037 (a)(b) | 980,000 | 980,000 | ||||||
Texas (5.1%) | ||||||||
La Salle County General Obligation Unlimited Bonds, Series B, 5.00%, 03/01/2019 | 1,025,000 | 1,034,666 | ||||||
Love Field Airport Modernization Corp. Special Facilities Revenue Bonds (Southwest Airlines Co.), 5.00%, 11/01/2018 | 1,300,000 | 1,300,000 | ||||||
Mission Economic Development Corp. Solid Waste Disposal Revenue Bonds (Republic Services, Inc.), 1.85%, 01/01/2026 (a) | 3,000,000 | 3,000,000 | ||||||
Port of Corpus Christi Authority of Nueces County Solid Waste Disposal Revenue Bonds (Flint Hills Resources LP) | ||||||||
Series A, 1.73%, 07/01/2029 (a)(b) | 44,075,000 | 44,075,000 | ||||||
Series F, 1.82%, 01/01/2032 (a) | 1,400,000 | 1,400,000 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. Revenue Bonds (Barton Creek Senior Living Center, Inc.), 5.00%, 11/15/2018 | 1,195,000 | 1,195,968 | ||||||
52,005,634 | ||||||||
Utah (0.1%) | ||||||||
Tender Option Bond Trust Receipts/Certificates, Series 2017-XM0493, 1.85%, 07/01/2047 (a)(b) | 1,500,000 | 1,500,000 | ||||||
Vermont (0.3%) | ||||||||
Vermont Housing Finance Agency Revenue Bonds, Series 19B, 1.73%, 05/01/2033 (a) | 2,560,000 | 2,560,000 | ||||||
West Virginia (2.3%) | ||||||||
West Virginia Economic Development Authority Revenue Bonds (Appalachian Power Co.), Series A, 1.72%, 02/01/2036 (a) | 24,000,000 | 24,000,000 | ||||||
Wisconsin (2.3%) | ||||||||
Marshfield Housing Authority Revenue Bonds (Wildwood Regency Housing LLC Project), 1.87%, 09/01/2033 (a) | 2,320,000 | 2,320,000 | ||||||
Milwaukee Redevelopment Authority Revenue Bonds (Kubin Nicholson Corp.), Series A, 1.75%, 08/01/2020 (a) | 220,000 | 220,000 | ||||||
Village of Menomonee Falls Industrial Development Revenue Bonds (Reich Tool & Design, Inc.), 1.75%, 11/01/2036 (a) | 2,360,000 | 2,360,000 | ||||||
Wisconsin Public Finance Authority Revenue Bonds (Waste Management, Inc.), 1.80%, 10/01/2025 (a) | 18,000,000 | 18,000,000 | ||||||
Wisconsin State Health & Educational Facilities Revenue Bond (Community Care, Inc.), 1.75%, 09/01/2032 (a) | 250,000 | 250,000 | ||||||
23,150,000 | ||||||||
Wyoming (0.3%) | ||||||||
Gillette Environmental Improvement Revenue Bonds (Black Hills Corp.), Series A, 1.79%, 06/01/2024 (a) | 2,855,000 | 2,855,000 | ||||||
Total Municipal Bonds | 1,046,749,380 | |||||||
Total Investments |
| 1,046,749,380 | ||||||
Liabilities in Excess of Other Assets—(2.1)% |
| (21,182,537 | ) | |||||
Net Assets—100.0% |
| $ | 1,025,566,843 |
(a) | Variable rate instrument. The rate shown is based on the latest available information as of October 31, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(b) | Denotes a security issued under Regulation S or Rule 144A. |
(c) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 57 |
Statements of Assets and Liabilities
October 31, 2018
Aberdeen Asia Bond Fund | Aberdeen Emerging Markets Debt Fund | Aberdeen Global Unconstrained Fixed Income Fund | Aberdeen High Yield Managed Duration Municipal Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments, at value | $ | 3,778,741 | $ | 22,425,277 | $ | 14,731,048 | $ | 205,035,903 | ||||||||
Short-term investments, at value | 377,434 | 1,187,484 | 1,032,167 | 142,377 | ||||||||||||
Cash collateral pledged for swaps contracts | – | – | 152,353 | – | ||||||||||||
Foreign currency, at value | 105,815 | – | 197,711 | – | ||||||||||||
Cash collateral pledged for futures | 6,846 | – | 99,066 | – | ||||||||||||
Cash at broker for forward foreign currency contracts | – | 70,000 | 20,000 | – | ||||||||||||
Cash | 10,000 | 118,334 | – | – | ||||||||||||
Cash at broker for China A shares | 7 | – | – | – | ||||||||||||
Interest and dividends receivable | 76,782 | 392,092 | 173,606 | 2,979,081 | ||||||||||||
Receivable for investments sold | – | 17,429 | 140,206 | 1,240,000 | ||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts | 18,667 | 38,059 | 191,932 | – | ||||||||||||
Receivable from Adviser | 12,911 | 14,019 | 25,287 | 71,510 | ||||||||||||
Variation margin receivable for futures contracts | 6,696 | – | 83,031 | – | ||||||||||||
Over-the-counter credit default swaps, at value (net upfront payments of $0, $0, $30,823 and $0, respectivley) | – | – | 30,545 | – | ||||||||||||
Receivable for capital shares issued | – | 7,964 | 89 | 42,429 | ||||||||||||
Prepaid expenses | 18,536 | 37,186 | 35,062 | – | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | 4,412,435 | 24,307,844 | 16,912,103 | 209,511,300 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Due to custodian | – | – | 3,500 | – | ||||||||||||
Payable for investments purchased | – | 220,022 | – | 1,820,943 | ||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts | 34,641 | 70,248 | 89,209 | – | ||||||||||||
Over-the-counter credit default swaps, at value (net upfront receipts of $0, $0, $2,673 and $0, respectively) | – | – | 7,989 | – | ||||||||||||
Cash due to broker for forward foreign currency contracts | – | 10,000 | 30,000 | – | ||||||||||||
Distributions payable | – | – | – | 18,711 | ||||||||||||
Payable for capital shares redeemed | – | – | 1,372 | 196,133 | ||||||||||||
Accrued foreign capital gains tax | – | 10,356 | – | – | ||||||||||||
Variation margin payable for centrally cleared swaps | – | – | 1,843 | – | ||||||||||||
Accrued expenses and other payables: | ||||||||||||||||
Audit fees | 42,148 | 42,149 | 47,650 | 41,750 | ||||||||||||
Investment advisory fees | 1,853 | 15,377 | 8,435 | 115,901 | ||||||||||||
Custodian fees | 7,078 | 4,589 | 22,645 | 9,183 | ||||||||||||
Administration fees | 297 | 1,640 | 1,125 | 18,313 | ||||||||||||
Sub-transfer agent and administrative services fees | 2,496 | 1,824 | 2,678 | 9,608 | ||||||||||||
Transfer agent fees | 3,691 | 3,435 | 3,224 | 3,249 | ||||||||||||
Distribution fees | 100 | 2,144 | 446 | 9,214 | ||||||||||||
Printing fees | 2,946 | 1,037 | 3,127 | – | ||||||||||||
Legal fees | 72 | 396 | 285 | 3,153 | ||||||||||||
Fund accounting fees | 182 | 835 | 493 | – | ||||||||||||
Other | 9,614 | 4,775 | 1,976 | 22,176 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 105,118 | 388,827 | 225,997 | 2,268,334 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets | $ | 4,307,317 | $ | 23,919,017 | $ | 16,686,106 | $ | 207,242,966 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cost: | ||||||||||||||||
Investments | $ | 4,145,225 | $ | 24,916,188 | $ | 15,045,524 | $ | 208,574,535 | ||||||||
Short-term investment | 377,434 | 1,187,484 | 1,032,167 | – | ||||||||||||
Foreign currency | 105,290 | – | 187,919 | – | ||||||||||||
Represented by: | ||||||||||||||||
Capital | $ | 9,717,344 | $ | 29,983,959 | $ | 16,351,711 | $ | 212,841,759 | ||||||||
Distributable earnings (accumulated loss) | (5,410,027 | ) | (6,064,942 | ) | 334,395 | (5,598,793 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets | $ | 4,307,317 | $ | 23,919,017 | $ | 16,686,106 | $ | 207,242,966 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Class A Shares | $ | 69,583 | $ | 1,049,506 | $ | 1,119,297 | $ | 29,433,376 | ||||||||
Class C Shares | 91,787 | 303,788 | 276,906 | – | ||||||||||||
Class R Shares | 10,144 | 3,825,670 | – | – | ||||||||||||
Institutional Service Class Shares | 147,725 | 19,885 | 9,768,434 | – | ||||||||||||
Institutional Class Shares | 3,988,078 | 18,720,168 | 5,521,469 | 177,809,590 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,307,317 | $ | 23,919,017 | $ | 16,686,106 | $ | 207,242,966 | ||||||||
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
58 | Annual Report 2018 |
Statements of Assets and Liabilities (continued)
October 31, 2018
Aberdeen Asia Bond Fund | Aberdeen Emerging Markets Debt Fund | Aberdeen Global Unconstrained Fixed Income Fund | Aberdeen High Yield Managed Duration Municipal Fund | |||||||||||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||||||||||
Class A Shares | 7,440 | 117,047 | 107,539 | 2,923,755 | ||||||||||||
Class C Shares | 9,970 | 34,117 | 27,455 | – | ||||||||||||
Class R Shares | 1,094 | 428,304 | – | – | ||||||||||||
Institutional Service Class Shares | 14,849 | 2,211 | 932,686 | – | ||||||||||||
Institutional Class Shares | 423,946 | 2,082,229 | 523,119 | 17,660,814 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 457,299 | 2,663,908 | 1,590,799 | 20,584,569 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||||||||||
Class A Shares | $ | 9.35 | $ | 8.97 | $ | 10.41 | $ | 10.07 | ||||||||
Class C Shares (a) | $ | 9.21 | $ | 8.90 | $ | 10.09 | * | $ | – | |||||||
Class R Shares | $ | 9.27 | $ | 8.93 | $ | – | $ | – | ||||||||
Institutional Service Class Shares | $ | 9.95 | $ | 8.99 | $ | 10.47 | $ | – | ||||||||
Institutional Class Shares | $ | 9.41 | $ | 8.99 | $ | 10.55 | $ | 10.07 | ||||||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||||||||||
Class A Shares | $ | 9.77 | $ | 9.37 | $ | 10.87 | $ | 10.52 | ||||||||
Maximum Sales Charge: | ||||||||||||||||
Class A Shares | 4.25 | % | 4.25 | % | 4.25 | % | 4.25 | % |
* | The NAV shown above differs from the traded NAV on October 31, 2018 due to financial statement rounding and/or financial statement adjustments. |
(a) | For Class C Shares, the redemption price per share is reduced by 1.00% for shares held less than one year due to contingent deferred sales charge. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 59 |
Statements of Assets and Liabilities (continued)
October 31, 2018
Aberdeen Tax-Free Income Fund | Aberdeen Ultra Short Municipal Income Fund | |||||||
Assets: | ||||||||
Investments, at value | $ | 70,689,429 | $ | 1,046,749,380 | ||||
Short-term investments, at value | 1,336,170 | – | ||||||
Cash | 568,875 | 5,163,127 | ||||||
Interest and dividends receivable | 939,710 | 2,821,223 | ||||||
Receivable for capital shares issued | – | 2,905,762 | ||||||
Receivable from Adviser | 18,235 | 257,539 | ||||||
Prepaid expenses | 24,675 | – | ||||||
|
|
|
| |||||
Total assets | 73,577,094 | 1,057,897,031 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | 568,875 | 30,204,167 | ||||||
Distributions payable | 8,351 | 43,119 | ||||||
Payable for capital shares redeemed | 27,677 | 1,338,866 | ||||||
Accrued expenses and other payables: | ||||||||
Investment advisory fees | 26,495 | 430,391 | ||||||
Audit fees | 38,750 | 48,500 | ||||||
Administration fees | 4,987 | 66,007 | ||||||
Sub-transfer agent and administrative services fees | 393 | 46,605 | ||||||
Custodian fees | 2,086 | 34,087 | ||||||
Distribution fees | 1,805 | 24,387 | ||||||
Fund accounting fees | 2,544 | 19,001 | ||||||
Transfer agent fees | 9,961 | 9,832 | ||||||
Legal fees | 1,251 | 14,868 | ||||||
Printing fees | 4,421 | – | ||||||
Other | 3,253 | 50,358 | ||||||
|
|
|
| |||||
Total liabilities | 700,849 | 32,330,188 | ||||||
|
|
|
| |||||
Net Assets | $ | 72,876,245 | $ | 1,025,566,843 | ||||
|
|
|
| |||||
Cost: | ||||||||
Investments | $ | 69,051,400 | $ | 1,046,832,954 | ||||
Short-term investment | 1,336,170 | – | ||||||
Represented by: | ||||||||
Capital | $ | 71,227,664 | $ | 1,026,112,855 | ||||
Distributable earnings (accumulated loss) | 1,648,581 | (546,012 | ) | |||||
|
|
|
| |||||
Net Assets | $ | 72,876,245 | $ | 1,025,566,843 | ||||
|
|
|
| |||||
Net Assets: | ||||||||
Class A Shares | $ | 7,140,743 | $ | 223,254,709 | ||||
Class C Shares | 279,287 | – | ||||||
Class R Shares | 10,611 | – | ||||||
Institutional Service Class Shares | 18,014 | – | ||||||
Institutional Class Shares | 65,427,590 | 802,312,134 | ||||||
|
|
|
| |||||
Total | $ | 72,876,245 | $ | 1,025,566,843 | ||||
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
60 | Annual Report 2018 |
Statements of Assets and Liabilities (concluded)
October 31, 2018
Aberdeen Tax-Free Income Fund | Aberdeen Ultra Short Municipal Income Fund | |||||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||
Class A Shares | 748,658 | 22,116,881 | ||||||
Class C Shares | 29,338 | – | ||||||
Class R Shares | 1,112 | – | ||||||
Institutional Service Class Shares | 1,888 | – | ||||||
Institutional Class Shares | 6,854,112 | 79,939,644 | ||||||
|
|
|
| |||||
Total | 7,635,108 | 102,056,525 | ||||||
|
|
|
| |||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||
Class A Shares | $ | 9.54 | $ | 10.09 | ||||
Class C Shares (a) | $ | 9.52 | $ | – | ||||
Class R Shares | $ | 9.54 | $ | – | ||||
Institutional Service Class Shares | $ | 9.54 | $ | – | ||||
Institutional Class Shares | $ | 9.55 | $ | 10.04 | ||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||
Class A Shares | $ | 9.96 | $ | 10.14 | ||||
Maximum Sales Charge: | ||||||||
Class A Shares | 4.25 | % | 0.50 | % |
(a) | For Class C Shares, the redemption price per share is reduced by 1.00% for shares held less than one year due to contingent deferred sales charge. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 61 |
Statements of Operations
For the Year Ended October 31, 2018
Aberdeen Asia Bond Fund | Aberdeen Emerging Markets Debt Fund | Aberdeen Global Unconstrained Fixed Income Fund | Aberdeen High Yield Managed Duration Municipal Fund | Aberdeen Tax-Free Income Fund | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Dividend income | $ | – | $ | – | $ | – | $ | 2,087 | $ | 1,867 | ||||||||||
Interest income | 297,141 | 1,553,132 | 371,119 | 8,839,043 | 2,875,291 | |||||||||||||||
Foreign tax withholding | (9,484 | ) | (2,428 | ) | – | – | – | |||||||||||||
Other income | 463 | 2,869 | 5,686 | – | – | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Income | 288,120 | 1,553,573 | 376,805 | 8,841,130 | 2,877,158 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fees | 29,070 | 184,864 | 82,895 | 1,459,459 | 326,167 | |||||||||||||||
Administration fees | 4,651 | 19,719 | 11,053 | 108,049 | 61,396 | |||||||||||||||
Distribution fees Class A | 1,477 | 3,747 | 2,204 | 101,020 | 19,842 | |||||||||||||||
Distribution fees Class C | 1,137 | 2,638 | 2,268 | – | 4,037 | |||||||||||||||
Distribution fees Class R | 54 | 18,910 | – | – | 53 | |||||||||||||||
Sub-transfer agent and administrative service fees Institutional Class | 3,443 | 10,794 | 5,124 | 49,758 | 3,884 | |||||||||||||||
Sub-transfer agent and administrative service fees Class A | 232 | 2,399 | 200 | 6,860 | 527 | |||||||||||||||
Sub-transfer agent and administrative service fees Class C | 73 | 161 | 290 | – | 176 | |||||||||||||||
Sub-transfer agent and administrative service fees Class R | – | 5,569 | – | – | – | |||||||||||||||
Sub-transfer agent and administrative service fees Institutional Service Class | – | – | 10,466 | – | – | |||||||||||||||
Fund accounting fees | 358 | 2,444 | 1,267 | – | 7,279 | |||||||||||||||
Transfer agent fees | 11,795 | 10,509 | 12,645 | 94,593 | 59,060 | |||||||||||||||
Trustee fees | 355 | 1,434 | 781 | 16,090 | 4,392 | |||||||||||||||
Legal fees | 2,751 | 1,425 | 2,659 | 27,420 | 7,456 | |||||||||||||||
Compliance fees | – | – | – | 9,706 | – | |||||||||||||||
Printing fees | 11,327 | 10,183 | 18,046 | 21,652 | 23,292 | |||||||||||||||
Custodian fees | 23,269 | 14,873 | 83,198 | 36,852 | 8,107 | |||||||||||||||
Registration and filing fees | 67,349 | 71,937 | 75,130 | 52,902 | 77,274 | |||||||||||||||
Audit fees | 42,150 | 42,150 | 47,650 | 48,330 | 38,750 | |||||||||||||||
Miscellaneous | 11,535 | – | – | – | – | |||||||||||||||
Other | 11,107 | 15,688 | 12,937 | 13,432 | 19,678 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses before reimbursed/waived expenses | 222,133 | 419,444 | 368,813 | 2,046,123 | 661,370 | |||||||||||||||
Interest Expense (a) | 501 | – | 40 | 21,973 | – | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total operating expenses before reimbursed/waived expenses | 222,634 | 419,444 | 368,853 | 2,068,096 | 661,370 | |||||||||||||||
Expenses reimbursed | (178,535 | ) | (164,344 | ) | (236,240 | ) | – | (222,152 | ) | |||||||||||
Expenses waived by investment adviser | – | – | – | (484,846 | ) | – | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net expenses | 44,099 | 255,100 | 132,613 | 1,583,250 | 439,218 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net Investment Income | 244,021 | 1,298,473 | 244,192 | 7,257,880 | 2,437,940 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||||||||||||||
Realized gain/(loss) on investment transactions | (105,672 | ) | (374,761 | ) | 45,992 | 187,903 | 228,399 | |||||||||||||
Realized gain/(loss) on futures contracts | 79,444 | – | 243,657 | – | – | |||||||||||||||
Realized gain/(loss) on swap contracts | – | – | (116,469 | ) | – | – | ||||||||||||||
Realized gain/(loss) on forward foreign currency exchange contracts | 14,897 | 83,538 | 213,927 | – | – | |||||||||||||||
Realized gain/(loss) on foreign currency transactions | (21,809 | ) | (34,540 | ) | (19,092 | ) | – | – | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gain/(loss) from investments, futures contracts, swaps, forward foreign currency exchange contracts and foreign currency transactions | (33,140 | ) | (325,763 | ) | 368,015 | 187,903 | 228,399 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/(depreciation) on investment transactions | (446,290 | ) | (3,009,725 | ) | (497,312 | ) | (3,943,029 | ) | (3,014,856 | ) | ||||||||||
Net change in unrealized appreciation/(depreciation) on swap contracts | – | – | 67,483 | – | – | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on futures contracts | (15,838 | ) | – | 9,890 | – | – | ||||||||||||||
Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange contracts | (23,395 | ) | (34,350 | ) | 116,602 | – | – | |||||||||||||
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities denominated in foreign currencies | (2,734 | ) | 2,499 | (5,271 | ) | – | – | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/(depreciation) from investments, futures contracts, swap contracts, forward foreign currency exchange contracts and translation of assets and liabilities denominated in foreign currencies | (488,257 | ) | (3,041,576 | ) | (308,608 | ) | (3,943,029 | ) | (3,014,856 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized/unrealized gain/(loss) from investments, futures contracts, swap contracts, forward foreign currency exchange contracts and foreign currency transactions | (521,397 | ) | (3,367,339 | ) | 59,407 | (3,755,126 | ) | (2,786,457 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (277,376 | ) | $ | (2,068,866 | ) | $ | 303,599 | $ | 3,502,754 | $ | (348,517 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
(a) | See Note 9 for additional information. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
62 | Annual Report 2018 |
Statements of Operations (concluded)
For the Year Ended October 31, 2018
Aberdeen Ultra Short Municipal Income Fund | ||||
INVESTMENT INCOME: | ||||
Interest income | $ | 17,821,093 | ||
|
| |||
Total Income | 17,821,093 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees | 5,024,797 | |||
Administration fees | 498,148 | |||
Distribution fees Class A | 486,904 | |||
Sub-transfer agent and administrative service fees Institutional Class | 224,143 | |||
Sub-transfer agent and administrative service fees Class A | 44,493 | |||
Fund accounting fees | 41,887 | |||
Transfer agent fees | 324,158 | |||
Trustee fees | 66,118 | |||
Legal fees | 106,110 | |||
Compliance fees | 40,616 | |||
Printing fees | 94,760 | |||
Custodian fees | 94,065 | |||
Registration and filing fees | 74,909 | |||
Audit fees | 57,005 | |||
Other | 56,991 | |||
|
| |||
Total operating expenses before reimbursed/waived expenses | 7,235,104 | |||
Expenses waived by investment adviser | (2,225,883 | ) | ||
|
| |||
Net expenses | 5,009,221 | |||
|
| |||
Net Investment Income | 12,811,872 | |||
|
| |||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||
Realized loss on investment transactions | (1,113 | ) | ||
|
| |||
Net realized loss from investments | (1,113 | ) | ||
|
| |||
Net change in unrealized appreciation/(depreciation) on investment transactions | (32,151 | ) | ||
|
| |||
Net change in unrealized appreciation/(depreciation) from investments | (32,151 | ) | ||
|
| |||
Net realized/unrealized (loss) from investments | (33,264 | ) | ||
|
| |||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 12,778,608 | ||
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 63 |
Statements of Changes in Net Assets
Aberdeen Asia Bond Fund | Aberdeen Emerging Markets Debt Fund | Aberdeen Global Unconstrained Fixed Income Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 244,021 | $ | 787,499 | $ | 1,298,473 | $ | 1,113,599 | $ | 244,192 | $ | 224,568 | ||||||||||||
Net realized gain/(loss) from investments, futures contracts, swaps, forward foreign currency exchange contracts and foreign currency transactions | (33,140 | ) | (433,024 | ) | (325,763 | ) | 89,159 | 368,015 | (57,969 | ) | ||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments, futures contracts, swaps, forward foreign currency exchange contracts and translation of assets and liabilities denominated in foreign currencies | (488,257 | ) | 183,509 | (3,041,576 | ) | 1,328,769 | (308,608 | ) | 111,096 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in net assets resulting from operations | (277,376 | ) | 537,984 | (2,068,866 | ) | 2,531,527 | 303,599 | 277,695 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders(a): | ||||||||||||||||||||||||
Class A | (62,781 | ) | – | (82,592 | ) | (21,569 | ) | (2,669 | ) | (10,566 | ) | |||||||||||||
Class C | (6,256 | ) | – | (12,580 | ) | (4,951 | ) | (810 | ) | (4,764 | ) | |||||||||||||
Class R | (706 | ) | – | (190,173 | ) | (51,220 | ) | – | – | |||||||||||||||
Institutional Service Class | (4,558 | ) | – | (1,168 | ) | (590 | ) | (33,212 | ) | (123,195 | ) | |||||||||||||
Institutional Class | (341,465 | ) | – | (1,051,808 | ) | (512,681 | ) | (5,209 | ) | (51,496 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from shareholder distributions | (415,766 | ) | – | (1,338,321 | ) | (591,011 | ) | (41,900 | ) | (190,021 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions | (1,387,622 | ) | (23,701,899 | ) | 3,757,260 | 2,653,709 | 3,133,843 | (2,545,971 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets | (2,080,764 | ) | (23,163,915 | ) | 350,073 | 4,594,225 | 3,395,542 | (2,458,297 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 6,388,081 | 29,551,996 | 23,568,944 | 18,974,719 | 13,290,564 | 15,748,861 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
End of year | $ | 4,307,317 | $ | 6,388,081 | $ | 23,919,017 | $ | 23,568,944 | $ | 16,686,106 | $ | 13,290,564 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the Funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
64 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen Asia Bond Fund | Aberdeen Emerging Markets Debt Fund | Aberdeen Global Unconstrained Fixed Income Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 224,222 | $ | 197,708 | $ | 603,622 | $ | 2,044,646 | $ | 735,247 | $ | 217,180 | ||||||||||||
Dividends reinvested | 62,070 | – | 82,592 | 21,569 | 2,631 | 10,302 | ||||||||||||||||||
Cost of shares redeemed | (1,255,227 | ) | (183,758 | ) | (1,431,544 | ) | (363,120 | ) | (439,757 | ) | (1,246,071 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A | (968,935 | ) | 13,950 | (745,330 | ) | 1,703,095 | 298,121 | (1,018,589 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | 7,370 | 131,000 | – | 68,987 | 28,226 | ||||||||||||||||||
Dividends reinvested | 5,081 | – | 10,325 | 4,032 | 779 | 4,399 | ||||||||||||||||||
Cost of shares redeemed | (76,566 | ) | (158,699 | ) | (63,128 | ) | (143,474 | ) | (41,779 | ) | (187,729 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C | (71,485 | ) | (151,329 | ) | 78,197 | (139,442 | ) | 27,987 | (155,104 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | 3,090,580 | 2,017,827 | – | – | ||||||||||||||||||
Dividends reinvested | 706 | – | 190,173 | 51,220 | – | – | ||||||||||||||||||
Cost of shares redeemed(b) | – | – | (1,849,359 | ) | (484,492 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R | 706 | – | 1,431,394 | 1,584,555 | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 853,852 | 22,152 | – | – | 937,763 | 1,308,965 | ||||||||||||||||||
Dividends reinvested | 4,544 | – | 1,168 | 590 | 32,760 | 121,013 | ||||||||||||||||||
Cost of shares redeemed | (871,436 | ) | (9,835,665 | ) | – | – | (1,949,530 | ) | (1,876,638 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class | (13,040 | ) | (9,813,513 | ) | 1,168 | 590 | (979,007 | ) | (446,660 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 1,143,058 | 1,911,340 | 2,849,403 | 6,136,523 | 5,170,550 | 3,069,715 | ||||||||||||||||||
Dividends reinvested | 341,223 | – | 1,037,303 | 507,047 | 5,207 | 51,431 | ||||||||||||||||||
Cost of shares redeemed | (1,819,149 | ) | (15,662,348 | ) | (894,875 | ) | (7,138,659 | ) | (1,389,015 | ) | (4,046,764 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class | (334,868 | ) | (13,751,008 | ) | 2,991,831 | (495,089 | ) | 3,786,742 | (925,618 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions: | $ | (1,387,622 | ) | $ | (23,701,900 | ) | $ | 3,757,260 | $ | 2,653,709 | $ | 3,133,843 | $ | (2,545,971 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(b) | Includes redemption fees, if any. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 65 |
Statements of Changes in Net Assets (continued)
Aberdeen Asia Bond Fund | Aberdeen Emerging Markets Debt Fund | Aberdeen Global Unconstrained Fixed Income Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 21,575 | 19,571 | 61,806 | 202,334 | 70,942 | 21,477 | ||||||||||||||||||
Reinvested | 6,018 | – | 8,540 | 2,102 | 258 | 1,021 | ||||||||||||||||||
Redeemed | (122,358 | ) | (18,154 | ) | (146,726 | ) | (36,382 | ) | (42,494 | ) | (122,740 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A Shares | (94,765 | ) | 1,417 | (76,380 | ) | 168,054 | 28,706 | (100,242 | )�� | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Issued | – | 735 | 13,966 | – | 6,828 | 2,854 | ||||||||||||||||||
Reinvested | 502 | – | 1,101 | 398 | 79 | 444 | ||||||||||||||||||
Redeemed | (7,381 | ) | (16,043 | ) | (6,451 | ) | (15,172 | ) | (4,177 | ) | (18,815 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C Shares | (6,879 | ) | (15,308 | ) | 8,616 | (14,774 | ) | 2,730 | (15,517 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Issued | – | – | 316,948 | 176,546 | – | – | ||||||||||||||||||
Reinvested | 70 | – | 20,028 | 5,049 | – | – | ||||||||||||||||||
Redeemed | – | – | (194,974 | ) | (48,964 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R Shares | 70 | – | 142,002 | 132,631 | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | 76,578 | 2,174 | – | – | 90,225 | 128,798 | ||||||||||||||||||
Reinvested | 421 | – | 122 | 58 | 3,202 | 11,958 | ||||||||||||||||||
Redeemed | (79,284 | ) | (937,006 | ) | – | – | (188,854 | ) | (183,897 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class Shares | (2,285 | ) | (934,832 | ) | 122 | 58 | (95,427 | ) | (43,141 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Issued | 110,298 | 189,534 | 285,269 | 734,421 | 492,386 | 300,303 | ||||||||||||||||||
Reinvested | 33,116 | – | 108,659 | 50,032 | 505 | 5,057 | ||||||||||||||||||
Redeemed | (178,229 | ) | (1,536,320 | ) | (95,661 | ) | (728,374 | ) | (132,841 | ) | (393,893 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class Shares | (34,815 | ) | (1,346,786 | ) | 298,267 | 56,079 | 360,050 | (88,533 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total change in shares: | (138,674 | ) | (2,295,509 | ) | 372,627 | 342,048 | 296,059 | (247,433 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
66 | Annual Report 2018 |
Statements of Changes in Net Assets (continued)
Aberdeen High Yield Managed Duration Municipal Fund | Aberdeen Tax-Free Income Fund | Aberdeen Ultra Short Municipal Income Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 7,257,880 | $ | 5,972,292 | $ | 2,437,940 | $ | 2,693,721 | $ | 12,811,872 | $ | 8,762,664 | ||||||||||||
Net realized gain/(loss) from investments, futures contracts, swaps and foreign currency transactions | 187,903 | (1,374,404 | ) | 228,399 | (39,259 | ) | (1,113 | ) | 97,195 | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments, futures contracts, swaps and translation of assets and liabilities denominated in foreign currencies | (3,943,029 | ) | (816,823 | ) | (3,014,856 | ) | (1,933,759 | ) | (32,151 | ) | (45,140 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in net assets resulting from operations | 3,502,754 | 3,781,065 | (348,517 | ) | 720,703 | 12,778,608 | 8,814,719 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders(a): | ||||||||||||||||||||||||
Class A | (1,242,147 | ) | (1,205,149 | ) | (234,032 | ) | (277,956 | ) | (2,112,020 | ) | (1,287,296 | ) | ||||||||||||
Class C | – | – | (8,894 | ) | (22,335 | ) | – | – | ||||||||||||||||
Class R | – | – | (288 | ) | (283 | ) | – | – | ||||||||||||||||
Institutional Service Class | – | – | (578 | ) | (704 | ) | – | – | ||||||||||||||||
Institutional Class | (6,113,864 | ) | (4,764,895 | ) | (2,194,148 | ) | (2,392,443 | ) | (10,716,922 | ) | (7,470,264 | ) | ||||||||||||
Tax return of capital | ||||||||||||||||||||||||
Class A | (701 | ) | – | – | – | – | – | |||||||||||||||||
Class C | – | – | – | – | – | – | ||||||||||||||||||
Class R | – | – | – | – | – | – | ||||||||||||||||||
Institutional Service Class | – | – | – | – | – | – | ||||||||||||||||||
Institutional Class | (3,194 | ) | – | – | – | – | – | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from shareholder distributions | (7,359,906 | ) | (5,970,044 | ) | (2,437,940 | ) | (2,693,721 | ) | (12,828,942 | ) | (8,757,560 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions | (47,233,456 | ) | 71,517,223 | (5,354,918 | ) | (7,976,144 | ) | (82,271,843 | ) | (4,270,253 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets | (51,090,608 | ) | 69,328,244 | (8,141,375 | ) | (9,949,162 | ) | (82,322,177 | ) | (4,213,094 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 258,333,574 | 189,005,330 | 81,017,620 | 90,966,782 | 1,107,889,020 | 1,112,102,114 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
End of year | $ | 207,242,966 | $ | 258,333,574 | $ | 72,876,245 | $ | 81,017,620 | $ | 1,025,566,843 | $ | 1,107,889,020 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the Funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 67 |
Statements of Changes in Net Assets (continued)
Aberdeen High Yield Managed Duration Municipal Fund | Aberdeen Tax-Free Income Fund | Aberdeen Ultra Short Municipal Income Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 7,090,877 | $ | 31,878,883 | $ | 283,873 | $ | 428,418 | $ | 150,553,474 | $ | 125,032,573 | ||||||||||||
Dividends reinvested | 1,037,750 | 975,417 | 170,617 | 211,612 | 1,907,875 | 1,086,121 | ||||||||||||||||||
Cost of shares redeemed | (28,973,531 | ) | (17,413,657 | ) | (2,105,919 | ) | (2,116,919 | ) | (140,452,304 | ) | (121,128,610 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A | (20,844,904 | ) | 15,440,643 | (1,651,429 | ) | (1,476,889 | ) | 12,009,045 | 4,990,084 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | 4 | 754,262 | – | – | ||||||||||||||||||
Dividends reinvested | – | – | 8,411 | 19,798 | – | – | ||||||||||||||||||
Cost of shares redeemed | – | – | (255,993 | ) | (1,062,506 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C | – | – | (247,578 | ) | (288,446 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Dividends reinvested | – | – | 288 | 283 | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R | – | – | 288 | 283 | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | – | – | 7 | 2,472 | – | – | ||||||||||||||||||
Dividends reinvested | – | – | 578 | 672 | – | – | ||||||||||||||||||
Cost of shares redeemed | – | – | (22 | ) | (12,458 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class | – | – | 563 | (9,314 | ) | – | – | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 77,235,723 | 147,828,809 | 1,284,290 | 2,940,975 | 549,504,679 | 664,227,328 | ||||||||||||||||||
Dividends reinvested | 4,994,780 | 3,337,131 | 1,726,017 | 1,863,928 | 8,605,104 | 5,604,077 | ||||||||||||||||||
Cost of shares redeemed | (108,619,055 | ) | (95,089,360 | ) | (6,467,069 | ) | (11,006,681 | ) | (652,390,671 | ) | (679,091,742 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class | (26,388,552 | ) | 56,076,580 | (3,456,762 | ) | (6,201,778 | ) | (94,280,888 | ) | (9,260,337 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions: | $ | (47,233,456 | ) | $ | 71,517,223 | $ | (5,354,918 | ) | $ | (7,976,144 | ) | $ | (82,271,843 | ) | $ | (4,270,253 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
68 | Annual Report 2018 |
Statements of Changes in Net Assets (concluded)
Aberdeen High Yield Managed Duration Municipal Fund | Aberdeen Tax-Free Income Fund | Aberdeen Ultra Short Municipal Income Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 694,917 | 3,121,734 | 28,960 | 43,119 | 14,916,826 | 12,388,093 | ||||||||||||||||||
Reinvested | 101,917 | 95,411 | 17,589 | 21,368 | 189,025 | 107,614 | ||||||||||||||||||
Redeemed | (2,842,731 | ) | (1,701,847 | ) | (216,368 | ) | (213,951 | ) | (13,916,883 | ) | (12,002,380 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A Shares | (2,045,897 | ) | 1,515,298 | (169,819 | ) | (149,464 | ) | 1,188,968 | 493,327 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Issued | – | – | – | 76,091 | – | – | ||||||||||||||||||
Reinvested | – | – | 868 | 2,004 | – | – | ||||||||||||||||||
Redeemed | – | – | (26,464 | ) | (107,426 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C Shares | – | – | (25,596 | ) | (29,331 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Reinvested | – | – | 30 | 29 | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R Shares | – | – | 30 | 29 | – | – | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | – | – | 1 | 250 | – | – | ||||||||||||||||||
Reinvested | – | – | 59 | 68 | – | – | ||||||||||||||||||
Redeemed | – | – | (2 | ) | (1,261 | ) | – | – | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class Shares | – | – | 58 | (943 | ) | – | – | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Issued | 7,578,069 | 14,433,357 | 131,431 | 296,521 | 54,735,898 | 66,167,995 | ||||||||||||||||||
Reinvested | 490,653 | 326,511 | 177,844 | 188,015 | 857,143 | 558,259 | ||||||||||||||||||
Redeemed | (10,656,718 | ) | (9,341,188 | ) | (664,603 | ) | (1,109,828 | ) | (64,982,743 | ) | (67,651,996 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class Shares | (2,587,996 | ) | 5,418,680 | (355,328 | ) | (625,292 | ) | (9,389,702 | ) | (925,742 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total change in shares: | (4,633,893 | ) | 6,933,978 | (550,655 | ) | (805,001 | ) | (8,200,734 | ) | (432,415 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 69 |
Financial Highlights
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Asia Bond Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Tax Return of Capital | Total Distributions | Net Asset Value, End of Period | ||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 10.68 | $ | 0.39 | $ | (1.02 | ) | $ | (0.63 | ) | $ | (0.70 | ) | $ | – | $ | – | $ | (0.70 | ) | $ | 9.35 | ||||||||||||||
Year Ended October 31, 2017 | 10.20 | 0.41 | 0.07 | 0.48 | – | – | – | – | 10.68 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 9.75 | 0.41 | 0.14 | 0.55 | – | – | (0.10 | ) | (0.10 | ) | 10.20 | |||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.19 | 0.39 | (0.71 | ) | (0.32 | ) | (0.04 | ) | – | (0.08 | ) | (0.12 | ) | 9.75 | ||||||||||||||||||||||
Year Ended October 31, 2014 | 10.43 | 0.35 | (0.12 | ) | 0.23 | (0.14 | ) | (0.33 | ) | – | (0.47 | ) | 10.19 | |||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.39 | 0.33 | (1.01 | ) | (0.68 | ) | (0.50 | ) | – | – | (0.50 | ) | 9.21 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 10.00 | 0.32 | 0.07 | 0.39 | – | – | – | – | 10.39 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 9.62 | 0.32 | 0.14 | 0.46 | – | – | (0.08 | ) | (0.08 | ) | 10.00 | |||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.10 | 0.31 | (0.71 | ) | (0.40 | ) | – | – | (0.08 | ) | (0.08 | ) | 9.62 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 10.37 | 0.28 | (0.11 | ) | 0.17 | (0.11 | ) | (0.33 | ) | – | (0.44 | ) | 10.10 | |||||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.59 | 0.39 | (1.03 | ) | (0.64 | ) | (0.68 | ) | – | – | (0.68 | ) | 9.27 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 10.14 | 0.38 | 0.07 | 0.45 | – | – | – | – | 10.59 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 9.71 | 0.38 | 0.14 | 0.52 | – | – | (0.09 | ) | (0.09 | ) | 10.14 | |||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.16 | 0.36 | (0.70 | ) | (0.34 | ) | (0.03 | ) | – | (0.08 | ) | (0.11 | ) | 9.71 | ||||||||||||||||||||||
Year Ended October 31, 2014 | 10.42 | 0.33 | (0.12 | ) | 0.21 | (0.14 | ) | (0.33 | ) | – | (0.47 | ) | 10.16 | |||||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.75 | 0.44 | (1.08 | ) | (0.64 | ) | (0.16 | ) | – | – | (0.16 | ) | 9.95 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 10.20 | 0.41 | 0.14 | 0.55 | – | – | – | – | 10.75 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 9.74 | 0.41 | 0.15 | 0.56 | – | – | (0.10 | ) | (0.10 | ) | 10.20 | |||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.20 | 0.39 | (0.72 | ) | (0.33 | ) | (0.05 | ) | – | (0.08 | ) | (0.13 | ) | 9.74 | ||||||||||||||||||||||
Year Ended October 31, 2014 | 10.43 | 0.35 | (0.10 | ) | 0.25 | (0.15 | ) | (0.33 | ) | – | (0.48 | ) | 10.20 | |||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.74 | 0.44 | (1.03 | ) | (0.59 | ) | (0.74 | ) | – | – | (0.74 | ) | 9.41 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 10.24 | 0.43 | 0.07 | 0.50 | – | – | – | – | 10.74 | |||||||||||||||||||||||||||
Year Ended October 31, 2016 | 9.76 | 0.42 | 0.16 | 0.58 | – | – | (0.10 | ) | (0.10 | ) | 10.24 | |||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.22 | 0.40 | (0.70 | ) | (0.30 | ) | (0.08 | ) | – | (0.08 | ) | (0.16 | ) | 9.76 | ||||||||||||||||||||||
Year Ended October 31, 2014 | 10.45 | 0.38 | (0.12 | ) | 0.26 | (0.16 | ) | (0.33 | ) | – | (0.49 | ) | 10.22 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
70 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Asia Bond Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(6.29 | %) | $ | 70 | 0.99 | %(e) | 4.00 | %(e) | 3.69 | % | 88.56 | % | |||||||||||
4.71 | %(f) | 1,091 | 0.97 | %(e) | 1.95 | %(e) | 3.98 | % | 106.31 | % | ||||||||||||
5.67 | % | 1,029 | 0.97 | %(g) | 1.40 | %(g) | 4.12 | % | 96.06 | % | ||||||||||||
(3.16 | %) | 774 | 0.96 | %(e) | 1.09 | %(e) | 3.91 | % | 93.16 | % | ||||||||||||
2.41 | % | 824 | 0.95 | % | 1.05 | % | 3.52 | % | 57.03 | % | ||||||||||||
(6.90 | %) | 92 | 1.71 | %(e) | 4.78 | %(e) | 3.25 | % | 88.56 | % | ||||||||||||
3.90 | %(f) | 175 | 1.70 | %(e) | 2.73 | %(e) | 3.21 | % | 106.31 | % | ||||||||||||
4.88 | % | 322 | 1.71 | %(g) | 2.17 | %(g) | 3.34 | % | 96.06 | % | ||||||||||||
(3.97 | %)(f) | 606 | 1.71 | %(e) | 1.84 | %(e) | 3.19 | % | 93.16 | % | ||||||||||||
1.76 | %(f) | 598 | 1.70 | % | 1.80 | % | 2.77 | % | 57.03 | % | ||||||||||||
(6.44 | %) | 10 | 1.21 | %(e) | 4.22 | %(e) | 3.83 | % | 88.56 | % | ||||||||||||
4.44 | % | 11 | 1.20 | %(e) | 2.18 | %(e) | 3.76 | % | 106.31 | % | ||||||||||||
5.44 | % | 10 | 1.20 | %(g) | 1.63 | %(g) | 3.85 | % | 96.06 | % | ||||||||||||
(3.40 | %) | 10 | 1.20 | %(e) | 1.33 | %(e) | 3.69 | % | 93.16 | % | ||||||||||||
2.14 | % | 10 | 1.20 | % | 1.31 | % | 3.25 | % | 57.03 | % | ||||||||||||
(5.93 | %) | 148 | 0.71 | %(e) | 3.72 | %(e) | 4.04 | % | 88.56 | % | ||||||||||||
5.39 | %(f) | 184 | 0.88 | %(e) | 1.86 | %(e) | 4.01 | % | 106.31 | % | ||||||||||||
5.78 | % | 9,709 | 0.88 | %(g) | 1.31 | %(g) | 4.17 | % | 96.06 | % | ||||||||||||
(3.21 | %) | 11,087 | 0.96 | %(e) | 1.09 | %(e) | 3.92 | % | 93.16 | % | ||||||||||||
2.54 | %(f) | 11,377 | 0.94 | % | 1.04 | % | 3.52 | % | 57.03 | % | ||||||||||||
(5.98 | %) | 3,988 | 0.71 | %(e) | 3.79 | %(e) | 4.30 | % | 88.56 | % | ||||||||||||
4.88 | % | 4,927 | 0.70 | %(e) | 1.76 | %(e) | 4.22 | % | 106.31 | % | ||||||||||||
6.02 | % | 18,483 | 0.71 | %(g) | 1.18 | %(g) | 4.29 | % | 96.06 | % | ||||||||||||
(2.99 | %) | 73,900 | 0.70 | %(e) | 0.83 | %(e) | 3.99 | % | 93.16 | % | ||||||||||||
2.72 | % | 224,989 | 0.70 | % | 0.80 | % | 3.77 | % | 57.03 | % |
(e) | Includes interest expense that amounts to less than 0.01%. |
(f) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
(g) | Includes interest expense that amounts to 0.01% |
2018 Annual Report | 71 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Emerging Markets Debt Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Tax Return of Capital | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 10.27 | $ | 0.47 | $ | (1.26 | ) | $ | (0.79 | ) | $ | (0.51 | ) | $ | – | $ | (0.51 | ) | $ | 8.97 | ||||||||||||
Year Ended October 31, 2017 | 9.73 | 0.49 | 0.30 | 0.79 | (0.25 | ) | – | (0.25 | ) | 10.27 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 8.77 | 0.57 | 0.65 | 1.22 | (0.22 | ) | (0.04 | ) | (0.26 | ) | 9.73 | |||||||||||||||||||||
Year Ended October 31, 2015 | 9.73 | 0.49 | (1.11 | ) | (0.62 | ) | (0.34 | ) | – | (0.34 | ) | 8.77 | ||||||||||||||||||||
Year Ended October 31, 2014 | 9.54 | 0.42 | 0.11 | 0.53 | (0.34 | ) | – | (0.34 | ) | 9.73 | ||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.22 | 0.43 | (1.28 | ) | (0.85 | ) | (0.47 | ) | – | (0.47 | ) | 8.90 | ||||||||||||||||||||
Year Ended October 31, 2017 | 9.68 | 0.44 | 0.29 | 0.73 | (0.19 | ) | – | (0.19 | ) | 10.22 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 8.76 | 0.57 | 0.59 | 1.16 | (0.21 | ) | (0.03 | ) | (0.24 | ) | 9.68 | |||||||||||||||||||||
Year Ended October 31, 2015 | 9.72 | 0.38 | (1.05 | ) | (0.67 | ) | (0.29 | ) | – | (0.29 | ) | 8.76 | ||||||||||||||||||||
Year Ended October 31, 2014 | 9.53 | 0.34 | 0.11 | 0.45 | (0.26 | ) | – | (0.26 | ) | 9.72 | ||||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.25 | 0.46 | (1.28 | ) | (0.82 | ) | (0.50 | ) | – | (0.50 | ) | 8.93 | ||||||||||||||||||||
Year Ended October 31, 2017 | 9.72 | 0.47 | 0.30 | 0.77 | (0.24 | ) | – | (0.24 | ) | 10.25 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 8.77 | 0.51 | 0.69 | 1.20 | (0.22 | ) | (0.03 | ) | (0.25 | ) | 9.72 | |||||||||||||||||||||
Year Ended October 31, 2015 | 9.73 | 0.46 | (1.10 | ) | (0.64 | ) | (0.32 | ) | – | (0.32 | ) | 8.77 | ||||||||||||||||||||
Year Ended October 31, 2014 | 9.54 | 0.39 | 0.11 | 0.50 | (0.31 | ) | – | (0.31 | ) | 9.73 | ||||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.30 | 0.52 | (1.28 | ) | (0.76 | ) | (0.55 | ) | – | (0.55 | ) | 8.99 | ||||||||||||||||||||
Year Ended October 31, 2017 | 9.75 | 0.54 | 0.30 | 0.84 | (0.29 | ) | – | (0.29 | ) | 10.30 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 8.78 | 0.64 | 0.61 | 1.25 | (0.24 | ) | (0.04 | ) | (0.28 | ) | 9.75 | |||||||||||||||||||||
Year Ended October 31, 2015 | 9.74 | 0.51 | (1.11 | ) | (0.60 | ) | (0.36 | ) | – | (0.36 | ) | 8.78 | ||||||||||||||||||||
Year Ended October 31, 2014 | 9.55 | 0.44 | 0.11 | 0.55 | (0.36 | ) | – | (0.36 | ) | 9.74 | ||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.29 | 0.52 | (1.28 | ) | (0.76 | ) | (0.54 | ) | – | (0.54 | ) | 8.99 | ||||||||||||||||||||
Year Ended October 31, 2017 | 9.74 | 0.54 | 0.29 | 0.83 | (0.28 | ) | – | (0.28 | ) | 10.29 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 8.77 | 0.65 | 0.60 | 1.25 | (0.24 | ) | (0.04 | ) | (0.28 | ) | 9.74 | |||||||||||||||||||||
Year Ended October 31, 2015 | 9.73 | 0.52 | (1.12 | ) | (0.60 | ) | (0.36 | ) | – | (0.36 | ) | 8.77 | ||||||||||||||||||||
Year Ended October 31, 2014 | 9.54 | 0.47 | 0.08 | 0.55 | (0.36 | ) | – | (0.36 | ) | 9.73 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
72 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Emerging Markets Debt Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(7.91 | %) | $ | 1,050 | 1.31 | % | 1.93 | % | 4.78 | % | 56.02 | % | |||||||||||
8.21 | % | 1,987 | 1.37 | % | 2.15 | % | 4.85 | % | 64.37 | % | ||||||||||||
14.45 | %(e) | 247 | 1.20 | %(f) | 1.79 | %(f) | 5.88 | % | 103.26 | % | ||||||||||||
(6.41 | %) | 10 | 1.17 | %(f) | 1.65 | %(f) | 5.39 | % | 64.60 | % | ||||||||||||
5.64 | % | 10 | 1.15 | % | 1.85 | % | 4.35 | % | 60.31 | % | ||||||||||||
(8.58 | %) | 304 | 1.90 | % | 2.58 | % | 4.52 | % | 56.02 | % | ||||||||||||
7.57 | % | 261 | 1.90 | % | 2.75 | % | 4.46 | % | 64.37 | % | ||||||||||||
13.62 | %(e) | 390 | 1.90 | %(f) | 2.53 | %(f) | 6.39 | % | 103.26 | % | ||||||||||||
(6.98 | %) | 650 | 1.90 | %(f) | 2.38 | %(f) | 4.29 | % | 64.60 | % | ||||||||||||
4.83 | %(g) | 10 | 1.89 | % | 2.60 | % | 3.60 | % | 60.31 | % | ||||||||||||
(8.25 | %) | 3,826 | 1.55 | % | 2.17 | % | 4.79 | % | 56.02 | % | ||||||||||||
7.96 | % | 2,934 | 1.56 | % | 2.34 | % | 4.72 | % | 64.37 | % | ||||||||||||
14.22 | %(e) | 1,493 | 1.40 | %(f) | 1.99 | %(f) | 5.04 | % | 103.26 | % | ||||||||||||
(6.60 | %) | 10 | 1.40 | %(f) | 1.88 | %(f) | 5.09 | % | 64.60 | % | ||||||||||||
5.37 | % | 10 | 1.40 | % | 2.10 | % | 4.10 | % | 60.31 | % | ||||||||||||
(7.63 | %) | 20 | 0.89 | % | 1.52 | % | 5.38 | % | 56.02 | % | ||||||||||||
8.67 | % | 22 | 0.90 | % | 1.68 | % | 5.43 | % | 64.37 | % | ||||||||||||
14.76 | %(e) | 20 | 0.90 | %(f) | 1.49 | %(f) | 7.01 | % | 103.26 | % | ||||||||||||
(6.22 | %)(g) | 10 | 0.90 | %(f) | 1.38 | %(f) | 5.62 | % | 64.60 | % | ||||||||||||
5.80 | %(g) | 10 | 0.90 | % | 1.60 | % | 4.60 | % | 60.31 | % | ||||||||||||
(7.58 | %) | 18,720 | 0.90 | % | 1.58 | % | 5.41 | % | 56.02 | % | ||||||||||||
8.62 | % | 18,365 | 0.90 | % | 1.76 | % | 5.42 | % | 64.37 | % | ||||||||||||
14.78 | %(e) | 16,825 | 0.90 | %(f) | 1.49 | %(f) | 7.37 | % | 103.26 | % | ||||||||||||
(6.23 | %) | 27,471 | 0.90 | %(f) | 1.38 | %(f) | 5.71 | % | 64.60 | % | ||||||||||||
5.91 | % | 31,173 | 0.90 | % | 1.60 | % | 4.79 | % | 60.31 | % |
(e) | Included within Net Realized and Unrealized Gains (Losses) on Investments per share is a payment from affiliate (Note 10). If such payment was excluded, the total return would have been 14.33% for Class A Shares, 13.15% for Class C Shares, 13.87% for Class R Shares, 14.41% for Institutional Service Class Shares and 14.31% for Institutional Class Shares. |
(f) | Includes interest expense that amounts to less than 0.01%. |
(g) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
2018 Annual Report | 73 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Global Unconstrained Fixed Income Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 10.22 | $ | 0.17 | $ | 0.05 | $ | 0.22 | $ | – | $ | (0.03 | ) | $ | (0.03 | ) | $ | 10.41 | ||||||||||||||
Year Ended October 31, 2017 | 10.18 | 0.13 | 0.02 | 0.15 | – | (0.11 | ) | (0.11 | ) | 10.22 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 9.41 | 0.13 | (f) | 0.67 | 0.80 | (0.03 | ) | – | (0.03 | ) | 10.18 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.12 | 0.22 | (0.84 | ) | (0.62 | ) | (0.09 | ) | – | (0.09 | ) | 9.41 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.37 | 0.24 | (0.23 | ) | 0.01 | (0.26 | ) | – | (0.26 | ) | 10.12 | |||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 9.97 | 0.09 | 0.06 | 0.15 | – | (0.03 | ) | (0.03 | ) | 10.09 | ||||||||||||||||||||||
Year Ended October 31, 2017 | 10.01 | 0.06 | 0.01 | 0.07 | – | (0.11 | ) | (0.11 | ) | 9.97 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 9.30 | 0.05 | (f) | 0.68 | 0.73 | (0.02 | ) | – | (0.02 | ) | 10.01 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.07 | 0.14 | (0.83 | ) | (0.69 | ) | (0.08 | ) | – | (0.08 | ) | 9.30 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.23 | 0.16 | (0.23 | ) | (0.07 | ) | (0.09 | ) | – | (0.09 | ) | 10.07 | ||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.26 | 0.18 | 0.06 | 0.24 | – | (0.03 | ) | (0.03 | ) | 10.47 | ||||||||||||||||||||||
Year Ended October 31, 2017 | 10.21 | 0.15 | 0.01 | 0.16 | – | (0.11 | ) | (0.11 | ) | 10.26 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 9.42 | 0.14 | (f) | 0.68 | 0.82 | (0.03 | ) | – | (0.03 | ) | 10.21 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.12 | 0.22 | (0.83 | ) | (0.61 | ) | (0.09 | ) | – | (0.09 | ) | 9.42 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.39 | 0.25 | (0.24 | ) | 0.01 | (0.28 | ) | – | (0.28 | ) | 10.12 | |||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 10.33 | 0.20 | 0.05 | 0.25 | – | (0.03 | ) | (0.03 | ) | 10.55 | ||||||||||||||||||||||
Year Ended October 31, 2017 | 10.26 | 0.16 | 0.02 | 0.18 | – | (0.11 | ) | (0.11 | ) | 10.33 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 9.46 | 0.16 | (f) | 0.68 | 0.84 | (0.04 | ) | – | (0.04 | ) | 10.26 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.15 | 0.25 | (0.84 | ) | (0.59 | ) | (0.10 | ) | – | (0.10 | ) | 9.46 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.43 | 0.27 | (0.24 | ) | 0.03 | (0.31 | ) | – | (0.31 | ) | 10.15 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
74 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Global Unconstrained Fixed Income Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
2.10 | % | $ | 1,119 | 1.12 | %(e) | 2.79 | %(e) | 1.60 | % | 62.39 | % | |||||||||||
1.53 | % | 806 | 1.17 | %(e) | 2.74 | %(e) | 1.29 | % | 91.26 | % | ||||||||||||
8.55 | %(f) | 1,824 | 1.13 | %(e) | 2.34 | %(e) | 1.38 | %(f) | 219.22 | % | ||||||||||||
(6.13 | %)(g) | 826 | 1.11 | % | 2.06 | % | 2.26 | % | 173.93 | % | ||||||||||||
0.05 | %(g) | 1,183 | 1.10 | % | 1.71 | % | 2.27 | % | 183.14 | % | ||||||||||||
1.45 | % | 277 | 1.85 | %(e) | 3.65 | %(e) | 0.86 | % | 62.39 | % | ||||||||||||
0.75 | %(g) | 247 | 1.85 | %(e) | 3.53 | %(e) | 0.62 | % | 91.26 | % | ||||||||||||
7.87 | %(f) | 403 | 1.85 | %(e) | 3.15 | %(e) | 0.52 | %(f) | 219.22 | % | ||||||||||||
(6.86 | %) | 251 | 1.85 | % | 2.80 | % | 1.51 | % | 173.93 | % | ||||||||||||
(0.70 | %) | 378 | 1.85 | % | 2.46 | % | 1.54 | % | 183.14 | % | ||||||||||||
2.29 | % | 9,768 | 0.96 | %(e) | 2.63 | %(e) | 1.75 | % | 62.39 | % | ||||||||||||
1.62 | % | 10,553 | 1.02 | %(e) | 2.59 | %(e) | 1.47 | % | 91.26 | % | ||||||||||||
8.76 | %(f) | 10,940 | 1.01 | %(e) | 2.22 | %(e) | 1.43 | %(f) | 219.22 | % | ||||||||||||
(6.02 | %) | 12,761 | 1.03 | % | 1.98 | % | 2.33 | % | 173.93 | % | ||||||||||||
0.07 | % | 16,724 | 1.01 | % | 1.62 | % | 2.39 | % | 183.14 | % | ||||||||||||
2.47 | % | 5,521 | 0.85 | %(e) | 2.70 | %(e) | 1.94 | % | 62.39 | % | ||||||||||||
1.81 | %(g) | 1,685 | 0.85 | %(e) | 2.56 | %(e) | 1.60 | % | 91.26 | % | ||||||||||||
8.87 | %(f) | 2,583 | 0.85 | %(e) | 2.12 | %(e) | 1.61 | %(f) | 219.22 | % | ||||||||||||
(5.88 | %) | 1,419 | 0.85 | % | 1.80 | % | 2.56 | % | 173.93 | % | ||||||||||||
0.25 | % | 2,717 | 0.85 | % | 1.46 | % | 2.63 | % | 183.14 | % |
(e) | Interest expense is less than 0.001%. |
(f) | Included within Net Investment Income per share, Total Return, and Ratio of Net Investment Income to Average Net Assets are the effects of a one-time reimbursement for overbilling of prior years’ custodian out-of-pocket fees. If such amounts were excluded, the impact to Net Investment Income per share would be $0.01, $0.01, $0.01 and $0.01, the impact to Total Return would be 0.11%, 0.11%, 0.11% and 0.11%, and the impact to Ratio of Net Investment Income to Average Net Assets would be, 0.20%, 0.11%, 0.09% and 0.16% for Class A, Class C, Institutional Service Class and Institutional Class, respectively. |
(g) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
2018 Annual Report | 75 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen High Yield Managed Duration Municipal Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Tax Return of Capital | Total Distributions | Redemption Fees | Net Asset Value, End of Period | |||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 10.24 | $ | 0.31 | (e) | $ | (0.17 | ) | $ | 0.14 | $ | (0.31 | ) | $ | – | $ | 0.00 | (f) | $ | (0.31 | ) | $ | 0.00 | (f) | $ | 10.07 | ||||||||||||||
Year Ended October 31, 2017 | 10.34 | 0.28 | (0.10 | ) | 0.18 | (0.28 | ) | – | – | (0.28 | ) | 0.00 | (f) | 10.24 | ||||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.29 | 0.32 | 0.04 | 0.36 | (0.31 | ) | – | – | (0.31 | ) | 0.00 | (f) | 10.34 | |||||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.29 | 0.34 | 0.00 | (f) | 0.34 | (0.34 | ) | (0.00 | )(f) | – | (0.34 | ) | – | 10.29 | ||||||||||||||||||||||||||
Year Ended October 31, 2014 | 9.95 | 0.35 | 0.34 | 0.69 | (0.35 | ) | – | – | (0.35 | ) | – | 10.29 | ||||||||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 10.24 | 0.33 | (e) | (0.16 | ) | 0.17 | (0.34 | ) | – | 0.00 | (f) | (0.34 | ) | 0.00 | (f) | 10.07 | ||||||||||||||||||||||||
Year Ended October 31, 2017 | 10.34 | 0.31 | (0.10 | ) | 0.21 | (0.31 | ) | – | – | (0.31 | ) | 0.00 | (f) | 10.24 | ||||||||||||||||||||||||||
Year Ended October 31, 2016 | 10.29 | 0.34 | 0.05 | 0.39 | (0.34 | ) | – | – | (0.34 | ) | 0.00 | (f) | 10.34 | |||||||||||||||||||||||||||
Year Ended October 31, 2015 | 10.29 | 0.36 | (0.00 | )(f) | 0.36 | (0.36 | ) | (0.00 | )(f) | – | (0.36 | ) | – | 10.29 | ||||||||||||||||||||||||||
Year Ended October 31, 2014 | 9.95 | 0.37 | 0.34 | 0.71 | (0.37 | ) | – | – | (0.37 | ) | – | 10.29 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
76 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen High Yield Managed Duration Municipal Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
1.42 | % | $ | 29,433 | 0.91 | %(g) | 1.11 | %(g) | 3.03 | % | 86.19 | % | |||||||||||
1.82 | % | 50,906 | 0.90 | %(g) | 1.09 | %(g) | 2.78 | % | 151.00 | % | ||||||||||||
3.58 | % | 35,705 | 0.93 | %(g) | 1.12 | %(g) | 3.03 | % | 132.00 | % | ||||||||||||
3.42 | % | 10,170 | 1.07 | %(g) | 1.37 | %(g) | 3.16 | % | 58.00 | % | ||||||||||||
7.08 | % | 107 | 1.06 | %(g) | 1.55 | %(g) | 3.49 | % | 62.00 | % | ||||||||||||
1.67 | % | 177,810 | 0.66 | %(g) | 0.87 | %(g) | 3.27 | % | 86.19 | % | ||||||||||||
2.08 | % | 207,427 | 0.65 | %(g) | 0.84 | %(g) | 3.04 | % | 151.00 | % | ||||||||||||
3.84 | % | 153,300 | 0.68 | %(g) | 0.88 | %(g) | 3.28 | % | 132.00 | % | ||||||||||||
3.65 | % | 48,261 | 0.82 | %(g) | 1.12 | %(g) | 3.49 | % | 58.00 | % | ||||||||||||
7.32 | % | 255,660 | 0.81 | %(g) | 1.30 | %(g) | 3.75 | % | 62.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Less than $0.005 per share. |
(g) | Includes interest expense that amounts to 0.01% for the years ended October 31, 2018, October 31, 2016 and October 31, 2014. Includes interest expense that amounts to less than 0.01% for the years ended October 31, 2017 and October 31, 2015. |
2018 Annual Report | 77 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Tax-Free Income Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 9.89 | $ | 0.29 | $ | (0.35 | ) | $ | (0.06 | ) | $ | (0.29 | ) | $ | – | $ | (0.29 | ) | $ | 9.54 | ||||||||||||
Year Ended October 31, 2017 | 10.11 | 0.29 | (0.22 | ) | 0.07 | (0.29 | ) | – | (0.29 | ) | 9.89 | |||||||||||||||||||||
Year Ended October 31, 2016 | 10.19 | 0.30 | (0.08 | ) | 0.22 | (0.30 | ) | – | (0.30 | ) | 10.11 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.38 | 0.32 | (0.16 | ) | 0.16 | (0.32 | ) | (0.03 | ) | (0.35 | ) | 10.19 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.24 | 0.32 | 0.29 | 0.61 | (0.32 | ) | (0.15 | ) | (0.47 | ) | 10.38 | |||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 9.87 | 0.21 | (0.35 | ) | (0.14 | ) | (0.21 | ) | – | (0.21 | ) | 9.52 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.09 | 0.22 | (0.22 | ) | – | (0.22 | ) | – | (0.22 | ) | 9.87 | |||||||||||||||||||||
Year Ended October 31, 2016 | 10.18 | 0.23 | (0.09 | ) | 0.14 | (0.23 | ) | – | (0.23 | ) | 10.09 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.37 | 0.24 | (0.16 | ) | 0.08 | (0.24 | ) | (0.03 | ) | (0.27 | ) | 10.18 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.23 | 0.24 | 0.29 | 0.53 | (0.24 | ) | (0.15 | ) | (0.39 | ) | 10.37 | |||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 9.90 | 0.26 | (0.36 | ) | (0.10 | ) | (0.26 | ) | – | (0.26 | ) | 9.54 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.12 | 0.27 | (0.23 | ) | 0.04 | (0.26 | ) | – | (0.26 | ) | 9.90 | |||||||||||||||||||||
Year Ended October 31, 2016 | 10.20 | 0.28 | (0.08 | ) | 0.20 | (0.28 | ) | – | (0.28 | ) | 10.12 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.40 | 0.29 | (0.17 | ) | 0.12 | (0.29 | ) | (0.03 | ) | (0.32 | ) | 10.20 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.25 | 0.30 | 0.30 | 0.60 | (0.30 | ) | (0.15 | ) | (0.45 | ) | 10.40 | |||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 9.89 | 0.31 | (0.35 | ) | (0.04 | ) | (0.31 | ) | – | (0.31 | ) | 9.54 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.12 | 0.31 | (0.23 | ) | 0.08 | (0.31 | ) | – | (0.31 | ) | 9.89 | |||||||||||||||||||||
Year Ended October 31, 2016 | 10.20 | 0.33 | (0.08 | ) | 0.25 | (0.33 | ) | – | (0.33 | ) | 10.12 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.40 | 0.34 | (0.17 | ) | 0.17 | (0.34 | ) | (0.03 | ) | (0.37 | ) | 10.20 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.25 | 0.35 | 0.30 | 0.65 | (0.35 | ) | (0.15 | ) | (0.50 | ) | 10.40 | |||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 9.90 | 0.31 | (0.35 | ) | (0.04 | ) | (0.31 | ) | – | (0.31 | ) | 9.55 | ||||||||||||||||||||
Year Ended October 31, 2017 | 10.12 | 0.32 | (0.23 | ) | 0.09 | (0.31 | ) | – | (0.31 | ) | 9.90 | |||||||||||||||||||||
Year Ended October 31, 2016 | 10.20 | 0.33 | (0.08 | ) | 0.25 | (0.33 | ) | – | (0.33 | ) | 10.12 | |||||||||||||||||||||
Year Ended October 31, 2015 | 10.40 | 0.34 | (0.17 | ) | 0.17 | (0.34 | ) | (0.03 | ) | (0.37 | ) | 10.20 | ||||||||||||||||||||
Year Ended October 31, 2014 | 10.25 | 0.35 | 0.30 | 0.65 | (0.35 | ) | (0.15 | ) | (0.50 | ) | 10.40 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
78 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Tax-Free Income Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (c) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (d) | |||||||||||||||||
(0.65 | %) | $ | 7,141 | 0.80 | % | 1.08 | % | 2.95 | % | 14.38 | % | |||||||||||
0.72 | % | 9,084 | 0.88 | %(e) | 1.05 | %(e) | 2.92 | % | 16.25 | % | ||||||||||||
2.19 | % | 10,798 | 0.88 | % | 1.03 | % | 2.96 | % | 10.71 | % | ||||||||||||
1.56 | % | 9,073 | 0.88 | % | 1.01 | % | 3.09 | % | 4.85 | % | ||||||||||||
6.12 | % | 9,379 | 0.87 | % | 1.00 | % | 3.14 | % | 5.58 | % | ||||||||||||
(1.39 | %) | 279 | 1.55 | % | 1.87 | % | 2.20 | % | 14.38 | % | ||||||||||||
(0.02 | %) | 542 | 1.62 | %(e) | 1.83 | %(e) | 2.21 | % | 16.25 | % | ||||||||||||
1.36 | % | 851 | 1.62 | % | 1.82 | % | 2.24 | % | 10.71 | % | ||||||||||||
0.82 | % | 878 | 1.62 | % | 1.75 | % | 2.37 | % | 4.85 | % | ||||||||||||
5.34 | % | 643 | 1.62 | % | 1.75 | % | 2.39 | % | 5.58 | % | ||||||||||||
(1.00 | %) | 11 | 1.04 | % | 1.32 | % | 2.71 | % | 14.38 | % | ||||||||||||
0.47 | % | 11 | 1.12 | %(e) | 1.29 | %(e) | 2.67 | % | 16.25 | % | ||||||||||||
1.96 | % | 11 | 1.12 | % | 1.27 | % | 2.72 | % | 10.71 | % | ||||||||||||
1.24 | % | 10 | 1.12 | % | 1.25 | % | 2.85 | % | 4.85 | % | ||||||||||||
5.96 | % | 10 | 1.12 | % | 1.25 | % | 2.89 | % | 5.58 | % | ||||||||||||
(0.40 | %) | 18 | 0.54 | % | 0.82 | % | 3.21 | % | 14.38 | % | ||||||||||||
0.79 | % | 18 | 0.69 | %(e) | 0.86 | %(e) | 3.10 | % | 16.25 | % | ||||||||||||
2.48 | % | 28 | 0.62 | % | 0.77 | % | 3.22 | % | 10.71 | % | ||||||||||||
1.74 | % | 18 | 0.62 | % | 0.75 | % | 3.35 | % | 4.85 | % | ||||||||||||
6.49 | % | 17 | 0.62 | % | 0.75 | % | 3.39 | % | 5.58 | % | ||||||||||||
(0.39 | %) | 65,428 | 0.54 | % | 0.83 | % | 3.21 | % | 14.38 | % | ||||||||||||
0.98 | % | 71,362 | 0.62 | %(e) | 0.79 | %(e) | 3.18 | % | 16.25 | % | ||||||||||||
2.47 | % | 79,279 | 0.62 | % | 0.77 | % | 3.23 | % | 10.71 | % | ||||||||||||
1.72 | % | 83,140 | 0.62 | % | 0.75 | % | 3.35 | % | 4.85 | % | ||||||||||||
6.49 | % | 89,924 | 0.62 | % | 0.75 | % | 3.38 | % | 5.58 | % |
(d) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(e) | Interest expense is less than 0.001%. |
2018 Annual Report | 79 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Ultra Short Municipal Income Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Redemption Fees | Net Asset Value, End of Period | ||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 10.09 | $ | 0.11 | (e) | $ | 0.00 | $ | 0.11 | $ | (0.11 | ) | $ | – | $ | (0.11 | ) | $ | 0.00 | (f) | $ | 10.09 | ||||||||||||||
Year Ended October 31, 2017 | 10.09 | 0.06 | (0.00 | )(f) | 0.06 | (0.06 | ) | – | (0.06 | ) | 0.00 | (f) | 10.09 | |||||||||||||||||||||||
Year Ended October 31, 2016 | 10.10 | 0.04 | (0.01 | ) | 0.03 | (0.04 | ) | – | (0.04 | ) | 0.00 | (f) | 10.09 | |||||||||||||||||||||||
Year Ended October 31, 2015 | 10.10 | 0.03 | 0.00 | (f) | 0.03 | (0.03 | ) | (0.00 | )(f) | (0.03 | ) | 0.00 | (f) | 10.10 | ||||||||||||||||||||||
Year Ended October 31, 2014 | 10.09 | 0.03 | 0.01 | 0.04 | (0.03 | ) | – | (0.03 | ) | 0.00 | (f) | 10.10 | ||||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 10.04 | 0.13 | (e) | 0.00 | 0.13 | (0.13 | ) | – | (0.13 | ) | 0.00 | (f) | 10.04 | |||||||||||||||||||||||
Year Ended October 31, 2017 | 10.04 | 0.09 | (0.00 | )(f) | 0.09 | (0.09 | ) | – | (0.09 | ) | 0.00 | (f) | 10.04 | |||||||||||||||||||||||
Year Ended October 31, 2016 | 10.04 | 0.06 | (0.00 | )(f) | 0.06 | (0.06 | ) | – | (0.06 | ) | 0.00 | (f) | 10.04 | |||||||||||||||||||||||
Year Ended October 31, 2015 | 10.04 | 0.05 | 0.00 | (f) | 0.05 | (0.05 | ) | (0.00 | )(f) | (0.05 | ) | 0.00 | (f) | 10.04 | ||||||||||||||||||||||
Year Ended October 31, 2014 | 10.03 | 0.05 | 0.01 | 0.06 | (0.05 | ) | – | (0.05 | ) | 0.00 | (f) | 10.04 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
80 | Annual Report 2018 |
Financial Highlights (concluded)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Ultra Short Municipal Income Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
1.09 | % | $ | 223,255 | 0.70 | % | 0.92 | % | 1.08 | % | 177.63 | % | |||||||||||
0.62 | % | 211,265 | 0.69 | % | 0.90 | % | 0.62 | % | 214.00 | % | ||||||||||||
0.29 | % | 206,259 | 0.68 | % | 0.99 | % | 0.39 | % | 143.00 | % | ||||||||||||
0.26 | % | 203,472 | 0.75 | % | 1.18 | % | 0.26 | % | 155.00 | % | ||||||||||||
0.38 | % | 247,599 | 0.78 | % | 1.15 | % | 0.28 | % | 168.00 | % | ||||||||||||
1.34 | % | 802,312 | 0.45 | % | 0.67 | % | 1.32 | % | 177.63 | % | ||||||||||||
0.87 | % | 896,624 | 0.44 | % | 0.65 | % | 0.86 | % | 214.00 | % | ||||||||||||
0.64 | % | 905,843 | 0.43 | % | 0.74 | % | 0.64 | % | 143.00 | % | ||||||||||||
0.52 | % | 772,308 | 0.50 | % | 0.93 | % | 0.51 | % | 155.00 | % | ||||||||||||
0.63 | % | 831,505 | 0.53 | % | 0.90 | % | 0.53 | % | 168.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Less than $0.005 per share. |
2018 Annual Report | 81 |
October 31, 2018
1. Organization
Aberdeen Funds (the “Trust”) was organized as a statutory trust under the laws of the state of Delaware by a Certificate of Trust filed on September 27, 2007 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. As of October 31, 2018, the Trust had authorized an unlimited number of shares of beneficial interest (“shares”) without par value. As of October 31, 2018, the Trust operated twenty-five (25) separate series, or mutual funds, each with its own investment objective(s) and strategies. This report contains the financial statements and financial highlights of the six (6) funds listed below (each a “Fund”; collectively, the “Funds”):
– | Aberdeen Asia Bond Fund (“Asia Bond Fund”) |
– | Aberdeen Emerging Markets Debt Fund (“Emerging Markets Debt Fund”) |
– | Aberdeen Global Unconstrained Fixed Income Fund (“Global Unconstrained Fixed Income Fund”) |
– | Aberdeen High Yield Managed Duration Municipal Fund (“High Yield Managed Duration Municipal Fund”) |
– | Aberdeen Tax-Free Income Fund (“Tax-Free Income Fund”) |
– | Aberdeen Ultra Short Municipal Income Fund (“Ultra Short Municipal Income Fund”) |
On December 14, 2017, at a meeting of the board of trustees (the “Alpine Board”) of Alpine Income Trust (the “Alpine Trust”), the Alpine Board considered and unanimously approved an agreement and plan of reorganization with respect to Alpine High Yield Managed Duration Municipal Fund and Alpine Ultra Short Municipal Income Fund (each a “Predecessor Fund” and together, the “Predecessor Funds”) whereby each Predecessor Fund would participate in a reorganization that would allow it to continue to operate as a corresponding new series of the Trust (the “Acquiring Funds”). Aberdeen Asset Management Inc. (“Aberdeen” or the “Adviser”) would serve as the investment adviser to the Acquiring Funds. Following approval by Predecessor Fund shareholders, each Predecessor Fund transferred all of its assets and liabilities as of the close of business May 4, 2018. The Predecessor Funds are the accounting and performance survivors of the reorganizations, and each Acquiring Fund adopted the corresponding Predecessor Fund’s performance history as of the close of business May 4, 2018; accordingly, information for the fiscal year ended October 31, 2018 includes the performance and accounting information of the Predecessor Funds.
The Acquiring Funds and corresponding Predecessor Funds are shown in the chart below.
Acquiring Fund | Corresponding Predecessor Fund | |
High Yield Managed Duration Municipal Fund | Alpine High Yield Managed Duration Municipal Fund, a series of Alpine Income Trust | |
Ultra Short Municipal Income Fund | Alpine Ultra Short Municipal Income Fund, a series of Alpine Income Trust |
Prior to the close of business day May 4, 2018, Alpine Woods Capital Investors, LLC (the “Predecessor Adviser”) had been the investment adviser of the Predecessor Funds.
2. Summary of Significant Accounting Policies
The Trust is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies conform to generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Funds are maintained in U.S. Dollars.
a. | Security Valuation |
The Funds value their securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Funds’ Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Funds disclose the fair value of their investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect
82 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.
Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider approved by the Board of Trustees of the Trust (the “Board”). If there are no current day bids, the security is valued at the previously applied bid. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size, and the strategies employed by the Adviser generally trade in round lot sizes. In certain circumstances, fixed income securities may be held or transactions may be conducted in smaller, “odd lot” sizes. Odd lots may trade at lower or, occasionally, higher prices than institutional round lot trades. Short-term debt securities (such as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service, or on the basis of amortized cost if it represents the best approximation for fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.
Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. Each Fund sweeps available cash into the State Street Institutional U.S. Government Money Market Fund, which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 per share net asset value (“NAV”). Generally, these investment types are categorized as Level 1 investments.
Derivative instruments are generally valued according to the following procedures. Exchange traded derivatives are generally Level 1 investments and over-the-counter derivatives are generally Level 2 investments. Forward currency exchange contracts are generally valued based on the current spot exchange rates and the forward exchange rate points (ex. 1-month, 3-month) that are obtained from an approved pricing agent. Based on the actual settlement dates of the forward contracts held, an interpolated value of the forward points is combined with the spot exchange rate to derive the valuation. Futures contracts are generally valued at the most recent settlement price as of NAV determination. Swap agreements are generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows). When market quotations or exchange rates are not readily available, or if the Adviser concludes that such market quotations do not accurately reflect fair value, the fair value of a Fund’s assets are determined in good faith in accordance with the Valuation Procedures.
In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closed before the Valuation Time (as defined below)), the security is valued at fair value as determined by the Funds’ Pricing Committee (the “Pricing Committee”), taking into account the relevant factors and surrounding circumstances using Valuation and Liquidity Procedures approved by the Board. Under normal circumstances, the Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). A security that has been fair valued by the Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs.
The three-level hierarchy of inputs is summarized below:
• | Level 1- quoted prices in active markets for identical investments; |
• | Level 2- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or |
• | Level 3- significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments). |
A summary of standard inputs is listed below:
Security Type | Standard Inputs | |
Debt and other fixed-income securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and maturity. | |
Forward foreign currency contracts | Forward exchange rate quotations. | |
Swap agreements | Market information pertaining to the underlying reference assets, i.e., credit spreads, credit event probabilities, fair values, forward rates, and volatility measures. |
The following is a summary of the inputs used as of October 31, 2018 in valuing the Funds’ investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
2018 Annual Report | 83 |
Notes to Financial Statements (continued)
October 31, 2018
Please refer to the Statements of Investments for a detailed breakout of the security types:
Investments, at Value | LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | ||||||||||||
Asia Bond Fund |
| |||||||||||||||
Investments in Securities |
| |||||||||||||||
Corporate Bonds | – | 1,850,211 | – | 1,850,211 | ||||||||||||
Government Bonds | – | 1,928,530 | – | 1,928,530 | ||||||||||||
Short-Term Investment | 377,434 | – | – | 377,434 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Assets | ||||||||||||||||
Futures Contracts | 13,624 | – | – | 13,624 | ||||||||||||
Forward Foreign Currency Exchange Contracts | – | 18,667 | – | 18,667 | ||||||||||||
Liabilities | ||||||||||||||||
Futures Contracts | (6,109 | ) | – | – | (6,109 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts | – | (34,641 | ) | – | (34,641 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
384,949 | 3,762,767 | – | 4,147,716 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Emerging Markets Debt Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Corporate Bonds | – | 6,402,944 | – | 6,402,944 | ||||||||||||
Government Bonds | – | 15,801,914 | – | 15,801,914 | ||||||||||||
Government Agencies | – | 220,419 | – | 220,419 | ||||||||||||
Short-Term Investment | 1,187,484 | – | – | 1,187,484 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | – | 38,059 | – | 38,059 | ||||||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | – | (70,248 | ) | – | (70,248 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
1,187,484 | 22,393,088 | – | 23,580,572 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Global Unconstrained Fixed Income Fund |
| |||||||||||||||
Investments in Securities |
| |||||||||||||||
Commercial Mortgage-Backed Securities | – | 312,960 | – | 312,960 | ||||||||||||
Residential Mortgage-Backed Securities | – | 1,360 | – | 1,360 | ||||||||||||
Corporate Bonds | – | 13,163,543 | – | 13,163,543 | ||||||||||||
Government Bonds | – | 199,940 | – | 199,940 | ||||||||||||
Government Agencies | – | 204,956 | – | 204,956 | ||||||||||||
U.S. Treasuries | – | 848,289 | – | 848,289 | ||||||||||||
Short-Term Investment | 1,032,167 | – | – | 1,032,167 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Assets | ||||||||||||||||
Futures Contracts | 61,117 | – | – | 61,117 | ||||||||||||
Forward Foreign Currency Exchange Contracts | – | 191,932 | – | 191,932 | ||||||||||||
Credit Default Swap Contracts | – | 3,877 | – | 3,877 | ||||||||||||
Interest Rate Swap Agreements | – | 210,878 | – | 210,878 |
84 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Investments, at Value | LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | ||||||||||||
Global Unconstrained Fixed Income Fund (continued) | ||||||||||||||||
Liabilities | ||||||||||||||||
Futures Contracts | (13,294 | ) | – | – | (13,294 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts | – | (89,209 | ) | – | (89,209 | ) | ||||||||||
Credit Default Swap Contracts | – | (9,731 | ) | – | (9,731 | ) | ||||||||||
Interest Rate Swap Agreements | – | (317,674 | ) | – | (317,674 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
1,079,990 | 14,721,121 | – | 15,801,111 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
High Yield Managed Duration Municipal Fund |
| |||||||||||||||
Investments in Securities |
| |||||||||||||||
Municipal Bonds | – | 205,035,903 | – | 205,035,903 | ||||||||||||
Short-Term Investment | 142,377 | – | – | 142,377 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
142,377 | 205,035,903 | – | 205,178,280 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Tax-Free Income Fund |
| |||||||||||||||
Investments in Securities |
| |||||||||||||||
Municipal Bonds | – | 70,689,429 | – | 70,689,429 | ||||||||||||
Short-Term Investment | 1,336,170 | – | – | 1,336,170 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
1,336,170 | 70,689,429 | – | 72,025,599 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Ultra Short Municipal Income Fund |
| |||||||||||||||
Investments in Securities |
| |||||||||||||||
Municipal Bonds | – | 1,046,749,380 | – | 1,046,749,380 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
– | 1,046,749,380 | – | 1,046,749,380 | |||||||||||||
|
|
|
|
|
|
|
|
b. | Restricted Securities |
Restricted securities are privately-placed securities whose resale is restricted under U.S. securities laws. The Funds may invest in restricted securities, including unregistered securities eligible for resale without registration pursuant to Rule 144A and privately-placed securities of U.S. and non-U.S. issuers offered outside the U.S. without registration pursuant to Regulation S under the Securities Act of 1933, as amended. Rule 144A securities may be freely traded among certain qualified institutional investors, such as the Funds, but resale of such securities in the U.S. is permitted only in limited circumstances.
c. | Foreign Currency Translation |
Foreign securities, currencies, and other assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate of said currencies against the U.S. Dollar, as of the Valuation Time, as provided by an independent pricing service. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective date of these transactions. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. These fluctuations are included with the net realized and unrealized gain or loss from investments within the Statements of Operations.
d. | Derivative Financial Instruments |
Certain Funds are authorized to use derivatives to manage currency risk, credit risk, and interest rate risk and to replicate, or use as a substitute for, physical securities. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of Assets and Liabilities.
2018 Annual Report | 85 |
Notes to Financial Statements (continued)
October 31, 2018
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward contract”) involves an obligation to purchase and sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward contracts are used to manage a Fund’s currency exposure in an efficient manner. They are used to sell unwanted currency exposure that comes with holding securities in a market, or to buy currency exposure where the exposure from holding securities is insufficient to give the desired currency exposure either in absolute terms or relative to the benchmark. The use of forward contracts allows the separation of decision-making between markets and their currencies. The forward contract is marked-to-market daily and the change in market value is recorded by a Fund as unrealized appreciation/(depreciation). Forward contracts’ prices are received daily from an independent pricing provider. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. These realized and unrealized gains and losses are reported on the Statements of Operations. During the year, the Funds used forward contracts for the purposes of efficient portfolio management and managing active currency risk relative to the benchmark, the latter of which involves both hedging currency risk and adding currency risk in excess of underlying bond positions.
While a Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. A Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while a Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for a Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent a Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risk that the counterparties to such contracts may default on their obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force a Fund to cover its purchase or sale commitments, if any, at the market price at the time of the default.
Futures Contracts
Certain Funds may invest in financial futures contracts (“futures contracts”) for the purpose of hedging their existing portfolio securities, or securities that a Fund intends to purchase, against fluctuations in value caused by changes in prevailing market interest rates or prices. Futures contracts may also be entered into for non-hedging purposes; however, in those instances, the aggregate initial margin and premiums required to establish a Fund’s positions may not exceed 5% of a Fund’s NAV after taking into account unrealized profits and unrealized losses on any such contract into which it has entered.
Upon entering into a futures contract, a Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This payment is known as “initial margin”. Subsequent payments, known as “variation margin,” are calculated each day, depending on the daily fluctuations in the fair value/market value of the underlying assets. An unrealized gain/(loss) equal to the variation margin is recognized on a daily basis. When the contract expires or is closed, the gain/(loss) is realized and is presented in the Statements of Operations as a net realized gain/(loss) on futures contracts. Futures contracts are valued daily at their last quoted sale price on the exchange on which they are traded.
A “sale” of a futures contract means a contractual obligation to deliver the securities or foreign currency called for by the contract at a fixed price at a specified time in the future. A “purchase” of a futures contract means a contractual obligation to acquire the securities or foreign currency at a fixed price at a specified time in the future.
There are significant risks associated with a Fund’s use of futures contracts, including the following: (1) the success of a hedging strategy may depend on the ability of a Fund’s investment adviser and/or sub-adviser to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect or no correlation between the movement in the price of futures contracts, interest rates and the value/market value of the securities held by a Fund; (3) there may not be a liquid secondary market for a futures contract; (4) trading restrictions or limitations may be imposed by an exchange; and (5) government regulations may restrict trading in futures contracts. In addition, should market conditions change unexpectedly, a Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss.
For the fiscal year ended October 31, 2018, the Asia Bond Fund invested in futures to hedge U.S. interest-rate risk and the Global Unconstrained Fixed Income Fund invested in futures to achieve more efficient portfolio management and to hedge interest-rate risk.
86 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Swaps
A swap is an agreement that obligates two parties to exchange a series of cash flows and/or meet certain obligations at specified intervals based upon or calculated by reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) or the occurrence of a credit event with respect to an underlying reference obligation (in the case of a credit default swap) for a specified amount of an underlying asset or notional principal amount. A Fund will enter into swaps only on a net basis, which means that the two payment streams are netted out, with a Fund receiving or paying, as the case may be, only the amount of the difference between the two payments. Except for currency swaps and credit default swaps, the notional principal amount is used solely to calculate the payment streams but is not exchanged. With respect to currency swaps, actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination of the transaction.
Traditionally, swaps were customized, privately negotiated agreements executed between two parties (“OTC Swaps”) but since 2013, certain swaps are required to be cleared pursuant to rules and regulations related to the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”) and/or Regulation (EU) No 648/2012 on OTC Derivatives, Central Counterparties and Trade Repositories (“EMIR”) (“Cleared Swaps”). Like OTC Swaps, Cleared Swaps are negotiated bilaterally. Unlike OTC Swaps, the act of clearing results in two swaps executed between each of the parties and a central counterparty (“CCP”), and thus the counterparty credit exposure of the parties is to the CCP rather than to one another. Upon entering into a Cleared Swap, a Fund is required to pledge an amount of cash and/or other assets equal to a certain percentage of the contract amount. This payment is known as “initial margin”. Subsequent payments, known as “variation margin,” are calculated each day, depending on the daily fluctuations in the fair value/market value of the underlying assets. An unrealized gain/(loss) equal to the variation margin is recognized on a daily basis. When the contract matures or is terminated, the gain or loss is realized and is presented in the Statements of Operations as a net realized gain or loss on swap contracts. As of March 2017, a Fund may be required to provide variation and/or initial margin for OTC Swaps pursuant to further rules and regulations related to Dodd Frank and EMIR. The margin requirements associated with OTC Swaps and Cleared Swaps may not be the same.
Entering into swap agreements involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. The Funds’ maximum risk of loss from counterparty risk related to swaps is the fair value of the contract. This risk is mitigated by the posting of collateral by the counterparties to the Funds to cover the Funds’ exposure to the counterparty.
Credit Default Swaps
A credit default swap is an agreement whereby one party, the buyer, is obligated to pay the other party, the seller, a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. A Fund might use credit default swap contracts to limit or to reduce risk exposure of the Fund to defaults of corporate and sovereign issues (i.e., to reduce risk when the Fund owns or has exposure to such issuers). A Fund also might use credit default swap contracts to create direct or synthetic short or long exposure to domestic or foreign corporate debt securities or certain sovereign debt securities to which the Fund is not otherwise exposed.
During the fiscal year ended October 31, 2018, Global Unconstrained Fixed Income Fund held credit default swaps to hedge the Fund’s exposure to the credit market.
Interest Rate Swaps
A Fund uses interest rate swap contracts to manage its exposure to interest rates. Interest rate swap contracts typically represent the exchange between a Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Interest rate swap contracts may have a term that is greater than one year, but typically require periodic interim settlement in cash, at which time the specified value of the variable interest rate is reset for the next settlement period. Net payments of interest are recorded as realized gains or losses. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from a Fund and changes in the value of swap contracts are recorded as unrealized gains or losses.
During the fiscal year ended October 31, 2018, Global Unconstrained Fixed Income Fund held interest rate swaps to hedge interest rate risk.
2018 Annual Report | 87 |
Notes to Financial Statements (continued)
October 31, 2018
Summary of Derivative Instruments
Certain Funds may use derivatives for various purposes as noted above. The following is a summary of the location of fair value amounts of derivatives, not accounted for as hedging instruments, as of October 31, 2018:
Location on the Statement of Assets and Liabilities | ||||
Derivative Instrument Risk Type | Asset Derivatives Liability Derivatives | |||
Interest Rate Risk | Variation margin receivable for centrally cleared swap contracts Variation margin receivable for futures contracts | Variation margin payable for centrally cleared swap contracts Variation margin payable for futures contracts | ||
Credit Risk | Over-the-counter credit default swap contracts | Over-the-counter credit default swap contracts | ||
Foreign Exchange Risk | Unrealized appreciation on forward foreign currency exchange contracts | Unrealized depreciation on forward foreign currency exchange contracts |
The following is a summary of the fair value of derivative instruments, not accounted for as hedging instruments, as of October 31, 2018:
Asset Derivatives | ||||||||||||||||||||||||
Funds | Total Value at October 31, 2018 | Over-the-Counter Credit Default Swaps (Credit risk)* | Centrally Cleared Credit Default Swaps (Credit Risk)* | Centrally Cleared Interest Rate Swaps (Interest Rate Risk)* | Forward Foreign Currency Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk)* | ||||||||||||||||||
Aberdeen Asia Bond Fund | $ | 32,292 | $ | – | $ | – | $ | – | $ | 18,667 | $ | 13,625 | ||||||||||||
Aberdeen Emerging Markets Debt Fund | 38,059 | – | – | – | 38,059 | – | ||||||||||||||||||
Aberdeen Global Unconstrained Fixed Income Fund | 458,086 | (278 | ) | – | 205,315 | 191,932 | 61,117 |
Liabilities Derivatives | ||||||||||||||||||||||||
Funds | Total Value at October 31, 2018 | Over-the-Counter Credit Default Swaps (Credit risk)* | Centrally Cleared Credit Default Swaps (Credit Risk)* | Centrally Cleared Interest Rate Swaps (Interest Rate Risk)* | Forward Foreign Currency Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk)* | ||||||||||||||||||
Aberdeen Asia Bond Fund | $ | 40,750 | $ | – | $ | – | $ | – | $ | 34,641 | $ | 6,109 | ||||||||||||
Aberdeen Emerging Markets Debt Fund | 70,248 | – | – | – | 70,248 | – | ||||||||||||||||||
Aberdeen Global Unconstrained Fixed Income Fund | 421,241 | 5,317 | 391 | 313,030 | 89,209 | 13,294 |
* | The values shown reflect unrealized appreciation/(depreciation) and the values shown in the Statements of Assets and Liabilities reflect variation margin. |
88 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Certain funds have transactions that may be subject to enforceable master netting arrangements. A reconciliation of the gross amounts on the Statements of Assets and Liabilities as of October 31, 2018 to the net amounts by broker and derivative type, including any collateral received or pledged, is included in the following tables:
Gross Amounts Not Offset in Statement of Assets & Liabilities | Gross Amounts Not Offset in Statement of Assets and Liabilities | |||||||||||||||||||||||||||||||
Description | Gross Amounts of Assets Presented in Statement of Financial Position | Financial Instruments | Collateral Received (1) | Net Amount (2) | Gross Amounts of Liabilities Presented in Statement of Financial Position | Financial Instruments | Collateral Pledged (1) | Net Amount (2) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||||||||||
Asia Bond Fund | ||||||||||||||||||||||||||||||||
Forward foreign currency (3) | ||||||||||||||||||||||||||||||||
BNP Paribas S.A. | $ | 285 | $ | – | $ | – | $ | 285 | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||
Citibank N.A. | 2,701 | – | – | 2,701 | – | – | – | – | ||||||||||||||||||||||||
Goldman Sachs & Co. | – | – | – | – | 11,515 | – | – | 11,515 | ||||||||||||||||||||||||
HSBC Bank USA | 3,949 | (3,949 | ) | – | – | 13,364 | (3,949 | ) | – | 9,415 | ||||||||||||||||||||||
ROYAL BANK OF CANADA (UK) | 2,333 | – | – | 2,333 | – | – | – | – | ||||||||||||||||||||||||
UBS AG | 9,399 | (9,399 | ) | – | – | 9,762 | (9,399 | ) | – | 363 |
1. | In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization. |
2. | Net amounts represent the net receivables/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity. |
3. | Includes financial instrument which are not subject to a master netting arrangement across funds, or another similar arrangement. |
Gross Amounts Not Offset in Statement of Assets & Liabilities | Gross Amounts Not Offset in Statement of Assets and Liabilities | |||||||||||||||||||||||||||||||
Description | Gross Amounts of Assets Presented in Statement of Financial Position | Financial Instruments | Collateral Received (1) | Net Amount (2) | Gross Amounts of Liabilities Presented in Statement of Financial Position | Financial Instruments | Collateral Pledged (1) | Net Amount (2) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||||||||||
Emerging Markets Debt Fund | ||||||||||||||||||||||||||||||||
Forward foreign currency (3) | ||||||||||||||||||||||||||||||||
Barclays Bank plc | $ | 3,160 | $ | – | $ | – | $ | 3,160 | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||
Citibank | – | – | – | – | 62,773 | – | (62,773 | ) | – | |||||||||||||||||||||||
Deutsche Bank | 18,629 | (3,289 | ) | (10,000 | ) | 5,340 | 3,289 | (3,289 | ) | – | – | |||||||||||||||||||||
Morgan Stanley & Co. | – | – | – | – | 68 | – | – | 68 | ||||||||||||||||||||||||
UBS | 16,270 | (4,118 | ) | – | 12,152 | 4,118 | (4,118 | ) | – | – |
1. | In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization. |
2. | Net amounts represent the net receivables/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity. |
3. | Includes financial instrument which are not subject to a master netting arrangement across funds, or another similar arrangement. |
2018 Annual Report | 89 |
Notes to Financial Statements (continued)
October 31, 2018
Gross Amounts Not Offset in Statement of Assets & Liabilities | Gross Amounts Not Offset in Statement of Assets and Liabilities | |||||||||||||||||||||||||||||||
Description | Gross Amounts of Assets Presented in Statement of Financial Position | Financial Instruments | Collateral Received (1) | Net Amount (2) | Gross Amounts of Liabilities Presented in Statement of Financial Position | Financial Instruments | Collateral Pledged (1) | Net Amount (2) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||||||||||
Global Unconstrained Fixed Income Fund |
| |||||||||||||||||||||||||||||||
Forward foreign currency (3) |
| |||||||||||||||||||||||||||||||
Barclays Bank | $ | 43,493 | $ | (7,177 | ) | $ | (30,000 | ) | $ | 6,316 | $ | 7,177 | $ | (7,177 | ) | $ | – | $ | – | |||||||||||||
Citibank | 12,889 | (12,889 | ) | – | – | 15,401 | (12,889 | ) | – | 2,512 | ||||||||||||||||||||||
Deutsche Bank | 22,451 | (22,451 | ) | – | – | 24,655 | (22,451 | ) | – | 2,204 | ||||||||||||||||||||||
JPMorgan Chase | 4,513 | (4,419 | ) | – | 94 | 4,419 | (4,419 | ) | – | – | ||||||||||||||||||||||
Morgan Stanley | 20,669 | (9,376 | ) | – | 11,293 | 9,376 | (9,376 | ) | – | – | ||||||||||||||||||||||
Royal Bank of Canada | 20,980 | (979 | ) | – | 20,001 | 979 | (979 | ) | – | – | ||||||||||||||||||||||
UBS | 66,937 | (27,202 | ) | – | 39,735 | 27,202 | (27,202 | ) | – | – | ||||||||||||||||||||||
Global Unconstrained Fixed Income Fund |
| |||||||||||||||||||||||||||||||
Credit default swaps (2) |
| |||||||||||||||||||||||||||||||
Barclays Bank | $ | – | $ | – | $ | – | $ | – | $ | 5,594 | $ | – | $ | – | $ | 5,594 |
1. | In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization. |
2. | Net amounts represent the net receivables/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity. |
3. | Includes financial instrument which are not subject to a master netting arrangement across funds, or another similar arrangement. |
The following is a summary of the location of realized gain/(loss) and net change in unrealized appreciation/(depreciation) on derivatives in the Statement of Operations for the fiscal year ended October 31, 2018:
Derivative Instrument Risk Type | Location on the Statement of Operations | |
Credit Risk | Realized gain/(loss) on swap contracts | |
Net change in unrealized appreciation/(depreciation) on swap contracts | ||
Interest Rate Risk | Realized gain/(loss) on future contracts transactions | |
Net change in unrealized appreciation/(depreciation) on futures contracts Realized gain/(loss) on swap contracts Net change in unrealized appreciation/(depreciation) on swap contracts | ||
Foreign Exchange Risk | Realized gain/(loss) on forward foreign currency exchange contracts | |
Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange contracts |
The following is a summary of the effect of derivative instruments on the Statement of Operations for the fiscal year ended October 31, 2018:
Realized Gain or (Loss) on Derivatives Recognized in the Statement of Operations | ||||||||||||||||||||
Funds | Total | Credit Default Swaps (Credit Risk) | Interest Rate Swaps (Interest Rate Risk) | Forward Foreign Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk) | |||||||||||||||
Aberdeen Asia Bond Fund | $ | 94,341 | $ | – | $ | – | $ | 14,897 | $ | 79,444 | ||||||||||
Aberdeen Emerging Markets Debt Fund | 83,858 | – | – | 83,858 | – | |||||||||||||||
Aberdeen Global Unconstrained Fixed Income Fund | 341,115 | (304 | ) | (116,165 | ) | 213,927 | 243,657 |
90 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Change in Unrealized Appreciation/ (Depreciation) on Derivatives Recognized in the Statement of Operations | ||||||||||||||||||||
Funds | Total | Credit Default Swaps (Credit Risk) | Interest Rate Swaps (Interest Rate Risk) | Forward Foreign Exchange Contracts (Foreign Exchange Risk) | Futures Contracts (Interest Rate Risk) | |||||||||||||||
Aberdeen Asia Bond Fund | $ | (39,233 | ) | $ | – | – | $ | (23,395 | ) | $ | (15,838 | ) | ||||||||
Aberdeen Emerging Markets Debt Fund | (34,350 | ) | – | – | (34,350 | ) | – | |||||||||||||
Aberdeen Global Unconstrained Fixed Income Fund | 193,975 | 173,422 | (105,939 | ) | 116,602 | 9,890 |
Information about derivatives reflected as of the date of this report is generally indicative of the type of activity for the fiscal year ended October 31, 2018. The table below summarizes the weighted average values of derivatives holdings by the Funds during the fiscal year ended October 31, 2018.
Fund | Purchase Forward Foreign Currency Contracts (Average Notional Value) | Sale Forward Foreign Currency Contracts (Average Notional Value) | Long Futures Contracts (Average Notional Value) | Short Futures Contracts (Average Notional Value) | Buy Protection Credit Default Swaps (Average Notional Value) | Sell Protection Credit Default Swaps (Average Notional Value) | Interest Rate Swaps (Average Notional Value) | |||||||||||||||||||||
Asia Bond Fund | $ | 5,765,714 | $ | 3,208,934 | $ | 1,118,271 | $ | 2,028,307 | $ | – | $ | – | $ | – | ||||||||||||||
Emerging Markets Debt Fund | 546,505 | 2,044,477 | – | – | – | – | – | |||||||||||||||||||||
Global Unconstrained Fixed Income Fund | 2,143,448 | 7,173,066 | 5,278,400 | 15,008,727 | 6,227,417 | 682,500 | 108,320,833 |
e. | Security Transactions, Investment Income and Expenses |
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income and corporate actions are recorded generally on the ex-date, except for certain dividends and corporate actions which may be recorded after the ex-date, as soon as a Fund acquires information regarding such dividends or corporate actions.
Interest income and expenses are recorded on an accrual basis. Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among the relevant Funds based on net assets of each Fund as of the month end. For each of the Funds, the method for allocating income, fund level expenses, and realized and unrealized gains or losses to a class is based on the total net asset value of that class’s shares in proportion to the total net assets of the relevant Fund. Expenses specific to a class (such as Rule 12b-1 and administrative services fees) are charged to that class.
f. | Distributions |
Distributions from net investment income, if any, are declared and paid quarterly for the Asia Bond Fund, the Emerging Markets Debt Fund and the Global Unconstrained Fixed Income Fund. Distributions from net investment income, if any, are declared daily and paid monthly for the High Yield Manged Duration Municipal Fund, the Tax-Free Income Fund and the Ultra Short Municipal Income Fund. The Funds will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies and loss deferrals.
g. | Federal Income Taxes |
Each Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Funds from all federal income taxes. Therefore, no federal income tax provision is required.
Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Funds’ U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31 are subject to such review.
h. | Repurchase Agreements |
The Funds may enter into a repurchase agreement under the terms of a Master Repurchase Agreement. It is each Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase
2018 Annual Report | 91 |
Notes to Financial Statements (continued)
October 31, 2018
transaction, including accrued interest. The repurchase price generally equals the price paid by a Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. If the counterparty to a repurchase agreement defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Funds may be delayed or limited. Repurchase agreements are subject to contractual netting arrangements with the Fund’s repurchase agreement counterparty, Fixed Income Clearing Corp. To the extent the Funds enter into repurchase agreements, additional information on individual repurchase agreements is included in the Statements of Investments. As of and during the fiscal year ended October 31, 2018, the Funds did not hold any repurchase agreements.
i. | Securities Lending |
Through an agreement with BNP Paribas as the Lending Agent and State Street Bank and Trust Company (the Funds’ custodian), the Funds may lend their portfolio securities to brokers, dealers and other financial institutions that pay a negotiated fee in order to generate additional income. The Funds receive non-cash collateral in the form of U.S. Government Securities, with respect to each loan of U.S. securities, typically equal to at least 102% of the value of the portfolio securities loaned, and, with respect to each loan of non-U.S. securities, typically equal to at least 105% of the value of the portfolio securities loaned, and at all times thereafter require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned.
The Funds continue to own the loaned securities and continue to recognize unrealized gains and losses on the securities on loan. However, securities lending involves certain risks, including the event of default or insolvency of the borrower, which could delay or restrict a Fund’s ability to recover the loaned securities or dispose of the collateral for the loan. Securities on loan are noted within the Statement of Investments. Non-cash securities lending collateral held by the Lending Agent on behalf of the Funds cannot be sold or repledged by the Funds and therefore, this amount is not presented on the Funds’ Statements of Investments.
At October 31, 2018, the Funds did not have any securities on loan.
3. Agreements and Transactions with Affiliates
a. | Investment Adviser |
Under the Investment Advisory Agreement with the Trust, the Adviser manages the Funds in accordance with the policies and procedures established by the Board.
For services provided under the terms of the current Investment Advisory Agreement, each Fund pays the Adviser an annual management fee (as a percentage of its average daily net assets) paid monthly according to the following schedule:
Fund | Fee Schedule | |||||||
Asia Bond Fund | On all assets | 0.500% | ||||||
Emerging Markets Debt Fund | Up to $500 million | 0.750% | ||||||
On $500 million and more | 0.700% | |||||||
Global Unconstrained Fixed Income Fund | Up to $500 million | 0.600% | ||||||
$500 million up to $1 billion | 0.550% | |||||||
On $1 billion and more | 0.500% | |||||||
High Yield Managed Duration Municipal Fund* | Up to $250 million | 0.650% | ||||||
On $250 million and more | 0.600% | |||||||
Tax-Free Income Fund | Up to $250 million | 0.425% | ||||||
$250 million up to $1 billion | 0.375% | |||||||
On $1 billion and more | 0.355% | |||||||
Ultra Short Municipal Income Fund** | Up to $2.5 billion | 0.500% | ||||||
On $2.5 billion and more | 0.450% |
* | Prior to May 7, 2018, pursuant to the prior advisory agreement with the Alpine High Yield Managed Duration Municipal Fund, the Predecessor Adviser was entitled to an annual advisory fee of 0.650% on assets up to $250 million and 0.600% on assets of $250 million or more. |
** | Prior to May 7, 2018, pursuant to the prior advisory agreement with the Alpine Ultra Short Municipal Income Fund, the Predecessor Adviser was entitled to an annual advisory fee of 0.500% on assets up to $2.5 billion and 0.450% on assets of $2.5 billion or more. |
The Adviser has engaged the services of affiliates Aberdeen Standard Investments (Asia) Limited (formerly known as Aberdeen Asset Management Asia Limited) (on behalf of Asia Bond Fund) and Aberdeen Asset Managers Limited (on behalf of Emerging Markets Debt Fund
92 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
and Global Unconstrained Fixed Income Fund) as subadvisers (the “Subadvisers”) pursuant to subadvisory agreements. The Subadvisers manage a portion of the applicable Fund’s investments and have the responsibility for making all investment decisions for the portion of such Fund’s assets they manage. Pursuant to the subadvisory agreements, the Adviser pays fees to the Subadvisers, if any.
The Trust and Aberdeen have entered into a written contract (“Expense Limitation Agreement”) limiting operating expenses for all classes of the Funds from exceeding the amounts listed in the tables below. For each Fund except the High Yield Managed Duration Municipal Fund and Ultra Short Municipal Income Fund, this contractual limitation may not be terminated before February 28, 2019 without the approval of the Trustees who are not “interested persons” of the Funds, as such term is defined by the 1940 Act (the “Independent Trustees”). The Expense Limitation Agreement with respect to the High Yield Managed Duration Municipal Fund and Ultra Short Municipal Income Fund may not be terminated before May 4, 2020 without the approval of the Independent Trustees. For each Fund except the High Yield Managed Duration Municipal Fund and Ultra Short Municipal Income Fund, this limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, acquired fund fees and expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A shares, Class R shares and Institutional Service Class shares and extraordinary expenses. The Expense Limitation Agreement with respect to the High Yield Managed Duration Municipal Fund and Ultra Short Municipal Income Fund excludes certain expenses, including any interest, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses.
Fund | Limit | |||
Asia Bond Fund | 0.70% | |||
Emerging Markets Debt Fund | 0.90% | |||
Global Unconstrained Fixed Income Fund | 0.85% | |||
Tax-Free Income Fund* | 0.50% |
* | Effective February 28, 2018, the expense limitation changed from 0.62% to 0.50%. |
Fund | Class A Limit | Institutional Class Limit | ||||||
High Yield Managed Duration Municipal Fund* | 0.90% | 0.65% | ||||||
Ultra Short Municipal Income Fund** | 0.70% | 0.45% |
* | Prior to May 7, 2018, the limit was 0.90% for Class A and 0.65% for Institutional Class. |
** | Prior to May 7, 2018, the limit was 0.70% for Class A and 0.45% for Institutional Class. |
Aberdeen may request and receive reimbursement from a Fund of the advisory fees waived and other expenses reimbursed pursuant to the Expense Limitation Agreement as of a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements do not cause a class to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser, and the payment of such reimbursement is approved by the Board on a quarterly basis (the “Reimbursement Requirements”). Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by Aberdeen is not permitted.
As of October 31, 2018, to the extent the Reimbursement Requirements are met, the cumulative potential reimbursements for each Fund, based on expenses reimbursed by Aberdeen would be:
Fund | Amount Fiscal Year 2016 (Expires 10/31/19) | Amount Fiscal Year 2017 (Expires 10/31/20) | Amount Fiscal Year 2018 (Expires 10/31/21) | Total* | ||||||||||||
Asia Bond Fund | $ | 174,473 | $ | 196,408 | $ | 178,535 | $ | 549,416 | ||||||||
Emerging Markets Debt Fund | 134,178 | 176,930 | 164,344 | 475,452 | ||||||||||||
Global Unconstrained Fixed Income Fund | 168,405 | 246,045 | 236,240 | 650,690 | ||||||||||||
High Yield Managed Duration Municipal Fund** | – | – | 280,141 | 280,141 | ||||||||||||
Tax-Free Income Fund | 136,796 | 143,650 | 222,152 | 502,598 | ||||||||||||
Ultra Short Municipal Income Fund** | – | – | 1,157,542 | 1,157,542 |
* | Amounts reported are due to expire throughout the respective 3-year expiration period presented above. |
** | Prior to May 7, 2018, amounts that were waived by the Predecessor Adviser will not be recaptured by Aberdeen. |
2018 Annual Report | 93 |
Notes to Financial Statements (continued)
October 31, 2018
In accordance with the Funds’ Expense Limitation Agreement and criteria, as described above, the Adviser did not recapture any expenses for which it previously reimbursed the Funds. Accordingly, at October 31, 2018, the Funds did not have liabilities payable to the Adviser for recapture of previously reimbursed expenses.
b. | Fund Administration |
Under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including daily valuation of the Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to the Board. For services provided pursuant to the Fund Administration Agreement, the Trust pays Aberdeen an annual fee of 0.08% based on the Trust’s average daily net assets. The fee is then allocated proportionately among all funds within the Trust (including the Funds) in relation to the average daily net assets of each fund. This asset-based fee is subject to an annual minimum fee based on the number of funds served. Pursuant to a sub-administration agreement with Aberdeen, State Street Bank and Trust Company (“State Street”) provides sub-administration services with respect to the Funds. Aberdeen pays State Street for providing such services.
Prior to May 7, 2018, State Street served as the custodian, fund accounting agent and administrator to the Predecessor Funds. Effective May 7, 2018, under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including oversight of the daily valuation of the Acquiring Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to the Board.
c. | Distributor and Shareholder Servicing |
The Trust and Aberdeen Fund Distributors, LLC (the “Distributor”) are parties to the current Underwriting Agreement (the “Underwriting Agreement”) whereby the Distributor acts as principal underwriter for the Trust’s shares.
The Trust has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act with respect to certain classes of shares. The Plan permits the Funds to compensate the Distributor, for expenses associated with the distribution-related and/or shareholder services provided by such entities. These fees are paid to the Distributor and are either kept or paid to shareholders’ financial advisors or other intermediaries for distribution and shareholder services. Although actual distribution expenses may be more or less, under the Plan, the Funds pay the Distributor an annual fee of the following amounts:
Fund | Class A Shares | Class C Shares (a) | Class R Shares (a) | |||||||||
Asia Bond Fund | 0.25% | 1.00% | 0.50% | |||||||||
Emerging Markets Debt Fund | 0.25% | 1.00% | 0.50% | |||||||||
Global Unconstrained Fixed Income Fund | 0.25% | 1.00% | 0.50% | |||||||||
High Yield Managed Duration Municipal Fund | 0.25% | – | – | |||||||||
Tax-Free Income Fund | 0.25% | 1.00% | 0.50% | |||||||||
Ultra Short Municipal Income Fund | 0.25% | – | – |
(a) | 0.25% of which is service fees. |
The Adviser or an affiliate of the Adviser may pay additional amounts from its own resources to dealers or other financial intermediaries, for aid in distribution or for aid in providing administrative services to shareholders.
Pursuant to the current Underwriting Agreement, the Distributor will also receive the proceeds of contingent deferred sales charges (“CDSCs”) of 1% imposed on certain redemptions of Class C (and up to 1% for certain Class A) shares.
In addition, the Distributor will re-allow to dealers 3.75% of sales charges on Class A shares of the Funds, which have a maximum front-end sales charge of 4.25% and will re-allow to dealers 0.50% of sales charges on Class A Shares of the Ultra Short Municipal Income Fund, and the Distributor or Adviser may compensate broker dealers or financial intermediaries for sales of Class C shares from its own resources at the rate of 1.00% on sales of Class C shares, which have a maximum CDSC of 1.00% (on the deferred sales charge assessed on sales within one year of purchase). For the fiscal year ended October 31, 2018, the Distributor retained commissions of $28,906 from front-end sales charges of Class A shares and $50 from CDSC fees from Class C (and certain Class A) shares of the Funds.
Prior to May 7, 2018, Quasar Distributors, LLC (“Quasar”) served as the distributor to each of the Predecessor Funds. Each of the Predecessor Funds had adopted a distribution and servicing plan (the “Quasar Plan”) for their Class A shares as allowed by Rule 12b-1 under the 1940 Act. The Quasar Plan authorized payments by the Predecessor Funds in connection with the distribution and servicing of their Class A shares at an annual rate, as determined from time to time by the Alpine Board, of up to 0.25% of the average daily net assets of the Class A shares of the Predecessor Funds. Amounts paid under the Quasar Plan by the Predecessor Funds could be spent by the Predecessor Funds on any
94 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
activities or expenses primarily intended to result in the sale of Class A shares of the Predecessor Funds, including but not limited to advertising, compensation for sales and marketing activities of financial institutions and others such as dealers and distributors, shareholder account servicing, the printing and mailing of prospectuses to other than current shareholders and the printing and mailing of sales literature. Alpine High Yield Managed Duration Municipal Fund and Alpine Ultra Short Municipal Income Fund incurred $56,501 and $245,748 respectively, pursuant to the Quasar Plan for the period from November 1, 2017 through May 4, 2018.
d. | Administrative Services Fees/Transfer Agent Out-of-Pocket Expenses |
The Funds may pay and/or reimburse administrative services fees/transfer agent out-of-pocket expenses to certain broker-dealers and financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds (sometimes referred to as “sub-transfer agency fees”), subject to certain limitations approved by the Board. These fees may be in addition to Rule 12b-1 fees. Sub-transfer agency fees generally include, but are not limited to, costs associated with omnibus accounting, recordkeeping, networking, sub-transfer agency or other administrative or shareholder services.
Class A, Class R and Institutional Service Class shares of the Funds pay for such services pursuant to an Administrative Services Plan adopted by the Board. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual sub-transfer agent and administrative services fee of 0.25% for Class A, Class R and Institutional Service Class shares. Under an amendment to the Administrative Services Plan that is in effect until at least February 28, 2019, the administrative service fee is limited to a maximum of 0.15% for contracts with fees that are calculated as a percentage of Fund assets and a maximum of $16 per account for contracts with fees that are calculated on a dollar per account basis. Class C and Institutional Class shares may also pay for the services described above directly, as these classes are not subject to an Administrative Services Plan.
The aggregate amount of sub-transfer agent and administrative service fees paid during the fiscal year ended October 31, 2018 was as follows:
Fund | Class A | Class C | Class R | Institutional Service | Institutional | |||||||||||||||
Asia Bond Fund | $ | 232 | $ | 73 | $ | – | $ | – | $ | 3,443 | ||||||||||
Emerging Markets Debt Fund | 2,399 | 161 | 5,569 | – | 10,794 | |||||||||||||||
Global Unconstrained Fixed Income Fund | 200 | 290 | – | 10,466 | 5,124 | |||||||||||||||
High Yield Managed Duration Municipal Fund | 6,860 | – | – | 49,758 | ||||||||||||||||
Tax-Free Income Fund | 527 | 176 | – | – | 3,884 | |||||||||||||||
Ultra Short Municipal Income Fund | 44,493 | – | – | – | 224,143 |
Amounts listed as “–” are $0 or round to $0.
4. Investment Transactions
Purchases and sales of securities (excluding short-term securities) for the fiscal year ended October 31, 2018, were as follows:
Fund | Purchases | Sales | ||||||
Asia Bond Fund | $ | 4,569,989 | $ | 5,440,893 | ||||
Emerging Markets Debt Fund | 17,374,151 | 13,029,533 | ||||||
Global Unconstrained Fixed Income Fund | 9,864,379 | 7,607,766 | ||||||
High Yield Managed Duration Municipal Fund | 186,615,740 | 228,367,946 | ||||||
Tax-Free Income Fund | 10,712,755 | 18,173,412 | ||||||
Ultra Short Municipal Income Fund | 1,686,535,721 | 1,780,094,835 |
5. Portfolio Investment Risks
a. | Asset-Backed Securities Risk |
Certain Funds are subject to Asset-Backed Securities Risk. Like traditional fixed income securities, the value of asset-backed securities typically increases when interest rates fall and decreases when interest rates rise. Certain asset-backed securities may also be subject to the risk of prepayment.
2018 Annual Report | 95 |
Notes to Financial Statements (continued)
October 31, 2018
b. | Call and Redemption Risk |
Some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
c. | Credit Risk |
Credit risk refers to the possibility that the issuer of a security will not be able to make payments of interest and principal when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation.
d. | Cybersecurity Risk |
Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser and/or its service providers (including, but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption or lose operational functionality.
e. | Derivatives Risk (including Options, Futures and Swaps) |
Certain Funds are subject to Derivatives Risk. Derivatives are speculative and may hurt the Fund’s performance. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways. The potential benefits to be derived from the Fund’s options, futures and derivatives strategy are dependent upon the portfolio managers’ ability to discern pricing inefficiencies and predict trends in these markets, which decisions could prove to be inaccurate. This requires different skills and techniques than predicting changes in the price of individual debt securities, and there can be no assurance that the use of this strategy will be successful.
Speculative Exposure Risk. To the extent that a derivative or practice is not used as a hedge, the Fund is directly exposed to its risks. Gains or losses from speculative positions in a derivative may be much greater than the derivative’s original cost. For example, potential losses from writing uncovered call options and from speculative short sales are unlimited.
Hedged Exposure Risk. Losses generated by a derivative or practice used by the Fund for hedging purposes should be substantially offset by gains on the hedged investment. However, while hedging can reduce or eliminate losses, it can also reduce or eliminate gains.
Correlation Risk. The Fund is exposed to the risk that changes in the value of a hedging instrument will not match those of the investment being hedged.
Counterparty Risk. Derivative transactions depend on the creditworthiness of the counterparty and the counterparty’s ability to fulfill its contractual obligations.
f. | Emerging Markets Risk |
Certain Funds are subject to Emerging Markets Risk. A magnification of the risks that apply to foreign investments. These risks are greater for securities of companies in emerging markets countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Foreign Securities Risk” below).
g. | Extension Risk |
Principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase. Rapidly rising interest rates may cause prepayments to occur more slowly than expected, thereby lengthening the maturity of the securities held by the Fund and making their prices more sensitive to rate changes and more volatile.
h. | Fixed Income Securities Risk |
Fixed income securities are subject to, among other risks, credit risk, extension risk, issuer risk, interest rate risk, market risk and prepayment risk.
i. | Foreign Currency Exposure Risk |
The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact a Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Adviser are unsuccessful.
96 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
j. | Foreign Securities Risk |
A Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which a Fund may invest may have markets that are less liquid, less regulated and more volatile than U.S. markets. The value of a Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable or unsuccessful government actions, reduction of government or central bank support and political or financial instability. Lack of information may also affect the value of these securities. To the extent the Fund focuses its investments in a single country or only a few countries in a particular geographic region, economic, political, regulatory or other conditions affecting such country or region may have a greater impact on Fund performance relative to a more geographically diversified fund.
k. | High-Yield Bonds and Other Lower-Rated Securities Risk |
A Fund’s investments in high-yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. Investments in high-yield bonds are speculative and issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.
l. | Illiquid Securities Risk |
Illiquid securities are assets that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the asset. An inability to sell a portfolio position can adversely affect a Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities. Illiquid securities and relatively less liquid securities may also be difficult to value. Over recent years, the capacity of dealers to make markets in fixed income securities has been outpaced by the growth in the size of the fixed income markets. Liquidity risk may be magnified in a rising interest rate environment or when investor redemptions from fixed income funds may be higher than normal, due to the increased supply in the market that would result from selling activity.
The Adviser employs procedures and tests using third-party and internal data inputs that seek to assess and manage the liquidity of the Fund’s portfolio holdings. These procedures and tests take into account the Fund’s investment strategy and liquidity of portfolio investments during both normal and foreseeable stressed conditions, cash-flow projections during both normal and reasonable foreseeable stressed conditions, relevant market, trading and other factors, and monitor whether liquidity should be adjusted based on changed market conditions. These procedures and tests are designed to assist the Fund in determining its ability to meet redemption requests in various market conditions. In light of the dynamic nature of markets, there can be no assurance that these procedures and tests will enable the Fund to ensure that it has sufficient liquidity to meet redemption requests.
m. | Impact of Large Redemptions and Purchases of Fund Shares |
Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause the Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of the Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.
n. | Interest Rate Risk |
Fixed income investments are subject to interest rate risk, which generally causes the value of a fixed income portfolio to decrease when interest rates rise resulting in a decrease in a Fund’s net assets. A Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. Interest rate fluctuations tend to have a greater impact on fixed income-securities with a greater time to maturity and/or lower coupon. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. In periods of market volatility, the market values of fixed income securities may be more sensitive to changes in interest rates.
o. | Issuer Risk |
The value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or service.
p. | Management Risk |
Each Fund is subject to the risk that the Adviser may make poor security selections. The Adviser and its portfolio managers apply their own investment techniques and risk analyses in making investment decisions for the Fund and there can be no guarantee that these decisions will achieve the desired results for the Fund. In addition, the Adviser may select securities that underperform the relevant market or other funds with similar investment objectives and strategies.
2018 Annual Report | 97 |
Notes to Financial Statements (continued)
October 31, 2018
In addition, the Adviser’s judgment about the quality, relative yield or value of, or market trends affecting, a particular security or sector, or about interest rates generally, may be incorrect.
q. | Market Risk |
Deteriorating market conditions might cause a general weakness in the market that reduces the prices, or yield, of securities in those markets in which a Fund invests.
r. | Mid-Cap Securities Risk |
Securities of medium-sized companies tend to be more volatile and less liquid than securities of larger companies.
s. | Municipal Securities Risk |
The Tax-Free Income, High Yield Managed Duration Fund and Ultra-Short Fund (the “Municipal Funds”) are subject to municipal securities risk. Municipal bonds can be significantly affected by political and economic changes, including inflation, as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders. Municipal bonds have varying levels of sensitivity to changes in interest rates. Interest rate risk is generally lower for shorter-term Municipal bonds and higher for long term Municipal bonds.
Municipal Bond Tax Risk. A municipal bond that is issued as tax-exempt may later be declared to be taxable. In addition, if the federal income tax rate is reduced, the value of the tax exemption may be less valuable, causing the value of a municipal bond to decline.
Municipal Market Volatility and Illiquidity Risk. The municipal bond market can be susceptible to unusual volatility, particularly for lower-rated and unrated securities. Liquidity can be reduced unpredictably in response to overall economic conditions or credit tightening. During times of reduced market liquidity, a Fund may not be able to readily sell bonds without the sale significantly changing the market value of the bond. If the Fund needed to sell large blocks of bonds to meet shareholder redemption requests or to raise cash, those sales could further reduce the bonds’ prices.
Municipal Sector Risk. From time to time a Fund may invest a substantial amount of its assets in municipal securities whose interest is paid solely from revenues of similar projects. If the Fund concentrates its investments in this manner, it assumes the economic risks relating to such projects and this may have a significant impact on the Fund’s investment performance.
t. | Non-Diversified Fund Risk |
The Asia Bond Fund’s and Emerging Market Debt Fund’s performance may be more volatile than a diversified fund because it may invest a greater percentage of its total assets in the securities of a single issuer.
u. | Portfolio Turnover Risk |
Certain Funds may engage in active and frequent trading of portfolio securities to achieve its investment objective. High portfolio turnover necessarily results in greater transaction costs which may reduce Fund performance. It may also result in greater realization of gains, which may include short-term gains taxable at ordinary income tax rates.
v. | Prepayment Risk |
As interest rates decline, debt issuers may repay or refinance their loans or obligations earlier than anticipated. The issuers of fixed income securities may, therefore, repay principal in advance. This forces a Fund to reinvest the proceeds from the principal prepayments at lower rates, which reduces the Fund’s income.
w. | Private Placements and Other Restricted Securities Risk |
The High Yield Fund and Asia Bond Fund are subject to Private Placements Risk. Investments in private placements and other restricted securities, including Regulation S Securities and Rule 144A Securities, could have the effect of increasing the Fund’s level of illiquidity. Private placements and restricted securities may be less liquid than other investments because such securities may not always be readily sold in broad public markets and the Fund might be unable to dispose of such securities promptly or at prices reflecting their true value.
x. | Puerto Rico and U.S. Territories Risk |
The Municipal Funds are subject to Puerto Rico and U.S. territories risk to the extent that they invest in municipal obligations of such territories. Certain municipal issuers in Puerto Rico have experienced financial difficulties over recent years. These financial difficulties have been exacerbated by the impact of severe weather events, including Hurricane Maria in 2017. Additionally, all three ratings agencies have maintained a negative outlook on Puerto Rico’s credit rating, which means that additional downgrades of securities issued by Puerto Rico are possible in the future. Puerto Rican financial difficulties could potentially lead to less liquidity for its bonds, wider spreads, and greater risk of default for Puerto Rican municipal securities, and consequently may affect a Fund’s performance to the extent it invests in Puerto Rican municipal securities. As with Puerto Rican municipal securities, events in any of the other territories where a Fund is invested may affect a Fund’s investments and its performance.
98 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
y. | Tender Option Bonds Risk |
The Municipal Funds are subject to Tender Option Bonds Risk. Tender option bonds are synthetic floating-rate or variable-rate securities issued when long-term bonds are purchased in the primary or secondary market and then deposited into a trust. Tender option bonds may be considered derivatives, and may expose the Fund to the same risks as investments in derivatives, as well as risks associated with leverage, especially the risk of increased volatility.
z. | Tobacco Related Bonds Risk |
The Municipal Funds are subject to Tobacco Related Bonds Risk. In 1998, the largest U.S. tobacco manufacturers reached an out of court agreement, the MSA, to settle claims against them by 46 states and six other U.S. jurisdictions. The tobacco manufacturers agreed to make annual payments to the government entities in exchange for the release of all litigation claims. A number of the states have sold bonds that are backed by those future payments. The Funds may invest in two types of those bonds: (i) bonds that make payments only from a state’s interest in the MSA and (ii) bonds that make payments from both the MSA revenue and from an “appropriation pledge” by the state. An “appropriation pledge” requires the state to pass a specific periodic appropriation to make the payments and is generally not an unconditional guarantee of payment by a state. The settlement payments are based on factors, including, but not limited to, annual domestic cigarette shipments, cigarette consumption, inflation and the financial capability of participating tobacco companies. Payments could be reduced if consumption decreases, if market share is lost to non-MSA manufacturers, or if there is a negative outcome in litigation regarding the MSA.
aa. | Sector Risk |
To the extent that a Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.
bb. | Small-Cap Securities Risk |
Securities of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
cc. | Sovereign Debt Risk |
The Asia Bond Fund is subject to Sovereign Debt Risk. Periods of economic and political uncertainty may result in the illiquidity and increased price volatility of a foreign government’s debt securities held by the Fund and impact an issuer’s ability and willingness to pay interest or repay principal when due. The Fund may have limited recourse to compel payment in the event of a default. A foreign government’s default on its debt securities may cause the value of securities held by the Fund to decline significantly.
dd. | Valuation Risk |
The price a Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third-party service providers.
ee. | Variable and Floating Rate Securities Risk |
Certain Funds are subject to Variable and Floating Rate Securities Risk. For floating and variable rate obligations, there may be a lag between an actual change in the underlying interest rate benchmark and the reset time for an interest payment of such an obligation, which could harm or benefit the Fund, depending on the interest rate environment or other circumstances. Variable rate demand obligations (“VRDOs”) are floating rate securities that combine an interest in a long term municipal bond with a right to demand payment before maturity from a bank or other financial institution. If the bank or financial institution is unable to pay, the Fund may lose money.
ff. | Yield Risk |
The Ultra Short Fund is subject to Yield Risk. The amount of income received by the Fund will go up or down depending on day-to-day variations in short-term interest rates, and when interest rates are very low the Fund’s expenses could absorb all or a significant portion of the Fund’s income. If interest rates increase, the Fund’s yield may not increase proportionately. For example, the Adviser may discontinue any temporary voluntary fee limitation or recoup amounts previously waived and/or reimbursed.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 99 |
Notes to Financial Statements (continued)
October 31, 2018
6. Contingencies
In the normal course of business, the Funds may provide general indemnifications pursuant to certain contracts and organizational documents. The Funds’ maximum exposure under these arrangements is dependent on future claims that may be made against the Funds, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
7. Tax Information
For the year ended October 31, 2017 the breakdown of distributions per class from net investment income and from net realized gains were as follows:
Distributions From Net Investment Income | Distributions From Net Realized | |||||||||||||||||||||||||||||||||||||||
Fund | Class A | Class C | Class R | Institutional Service Class | Institutional Class | Class A | Class C | Class R | Institutional Service Class | Institutional Class | ||||||||||||||||||||||||||||||
Asia Bond Fund | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ – | $ | – | $ | – | $ | – | |||||||||||||||||||||
Emerging Markets Debt Fund | (21,569 | ) | (4,951 | ) | (51,220 | ) | (590 | ) | (512,681 | ) | – | – | – | – | – | |||||||||||||||||||||||||
Global Unconstrained Fixed Income Fund | – | – | – | – | – | (10,566 | ) | (4,764) | – | (123,195 | ) | (51,496 | ) | |||||||||||||||||||||||||||
High Yield Managed Duration Municipal Fund | (1,205,149 | ) | – | – | – | (4,764,895 | ) | – | – | – | – | – | ||||||||||||||||||||||||||||
Tax-Free Income Fund | (277,956 | ) | (22,335 | ) | (283 | ) | (704 | ) | (2,392,443 | ) | – | – | – | – | – | |||||||||||||||||||||||||
Ultra Short Municipal Income Fund | (1,287,296 | ) | – | – | – | (7,470,264 | ) | – | – | – | – | – |
As of October 31, 2018, the tax cost of securities and the breakdown of unrealized appreciation/(depreciation) for each Fund were as follows:
Tax Cost of Securities | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Asia Bond Fund | $ | 4,535,465 | $ | 9,194 | $ | (380,969 | ) | $ | (371,775 | ) | ||||||
Emerging Markets Debt Fund | 26,287,737 | 48,419 | (2,723,395 | ) | (2,674,976 | ) | ||||||||||
Global Unconstrained Fixed Income Fund | 3,099,882 | 2,579,857 | (3,028,930 | ) | (449,073 | ) | ||||||||||
High Yield Managed Duration Municipal Fund | 208,651,540 | 859,537 | (4,332,798 | ) | (3,473,261 | ) | ||||||||||
Tax-Free Income Fund | 70,387,570 | 2,332,519 | (694,490 | ) | 1,638,029 | |||||||||||
Ultra Short Municipal Income Fund | 1,046,832,979 | 18,304 | (101,902 | ) | (83,598 | ) |
The tax character of distributions paid during the fiscal year ended October 31, 2018 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income* | Net Long Term Capital Gains* | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
Asia Bond Fund | $ | 415,766 | $ | – | $ | 415,766 | $ | – | $ | – | $ | 415,766 | ||||||||||||
Emerging Markets Debt Fund | 1,338,321 | – | 1,338,321 | – | – | 1,338,321 | ||||||||||||||||||
Global Unconstrained Fixed Income Fund | – | 41,900 | 41,900 | – | – | 41,900 | ||||||||||||||||||
High Yield Managed Duration Municipal Fund | 194,481 | – | 194,481 | 7,161,530 | 3,895 | 7,359,906 | ||||||||||||||||||
Tax-Free Income Fund | 4,692 | – | 4,692 | 2,433,250 | – | 2,437,942 | ||||||||||||||||||
Ultra Short Municipal Income Fund | – | – | – | 12,828,942 | – | 12,828,942 |
100 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
The tax character of distributions paid during the fiscal year ended October 31, 2017 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income* | Net Long Term Capital Gains* | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
Asia Bond Fund | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||||
Emerging Markets Debt Fund | 591,011 | – | 591,011 | – | – | 591,011 | ||||||||||||||||||
Global Unconstrained Fixed Income Fund | 190,016 | 5 | 190,021 | – | – | 190,021 | ||||||||||||||||||
High Yield Managed Duration Municipal Fund | 85,043 | – | 85,043 | 5,885,001 | – | 5,970,044 | ||||||||||||||||||
Tax-Free Income Fund | 5,055 | – | 5,055 | 2,686,866 | – | 2,693,721 | ||||||||||||||||||
Ultra Short Municipal Income Fund | 463 | – | 463 | 8,757,097 | – | 8,757,560 |
Amounts listed as “–” are $0 or round to $0.
As of October 31, 2018, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Fund | Undistributed Tax Exempt Income | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Distributions Payable | Late Year Ordinary and Post-October Capital Loss Deferrals | Other Temporary Differences | Unrealized Appreciation/ (Depreciation)* | Accumulated Capital and Other Losses** | Total Accumulated Earnings/ (Deficit) | ||||||||||||||||||||||||||||||
Asia Bond Fund | $ | – | $ | 107,657 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | (390,361 | ) | $ | (5,127,323 | ) | $ | (5,410,027 | ) | |||||||||||||||||
Emerging Markets Debt Fund | – | 355,036 | – | – | – | – | – | (2,675,318 | ) | (3,744,660 | ) | (6,064,942 | ) | |||||||||||||||||||||||||||
Global Unconstrained Fixed Income Fund | – | 759,501 | 47,303 | – | – | – | – | (472,409 | ) | – | 334,395 | |||||||||||||||||||||||||||||
High Yield Managed Duration Municipal Fund | – | – | – | – | – | – | (18,711 | ) | (3,473,261 | ) | (2,106,821 | ) | (5,598,793 | ) | ||||||||||||||||||||||||||
Tax-Free Income Fund | – | – | 18,900 | – | – | – | (8,351 | ) | 1,638,031 | – | 1,648,580 | |||||||||||||||||||||||||||||
Ultra Short Municipal Income Fund | 31,141 | – | – | – | (43,119 | ) | – | – | (83,599 | ) | (450,435 | ) | (546,012 | ) |
* | The difference between the book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to tax deferral of losses on wash sales. |
** | As of October 31, 2018, for Federal income tax purposes, these Funds have capital loss carryforwards available to offset capital gains, if any, to the extent provided by the Treasury regulations. |
Amounts listed as “–” are $0 or round to $0.
As of October 31, 2018 for Federal income tax purposes, the following Funds have capital loss carry forwards available to offset capital gains, if any, to the extent provided by the Treasury regulations.
Fund | Amount | Expires | ||||||
Asia Bond Fund | $ | 3,851,535 | Unlimited (Short-Term) | |||||
Asia Bond Fund | 1,275,788 | Unlimited (Long-Term) | ||||||
Emerging Markets Debt Fund | 888,201 | Unlimited (Short-Term) | ||||||
Emerging Markets Debt Fund | 2,856,459 | Unlimited (Long-Term) | ||||||
High Yield Managed Duration Municipal Fund | 2,043,782 | Unlimited (Short-Term) | ||||||
High Yield Managed Duration Municipal Fund | 63,039 | Unlimited (Long-Term) | ||||||
Ultra Short Municipal Income Fund | 67,228 | 2019 (Short-Term) | ||||||
Ultra Short Municipal Income Fund | 365,097 | Unlimited (Short-Term) | ||||||
Ultra Short Municipal Income Fund | 18,110 | Unlimited (Long-Term) |
2018 Annual Report | 101 |
Notes to Financial Statements (continued)
October 31, 2018
Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 or on the date of their formation, whichever is later, for an unlimited period. However, any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to foreign currency gain/(loss), equalization, paydown gain/(loss), amortization of upfront payments-open swaps, capital gain tax, swap gain/(loss), and distribution re-designations. These reclassifications have no effect on net assets or NAVs per share.
Fund | Paid-in Capital | Distributable Earnings/ (Accumulated Loss) | ||||||
Asia Bond Fund | $ | – | $ | – | ||||
Emerging Markets Debt Fund | (477 | ) | 477 | |||||
Global Unconstrained Fixed Income Fund | 92,266 | (92,266 | ) | |||||
High Yield Managed Duration Municipal Fund | – | – | ||||||
Tax-Free Income Fund | – | – | ||||||
Ultra Short Municipal Income Fund | – | – |
8. Significant Shareholders
As of October 31, 2018, the Funds had shareholders with the percentage ownership indicated, which are considered significant shareholders (holdings greater than 5.0%) for financial reporting purposes:
Fund | Record Ownership % | Number of Account Owners | ||||||
Asia Bond Fund | 85.0 | % | 5 | |||||
Emerging Markets Debt Fund | 90.0 | 4 | ||||||
Global Unconstrained Fixed Income Fund | 69.1 | 5 | ||||||
High Yield Managed Duration Municipal Fund | 84.8 | 6 | ||||||
Tax-Free Income Fund | – | – | ||||||
Ultra Short Municipal Income Fund | 69.9 | 5 |
Amounts listed as “–” are $0 or round to $0.
9. Line of Credit
The Trust, on behalf of each of the funds of the Trust ( including the Funds) (the “Borrowers”), has entered into an agreement (the “Agreement”) with State Street Bank and Trust Company (the “Bank”), subject to annual renewal. The Agreement provides for a revolving credit facility (the “Credit Facility”) in the amount of $250,000,000 to be utilized for temporary or emergency purposes to fund shareholder redemptions or other short-term liquidity purposes.
Principal on each outstanding loan made under the Agreement bears interest at a variable rate per annum equal to the higher of (a) the Federal Funds Rate as in effect on that day (not less than zero) plus 1.25% or (b) the One-Month London Interbank Offered Rate as in effect on that day (not less than zero) plus 1.25%. In addition, the Borrowers shall pay to the Bank a commitment fee at the rate of 0.25% per annum on the daily unused portion of the Credit Facility, as applicable, which is allocated among the Borrowers in such manner as is determined by the Board to be reasonable. For each Fund that borrowed under the Credit Facility during the fiscal year ended October 31, 2018, the following table shows the average outstanding daily balance of the days the Fund utilized the Credit Facility and the average weighted interest rate paid by the Fund during the fiscal year ended October 31, 2018.
102 | Annual Report 2018 |
Notes to Financial Statements (concluded)
October 31, 2018
Average Outstanding Daily Balance | Average Weighted Interest Rate | Days Utilized | ||||||||||
Asia Bond Fund | $ | 285,832 | 3.23 | % | 20 | |||||||
Global Unconstrained Fixed Income Fund | 175,000 | 2.75 | % | 3 | ||||||||
High Yield Managed Duration Municipal Fund* | 1,171,659 | 3.35 | % | 8 | ||||||||
Ultra Short Municipal Income Fund* | 4,758,690 | 3.35 | % | 5 |
* | Prior to May 7, 2018, the Predecessor Funds had entered into a lending agreement with BNP Paribas. The amounts in the above table reflect the time period May 7, 2018 to October 31, 2018 and the terms of the State Street Agreement, in effect during that time period. |
10. Recent Accounting Pronouncements
On August 17, 2018, the SEC voted to adopt amendments to certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The SEC will also be referring certain SEC disclosure requirements that overlap with, but require information incremental to, U.S. GAAP to the FASB for potential incorporation into U.S. GAAP. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments became effective November 5, 2018.
On August 28, 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 includes removals, additions and modifications to the disclosure requirements for fair value measurements that are intended to improve the effectiveness of disclosures in the notes to financial statements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. Aberdeen has evaluated ASU 2018-13 and determined that there is no significant impact on the Trust’s financial statements. Aberdeen has early adopted the following ASU 2018-13 guidance in the Trust’s financial statements pertaining to the removal of (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and (ii) the policy for timing of transfers between levels.
11. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures and/or adjustments were required to the financial statements as of October 31, 2018.
On December 12, 2018, the Board of Trustees of the Trust (the “Board”) approved a reduction in the investment advisory fee for the Emerging Markets Debt Fund from 0.75% on the first $500 million of average daily net assets and 0.70% on average daily net assets of $500 million and more to 0.60% on the first $500 million of average daily net assets and 0.55% of average daily net assets of $500 million and more effective December 14, 2018. The Board also approved a reduction in the Fund’s expense limitation from an annual rate of 0.90% of the Fund’s average daily net assets to 0.65% of the Fund’s average daily net assets, and an extension of the expense limitation to February 29, 2020.
2018 Annual Report | 103 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of Aberdeen Funds:
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of the Aberdeen Asia Bond Fund, Aberdeen Emerging Markets Debt Fund, Aberdeen Global Unconstrained Fixed Income Fund, Aberdeen High Yield Managed Duration Municipal Fund, Aberdeen Tax-Free Income Fund, and Aberdeen Ultra Short Municipal Income Fund, six of the funds comprising Aberdeen Funds (the Funds), including the statements of investments, as of October 31, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended except for the Aberdeen High Yield Managed Duration Municipal Fund and Aberdeen Ultra Short Municipal Income Fund, for which the period is the year ended October 31, 2018, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended except for the Aberdeen High Yield Managed Duration Municipal Fund and Aberdeen Ultra Short Municipal Income Fund, for which the period is the year ended October 31, 2018. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of October 31, 2018, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, except for the Aberdeen High Yield Managed Duration Municipal Fund and Aberdeen Ultra Short Municipal Income Fund for which the period is the year ended October 31, 2018 and the financial highlights for each of the years in the five-year period then ended except for the Aberdeen High Yield Managed Duration Municipal Fund and Aberdeen Ultra Short Municipal Income Fund, for which the period is the year ended October 31, 2018, in conformity with U.S. generally accepted accounting principles. The statements of changes in net assets for the year ended October 31, 2017 and the financial highlights for each of the years in the three-year period ended October 31, 2017 for Aberdeen High Yield Managed Duration Municipal Fund and Aberdeen Ultra Short Municipal Income Fund were audited by other independent registered public accountants whose report, dated December 22, 2017, expressed an unqualified opinion on those changes in net assets and financial highlights. The financial highlights for the year ended October 31, 2014 for the Aberdeen High Yield Managed Duration Municipal Fund and Aberdeen Ultra Short Municipal Income Fund were audited by other independent registered public accountants whose report, dated December 29, 2014, expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian, transfer agent of the underlying funds, brokers, or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Aberdeen investment companies since 2009.
Philadelphia, Pennsylvania
December 27, 2018
104 | Annual Report 2018 |
Other Tax Information (Unaudited)
For the period ended October 31, 2018, certain dividends paid by the Funds may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2018 Form 1099-DIV.
The Funds intend to elect to pass through to their shareholders the credit for taxes paid in foreign countries during its fiscal year ended October 31, 2018. In accordance with the current tax laws, the foreign income and foreign tax per share (for a share outstanding as of October 31, 2018) were as follows:
Fund | Foreign Tax | |||
Asia Bond Fund | $ | 0.0077 |
During the year ended October 31, 2018, the following Funds designated dividends as long-term capital gains:
Fund | Amount | |||
Global Unconstrained Fixed income Fund | $ | 47,310 | ||
Tax-Free Income Fund | 503 |
2018 Annual Report | 105 |
Shareholder Expense Examples (Unaudited)
As a shareholder of the Aberdeen Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) paid on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, transfer agent out-of-pocket expenses, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Aberdeen Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples assume that you had a $1,000 investment in the Class at the beginning of the reporting period, May 1, 2018 and continued to hold your shares at the end of the reporting period, October 31, 2018.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Actual Expenses Paid During Period” for the class of a Fund that you own to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of a Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the information for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
Beginning Account Value, May 1, 2018 | Actual Ending Account Value, October 31, 2018 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period*1 | Annualized Expense Ratio** | |||||||||||||||||||||
Asia Bond Fund | Class A | $ | 1,000.00 | $ | 916.00 | $ | 1,019.81 | $ | 5.17 | $ | 5.45 | 1.07% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 913.40 | $ | 1,016.59 | $ | 8.25 | $ | 8.69 | 1.71% | |||||||||||||||
Class R | $ | 1,000.00 | $ | 915.60 | $ | 1,019.11 | $ | 5.84 | $ | 6.16 | 1.21% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 918.00 | $ | 1,021.63 | $ | 3.43 | $ | 3.62 | 0.71% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 917.80 | $ | 1,021.63 | $ | 3.43 | $ | 3.62 | 0.71% | |||||||||||||||
Emerging Markets Debt Fund | Class A | $ | 1,000.00 | $ | 946.20 | $ | 1,019.01 | $ | 6.03 | $ | 6.26 | 1.23% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 942.50 | $ | 1,015.63 | $ | 9.30 | $ | 9.65 | 1.90% | |||||||||||||||
Class R | $ | 1,000.00 | $ | 944.10 | $ | 1,017.29 | $ | 7.69 | $ | 7.98 | 1.57% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 947.50 | $ | 1,020.57 | $ | 4.52 | $ | 4.69 | 0.92% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 947.30 | $ | 1,020.67 | $ | 4.42 | $ | 4.58 | 0.90% | |||||||||||||||
Global Unconstrained Fixed Income Fund | Class A | $ | 1,000.00 | $ | 1,011.70 | $ | 1,019.61 | $ | 5.63 | $ | 5.65 | 1.11% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 1,008.00 | $ | 1,015.88 | $ | 9.36 | $ | 9.40 | 1.85% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 1,012.60 | $ | 1,020.42 | $ | 4.82 | $ | 4.84 | 0.95% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,013.40 | $ | 1,020.92 | $ | 4.31 | $ | 4.33 | 0.85% | |||||||||||||||
High Yield Managed Duration Municipal Fund | Class A | $ | 1,000.00 | $ | 1,007.50 | $ | 1,020.67 | $ | 4.55 | $ | 4.58 | 0.90% | ||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,008.60 | $ | 1,021.93 | $ | 3.29 | $ | 3.31 | 0.65% | |||||||||||||||
Tax-Free Income Fund | Class A | $ | 1,000.00 | $ | 1,003.40 | $ | 1,021.37 | $ | 3.84 | $ | 3.87 | 0.76% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 999.70 | $ | 1,017.64 | $ | 7.56 | $ | 7.63 | 1.50% | |||||||||||||||
Class R | $ | 1,000.00 | $ | 1,001.10 | $ | 1,020.16 | $ | 5.04 | $ | 5.09 | 1.00% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 1,003.60 | $ | 1,022.69 | $ | 2.53 | $ | 2.55 | 0.50% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,004.70 | $ | 1,022.69 | $ | 2.53 | $ | 2.55 | 0.50% |
106 | Annual Report 2018 |
Shareholder Expense Examples (Unaudited) (concluded)
Beginning Account Value, May 1, 2018 | Actual Ending Account Value, October 31, 2018 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period*1 | Annualized Expense Ratio** | |||||||||||||||||||||
Ultra Short Municipal Income Fund | Class A | $ | 1,000.00 | $ | 1,005.90 | $ | 1,021.68 | $ | 3.54 | $ | 3.57 | 0.70% | ||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,007.10 | $ | 1,022.94 | $ | 2.28 | $ | 2.29 | 0.45% |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period multiplied by 184/365 (to reflect the one-half year period). |
** | The expense ratio presented represents a six-month, annualized ratio. |
1 | Represents the hypothetical 5% return before expenses. |
2018 Annual Report | 107 |
Supplemental Information (Unaudited)
Board of Trustees’ Consideration of Advisory and Sub-Advisory Agreements
At an in-person meeting of the Board of Trustees (the “Board” or the “Trustees”) of the Aberdeen Funds (the “Trust”) held on June 13, 2018, the Board, including a majority of the Trustees who are not considered to be “interested persons” of the Trust (the “Independent Trustees”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period the continuation of the Trust’s advisory agreement (the “Advisory Agreement”) with Aberdeen Asset Management Inc. (“AAMI”) and the applicable sub-advisory agreements (each a “Sub-Advisory Agreement,” and collectively with the Advisory Agreement, the “Agreements”) between: (i) AAMI and Aberdeen Asset Management Asia Limited (“AAMAL”) and (ii) AAMI and Aberdeen Asset Managers Limited (“AAML”) (each a “Sub-Adviser,” and collectively, the “Sub-Advisers”) for each of the following series of the Trust: Aberdeen Asia Bond Fund, Aberdeen Emerging Markets Debt Fund, Aberdeen Global Unconstrained Fixed Income Fund and Aberdeen Tax-Free Income Fund (each a “Fund,” and collectively the “Funds”). In addition, the Independent Trustees held a separate telephonic meeting on June 6, 2018 to review the materials provided and the relevant legal considerations (together with the in-person meeting held on June 13, 2018, the “Meetings”). AAMAL and AAML are affiliates of AAMI. AAMI and the Sub-Advisers are sometimes referred to collectively as the “Advisers.”
In connection with the Meetings, the Board reviewed a variety of information provided by the Advisers relating to the Funds, the Agreements and the Advisers, including comparative performance, fee and expense information and other information regarding the nature, extent and quality of services provided by the Advisers under their respective Agreements. The materials provided to the Board generally included, among other items: (i) information on the investment performance of the Funds and the performance of peer groups of funds and the Funds’ performance benchmarks; (ii) information on the Funds’ advisory fees and other expenses, including information comparing each Fund’s expenses to those of a peer group of funds and information about any applicable expense limitations and fee “breakpoints”; (iii) sales and redemption data with respect to each Fund; (iv) information about the profitability of the Agreements to the Advisers; (v) a report prepared by the Advisers in response to a request submitted by the Independent Trustees’ independent legal counsel on behalf of such Trustees; and (vi) a memorandum from the Independent Trustees’ independent legal counsel on the responsibilities of the Board in considering for approval the investment advisory and investment sub-advisory arrangements under the 1940 Act and Delaware law. The Board, including the Independent Trustees, also considered other matters such as: (i) the Advisers’ financial results and financial condition; (ii) each Fund’s investment objective and strategies; (iii) the Advisers’ investment personnel and operations; (iv) arrangements relating to the distribution of the Funds’ shares and the related costs; (v) the procedures employed to determine the value of the Funds’ assets; (vi) the allocation of the Funds’ brokerage, if any, including, if applicable, allocations to brokers affiliated with the Advisers and the use, if any, of “soft” commission dollars to pay Fund expenses and to pay for research and other similar services; (vii) the resources devoted to, and the record of compliance with, the Funds’ investment policies and restrictions, policies on personal securities transactions and other compliance policies; and (viii) possible conflicts of interest. The Board also considered the nature, extent and quality of the services provided to the Funds by AAMI’s affiliates. Throughout the process, the Trustees were afforded the opportunity to ask questions of and request additional materials from AAMI and the Sub-Advisers.
In addition to the materials requested by the Trustees in connection with their annual consideration of the continuation of the Agreements, the Trustees received materials in advance of each regular quarterly meeting of the Board that provide information relating to the services provided by the Advisers, including detailed information about the Funds’ investment performance. This information generally included, among other things, third-party performance rankings for various periods (including prior to the Advisers’ management of the Funds, to the extent applicable) comparing each Fund against its peer group, total return information for various periods, and details of sales and redemptions of Fund shares for the period. The Board also received periodic presentations from the portfolio management teams in connection with the performance of the Funds.
The Independent Trustees were advised by separate independent legal counsel throughout the process. The Independent Trustees also consulted in executive sessions with counsel to the Independent Trustees regarding consideration of the renewal of the Agreements. In considering whether to approve the continuation of the Agreements, the Board of Trustees, including the Independent Trustees, did not identify any single factor as determinative. Individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. Matters considered by the Trustees, including the Independent Trustees, in connection with their approval of the continuation of the Agreements included the factors listed below.
The nature, extent and quality of the services provided to the Funds under the Agreements. The Trustees considered the nature, extent and quality of the services provided by AAMI and the Sub-Advisers, as applicable, to the Funds and the resources dedicated to the Funds by AAMI and its affiliates. The Board considered, among other things, the Advisers’ investment experience. The Board also considered the background and experience of the Advisers’ senior management personnel and the qualifications, background and responsibilities of the portfolio managers that are primarily responsible for the day-to-day portfolio management services for the Funds. The Board also considered the allocation of responsibilities among the Advisers. The Trustees considered not only the advisory services provided by AAMI to the Funds, but also the administrative services provided by AAMI to the Funds under a separate administration agreement. AAMI’s role in coordinating the activities of the Trust’s other service providers was also considered. The Board also considered that it receives information on a regular basis from the Trust’s
108 | Annual Report 2018 |
Supplemental Information (Unaudited) (continued)
Chief Compliance Officer regarding the Advisers’ compliance policies and procedures. The Board also considered the Advisers’ risk management processes. The Board was also mindful of the Advisers’ focus on the monitoring of the performance of the Funds and in addressing performance matters. The Trustees also considered the benefits to shareholders of investing in a mutual fund that is part of a family of funds that offers shareholders the right to exchange shares of one type of fund for shares of another type of fund, and provides a variety of fund and shareholder services. The Board also took into account its knowledge of management and the quality of the performance of management’s duties through Board meetings, discussion and reports during the preceding year.
After reviewing these and related factors, the Board concluded that they were satisfied with the nature, extent and quality of the services provided and supported the renewal of the Agreements.
Investment performance of the Funds and the Advisers. The Trustees received information about the performance of the Funds over various time periods, including information that compared the performance of the Funds to the performance of peer groups of funds and each Fund’s performance benchmark. The Trustees also considered that certain of the Funds had changed their respective performance benchmarks to better reflect the respective Fund’s investment strategy. The Trustees also considered the performance of the Funds compared to the performance of comparable funds or accounts managed by AAMI and its affiliates to the extent available. In addition, the Trustees also reviewed data prepared by an independent third party that analyzed the performance of the Funds using a variety of performance metrics.
The Trustees also considered AAMI’s and the Sub-Advisers’ performance and reputation generally, the performance of the fund family generally, the historical responsiveness of AAMI to Trustee concerns about performance and the willingness of AAMI and the Sub-Advisers to take steps intended to improve performance. The Trustees also considered the performance of the Advisers since they commenced management of the Funds.
Based on these factors, the Board determined that the Advisers are appropriate investment advisers for the Funds.
The Board further noted that it will continue to monitor the Funds’ performance and any actions taken by AAMI and its affiliates relating to performance.
The costs of the services provided and profits realized by the Advisers and their affiliates from their relationships with the Funds. The Trustees considered the fees charged to the Funds for advisory services as well as the total expense levels of the Funds. This information included comparisons (provided by an independent third party) of each Fund’s net management fee and total expense level to those of its expense peer group and information about the advisory fees charged by AAMI to any separately managed accounts with a similar strategy. In comparing each Fund’s net management fee to that of comparable funds, the Board noted that such fee includes both advisory and administrative fees. In considering the fees charged to any comparable accounts, the Trustees considered, among other things, management’s discussion of the different objectives, policies or restrictions that may be involved in managing the different types of accounts. In evaluating the Funds’ advisory fees, the Trustees also took into account the demands, complexity and quality of the investment management of the Funds.
The Trustees also noted that the sub-advisory fees, as applicable, for the Funds would be paid by AAMI out of its advisory fee, not by the Funds. The Board also considered that AAMI had entered into expense limitation agreements with the Funds, pursuant to which AAMI agreed to waive a portion of its advisory fee and/or reimburse certain expenses as a means of limiting each Fund’s total annual operating expenses for a period of time.
The Trustees also considered the compensation directly or indirectly received by AAMI and its affiliates from their relationships with the Funds. The Trustees reviewed information provided by management as to the profitability of AAMI and its affiliates’ relationships with the Funds, such as the engagement of affiliates of AAMI to provide distribution and administrative services to the Funds. The Trustees also examined the profitability of AAMI and its affiliates on a Fund-by-Fund basis. The Trustees also considered information about the allocation of expenses used to calculate profitability. When reviewing profitability, the Trustees also considered information about court cases regarding adviser profitability, the performance of the Funds, the expense levels of the Funds, and whether AAMI had implemented breakpoints and expense limitations with respect to the Funds.
After reviewing these and related factors, including taking into account management’s discussion regarding Fund expenses, the Board concluded that the advisory fees, and as applicable, the sub-advisory fees, were fair and reasonable, and that the costs of these services generally and the related profitability of AAMI and its affiliates from their relationships with the Funds were reasonable and supported the renewal of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of scale in the provision of services by AAMI and the Sub-Advisers and whether those economies would be shared with the Funds through breakpoints in the investment advisory fees or other means, such as expense waivers or limitations. The Trustees noted that each of the Funds was subject to an expense limitation and considered that certain Funds
2018 Annual Report | 109 |
Supplemental Information (Unaudited) (concluded)
were subject to breakpoints. The Board noted management’s discussion of the Funds’ advisory fee structure. The Trustees also took note of the costs of the services provided and the profitability to AAMI and its affiliates from their relationships with the Funds, as discussed above. The Board also considered the potential effect of each Fund’s growth and size on fees, noting that if a Fund’s assets increase over time, the Fund may realize other economies of scale if assets increase proportionally more than certain expenses.
After reviewing these and related factors, the Board concluded that the advisory fees, and as applicable, sub-advisory fees were reasonable and supported the renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited to the following:
• | the effect of any market and economic volatility on the performance, asset levels and expense ratios of the Funds. |
• | whether the Funds have operated in accordance with their investment objectives and the Funds’ record of compliance with their investment restrictions, and the compliance programs of the Trust and AAMI. The Trustees also considered the compliance-related resources AAMI and its affiliates were providing to the Funds. |
• | the nature, quality, cost and extent of administrative services performed by AAMI under the Advisory Agreement and under a separate agreement covering administrative services. |
• | so-called “fallout benefits” to AAMI, such as the benefits of research made available to AAMI by reason of brokerage commissions generated by the Funds’ securities transactions or reputational and other indirect benefits. The Trustees considered any possible conflicts of interest associated with these fallout and other benefits, and the reporting, disclosure and other processes in place to disclose and monitor such possible conflicts of interest. |
* * *
Based on their evaluation of all factors that they deemed to be material, including those factors described above, and assisted by the advice of independent counsel, the Trustees, including the Independent Trustees, concluded that renewal of the Agreements would be in the best interest of each of the Funds and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Agreements for an additional one-year period.
110 | Annual Report 2018 |
Management of the Funds (Unaudited)
As of October 31, 2018
Board of Trustees and Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are not interested persons (as defined in the 1940 Act) of the trust (“Independent Trustees”) | ||||||||
P. Gerald Malone**** Year of Birth: 1950 | Trustee since December 2007 Chairman of the Board | Mr. Malone is, by profession, a solicitor of over 40 years standing. As a member of the UK House of Commons, he served as a Minister of State in the United Kingdom Government. Mr. Malone currently serves as an independent director of Bionik Laboratories Corp., a US healthcare company, specializing in stroke rehabilitation using robotic devices. He is Chairman of the Board of Trustees of Aberdeen Funds, Chairman of the Board of Directors of Aberdeen Global Income Fund, Inc., Chairman of the Board of Directors of Aberdeen Asia-Pacific Income Fund, Inc. Chairman of the Board of Directors of Aberdeen Global Dynamic Dividend Fund, Chairman of the Board of Directors of Aberdeen Total Dynamic Dividend Fund, Chairman of the Board of Directors of Aberdeen Global Premier Properties Fund, Chairman of the Board of Directors of Aberdeen Income Credit Strategies Fund and a Director of Aberdeen Australia Equity Fund, Inc. He previously served as Independent Chairman of UK companies, Crescent OTC Ltd (pharmaceutical services) until February 2018; and fluidOil Ltd. (oil services) until June 2018; U.S. company Rejuvenan llc (wellbeing services) until September 2017 and as chairman of UK company, Ultrasis plc (healthcare software services company) until October 2014. | 32 | None. | ||||
Neville J. Miles**** Year of Birth: 1946 | Trustee since December 2011 | Mr. Miles is, and has been for over ten years, Chairman of Ballyshaw Pty. Ltd. (share trading, real estate development and investment). He is Chairman of the Board of Directors of Aberdeen Australia Equity Fund, Inc. He also is a non-executive director of a number of Australian and overseas companies. | 28 | None. | ||||
Rahn K. Porter**** Year of Birth: 1954 | Trustee since September 2016 | Mr. Porter has been the Chief Financial Officer of The Colorado Health Foundation since 2013. Previously, he was the Interim Chief Executive Officer of the Colorado Health Foundation from 2014 to 2015 and was Senior Vice President and Treasurer, Qwest Communications International Inc. (telecommunications) from 2008 to 2011. | 27 | Director, CenturyLink Investment Management Company, since 2006; Director, BlackRidge Financial Inc., since March, 2005. |
2018 Annual Report | 111 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Steven N. Rappaport**** Year of Birth: 1948 | Trustee since September 2016 | Mr. Rappaport has been a Partner of Lehigh Court, LLC (private investment firm) and RZ Capital LLC (private investment firm) since 2004. | 26 | Director of iCAD, Inc., since 2006; Director of Credit Suisse Funds (9) since 1999; Director of Credit Suisse Asset Management Income Fund, Inc. since 2005 and Director of Credit Suisse High Yield Bond Fund, Inc. since 2005. | ||||
Peter D. Sacks**** Year of Birth: 1945 | Trustee since December 2007 | Mr. Sacks was a Director and Founding Partner of Toron AMI International Asset Management (investment management) from 1988 to 2015. He is currently a Director of Aberdeen Asia-Pacific Income Fund Inc., Aberdeen Global Income Fund Inc., Aberdeen Australia Equity Fund Inc. and Tricon Capital Group Inc. | 28 | None. | ||||
Warren C. Smith**** Year of Birth: 1955 | Trustee since December 2007 | Mr. Smith has been a founding partner of MRB Partners Inc. (independent investment research and consultancy firm) since 2010. He has been a Director of Aberdeen Asia-Pacific Income Investment Company Limited (Canadian investment fund) since 1993. Mr. Smith was a Managing Editor with The Bank Credit Analyst Research Group (independent publishers of financial market research and publications, including The Bank Credit Analyst) from 1982 to 2009. | 26 | None. |
112 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are interested persons (as defined in the 1940 Act) of the trust (“Interested Trustees”) | ||||||||
Martin Gilbert****† Year of Birth: 1955 | Trustee since December 2007 | Martin is the Co-Chief Executive of Standard Life Aberdeen PLC, the company formed as a result of the merger between Aberdeen Asset Management PLC and Standard Life plc in August 2017. Prior to this, Martin was a co-founder and the Chief Executive of Aberdeen Asset Management, which was established as a dedicated asset manager in 1983. | 32 | Chairman, Prudential Regulation Authority’s Practitioner Panel, Director, Institute of International Finance, Non-Executive Director, Glencore plc |
* | Each Trustee holds office for an indefinite term until his successor is elected and qualified. |
** | The Aberdeen Fund Complex consists of the Trust, which currently consists of 25 portfolios, Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Global Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds, which currently consists of 4 portfolios, and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios. |
*** | Directorships held in (1) any other investment companies registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange Act. |
**** | Each Trustee may be contacted by writing to the Trustee c/o Aberdeen Asset Management Inc., 1735 Market Street, 32nd Floor, Philadelphia, Pennsylvania 19103, Attn: Alan Goodson. |
† | Mr. Gilbert is considered to be an “interested person” of the Trust as defined in the 1940 Act because of his affiliation with the Adviser. |
2018 Annual Report | 113 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Bev Hendry** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1953 | President, Chief Executive Officer and Principal Executive Officer (Since September 2014) | Currently, Chairman- Americas for Standard Life Aberdeen plc (2018-present). Mr. Hendry was Chief Executive Officer–Americas for Aberdeen Asset Management PLC (2014-2018) and Chief Operating Officer for Hansberger Global Investors (2008-2014). | ||
Jeffrey Cotton** Aberdeen Asset Managers Limited 6 St Andrew Square Edinburgh EH2 2AH Year of Birth: 1977 | Vice President and Chief Compliance Officer (Since March 2011) | Currently, Interim Global Head of Conduct & Compliance for Standard Life Aberdeen plc. Mr. Cotton is also Vice President of Aberdeen Fund Distributors LLC. Mr. Cotton joined Aberdeen in 2010. | ||
Joseph Andolina** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President – Compliance (Since March 2017) | Currently, Head of Conduct & Compliance–Americas/Deputy Chief Risk Officer for Aberdeen Asset Management Inc. Prior to joining the Compliance Department, he was a member of Aberdeen’s Legal Department, where he served as U.S. Counsel and worked primarily on matters relating to Aberdeen’s registered funds. | ||
Andrea Melia** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1969 | Treasurer, Chief Financial Officer, and Principal Accounting Officer (Since September 2009) | Currently, Vice President and Head of Fund Operations, Traditional Assets–Americas for Aberdeen Asset Management Inc. (since 2009). | ||
Megan Kennedy** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Secretary and Vice President (Since September 2009) | Currently, Head of Product Management for Aberdeen Asset Management Inc. Ms. Kennedy joined Aberdeen Asset Management Inc. in 2005 as a Senior Fund Administrator. | ||
Lucia Sitar** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1971 | Vice President (Since December 2008) | Currently, Vice President and Managing U.S. Counsel for Aberdeen Asset Management Inc. Ms. Sitar joined Aberdeen Asset Management Inc. in July 2007. | ||
Alan Goodson** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Vice President (Since March 2009) | Currently, Director, Vice President and Head of Product–Americas for Aberdeen Asset Management Inc., overseeing Product Management and Product Development for Aberdeen’s registered and unregistered investment companies in the U.S. and Canada. Mr. Goodson is Director and Vice President of Aberdeen Asset Management Inc. and joined Aberdeen in 2000. | ||
Adam McCabe** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1979 | Vice President (Since March 2010) | Currently, Head of Asian Fixed Income. Mr. McCabe joined Aberdeen Asset Management via the acquisition of certain asset management businesses from Credit Suisse in 2009. |
114 | Annual Report 2018 |
Management of the Funds (Unaudited) (concluded)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Jennifer Nichols** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President (Since December 2007) | Currently, Head of Legal–Americas for Aberdeen Asset Management Inc. Director and Vice President for Aberdeen Asset Management Inc. (since October 2006). | ||
Hugh Young** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1958 | Vice President (Since June 2011) | Currently, Managing Director of Aberdeen Standard Investments (Asia) Limited (since 1991) and member of the Executive Management Committee and Director of Standard Life Aberdeen plc (since 1991 and 2011, respectively). Mr. Young joined Aberdeen in 1991. | ||
Ben Moser** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1979 | Vice President (Since September 2018) | Currently, Head of Investor Services–US. Mr. Moser joined Aberdeen Asset Management in July 2008. | ||
Brian O’Neill** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1968 | Assistant Treasurer (Since September 2008) | Currently, Senior Fund Administration Manager–U.S. for Aberdeen Asset Management Inc. Mr. O’Neill joined Aberdeen Asset Management Inc. in 2008. | ||
Eric Olsen** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1970 | Assistant Treasurer (Since December 2013) | Currently, Deputy Head of Fund Administration–U.S. for Aberdeen Asset Management Inc. Mr. Olsen joined Aberdeen Asset Management Inc. in August 2013. | ||
Andrew Kim** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1983 | Assistant Secretary (Since March 2017) | Currently, Senior Product Manager. Mr. Kim joined Aberdeen Asset Management Inc. in August 2013. | ||
Stephen Varga** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1985 | Assistant Secretary (Since March 2017) | Currently, Product Manager. Mr. Varga joined Aberdeen Asset Management Inc. in 2011. |
* | Each officer holds office for an indefinite term at the pleasure of the Board of Trustees and until his or her successor is elected and qualified. |
** | Mr. Hendry, Ms. Melia, Ms. Kennedy, Mr. Goodson, Ms. Nichols, Mr. Cotton, Mr. McCabe, Mr. Young, Ms. Sitar, Mr. Andolina, Mr. Moser, Mr. Olsen, Mr. O’Neill, Mr. Kim and Mr. Varga hold officer position(s) in one or more of the following: Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Global Income Fund, Inc., Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds (consisting of 4 portfolios) and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios, each of which may also be deemed to be a part of the same “Fund Complex” as the Trust. |
2018 Annual Report | 115 |
Management Information
Trustees
P. Gerald Malone, Chairman
Martin J. Gilbert
Neville J. Miles
Rahn K. Porter
Steven N. Rappaport
Peter D. Sacks
Warren C. Smith
Officers
Bev Hendry, President and Chief Executive Officer
Jeffrey Cotton, Chief Compliance Officer and Vice President
Joseph Andolina, Vice President – Compliance
Andrea Melia, Treasurer and Chief Financial Officer
Megan Kennedy, Secretary and Vice President
Lucia Sitar, Vice President
Alan Goodson, Vice President
Adam McCabe, Vice President
Ben Moser, Vice President
Jennifer Nichols, Vice President
Hugh Young, Vice President
Eric Olsen, Assistant Treasurer
Brian O’Neill, Assistant Treasurer
Andrew Kim, Assistant Secretary
Stephen Varga, Assistant Secretary
Investment Manager
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Fund Administrator
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Transfer Agent
DST Asset Manager Solutions, Inc.
333 West 11th Street
Kansas City, MO 64105
Distributor
Aberdeen Fund Distributors LLC
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Sub-Administrator, Custodian & Fund Accountant
State Street Bank and Trust Company
1 Heritage Drive, 3rd Floor
North Quincy, MA 02171
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Fund Counsel
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Aberdeen Asset Management Inc. 1735 Market Street, 32nd Floor Philadelphia, PA 19103 aberdeen-asset.us |
AOE-0143-AR
Aberdeen Funds
Asset Allocations Series
Annual Report
October 31, 2018
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Aberdeen Diversified Income Fund
Aberdeen Dynamic Allocation Fund
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Investors should carefully consider a fund’s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a prospectus, or download a prospectus at www.aberdeen-asset.us. Please read it carefully before investing any money.
Investing in mutual funds involves risk, including possible loss of principal.
Aberdeen Funds is distributed by Aberdeen Fund Distributors LLC, Member FINRA, 1735 Market Street, 32nd Floor, Philadelphia, PA 19103.
Aberdeen Asset Management Inc. (AAMI) has been registered as an investment adviser under the Investment Advisers Act of 1940 since August 23, 1995.
Statement Regarding Availability of Quarterly Portfolio Schedule.
The complete schedule of portfolio holdings for each fund of Aberdeen Funds (each, a “Fund” and collectively, the “Funds”) is included in the Funds’ semi-annual and annual reports to shareholders. Aberdeen Funds also files complete schedules of portfolio holdings for each Fund with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q filings are available on the Commission’s website at http://www.sec.gov. The Funds’ Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330; and the Funds make the information on Form N-Q available to shareholders on www.aberdeen-asset.us or upon request without charge.
Statement Regarding Availability of Proxy Voting Record.
Information regarding the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-866-667-9231. The information is also included in the Funds’ Statement of Additional Information, which is available on the Funds’ website at www.aberdeen-asset.us and on the Commission’s website at www.sec.gov.
Information relating to how each Fund voted proxies relating to portfolio securities held during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling 1-866-667-9231; and (ii) on the Commission’s website at www.sec.gov.
Global financial markets weathered numerous bouts of significant volatility during the 12-month period ended October 31, 2018, capped off by a major downturn in October 2018. Global stock markets in aggregate gained ground for the first few months of the period, as generally upbeat corporate earnings reports, tax reform in the U.S., and relatively steady economic growth buoyed investors’ confidence. However, market sentiment soon turned negative amid concerns that rising inflation could lead to more aggressive global central bank monetary policy, as well as fears of a possible global trade war spurred by tensions between the U.S and China. Global equities recovered during the third quarter of 2018, led by the U.S., with the broader-market Standard and Poor’s (S&P) 500 Index1 climbing 7.7% – its strongest quarterly performance since 2013. Nonetheless, in an apparent case of “financial whiplash,” global markets declined sharply towards the end of the reporting period in October. Investors were rattled by concerns ranging from lower corporate earnings estimates to the impact of continued monetary policy normalization. There also was a spike in U.S. Treasury yields during the month, triggered by expectations of further U.S. Federal Reserve (Fed) interest-rate increases. Shares of technology companies tumbled as higher interest rates led to investors’ apprehension about the rising valuations in the sector.
There was divergent performance among the regional stock markets during the 12-month reporting period. The Morgan Stanley Capital International (MSCI) World Index,2 a global equity market benchmark, posted a modest gain of 1.7% for the period, despite the vast majority of its constituents recording losses for the period. The U.S. was the lone major developed market to garner a positive return, while European stocks declined and were the weakest performers. Global emerging equity markets, as represented by the MSCI Emerging Markets Index,3 fell 12.2% over the reporting period, hampered by the strengthening U.S. dollar, which weighed on vulnerable economies with substantial foreign debt. The escalating trade tensions between the U.S. and China had a negative impact on Asia-Pacific stock markets, which declined 11.8% for the period, as measured by the MSCI All Country (AC) Asia Pacific ex Japan Index.4
While shares of U.S. companies could not avoid the sell-off in the global financial markets in October 2018, they finished the 12-month reporting period in positive territory. The U.S. market was bolstered for most of the period by generally positive economic data and corporate earnings reports, as well as the tax reform legislation that was enacted in late 2017. Many large-cap companies responded to the reduction of the top U.S. corporate tax rate from 35% to 21% by increasing their dividend payments and accelerating share repurchases. Late in the period, however, as investors worried that rising wage pressure and inflation could force the Fed to tighten monetary policy more aggressively than previously forecast. U.S. large-cap stocks, as represented by the S&P 500 Index, gained 7.4% during the reporting period, substantially outperforming the corresponding 2.8% and 1.9% returns of their mid- and small-cap counterparts, as measured by the Russell Midcap5 and Russell 20006 indices, respectively.
Shares of large-cap companies in the Asia-Pacific region fell sharply over the reporting period, hampered in part by investors’ concerns about a possible U.S.-China trade war. In June 2018, the administration of U.S. President Donald Trump assessed tariffs on US$50 billion in Chinese imports. Three months later, the U.S. placed an additional US$200 billion of levies on Chinese imports. China responded without escalating rhetoric while allowing its currency, the renminbi, to depreciate further against the U.S. dollar. Additionally, the weak investor sentiment in mainland China was compounded by fears over the country’s moderating economic growth.
One of the key reasons for the weakness in emerging-market equities was the liquidity squeeze on the U.S. dollar, stemming from the U.S. tax reforms that encouraged U.S. companies to repatriate7 their cash, as well as the Fed’s hawkish monetary policy stance. Turkey bore the brunt of the downturn amid worries about the central bank’s unwillingness to adopt orthodox economic policies and the government’s deteriorating relations with the U.S. In Mexico, Andres Lopez Obrador, the left-wing candidate, won Mexico’s presidential election in July 2018. While this outcome was expected, the market has become increasingly concerned with his plans to unwind some of the reforms that had occurred under his predecessor, Pena Nieto. Japan’s longest economic growth streak in 28 years stalled in the first quarter of 2018, but the economy subsequently resumed its momentum. An upgrade of second-quarter 2018 gross domestic product (GDP) data was attributable to an increase in capital investments. This was partly the result of the tight Japanese labor market, which saw the unemployment rate reach its lowest since the 1990s, boosting investments in labor-saving technologies.
Regarding the global fixed-income markets during the reporting period, capital outflows from emerging markets quickened due to the Fed’s ongoing rate-hike cycle and rising U.S. Treasury yields. As monetary policy normalization accelerated in the West, the easing cycle also came to an end in most parts of Asia. Indonesia’s central bank led the charge, raising its benchmark interest rate five times over the reporting period in a bid to stem the falling Indonesian rupiah as most emerging-market currencies succumbed to broad U.S.-dollar strength. Central banks in the Philippines and India also increased interest rates, but more in response to rising inflation, given the threat posed by higher global oil prices after U.S. President Trump reimposed economic sanctions on Iran. Yields on U.S. Treasuries rose, with two-, five- and ten year yields increasing by 127, 97 and 77 basis points (bps), respectively, over the reporting period, and this pressured higher-quality, lower-yielding and longer duration8 credit. U.S. and European high-yield markets saw marginal gains over the reporting period. Corporate earnings remained supported by generally positive economic growth, while default rates remained low. Supply was also lower than that in 2017 as companies, faced with rising borrowing costs, responded by reducing new issuance. However, investor sentiment in the U.S. deteriorated towards the end of the reporting period as trade tensions with China worsened and businesses began to forecast more conservative revenues and profitability in the ensuing quarters.
Global real estate equity markets faced a challenging environment during the reporting period. While the Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT)
2018 Annual Report | 1 |
Market Review (concluded)
Global Real Estate Index9 ended the period with a modest negative return, there were considerable variations in country-level returns. The performance of real estate markets in developed countries was modestly positive, while emerging markets generally posted negative returns for the reporting period.
Outlook
As we near the end of 2018, global financial markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including Italy’s fiscal problems and political uncertainty in Europe caused by negotiations surrounding the UK’s exit from the EU (“Brexit”), which have yet to provide clarity on what the outcome will be for the UK or Europe.
The UK remains a member of the EU until the legally established departure date of March 29, 2019 and, until such date, all existing EU-derived laws and regulations continue to apply in the UK. Those laws may continue to apply for a transitional period, depending on whether a deal is struck and, if so, what that deal is. In any event, the UK’s on-shoring of EU legislation currently envisages no policy changes to EU law. However, the EU has not yet provided any material cushion from the effects of Brexit for financial services as a matter of EU law. Whether or not a Fund invests in securities of issuers located in Europe (whether the EU, Eurozone or UK) or with significant exposure to European, EU, Eurozone or UK issuers or countries, the unavoidable uncertainties and events related to Brexit could negatively affect the value and liquidity of a Fund’s investments, increase taxes and costs of business and cause volatility in currency exchange rates and interest rates. Brexit could adversely affect the performance of contracts in existence at the date of Brexit and European, UK or worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions, regulatory agencies and financial markets. Brexit could also lead to legal uncertainty and politically divergent national laws and regulations as a new relationship between the UK and EU is defined and the UK determines which EU laws to replace or replicate. Any of these effects of Brexit, and others that cannot be anticipated, could adversely affect a Fund’s business, results of operations and financial condition. In addition, the risk that Standard Life Aberdeen plc, the parent of the companies that provide investment advisory and sub-advisory services to the Funds and which is headquartered in the UK, fails to adequately prepare for Brexit could have significant customer, reputation and capital impacts for Standard Life Aberdeen plc and its subsidiaries, including those providing services to the Funds; however, we have detailed contingency planning in place to seek to manage the consequences of Brexit on the Funds and to avoid any disruption on the Funds and to the services we provide. Given the fluidity and complexity of the situation, however, we cannot assure that the Funds will not be adversely impacted despite our preparations.
We remain cautious on the growing divergence across global markets, with strength in U.S. macroeconomic data contrasting with slowing growth across other economies and markets. With the U.S. economy gradually moving closer towards full capacity, the Federal Reserve maintains its monetary policy tightening stance and is expected to continue to raise interest rates into 2019. In Asia, China continues to balance further trade-related responses towards the U.S. with managing and maintaining its closely monitored economic growth rates.
Aberdeen Standard Investments
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed-market countries. |
3 | The MSCI Emerging Markets Index tracks the performance of large- and mid-cap stocks across 24 emerging-market countries. |
4 | The MSCI AC Asia Pacific ex Japan Index tracks the performance of large and mid-cap representation across two of three developed-market countries (excluding Japan) and nine emerging-market countries in Asia. |
5 | The Russell Midcap Index is an unmanaged index considered representative of U.S. mid-cap stocks. |
6 | The Russell 2000 Index is an unmanaged index considered representative of U.S. small-cap stocks. |
7 | Repatriation refers to a corporation’s conversion of any offshore capital back to the currency of the country in which the corporation is based. |
8 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
9 | The FTSE EPRA/NAREIT Index is an unmanaged index considered representative of real estate companies and REITs outside the U.S. |
2 | Annual Report 2018 |
Aberdeen Diversified Alternatives Fund (Unaudited)
The Aberdeen Diversified Alternatives Fund (Institutional Class shares net of fees) returned -0.22% for the 12-month period ended October 31, 2018, versus the 0.67% return of its benchmark, the Financial Times Stock Exchange (FTSE) 3-Month Treasury Bill Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Alternative Multi-Strategy Funds (comprising 72 funds), as measured by Lipper, Inc., was -1.90%.
The stability and upward trajectory of global financial markets through the 2017 calendar year seems like a distant memory after the first 10 months of 2018. The markets ended 2017 and started 2018 with a strong move higher, buoyed by investor confidence in the wake of U.S. corporate tax cuts and rising expectations for global economic growth. However, investor sentiment shifted quickly in the beginning of February, as the markets became concerned that rising wage pressure and inflation could force the U.S. Federal Reserve (Fed) to tighten monetary policy more aggressively than previously forecast. Market volatility remained at elevated levels in March, amid a backdrop of both political and macroeconomic events. The U.S. equity market calmed and was the star performer over the spring and summer of 2018, led by large-cap and technology company stocks. However, October brought the return of volatility to risk assets, driven by higher U.S. interest rates and strong economic data which pointed to further interest-rate hikes in the U.S. In addition, concerns about global growth peaking and trade tariffs caused investor sentiment towards equities to turn negative. October marked the worst-monthly performances for the Nasdaq Composite,1 Standard and Poor’s (S&P) 500,2 Morgan Stanley Capital International (MSCI) Emerging Markets3 and Euro Stoxx 504 indices since November 2008, September 2011, August 2015, and May 2012, respectively. U.S. interest rates trended higher over the month, despite briefly falling in the second half of October as investors moved into safe haven assets to avoid market volatility. The Brent crude oil price, which had rallied for most of the year, experienced a correction dropping more than 10% owing to mounting concerns that U.S.-China trade tariffs could stifle global growth and curb oil demand.
The Fund’s performance for the 12-month period ended October 31, 2018 lagged relative to the broader U.S. equity market, as measured by the S&P 500 Index. However, the Fund outperformed the broad U.S. fixed-income market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index,5 for the reporting period. The top contributor to Fund performance was the Eaton Vance Floating Rate Fund, as U.S. interest rates rose, helping to increase its yield, and as spreads generally tightened for most of the period. The Fund’s position in BlackRock Global Long/Short Equity Fund also had a positive impact on performance. While the holding underperformed the U.S. equity market for the period, it was a notable outperformer in the more difficult months such as February and October 2018. Additionally, the Fund’s smart beta6 basket bolstered performance, led by the minimum volatility and momentum factors.
In contrast, Boston Partners Long/Short Research Fund was the biggest detractor from Fund performance for the reporting period. The holding struggled for most of the period as value underperformed and its short book hampered performance. The other detractors from Fund performance for the period were iShares MSCI Eurozone ETF and Nuveen Preferred Securities Fund.
At the end of the reporting period, the Fund was invested in line with its alternatives orientation and lower-volatility objective. The key trend driving the opportunity set is the tightening of monetary policy by central banks in response to gradually building inflationary pressures. Realized volatility has started to increase and U.S. interest rates have risen significantly. We maintain our belief that the U.S. is leading the current economic cycle and that moving forward, other developed economies will follow a similar path in terms of rising inflation, rising rates, and less liquidity provision by their central banks. However, we think that there are some notable risks to this outlook. The U.S. yield curve is flattening, indicating that investors do not see a need for much further tightening by the Fed in order to keep inflation stable, and we are cognizant that outside of the U.S., there is little evidence thus far of inflation rising. In our view, this suggests that accommodative monetary policies in Europe and Asia could remain in place for longer than we are currently assuming. Furthermore, we see indications that economic growth in Europe is slowing, posing additional risks that the European Central Bank and other European central banks may decide to extend their current extraordinarily easy monetary policy stance. Over the next few months we will closely monitor activity and inflation trends outside of the U.S. to determine whether we are, indeed, at the beginning of a larger global reflation trend. Over the past few months, the key developments pertaining to our outlook have been the further escalation of trade tensions between the U.S. and China; growing divergence between growth in the U.S. and the rest of the world; continued slowing of economic activity in Europe; and signs that stresses in emerging markets may be starting to weigh on risk assets in developed markets.
1 | The Nasdaq Composite Index is a broad-based, capitalization-weighted index of all Nasdaq domestic and international based common type stocks listed on The Nasdaq Stock Market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. |
3 | The MSCI Emerging Markets Index tracks the performance of large- and mid-cap stocks across 24 emerging markets countries. |
4 | The Euro Stoxx 50 Index is a market capitalization-weighted stock index of 50 large, blue-chip European companies operating within Eurozone member nations. |
5 | The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the performance of the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. Companies whose bonds are rated as “investment grade” have a lower chance of defaulting on their debt than those rated as “non-investment grade.” Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB- or above are known as investment-grade bonds. S&P Global Ratings’ credit ratings communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The investment-grade category is a rating from AAA to BBB- |
6 | Smart beta seeks to deliver a better risk and return trade-off than conventional market cap-weighted indices by using alternative weighting methodologies based on measures such as volatility or dividends. Beta is a measure of the volatility of a portfolio in comparison to a benchmark index. |
2018 Annual Report | 3 |
Aberdeen Diversified Alternatives Fund (Unaudited) (continued)
Portfolio Management
Aberdeen Alternatives and Multi-Asset Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
The Fund is subject to different levels and combinations of risk, based on its actual allocation among the various asset classes and underlying funds. The Fund will be affected by stock and bond market risks, among others.
The Fund invests a significant proportion of its assets in non-traditional asset classes, which may involve riskier types of securities or investments than those offered by other asset classes.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Please read the prospectus for more detailed information regarding these and other risks.
4 | Annual Report 2018 |
Aberdeen Diversified Alternatives Fund (Unaudited) (continued)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||||
Class A | w/o SC | -0.63% | 1.42% | 5.52% | ||||||||||
w/SC2 | -6.35% | 0.22% | 4.89% | |||||||||||
Class C | w/o SC | -1.25% | 0.76% | 4.79% | ||||||||||
w/SC3 | -2.24% | 0.76% | 4.79% | |||||||||||
Class R4 | w/o SC | -0.94% | 1.12% | 5.20% | ||||||||||
Institutional Service Class4,5 | w/o SC | -0.28% | 1.57% | 5.60% | ||||||||||
Institutional Class4 | w/o SC | -0.22% | 1.77% | 5.84% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund changed its investment objective and strategy effective September 24, 2012. Performance information for periods prior to September 24, 2012 does not reflect the current investment strategy. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the commencement of operations of the Institutional Service Class (December 29, 2016) are based on the performance of the Fund’s Class A shares. These returns have not been adjusted to reflect the expenses applicable to the Institutional Service Class. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Service Class shares would only differ to the extent of the differences in expenses of the two classes. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen Diversified Alternatives Fund, the Financial Times Stock Exchange (FTSE) 3-Month Treasury Bill Index, the HFRX Global Hedge Fund Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The FTSE 3-Month Treasury Bill Index consists of the last three-month Treasury bill issues and measures monthly returns equivalents of yield averages that are not marked to market.
The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Performance returns reflect fee waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 5 |
Aberdeen Diversified Alternatives Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Mutual Funds | 81.5% | |||
Exchange-Traded Funds | 12.1% | |||
Short-Term Investment | 6.5% | |||
Liabilities in Excess of Other Assets | (0.1)% | |||
100.0% |
Top Industries | ||||
Alternative Investment | 53.4% | |||
Fixed Income Funds | 32.2% | |||
Equity Funds | 8.0% | |||
Other | 6.4% | |||
100.0% |
Top Holdings* | ||||
Eaton Vance Floating-Rate Fund, Class I | 20.0% | |||
Arbitrage Event Driven Fund, Institutional Class | 13.9% | |||
Gotham Neutral Fund, Institutional Class | 12.0% | |||
Boston Partners Long/Short Research Fund, Institutional Class | 10.7% | |||
Nuveen Preferred Securities Fund, Institutional Class | 8.2% | |||
BlackRock Global Long/Short Equity Fund, Institutional Class | 7.8% | |||
Otter Creek Long/Short Opportunity Fund, Institutional Class | 4.9% | |||
iShares TIPS Bond ETF | 4.1% | |||
AQR Managed Futures Strategy Fund, Class I | 4.0% | |||
iShares Edge MSCI USA Momentum Factor ETF | 1.9% | |||
Other | 12.5% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
6 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Diversified Alternatives Fund
Shares or Principal Amount | Value | |||||||
MUTUAL FUNDS (81.5%) | ||||||||
Alternative Investment (53.4%) | ||||||||
AQR Managed Futures Strategy Fund, Class I (a) | 145,382 | $ | 1,267,732 | |||||
Arbitrage Event Driven Fund, Institutional Class | 461,060 | 4,361,624 | ||||||
BlackRock Global Long/Short Equity Fund, Institutional Class (a) | 200,701 | 2,464,604 | ||||||
Boston Partners Long/Short Research Fund, Institutional Class (a) | 209,969 | 3,367,900 | ||||||
Gotham Neutral Fund, Institutional Class (a) | 367,774 | 3,784,401 | ||||||
Otter Creek Long/Short Opportunity Fund, Institutional Class (a) | 132,667 | 1,534,959 | ||||||
16,781,220 | ||||||||
Fixed Income Funds (28.1%) | ||||||||
Eaton Vance Floating-Rate Fund, Class I | 693,938 | 6,287,074 | ||||||
Nuveen Preferred Securities Fund, Institutional Class | 156,022 | 2,563,449 | ||||||
8,850,523 | ||||||||
Total Mutual Funds | 25,631,743 | |||||||
EXCHANGE-TRADED FUNDS (12.1%) | ||||||||
Equity Funds (8.0%) | ||||||||
iShares Edge MSCI Min Vol USA ETF | 6,195 | 339,052 | ||||||
iShares Edge MSCI USA Momentum Factor ETF | 5,594 | 600,068 | ||||||
iShares Edge MSCI USA Quality Factor ETF | 2,884 | 240,901 | ||||||
iShares Edge MSCI USA Size Factor ETF | 2,122 | 175,797 | ||||||
iShares Edge MSCI USA Value Factor ETF | 4,916 | 406,357 | ||||||
iShares MSCI Eurozone ETF | 6,478 | 242,083 | ||||||
iShares Nasdaq Biotechnology ETF | 2,789 | 290,251 | ||||||
X-trackers MSCI Japan Hedged Equity ETF | 5,993 | 242,117 | ||||||
2,536,626 | ||||||||
Fixed Income Fund (4.1%) | ||||||||
iShares TIPS Bond ETF | 11,797 | 1,283,986 | ||||||
Total Exchange-Traded Funds | 3,820,612 | |||||||
SHORT-TERM INVESTMENT (6.5%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (b) | 2,046,514 | 2,046,514 | ||||||
Total Short-Term Investment | 2,046,514 | |||||||
Total Investments (Cost $31,376,251) (c)—100.1% | 31,498,869 | |||||||
Liabilities in Excess of Other Assets—(0.1)% | (46,183 | ) | ||||||
Net Assets—100.0% |
| $ | 31,452,686 |
(a) | Non-income producing security. |
(b) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(c) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ETF | Exchange-Traded Fund |
TIPS | Treasury Inflation Protected Securities |
See accompanying Notes to Financial Statements.
2018 Annual Report | 7 |
Aberdeen Diversified Income Fund (Unaudited)
The Aberdeen Diversified Income Fund (Institutional Class shares net of fees) returned -2.46% for the 12-month period ended October 31, 2018, versus the -2.05% return of its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Flexible Portfolio Funds (comprising 252 funds), as measured by Lipper, Inc., was -1.18%.
Political events dominated the global financial markets over the reporting period. The U.S. Congress enacted tax reform legislation in late December 2017. The sweeping changes increased the global competitiveness of U.S. corporations and removed incentives for offshore cash and intellectual property. The reduction of corporate tax rates increased the after-tax earnings of many U.S. companies and provided generous incentives for capital investment, which in our view should eventually improve productivity. Equity markets rallied during the autumn of 2017 in anticipation of the implementation of tax reform. However, investors’ enthusiasm was tempered towards the end of January 2018, when fears of a tariff war gripped the market. February and March were marked by domestic risk amid concerns regarding a U.S. government shutdown and negotiations on budget appropriations, which eventually passed on March 23, 2018. Rising U.S. interest rates helped the U.S. dollar appreciate which disadvantaged foreign assets including European and emerging market equities. Additionally, trade conflicts escalated ahead of the U.S. midterm Congressional elections, which were held in early November 2018, hampering investor sentiment for foreign assets. A spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations.
The primary detractors from Fund performance for the reporting period included positions in emerging-market equities and debt, as well as European equities. Conversely, the Fund’s holdings in floating-rate securities, large-cap U.S. equities and low-duration1 investment grade2 U.S. bonds bolstered performance.
During the reporting period, we reduced the Fund’s fixed-income exposures, including preferred securities and international bonds. We used the proceeds of these sales to increase allocations to U.S. equities. We also increased exposure to more value-oriented equity sectors, including emerging-market high-dividend equities, and Europe, Australasia and Far East (EAFE) value style equity.
As of the end of the reporting period, the Fund’s fixed-income allocations were positioned in anticipation of higher U.S. interest rates. The fixed-income exposure comprised overweight allocations to a very short-duration floating-rate bank notes fund and preferred securities and high-yield emerging-market bonds, both local currency- and U.S. dollar-denominated high-yield bonds. We have positioned the Fund’s equity allocations in an effort to benefit from profit growth for Japanese, European and U.S. companies, given U.S. economic growth prospects and accommodative monetary policies in Europe and Japan.
We believe that the U.S. economy should continue to expand at an above-average pace despite a lowering of expectations. We think that many of the asset markets that have performed poorly in 2018 are now interesting value purchases. The Fund is positioned to participate in a wider acknowledgement of their value. In our view, the trade dispute between the U.S. and China is a long standing secular issue to be resolved over coming years. We expect the tensions to ebb and flow, and we believe that a de-escalation of tensions is overdue.
In our view, leading economic indicators still point to increasing activity in the Eurozone economy, albeit at a lower rate. Central banks in the U.S. and United Kingdom are tightening monetary policy with caution, while the Eurozone and Japan maintain accommodative monetary policies with increasing balance sheets at least through 2018. We believe that the primary risks to the positive environment for equities emanate from geopolitical shifts, central bank miscues, and from the ability of trade negotiation outcomes to surprise. In our opinion, upside risks include the overachievement of U.S. fiscal reform and a receding of populist agendas.
The Fund remains diversified,3 and we think that it has the flexibility to tilt specific allocations based on changes in relative valuations or specific macroeconomic events. We believe that this allows us to respond effectively to changing market conditions and position the Fund’s asset class exposures accordingly.
Portfolio Management
Aberdeen Alternatives and Multi-Asset Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
1 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
2 | Companies whose bonds are rated as “investment grade” have a lower chance of defaulting on their debt than those rated as “non-investment grade.” Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB- or above are known as investment-grade bonds. S&P Global Ratings’ credit ratings communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The investment-grade category is a rating from AAA to BBB-. |
3 | Diversification does not ensure a profit or protect against a loss in a declining market. |
8 | Annual Report 2018 |
Aberdeen Diversified Income Fund (Unaudited) (continued)
Risk Considerations
The Fund is subject to different levels and combinations of risk, based on its actual allocation among the various asset classes and underlying funds. The Fund will be affected by stock and bond market risks, among others.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities, and are subject to different accounting and regulatory standards, political and economic risks and, to the extent denominated in foreign currencies, currency exchange rate risk (unless otherwise hedged). These risks are enhanced in emerging market countries.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase). Additionally, non-investment grade debt securities (high yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher rated securities.
The Fund may allocate its assets, to a limited extent, to alternative investment strategies, which may involve riskier types of securities or investments than those offered by investment in traditional asset classes.
Please read the prospectus for more detailed information regarding these and other risks.
2018 Annual Report | 9 |
Aberdeen Diversified Income Fund (Unaudited) (continued)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||
Class A | w/o SC | -2.71% | 3.17% | 6.37% | ||||||||
w/SC2 | -8.32% | 1.95% | 5.73% | |||||||||
Class C | w/o SC | -3.35% | 2.46% | 5.60% | ||||||||
w/SC3 | -4.29% | 2.46% | 5.60% | |||||||||
Class R4 | w/o SC | -2.95% | 2.80% | 5.99% | ||||||||
Institutional Service Class4,5 | w/o SC | -2.65% | 3.42% | 6.53% | ||||||||
Institutional Class4 | w/o SC | -2.46% | 3.47% | 6.65% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund changed its investment objective and strategy effective September 24, 2012. Performance information for periods prior to September 24, 2012 does not reflect the current investment strategy. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the first offering of the Institutional Service Class (September 24, 2012) are based on the performance of the Fund’s Class A shares. These returns have not been adjusted to reflect the expenses applicable to the Institutional Service Class. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Service Class shares would only differ to the extent of the differences in expenses of the two classes. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen Diversified Income Fund, the Bloomberg Barclays U.S. Aggregate Bond Index, a blended benchmark of 50% Morgan Stanley Capital International All Country (MSCI AC) World Index/50% Bloomberg Barclays U.S. Aggregate Bond Index, and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities.
The MSCI AC World Index is a free float-adjusted market capitalization-weighted index that captures the large- and mid-cap representation across 23 developed markets and 24 emerging markets. The developed markets countries in the Index are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the U.K. and the U.S. The emerging markets countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Performance returns reflect fee waivers and reimbursements in effect, without which returns would have been lower.
10 | Annual Report 2018 |
Aberdeen Diversified Income Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Exchange-Traded Funds | 71.2% | |||
Mutual Funds | 26.1% | |||
Short-Term Investment | 1.8% | |||
Other Assets in Excess of Liabilities | 0.9% | |||
100.0% |
Top Industries | ||||
Equity Funds | 54.3% | |||
Fixed Income Funds | 43.0% | |||
Other | 2.7% | |||
100.0% |
Top Holdings* | ||||
Vanguard High Dividend Yield ETF | 15.1% | |||
Eaton Vance Floating-Rate Fund, Class I | 14.0% | |||
iShares MSCI EAFE Value ETF | 8.1% | |||
iShares Select Dividend ETF | 8.1% | |||
iShares U.S. & International High Yield Corp Bond ETF | 7.0% | |||
Nuveen Preferred Securities Fund, Institutional Class | 6.0% | |||
Oppenheimer International Bond Fund, Class Y | 6.0% | |||
iShares JP Morgan EM Local Currency Bond ETF | 6.0% | |||
iShares Core S&P 500 ETF | 5.5% | |||
iShares Emerging Markets Dividend ETF | 5.0% | |||
Other | 19.2% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
2018 Annual Report | 11 |
Statement of Investments
October 31, 2018
Aberdeen Diversified Income Fund
Shares or Principal Amount | Value | |||||||
MUTUAL FUNDS (26.1%) | ||||||||
Fixed Income Funds (26.1%) | ||||||||
Eaton Vance Floating-Rate Fund, Class I | 229,030 | $ | 2,075,017 | |||||
Nuveen Preferred Securities Fund, Institutional Class | 54,299 | 892,141 | ||||||
Oppenheimer International Bond Fund, Class Y | 166,755 | 888,803 | ||||||
Total Mutual Funds | 3,855,961 | |||||||
EXCHANGE-TRADED FUNDS (71.2%) | ||||||||
Equity Funds (54.3%) | ||||||||
iShares Core S&P 500 ETF | 3,005 | 819,644 | ||||||
iShares Emerging Markets Dividend ETF | 19,777 | 744,406 | ||||||
iShares MSCI EAFE Value ETF | 24,694 | 1,191,486 | ||||||
iShares MSCI Japan ETF | 9,873 | 541,435 | ||||||
iShares MSCI Pacific ex Japan ETF | 6,830 | 284,674 | ||||||
iShares Select Dividend ETF | 12,414 | 1,190,130 | ||||||
Vanguard High Dividend Yield ETF | 26,910 | 2,240,527 | ||||||
WisdomTree Europe Hedged Equity Fund | 10,070 | 601,179 | ||||||
X-trackers MSCI Japan Hedged Equity ETF | 10,327 | 417,211 | ||||||
8,030,692 | ||||||||
Fixed Income Funds (16.9%) | ||||||||
iShares Emerging Markets High Yield Bond ETF | 13,002 | 588,731 | ||||||
iShares JP Morgan EM Local Currency Bond ETF(a) | 20,372 | 882,922 | ||||||
iShares U.S. & International High Yield Corp Bond ETF | 21,463 | 1,032,799 | ||||||
2,504,452 | ||||||||
Total Exchange-Traded Funds | 10,535,144 | |||||||
SHORT-TERM INVESTMENT (1.8%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09%(b) | 266,337 | 266,337 | ||||||
Total Short-Term Investment | 266,337 | |||||||
Total Investments | 14,657,442 | |||||||
Other Assets in Excess of Liabilities—0.9% | 136,948 | |||||||
Net Assets—100.0% | $ | 14,794,390 |
(a) | Non-income producing security. |
(b) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(c) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ETF | Exchange-Traded Fund |
See accompanying Notes to Financial Statements.
12 | Annual Report 2018 |
Aberdeen Dynamic Allocation Fund (Unaudited)
The Aberdeen Dynamic Allocation Fund (Institutional Class shares net of fees) returned -2.16% for the 12-month period ended October 31, 2018, versus the 0.00% return of its benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Flexible Portfolio Funds (comprising 252 funds), as measured by Lipper, Inc., was -1.18%.
Political events dominated the global financial markets over the reporting period. The U.S. Congress enacted tax reform legislation in late December 2017. The sweeping changes increased the global competitiveness of U.S. corporations and removed incentives for offshore cash and intellectual property. The reduction of corporate tax rates increased the after-tax earnings of many U.S. companies and provided generous incentives for capital investment, which in our view should eventually improve productivity. Equity markets rallied during the autumn of 2017 in anticipation of the implementation of tax reform. However, investors’ enthusiasm was tempered towards the end of January 2018, when fears of a tariff war gripped the market. February and March were marked by domestic risk amid concerns regarding a U.S. government shutdown and negotiations on budget appropriations, which eventually passed on March 23, 2018. Rising U.S. interest rates helped the U.S. dollar appreciate which disadvantaged foreign assets including European and emerging market equities. Additionally, trade conflicts escalated ahead of the U.S. midterm Congressional elections, which were held in early November 2018, hampering investor sentiment for foreign assets. A spike in U.S. Treasury yields at the end of the reporting period triggered a slide in share prices as investors reassessed global stock valuations.
The most notable detractors from Fund performance for the reporting period included emerging-market equities, European equities, and emerging-market debt.
The primary contributors to Fund performance over the period were holdings in small- and large-cap U.S. equities, as well as floating-rate securities and high dividend-paying U.S. equities.
Over the reporting period, we reduced the Fund’s European equity exposures, Treasury Inflation-protected Securities (TIPS) and preferred stocks. We used the proceeds of these sales to increase allocations to emerging-market equities, as well as U.S. large-cap equities, floating-rate securities and U.S. investment-grade1 bonds.
As of the end of the reporting period, the Fund’s fixed-income allocations were positioned in anticipation of higher U.S. interest rates. The fixed-income exposure comprised a moderate allocation to a very short-duration2 floating-rate bank notes fund, some preferred securities, and relatively small allocations to the U.S. investment-grade and European fixed-income sectors, where we did not feel compensated for risk. We have positioned the Fund’s equity allocations in an effort to benefit from profit growth for Japanese, European and U.S. companies, given U.S. economic growth prospects with mild wage inflation, and accommodative monetary policies in Europe and Japan.
We believe that the U.S. economy should continue to expand at an above-average pace despite a lowering of expectations. We think that many of the asset markets that have performed poorly in 2018 are now interesting value purchases. The Fund is positioned to participate in a wider acknowledgement of their value. In our view, the trade dispute between the U.S. and China is a long standing secular issue to be resolved over coming years. We expect the tensions to ebb and flow, and we believe that a de-escalation of tensions is overdue.
In our view, leading economic indicators still point to increasing activity in the Eurozone economy, albeit at a lower rate. Central banks in the U.S. and UK are tightening monetary policy with caution, while the Eurozone and Japan maintain accommodative monetary policies with increasing balance sheets at least through 2018. We believe that the primary risks to the positive environment for equities emanate from geopolitical shifts, central bank miscues, and from the ability of trade negotiation outcomes to surprise. In our opinion, upside risks include the overachievement of U.S. fiscal reform and a receding of populist agendas.
The Fund remains diversified,3 and we think that it has the flexibility to tilt specific allocations based on changes in relative valuations or specific macroeconomic events. We believe that this allows us to respond effectively to changing market conditions and position the Fund’s asset class exposures accordingly.
Portfolio Management
Aberdeen Alternatives and Multi-Asset Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including the possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
1 | Companies whose bonds are rated as “investment grade” have a lower chance of defaulting on their debt than those rated as “non-investment grade.” Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB- or above are known as investment-grade bonds. S&P Global Ratings’ credit ratings communicate the agency’s opinion of relative level of credit risk. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The investment-grade category is a rating from AAA to BBB-. |
2 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
3 | Diversification does not ensure a profit or protect against a loss in a declining market. |
2018 Annual Report | 13 |
Aberdeen Dynamic Allocation Fund (Unaudited) (continued)
Risk Considerations
The Fund is subject to different levels and combinations of risk, based on its actual allocation among the various asset classes and underlying funds. The Fund will be affected by stock and bond market risks, among others.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities, and are subject to different accounting and regulatory standards, political and economic risks and, to the extent denominated in foreign currencies, currency exchange rate risk (unless otherwise hedged). These risks are enhanced in emerging market countries.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
The Fund allocates its assets, to a limited extent, to alternative investment strategies, which may involve riskier types of securities or investments than those offered by investment in traditional asset classes.
Please read the prospectus for more detailed information regarding these and other risks.
14 | Annual Report 2018 |
Aberdeen Dynamic Allocation Fund (Unaudited) (continued)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | |||||||||
Class A | w/o SC | -2.44% | 3.23 | % | 6.85 | % | ||||||
w/SC2 | -8.04% | 2.02 | % | 6.21 | % | |||||||
Class C | w/o SC | -3.12% | 2.52 | % | 6.10 | % | ||||||
w/SC3 | -4.08% | 2.52 | % | 6.10 | % | |||||||
Class R4 | w/o SC | -2.78% | 2.84 | % | 6.53 | % | ||||||
Institutional Service Class4,5 | w/o SC | -2.13% | 3.54 | % | 7.04 | % | ||||||
Institutional Class4, 5 | w/o SC | -2.16% | 3.53 | % | 7.07 | % |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | The Fund changed its investment objective and strategy effective September 24, 2012. Performance information for periods prior to September 24, 2012 does not reflect the current investment strategy. |
2 | A 5.75% front-end sales charge was deducted. |
3 | A 1.00% contingent deferred sales charge (CDSC) was deducted from the one year return because it is charged when Class C shares are sold within the first year after purchase. |
4 | Not subject to any sales charges. |
5 | Returns before the first offering of the Institutional Service Class (September 24, 2012) and Institutional Class (July 29, 2009) are based on the previous performance of the Fund’s Class A shares. Returns of each class have not been adjusted to reflect the expenses applicable to the respective classes. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what the Institutional Service Class and Institutional Class shares would have produced because all classes invest in the same portfolio of securities. Returns for the Institutional Service Class and Institutional Class shares would only differ to the extent of the differences in expenses of the two classes. |
Performance of a $10,000 Investment (as of October 31, 2018)
Comparative performance of $10,000 invested in Class A shares of the Aberdeen Dynamic Allocation Fund, the Morgan Stanley Capital International All Country (MSCI AC) World Index, a blended benchmark of 60% MSCI AC World Index/40% Bloomberg Barclays U.S. Aggregate Bond Index, and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses, or sales charges. Investors cannot invest directly in market indexes.
The MSCI AC World Index is a free float-adjusted market capitalization-weighted index that captures the large- and mid-cap representation across 23 developed markets and 24 emerging markets. The developed markets countries in the Index are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the U.K. and the U.S. The emerging markets countries in the Index are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Performance returns reflect fee waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 15 |
Aberdeen Dynamic Allocation Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Exchange-Traded Funds | 84.4 | % | ||
Mutual Funds | 13.5 | % | ||
Short-Term Investment | 2.2 | % | ||
Liabilities in Excess of Other Assets | (0.1 | )% | ||
100.0 | % |
Top Industries | ||||
Equity Funds | 67.3 | % | ||
Fixed Income Funds | 30.6 | % | ||
Other | 2.1 | % | ||
100.0 | % |
Top Holdings* | ||||
iShares Core S&P 500 ETF | 13.0 | % | ||
WisdomTree Europe Hedged Equity Fund | 11.1 | % | ||
iShares Russell 2000 ETF | 10.0 | % | ||
Eaton Vance Floating-Rate Fund, Class I | 9.7 | % | ||
iShares Russell Mid-Cap ETF | 9.1 | % | ||
iShares Edge U.S. Fixed Income Balanced Risk ETF | 6.1 | % | ||
iShares MSCI Japan ETF | 6.0 | % | ||
iShares MSCI EAFE ETF | 4.9 | % | ||
iShares U.S. & International High Yield Corp Bond ETF | 4.2 | % | ||
iShares MSCI Eurozone ETF | 4.0 | % | ||
Other | 21.9 | % | ||
100.0 | % |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
16 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Dynamic Allocation Fund
Shares or Principal Amount | Value | |||||||
MUTUAL FUNDS (13.5%) | ||||||||
Fixed Income Funds (13.5%) | ||||||||
Eaton Vance Floating-Rate Fund, Class I | 125,623 | $ | 1,138,138 | |||||
Nuveen Preferred Securities Fund, Institutional Class | 7,179 | 117,954 | ||||||
Oppenheimer International Bond Fund, Class Y | 60,504 | 322,485 | ||||||
Total Mutual Funds | 1,578,577 | |||||||
EXCHANGE-TRADED FUNDS (84.4%) | ||||||||
Equity Funds (67.3%) | ||||||||
iShares Core S&P 500 ETF | 5,598 | 1,526,910 | ||||||
iShares MSCI EAFE ETF | 9,111 | 569,073 | ||||||
iShares MSCI Emerging Markets ETF | 11,977 | 469,019 | ||||||
iShares MSCI Eurozone ETF | 12,645 | 472,544 | ||||||
iShares MSCI Japan ETF | 12,856 | 705,023 | ||||||
iShares Russell 2000 ETF | 7,856 | 1,178,636 | ||||||
iShares Russell Mid-Cap ETF | 21,056 | 1,064,591 | ||||||
Vanguard High Dividend Yield ETF | 2,878 | 239,622 | ||||||
WisdomTree Europe Hedged Equity Fund | 21,928 | 1,309,102 | ||||||
X-trackers MSCI Japan Hedged Equity ETF | 9,342 | 377,417 | ||||||
7,911,937 | ||||||||
Fixed Income Funds (17.1%) | ||||||||
iShares Edge U.S. Fixed Income Balanced Risk ETF | 7,477 | 718,163 | ||||||
iShares Emerging Markets High Yield Bond ETF | 5,148 | 233,101 | ||||||
iShares JP Morgan EM Local Currency Bond ETF(a) | 10,275 | 445,318 | ||||||
iShares TIPS Bond ETF | 1,075 | 117,003 | ||||||
iShares U.S. & International High Yield Corp Bond ETF | 10,249 | 493,182 | ||||||
2,006,767 | ||||||||
Total Exchange-Traded Funds | 9,918,704 | |||||||
SHORT-TERM INVESTMENT (2.2%) State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09%(b) | 260,668 | 260,668 | ||||||
Total Short-Term Investment | 260,668 | |||||||
Total Investments (Cost $11,528,642) (c)—100.1% | 11,757,949 | |||||||
Liabilities in Excess of Other Assets—(0.1)% | (6,829 | ) | ||||||
Net Assets—100.0% | $ | 11,751,120 |
(a) | Non-income producing security. |
(b) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(c) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
ETF | Exchange-Traded Fund |
TIPS | Treasury Inflation Protected Securities |
See accompanying Notes to Financial Statements.
2018 Annual Report | 17 |
Statements of Assets and Liabilities
October 31, 2018
Aberdeen Diversified Alternatives Fund | Aberdeen Diversified Income Fund | Aberdeen Dynamic Allocation Fund | ||||||||||
Assets: | ||||||||||||
Investments, at value | $ | 29,452,355 | $ | 14,391,105 | $ | 11,497,281 | ||||||
Short-term investment, at value | 2,046,514 | 266,337 | 260,668 | |||||||||
Receivable for investments sold | – | 218,575 | – | |||||||||
Interest and dividends receivable | 38,083 | 19,607 | 6,651 | |||||||||
Receivable from Adviser | 14,217 | 14,207 | 14,455 | |||||||||
Receivable for capital shares issued | 5,234 | – | – | |||||||||
Prepaid expenses | 40,440 | 39,106 | 39,149 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 31,596,843 | 14,948,937 | 11,818,204 | |||||||||
|
|
|
|
|
| |||||||
Liabilities: | ||||||||||||
Payable for investments purchased | 36,638 | 98,571 | 6,692 | |||||||||
Payable for capital shares redeemed | 40,438 | 297 | 8,727 | |||||||||
Accrued expenses and other payables: | ||||||||||||
Audit fees | 25,900 | 25,900 | 25,900 | |||||||||
Printing fees | 15,537 | 9,689 | 9,907 | |||||||||
Distribution fees | 6,112 | 7,770 | 4,987 | |||||||||
Transfer agent fees | 5,103 | 4,775 | 4,450 | |||||||||
Investment advisory fees | 4,075 | 1,930 | 1,536 | |||||||||
Sub-transfer agent and administrative services fees | 3,943 | 1,652 | 1,400 | |||||||||
Custodian fees | 1,872 | 1,732 | 1,735 | |||||||||
Administration fees | 2,173 | 1,030 | 819 | |||||||||
Fund accounting fees | 1,120 | 546 | 447 | |||||||||
Legal fees | 585 | 284 | 218 | |||||||||
Other | 661 | 371 | 266 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 144,157 | 154,547 | 67,084 | |||||||||
|
|
|
|
|
| |||||||
Net Assets | $ | 31,452,686 | $ | 14,794,390 | $ | 11,751,120 | ||||||
|
|
|
|
|
| |||||||
Cost: | ||||||||||||
Investments | $ | 29,329,737 | $ | 14,698,613 | $ | 11,267,974 | ||||||
Short-term investment | 2,046,514 | 266,337 | 260,668 | |||||||||
Represented by: | ||||||||||||
Capital | $ | 39,043,111 | $ | 14,972,660 | $ | 11,276,654 | ||||||
Distributable earnings/(accumulated loss) | (7,590,425 | ) | (178,270 | ) | 474,466 | |||||||
|
|
|
|
|
| |||||||
Net Assets | $ | 31,452,686 | $ | 14,794,390 | $ | 11,751,120 | ||||||
|
|
|
|
|
| |||||||
Net Assets: | ||||||||||||
Class A Shares | $ | 11,159,758 | $ | 6,768,721 | $ | 7,019,998 | ||||||
Class C Shares | 3,650,411 | 7,125,347 | 3,858,939 | |||||||||
Class R Shares | 1,320,315 | 166,540 | 240,032 | |||||||||
Institutional Service Class Shares | 2,814 | 2,803 | 11,118 | |||||||||
Institutional Class Shares | 15,319,388 | 730,979 | 621,033 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 31,452,686 | $ | 14,794,390 | $ | 11,751,120 | ||||||
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
18 | Annual Report 2018 |
Statements of Assets and Liabilities (concluded)
October 31, 2018
Aberdeen Diversified Alternatives Fund | Aberdeen Diversified Income Fund | Aberdeen Dynamic Allocation Fund | ||||||||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||||||
Class A Shares | 877,106 | 569,893 | 531,744 | |||||||||
Class C Shares | 298,906 | 613,444 | 298,505 | |||||||||
Class R Shares | 104,829 | 14,145 | 18,285 | |||||||||
Institutional Service Class Shares | 219 | 237 | 846 | |||||||||
Institutional Class Shares | 1,190,500 | 61,518 | 47,107 | |||||||||
|
|
|
|
|
| |||||||
Total | 2,471,560 | 1,259,237 | 896,487 | |||||||||
|
|
|
|
|
| |||||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||||||
Class A Shares | $ | 12.72 | $ | 11.88 | $ | 13.20 | ||||||
Class C Shares (a) | $ | 12.21 | $ | 11.62 | $ | 12.93 | ||||||
Class R Shares | $ | 12.59 | $ | 11.77 | $ | 13.13 | ||||||
Institutional Service Class Shares | $ | 12.85 | $ | 11.83 | $ | 13.14 | ||||||
Institutional Class Shares | $ | 12.87 | $ | 11.88 | $ | 13.18 | ||||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||||||
Class A Shares | $ | 13.50 | $ | 12.60 | $ | 14.01 | ||||||
Maximum Sales Charge: | ||||||||||||
Class A Shares | 5.75 | % | 5.75 | % | 5.75 | % |
(a) | For Class C Shares, the redemption price per share is reduced by 1.00% for shares held less than one year. |
See accompanying Notes to Financial Statements.
2018 Annual Report | 19 |
Statements of Operations
For the Year Ended October 31, 2018
Aberdeen Diversified Alternatives Fund | Aberdeen Diversified Income Fund | Aberdeen Dynamic Allocation Fund | ||||||||||
INVESTMENT INCOME: | ||||||||||||
Dividend income | $ | 546,271 | $ | 621,710 | $ | 356,960 | ||||||
Interest income | 29,338 | 3,007 | 2,918 | |||||||||
Securities lending income, net | 229 | 12,126 | 5,302 | |||||||||
|
|
|
|
|
| |||||||
Total Income | 575,838 | 636,843 | 365,180 | |||||||||
|
|
|
|
|
| |||||||
EXPENSES: | ||||||||||||
Investment advisory fees | 52,151 | 25,429 | 20,621 | |||||||||
Administration fees | 27,814 | 13,562 | 10,998 | |||||||||
Distribution fees Class A | 32,083 | 16,619 | 18,803 | |||||||||
Distribution fees Class C | 44,012 | 89,770 | 49,439 | |||||||||
Distribution fees Class R | 6,699 | 808 | 1,434 | |||||||||
Sub-transfer agent and administrative service fees Class A | 16,868 | 4,444 | 5,690 | |||||||||
Sub-transfer agent and administrative service fees Institutional Class | 11,777 | 680 | 259 | |||||||||
Sub-transfer agent and administrative service fees Class C | 4,899 | 5,262 | 4,254 | |||||||||
Sub-transfer agent and administrative service fees Class R | 2,570 | 204 | 400 | |||||||||
Fund accounting fees | 3,326 | 1,641 | 1,303 | |||||||||
Transfer agent fees | 22,497 | 17,338 | 19,231 | |||||||||
Trustee fees | 1,967 | 983 | 794 | |||||||||
Legal fees | 2,070 | 1,004 | 808 | |||||||||
Printing fees | 29,767 | 19,788 | 20,328 | |||||||||
Custodian fees | 7,171 | 5,961 | 6,097 | |||||||||
Registration and filing fees | 69,340 | 65,360 | 64,608 | |||||||||
Audit fees | 25,900 | 25,900 | 25,900 | |||||||||
Other | 8,676 | 5,975 | 5,657 | |||||||||
|
|
|
|
|
| |||||||
Total expenses before reimbursed/waived expenses | 369,587 | 300,728 | 256,624 | |||||||||
Interest expense(a) | 329 | 101 | – | |||||||||
|
|
|
|
|
| |||||||
Total operating expenses before reimbursed/waived expenses | 369,916 | 300,829 | 256,624 | |||||||||
Expenses reimbursed/waived by investment advisor | (180,434 | ) | (146,502 | ) | (146,489 | ) | ||||||
|
|
|
|
|
| |||||||
Net expenses | 189,482 | 154,327 | 110,135 | |||||||||
|
|
|
|
|
| |||||||
Net Investment Income | 386,356 | 482,516 | 255,045 | |||||||||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||||||
Realized gain from investment transactions | 313,343 | 603,158 | 365,568 | |||||||||
Net change in unrealized appreciation/(depreciation) | (839,320 | ) | (1,554,480 | ) | (893,286 | ) | ||||||
|
|
|
|
|
| |||||||
Net realized/unrealized (loss) from investments | (525,977 | ) | (951,322 | ) | (527,718 | ) | ||||||
|
|
|
|
|
| |||||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (139,621 | ) | $ | (468,806 | ) | $ | (272,673 | ) | |||
|
|
|
|
|
|
(a) See Note 9 for additional information.
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
20 | Annual Report 2018 |
Statements of Changes in Net Assets
Aberdeen Diversified Alternatives Fund | Aberdeen Diversified Income Fund | Aberdeen Dynamic Allocation Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 386,356 | $ | 381,984 | $ | 482,516 | $ | 514,590 | $ | 255,045 | $ | 284,449 | ||||||||||||
Net realized gain/(loss) from investments | 313,343 | (309,994 | ) | 603,158 | (73,330 | ) | 365,568 | 531,787 | ||||||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (839,320 | ) | 1,662,683 | (1,554,480 | ) | 1,321,190 | (893,286 | ) | 856,134 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in net assets resulting from operations | (139,621 | ) | 1,734,673 | (468,806 | ) | 1,762,450 | (272,673 | ) | 1,672,370 | |||||||||||||||
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| |||||||||||||
Distributions to Shareholders From (a): | ||||||||||||||||||||||||
Class A | (134,225 | ) | (124,294 | ) | (194,524 | ) | (186,456 | ) | (153,622 | ) | (167,300 | ) | ||||||||||||
Class C | (19,245 | ) | (7,690 | ) | (194,280 | ) | (265,080 | ) | (64,868 | ) | (122,857 | ) | ||||||||||||
Class R | (10,473 | ) | (7,998 | ) | (3,770 | ) | (9,580 | ) | (4,559 | ) | (9,742 | ) | ||||||||||||
Institutional Service Class | (33 | ) | (13 | ) | (532 | ) | (1,217 | ) | (276 | ) | (279 | ) | ||||||||||||
Institutional Class | (218,643 | ) | (227,702 | ) | (34,032 | ) | (41,964 | ) | (21,225 | ) | (28,014 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from shareholder distributions | (382,619 | ) | (367,697 | ) | (427,138 | ) | (504,297 | ) | (244,550 | ) | (328,192 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions | (9,935,523 | ) | (18,534,078 | ) | (2,847,645 | ) | (1,878,444 | ) | (3,344,847 | ) | (4,635,153 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets | (10,457,763 | ) | (17,167,102 | ) | (3,743,589 | ) | (620,291 | ) | (3,862,070 | ) | (3,290,975 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of year | 41,910,449 | 59,077,551 | 18,537,979 | 19,158,270 | 15,613,190 | 18,904,165 | ||||||||||||||||||
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|
|
|
|
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|
|
| |||||||||||||
End of year | $ | 31,452,686 | $ | 41,910,449 | $ | 14,794,390 | $ | 18,537,979 | $ | 11,751,120 | $ | 15,613,190 | ||||||||||||
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| |||||||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Proceeds from shares issued | $ | 2,321,859 | $ | 8,783,295 | $ | 1,553,612 | $ | 2,267,743 | $ | 839,302 | $ | 1,777,504 | ||||||||||||
Dividends reinvested | 105,341 | 106,369 | 125,835 | 131,448 | 97,628 | 121,336 | ||||||||||||||||||
Cost of shares redeemed | (7,752,459 | ) | (8,812,964 | ) | (1,330,889 | ) | (1,361,188 | ) | (1,172,767 | ) | (2,534,465 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A | (5,325,259 | ) | 76,700 | 348,558 | 1,038,003 | (235,837 | ) | (635,625 | ) | |||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 106,934 | 130,238 | 157,067 | 693,097 | 64,998 | 222,715 | ||||||||||||||||||
Dividends reinvested | 16,524 | 5,606 | 166,216 | 196,083 | 57,853 | 84,926 | ||||||||||||||||||
Cost of shares redeemed | (1,515,135 | ) | (5,899,565 | ) | (2,756,281 | ) | (3,945,707 | ) | (2,412,663 | ) | (4,105,136 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C | (1,391,677 | ) | (5,763,721 | ) | (2,432,998 | ) | (3,056,527 | ) | (2,289,812 | ) | (3,797,495 | ) | ||||||||||||
|
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|
|
|
|
|
|
|
|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 412,420 | 489,108 | 83,199 | 54,133 | 17,100 | 55,732 | ||||||||||||||||||
Dividends reinvested | 9,659 | 6,141 | 951 | 31 | 4,200 | 7,703 | ||||||||||||||||||
Cost of shares redeemed | (524,076 | ) | (954,002 | ) | (271,039 | ) | (26,083 | ) | (245,118 | ) | (136,640 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R | (101,997 | ) | (458,753 | ) | (186,889 | ) | 28,081 | (223,818 | ) | (73,205 | ) | |||||||||||||
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|
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|
|
(a) Per Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. For the year ended October 31, 2017 all distributions were from net investment income.
2018 Annual Report | 21 |
Statements of Changes in Net Assets (continued)
Aberdeen Diversified Alternatives Fund | Aberdeen Diversified Income Fund | Aberdeen Dynamic Allocation Fund | ||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 1,195 | 1,600 | — | 1,468 | — | — | ||||||||||||||||||
Dividends reinvested | 33 | 13 | 532 | 1,217 | 276 | 279 | ||||||||||||||||||
Cost of shares redeemed | (13 | ) | (19,107 | ) | (35,347 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class | 1,215 | (17,494 | ) | (34,815 | ) | 2,685 | 276 | 279 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Proceeds from shares issued | 9,445,083 | 5,284,150 | 394,039 | 482,829 | 65,225 | 770,432 | ||||||||||||||||||
Dividends reinvested | 207,085 | 201,168 | 27,179 | 33,233 | 16,447 | 17,784 | ||||||||||||||||||
Cost of shares redeemed | (12,769,973 | ) | (17,856,128 | ) | (962,719 | ) | (406,748 | ) | (677,328 | ) | (917,323 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class | (3,117,805 | ) | (12,370,810 | ) | (541,501 | ) | 109,314 | (595,656 | ) | (129,107 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in net assets from capital transactions: | $ | (9,935,523 | ) | $ | (18,534,078 | ) | $ | (2,847,645 | ) | $ | (1,878,444 | ) | $ | (3,344,847 | ) | $ | (4,635,153 | ) | ||||||
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| |||||||||||||
SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Issued | 177,548 | 691,898 | 124,609 | 184,501 | 60,071 | 133,205 | ||||||||||||||||||
Reinvested | 8,137 | 8,363 | 10,154 | 10,887 | 6,999 | 9,228 | ||||||||||||||||||
Redeemed | (597,081 | ) | (694,182 | ) | (106,778 | ) | (111,986 | ) | (84,241 | ) | (192,494 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class A Shares | (411,396 | ) | 6,079 | 27,985 | 83,402 | (17,171 | ) | (50,061 | ) | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Class C Shares | ||||||||||||||||||||||||
Issued | 8,610 | 10,736 | 12,905 | 58,712 | 4,763 | 17,392 | ||||||||||||||||||
Reinvested | 1,328 | 458 | 13,704 | 16,611 | 4,234 | 6,609 | ||||||||||||||||||
Redeemed | (121,794 | ) | (485,598 | ) | (227,114 | ) | (331,381 | ) | (176,390 | ) | (316,360 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class C Shares | (111,856 | ) | (474,404 | ) | (200,505 | ) | (256,058 | ) | (167,393 | ) | (292,359 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
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|
| |||||||||||||
Class R Shares | ||||||||||||||||||||||||
Issued | 32,100 | 38,998 | 6,599 | 4,554 | 1,234 | 4,282 | ||||||||||||||||||
Reinvested | 754 | 487 | 78 | 3 | 303 | 589 | ||||||||||||||||||
Redeemed | (40,774 | ) | (76,062 | ) | (21,804 | ) | (2,183 | ) | (17,883 | ) | (10,310 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Class R Shares | (7,920 | ) | (36,577 | ) | (15,127 | ) | 2,374 | (16,346 | ) | (5,439 | ) | |||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||
Issued | 91 | 126 | — | 124 | — | — | ||||||||||||||||||
Reinvested | 3 | 1 | 43 | 101 | 20 | 21 | ||||||||||||||||||
Redeemed | (1 | ) | (1,500 | ) | (2,838 | ) | — | — | — | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Service Class Shares | 93 | (1,373 | ) | (2,795 | ) | 225 | 20 | 21 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||
Issued | 718,511 | 412,914 | 31,454 | 39,967 | 4,690 | 58,883 | ||||||||||||||||||
Reinvested | 15,835 | 15,684 | 2,190 | 2,751 | 1,181 | 1,354 | ||||||||||||||||||
Redeemed | (972,808 | ) | (1,399,037 | ) | (77,282 | ) | (33,671 | ) | (48,750 | ) | (70,504 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Institutional Class Shares | (238,462 | ) | (970,439 | ) | (43,638 | ) | 9,047 | (42,879 | ) | (10,267 | ) | |||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total change in shares: | (769,541 | ) | (1,476,714 | ) | (234,080 | ) | (161,010 | ) | (243,769 | ) | (358,105 | ) | ||||||||||||
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|
Amounts listed as “-” are $0 or round to $0.
See accompanying Notes to Financial Statements.
22 | Annual Report 2018 |
This page intentionally left blank.
Financial Highlights
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Diversified Alternatives Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net (a) | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | Net Asset Value, End of Period | ||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 12.94 | $ | 0.13 | $ | (0.21 | ) | $ | (0.08 | ) | $ | (0.14 | ) | $ | (0.14 | ) | $ | 12.72 | ||||||||||
Year Ended October 31, 2017 | 12.56 | 0.09 | 0.39 | 0.48 | (0.10 | ) | (0.10 | ) | 12.94 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.82 | 0.13 | (0.24 | ) | (0.11 | ) | (0.15 | ) | (0.15 | ) | 12.56 | |||||||||||||||||
Year Ended October 31, 2015 | 13.32 | 0.17 | (0.39 | ) | (0.22 | ) | (0.28 | ) | (0.28 | ) | 12.82 | |||||||||||||||||
Year Ended October 31, 2014 | 12.63 | 0.05 | 0.79 | 0.84 | (0.15 | ) | (0.15 | ) | 13.32 | |||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.42 | 0.05 | (0.20 | ) | (0.15 | ) | (0.06 | ) | (0.06 | ) | 12.21 | |||||||||||||||||
Year Ended October 31, 2017 | 12.05 | 0.01 | 0.37 | 0.38 | (0.01 | ) | (0.01 | ) | 12.42 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.33 | 0.04 | (0.22 | ) | (0.18 | ) | (0.10 | ) | (0.10 | ) | 12.05 | |||||||||||||||||
Year Ended October 31, 2015 | 12.89 | 0.10 | (0.39 | ) | (0.29 | ) | (0.27 | ) | (0.27 | ) | 12.33 | |||||||||||||||||
Year Ended October 31, 2014 | 12.22 | (0.05 | ) | 0.77 | 0.72 | (0.05 | ) | (0.05 | ) | 12.89 | ||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.81 | 0.09 | (0.21 | ) | (0.12 | ) | (0.10 | ) | (0.10 | ) | 12.59 | |||||||||||||||||
Year Ended October 31, 2017 | 12.44 | 0.05 | 0.38 | 0.43 | (0.06 | ) | (0.06 | ) | 12.81 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.72 | 0.07 | (0.22 | ) | (0.15 | ) | (0.13 | ) | (0.13 | ) | 12.44 | |||||||||||||||||
Year Ended October 31, 2015 | 13.25 | 0.11 | (0.36 | ) | (0.25 | ) | (0.28 | ) | (0.28 | ) | 12.72 | |||||||||||||||||
Year Ended October 31, 2014 | 12.56 | 0.02 | 0.78 | 0.80 | (0.11 | ) | (0.11 | ) | 13.25 | |||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.07 | 0.18 | (0.21 | ) | (0.03 | ) | (0.19 | ) | (0.19 | ) | 12.85 | |||||||||||||||||
Year Ended October 31, 2017 | 12.68 | 0.12 | 0.41 | 0.53 | (0.14 | ) | (0.14 | ) | 13.07 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.94 | 0.15 | (0.22 | ) | (0.07 | ) | (0.19 | ) | (0.19 | ) | 12.68 | |||||||||||||||||
Year Ended October 31, 2015 | 13.44 | 0.20 | (0.38 | ) | (0.18 | ) | (0.32 | ) | (0.32 | ) | 12.94 | |||||||||||||||||
Year Ended October 31, 2014 | 12.75 | 0.09 | 0.80 | 0.89 | (0.20 | ) | (0.20 | ) | 13.44 | |||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.08 | 0.18 | (0.21 | ) | (0.03 | ) | (0.18 | ) | (0.18 | ) | 12.87 | |||||||||||||||||
Year Ended October 31, 2017 | 12.68 | 0.14 | 0.40 | 0.54 | (0.14 | ) | (0.14 | ) | 13.08 | |||||||||||||||||||
Year Ended October 31, 2016 | 12.93 | 0.20 | (0.27 | ) | (0.07 | ) | (0.18 | ) | (0.18 | ) | 12.68 | |||||||||||||||||
Year Ended October 31, 2015 | 13.43 | 0.21 | (0.39 | ) | (0.18 | ) | (0.32 | ) | (0.32 | ) | 12.93 | |||||||||||||||||
Year Ended October 31, 2014 | 12.75 | 0.08 | 0.80 | 0.88 | (0.20 | ) | (0.20 | ) | 13.43 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | Does not include expenses of the underlying fund in which the Fund invests. Had underlying fund expenses been included, the net and gross expense ratios to average net assets would have been higher. |
(d) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(f) | Includes interest expense that amounts to less than 0.01%. |
(g) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
24 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Diversified Alternatives Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses Waivers) (c) | Ratio of Expenses (c)(d) | Ratio of Net Investment Income/(Loss) to Average Net Assets | Portfolio Turnover (e) | |||||||||||||||||
(0.63 | %) | $ | 11,160 | 0.63 | %(f) | 1.10 | %(f) | 1.02 | % | 18.23 | % | |||||||||||
3.82 | % | 16,672 | 0.65 | %(f) | 1.01 | %(f) | 0.75 | % | 26.64 | % | ||||||||||||
(0.87 | %) | 16,106 | 0.62 | %(f) | 0.88 | %(f) | 1.01 | % | 36.02 | % | ||||||||||||
(1.68 | %) | 27,238 | 0.57 | % | 0.80 | % | 1.31 | % | 78.72 | % | ||||||||||||
6.70 | % | 21,608 | 0.52 | % | 0.88 | % | 0.36 | % | 54.26 | % | ||||||||||||
(1.25 | %) | 3,650 | 1.25 | %(f) | 1.83 | %(f) | 0.41 | % | 18.23 | % | ||||||||||||
3.20 | % | 5,101 | 1.25 | %(f) | 1.75 | %(f) | 0.10 | % | 26.64 | % | ||||||||||||
(1.45 | %) | 10,664 | 1.25 | %(f) | 1.60 | %(f) | 0.34 | % | 36.02 | % | ||||||||||||
(2.35 | %) | 16,740 | 1.25 | % | 1.48 | % | 0.79 | % | 78.72 | % | ||||||||||||
5.91 | % | 15,565 | 1.25 | % | 1.61 | % | (0.36 | %) | 54.26 | % | ||||||||||||
(0.94 | %) | 1,320 | 0.94 | %(f) | 1.41 | %(f) | 0.73 | % | 18.23 | % | ||||||||||||
3.49 | % | 1,444 | 0.95 | %(f) | 1.32 | %(f) | 0.42 | % | 26.64 | % | ||||||||||||
(1.17 | %) | 1,858 | 0.92 | %(f) | 1.18 | %(f) | 0.58 | % | 36.02 | % | ||||||||||||
(1.98 | %) | 1,341 | 0.87 | % | 1.10 | % | 0.81 | % | 78.72 | % | ||||||||||||
6.37 | %(g) | 348 | 0.83 | % | 1.19 | % | 0.14 | % | 54.26 | % | ||||||||||||
(0.28 | %) | 3 | 0.32 | %(f) | 0.79 | %(f) | 1.37 | % | 18.23 | % | ||||||||||||
4.18 | % | 2 | 0.29 | %(f) | 0.66 | %(f) | 0.97 | % | 26.64 | % | ||||||||||||
(0.55 | %) | 19 | 0.32 | %(f) | 0.58 | %(f) | 1.22 | % | 36.02 | % | ||||||||||||
(1.38 | %) | 19 | 0.25 | % | 0.48 | % | 1.54 | % | 78.72 | % | ||||||||||||
7.02 | % | 12 | 0.25 | % | 0.61 | % | 0.65 | % | 54.26 | % | ||||||||||||
(0.22 | %) | 15,319 | 0.25 | %(f) | 0.80 | %(f) | 1.40 | % | 18.23 | % | ||||||||||||
4.26 | % | 18,691 | 0.25 | %(f) | 0.70 | %(f) | 1.12 | % | 26.64 | % | ||||||||||||
(0.51 | %) | 30,431 | 0.25 | %(f) | 0.55 | %(f) | 1.58 | % | 36.02 | % | ||||||||||||
(1.38 | %) | 104,291 | 0.25 | % | 0.48 | % | 1.59 | % | 78.72 | % | ||||||||||||
6.94 | % | 66,073 | 0.25 | % | 0.61 | % | 0.58 | % | 54.26 | % |
2018 Annual Report | 25 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Diversified Income Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net (a) | Net Realized and Unrealized Gains/ (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 12.57 | $ | 0.39 | $ | (0.72 | ) | $ | (0.33 | ) | $ | (0.36 | ) | $ | – | $ | (0.36 | ) | $ | 11.88 | ||||||||||||
Year Ended October 31, 2017 | 11.76 | 0.38 | 0.81 | 1.19 | (0.38 | ) | – | (0.38 | ) | 12.57 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.73 | 0.35 | 0.10 | 0.45 | (0.33 | ) | (0.09 | ) | (0.42 | ) | 11.76 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.99 | 0.38 | (0.65 | ) | (0.27 | ) | (0.37 | ) | (0.62 | ) | (0.99 | ) | 11.73 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.58 | 0.39 | 0.48 | 0.87 | (0.46 | ) | – | (0.46 | ) | 12.99 | ||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.29 | 0.31 | (0.71 | ) | (0.40 | ) | (0.27 | ) | – | (0.27 | ) | 11.62 | ||||||||||||||||||||
Year Ended October 31, 2017 | 11.49 | 0.29 | 0.79 | 1.08 | (0.28 | ) | – | (0.28 | ) | 12.29 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.47 | 0.26 | 0.10 | 0.36 | (0.25 | ) | (0.09 | ) | (0.34 | ) | 11.49 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.75 | 0.28 | (0.64 | ) | (0.36 | ) | (0.30 | ) | (0.62 | ) | (0.92 | ) | 11.47 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.35 | 0.29 | 0.48 | 0.77 | (0.37 | ) | – | (0.37 | ) | 12.75 | ||||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.43 | 0.35 | (0.71 | ) | (0.36 | ) | (0.30 | ) | – | (0.30 | ) | 11.77 | ||||||||||||||||||||
Year Ended October 31, 2017 | 11.63 | 0.34 | 0.81 | 1.15 | (0.35 | ) | – | (0.35 | ) | 12.43 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.61 | 0.32 | 0.09 | 0.41 | (0.30 | ) | (0.09 | ) | (0.39 | ) | 11.63 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.90 | 0.32 | (0.66 | ) | (0.34 | ) | (0.33 | ) | (0.62 | ) | (0.95 | ) | 11.61 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.49 | 0.33 | 0.49 | 0.82 | (0.41 | ) | – | (0.41 | ) | 12.90 | ||||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.55 | 0.45 | (0.77 | ) | (0.32 | ) | (0.40 | ) | – | (0.40 | ) | 11.83 | ||||||||||||||||||||
Year Ended October 31, 2017 | 11.74 | 0.42 | 0.81 | 1.23 | (0.42 | ) | – | (0.42 | ) | 12.55 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.72 | 0.38 | 0.10 | 0.48 | (0.37 | ) | (0.09 | ) | (0.46 | ) | 11.74 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.97 | 0.38 | (0.61 | ) | (0.23 | ) | (0.40 | ) | (0.62 | ) | (1.02 | ) | 11.72 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.57 | 0.42 | 0.48 | 0.90 | (0.50 | ) | – | (0.50 | ) | 12.97 | ||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 12.57 | 0.43 | (0.73 | ) | (0.30 | ) | (0.39 | ) | – | (0.39 | ) | 11.88 | ||||||||||||||||||||
Year Ended October 31, 2017 | 11.75 | 0.42 | 0.81 | 1.23 | (0.41 | ) | – | (0.41 | ) | 12.57 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 11.72 | 0.38 | 0.10 | 0.48 | (0.36 | ) | (0.09 | ) | (0.45 | ) | 11.75 | |||||||||||||||||||||
Year Ended October 31, 2015 | 12.97 | 0.40 | (0.63 | ) | (0.23 | ) | (0.40 | ) | (0.62 | ) | (1.02 | ) | 11.72 | |||||||||||||||||||
Year Ended October 31, 2014 | 12.56 | 0.42 | 0.49 | 0.91 | (0.50 | ) | – | (0.50 | ) | 12.97 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | Does not include expenses of the underlying fund in which the Fund invests. Had underlying fund expenses been included, the net and gross expense ratios to average net assets would have been higher. |
(d) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(f) | Includes interest expense that amounts to less than 0.01%. |
(g) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
26 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Diversified Income Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses Waivers) (c) | Ratio of Expenses (c)(d) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (e) | |||||||||||||||||
(2.71 | %) | $ | 6,769 | 0.57 | %(f) | 1.40 | %(f) | 3.17 | % | 52.48 | % | |||||||||||
10.27 | % | 6,811 | 0.58 | % | 1.36 | % | 3.17 | % | 27.52 | % | ||||||||||||
4.00 | % | 5,390 | 0.56 | % | 1.22 | % | 3.02 | % | 20.87 | % | ||||||||||||
(2.21 | %) | 6,291 | 0.53 | %(f) | 1.16 | %(f) | 3.07 | % | 50.74 | % | ||||||||||||
7.10 | % | 7,542 | 0.51 | % | 1.08 | % | 3.06 | % | 29.19 | % | ||||||||||||
(3.35 | %) | 7,125 | 1.25 | %(f) | 2.14 | %(f) | 2.52 | % | 52.48 | % | ||||||||||||
9.55 | % | 10,003 | 1.25 | % | 2.11 | % | 2.46 | % | 27.52 | % | ||||||||||||
3.24 | % | 12,293 | 1.25 | % | 1.96 | % | 2.33 | % | 20.87 | % | ||||||||||||
(2.96 | %) | 14,396 | 1.25 | %(f) | 1.88 | %(f) | 2.33 | % | 50.74 | % | ||||||||||||
6.34 | %(g) | 14,906 | 1.25 | % | 1.82 | % | 2.31 | % | 29.19 | % | ||||||||||||
(2.95 | %) | 167 | 0.88 | %(f) | 1.71 | %(f) | 2.87 | % | 52.48 | % | ||||||||||||
10.00 | % | 364 | 0.83 | % | 1.61 | % | 2.86 | % | 27.52 | % | ||||||||||||
3.65 | % | 313 | 0.85 | % | 1.51 | % | 2.77 | % | 20.87 | % | ||||||||||||
(2.75 | %) | 421 | 0.98 | %(f) | 1.61 | %(f) | 2.64 | % | 50.74 | % | ||||||||||||
6.66 | % | 408 | 0.97 | % | 1.54 | % | 2.58 | % | 29.19 | % | ||||||||||||
(2.65 | %) | 3 | 0.25 | %(f) | 1.08 | %(f) | 3.53 | % | 52.48 | % | ||||||||||||
10.64 | % | 38 | 0.25 | % | 1.04 | % | 3.45 | % | 27.52 | % | ||||||||||||
4.28 | % | 33 | 0.25 | % | 0.91 | % | 3.32 | % | 20.87 | % | ||||||||||||
(1.91 | %) | 32 | 0.25 | %(f) | 0.88 | %(f) | 3.16 | % | 50.74 | % | ||||||||||||
7.32 | %(g) | 12 | 0.25 | % | 0.82 | % | 3.31 | % | 29.19 | % | ||||||||||||
(2.46 | %) | 731 | 0.25 | %(f) | 1.14 | %(f) | 3.48 | % | 52.48 | % | ||||||||||||
10.66 | % | 1,322 | 0.25 | % | 1.09 | % | 3.47 | % | 27.52 | % | ||||||||||||
4.30 | % | 1,129 | 0.25 | % | 0.95 | % | 3.32 | % | 20.87 | % | ||||||||||||
(1.91 | %) | 1,314 | 0.25 | %(f) | 0.88 | %(f) | 3.30 | % | 50.74 | % | ||||||||||||
7.40 | % | 2,339 | 0.25 | % | 0.82 | % | 3.32 | % | 29.19 | % |
2018 Annual Report | 27 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Dynamic Allocation Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net (a) | Net (Losses) Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | $ | 13.81 | $ | 0.29 | $ | (0.61 | ) | $ | (0.32 | ) | $ | (0.29 | ) | $ | — | $ | (0.29 | ) | $ | 13.20 | ||||||||||||
Year Ended October 31, 2017 | 12.76 | 0.26 | 1.09 | 1.35 | (0.30 | ) | — | (0.30 | ) | 13.81 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.86 | 0.24 | (0.07 | ) | 0.17 | (0.26 | ) | (0.01 | ) | (0.27 | ) | 12.76 | ||||||||||||||||||||
Year Ended October 31, 2015 | 13.30 | 0.33 | (0.43 | ) | (0.10 | ) | (0.34 | ) | — | (0.34 | ) | 12.86 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.51 | 0.20 | 0.80 | 1.00 | (0.21 | ) | — | �� | (0.21 | ) | 13.30 | |||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.53 | 0.19 | (0.60 | ) | (0.41 | ) | (0.19 | ) | — | (0.19 | ) | 12.93 | ||||||||||||||||||||
Year Ended October 31, 2017 | 12.49 | 0.17 | 1.07 | 1.24 | (0.20 | ) | — | (0.20 | ) | 13.53 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.60 | 0.15 | (0.07 | ) | 0.08 | (0.18 | ) | (0.01 | ) | (0.19 | ) | 12.49 | ||||||||||||||||||||
Year Ended October 31, 2015 | 13.06 | 0.23 | (0.43 | ) | (0.20 | ) | (0.26 | ) | — | (0.26 | ) | 12.60 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.28 | 0.11 | 0.78 | 0.89 | (0.11 | ) | — | (0.11 | ) | 13.06 | ||||||||||||||||||||||
Class R Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.73 | 0.24 | (0.61 | ) | (0.37 | ) | (0.23 | ) | — | (0.23 | ) | 13.13 | ||||||||||||||||||||
Year Ended October 31, 2017 | 12.68 | 0.22 | 1.08 | 1.30 | (0.25 | ) | — | (0.25 | ) | 13.73 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.79 | 0.19 | (0.08 | ) | 0.11 | (0.21 | ) | (0.01 | ) | (0.22 | ) | 12.68 | ||||||||||||||||||||
Year Ended October 31, 2015 | 13.23 | 0.27 | (0.42 | ) | (0.15 | ) | (0.29 | ) | — | (0.29 | ) | 12.79 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.45 | 0.15 | 0.78 | 0.93 | (0.15 | ) | — | (0.15 | ) | 13.23 | ||||||||||||||||||||||
Institutional Service Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.75 | 0.34 | (0.62 | ) | (0.28 | ) | (0.33 | ) | — | (0.33 | ) | 13.14 | ||||||||||||||||||||
Year Ended October 31, 2017 | 12.70 | 0.30 | 1.09 | 1.39 | (0.34 | ) | — | (0.34 | ) | 13.75 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.81 | 0.28 | (0.08 | ) | 0.20 | (0.30 | ) | (0.01 | ) | (0.31 | ) | 12.70 | ||||||||||||||||||||
Year Ended October 31, 2015 | 13.24 | 0.34 | (0.40 | ) | (0.06 | ) | (0.37 | ) | — | (0.37 | ) | 12.81 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.46 | 0.24 | 0.78 | 1.02 | (0.24 | ) | — | (0.24 | ) | 13.24 | ||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018 | 13.79 | 0.33 | (0.61 | ) | (0.28 | ) | (0.33 | ) | — | (0.33 | ) | 13.18 | ||||||||||||||||||||
Year Ended October 31, 2017 | 12.72 | 0.30 | 1.10 | 1.40 | (0.33 | ) | — | (0.33 | ) | 13.79 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 12.81 | 0.28 | (0.08 | ) | 0.20 | (0.28 | ) | (0.01 | ) | (0.29 | ) | 12.72 | ||||||||||||||||||||
Year Ended October 31, 2015 | 13.24 | 0.36 | (0.42 | ) | (0.06 | ) | (0.37 | ) | — | (0.37 | ) | 12.81 | ||||||||||||||||||||
Year Ended October 31, 2014 | 12.46 | 0.24 | 0.78 | 1.02 | (0.24 | ) | — | (0.24 | ) | 13.24 |
(a) | Net investment income/(loss) is based on average shares outstanding during the period. |
(b) | Excludes sales charge. |
(c) | Does not include expenses of the underlying fund in which the Fund invests. Had underlying fund expenses been included, the net and gross expense ratios to average net assets would have been higher. |
(d) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(e) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(f) | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
Amounts listed as “-” are $0 or round to $0.
See accompanying Notes to Financial Statements.
28 | Annual Report 2018 |
Financial Highlights (concluded)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Dynamic Allocation Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (b) | Net Assets at End of Period (000’s) | Ratio of Expenses Waivers) (c) | Ratio of Expenses (c)(d) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (e) | |||||||||||||||||
(2.44 | %) | $ | 7,020 | 0.58 | % | 1.61 | % | 2.09 | % | 23.56 | % | |||||||||||
10.71 | % | 7,583 | 0.58 | % | 1.47 | % | 2.00 | % | 56.19 | % | ||||||||||||
1.30 | % | 7,641 | 0.56 | % | 1.24 | % | 1.92 | % | 40.08 | % | ||||||||||||
(0.82 | %) | 8,677 | 0.53 | % | 1.19 | % | 2.50 | % | 40.49 | % | ||||||||||||
8.03 | % | 9,506 | 0.52 | % | 1.16 | % | 1.58 | % | 52.34 | % | ||||||||||||
(3.12 | %) | 3,859 | 1.25 | % | 2.37 | % | 1.41 | % | 23.56 | % | ||||||||||||
10.04 | % | 6,302 | 1.25 | % | 2.23 | % | 1.29 | % | 56.19 | % | ||||||||||||
0.58 | % | 9,470 | 1.25 | % | 2.00 | % | 1.24 | % | 40.08 | % | ||||||||||||
(1.55 | %) | 11,687 | 1.25 | % | 1.91 | % | 1.78 | % | 40.49 | % | ||||||||||||
7.28 | % | 12,939 | 1.25 | % | 1.89 | % | 0.85 | % | 52.34 | % | ||||||||||||
(2.78 | %) | 240 | 0.89 | % | 1.92 | % | 1.72 | % | 23.56 | % | ||||||||||||
10.38 | % | 475 | 0.95 | % | 1.83 | % | 1.64 | % | 56.19 | % | ||||||||||||
0.84 | % | 508 | 0.93 | % | 1.61 | % | 1.52 | % | 40.08 | % | ||||||||||||
(1.16 | %) | 501 | 0.96 | % | 1.62 | % | 2.04 | % | 40.49 | % | ||||||||||||
7.52 | % | 454 | 0.95 | % | 1.59 | % | 1.15 | % | 52.34 | % | ||||||||||||
(2.13 | %) | 11 | 0.25 | % | 1.28 | % | 2.42 | % | 23.56 | % | ||||||||||||
11.13 | % | 11 | 0.25 | % | 1.13 | % | 2.30 | % | 56.19 | % | ||||||||||||
1.58 | % | 10 | 0.25 | % | 0.93 | % | 2.22 | % | 40.08 | % | ||||||||||||
(0.53 | %)(f) | 10 | 0.25 | % | 0.91 | % | 2.56 | % | 40.49 | % | ||||||||||||
8.36 | % | 12 | 0.25 | % | 0.89 | % | 1.85 | % | 52.34 | % | ||||||||||||
(2.16 | %) | 621 | 0.25 | % | 1.31 | % | 2.37 | % | 23.56 | % | ||||||||||||
11.13 | % | 1,241 | 0.25 | % | 1.23 | % | 2.30 | % | 56.19 | % | ||||||||||||
1.57 | % | 1,275 | 0.25 | % | 1.02 | % | 2.26 | % | 40.08 | % | ||||||||||||
(0.53 | %) | 1,675 | 0.25 | % | 0.91 | % | 2.73 | % | 40.49 | % | ||||||||||||
8.28 | % | 1,506 | 0.25 | % | 0.89 | % | 1.86 | % | 52.34 | % |
2018 Annual Report | 29 |
October 31, 2018
1. Organization
Aberdeen Funds (the “Trust”) was organized as a statutory trust under the laws of the state of Delaware by a Certificate of Trust filed on September 27, 2007 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. As of October 31, 2018, the Trust had authorized an unlimited number of shares of beneficial interest (“shares”) without par value. As of October 31, 2018, the Trust operated twenty-five (25) separate series, or mutual funds, each with its own investment objective(s) and strategies. This report contains the financial statements and financial highlights of the three (3) funds listed below (each a “Fund”; collectively, the “Funds”):
– | Aberdeen Diversified Alternatives Fund (“Diversified Alternatives Fund”) |
– | Aberdeen Diversified Income Fund (“Diversified Income Fund”) |
– | Aberdeen Dynamic Allocation Fund (“Dynamic Allocation Fund”) |
Each of the Funds is operated as a “fund of funds,” which means that each of these Funds pursues its investment objective primarily by allocating its investments among other affiliated and unaffiliated mutual funds and exchange traded funds (“Underlying Funds”).
2. Summary of Significant Accounting Policies
The Trust is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies conform to generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Funds are maintained in U.S. Dollars.
a. | Security Valuation |
The Funds value their securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Funds’ Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Funds disclose the fair value of their investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.
Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the “Valuation Time” subject to application, when appropriate, of the valuation factors described in the paragraph below. Under normal circumstances, the Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask price quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Open-end mutual funds are valued at the respective net asset value as reported by such company. The prospectuses for the registered open-end management investment companies in which a Fund invests explain the circumstances under which those companies will use fair value pricing and the effects of using fair value pricing. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time. A security using any of these pricing methodologies is determined to be a Level 1 investment.
Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. Each Fund sweeps available cash into the State Street Institutional U.S. Government Money Market Fund, which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 per share net asset value. Generally, these investment types are categorized as Level 1 investments.
30 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closed before the Valuation Time), the security is valued at fair value as determined by the Funds’ Pricing Committee (the “Pricing Committee”), taking into account the relevant factors and surrounding circumstances using Valuation and Liquidity Procedures approved by the Board of Trustees of the Trust (the “Board”). A security that has been fair valued by the Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs.
The three-level hierarchy of inputs is summarized below:
Level | 1- quoted prices in active markets for identical investments; |
Level | 2- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or |
Level | 3- significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments). |
The following is a summary of the inputs used as of October 31, 2018 in valuing the Funds’ investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Please refer to the Statements of Investments for a detailed breakout of the security types:
LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | |||||||||||||
Diversified Alternatives Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Mutual Funds | 25,631,743 | – | – | 25,631,743 | ||||||||||||
Exchange-Traded Funds | 3,820,612 | – | – | 3,820,612 | ||||||||||||
Short-Term Investment | 2,046,514 | – | – | 2,046,514 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
31,498,869 | – | – | 31,498,869 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diversified Income Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Mutual Funds | 3,855,961 | – | – | 3,855,961 | ||||||||||||
Exchange-Traded Funds | 10,535,144 | – | – | 10,535,144 | ||||||||||||
Short-Term Investment | 266,337 | – | – | 266,337 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
14,657,442 | – | – | 14,657,442 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Dynamic Allocation Fund | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Mutual Funds | 1,578,577 | – | – | 1,578,577 | ||||||||||||
Exchange-Traded Funds | 9,918,704 | – | – | 9,918,704 | ||||||||||||
Short-Term Investment | 260,668 | – | – | 260,668 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
11,757,949 | – | – | 11,757,949 | |||||||||||||
|
|
|
|
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
b. | Restricted Securities |
Restricted securities are privately-placed securities whose resale is restricted under U.S. securities laws. The Funds may invest in restricted securities, including unregistered securities eligible for resale without registration pursuant to Rule 144A and privately-placed securities of U.S. and non-U.S. issuers offered outside the U.S. without registration pursuant to Regulation S under the Securities Act of 1933, as amended (the “1933 Act”). Rule 144A securities may be freely traded among certain qualified institutional investors, such as the Funds, but resale of such securities in the U.S. is permitted only in limited circumstances.
c. | Security Transactions, Investment Income and Expenses |
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income and corporate actions are recorded generally on the ex-date, except for certain dividends and corporate actions which may be recorded after the ex-date, as soon as a Fund acquires information regarding such dividends or corporate actions.
2018 Annual Report | 31 |
Notes to Financial Statements (continued)
October 31, 2018
Interest income and expenses are recorded on an accrual basis. Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among the relevant Funds based on net assets of each. For each of the Funds, the method for allocating income, fund level expenses, and realized and unrealized gains or losses to a class is based on the total net asset value of that class’ shares in proportion to the total net assets of the relevant Fund. Expenses specific to a class (such as Rule 12b-1 and administrative services fees) are charged to that class.
d. | Distributions |
Distributions from net investment income, if any, are declared and paid quarterly for all Funds. The Funds will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies and loss deferrals.
e. | Federal Income Taxes |
Each Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Funds from all federal income taxes. Therefore, no federal income tax provision is required.
Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Funds’ U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31 are subject to such review.
f. | Repurchase Agreements |
The Funds may enter into a repurchase agreement under the terms of a Master Repurchase Agreement. It is each Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by a Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. If the counterparty to a repurchase agreement defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Funds may be delayed or limited. Repurchase agreements are subject to contractual netting arrangements with the Fund’s repurchase agreement counterparty, Fixed Income Clearing Corp. To the extent a Fund enters into repurchase agreements, additional information on individual repurchase agreements is included in the Statements of Investments. As of and during the fiscal year ended October 31, 2018, the Funds’ did not hold any repurchase agreements.
g. | Securities Lending |
Through an agreement with BNP Paribas as the Lending Agent and State Street Bank and Trust Company (the Funds’ custodian), the Funds may lend their portfolio securities to brokers, dealers and other financial institutions that pay a negotiated fee in order to generate income. The Funds receive non-cash collateral in the form of U.S. Government Securities, with respect to each loan of U.S. securities, typically equal to at least 102% of the value of the portfolio securities loaned, and, with respect to each loan of non-U.S. securities, typically equal to at least 105% of the value of the portfolio securities loaned, and at all times thereafter require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities loaned.
The Funds continue to own the loaned securities and continue to recognize unrealized gains and losses on the securities on loan. However, securities lending involves certain risks, including the event of default or insolvency of the borrower, which could delay or restrict a Fund’s ability to recover the loaned securities or dispose of the collateral for the loan. Securities on loan are noted within the Statement of Investments. Non-cash securities lending collateral held by the Lending Agent on behalf of the Funds cannot be sold or repledged by the Funds and therefore, this amount is not presented on the Funds’ Statements of Investments.
At October 31, 2018, the Funds did not have any securities on loan.
3. Agreements and Transactions with Affiliates
a. | Investment Adviser |
Under the Investment Advisory Agreement with the Trust, Aberdeen Asset Management Inc. (“Aberdeen” or the “Adviser”) manages the Funds in accordance with the policies and procedures established by the Board. Under the terms of the Investment Advisory Agreement, each Fund pays Aberdeen an annual management fee of 0.15% based on such Fund’s average daily net assets, paid monthly.
32 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
The Trust and Aberdeen have entered into a written contract (the “Expense Limitation Agreement”) limiting operating expenses to 0.25% for all classes of the Funds. This contractual limitation may not be terminated before February 28, 2019 without the approval of the Trustees who are not “interested persons” of the Funds, as such term is defined by the 1940 Act (the “Independent Trustees”). This limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, Acquired Fund Fees and Expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A shares, Class R shares, and Institutional Service Class shares and extraordinary expenses.
Aberdeen may request and receive reimbursement from a Fund of the advisory fees waived and other expenses reimbursed pursuant to the Expense Limitation Agreement as of a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements do not cause a class to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser, and the payment of such reimbursement is approved by the Board on a quarterly basis (the “Reimbursement Requirements”). Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by Aberdeen is not permitted.
As of October 31, 2018, to the extent the Reimbursement Requirements are met, the cumulative potential reimbursements for each Fund, based on expenses reimbursed by Aberdeen would be:
Fund | Amount Fiscal Year 2016 (Expires 10/31/19) | Amount Fiscal Year 2017 (Expires 10/31/20) | Amount Fiscal Year 2018 (Expires 10/31/21) | Total* | ||||||||||||
Diversified Alternatives Fund | $272,716 | $202,256 | $180,434 | $655,406 | ||||||||||||
Diversified Income Fund | 142,028 | 155,750 | 146,502 | 444,280 | ||||||||||||
Dynamic Allocation Fund | 151,253 | 159,325 | 146,489 | 457,067 |
* | Amounts reported are due to expire throughout the respective 3-year expiration period presented above. |
In accordance with the Funds’ Expense Limitation Agreement and criteria, as described above, the Adviser did not recapture any expenses for which it previously reimbursed the Funds. Accordingly, at October 31, 2018, the Funds did not have liabilities payable to the Adviser for recapture of previously reimbursed expenses.
b. | Fund Administration |
Under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including daily valuation of the Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to the Board. For services provided pursuant to the Fund Administration Agreement, the Trust pays Aberdeen an annual fee of 0.08% based on the Trust’s average daily net assets. The fee is then allocated proportionately among all funds within the Trust (including the Funds) in relation to the average daily net assets of each fund. This asset-based fee is subject to an annual minimum fee based on the number of funds served. Pursuant to a sub-administration agreement with Aberdeen, State Street Bank and Trust Company (“State Street”) provides sub-administration services with respect to the Funds. Aberdeen pays State Street for providing such services.
c. | Distributor and Shareholder Servicing |
The Trust and Aberdeen Fund Distributors, LLC (the “Distributor” or “AFD”) are parties to the current Underwriting Agreement (the “Underwriting Agreement”) whereby the Distributor acts as principal underwriter for the Trust’s shares.
The Trust has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act with respect to certain classes of shares. The Plan permits the Funds to compensate AFD, as the Funds’ Distributor, for expenses associated with the distribution of certain classes of shares of the Funds of the Trust. Although actual distribution expenses may be more or less, under the Plan, the Funds of the Trust pay the Distributor an annual fee of the following amounts:
Fund | Class A Shares | Class C Shares (a) | Class R Shares (a) | |||||||||
Diversified Alternatives Fund | 0.25% | 1.00% | 0.50% | |||||||||
Diversified Income Fund | 0.25% | 1.00% | 0.50% | |||||||||
Dynamic Allocation Fund | 0.25% | 1.00% | 0.50% |
(a) | 0.25% of which is service fees |
2018 Annual Report | 33 |
Notes to Financial Statements (continued)
October 31, 2018
The Adviser or an affiliate of the Adviser may pay additional amounts from its own resources to dealers or other financial intermediaries, for aid in distribution or for aid in providing administrative services to shareholders.
Pursuant to the current Underwriting Agreement, the Distributor will also receive the proceeds of contingent deferred sales charges (“CDSCs”) of 1% imposed on certain redemptions of Class C (and up to 1% for certain Class A) shares.
In addition, the Distributor will re-allow to dealers 5.00% of sales charges on Class A shares of the Funds, which have a maximum front-end sales charge of 5.75% and the Distributor or the Adviser may compensate broker dealers or financial intermediaries from its own resources at the rate of 1.00% on sales of Class C shares of the Funds, which have a maximum CDSC of 1.00%, (on the CDSC assessed on sales within one year of purchase). For the fiscal year ended October 31, 2018, AFD retained commissions of $6,119 from front-end sales charges of Class A shares and $1,465 from CDSC fees from Class C shares (and certain Class A shares) of the Funds.
d. | Administrative Services Fees/Transfer Agent Out-of-Pocket Expenses |
The Funds may pay and/or reimburse administrative services fees/transfer agent out-of-pocket expenses to certain broker-dealers and financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds (sometimes referred to as “sub-transfer agency fees”), subject to certain limitations approved by the Board. These fees may be in addition to Rule 12b-1 fees. Sub-transfer agency fees generally include, but are not limited to, costs associated with omnibus accounting, recordkeeping, networking, sub-transfer agency or other administrative or shareholder services.
Class A, Class R and Institutional Service Class shares of the Funds pay for such services pursuant to an Administrative Services Plan adopted by the Board. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual administrative services fee of 0.25% for Class A, Class R and Institutional Services Class shares. Under an amendment to the Administrative Services Plan that is in effect until at least February 28, 2019, the administrative services fee is limited to a maximum of 0.15% for contracts with fees that are calculated as a percentage of Fund assets and a maximum of $16 per account for contracts with fees that are calculated on a dollar per account basis. Class C and Institutional Class shares may also pay for the services described above directly, as these classes are not subject to an Administrative Services Plan.
The amount of sub-transfer agent and administrative service fees paid during the fiscal year ended October 31, 2018 was as follows:
Fund | Class A | Class C | Class R | Institutional Service | Institutional | |||||||||||||||
Diversified Alternatives Fund | $16,868 | $4,899 | $2,570 | $ – | $11,777 | |||||||||||||||
Diversified Income Fund | 4,444 | 5,262 | 204 | – | 680 | |||||||||||||||
Dynamic Allocation Fund | 5,690 | 4,254 | 400 | – | 259 |
Amounts listed as “–” are $0 or round to $0.
4. Investment Transactions
Purchases and sales of Underlying Funds for the fiscal year ended October 31, 2018, were as follows:
Fund | Purchases | Sales | ||||||
Diversified Alternatives Fund | $6,014,515 | $16,554,368 | ||||||
Diversified Income Fund | 8,762,604 | 11,855,847 | ||||||
Dynamic Allocation Fund | 3,173,726 | 5,996,820 |
5. Portfolio Investment Risks
Principal | Risks of the Funds |
a. | Affiliated Funds Risk |
The Funds’ Adviser serves as the adviser of certain Underlying Funds. It is possible that a conflict of interest among the Funds and the Underlying Funds could affect how the Funds’ Adviser fulfills its fiduciary duties to each Fund and the Underlying Funds.
34 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
b. | Asset Allocation Risk |
Each Fund is subject to different levels and combinations of risk, based on its actual allocation among the various asset classes and Underlying Funds. Each Fund will be exposed to risks of the Underlying Funds in which it invests. The Funds will be affected by stock and bond market risks, among others. To the extent a Fund invests in Underlying Funds that expose it to non-traditional or alternative asset classes (which include investments that focus on a specialized asset class (e.g. long-short strategies), as well as specific market sectors within a broader asset class), the Fund will be exposed to the increased risk associated with those asset classes. The potential impact of the risks related to an asset class depends on the size of a Fund’s investment allocation to it.
c. | Asset Class Variation Risk |
The Underlying Funds invest principally in the securities or investments constituting their asset class. However, under normal market conditions, an Underlying Fund may vary the percentage of its assets in these securities or investments (subject to any applicable regulatory requirements). Depending upon the percentage of securities or investments in a particular asset class held by the Underlying Funds at any given time and the percentage of the Fund’s assets invested in various Underlying Funds, the Fund’s actual exposure to the securities or investments in a particular asset class may vary substantially from its allocation model for that asset class.
d. | Cybersecurity Risk |
Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser and/or its service providers (including, but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption or lose operational functionality.
e. | Derivatives Risk |
Derivatives are speculative and may hurt a Fund’s performance. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways. The potential benefits to be derived from a Fund’s derivatives strategy are dependent upon the portfolio managers’ ability to discern pricing inefficiencies and predict trends in markets, which decisions could prove to be inaccurate. This requires different skills and techniques than predicting changes in the price of individual securities, and there can be no assurance that the use of this strategy will be successful.
Hedged Exposure Risk – Losses generated by a derivative or practice used by a Fund for hedging purposes should be offset in part by gains on the hedged investment depending on the degree of correlation between the hedging instrument and the assets hedged. However, while hedging can reduce or eliminate losses, it can also reduce or eliminate gains.
Correlation Risk – The Funds are exposed to the risk that changes in the value of a hedging instrument will not match those of the investment being hedged.
Counterparty Risk – Derivative transactions depend on the creditworthiness of the counterparty and the counterparty’s ability to fulfill its contractual obligations.
f. | Exchange-Traded Notes Risk |
Certain Funds may invest in exchange-traded notes (ETNs). ETNs are a type of unsecured, unsubordinated debt security that have characteristics and risks similar to those of fixed income securities and trade on a major exchange similar to shares of exchange-traded funds. However, this type of debt security differs from other types of bonds and notes because ETN returns are based upon the performance of a financial asset or market index minus applicable fees, no periodic coupon payments are distributed, and no principal protections exist. The purpose of ETNs is to create a type of security that combines the aspects of both bonds and exchange-traded funds. The value of an ETN may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying commodities or securities markets, changes in the applicable interest rates, changes in the issuer’s credit rating and economic, legal, political or geographic events that affect the referenced asset or index.
g. | Exchange-Traded Fund Risk |
To the extent that a Fund invests in exchange traded funds (“ETFs”), the Fund may be subject to, among other risks, tracking error risk and passive and, in some cases, active management investment risk. An active secondary market in ETF shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance that an ETF’s shares will continue to be listed on an active exchange. In addition, Fund shareholders bear both their proportionate share of the Fund’s expenses and similar expenses incurred through the Fund’s ownership of the ETF.
2018 Annual Report | 35 |
Notes to Financial Statements (continued)
October 31, 2018
h. | Fund of Funds Risk |
Your cost of investing in one of the Funds, as a fund of funds, may be higher than the cost of investing in a mutual fund that only invests directly in individual securities. An Underlying Fund may change its investment objective or policies without a Fund’s approval, which could force the Fund to withdraw its investment from such Underlying Fund at a time that is unfavorable to the Fund. In addition, one Underlying Fund may buy the same securities that another Underlying Fund sells. Therefore, the Fund would indirectly bear the costs of these trades without accomplishing any investment purpose.
i. | Impact of Large Redemptions and Purchases of Fund Shares |
Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause a Fund to have to sell securities or invest additional cash. These transactions may adversely affect a Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of a Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sale of portfolio securities to cover the redemption request settles. For additional information on redemptions, please see the Statement of Changes in Net Assets.
j. | Performance Risk |
Each Fund’s investment performance is directly tied to the performance of the Underlying Funds and other investments in which the Fund invests. If one or more of the Underlying Funds fails to meet its investment objective, a Fund’s performance could be negatively affected. There can be no assurance that each Fund or any Underlying Fund will achieve its investment objective.
Principal | Risks of Underlying Funds |
a. | Alternative Strategies Risk |
Certain Funds invest in Underlying Funds that involve Alternative Strategies Risk. The performance of Underlying Funds that pursue alternative strategies is linked to the performance of highly volatile alternative asset classes (e.g., commodities and currencies) and alternative strategies (e.g., managed futures). To the extent a Fund invests in such Underlying Funds, the Fund’s share price will be exposed to potentially significant fluctuations in value. In addition, Underlying Funds that employ alternative strategies have the risk that anticipated opportunities do not play out as planned, resulting in potentially substantial losses to the Underlying Fund. Furthermore, alternative strategies may employ leverage, involve extensive short positions and/or focus on narrow segments of the market, which may magnify the overall risks and volatility associated with such Underlying Funds’ investments. Depending on the particular alternative strategies used by an Underlying Fund, it may be subject to risks not associated with more traditional investments. These risks may include, but are not limited to, derivatives risk, liquidity risk, credit risk, commodity risk and counterparty risk.
b. | Commodity Risk |
The Funds may invest in Underlying Funds that involve Commodity Risk. The value of commodities may be more volatile than the value of equity securities or debt instruments and their value may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity. The price of a commodity may be affected by demand/supply imbalances in the market for the commodity.
c. | Counterparty and Third Party Risk |
Transactions involving a counterparty or third party (other than the issuer of the instrument) are subject to the counterparty’s or third party’s credit risk and ability to perform in accordance with the terms of the transaction.
d. | Credit Risk |
Credit risk refers to the possibility that the issuer of a security will not be able to make payments of interest and principal when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation.
e. | Derivatives Risk |
Derivatives can be highly volatile and involve risks in addition to the risks of the underlying security. Gains or losses from derivatives can be substantially greater than the derivatives’ original cost and can involve leverage.
f. | Emerging Markets Risk |
Emerging market securities are subject to a magnification of the risks that apply to foreign investments; such risks are greater for securities of companies in emerging market countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Foreign Securities Risk” below).
36 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
g. | Floating Rate Loan Risk |
Floating rate loans generally are subject to restrictions on resale. Floating rate loans sometimes trade infrequently in the secondary market. As a result, valuing a floating rate loan can be more difficult and buying and selling a floating rate loan at an acceptable price can be more difficult or delayed. Difficulty in selling a floating rate loan can result in a loss. In addition, a floating rate loan may not be fully collateralized which may cause the floating rate loan to decline significantly in value.
h. | Foreign Currency Exposure Risk |
The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact a Fund more greatly to the extent the Underlying Fund does not hedge its currency risk, or hedging techniques used by the Underlying Fund are unsuccessful.
i. | Foreign Securities Risk |
The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than U.S. markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable or unsuccessful government actions, reduction of government or central bank support and political or financial instability. Lack of information may also affect the value of these securities. To the extent the Fund focuses its investments in a single country or only a few countries in a particular geographic region, economic, political, regulatory or other conditions affecting such country or region may have a greater impact on Fund performance relative to a more geographically diversified fund.
j. | High-Yield Bond and Other Lower-Rated Securities Risk |
An Underlying Fund’s investments in high-yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Underlying Fund to substantial risk of loss. Investments in high-yield bonds are speculative and issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.
k. | Illiquid Securities Risk |
The Funds may invest in Underlying Funds that hold illiquid securities. Illiquid securities are assets which may not be sold or disposed of in the ordinary course of business within seven days at approximately the price at which the Underlying Fund has valued the investment on its books and may include such securities as those not registered under U.S. securities laws or securities that cannot be sold in public transactions. An inability to sell a portfolio position can adversely affect the Underlying Fund’s value or prevent the Underlying Fund from being able to take advantage of other investment opportunities. Illiquid securities and relatively less liquid securities may also be difficult to value. Over recent years, the capacity of dealers to make markets in fixed income securities have been outpaced by the growth in the size of the fixed income markets. Liquidity risk may be magnified in a rising interest rate environment or when investor redemptions from fixed income funds may be higher than normal, due to the increased supply in the market that would result from selling activity.
l. | Impact of Large Redemptions and Purchases of Underlying Fund Shares |
Occasionally, shareholders of an Underlying Fund may make large redemptions or purchases of the Underlying Fund’s shares, which may cause the Underlying Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Underlying Fund’s performance and increase transaction costs to Underlying Fund shareholders, including the Fund. In addition, large redemption requests may exceed the cash balance of the Underlying Fund and result in credit line borrowing fees and/or overdraft charges to the Underlying Fund until the sale of portfolio securities to cover the redemption request settles.
m. | Interest Rate Risk |
Certain Funds invest in underlying Funds that involve interest rate risk. Fixed income investments are subject to interest rate risk, which generally causes the value of a fixed income portfolio to decrease when interest rates rise resulting in a decrease in the Underlying Fund’s, and possibly a Fund’s, net assets. An Underlying Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. Interest rate fluctuations tend to have a greater impact on fixed income securities with a greater time to maturity and/or lower coupon. In periods of market volatility, the market values of fixed income securities may be more sensitive to changes in interest rates.
n. | Issuer Risk |
The value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or service.
2018 Annual Report | 37 |
Notes to Financial Statements (continued)
October 31, 2018
o. | Market Risk |
Deteriorating market conditions might cause a general weakness in the market that reduces the prices, or yield, of securities in that market in which an Underlying Fund invests.
p. | Mid-Cap Securities Risk |
A Fund may invest in Underlying Funds that hold mid-cap securities. Securities of medium-sized companies tend to be more volatile and less liquid than securities of larger companies.
q. | Real Estate Investment Trusts (“REIT”) and Real Estate Risk |
The Funds may invest in Underlying Funds that are subject to REIT and Real Estate Risk. Investment in REITs and real estate involves the risks that are associated with direct ownership of real estate and with the real estate industry in general. These risks include risks related to general, regional and local economic conditions; fluctuations in interest rates; property tax rates, zoning laws, environmental regulations and other governmental action; cash flow dependency; increased operating expenses; lack of availability of mortgage funds; losses due to natural disasters; changes in property values and rental rates; and other factors.
r. | Sector Risk |
At times, a Fund may have a significant portion of its assets invested in Underlying Funds that invest primarily in securities of companies conducting business in a broadly related group of industries within an economic sector. Companies in the same economic sector may be similarly affected by economic or market events, making a Fund more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.
s. | Short Sale Risk |
The Funds may invest in Underlying Funds that sell securities short. Short Sale risk is the risk that the price of a security sold short will increase in value between the time of the short sale and the time the Underlying Fund must purchase the security to return it to the lender. The Underlying Fund’s potential loss on a short sale could theoretically be unlimited in a case where the Underlying Fund is unable, for whatever reason, to close out its short position.
t. | Small-Cap Securities Risk |
The Funds may invest in Underlying Funds that hold small-cap securities. Securities of smaller companies are usually less stable in price and less liquid than larger, more established companies. Therefore, they generally involve greater risk. If the value of a Fund’s investment decrease, you may lose money.
u. | Valuation Risk |
The price that an Underlying Fund could receive upon the sale of any particular portfolio investment may differ from the Underlying Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Underlying Fund, and the Underlying Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. An Underlying Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third-party service providers.
Please read the prospectus for more detailed information regarding these and other risks.
6. Contingencies
In the normal course of business, the Funds may provide general indemnifications pursuant to certain contracts and organizational documents. The Funds’ maximum exposure under these arrangements is dependent on future claims that may be made against the Funds, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
7. Tax Information
As of October 31, 2018, the tax cost of securities and the breakdown of unrealized appreciation/(depreciation) for each Fund were as follows:
Tax Cost of | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Diversified Alternatives Fund | $ | 31,946,260 | $ | 93,572 | $ | (540,963 | ) | $ | (447,391 | ) | ||||||
Diversified Income Fund | 14,994,049 | 270,403 | (607,010 | ) | (336,607 | ) | ||||||||||
Dynamic Allocation Fund | 11,534,788 | 501,698 | (278,537 | ) | 223,161 |
38 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
The tax character of distributions paid during the fiscal year ended October 31, 2018 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income* | Net Long Term Capital Gains* | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
Diversified Alternatives Fund | $ | 382,619 | $ | – | $ | 382,619 | $ | – | $ | – | $ | 382,619 | ||||||||||||
Diversified Income Fund | 427,138 | – | 427,138 | – | – | 427,138 | ||||||||||||||||||
Dynamic Allocation Fund | 244,550 | – | 244,550 | – | – | 244,550 |
The tax character of distributions paid during the fiscal year ended October 31, 2017 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income* | Net Long Term Capital Gains* | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
Diversified Alternatives Fund | $ | 367,697 | $ | – | $ | 367,697 | $ | – | $ | – | $ | 367,697 | ||||||||||||
Diversified Income Fund | 504,297 | – | 504,297 | – | – | 504,297 | ||||||||||||||||||
Dynamic Allocation Fund | 328,192 | – | 328,192 | – | – | 328,192 |
* | The difference between the book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
Amounts listed as “–” are $0 or round to $0.
As of October 31, 2018, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Fund | Undistributed Tax Exempt Income | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Distributions Payable | Late Year Ordinary and Post- October Capital Loss Deferrals | Other Temporary Differences | Unrealized Appreciation/ (Depreciation)* | Accumulated Capital and Other Losses** | Total Accumulated Earnings/ (Deficit) | ||||||||||||||||||||||||||||||
Diversified Alternatives Fund | $ | – | $ | 50,542 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | (447,391 | ) | $ | (7,193,576 | ) | $ | (7,590,425 | ) | |||||||||||||||||
Diversified Income Fund | – | 55,786 | 102,546 | – | – | – | – | (336,602 | ) | – | (178,270 | ) | ||||||||||||||||||||||||||||
Dynamic Allocation Fund | – | 19,384 | 231,920 | – | – | – | – | 223,162 | – | 474,466 |
* | The difference between the book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to non-REITs dividend, ROC non-taxable dividend adjustment to income and tax deferral of losses on wash sales. |
** | As of October 31, 2018, for Federal income tax purposes, these Funds have capital loss carryforwards available to offset capital gains, if any, to the extent provided by the Treasury regulations. |
Amounts listed as “–” are $0 or round to $0.
As of October 31, 2018, for federal tax purposes, capital loss carryforwards, as shown in the table below, were available to the extent provided by the regulations to offset future realized gains on each respective fund throughout the years indicated.
Fund | Amount | Expires | ||||||
Diversified Alternatives Fund | $ | 1,084,237 | 2019 (Short-Term) | |||||
Diversified Alternatives Fund | 4,606,185 | Unlimited (Short-Term) | ||||||
Diversified Alternatives Fund | 1,503,154 | Unlimited (Long-Term) |
Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 or on the date of their formation, whichever is later, for an unlimited period. However, any losses
2018 Annual Report | 39 |
Notes to Financial Statements (continued)
October 31, 2018
incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to capital loss carryforwards that expired current year and non-taxable dividend adjustment. These reclassifications have no effect on net assets or NAVs per share.
Fund | Paid-in Capital | Distributable Earnings/ (Accumulated Loss) | ||||||
Diversified Alternatives Fund | $ | (6,953,184 | ) | $ | 6,953,184 | |||
Diversified Income Fund | – | – | ||||||
Dynamic Allocation Fund | 2,279 | (2,279 | ) |
8. Significant Shareholders
As of October 31, 2018, the Funds had shareholders with the percentage ownership indicated, which are considered significant shareholders (holdings greater than 5.0%) for financial reporting purposes:
Fund | Record Ownership % | Number of Account Owners | ||
Diversified Alternatives Fund | 58.7% | 5 | ||
Diversified Income Fund | 51.0 | 4 | ||
Dynamic Allocation Fund | 28.5 | 2 |
9. Line of Credit
The Trust, on behalf of each of the funds of the Trust (the “Borrowers”), has entered into an agreement (the “Agreement”) with State Street Bank and Trust Company (the “Bank”), subject to annual renewal. The Agreement provides for a revolving credit facility (the “Credit Facility”) for the amount of $250,000,000 to be utilized for temporary or emergency purposes to fund shareholder redemptions or other short-term liquidity purposes.
Principal on each outstanding loan made under the Agreement bears interest at a variable rate per annum equal to the higher of (a) the Federal Funds Rate as in effect on that day (not less than zero) plus 1.25% or (b) the One-Month London Interbank Offered Rate as in effect on that day (not less than zero) plus 1.25%. In addition, the Borrowers shall pay to the Bank a commitment fee at the rate of 0.25% per annum on the daily unused portion of the Credit Facility, as applicable, which is allocated among the Borrowers in such manner as is determined by the Board to be reasonable. For each Fund that borrowed under the Credit Facility during the fiscal year ended October 31, 2018, the following table shows the average outstanding daily balance for the Fund under the Credit Facility and the average weighted interest rate paid by the Fund during the fiscal year ended October 31, 2018.
Average Outstanding Daily Balance | Average Weighted Interest Rate | Days Utilized | ||||||||||
Diversified Alternatives Fund | $ | 2,175,000 | 2.72 | % | 2 | |||||||
Diversified Income Fund | 173,908 | 3.47 | % | 6 |
10. Recent Accounting Pronouncements
On August 17, 2018, the SEC voted to adopt amendments to certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The SEC will also be referring certain SEC disclosure requirements that overlap with, but require information incremental to, U.S. GAAP to the FASB for potential incorporation into U.S. GAAP. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments became effective November 5, 2018.
40 | Annual Report 2018 |
Notes to Financial Statements (concluded)
October 31, 2018
On August 28, 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 includes removals, additions and modifications to the disclosure requirements for fair value measurements that are intended to improve the effectiveness of disclosures in the notes to financial statements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. Aberdeen has evaluated ASU 2018-13 and determined that there is no significant impact on the Trust’s financial statements. Aberdeen has early adopted the following ASU 2018-13 guidance in the Trust’s financial statements pertaining to the removal of (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and (ii) the policy for timing of transfers between levels.
11. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures and/or adjustments were required to the financial statements as of October 31, 2018.
2018 Annual Report | 41 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of Aberdeen Funds:
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of the Aberdeen Diversified Alternatives Fund, Aberdeen Diversified Income Fund, and Aberdeen Dynamic Allocation Fund, three of the funds comprising Aberdeen Funds (the Funds), including the statements of investments, as of October 31, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of October 31, 2018, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian, the transfer agent of the underlying funds, and brokers, or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Aberdeen investment companies since 2009.
Philadelphia, Pennsylvania
December 27, 2018
42 | Annual Report 2018 |
Other Tax Information (Unaudited)
For the period ended October 31, 2018, certain dividends paid by the Funds may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2018 Form 1099-DIV.
2018 Annual Report | 43 |
Shareholder Expense Examples (Unaudited)
As a shareholder of the Aberdeen Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) paid on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, transfer agent out-of-pocket expenses, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Aberdeen Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples assume that you had a $1,000 investment in the Class at the beginning of the reporting period, May 1, 2018 and continued to hold your shares at the end of the reporting period, October 31, 2018.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Actual Expenses Paid During Period” for the class of a Fund that you own to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of a Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the information for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
Beginning Account Value, May 1, 2018 | Actual Ending Account Value, October 31, 2018 | Hypothetical Ending Account Value | Actual Expenses Paid During Period*+ | Hypothetical Expenses Paid During Period*+1 | Annualized Expense Ratio** | |||||||||||||||||||||
Diversified Alternatives Fund | Class A | $ | 1,000.00 | $ | 991.80 | $ | 1,022.08 | $ | 3.11 | $ | 3.16 | 0.62% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 988.60 | $ | 1,018.90 | $ | 6.27 | $ | 6.36 | 1.25% | |||||||||||||||
Class R | $ | 1,000.00 | $ | 990.20 | $ | 1,020.57 | $ | 4.62 | $ | 4.69 | 0.92% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 993.30 | $ | 1,023.44 | $ | 1.76 | $ | 1.79 | 0.35% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 994.20 | $ | 1,023.95 | $ | 1.26 | $ | 1.28 | 0.25% | |||||||||||||||
Diversified Income Fund | Class A | $ | 1,000.00 | $ | 971.20 | $ | 1,022.38 | $ | 2.78 | $ | 2.85 | 0.56% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 968.40 | $ | 1,018.90 | $ | 6.20 | $ | 6.36 | 1.25% | |||||||||||||||
Class R | $ | 1,000.00 | $ | 969.60 | $ | 1,020.77 | $ | 4.37 | $ | 4.48 | 0.88% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 972.60 | $ | 1,023.95 | $ | 1.24 | $ | 1.28 | 0.25% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 972.40 | $ | 1,023.95 | $ | 1.24 | $ | 1.28 | 0.25% | |||||||||||||||
Dynamic Allocation Fund | Class A | $ | 1,000.00 | $ | 961.20 | $ | 1,022.33 | $ | 2.82 | $ | 2.91 | 0.57% | ||||||||||||||
Class C | $ | 1,000.00 | $ | 958.70 | $ | 1,018.90 | $ | 6.17 | $ | 6.36 | 1.25% | |||||||||||||||
Class R | $ | 1,000.00 | $ | 960.10 | $ | 1,020.72 | $ | 4.40 | $ | 4.53 | 0.89% | |||||||||||||||
Institutional Service Class | $ | 1,000.00 | $ | 963.30 | $ | 1,023.95 | $ | 1.24 | $ | 1.28 | 0.25% | |||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 963.10 | $ | 1,023.95 | $ | 1.24 | $ | 1.28 | 0.25% |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period multiplied by 184/365 (to reflect the one-half year period). |
** | The expense ratio presented represents a six-month, annualized ratio. |
+ | Expenses are based on the direct expenses of the Fund and do not include the effect of the Underlying Funds’ expenses, which are disclosed in the Fee and expense table and described more fully in a footnote to that table in your Fund Prospectus. |
1 | Represents the hypothetical 5% return before expenses. |
44 | Annual Report 2018 |
Supplemental Information (Unaudited)
Board of Trustees’ Consideration of Advisory Agreements
At an in-person meeting of the Board of Trustees (the “Board” or the “Trustees”) of the Aberdeen Funds (the “Trust”) held on June 13, 2018, the Board, including a majority of the Trustees who are not considered to be “interested persons” of the Trust (the “Independent Trustees”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period the continuation of the Trust’s advisory agreement (the “Advisory Agreement”) with Aberdeen Asset Management Inc. (“AAMI” or the “Adviser”) for each of the following series of the Trust: Aberdeen Diversified Alternatives Fund, Aberdeen Diversified Income Fund and Aberdeen Dynamic Allocation Fund (each a “Fund,” and collectively the “Funds”). In addition, the Independent Trustees held a separate telephonic meeting on June 6, 2018 to review the materials provided and the relevant legal considerations (together with the in-person meeting held on June 13, 2018, the “Meetings”).
In connection with the Meetings, the Board reviewed a variety of information provided by the Adviser relating to the Funds, the Advisory Agreement and the Adviser, including comparative performance, fee and expense information and other information regarding the nature, extent and quality of services provided by the Adviser under the Advisory Agreement. The materials provided to the Board generally included, among other items: (i) information on the investment performance of the Funds and the performance of peer groups of funds and the Funds’ performance benchmarks; (ii) information on the Funds’ advisory fees and other expenses, including information comparing each Fund’s expenses to those of a peer group of funds and information about any applicable expense limitations and fee “breakpoints”; (iii) sales and redemption data with respect to each Fund; (iv) information about the profitability of the Advisory Agreement to the Adviser; (v) a report prepared by the Adviser in response to a request submitted by the Independent Trustees’ independent legal counsel on behalf of such Trustees; and (vi) a memorandum from the Independent Trustees’ independent legal counsel on the responsibilities of the Board in considering for approval the investment advisory arrangements under the 1940 Act and Delaware law. The Board, including the Independent Trustees, also considered other matters such as: (i) the Adviser’s financial results and financial condition; (ii) each Fund’s investment objective and strategies; (iii) the Adviser’s investment personnel and operations; (iv) arrangements relating to the distribution of the Funds’ shares and the related costs; (v) the procedures employed to determine the value of the Funds’ assets; (vi) the allocation of the Funds’ brokerage, if any, including, if applicable, allocations to brokers affiliated with the Adviser and the use, if any, of “soft” commission dollars to pay Fund expenses and to pay for research and other similar services; (vii) the resources devoted to, and the record of compliance with, the Funds’ investment policies and restrictions, policies on personal securities transactions and other compliance policies; and (viii) possible conflicts of interest. The Board also considered the nature, extent and quality of the services provided to the Funds by AAMI’s affiliates. Throughout the process, the Trustees were afforded the opportunity to ask questions of and request additional materials from AAMI.
In addition to the materials requested by the Trustees in connection with their annual consideration of the continuation of the Advisory Agreement, the Trustees received materials in advance of each regular quarterly meeting of the Board that provided information relating to the services provided by the Adviser, including detailed information about the Funds’ investment performance. This information generally included, among other things, third-party performance rankings for various periods (including prior to the Adviser’s management of the Funds) comparing each Fund against its peer group, total return information for various periods, and details of sales and redemptions of Fund shares for the period. The Board also received periodic presentations from the portfolio management teams in connection with the performance of the Funds.
The Independent Trustees were advised by separate independent legal counsel throughout the process. The Independent Trustees also consulted in executive sessions with counsel to the Independent Trustees regarding consideration of the renewal of the Advisory Agreement. In considering whether to approve the continuation of the Advisory Agreement, the Board of Trustees, including the Independent Trustees, did not identify any single factor as determinative. Individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. Matters considered by the Trustees, including the Independent Trustees, in connection with their approval of the continuation of the Advisory Agreement included the factors listed below.
The nature, extent and quality of the services provided to the Funds under the Advisory Agreement. The Trustees considered the nature, extent and quality of the services provided by AAMI to the Funds and the resources dedicated to the Funds by AAMI and its affiliates. The Board considered, among other things, the Adviser’s investment experience. The Board also considered the background and experience of the Adviser’s senior management personnel and the qualifications, background and responsibilities of the portfolio managers that are primarily responsible for the day-to-day portfolio management services for the Funds. The Trustees considered not only the advisory services provided by AAMI to the Funds, but also the administrative services provided by AAMI to the Funds under a separate administration agreement. AAMI’s role in coordinating the activities of the Trust’s other service providers was also considered. The Board also considered that it receives information on a regular basis from the Trust’s Chief Compliance Officer regarding the Adviser’s compliance policies and procedures. The Board also considered the Adviser’s risk management processes. The Board was also mindful of the Adviser’s focus on the monitoring of the performance of the Funds and in addressing performance matters. The Trustees also considered the benefits to shareholders of investing in a mutual fund that is part of a family of funds that
2018 Annual Report | 45 |
Supplemental Information (Unaudited) (continued)
offers shareholders the right to exchange shares of one type of fund for shares of another type of fund, and provides a variety of fund and shareholder services. The Board also took into account its knowledge of management and the quality of the performance of management’s duties through Board meetings, discussion and reports during the preceding year.
After reviewing these and related factors, the Board concluded that they were satisfied with the nature, extent and quality of the services provided and supported the renewal of the Advisory Agreement.
Investment performance of the Funds and the Adviser. The Trustees received information about the performance of the Funds over various time periods, including information that compared the performance of the Funds to the performance of peer groups of funds and each Fund’s performance benchmark. The Trustees also considered the performance of the Funds compared to the performance of comparable funds or accounts managed by AAMI and its affiliates to the extent available. In addition, the Trustees also reviewed data prepared by an independent third party that analyzed the performance of the Funds using a variety of performance metrics.
The Trustees also considered AAMI’s performance and reputation generally, the performance of the fund family generally, the historical responsiveness of AAMI to Trustee concerns about performance and the willingness of AAMI to take steps intended to improve performance. The Trustees also considered the performance of the Adviser since it commenced management of the Funds.
Based on these factors, the Board determined that the Adviser is an appropriate investment adviser for the Funds.
The Board further noted that it will continue to monitor the Funds’ performance and any actions taken by AAMI and its affiliates relating to performance.
The costs of the services provided and profits realized by the Adviser and its affiliates from their relationships with the Funds. The Trustees considered the fees charged to the Funds for advisory services as well as the total expense levels of the Funds. This information included comparisons (provided by an independent third party) of each Fund’s net management fee and total expense level to those of its expense peer group and information about the advisory fees charged by AAMI to any separately managed accounts with a similar strategy. In comparing each Fund’s net management fee to that of comparable funds, the Board noted that such fee includes both advisory and administrative fees. In considering the fees charged to any comparable accounts, the Trustees considered, among other things, management’s discussion of the different objectives, policies or restrictions that may be involved in managing the different types of accounts. In evaluating the Funds’ advisory fees, the Trustees also took into account the demands, complexity and quality of the investment management of the Funds.
The Board also considered that AAMI had entered into expense limitation agreements with the Funds, pursuant to which AAMI agreed to waive a portion of its advisory fee and/or reimburse certain expenses as a means of limiting each Fund’s total annual operating expenses for a period of time.
The Trustees also considered the compensation directly or indirectly received by AAMI and its affiliates from their relationships with the Funds. The Trustees reviewed information provided by management as to the profitability of AAMI and its affiliates’ relationships with the Funds, such as the engagement of affiliates of AAMI to provide distribution and administrative services to the Funds. The Trustees also examined the profitability of AAMI and its affiliates on a Fund-by-Fund basis. The Trustees also considered information about the allocation of expenses used to calculate profitability. When reviewing profitability, the Trustees also considered information about court cases regarding adviser profitability, the performance of the Funds, the expense levels of the Funds, and whether AAMI had implemented breakpoints and expense limitations with respect to the Funds.
After reviewing these and related factors, including taking into account management’s discussion regarding Fund expenses, the Board concluded that the advisory fees were fair and reasonable, and that the costs of these services generally and the related profitability of AAMI and its affiliates from their relationships with the Funds were reasonable and supported the renewal of the Advisory Agreement.
Economies of Scale. The Trustees considered the existence of any economies of scale in the provision of services by AAMI and whether those economies would be shared with the Funds through breakpoints in the investment advisory fees or other means, such as expense waivers or limitations. The Trustees noted that each of the Funds was subject to an expense limitation. The Board noted management’s discussion of the Funds’ advisory fee structure. The Trustees also took note of the costs of the services provided and the profitability to AAMI and its affiliates from their relationships with the Funds, as discussed above. The Board also considered the potential effect of each Fund’s growth and size on fees, noting that if a Fund’s assets increase over time, the Fund may realize other economies of scale if assets increase proportionally more than certain expenses.
After reviewing these and related factors, the Board concluded that the advisory fees were reasonable and supported the renewal of the Advisory Agreement.
46 | Annual Report 2018 |
Supplemental Information (Unaudited) (concluded)
The Trustees also considered other factors, which included but were not limited to the following:
• | the effect of any market and economic volatility on the performance, asset levels and expense ratios of the Funds. |
• | whether the Funds have operated in accordance with their investment objectives and the Funds’ record of compliance with their investment restrictions, and the compliance programs of the Trust and AAMI. The Trustees also considered the compliance-related resources AAMI and its affiliates were providing to the Funds. |
• | the nature, quality, cost and extent of administrative services performed by AAMI under the Advisory Agreement and under a separate agreement covering administrative services. |
• | so-called “fallout benefits” to AAMI, such as the benefits of research made available to AAMI by reason of brokerage commissions generated by the Funds’ securities transactions or reputational and other indirect benefits. The Trustees considered any possible conflicts of interest associated with these fallout and other benefits, and the reporting, disclosure and other processes in place to disclose and monitor such possible conflicts of interest. |
* * *
Based on their evaluation of all factors that they deemed to be material, including those factors described above, and assisted by the advice of independent counsel, the Trustees, including the Independent Trustees, concluded that renewal of the Advisory Agreement would be in the best interest of each of the Funds and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement for an additional one-year period.
2018 Annual Report | 47 |
Management of the Funds (Unaudited)
As of October 31, 2018
Board of Trustees and Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are not interested persons (as defined in the 1940 Act) of the trust (“Independent Trustees”) | ||||||||
P. Gerald Malone**** Year of Birth: 1950 | Trustee since December 2007 Chairman of the Board | Mr. Malone is, by profession, a solicitor of over 40 years standing. As a member of the UK House of Commons, he served as a Minister of State in the United Kingdom Government. Mr. Malone currently serves as an independent director of Bionik Laboratories Corp., a US healthcare company, specializing in stroke rehabilitation using robotic devices. He is Chairman of the Board of Trustees of Aberdeen Funds, Chairman of the Board of Directors of Aberdeen Global Income Fund, Inc., Chairman of the Board of Directors of Aberdeen Asia-Pacific Income Fund, Inc. Chairman of the Board of Directors of Aberdeen Global Dynamic Dividend Fund, Chairman of the Board of Directors of Aberdeen Total Dynamic Dividend Fund, Chairman of the Board of Directors of Aberdeen Global Premier Properties Fund, Chairman of the Board of Directors of Aberdeen Income Credit Strategies Fund and a Director of Aberdeen Australia Equity Fund, Inc. He previously served as Independent Chairman of UK companies, Crescent OTC Ltd (pharmaceutical services) until February 2018; and fluidOil Ltd. (oil services) until June 2018; U.S. company Rejuvenan llc (wellbeing services) until September 2017 and as chairman of UK company, Ultrasis plc (healthcare software services company) until October 2014. | 32 | None. | ||||
Neville J. Miles**** Year of Birth: 1946 | Trustee since December 2011 | Mr. Miles is, and has been for over ten years, Chairman of Ballyshaw Pty. Ltd. (share trading, real estate development and investment). He is Chairman of the Board of Directors of Aberdeen Australia Equity Fund, Inc. He also is a non-executive director of a number of Australian and overseas companies. | 28 | None. |
48 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Rahn K. Porter**** Year of Birth: 1954 | Trustee since September 2016 | Mr. Porter has been the Chief Financial Officer of The Colorado Health Foundation since 2013. Previously, he was the Interim Chief Executive Officer of the Colorado Health Foundation from 2014 to 2015 and was Senior Vice President and Treasurer, Qwest Communications International Inc. (telecommunications) from 2008 to 2011. | 27 | Director, CenturyLink Investment Management Company, since 2006; Director, BlackRidge Financial Inc., since March, 2005. | ||||
Steven N. Rappaport**** Year of Birth: 1948 | Trustee since September 2016 | Mr. Rappaport has been a Partner of Lehigh Court, LLC (private investment firm) and RZ Capital LLC (private investment firm) since 2004. | 26 | Director of iCAD, Inc., since 2006; Director of Credit Suisse Funds (9) since 1999; Director of Credit Suisse Asset Management Income Fund, Inc. since 2005 and Director of Credit Suisse High Yield Bond Fund, Inc. since 2005. | ||||
Peter D. Sacks**** Year of Birth: 1945 | Trustee since December 2007 | Mr. Sacks was a Director and Founding Partner of Toron AMI International Asset Management (investment management) from 1988 to 2015. He is currently a Director of Aberdeen Asia-Pacific Income Fund Inc., Aberdeen Global Income Fund Inc., Aberdeen Australia Equity Fund Inc. and Tricon Capital Group Inc. | 28 | None. | ||||
Warren C. Smith**** Year of Birth: 1955 | Trustee since December 2007 | Mr. Smith has been a founding partner of MRB Partners Inc. (independent investment research and consultancy firm) since 2010. He has been a Director of Aberdeen Asia-Pacific Income Investment Company Limited (Canadian investment fund) since 1993. Mr. Smith was a Managing Editor with The Bank Credit Analyst Research Group (independent publishers of financial market research and publications, including The Bank Credit Analyst) from 1982 to 2009. | 26 | None. |
2018 Annual Report | 49 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are interested persons (as defined in the 1940 Act) of the trust (“Interested Trustees”) | ||||||||
Martin Gilbert****† Year of Birth: 1955 | Trustee since December 2007 | Martin is the Co-Chief Executive of Standard Life Aberdeen PLC, the company formed as a result of the merger between Aberdeen Asset Management PLC and Standard Life plc in August 2017. Prior to this, Martin was a co-founder and the Chief Executive of Aberdeen Asset Management, which was established as a dedicated asset manager in 1983. | 32 | Chairman, Prudential Regulation Authority’s Practitioner Panel, Director, Institute of International Finance, Non-Executive Director, Glencore plc |
* | Each Trustee holds office for an indefinite term until his successor is elected and qualified. |
** | The Aberdeen Fund Complex consists of the Trust, which currently consists of 25 portfolios, Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Global Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds, which currently consists of 4 portfolios, and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios. |
*** | Directorships held in (1) any other investment companies registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange Act. |
**** | Each Trustee may be contacted by writing to the Trustee c/o Aberdeen Asset Management Inc., 1735 Market Street, 32nd Floor, Philadelphia, Pennsylvania 19103, Attn: Alan Goodson. |
† | Mr. Gilbert is considered to be an “interested person” of the Trust as defined in the 1940 Act because of his affiliation with the Adviser. |
50 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Bev Hendry** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1953 | President, Chief Executive Officer and Principal Executive Officer (Since September 2014) | Currently, Chairman–Americas for Standard Life Aberdeen plc (2018-present). Mr. Hendry was Chief Executive Officer–Americas for Aberdeen Asset Management PLC (2014-2018) and Chief Operating Officer for Hansberger Global Investors (2008-2014). | ||
Jeffrey Cotton** Aberdeen Asset Managers Limited 6 St Andrew Square Edinburgh EH2 2AH Year of Birth: 1977 | Vice President and Chief Compliance Officer (Since March 2011) | Currently, Interim Global Head of Conduct & Compliance for Standard Life Aberdeen plc. Mr. Cotton is also Vice President of Aberdeen Fund Distributors LLC. Mr. Cotton joined Aberdeen in 2010. | ||
Joseph Andolina** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President–Compliance (Since March 2017) | Currently, Head of Conduct & Compliance–Americas/Deputy Chief Risk Officer for Aberdeen Asset Management Inc. Prior to joining the Compliance Department, he was a member of Aberdeen’s Legal Department, where he served as U.S. Counsel and worked primarily on matters relating to Aberdeen’s registered funds. | ||
Andrea Melia** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1969 | Treasurer, Chief Financial Officer, and Principal Accounting Officer (Since September 2009) | Currently, Vice President and Head of Fund Operations, Traditional Assets–Americas for Aberdeen Asset Management Inc. (since 2009). | ||
Megan Kennedy** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Secretary and Vice President (Since September 2009) | Currently, Head of Product Management for Aberdeen Asset Management Inc. Ms. Kennedy joined Aberdeen Asset Management Inc. in 2005 as a Senior Fund Administrator. | ||
Lucia Sitar** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1971 | Vice President (Since December 2008) | Currently, Vice President and Managing U.S. Counsel for Aberdeen Asset Management Inc. Ms. Sitar joined Aberdeen Asset Management Inc. in July 2007. | ||
Alan Goodson** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Vice President (Since March 2009) | Currently, Director, Vice President and Head of Product–Americas for Aberdeen Asset Management Inc., overseeing Product Management and Product Development for Aberdeen’s registered and unregistered investment companies in the U.S. and Canada. Mr. Goodson is Director and Vice President of Aberdeen Asset Management Inc. and joined Aberdeen in 2000. |
2018 Annual Report | 51 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Adam McCabe** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1979 | Vice President (Since March 2010) | Currently, Head of Asian Fixed Income. Mr. McCabe joined Aberdeen Asset Management via the acquisition of certain asset management businesses from Credit Suisse in 2009. | ||
Jennifer Nichols** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President (Since December 2007) | Currently, Head of Legal–Americas for Aberdeen Asset Management Inc. Director and Vice President for Aberdeen Asset Management Inc. (since October 2006). | ||
Hugh Young** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1958 | Vice President (Since June 2011) | Currently, Managing Director of Aberdeen Standard Investments (Asia) Limited (since 1991) and member of the Executive Management Committee and Director of Standard Life Aberdeen plc (since 1991 and 2011, respectively). Mr. Young joined Aberdeen in 1991. | ||
Ben Moser** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1979 | Vice President (Since September 2018) | Currently, Head of Investor Services–US. Mr. Moser joined Aberdeen Asset Management in July 2008. | ||
Brian O’Neill** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1968 | Assistant Treasurer (Since September 2008) | Currently, Senior Fund Administration Manager–U.S. for Aberdeen Asset Management Inc. Mr. O’Neill joined Aberdeen Asset Management Inc. in 2008. | ||
Eric Olsen** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1970 | Assistant Treasurer (Since December 2013) | Currently, Deputy Head of Fund Administration–U.S. for Aberdeen Asset Management Inc. Mr. Olsen joined Aberdeen Asset Management Inc. in August 2013. | ||
Andrew Kim** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1983 | Assistant Secretary (Since March 2017) | Currently, Senior Product Manager. Mr. Kim joined Aberdeen Asset Management Inc. in August 2013. |
52 | Annual Report 2018 |
Management of the Funds (Unaudited) (concluded)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Stephen Varga** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1985 | Assistant Secretary (Since March 2017) | Currently, Product Manager. Mr. Varga joined Aberdeen Asset Management Inc. in 2011. |
* | Each officer holds office for an indefinite term at the pleasure of the Board of Trustees and until his or her successor is elected and qualified. |
** | Mr. Hendry, Ms. Melia, Ms. Kennedy, Mr. Goodson, Ms. Nichols, Mr. Cotton, Mr. McCabe, Mr. Young, Ms. Sitar, Mr. Andolina, Mr. Moser, Mr. Olsen, Mr. O’Neill, Mr. Kim and Mr. Varga hold officer position(s) in one or more of the following: Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Global Income Fund, Inc., Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds (consisting of 4 portfolios) and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios, each of which may also be deemed to be a part of the same “Fund Complex” as the Trust. |
2018 Annual Report | 53 |
Management Information
Trustees
P. Gerald Malone, Chairman
Martin J. Gilbert
Neville J. Miles
Rahn K. Porter
Steven N. Rappaport
Peter D. Sacks
Warren C. Smith
Officers
Bev Hendry, President and Chief Executive Officer
Jeffrey Cotton, Chief Compliance Officer and Vice President
Joseph Andolina, Vice President – Compliance
Andrea Melia, Treasurer and Chief Financial Officer
Megan Kennedy, Secretary and Vice President
Lucia Sitar, Vice President
Alan Goodson, Vice President
Adam McCabe, Vice President
Ben Moser, Vice President
Jennifer Nichols, Vice President
Hugh Young, Vice President
Eric Olsen, Assistant Treasurer
Brian O’Neill, Assistant Treasurer
Andrew Kim, Assistant Secretary
Stephen Varga, Assistant Secretary
Investment Manager
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Fund Administrator
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Transfer Agent
DST Asset Manager Solutions, Inc.
333 West 11th Street
Kansas City, MO 64105
Distributor
Aberdeen Fund Distributors LLC
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Sub-Administrator, Custodian & Fund Accountant
State Street Bank and Trust Company
1 Heritage Drive, 3rd Floor
North Quincy, MA 02171
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Fund Counsel
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Aberdeen Asset Management Inc. 1735 Market Street, 32nd Floor Philadelphia, PA 19103 aberdeen-asset.us |
AOE-0142-AR
Aberdeen Funds
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Annual Report
October 31, 2018
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Investors should carefully consider a fund’s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a prospectus, or download a prospectus at www.aberdeen-asset.us. Please read it carefully before investing any money.
Mutual fund investing involves risk. Principal loss is possible.
Aberdeen Funds is distributed by Aberdeen Fund Distributors LLC, Member FINRA, 1735 Market Street, 32nd Floor, Philadelphia, PA 19103.
Aberdeen Asset Management Inc. (AAMI) has been registered as an investment adviser under the Investment Advisers Act of 1940 since August 23, 1995.
Statement Regarding Availability of Quarterly Portfolio Schedule.
The complete schedule of portfolio holdings for each fund of Aberdeen Funds (each a “Fund” and collectively, the “Funds”) is included in the Funds’ semi-annual and annual reports to shareholders. Aberdeen Funds also files complete schedules of portfolio holdings for each Fund with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q filings are available on the Commission’s website at http://www.sec.gov. The Funds’ Form N-Q filings may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330; and the Funds make the information on Form N-Q available to shareholders on www.aberdeen-asset.us or upon request without charge.
Statement Regarding Availability of Proxy Voting Record.
Information regarding the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-866-667-9231. The information is also included in the Funds’ Statement of Additional Information, which is available on the Funds’ website at www.aberdeen-asset.us and on the Commission’s website at www.sec.gov.
Information relating to how each Fund voted proxies relating to portfolio securities held during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling 1-866-667-9231; and (ii) on the Commission’s website at www.sec.gov.
Global financial markets weathered numerous bouts of significant volatility during the 12-month period ended October 31, 2018, capped off by a major downturn in October 2018. Global stock markets in aggregate gained ground for the first few months of the period, as generally upbeat corporate earnings reports, tax reform in the U.S., and relatively steady economic growth buoyed investors’ confidence. However, market sentiment soon turned negative amid concerns that rising inflation could lead to more aggressive global central bank monetary policy, as well as fears of a possible global trade war spurred by tensions between the U.S and China. Global equities recovered during the third quarter of 2018, led by the U.S., with the broader-market Standard and Poor’s (S&P) 500 Index1 climbing 7.7% – its strongest quarterly performance since 2013. Nonetheless, in an apparent case of “financial whiplash,” global markets declined sharply towards the end of the reporting period in October. Investors were rattled by concerns ranging from lower corporate earnings estimates to the impact of continued monetary policy normalization. There also was a spike in U.S. Treasury yields during the month, triggered by expectations of further U.S. Federal Reserve (Fed) interest-rate increases. Shares of technology companies tumbled as higher interest rates led to investors’ apprehension about the rising valuations in the sector.
There was divergent performance among the regional stock markets during the 12-month reporting period. The Morgan Stanley Capital International (MSCI) World Index,2 a global equity market benchmark, posted a modest gain of 1.7% for the period, despite the vast majority of its constituents recording losses for the period. The U.S. was the lone major developed market to garner a positive return, while European stocks declined and were the weakest performers. Global emerging equity markets, as represented by the MSCI Emerging Markets Index,3 fell 12.2% over the reporting period, hampered by the strengthening U.S. dollar, which weighed on vulnerable economies with substantial foreign debt. The escalating trade tensions between the U.S. and China had a negative impact on Asia-Pacific stock markets, which declined 11.8% for the period, as measured by the MSCI All Country (AC) Asia Pacific ex Japan Index.4
While shares of U.S. companies could not avoid the sell-off in the global financial markets in October 2018, they finished the 12-month reporting period in positive territory. The U.S. market was bolstered for most of the period by generally positive economic data and corporate earnings reports, as well as the tax reform legislation that was enacted in late 2017. Many large-cap companies responded to the reduction of the top U.S. corporate tax rate from 35% to 21% by increasing their dividend payments and accelerating share repurchases. Late in the period, however, as investors worried that rising wage pressure and inflation could force the Fed to tighten monetary policy more aggressively than previously forecast. U.S. large-cap stocks, as represented by the S&P 500 Index, gained 7.4% during the reporting period, substantially outperforming the corresponding 2.8% and 1.9% returns of their mid- and small-cap counterparts, as measured by the Russell Midcap5 and Russell 20006 indices, respectively.
Shares of large-cap companies in the Asia-Pacific region fell sharply over the reporting period, hampered in part by investors’ concerns about a possible U.S.-China trade war. In June 2018, the administration of U.S. President Donald Trump assessed tariffs on US$50 billion in Chinese imports. Three months later, the U.S. placed an additional US$200 billion of levies on Chinese imports. China responded without escalating rhetoric while allowing its currency, the renminbi, to depreciate further against the U.S. dollar. Additionally, the weak investor sentiment in mainland China was compounded by fears over the country’s moderating economic growth.
One of the key reasons for the weakness in emerging-market equities was the liquidity squeeze on the U.S. dollar, stemming from the U.S. tax reforms that encouraged U.S. companies to repatriate7 their cash, as well as the Fed’s hawkish monetary policy stance. Turkey bore the brunt of the downturn amid worries about the central bank’s unwillingness to adopt orthodox economic policies and the government’s deteriorating relations with the U.S. In Mexico, Andres Lopez Obrador, the left-wing candidate, won Mexico’s presidential election in July 2018. While this outcome was expected, the market has become increasingly concerned with his plans to unwind some of the reforms that had occurred under his predecessor, Pena Nieto. Japan’s longest economic growth streak in 28 years stalled in the first quarter of 2018, but the economy subsequently resumed its momentum. An upgrade of second-quarter 2018 gross domestic product (GDP) data was attributable to an increase in capital investments. This was partly the result of the tight Japanese labor market, which saw the unemployment rate reach its lowest since the 1990s, boosting investments in labor-saving technologies.
Regarding the global fixed-income markets during the reporting period, capital outflows from emerging markets quickened due to the Fed’s ongoing rate-hike cycle and rising U.S. Treasury yields. As monetary policy normalization accelerated in the West, the easing cycle also came to an end in most parts of Asia. Indonesia’s central bank led the charge, raising its benchmark interest rate five times over the reporting period in a bid to stem the falling Indonesian rupiah as most emerging-market currencies succumbed to broad U.S.-dollar strength. Central banks in the Philippines and India also increased interest rates, but more in response to rising inflation, given the threat posed by higher global oil prices after U.S. President Trump reimposed economic sanctions on Iran. Yields on U.S. Treasuries rose, with two-, five- and ten year yields increasing by 127, 97 and 77 basis points (bps), respectively, over the reporting period, and this pressured higher-quality, lower-yielding and longer duration8 credit. U.S. and European high-yield markets saw marginal gains over the reporting period. Corporate earnings remained supported by generally positive economic growth, while default rates remained low. Supply was also lower than that in 2017 as companies, faced with rising borrowing costs, responded by reducing new issuance. However, investor sentiment in the U.S. deteriorated towards the end of the reporting period as trade tensions with China worsened and businesses began to forecast more conservative revenues and profitability in the ensuing quarters.
Global real estate equity markets faced a challenging environment during the reporting period. While the Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT)
2018 Annual Report | 1 |
Market Review (concluded)
Global Real Estate Index9 ended the period with a modest negative return, there were considerable variations in country-level returns. The performance of real estate markets in developed countries was modestly positive, while emerging markets generally posted negative returns for the reporting period.
Outlook
As we near the end of 2018, global financial markets are beset by worries over rising interest rates, trade tensions and a slowing global economy. Although the U.S. market initially appeared to be indifferent to these concerns, the technology rally which had underpinned the current bull market appears to have faltered. Other threats remain, including Italy’s fiscal problems and political uncertainty in Europe caused by negotiations surrounding the UK’s exit from the EU (“Brexit”), which have yet to provide clarity on what the outcome will be for the UK or Europe.
The UK remains a member of the EU until the legally established departure date of March 29, 2019 and, until such date, all existing EU-derived laws and regulations continue to apply in the UK. Those laws may continue to apply for a transitional period, depending on whether a deal is struck and, if so, what that deal is. In any event, the UK’s on-shoring of EU legislation currently envisages no policy changes to EU law. However, the EU has not yet provided any material cushion from the effects of Brexit for financial services as a matter of EU law. Whether or not a Fund invests in securities of issuers located in Europe (whether the EU, Eurozone or UK) or with significant exposure to European, EU, Eurozone or UK issuers or countries, the unavoidable uncertainties and events related to Brexit could negatively affect the value and liquidity of a Fund’s investments, increase taxes and costs of business and cause volatility in currency exchange rates and interest rates. Brexit could adversely affect the performance of contracts in existence at the date of Brexit and European, UK or worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions, regulatory agencies and financial markets. Brexit could also lead to legal uncertainty and politically divergent national laws and regulations as a new relationship between the UK and EU is defined and the UK determines which EU laws to replace or replicate. Any of these effects of Brexit, and others that cannot be anticipated, could adversely affect a Fund’s business, results of operations and financial condition. In addition, the risk that Standard Life Aberdeen plc, the parent of the companies that provide investment advisory and sub-advisory services to the Funds and which is headquartered in the UK, fails to adequately prepare for Brexit could have significant customer, reputation and capital impacts for Standard Life Aberdeen plc and its subsidiaries, including those providing services to the Funds; however, we have detailed contingency planning in place to seek to manage the consequences of Brexit on the Funds and to avoid any disruption on the Funds and to the services we provide. Given the fluidity and complexity of the situation, however, we cannot assure that the Funds will not be adversely impacted despite our preparations.
We remain cautious on the growing divergence across global markets, with strength in U.S. macroeconomic data contrasting with slowing growth across other economies and markets. With the U.S. economy gradually moving closer towards full capacity, the Federal Reserve maintains its monetary policy tightening stance and is expected to continue to raise interest rates into 2019. In Asia, China continues to balance further trade-related responses towards the U.S. with managing and maintaining its closely monitored economic growth rates.
Aberdeen Standard Investments
1 | The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index. |
2 | The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed-market countries. |
3 | The MSCI Emerging Markets Index tracks the performance of large- and mid-cap stocks across 24 emerging-market countries. |
4 | The MSCI AC Asia Pacific ex Japan Index tracks the performance of large and mid-cap representation across two of three developed-market countries (excluding Japan) and nine emerging-market countries in Asia. |
5 | The Russell Midcap Index is an unmanaged index considered representative of U.S. mid-cap stocks. |
6 | The Russell 2000 Index is an unmanaged index considered representative of U.S. small-cap stocks. |
7 | Repatriation refers to a corporation’s conversion of any offshore capital back to the currency of the country in which the corporation is based. |
8 | Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements. |
9 | The FTSE EPRA/NAREIT Index is an unmanaged index considered representative of real estate companies and REITs outside the U.S. |
2 | Annual Report 2018 |
Aberdeen International Real Estate Equity Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine International Real Estate Equity Fund (the “Predecessor Fund”), a series of Alpine Equity Trust, in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen International Real Estate Equity Fund (Institutional Class shares net of fees) returned -10.35% for the 12-month period ended October 31, 2018, versus the -6.39% return of its primary benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index, and the -3.93% return of the Financial Times Stock Exchange European Public Real Estate Association/ National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT) Global ex-US Index for the same period. For broader comparison, the average return of the Fund’s peer category of International Real Estate Funds (comprising 17 funds), as measured by Lipper, Inc., was -3.24%.
International real estate equities generated weak results during the 12-month reporting period. In developed markets outside the U.S., Europe was hampered by diminishing economic momentum and signs of strengthening inflation. Retail landlords globally also suffered ongoing weakness due to structural concerns from internet retailers. Emerging-markets (EM) real estate companies were hurt by U.S. dollar appreciation and rising interest rates. In addition, political uncertainty in key markets such as Mexico and Brazil, along with the ongoing trade dispute between China and the U.S., were headwinds for performance.
During the period of November 1, 2017 through May 4, 2018, the most significant detractor from the Predecessor Fund’s relative performance versus the FTSE EPRA/NAREIT Global ex-US Index was the allocation to the U.S., which is not represented in the index. The Predecessor Fund’s exposure to the U.S. market was concentrated in homebuilders and data-center real estate investment trusts (REITs). In the UK, both the Predecessor Fund’s underweight positioning and poor stock selection weighed on relative performance. Stock selection in Germany also was a detractor, particularly the Predecessor Fund’s holdings in two real estate asset management firms. The most significant individual stock detractor from the Predecessor Fund’s relative performance was Emaar Properties PJSC in the United Arab Emirates. The property developer’s share price declined due to both a weakening operating environment in general and, in particular, a spin-off of the company’s development business in the fourth quarter of 2017 at a lower valuation than the market generally had expected. The Predecessor Fund subsequently eliminated its position in the company. The Predecessor Fund’s holding in U.S.-based data-center REIT QTS Realty Trust Inc. was also had a negative impact on relative performance. Investors took a negative view of the unexpected news of the company’s strategic shift in its business toward hyperscale1 data centers and a reshuffling of the top sales and operations management just several months after its investor day in November 2017.
At the country level, the Predecessor Fund’s overweight exposure to Japan, particularly real estate developers, was the largest contributor to relative performance versus the benchmark over this period. Shares of Japanese developers posted gains on the back of a resilient office-leasing sector, where preleasing of the new round of office towers being delivered in 2018 and 2019 remained strong and Class A2 vacancy rates dipped below 2%. The largest contributor to the Predecessor Fund’s relative performance among individual holdings was Open House Co. Ltd. The Japanese developer of single and multi-family housing posted stronger-than-expected earnings over this period and announced a mid-term business plan which, in our view, suggested that the growth might continue for several years. Another key contributor was the Fund’s holding in Dalata Hotel Group, a rapidly expanding Irish owner/operator of three- and four-star hotels. Dalata outperformed operating expectations during its 2017 fiscal year, with approximately 10% growth in revenue per available room and over 20% growth in earnings before interest, tax, depreciation and amortization (EBITDA). Additionally, the company progressed with the next stage of its growth strategy, which will focus on seeking to take market share in fragmented UK regional markets.
From May 5, 2018 through October 31, 2018, Aberdeen International Real Estate Equity Fund’s performance relative to the FTSE EPRA/NAREIT Global ex-US Index was hampered by holdings in housing developers as the environment turned more challenging due to rising interest rates, affordability concerns, rising inflation and new/tighter policy restrictions in countries such as China and Singapore. An overweight position in EMs such as India and Brazil was also a significant detractor given the overall underperformance of the asset class. Among the largest detractors from the Fund’s relative performance among individual holdings for the reporting period were SARE Homes, DB Realty Ltd. and Shinoken Group Co. Ltd. SARE Homes is an unlisted private company developing housing in India and is not represented in the benchmark index. Its shares declined after creditors launched bankruptcy proceedings. DB Realty is a small-cap Indian developer whose shares sold off along with broader Indian real estate sector over the reporting period. We exited the position in the company in the third quarter of 2018, as part of our effort to reduce the Fund’s EM exposure. Shinoken Group is a small-cap Japanese company that develops and manages rental housing for individual investors. Its shares declined on allegations of fraudulent
1 | Hyperscale refers to the facilities and provisioning required in distributed computing environments to efficiently scale from a few servers to thousands of servers. Hyperscale computing is typically used for big data and cloud-computing businesses. |
2 | Class A properties comprise the highest-quality buildings in their market and geographical area. They are generally newer properties built within the last 15 years with top amenities, high income-earning tenants and low vacancy rates. |
2018 Annual Report | 3 |
Aberdeen International Real Estate Equity Fund (Unaudited) (concluded)
mortgage applications submitted on behalf of customers by Tateru Inc., a key competitor. This triggered investors’ concerns that the practice could be widespread throughout the industry and that it may prompt increased scrutiny and regulation of investor mortgages that would reduce liquidity in the market. Against this backdrop, we reduced the Fund’s position in Shinoken Group.
On the upside, the Fund’s underweight allocation to Chinese developers relative to the benchmark benefited performance over the reporting period, as these companies generally underperformed along with their EM peers. Stock selection in Japanese REITs contributed to the Fund’s relative performance. Specifically, the Fund had exposure to three mid-cap office REITs that were among the few in Japan benefiting from positive rental growth. In Europe, the Fund’s relative performance benefited from its underweight to retail REITs. This portion of the market performed poorly due to fears about the sustainability of capital values as retail spending moves online. The largest contributors to the Fund’s relative performance among individual holdings were Country Garden Holdings Co., ADO Properties S.A., and Invesco Office J-REIT Inc. An underweight position in Country Garden enhanced Fund relative performance as its shares sold off along with those of other China housing developers given U.S.-China trade war fears and restrictive policy measures. ADO Properties is a Berlin, Germany-based residential landlord whose shares rose on the back of continued strong growth in rental and capital values. Berlin is being supported by strong demographic growth and job creation that is causing rents and property values to narrow their long-term discounts to those of other large German cities. Invesco Office J-REIT continued to benefit from rental growth in the Japanese office market over the reporting period.
As we near the end of 2018, we remain cautious on the growing divergence across global markets, with strength in U.S. macroeconomic data contrasting with slowing growth across other economies and markets. With the U.S. economy gradually moving closer towards full capacity, the Federal Reserve maintains its monetary policy tightening stance and is expected to continue to raise interest rates into 2019. In Asia, China continues to balance further trade-related responses towards the U.S. with managing and maintaining its closely monitored economic growth rates. We have maintained the Fund’s underweight allocation relative to its benchmark to Hong Kong, where we believe that residential developers are vulnerable to rising interest rates and stretched affordability. The Fund remains overweight to Europe, as we believe that yield compression3 has largely run its course and so occupancy gains, rental growth and development are becoming the key drivers of total returns. We believe that there likely will be further pockets of political and market volatility into the end of 2018 and beyond as the Italian government tests the limits of the European Union relationship and the Brexit negotiations conclude.
In this uncertain environment, we remain committed to our fundamentals-focused investment process, seeking companies that we believe have strong and sustainable business models and management teams with a conservative mindset toward balance-sheet structure.
Portfolio Management:
Aberdeen Global Real Estate team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
The Fund is subject to concentration risk, meaning the Fund may concentrate portfolio assets in companies within the same or related industry. Therefore, the Fund is more exposed to volatility within that industry than a fund that was not concentrated.
Investments in real estate securities may involve greater risk and volatility including greater exposure to economic downturns and changes in real estate values, rents, property taxes, interest rates, tax and other laws. A REIT’s share price may decline because of adverse developments affecting the real estate industry.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and currency exchange rate, political and economic risks. Fluctuations in currency exchange rates may impact the Fund’s returns more greatly to the extent the Fund does not hedge currency exposure or hedging techniques are unsuccessful. These risks are enhanced in emerging markets countries.
Equity securities of micro-, small- and mid-cap companies carry greater risk, and more volatility than equity securities of larger, more established companies.
Please read the prospectus for more detailed information regarding these and other risks.
3 | Yield compression occurs when property prices increase as rental yields concurrently decrease. |
4 | Annual Report 2018 |
Aberdeen International Real Estate Equity Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | Inception4 | ||||||||||||||
Class A | w/o SC | -10.52% | -1.69% | N/A | 2.99% | |||||||||||||
w/SC2 | -15.66% | -2.84% | N/A | 2.10% | ||||||||||||||
Institutional Class3 | w/o SC | -10.35% | -1.43% | 7.14% | 4.31% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | Not subject to any sales charges. |
4 | Predecessor Fund commenced operations on February 1, 1989. The first offering of Class A shares was December 30, 2011. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen International Real Estate Equity Fund, the Morgan Stanley Capital International (MSCI) EAFE Index, FTSE EPRA/NAREIT Global ex US Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses or sales charges. Investors cannot invest directly in market indexes.
MSCI EAFE Index is a total return, free-float adjusted market capitalization weighted index that measures the performance of stocks from Europe, Asia, and the Far East. This is one of the most widely used measures of international stock performance.
FTSE EPRA/NAREIT Global ex-U.S. Index is a total return index that is designed to represent general trends in eligible real estate equities outside the United States.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 5 |
Aberdeen International Real Estate Equity Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 98.2% | |||
Short-Term Investment | 2.6% | |||
Liabilities in Excess of Other Assets | (0.8)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries.
Top Sectors | ||||
Real Estate | 93.2% | |||
Consumer Discretionary | 3.3% | |||
Information Technology | 1.7% | |||
Other | 1.8% | |||
100.0% |
Top Holdings* | ||||
CK Asset Holdings Ltd. | 2.8% | |||
Goodman Group, REIT | 2.7% | |||
Vonovia SE | 2.6% | |||
ADO Properties SA | 2.5% | |||
New World Development Co. Ltd. | 2.5% | |||
Gecina SA, REIT | 2.4% | |||
China Resources Land Ltd. | 2.3% | |||
Daiwa Office Investment Corp., REIT | 2.2% | |||
GLP J-Reit | 2.2% | |||
Invesco Office J-Reit, Inc. | 2.1% | |||
Other | 75.7% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
Japan | 17.4% | |||
Hong Kong | 9.1% | |||
China | 8.6% | |||
Germany | 8.2% | |||
United States | 6.9% | |||
United Kingdom | 6.0% | |||
Australia | 5.0% | |||
Brazil | 4.8% | |||
Spain | 4.8% | |||
France | 4.3% | |||
Other | 24.9% | |||
100.0% |
6 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen International Real Estate Equity Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (98.2%) | ||||||||
AUSTRALIA (5.0%) | ||||||||
Real Estate (5.0%) | ||||||||
Goodman Group, REIT (a) | 352,364 | $ | 2,589,680 | |||||
Mirvac Group, REIT (a) | 376,475 | 579,107 | ||||||
Scentre Group, REIT | 596,681 | 1,681,708 | ||||||
4,850,495 | ||||||||
AUSTRIA (1.6%) | ||||||||
Real Estate (1.6%) | ||||||||
CA Immobilien Anlagen AG | 48,297 | 1,572,182 | ||||||
BELGIUM (1.7%) | ||||||||
Real Estate (1.7%) | ||||||||
VGP NV | 23,000 | 1,625,580 | ||||||
BRAZIL (4.8%) | ||||||||
Real Estate (4.8%) | ||||||||
BR Malls Participacoes SA (b) | 300,000 | 1,023,781 | ||||||
Construtora Tenda SA (b) | 100,000 | 766,627 | ||||||
Cyrela Commercial Properties SA Empreendimentos e Participacoes | 140,804 | 336,734 | ||||||
General Shopping e Outlets do Brasil SA (b) | 580,900 | 530,716 | ||||||
MRV Engenharia e Participacoes SA | 430,736 | 1,462,986 | ||||||
Sao Carlos Empreendimentos e Participacoes SA | 66,163 | 568,914 | ||||||
4,689,758 | ||||||||
CANADA (2.7%) | ||||||||
Real Estate (2.7%) | ||||||||
Allied Properties Real Estate Investment Trust, REIT | 31,132 | 1,000,330 | ||||||
Dream Global Real Estate Investment Trust, REIT | 161,000 | 1,641,247 | ||||||
2,641,577 | ||||||||
CHINA (8.6%) | ||||||||
Real Estate (8.6%) | ||||||||
Agile Group Holdings Ltd. (a) | 753,000 | 865,156 | ||||||
China Resources Land Ltd. (a) | 668,351 | 2,273,195 | ||||||
China Vanke Co. Ltd., H Shares (a) | 466,500 | 1,440,504 | ||||||
CIFI Holdings Group Co. Ltd. (a) | 1,960,505 | 822,542 | ||||||
KWG Group Holdings Ltd. (a) | 917,500 | 704,113 | ||||||
Longfor Group Holdings Ltd. (a) | 536,563 | 1,303,947 | ||||||
Times China Holdings Ltd. (a) | 1,150,000 | 1,007,695 | ||||||
8,417,152 | ||||||||
FRANCE (4.3%) | ||||||||
Real Estate (4.3%) | ||||||||
Gecina SA, REIT (a) | 16,109 | 2,362,591 | ||||||
Unibail-Rodamco-Westfield (a) | 10,000 | 1,809,590 | ||||||
4,172,181 | ||||||||
GERMANY (8.2%) | ||||||||
Real Estate (8.2%) | ||||||||
ADO Properties SA (a)(c) | 41,500 | 2,447,734 | ||||||
Deutsche Konsum REIT — AG (b) | 48,912 | 578,932 | ||||||
Instone Real Estate Group AG (b)(c) | 61,783 | 1,449,255 | ||||||
TLG Immobilien AG (a) | 42,753 | 1,085,473 | ||||||
Vonovia SE (a) | 54,289 | 2,480,816 | ||||||
8,042,210 | ||||||||
HONG KONG (9.1%) | ||||||||
Real Estate (9.1%) | ||||||||
China Overseas Land & Investment Ltd. (a) | 200,000 | 628,768 | ||||||
CK Asset Holdings Ltd. (a) | 425,000 | 2,765,791 | ||||||
Joy City Property Ltd. (a) | 3,000,000 | 318,893 | ||||||
Link REIT (a) | 195,000 | 1,732,982 | ||||||
New World Development Co. Ltd. (a) | 1,913,000 | 2,433,651 | ||||||
Shimao Property Holdings Ltd. (a) | 519,312 | 1,023,273 | ||||||
8,903,358 | ||||||||
INDIA (1.8%) | ||||||||
Real Estate (1.8%) | ||||||||
Hirco PLC (b)(d)(i) | 2,290,373 | – | ||||||
Phoenix Mills Ltd. (The) (a) | 160,063 | 1,209,760 | ||||||
Prestige Estates Projects Ltd. (a) | 222,702 | 581,591 | ||||||
1,791,351 | ||||||||
ITALY (0.5%) | ||||||||
Real Estate (0.5%) | ||||||||
COIMA RES SpA, REIT (c) | 55,737 | 484,842 | ||||||
JAPAN (17.4%) | ||||||||
Real Estate (17.4%) | ||||||||
Daiwa Office Investment Corp., REIT (a) | 355 | 2,168,249 | ||||||
GLP J — Reit (a) | 2,144 | 2,121,587 | ||||||
Ichigo, Inc. (a) | 291,969 | 953,236 | ||||||
Invesco Office J-Reit, Inc. (a) | 14,662 | 2,066,095 | ||||||
Invincible Investment Corp., REIT (a) | 2,685 | 1,112,123 | ||||||
Kenedix, Inc. (a) | 200,000 | 1,041,022 | ||||||
Mitsubishi Estate Co. Ltd. (a) | 29,080 | 464,751 | ||||||
NIPPON REIT Investment Corp. (a) | 499 | 1,622,216 | ||||||
Open House Co. Ltd. (a) | 30,500 | 1,205,536 | ||||||
Orix JREIT, Inc., REIT (a) | 353 | 540,021 | ||||||
Shinoken Group Co. Ltd. (a) | 84,113 | 695,504 | ||||||
Sumitomo Realty & Development Co. Ltd. (a) | 59,010 | 2,027,586 | ||||||
Tokyu Fudosan Holdings Corp. (a) | 172,347 | 971,061 | ||||||
16,988,987 | ||||||||
MEXICO (2.2%) | ||||||||
Consumer Discretionary (1.4%) | ||||||||
Hoteles City Express SAB de CV (b) | 1,257,643 | 1,393,030 | ||||||
Real Estate (0.8%) | ||||||||
Corp. Inmobiliaria Vesta SAB de CV | 500,024 | 609,237 | ||||||
Grupo GICSA SA de CV (b) | 489,802 | 189,765 | ||||||
799,002 | ||||||||
2,192,032 | ||||||||
NETHERLANDS (3.6%) | ||||||||
Information Technology (1.7%) | ||||||||
InterXion Holding NV (b) | 28,333 | 1,667,964 |
See accompanying Notes to Financial Statements.
2018 Annual Report | 7 |
Statement of Investments (concluded)
October 31, 2018
Aberdeen International Real Estate Equity Fund
Shares or Principal Amount | Value | |||||||
Real Estate (1.9%) | ||||||||
Corestate Capital Holding SA (b) | 42,844 | $ | 1,848,889 | |||||
3,516,853 | ||||||||
PHILIPPINES (2.0%) | ||||||||
Real Estate (2.0%) | ||||||||
Ayala Land, Inc. (a) | 957,077 | 710,155 | ||||||
Megaworld Corp. (a) | 3,500,000 | 288,769 | ||||||
Robinsons Land Corp. (a) | 2,403,041 | 944,585 | ||||||
SM Prime Holdings, Inc. (a) | 1 | 1 | ||||||
1,943,510 | ||||||||
POLAND (0.6%) | ||||||||
Real Estate (0.6%) | ||||||||
Echo Investment SA | 518,970 | 542,348 | ||||||
Nanette Real Estate Group NV (b)(d)(i) | 3,265,00 | – | ||||||
542,348 | ||||||||
REPUBLIC OF IRELAND (4.1%) | ||||||||
Consumer Discretionary (1.9%) | ||||||||
Dalata Hotel Group PLC (a) | 306,050 | 1,891,576 | ||||||
Real Estate (2.2%) | ||||||||
Green REIT PLC | 668,484 | 1,103,937 | ||||||
Hibernia REIT PLC | 649,529 | 1,022,608 | ||||||
2,126,545 | ||||||||
4,018,121 | ||||||||
SINGAPORE (3.2%) | ||||||||
Real Estate (3.2%) | ||||||||
CapitaLand Mall Trust, REIT (a) | 1,030,407 | 1,569,425 | ||||||
City Developments Ltd. (a) | 268,500 | 1,534,451 | ||||||
3,103,876 | ||||||||
SPAIN (4.8%) | ||||||||
Real Estate (4.8%) | ||||||||
Aedas Homes SAU (b)(c) | 58,646 | 1,517,156 | ||||||
Inmobiliaria Colonial Socimi SA, REIT (a) | 161,274 | 1,619,275 | ||||||
Merlin Properties Socimi SA, REIT (a) | 122,000 | 1,528,669 | ||||||
4,665,100 | ||||||||
SWEDEN (1.7%) | ||||||||
Real Estate (1.7%) | ||||||||
Fabege AB (a) | 61,926 | 790,757 | ||||||
Kungsleden AB (a) | 125,000 | 873,767 | ||||||
1,664,524 | ||||||||
UNITED KINGDOM (6.0%) | ||||||||
Consumer Discretionary (1.2%) | ||||||||
Real Estate (6.0%) | ||||||||
Countryside Properties PLC (a)(c) | 300,000 | 1,146,702 | ||||||
Hammerson PLC, REIT (a) | 229,420 | 1,280,849 | ||||||
LondonMetric Property PLC, REIT (a) | 264,075 | 608,109 | ||||||
Purplebricks Group PLC (b) | 145,391 | 330,236 | ||||||
Segro PLC, REIT (a) | 184,186 | 1,443,994 | ||||||
South Asian Real Estate Pvt. Ltd. (b)(c)(d)(e) | 2,000,000 | – | ||||||
St Modwen Properties PLC (a) | 220,000 | 1,050,202 | ||||||
5,860,092 | ||||||||
UNITED STATES (4.3%) | ||||||||
Real Estate (4.3%) | ||||||||
CyrusOne, Inc., REIT (f) | 20,000 | 1,064,600 | ||||||
Equinix, Inc., REIT | 4,459 | 1,688,802 | ||||||
Prologis, Inc., REIT | 22,262 | 1,435,231 | ||||||
4,188,633 | ||||||||
Total Common Stocks | 95,874,762 | |||||||
SHORT-TERM INVESTMENT (2.6%) |
| |||||||
UNITED STATES (2.6%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (g) | 2,516,966 | 2,516,966 | ||||||
Total Short-Term Investment | 2,516,966 | |||||||
Total Investments | 98,391,728 | |||||||
Liabilities in Excess of Other Assets—(0.8)% | (820,728 | ) | ||||||
Net Assets—100.0% | $ | 97,571,000 |
(a) | Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. |
(b) | Non-income producing security. |
(c) | Denotes a security issued under Regulation S or Rule 144A. |
(d) | Illiquid security. |
(e) | Fair Value is determined pursuant to procedures approved by the Fund’s Board of Trustees. See Note 2(a) of the accompanying Notes to Financial Statements for inputs used. |
(f) | All or a portion of the securities are on loan. The total value of all securities on loan is $1,023,530. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(j) for additional information. |
(g) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2018. |
(h) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
(i) | Delisted security. Fair Values are determined pursuant to procedures approved by the Fund’s Board of Trustees. |
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
At October 31, 2018, the Fund’s open forward foreign currency exchange contracts were as follows:
Purchase Contracts Settlement Date | Counterparty | Amount Purchased | Amount Sold | Fair Value | Unrealized Depreciation | |||||||||||||||||||||||
Singapore Dollar/United States Dollar |
| |||||||||||||||||||||||||||
11/08/2018 | Credit Agricole | SGD | 661,644 | USD | 478,804 | $ | 477,726 | $ | (1,078 | ) | ||||||||||||||||||
11/08/2018 | Royal Bank of Canada | SGD | 3,307 | USD | 2,389 | 2,387 | (2 | ) | ||||||||||||||||||||
$ | 480,113 | $ | (1,080 | ) |
See accompanying Notes to Financial Statements.
8 | Annual Report 2018 |
Aberdeen Realty Income & Growth Fund (Unaudited)
The Fund acquired all of the assets and liabilities of the Alpine Realty Income & Growth Fund (the “Predecessor Fund”), a series of Alpine Equity Trust, in connection with a reorganization that occurred as of the close of business on May 4, 2018. Aberdeen Asset Management Inc. (the “Adviser”) became the investment adviser effective upon the closing of the reorganization. The Predecessor Fund was managed by a different investment adviser.
The commentary for the period ended May 4, 2018, reflects the performance of the Predecessor Fund under the former investment adviser. Commentary for the period of May 5 to October 31, 2018, reflects Fund performance under the Adviser.
The Aberdeen Realty Income & Growth Fund (Institutional Class shares net of fees) returned -1.15% for the 12-month period ended October 31, 2018, versus the 1.69% return of its benchmark, the Morgan Stanley Capital International (MSCI) US REIT Index, for the same period. For broader comparison, the average return of the Fund’s peer category of Real Estate Funds (comprising 139 funds), as measured by Lipper, Inc., was 0.84%.
Despite periods of extreme volatility, U.S. real estate investment trusts (REITs) garnered positive returns during the 12 months ended October 31, 2018, but lagged the broader U.S. equity markets. The sector experienced a sharp sell-off at the start of 2018, driven by concerns about the potential impact of rising interest rates on property prices and excitement about potential economic growth stemming from the tax reform bill enacted in December 2017. The four interest-rate hikes by the U.S. Federal Reserve (Fed) over the reporting period along with concerns over a global trade war leading to slower economic growth going forward, resulted in sell-off in the broader equity market later in 2018, but spurred a rally in REITs due to their defensive characteristics and attractive dividend yields.
For the period from November 1, 2017 through May 4, 2018, the most significant detractor from the Predecessor Fund’s performance versus its benchmark, the MSCI US REIT Index, was an underweight allocation to hotel and resort REITs. While the fundamentals of these REITs have not been compelling, in our opinion, the sector’s performance strengthened over the period as investors focused on their relatively discounted valuations and the potential positive impact of mergers-and-acquisition (M&A) activity. The Predecessor Fund’s overweight allocation and stock selection in the underperforming residential REIT sector also detracted from relative performance. Despite the challenges facing “brick-and-mortar” retailers as online retail continues to take market share, retail REITs outperformed over this period. At the stock level, the most significant detractor from the Fund’s relative performance was its holding in regional mall owner CBL & Associates Properties Inc. CBL’s stock price declined as the company reduced the dividend in November 2017. Additionally, we believe that CBL’s fourth-quarter 2017 results and earnings guidance for 2018 generally did not meet investors’ expectations. Another detractor from relative performance was the lack of a position in DCT Industrial Trust Inc. The company was acquired by Prologis Inc. in late April 2018, at a 15% premium to its then-current share price.
On the upside, stock selection and an overweight allocation in office REITs comprised the largest positive contribution to the Predecessor Fund’s relative performance for the period. The Predecessor Fund’s underweight allocation to healthcare REITs also bolstered relative performance. At the stock level, the most significant contributor to the relative performance was the absence of a holding in Colony NorthStar Inc., as shares of the REIT declined after the company reported relatively disappointing earnings for the fourth quarter of its 2017 fiscal year and cut its dividend. The Predecessor Fund’s position in Alexandria Real Estate Equities Inc., which is focused on laboratory and office space for life sciences, was another key contributor to relative performance. The company benefited from strong macroeconomic trends driving robust results in its property portfolio.
For the period of May 5, 2018 through October 31, 2018, Aberdeen Realty Income & Growth Fund’s overweight to the office sector and an underweight to the healthcare sector were the largest detractors from the performance relative to the benchmark. We think that the office sector is trading at a discount to its net asset value and, therefore, is not reflecting the intrinsic value* of the underlying properties. However, the Fund’s overweight position to the sector was a headwind for performance over the reporting period as it lagged the benchmark index. We believe that this was driven by concerns over increased capital expenditures needed to refresh properties to attract new tenants. The Fund’s underweight allocation to the heathcare sector relative to the benchmark was based on our concerns that rising interest rates would be an impediment for these REITs to pursue their growth initiatives. However, the heathcare sector outperformed the benchmark, as investors viewed it as being defensive in nature, and it offered a relatively attractive dividend yield. At the stock level, the Fund’s holdings in Highwoods Properties Inc., Diamondrock Hospitality Co., and Alexandria Real Estate Equities Inc., were the largest detractors from the Fund’s relative performance for the period. Highwoods Properties is an office REIT with a focus on the Sun Belt in the U.S. While its shares performed well earlier in the year, it experienced a setback given a longer-than-expected lag in leasing some of its properties. Diamondrock Hospitality has changed its strategy from focusing on core urban hotels to more luxury hotels. Its shares declined amid investors’ concerns over a potential slowdown in revenue per available room (RevPAR) should economic growth in the U.S. moderate. Shares of Alexandria Real Estate Equities experienced a modest decline over the reporting period. However, there was no company-specific news triggering the weakness, and we maintain our favorable view on the company.
The Fund’s underweight allocation to the self-storage sector bolstered the performance relative to the benchmark for the reporting period. An increase in new supply has led to decelerating growth rental growth in the sector. Therefore, the Fund’s
* | Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ from the current market value. |
2018 Annual Report | 9 |
Aberdeen Realty Income & Growth Fund (Unaudited) (concluded)
underweight position in self-storage had a positive impact on relative performance. At the stock level, Simon Property Group, Inc., Welltower, Inc. and Realty Income Corp. were the most notable contributors the Fund’s relative performance. Simon Property Group is the largest shopping mall operator in the U.S. Mall REITs in general have been out of favor as traditional brick and mortar retailers are experiencing structural pressures from online retailers. However, the share price of Simon Property Group rallied sharply over this period, as investors appeared to take a favorable view of the locations of the company’s properties and its strong operations relative to those of its peers. Additionally, we believe that the company’s strong balance sheet provides it with the ability to refresh dormant spaces to generate future rents. Welltower is a healthcare REIT that benefited over the period from investors’ preference for more defensive REITs. Welltower’s senior housing properties are also outpacing their peers in terms of occupancy rates and profitability. Furthermore, the company’s investments in post-acute care facilities have generated attractive returns, in our view. Realty Income Corp. is other defensive REIT. Shares of the company performed well during the reporting period due to its relatively attractive monthly dividend and its strong free cash-flow that enables the company to find sources for new deals.
As we near the end of 2018, we remain cautious on the growing divergences across global markets, with strength in U.S. macroeconomic data contrasting with slowing growth across other economies and markets. With the U.S. economy gradually moving closer towards full capacity, the Federal Reserve maintains its monetary policy tightening stance and is expected to continue to raise interest rates into 2019. In Asia, China continues to balance further trade- related responses towards the U.S. with managing and maintaining its closely monitored economic growth rates. When combined with the potential for further political volatility as the Italian government tests the limits of the European Union relationship and the rapidly approaching sharp end of the Brexit negotiations, we believe that there likely will be further pockets of market volatility into the end of the year. In this uncertain environment, we remain committed to finding companies that we believe have strong and sustainable business models and management teams with a conservative mindset toward balance-sheet structure.
Portfolio Management:
Aberdeen Global Equity Team
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
The performance data quoted represents past performance and current returns may be lower or higher. Class A Shares have up to a 5.75% front-end sales charge and a 0.25% 12b-1 fee. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, which may be higher or lower than the performance shown above, please call 866-667-9231 or go to www.aberdeen-asset.us.
Investing in mutual funds involves risk, including possible loss of principal.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
Lipper is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.
Risk Considerations
Investments in real estate securities may involve greater risk and volatility including greater exposure to economic downturns and changes in real estate values, rents, property taxes, interest rates, tax and other laws. A REIT’s share price may decline because of adverse developments affecting the real estate industry. Concentrating investments in one sector subjects the Fund to more volatility and greater risk of loss than more diverse funds.
Dividends are not guaranteed and a company’s future ability to pay dividends may be limited.
The Fund may invest in preferred stocks and convertible securities. The values of such securities typically have an inverse relationship with changes in the prevailing interest rate.
Securities with longer maturities generally involve a greater risk of fluctuations in the value resulting from changes in interest rates.
Equity securities of small- and mid-cap companies carry greater risk, and more volatility than equity securities of larger, more established companies.
The Fund’s performance may be more volatile than a diversified fund because it may invest a greater percentage of its total assets in the securities of a single issuer.
Please read the prospectus for more detailed information regarding these and other risks.
10 | Annual Report 2018 |
Aberdeen Realty Income & Growth Fund (Unaudited)
Average Annual Total Return1 (For periods ended October 31, 2018) | 1 Yr. | 5 Yr. | 10 Yr. | Inception4 | ||||||||||||||
Class A | w/o SC | -1.35% | 7.97% | N/A | 9.23% | |||||||||||||
w/SC2 | -7.03% | 6.70% | N/A | 8.29% | ||||||||||||||
Institutional Class3 | w/o SC | -1.15% | 8.25% | 13.63% | 10.31% |
All figures showing the effect of a sales charge (SC) reflect the maximum charge possible because it has the most significant effect on performance data. The total returns shown above do not include the impact of financial statement rounding of the net asset value (NAV) per share and/or financial statement adjustments.
1 | Returns prior to May 7, 2018 reflect the performance of a predecessor fund (the “Predecessor Fund”). Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. The Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Please consult the Fund’s prospectus for more detail. |
2 | A 5.75% front-end sales charge was deducted. |
3 | Not subject to any sales charges. |
4 | Predecessor Fund commenced operations on December 29, 1998. The first offering of Class A shares was December 30, 2011. |
Performance of a $1,000,000 Investment* (as of October 31, 2018)
* | Minimum Initial Investment |
Comparative performance of $1,000,000 invested in Institutional Class shares of the Aberdeen International Real Estate Equity Fund, the Morgan Stanley Capital International (MSCI) US REIT Index, the S&P 500® Index and the Consumer Price Index (CPI) over a 10-year period ended October 31, 2018. Unlike the Fund, the returns for these unmanaged indexes do not reflect any fees, expenses or sales charges. Investors cannot invest directly in market indexes.
MSCI US REIT Index is a gross, total return, free float-adjusted market capitalization index that is comprised of equity REITs. The index is based on MSCI USA Investable Market Index (IMI) its parent index which captures large, mid and small caps securities. With 144 constituents, it represents about 99% of the US REIT universe and securities are classified in the REIT sector according to the Global Industry Classification Standard (GICS®). However, it excludes Mortgage REIT and selected Specialized REITs. This index reinvests as much as possible of a company’s dividend distributions. The reinvested amount is equal to the total dividend amount distributed to persons residing in the country of the dividend-paying company. Gross total return indexes do not, however, include any tax credits.
The S&P 500® Index represents large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available U.S. market capitalization.
The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Investment return and principal value will fluctuate, and when redeemed, shares may be worth more or less than original cost. Past performance is no guarantee of future results. The Average Annual Total Return table and Performance graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investing in mutual funds involves market risk, including loss of principal. Performance returns assume the reinvestment of all distributions. Total returns reflect waivers and reimbursements in effect, without which returns would have been lower.
2018 Annual Report | 11 |
Aberdeen Realty Income & Growth Fund (Unaudited) (concluded)
Portfolio Summary (as a percentage of net assets)
October 31, 2018 (Unaudited)
Asset Allocation | ||||
Common Stocks | 98.8% | |||
Short-Term Investment | 1.3% | |||
Liabilities in Excess of Other Assets | (0.1)% | |||
100.0% |
The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries.
Top Sectors | ||||
Real Estate | 96.6% | |||
Consumer Discretionary | 1.7% | |||
Financials | 0.5% | |||
Other | 1.2% | |||
100.0% |
Top Holdings* | ||||
Prologis, Inc., REIT | 6.8% | |||
Simon Property Group, Inc., REIT | 5.2% | |||
AvalonBay Communities, Inc., REIT | 5.1% | |||
Digital Realty Trust, Inc., REIT | 4.3% | |||
Welltower, Inc., REIT | 4.2% | |||
Equinix, Inc., REIT | 4.0% | |||
Ventas, Inc., REIT | 3.7% | |||
Alexandria Real Estate Equities, Inc., REIT | 3.1% | |||
Realty Income Corp., REIT | 3.0% | |||
Equity LifeStyle Properties, Inc., REIT | 2.9% | |||
Other | 57.7% | |||
100.0% |
* | For the purpose of listing top holdings, Short-Term Investments are included as part of Other. |
Top Countries | ||||
United States | 100.1% | |||
Other | (0.1)% | |||
100.0% |
12 | Annual Report 2018 |
Statement of Investments
October 31, 2018
Aberdeen Realty Income & Growth Fund
Shares or Principal Amount | Value | |||||||
COMMON STOCKS (98.8%) | ||||||||
Diversified REITs (3.3%) | ||||||||
STORE Capital Corp. | 49,884 | $ | 1,448,133 | |||||
VEREIT, Inc. | 179,773 | 1,317,736 | ||||||
2,765,869 | ||||||||
Health Care REITs (12.6%) | ||||||||
Medical Properties Trust, Inc. (a) | 96,142 | 1,428,670 | ||||||
Omega Healthcare Investors, Inc. | 42,440 | 1,415,374 | ||||||
Sabra Health Care REIT, Inc. (a) | 49,950 | 1,081,417 | ||||||
Ventas, Inc. | 54,859 | 3,184,016 | ||||||
Welltower, Inc. | 54,742 | 3,616,804 | ||||||
10,726,281 | ||||||||
Hotel & Resort REITs (4.8%) | ||||||||
DiamondRock Hospitality Co. (a) | 70,060 | 732,127 | ||||||
Host Hotels & Resorts, Inc. (a) | 94,719 | 1,810,080 | ||||||
Park Hotels & Resorts, Inc. (a) | 27,214 | 791,111 | ||||||
Pebblebrook Hotel Trust | 22,086 | 744,519 | ||||||
�� | 4,077,837 | |||||||
Hotels, Resorts & Cruise Lines (1.7%) | ||||||||
Hilton Worldwide Holdings, Inc. | 8,871 | 631,349 | ||||||
Hyatt Hotels Corp., Class A | 11,429 | 790,887 | ||||||
1,422,236 | ||||||||
Industrial REITs (11.2%) | ||||||||
Duke Realty Corp. | 73,418 | 2,024,134 | ||||||
Prologis, Inc. | 89,544 | 5,772,902 | ||||||
STAG Industrial, Inc. | 33,377 | 883,156 | ||||||
Terreno Realty Corp. | 24,075 | 901,127 | ||||||
9,581,319 | ||||||||
Mortgage REITs (0.5%) | ||||||||
Starwood Property Trust, Inc. | 20,000 | 434,400 | ||||||
Office REITs (14.3%) | ||||||||
Alexandria Real Estate Equities, Inc. | 21,592 | 2,639,190 | ||||||
Brandywine Realty Trust | 40,802 | 573,676 | ||||||
Douglas Emmett, Inc. | 41,842 | 1,514,262 | ||||||
Highwoods Properties, Inc. | 47,102 | 2,008,429 | ||||||
Hudson Pacific Properties, Inc. | 30,457 | 922,847 | ||||||
JBG SMITH Properties | 23,058 | 864,214 | ||||||
SL Green Realty Corp. | 17,909 | 1,634,375 | ||||||
Vornado Realty Trust | 30,322 | 2,064,322 | ||||||
12,221,315 | ||||||||
Residential REITs (17.2%) | ||||||||
AvalonBay Communities, Inc. (c) | 24,620 | 4,317,856 | ||||||
Camden Property Trust | 14,972 | 1,351,522 | ||||||
Equity LifeStyle Properties, Inc. | 26,086 | 2,470,083 | ||||||
Equity Residential | 17,605 | 1,143,621 | ||||||
Essex Property Trust, Inc. | 8,469 | 2,123,856 | ||||||
Invitation Homes, Inc. (a) | 49,885 | 1,091,484 | ||||||
Mid-America Apartment Communities, Inc. | 22,202 | 2,169,357 | ||||||
14,667,779 | ||||||||
Retail REITs (17.4%) | ||||||||
Brixmor Property Group, Inc. | 65,917 | 1,067,856 | ||||||
Federal Realty Investment Trust (a) | 12,100 | 1,501,005 | ||||||
Macerich Co. (The) (a) | 25,628 | 1,322,917 | ||||||
National Retail Properties, Inc. | 30,019 | 1,403,388 | ||||||
Realty Income Corp. | 42,278 | 2,548,095 | ||||||
Regency Centers Corp. | 28,300 | 1,793,088 | ||||||
Simon Property Group, Inc. (a) | 24,143 | 4,430,724 | ||||||
SITE Centers Corp. | 64,426 | 800,815 | ||||||
14,867,888 | ||||||||
Specialized REITs (15.8%) | ||||||||
American Tower Corp. | 9,297 | 1,448,566 | ||||||
CoreSite Realty Corp. | 12,153 | 1,140,681 | ||||||
Digital Realty Trust, Inc. | 35,663 | 3,682,561 | ||||||
Equinix, Inc. | 9,026 | 3,418,507 | ||||||
Extra Space Storage, Inc. (a) | 20,218 | 1,820,833 | ||||||
Public Storage (a) | 9,716 | 1,996,347 | ||||||
13,507,495 | ||||||||
Total Common Stocks | 84,272,419 | |||||||
SHORT-TERM INVESTMENT (1.3%) | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (b) | 1,158,549 | 1,158,549 | ||||||
Total Short-Term Investment | 1,158,549 | |||||||
Total Investments | 85,430,968 | |||||||
Liabilities in Excess of Other Assets—(0.1)% | (107,071 | ) | ||||||
Net Assets—100.0% | $ | 85,323,897 |
(a) | All or a portion of the securities are on loan. The total value of all securities on loan is $16,887,796. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. See Note 2(j) for additional information. |
(b) | Registered investment company advised by State Street Global Advisors. The rate shown is the current yield as of October 31, 2018. |
(c) | All or a portion of the security has been designated as collateral for the line of credit. |
(d) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements.
2018 Annual Report | 13 |
Statements of Assets and Liabilities
October 31, 2018
Aberdeen International Real Estate Equity Fund | Aberdeen Realty Income & Growth Fund | |||||||
Assets: | ||||||||
Investments, at value | $ | 95,874,762 | $ | 84,272,419 | ||||
Short-term investments, at value | 2,516,966 | 1,158,549 | ||||||
Receivable for investments sold | 1,244,430 | – | ||||||
Interest and dividends receivable | 252,492 | 57,558 | ||||||
Receivable from Adviser | 3,239 | 33,783 | ||||||
Receivable for capital shares issued | 134 | 354 | ||||||
Tax reclaim receivable | 44,857 | – | ||||||
Securities lending income receivable | 69 | 863 | ||||||
|
|
|
| |||||
Total assets | 99,936,949 | 85,523,526 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | 2,179,156 | – | ||||||
Unrealized depreciation on forward foreign currency exchange contracts | 1,080 | – | ||||||
Payable for capital shares redeemed | 10,076 | 41,899 | ||||||
Accrued expenses and other payables: | ||||||||
Investment advisory fees | 85,208 | 72,762 | ||||||
Audit fees | 43,250 | 37,250 | ||||||
Fund accounting fees | 20,085 | 5,992 | ||||||
Administration fees | 6,238 | 5,121 | ||||||
Transfer agent fees | 6,143 | 4,709 | ||||||
Sub-transfer agent and administrative services fees | 3,629 | 5,215 | ||||||
Custodian fees | 3,961 | 3,049 | ||||||
Legal fees | 1,461 | 1,251 | ||||||
Distribution fees | 175 | 1,358 | ||||||
Other | 5,487 | 21,023 | ||||||
|
|
|
| |||||
Total liabilities | 2,365,949 | 199,629 | ||||||
|
|
|
| |||||
Net Assets | $ | 97,571,000 | $ | 85,323,897 | ||||
|
|
|
| |||||
Cost: | ||||||||
Investments | $ | 118,966,135 | $ | 58,450,618 | ||||
Short-term investment | 2,516,966 | 1,158,549 | ||||||
Represented by: | ||||||||
Capital | $ | 249,513,352 | $ | 36,130,037 | ||||
Distributable earnings (accumulated loss) | (151,942,352 | ) | 49,193,860 | |||||
|
|
|
| |||||
Net Assets | $ | 97,571,000 | $ | 85,323,897 | ||||
|
|
|
| |||||
Net Assets: | ||||||||
Class A Shares | $ | 135,130 | $ | 1,751,078 | ||||
Institutional Class Shares | 97,435,870 | 83,572,819 | ||||||
|
|
|
| |||||
Total | $ | 97,571,000 | $ | 85,323,897 | ||||
|
|
|
| |||||
Shares Outstanding (unlimited number of shares authorized): | ||||||||
Class A Shares | 6,750 | 81,904 | ||||||
Institutional Class Shares | 4,831,519 | 3,902,883 | ||||||
|
|
|
| |||||
Total | 4,838,269 | 3,984,787 | ||||||
|
|
|
| |||||
Net asset value and redemption price per share (Net assets by class divided by shares outstanding by class, respectively): | ||||||||
Class A Shares | $ | 20.02 | $ | 21.38 | ||||
Institutional Class Shares | $ | 20.17 | $ | 21.41 | ||||
Maximum offering price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent): | ||||||||
Class A Shares | $ | 21.24 | $ | 22.68 | ||||
Maximum Sales Charge: | ||||||||
Class A Shares | 5.75 | % | 5.75 | % |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
14 | Annual Report 2018 |
For the Year Ended October 31, 2018
Aberdeen International Real Estate Equity Fund | Aberdeen Realty Income & Growth Fund | |||||||
INVESTMENT INCOME: | ||||||||
Dividend income | $ | 2,908,417 | $ | 3,430,617 | ||||
Interest income | 28,536 | 7,520 | ||||||
Securities lending income, net | 69 | 863 | ||||||
Foreign tax withholding | (266,863 | ) | – | |||||
Other income | 559 | 15 | ||||||
|
|
|
| |||||
Total Income | 2,670,718 | 3,439,015 | ||||||
|
|
|
| |||||
EXPENSES: | ||||||||
Investment advisory fees | 1,176,451 | 965,941 | ||||||
Administration fees | 57,434 | 47,070 | ||||||
Distribution fees Class A | 387 | 4,027 | ||||||
Sub-transfer agent and administrative service fees Institutional Class | 21,412 | 25,791 | ||||||
Sub-transfer agent and administrative service fees Class A | 74 | 726 | ||||||
Fund accounting fees | 67,651 | 11,207 | ||||||
Transfer agent fees | 97,236 | 98,103 | ||||||
Trustee fees | 7,826 | 6,477 | ||||||
Legal fees | 20,566 | 14,708 | ||||||
Compliance fees | 4,931 | 4,026 | ||||||
Printing fees | 28,914 | 25,694 | ||||||
Custodian fees | 11,329 | 9,412 | ||||||
Registration and filing fees | 36,613 | 35,600 | ||||||
Audit fees | 53,983 | 39,234 | ||||||
Other | 26,939 | 19,153 | ||||||
|
|
|
| |||||
Total expenses before reimbursed/waived expenses | 1,611,746 | 1,307,169 | ||||||
Interest expense (Note 9) | 21,355 | 96,697 | ||||||
|
|
|
| |||||
Total operating expenses before reimbursed/waived expenses | 1,633,101 | 1,403,866 | ||||||
Expenses waived by investment adviser | (11,346 | ) | (337,200 | ) | ||||
|
|
|
| |||||
Net expenses | 1,621,755 | 1,066,666 | ||||||
|
|
|
| |||||
Net Investment Income | 1,048,963 | 2,372,349 | ||||||
|
|
|
| |||||
REALIZED/UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||
Realized gain from investment transactions | 2,229,579 | 30,573,968 | ||||||
Realized gain/(loss) on forward foreign currency exchange contracts | (548,659 | ) | – | |||||
Realized gain/(loss) on foreign currency transactions | (186,819 | ) | (221 | ) | ||||
|
|
|
| |||||
Net realized gain from investments and foreign currency transactions | 1,494,101 | 30,573,747 | ||||||
|
|
|
| |||||
Net change in unrealized appreciation/(depreciation) on investment transactions | (13,719,866 | ) | (34,551,996 | ) | ||||
Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange rate contracts | 64,765 | – | ||||||
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities denominated in foreign currencies | 10,887 | 258 | ||||||
|
|
|
| |||||
Net change in unrealized appreciation/(depreciation) from investments and translation of assets and liabilities denominated in foreign currencies | (13,644,214 | ) | (34,551,738 | ) | ||||
|
|
|
| |||||
Net realized/unrealized (loss) from investments and foreign currency transactions | (12,150,113 | ) | (3,977,991 | ) | ||||
|
|
|
| |||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (11,101,150 | ) | $ | (1,605,642 | ) | ||
|
|
|
|
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
2018 Annual Report | 15 |
Statements of Changes in Net Assets
Aberdeen International Real Estate Equity Fund | Aberdeen Realty Income & Growth Fund | |||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | |||||||||||||
FROM INVESTMENT ACTIVITIES: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 1,048,963 | $ | 1,048,881 | $ | 2,372,349 | $ | 1,019,244 | ||||||||
Net realized gain/(loss) from investments and foreign currency transactions | 1,494,101 | (16,161,550 | ) | 30,573,747 | 5,174,337 | |||||||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (13,644,214 | ) | 33,828,367 | (34,551,738 | ) | 4,003,160 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Changes in net assets resulting from operations | (11,101,150 | ) | 18,715,698 | (1,605,642 | ) | 10,196,741 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders (a): | ||||||||||||||||
Class A | (3,094 | ) | – | (91,425 | ) | (163,119 | ) | |||||||||
Institutional Class | (2,701,730 | ) | (147,213 | ) | (5,947,732 | ) | (5,815,679 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from shareholder distributions | (2,704,824 | ) | (147,213 | ) | (6,039,157 | ) | (5,978,798 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from capital transactions | (6,283,180 | ) | (8,777,434 | ) | (15,638,364 | ) | (6,333,991 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets | (20,089,154 | ) | 9,791,051 | (23,283,163 | ) | (2,116,048 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 117,660,154 | 107,869,103 | 108,607,060 | 110,723,108 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of year | $ | 97,571,000 | $ | 117,660,154 | $ | 85,323,897 | $ | 108,607,060 | ||||||||
|
|
|
|
|
|
|
| |||||||||
CAPITAL TRANSACTIONS: | ||||||||||||||||
Class A Shares | ||||||||||||||||
Proceeds from shares issued | $ | 9,729 | $ | 27,435 | $ | 445,986 | $ | 744,572 | ||||||||
Dividends reinvested | 3,094 | – | 52,627 | 69,641 | ||||||||||||
Cost of shares redeemed | (34,914 | ) | – | (194,800 | ) | (2,173,856 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class A | (22,091 | ) | 27,435 | 303,813 | (1,359,643 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Class Shares | ||||||||||||||||
Proceeds from shares issued | 1,013,783 | 746,617 | 2,502,072 | 2,938,713 | ||||||||||||
Dividends reinvested | 2,642,333 | 143,279 | 5,429,006 | 5,213,179 | ||||||||||||
Cost of shares redeemed | (9,917,205 | ) | (9,694,765 | ) | (23,873,255 | ) | (13,126,240 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Institutional Class | (6,261,089 | ) | (8,804,869 | ) | (15,942,177 | ) | (4,974,348 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in net assets from capital transactions: | $ | (6,283,180 | ) | $ | (8,777,434 | ) | $ | (15,638,364 | ) | $ | (6,333,991 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
SHARE TRANSACTIONS: | ||||||||||||||||
Class A Shares | ||||||||||||||||
Issued | 426 | 1,249 | 20,106 | 33,027 | ||||||||||||
Reinvested | 129 | – | 2,306 | 3,139 | ||||||||||||
Redeemed | (1,524 | ) | – | (8,758 | ) | (95,029 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Class A Shares | (969 | ) | 1,249 | 13,654 | (58,863 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Class Shares | ||||||||||||||||
Issued | 41,694 | 34,526 | 114,349 | 128,813 | ||||||||||||
Reinvested | 109,453 | 7,699 | 240,591 | 232,165 | ||||||||||||
Redeemed | (429,524 | ) | (469,851 | ) | (1,112,893 | ) | (580,933 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Institutional Class Shares | (278,377 | ) | (427,626 | ) | (757,953 | ) | (219,955 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total change in shares: | (279,346 | ) | (426,377 | ) | (744,299 | ) | (278,818 | ) | ||||||||
|
|
|
|
|
|
|
|
(a) | Per Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”, the Funds are no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. Please see Note 7 for the fiscal year October 31, 2017 distribution designations. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
16 | Annual Report 2018 |
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Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen International Real Estate Equity Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | Redemption Fees | Net Asset Value, End of Period | |||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 22.82 | $ | 0.14 | (e) | $ | (2.46 | ) | $ | (2.32 | ) | $ | (0.48 | ) | $ | (0.48 | ) | $ | 0.00 | (f) | $ | 20.02 | ||||||||||
Year Ended October 31, 2017 | 19.33 | 0.02 | 3.47 | 3.49 | – | – | 0.00 | (f) | 22.82 | |||||||||||||||||||||||
Year Ended October 31, 2016 | 21.79 | 0.08 | (1.12 | ) | (1.04 | ) | (1.42 | ) | (1.42 | ) | 0.00 | (f) | 19.33 | |||||||||||||||||||
Year Ended October 31, 2015 | 23.75 | 1.34 | (3.30 | ) | (1.96 | ) | – | – | 0.00 | (f) | 21.79 | |||||||||||||||||||||
Year Ended October 31, 2014 | 23.81 | – | (f) | (0.06 | ) | (0.06 | ) | – | – | 0.00 | (f) | 23.75 | ||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 22.99 | 0.21 | (e) | (2.49 | ) | (2.28 | ) | (0.54 | ) | (0.54 | ) | 0.00 | (f) | 20.17 | ||||||||||||||||||
Year Ended October 31, 2017 | 19.46 | 0.20 | 3.36 | 3.56 | (0.03 | ) | (0.03 | ) | 0.00 | (f) | 22.99 | |||||||||||||||||||||
Year Ended October 31, 2016 | 21.92 | 0.17 | (1.16 | ) | (0.99 | ) | (1.47 | ) | (1.47 | ) | 0.00 | (f) | 19.46 | |||||||||||||||||||
Year Ended October 31, 2015 | 23.84 | 1.48 | (3.40 | ) | (1.92 | ) | – | – | 0.00 | (f) | 21.92 | |||||||||||||||||||||
Year Ended October 31, 2014 | 23.87 | (0.09 | ) | 0.11 | 0.02 | (0.05 | ) | (0.05 | ) | 0.00 | (f) | 23.84 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “–” are $0 or round to $0.
See accompanying Notes to Financial Statements.
18 | Annual Report 2018 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen International Real Estate Equity Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
(10.52 | %) | $ | 135 | 1.63 | %(g) | 1.67 | %(g) | 0.62 | % | 89.59 | % | |||||||||||
18.05 | % | 176 | 1.61 | %(g) | 1.62 | %(g) | 0.75 | % | 60.00 | % | ||||||||||||
(4.99 | %) | 125 | 1.57 | %(g) | 1.60 | %(g) | 0.54 | % | 33.00 | % | ||||||||||||
(8.25 | %) | 132 | 1.68 | %(g) | 1.68 | %(g) | 6.00 | % | 28.00 | % | ||||||||||||
(0.25 | %) | 146 | 1.85 | %(g) | 1.85 | %(g) | – | % | 23.00 | % | ||||||||||||
(10.35 | %) | 97,453 | 1.38 | %(g) | 1.39 | %(g) | 0.89 | % | 89.59 | % | ||||||||||||
18.36 | % | 117,484 | 1.35 | %(g) | 1.37 | %(g) | 0.94 | % | 60.00 | % | ||||||||||||
(4.70 | %) | 107,744 | 1.34 | %(g) | 1.37 | %(g) | 0.75 | % | 33.00 | % | ||||||||||||
(8.05 | %) | 129,048 | 1.43 | %(g) | 1.43 | %(g) | 6.46 | % | 28.00 | % | ||||||||||||
0.08 | % | 169,226 | 1.60 | %(g) | 1.60 | %(g) | 0.23 | % | 23.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Less than $0.005 per share. |
(g) | Includes interest expense that amounts to 0.02%, less than 0.01%, less than 0.01%, 0.02% and 0.03% for Class A and Institutional Class for the years ended October 31, 2018, October 31, 2017, 0ctober 31, 2016, October 31, 2015 and October 31, 2014, respectively. |
2018 Annual Report | 19 |
Financial Highlights (continued)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Realty Income & Growth Fund
Investment Activities | Distributions | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains | Total Distributions | Redemption Fees | Net Asset Value, End of Period | ||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | $ | 22.93 | $ | 0.47 | (e) | $ | (0.74 | ) | $ | (0.27 | ) | $ | (0.69 | ) | $ | (0.59 | ) | $ | (1.28 | ) | $ | 0.00 | (e) | $ | 21.38 | |||||||||||
Year Ended October 31, 2017 | 22.09 | (0.41 | ) | 2.42 | 2.02 | (0.70 | ) | (0.47 | ) | (1.17 | ) | 0.00 | (e) | 22.93 | ||||||||||||||||||||||
Year Ended October 31, 2016 | 21.97 | 0.45 | 0.63 | 1.08 | (0.50 | ) | (0.46 | ) | (0.96 | ) | 0.00 | (e) | 22.09 | |||||||||||||||||||||||
Year Ended October 31, 2015 | 21.26 | 0.33 | 1.08 | 1.41 | (0.43 | ) | (0.27 | ) | (0.70 | ) | 0.00 | (e) | 21.97 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 18.16 | 0.46 | 3.34 | 3.80 | (0.45 | ) | (0.25 | ) | (0.70 | ) | 0.00 | (e) | 21.26 | |||||||||||||||||||||||
Institutional Class Shares | ||||||||||||||||||||||||||||||||||||
Year Ended October 31, 2018(d) | 22.97 | 0.54 | (e) | (0.76 | ) | (0.22 | ) | (0.75 | ) | (0.59 | ) | (1.34 | ) | 0.00 | (e) | 21.41 | ||||||||||||||||||||
Year Ended October 31, 2017 | 22.11 | 0.20 | 1.88 | 2.08 | (0.75 | ) | (0.47 | ) | (1.22 | ) | 0.00 | (e) | 22.97 | |||||||||||||||||||||||
Year Ended October 31, 2016 | 22.00 | 0.49 | 0.64 | 1.13 | (0.56 | ) | (0.46 | ) | (1.02 | ) | 0.00 | (e) | 22.11 | |||||||||||||||||||||||
Year Ended October 31, 2015 | 21.29 | 0.44 | 1.02 | 1.46 | (0.48 | ) | (0.27 | ) | (0.75 | ) | 0.00 | (e) | 22.00 | |||||||||||||||||||||||
Year Ended October 31, 2014 | 18.17 | 0.52 | 3.35 | 3.87 | (0.50 | ) | (0.25 | ) | (0.75 | ) | 0.00 | (e) | 21.29 |
(a) | Excludes sales charge. |
(b) | During the period, certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated. |
(c) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares. |
(d) | Beginning with the year ended October 31, 2018, the Fund was audited by KPMG LLP. Previous years were audited by different independent registered public accounting firms. |
Amounts listed as “-” are $0 or round to $0.
See accompanying Notes to Financial Statements.
20 | Annual Report 2018 |
Financial Highlights (concluded)
Selected Data for Each Share of Capital Outstanding Throughout the Periods Indicated
Aberdeen Realty Income & Growth Fund (concluded)
Ratios/Supplemental Data | ||||||||||||||||||||||
Total Return (a) | Net Assets at End of Period (000’s) | Ratio of Expenses (Net of Reimbursements/Waivers) to Average Net Assets | Ratio of Expenses (Prior to Reimbursements) to Average Net Assets (b) | Ratio of Net Investment Income to Average Net Assets | Portfolio Turnover (c) | |||||||||||||||||
(1.35 | %) | $ | 1,751 | 1.34 | %(f) | 1.71 | %(f) | 2.16 | % | 42.71 | % | |||||||||||
9.37 | % | 1,565 | 1.46 | %(f) | 1.65 | %(f) | 0.66 | % | 7.00 | % | ||||||||||||
4.90 | % | 2,807 | 1.58 | %(f) | 1.59 | %(f) | 2.07 | % | 15.00 | % | ||||||||||||
6.72 | % | 2,886 | 1.60 | %(f) | 1.60 | %(f) | 1.72 | % | 32.00 | % | ||||||||||||
21.51 | % | 2,441 | 1.67 | %(f) | 1.72 | %(f) | 2.42 | % | 32.00 | % | ||||||||||||
(1.15 | %) | 83,573 | 1.10 | %(f) | 1.45 | %(f) | 2.46 | % | 42.71 | % | ||||||||||||
9.65 | % | 107,042 | 1.21 | %(f) | 1.40 | %(f) | 0.92 | % | 7.00 | % | ||||||||||||
5.15 | % | 107,916 | 1.35 | %(f) | 1.36 | %(f) | 2.28 | % | 15.00 | % | ||||||||||||
6.98 | % | 112,927 | 1.35 | %(f) | 1.35 | %(f) | 2.00 | % | 32.00 | % | ||||||||||||
21.90 | % | 112,984 | 1.42 | %(f) | 1.47 | %(f) | 2.71 | % | 32.00 | % |
(e) | Net investment income/(loss) is based on average shares outstanding during the period. |
(f) | Includes interest expense that amounts to 0.10%, 0.10%, 0.06%, 0.04% and 0.07% for Class A and Institutional Class for the years ended October 31, 2018, October 31, 2017, 0ctober 31, 2016, October 31, 2015 and October 31, 2014, respectively. |
2018 Annual Report | 21 |
October 31, 2018
1. Organization
Aberdeen Funds (the “Trust”) was organized as a statutory trust under the laws of the state of Delaware by a Certificate of Trust filed on September 27, 2007 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. As of October 31, 2018, the Trust had authorized an unlimited number of shares of beneficial interest (“shares”) without par value. As of October 31, 2018, the Trust operated twenty five (25) separate series, or mutual funds, each with its own investment objective(s) and strategies. This report contains the financial statements and financial highlights of the two (2) funds listed below (each a “Fund”; collectively, the “Funds”):
– | Aberdeen International Real Estate Equity Fund (“International Real Estate Equity Fund”) |
– | Aberdeen Realty Income & Growth Fund (“Realty Income & Growth Fund”) |
On December 14, 2017, at a meeting of the board of trustees (the “Alpine Board”) of Alpine Equity Trust (the “Predecessor Trust”), the Alpine Board considered and unanimously approved an agreement and plan of reorganization with respect to the Alpine International Real Estate Equity Fund and Alpine Realty Income & Growth Fund (each, a “Predecessor Fund” and collectively, the “Predecessor Funds”) whereby each Predecessor Fund would participate in a reorganization that would allow it to continue to operate as a corresponding new series of Aberdeen Funds (the “Acquiring Funds”). Aberdeen Asset Management Inc. (“Aberdeen” or the “Adviser”) would serve as the investment adviser and Aberdeen Asset Managers Limited would serve as the subadviser to the Acquiring Funds. Following approval by shareholders each Predecessor Fund transferred all of its assets and liabilities as of the close of business May 4, 2018. The Predecessor Funds are the accounting and performance survivors of the reorganizations, and each Acquiring Fund adopted the corresponding Predecessor Fund’s performance history as of the close of business May 4, 2018; accordingly, information for the fiscal year ended October 31, 2018 includes the performance and accounting information of the Predecessor Funds.
The Acquiring Funds and corresponding Predecessor Funds are shown in the chart below.
Acquiring Fund | Corresponding Predecessor Fund | |
International Real Estate Equity Fund | Alpine International Real Estate Equity Fund, a series of Alpine Equity Trust | |
Realty Income & Growth Fund | Alpine Realty Income & Growth Fund, a series of Alpine Equity Trust |
Prior to the close of business May 4, 2018, Alpine Woods Capital Investors, LLC (the “Predecessor Adviser”) had been the investment adviser of the Predecessor Funds.
2. Summary of Significant Accounting Policies
The Trust is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies conform to generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Funds are maintained in U.S. Dollars.
a. | Security Valuation |
The Funds value their securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Funds’ Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date.
Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the “Valuation Time” subject to application, when appropriate, of the valuation factors described in the paragraph below. Under normal circumstances, the Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask price quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Funds disclose the fair value of their investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy
22 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. Open-end mutual funds are valued at the respective net asset value (“NAV”) as reported by such company. The prospectuses for the registered open-end management investment companies in which a Fund invests explain the circumstances under which those companies will use fair value pricing and the effects of using fair value pricing. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time. A security using any of these pricing methodologies is determined to be a Level 1 investment.
Foreign equity securities that are traded on foreign exchanges that close prior to Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service provider approved by the Board. These valuation factors are used when pricing a Fund’s portfolio holdings to estimate market movements between the time foreign markets close and the time a Fund values such foreign securities. These valuation factors are based on inputs such as depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as quoted or published prices of the securities on their primary markets. A security that applies a valuation factor is determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.
Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider approved by the Board of Trustees of the Trust (the “Board”). If there are no current-day bids, the security is valued at the previously applied bid. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size, and the strategies employed by Aberdeen generally trade in round lot sizes. In certain circumstances, fixed income securities may be held or transactions may be conducted in smaller, “odd lot” sizes. Odd lots may trade at lower or, occasionally, higher prices than institutional round lot trades. Short-term debt securities (such as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service, or on the basis of amortized cost if it represents the best approximation for fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.
Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The Funds sweep available cash into the State Street Institutional U.S. Government Money Market Fund, which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 NAV. Generally, these investment types are categorized as Level 1 investments.
Forward foreign currency contracts are generally valued based on the bid price of the forward rates and the current spot rate. Forward exchange rate quotations are available for scheduled settlement dates, such as 1-, 3-, 6-, 9- and 12-month periods. An interpolated valuation is derived based on the actual settlement dates of the forward contracts held. Futures contracts are valued at the settlement price or at the last bid price if no settlement price is available. Interest rate swaps agreements are generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows).
In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closed before the Valuation Time), the security is valued at fair value as determined by the Funds’ pricing committee (the “Pricing Committee”), taking into account the relevant factors and surrounding circumstances using Valuation and Liquidity Procedures approved by the Board. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs.
2018 Annual Report | 23 |
Notes to Financial Statements (continued)
October 31, 2018
The three-level hierarchy of inputs is summarized below:
• | Level 1- quoted prices in active markets for identical investments; |
• | Level 2- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or |
• | Level 3- significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments). |
A summary of standard inputs is listed below:
Security Type | Standard Inputs | |
Foreign equities utilizing a fair value factor | Depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. |
The following is a summary of the inputs used as of October 31, 2018 in valuing the Funds’ investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Please refer to the Statements of Investments for a detailed breakout of the security types:
Investments, at Value | LEVEL 1–Quoted Prices ($) | LEVEL 2–Other Significant Observable Inputs ($) | LEVEL 3–Significant Unobservable Inputs ($) | Total ($) | ||||||||||||
International Real Estate Equity Fund |
| |||||||||||||||
Investments in Securities |
| |||||||||||||||
Common Stocks | $29,137,637 | $66,737,125 | $0 | $95,874,762 | ||||||||||||
Short-Term Investment | 2,516,966 | – | – | 2,516,966 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | – | (1,080 | ) | – | (1,080 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
31,654,603 | 66,736,045 | – | 98,390,648 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Realty Income & Growth Fund |
| |||||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | 84,272,419 | – | – | 84,272,419 | ||||||||||||
Short-Term Investment | 1,158,549 | – | – | 1,158,549 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
85,430,968 | – | – | 85,430,968 | |||||||||||||
|
|
|
|
|
|
|
|
The following table shows the valuation techniques and significant amounts of unobservable inputs used in the fair value measurement of the International Real Estate Equity Fund Level 3 investment, as of October 31, 2018:
Asset | Fair Value at 10/31/18 ($) | Significant Valuation Technique | Significant Unobservable Input | Range of Values | Weighted Average | Relationship Between Fair Value and Input: If Input Value Increases Then: | ||||||||||||
Common Stock* | $ | 0 | Market Approach | Liquidity Discount | 100 | % | 100 | % | Fair Value would Decrease | |||||||||
Total Enterprise Value / Revenue | 1.50x to 2.00x | 1.75x | Fair Value would Increase | |||||||||||||||
Price/Book | 0.70x - 1.10x | 0.90x | Fair Value would Increase | |||||||||||||||
Income Approach | Adjusted Weighted Average Cost of Capital | 16.0% - 18.0% | 17.00 | % | Fair Value would Decrease |
* | Represents a single security, as of October 31, 2018. As a result, the range of values and weighted average for each unobservable input refer to a single value. |
24 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
The significant unobservable inputs used in the fair value measurement of common stock is liquidity discounts, total enterprise value/revenue, total enterprise value/earnings before interest & taxes, price/book, adjusted weighted average cost of capital. Other market indicators are also considered. Changes in any of those inputs would result in a lower or higher fair value measurement.
International Real Estate Equity Fund Rollforward of Level 3 Fair Value Measurement For the Year Ended October 31, 2018 | ||||||||||||||||||||||||||||||||||||||||
Investments in Securities | Balance as of October 31, | Accrued (Premiums) | Realized Gain (Loss) | Change in (Depreciation) | Net Purchases | Net Sales | Net Level 3 | Net Transfers out of Level 3 | Balance as 2018 | Change in October 31, | ||||||||||||||||||||||||||||||
COMMON STOCK | ||||||||||||||||||||||||||||||||||||||||
India | $ | 1,301,587 | $ | – | $ | – | $ | (1,301,587 | ) | $ | – | $ | – | $ | – | $ | – | $ | 0 | $ | (1,301,587 | ) | ||||||||||||||||||
TOTAL | $ | 1,301,587 | $ | – | $ | – | $ | (1,301,587 | ) | $ | – | $ | – | $ | – | $ | – | $ | 0 | $ | (1,301,587 | ) |
b. | Restricted Securities |
Restricted securities are privately-placed securities whose resale is restricted under U.S. securities laws. The Funds may invest in restricted securities, including unregistered securities eligible for resale without registration pursuant to Rule 144A and privately-placed securities of U.S. and non-U.S. issuers offered outside the U.S. without registration pursuant to Regulation S under the Securities Act of 1933, as amended (the “1933 Act”). Rule 144A securities may be freely traded among certain qualified institutional investors, such as the Funds, but resale of such securities in the U.S. is permitted only in limited circumstances.
c. | Foreign Currency Translation |
Foreign securities, currency and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate of said currencies against the U.S. dollar, at Valuation Time, as provided by an independent pricing service. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective date of these transactions. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. These fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currencies within the Statements of Operations.
d. | Rights Issues and Warrants |
Rights issues give the right, normally to existing shareholders, to buy a proportional number of additional securities at a given price (generally at a discount) within a fixed period (generally a short-term period) and are offered at the company’s discretion. Warrants are securities that give the holder the right to buy common stock at a specified price for a specified period of time. Rights issues and warrants are speculative and have no value if they are not exercised before the expiration date. Rights issues and warrants are valued at the last sale price on the exchange on which they are traded.
e. | Derivative Financial Instruments |
Certain Funds are authorized to use derivatives to manage currency risk, credit risk, and interest rate risk and to replicate, or use as a substitute for, physical securities. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of Assets and Liabilities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward contract”) involves an obligation to purchase and sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward contracts are used to manage a Fund’s currency exposure in an efficient manner. They are used to sell unwanted currency exposure that comes with holding securities in a market, or to buy currency exposure where the exposure from holding securities is insufficient to give the desired currency exposure either in absolute terms or relative to the benchmark. The use of forward contracts allows the separation of decision-making between markets and their currencies. The forward contract is marked-to market daily and the change in market value is recorded by a Fund as unrealized appreciation/(depreciation). Forward contracts’ prices are received daily from an independent pricing provider. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. These realized and unrealized gains and losses are reported on the
2018 Annual Report | 25 |
Notes to Financial Statements (continued)
October 31, 2018
Statements of Operations. During the year, the Funds used forward contracts for the purposes of efficient portfolio management and managing active currency risk relative to the benchmark, the latter of which involves both hedging currency risk and adding currency risk in excess of underlying bond positions.
While a Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. A Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while a Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for a Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent a Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risk that the counterparties to such contracts may default on their obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force a Fund to cover its purchase or sale commitments, if any, at the market price at the time of the default.
Summary of Derivative Instruments
A Fund may use derivatives for various purposes as noted above. The following is a summary of the location of fair value amounts of derivatives, not accounted for as hedging instruments, as of October 31, 2018:
Location on the Statement of Assets and Liabilities | ||||
Derivative Instrument Risk Type | Asset Derivatives | Liability Derivatives | ||
Foreign Exchange Risk | Unrealized appreciation on forward foreign currency exchange contracts | Unrealized depreciation on forward foreign currency exchange contracts |
The following is a summary of the fair value of derivative instruments, not accounted for as hedging instruments, as of October 31, 2018:
International Real Estate Equity Fund | Asset Derivatives | Liability Derivatives | ||||||||||
Derivatives not accounted for as hedging instruments and risk exposure | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Forward foreign exchange contracts |
| |||||||||||
(foreign exchange risk) | Unrealized appreciation on forward foreign currency exchange contracts | $ | – | Unrealized depreciation on forward foreign currency exchange contracts | $ | 1,080 | ||||||
Total | $ | – | $ | 1,080 |
A Fund may have transactions that may be subject to enforceable master netting arrangements. A reconciliation of the gross amounts on the Statements of Assets and Liabilities as of October 31, 2018 to the net amounts by broker and derivative type, including any collateral received or pledged, is included in the following tables:
Gross Amounts Not Offset in Statement of Assets & Liabilities | Gross Amounts Not Offset in Statement of Assets and Liabilities | |||||||||||||||||||||||||||||||
Description | Gross Amounts of Assets Presented in Statement of Financial Position | Financial Instruments | Collateral Received (1) | Net Amount (3) | Gross Amounts of Liabilities Presented in Statement of Financial Position | Financial Instruments | Collateral Pledged (1) | Net Amount (3) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||||||||||
International Real Estate Equity Fund |
| |||||||||||||||||||||||||||||||
Forward foreign currency (2) | ||||||||||||||||||||||||||||||||
Credit Agricole | $ | – | $ | – | $ | – | $ | – | $ | 1,078 | $ | – | $ | – | $ | 1,078 | ||||||||||||||||
Royal Bank of Canada | – | – | – | – | 2 | – | – | 2 |
1. | In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization. |
2. | Includes financial instruments which are not subject to a master netting arrangement across funds, or another similar arrangement. |
3. | Net amounts represent the net receivables/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity. |
26 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
The following is a summary of the location of realized gain/(loss) and net change in unrealized appreciation/(depreciation) on derivatives in the Statement of Operations for the fiscal year ended October 31, 2018:
Derivative Instrument Risk Type | Location on the Statement of Operations | |
Foreign Exchange Risk | Realized gain/(loss) on forward foreign currency exchange contracts | |
Net change in unrealized appreciation/(depreciation) on forward foreign currency exchange contracts |
The following is a summary of the effect of derivative instruments on the Statement of Operations for the fiscal year ended October 31, 2018:
International Real Estate Equity Fund | Location of Gain or (Loss) on Derivatives | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation/ (Depreciation) on Derivatives | |||||||
Realized/Unrealized Gain/(Loss) from Forward Foreign Currency Exchange Contracts | ||||||||||
Forward foreign exchange contracts | ||||||||||
(foreign exchange risk) | $ | (548,659 | ) | $ | 64,765 | |||||
Total | $ | (548,659 | ) | $ | 64,765 |
Information about derivatives reflected as of the date of this report is generally indicative of the type of activity for the fiscal year ended October 31, 2018. The table below summarizes the weighted average values of derivatives holdings by the Funds during the fiscal year ended October 31, 2018.
Fund | Purchase Forward Foreign Currency Contracts (Average Notional Value) | Sale Forward Foreign Currency Contracts (Average Notional Value) | ||||||
International Real Estate Equity Fund | $ | 7,323,921 | $ | 17,944,753 |
f. | Security Transactions, Investment Income and Expenses |
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income and corporate actions are recorded generally on the ex-date, except for certain dividends and corporate actions which may be recorded after the ex-date, as soon as a Fund acquires information regarding such dividends or corporate actions.
Interest income and expenses are recorded on an accrual basis. Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among the relevant Funds based on net assets of each. For each of the Funds, the method for allocating income, fund level expenses, and realized and unrealized gains or losses to a class is based on the average net asset value of that class’ shares in proportion to the average net assets of the relevant Fund when incurred. Expenses specific to a class (such as Rule 12b-1 and administrative services fees) are charged to that class.
g. | Distributions |
Distributions from net investment income, if any, are declared and paid quarterly for the Realty Income & Growth Fund. Distributions from net investment income, if any, are declared and paid annually for the International Real Estate Equity Fund. The Funds will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies and loss deferrals.
2018 Annual Report | 27 |
Notes to Financial Statements (continued)
October 31, 2018
h. | Federal Income Taxes |
Each Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Funds from all federal income taxes. Therefore, no federal income tax provision is required. Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Funds’ U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31 are subject to such review.
i. | Foreign Withholding Tax |
Dividend and interest income from non-U.S. sources received by the Funds are generally subject to non-U.S. withholding taxes. In addition, the Funds may be subject to capital gains tax in certain countries in which they invest. The above taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties with some of these countries. The Funds accrue such taxes when the related income is earned.
In addition, when the Fund sells securities within certain countries in which it invests, the capital gains realized may be subject to tax. Based on these market requirements and as required under GAAP, the Fund accrues deferred capital gains tax on securities currently held that have unrealized appreciation within these countries. The amount of deferred capital gains tax accrued is reported on the Statement of Operations as part of the Net Change in Unrealized Appreciation/Depreciation on Investments.
j. | Securities Lending |
Through an agreement with BNP Paribas as the Lending Agent and State Street Bank and Trust Company (the Funds’ custodian), the Funds may lend their portfolio securities to brokers, dealers and other financial institutions that pay a negotiated fee in order to generate additional income. The Funds receive non-cash collateral in the form of U.S. Government Securities, with respect to each loan of U.S. securities, typically equal to at least 102% of the value of the portfolio securities loaned, and, with respect to each loan of non-U.S. securities, typically equal to at least 105% of the value of the portfolio securities loaned, and at all times thereafter shall require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned.
The Funds continue to own the loaned securities. However, securities lending involves certain risks including the event of default or insolvency of the borrower and possible delays or restrictions upon a Fund’s ability to recover the loaned securities or dispose of the collateral for the loan. Securities on loan are noted within the Statement of Investments. Non-cash securities lending collateral held by the Lending Agent on behalf of the Funds cannot be sold or repledged by the Funds and, therefore, this amount is not presented on the Funds’ Statements of Investments.
At October 31, 2018, the market value of loaned securities and collateral received were as follows:
Fund | Value of Securities Loaned | Value of Cash Collateral | Value of Non-cash Collateral | |||||||||
Aberdeen International Real Estate Equity Fund | $ | 1,023,530 | $ | 1,044,246 | $ | – | ||||||
Aberdeen Realty Income & Growth Fund | 16,887,796 | 17,228,844 | – |
3. Agreements and Transactions with Affiliates
a. | Investment Adviser |
Under the Investment Advisory Agreement with the Trust, Aberdeen manages the Funds in accordance with the policies and procedures established by the Board.
28 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
For services provided under the terms of the current Investment Advisory Agreement, each Fund pays the Adviser an annual management fee (as a percentage of its average daily net assets) paid monthly according to the following schedule:
Fund | Fee Schedule | |||||||
International Real Estate Equity Fund* | On All Assets | 1.00% | ||||||
Realty Income & Growth Fund** | On assets up to $250 million | 1.00% | ||||||
On assets of $250 million up to $750 million | 0.95% | |||||||
On assets of $750 million up to $1 billion | 0.90% | |||||||
On assets of $1 billion and more | 0.80% |
* | Prior to May 7, 2018, pursuant to the prior advisory agreement with the Alpine International Real Estate Equity Fund, the Predecessor Adviser was entitled to an annual advisory fee of 1.00% on all assets. |
** | Prior to May 7, 2018, pursuant to the prior advisory agreement with the Alpine Realty Income & Growth Fund, the Predecessor Adviser was entitled to an annual advisory fee of 1.00% on assets up to $250 million, 0.95% on assets between $250 million and $500 million, 0.90% on assets of between $750 million and $1 billion and 0.80% on assets in excess of $1 billion. |
The Adviser has engaged the services of affiliate Aberdeen Asset Managers Limited (“AAML” or the “Subadviser”) as a subadviser pursuant to a subadvisory agreement. The Subadviser manages a portion of the Funds’ investments and has the responsibility for making all investment decisions for the portion of a Fund’s assets it manages. Pursuant to the subadvisory agreements, the Adviser pays fees to the Subadviser.
The Trust and Aberdeen have entered into a written contract (“Expense Limitation Agreement”) limiting operating expenses for all classes of the Funds from exceeding the amounts listed in the tables below. The Expense Limitation Agreement may not be terminated before May 4, 2020 without the approval of the Trustees who are not “interested persons” of the Funds, as such term is defined by the 1940 Act (the “Independent Trustees”). The Expense Limitation Agreement excludes certain expenses, including any interest, brokerage commissions, acquired funds fees and expenses, and extraordinary expenses.
Fund | Class | Limit | ||||||
International Real Estate Equity Fund* | Institutional | 1.37% | ||||||
Class A | 1.62% | |||||||
Realty Income & Growth Fund** | Institutional | 1.00% | ||||||
Class A | 1.25% |
* | Prior to May 7, 2018, there was no limit. |
** | Prior to May 7, 2018, the limit was 1.25% for Class A and 1.00% for Institutional Class. Additionally, the Predecessor Adviser had contractually agreed to waive 0.05% of the advisory fee. |
Aberdeen may request and receive reimbursement from a Fund of the advisory fees waived and other expenses reimbursed pursuant to the Expense Limitation Agreement as of a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements do not cause a class to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser, and the payment of such reimbursement is approved by the Board on a quarterly basis (the “Reimbursement Requirements”). Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by Aberdeen is not permitted.
As of October 31, 2018, to the extent the Reimbursement Requirements are met, the cumulative potential reimbursements to Aberdeen for each Fund, based on expenses reimbursed by Aberdeen, including adjustments described above, would be:
Fund | Amount Fiscal Year 2018 (Expires 10/31/21) | |||
International Real Estate Equity Fund | $ | 11,346 | ||
Realty Income & Growth Fund | 160,149 |
b. | Fund Administration |
Under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including daily valuation of the Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to
2018 Annual Report | 29 |
Notes to Financial Statements (continued)
October 31, 2018
the Board. For services provided pursuant to the Fund Administration Agreement, the Trust pays Aberdeen an annual fee of 0.08% based on the Trust’s average daily net assets. The fee is then allocated proportionately among all funds within the Trust (including the Funds) in relation to the average daily net assets of each fund. This asset-based fee is subject to an annual minimum fee based on the number of funds served. Pursuant to a sub-administration agreement with Aberdeen, State Street Bank and Trust Company (“State Street”) provides sub-administration services with respect to the Funds. Aberdeen pays State Street for such services.
Prior to May 7, 2018, State Street served as the custodian, fund accounting agent and administrator to the Predecessor Funds. Effective May 7, 2018, under the terms of the Fund Administration Agreement, Aberdeen provides various administrative and accounting services, including oversight of the daily valuation of the Funds’ shares, preparation of financial statements, tax returns, regulatory reports, and presentation of quarterly reports to the Board. In addition to the sub-administration services State Street provides to the Funds, State Street also provides custody and accounting services pursuant to a custodian agreement with the Funds.
c. | Distributor and Shareholder Servicing |
The Trust and Aberdeen Fund Distributors, LLC (the “Distributor”) are parties to the current Underwriting Agreement (the “Underwriting Agreement”) whereby the Distributor acts as principal underwriter for the Trust’s shares.
The Trust has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act with respect to certain classes of shares. The Plan permits the Funds to compensate the Distributor, for expenses associated with the distribution-related and/or shareholder services provided by such entities. These fees are paid to the Distributor and are either kept or paid to shareholders’ financial advisors or other intermediaries for distribution and shareholder services. Although actual distribution expenses may be more or less, under the Plan, the Funds pay the Distributor an annual fee of the following amounts:
Fund | Class A Shares | |||
International Real Estate Equity Fund | 0.25% | |||
Realty Income & Growth Fund | 0.25% |
The Adviser or an affiliate of the Adviser may pay additional amounts from its own resources to dealers or other financial intermediaries, for aid in distribution or for aid in providing administrative services to shareholders.
Pursuant to the current Underwriting Agreement, the Distributor will also receive the proceeds of contingent deferred sales charges (“CDSCs”) of up to 1% imposed on certain redemptions of Class A shares of the Funds.
In addition, the Distributor will re-allow to dealers 5.00% of sales charges on Class A shares of the Funds, which have a maximum front-end sales charge of 5.75% For the fiscal year ended October 31, 2018, the Distributor retained commissions of $7,851 from front-end sales charges of Class A shares and $0 from CDSC fees from certain Class A shares of the Funds.
Prior to May 7, 2018, Quasar Distributors, LLC served as each Predecessor Fund’s distributor. Each of the Predecessor Funds had adopted a distribution and servicing plan (the “Quasar Plan”) for their Class A shares as allowed by Rule 12b-1 under the 1940 Act. The Quasar Plan authorized payments by the Predecessor Funds in connection with the distribution and servicing of their Class A shares at an annual rate, as determined from time to time by the Alpine Board, of up to 0.25% of the average daily net assets of the Class A shares of the Predecessor Funds. Amounts paid under the Quasar Plan by the Predecessor Funds could be spent by the Predecessor Funds on any activities or expenses primarily intended to result in the sale of Class A shares of the Predecessor Funds, including but not limited to advertising, compensation for sales and marketing activities of financial institutions and others such as dealers and distributors, shareholder account servicing, the printing and mailing of prospectuses to other than current shareholders and the printing and mailing of sales literature. The Alpine International Real Estate Equity Fund and Alpine Realty Income & Growth Fund incurred $201 and $1,963 respectively, pursuant to the Quasar Plan for the period from November 1, 2017 to May 4, 2018.
d. | Administrative Services Fees/Transfer Agent Out-of-Pocket Expenses |
The Funds may pay and/or reimburse administrative services fees/transfer agent out-of-pocket expenses to certain broker-dealers and financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds (sometimes referred to as “sub-transfer agency fees”), subject to certain limitations approved by the Board. These fees may be in addition to Rule 12b-1 fees. Sub-transfer agency fees generally include, but are not limited to, costs associated with omnibus accounting, recordkeeping, networking, sub-transfer agency or other administrative or shareholder services.
Class A and Institutional Class shares of the Funds pay for such services pursuant to an Administrative Services Plan adopted by the Board. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual administrative services fee of 0.25% for Class A and Institutional Class shares. Under an amendment to the Administrative Services Plan that is in effect until at least
30 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
February 28, 2019, a Fund may pay a maximum of 0.15% for contracts with fees that are calculated as a percentage of Fund assets and a maximum of $16 per account for contracts with fees that are calculated on a dollar per account basis. Institutional Class shares may also pay for the services described above directly, as these classes are not subject to an Administrative Services Plan.
The aggregate amount of sub-transfer agent and administrative service fees paid during the fiscal year ended October 31, 2018 was as follows:
Fund | Class A | Institutional | ||||||
International Real Estate Equity Fund | $ | 74 | $ | 21,412 | ||||
Realty Income & Growth Fund | 726 | 25,791 |
e. | Purchase/Sale Transactions Between Affiliates |
The Funds are permitted to buy or sell securities with funds that have a common investment adviser (or investment advisers which are affiliates) under specific procedures which have been approved by the Board of Trustees of the Trust. The procedures are designed to satisfy the requirements of Rule 17a-7 of the Investment Company Act of 1940 (“Rule 17a-7”). During the year ended October 31, 2018, the Funds did not engage in any of these trades.
4. Investment Transactions
Purchases and sales of securities (excluding short-term securities) for the fiscal year ended October 31, 2018, were as follows:
Fund | Purchases | Sales | ||||||
International Real Estate Equity Fund | $ | 107,433,918 | $ | 102,888,447 | ||||
Realty Income & Growth Fund | 42,572,137 | 66,924,088 |
5. Portfolio Investment Risks
a. | Concentration Risk |
Each Fund’s strategy of concentrating in companies in a specific industry means that its performance will be closely tied to the performance of a particular market segment. Each Fund’s concentration in these companies may present more risks than if it were broadly diversified over numerous industries and sectors of the economy. A downturn in these companies would have a larger impact on the Fund than on a mutual fund that does not concentrate in such companies. At times, the performance of these companies will lag the performance of other industries or the broader market as a whole.
b. | Cybersecurity Risk |
Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser and/or its service providers (including, but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption or lose operational functionality.
c. | Dividend Strategy Risk |
With respect to the Aberdeen Realty Income & Growth Fund, there is no guarantee that the issuers of the stocks held by the Fund will declare dividends in the future or that, if dividends are declared, they will remain at their current levels or increase over time. The Fund’s emphasis on dividend paying stocks could cause the Fund to underperform similar funds that invest without consideration of a company’s track record of paying dividends or ability to pay dividends in the future. Dividend-paying stocks may not participate in a broad market advance to the same degree as other stocks, and a sharp rise in interest rates or economic downturn could cause a company to unexpectedly reduce or eliminate its dividend. The Fund may hold securities for short periods of time related to the dividend payment periods and may experience loss during these periods.
d. | Emerging Markets Risk |
This risk applies to the Aberdeen International Real Estate Equity Fund and is a magnification of the risks that apply to foreign investments. These risks are greater for securities of companies in emerging market countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Foreign Securities Risk” below).
e. | Equity Securities Risk |
The stock or other security of a company may not perform as well as expected, and may decrease in value, because of factors related to the company (such as poorer than expected earnings or certain management decisions) or to the industry in which the company is engaged (such as a reduction in the demand for products or services in a particular industry). Holders of common stock generally are subject to more
2018 Annual Report | 31 |
Notes to Financial Statements (continued)
October 31, 2018
risks than holders of preferred stock or debt securities because the right to repayment of common stockholders’ claims is subordinated to that of preferred stock and debt securities upon the bankruptcy of the issuer.
f. | Extension Risk |
This risk applies to the Aberdeen Realty Income & Growth Fund. Principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase. Rapidly rising interest rates may cause prepayments to occur more slowly than expected, thereby lengthening the maturity of the securities held by the Fund and making their prices more sensitive to rate changes and more volatile.
g. | Fixed Income Securities Risk |
This risk applies to the Aberdeen Realty Income & Growth Fund. Fixed income securities are subject to, among other risks, credit risk, extension risk, issuer risk, interest rate risk, market risk and prepayment risk.
h. | Foreign Currency Exposure Risk |
The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact a Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Adviser are unsuccessful.
i. | Foreign Securities Risk |
Each Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which a Fund may invest may have markets that are less liquid, less regulated and more volatile than U.S. markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable or unsuccessful government actions, reduction of government or central bank support and political or financial instability. Lack of information may also affect the value of these securities. To the extent the Fund focuses its investments in a single country or only a few countries in a particular geographic region, economic, political, regulatory or other conditions affecting such country or region may have a greater impact on Fund performance relative to a more geographically diversified fund.
j. | High-Yield Bonds and Other Lower-Rated Securities Risk |
This risk applies to the Aberdeen Realty Income & Growth Fund. The Fund’s investments in high-yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. Investments in high-yield bonds are speculative and issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.
k. | Illiquid Securities Risk |
Illiquid securities are assets that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the asset. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities. Illiquid securities and relatively less liquid securities may also be difficult to value. Over recent years, the capacity of dealers to make markets in fixed income securities has been outpaced by the growth in the size of the fixed income markets. Liquidity risk may be magnified in a rising interest rate environment or when investor redemptions from fixed income funds may be higher than normal, due to the increased supply in the market that would result from selling activity.
The Adviser employs procedures and tests using third-party and internal data inputs that seek to assess and manage the liquidity of a Fund’s portfolio holdings. These procedures and tests take into account the Fund’s investment strategy and liquidity of portfolio investments during both normal and foreseeable stressed conditions, cash-flow projections during both normal and reasonable foreseeable stressed conditions, relevant market, trading and other factors, and monitor whether liquidity should be adjusted based on changed market conditions. These procedures and tests are designed to assist the Fund in determining its ability to meet redemption requests in various market conditions. In light of the dynamic nature of markets, there can be no assurance that these procedures and tests will enable the Fund to ensure that it has sufficient liquidity to meet redemption requests.
l. | Impact of Large Redemptions and Purchases of Fund Shares |
Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause a Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of the Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.
m. | Initial Public Offerings and Secondary Offerings Risk |
Each Fund may invest a portion of its assets in shares of IPOs or secondary offerings of an issuer. IPOs and secondary offerings may have a magnified impact on the performance of a fund with a small asset base. The impact of IPOs and secondary offerings on a Fund’s
32 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
performance likely will decrease as the Fund’s asset size increases, which could reduce the Fund’s returns. IPOs and secondary offerings may not be consistently available to the Fund for investing. IPO and secondary offering shares frequently are volatile in price due to the absence of a prior public market, the small number of shares available for trading and limited information about the issuer. Therefore, the Fund may hold IPO and secondary offering shares for a very short period of time. This may increase the turnover of the Fund and may lead to increased expenses for the Fund, such as commissions and transaction costs. In addition, IPO and secondary offering shares can experience an immediate drop in value if the demand for the securities does not continue to support the offering price.
n. | Interest Rate Risk |
This risk applies to the Aberdeen Realty Income & Growth Fund. The Fund’s fixed income investments are subject to interest rate risk, which generally causes the value of a fixed income portfolio to decrease when interest rates rise resulting in a decrease in the Fund’s net assets. The Fund may be subject to a greater risk of rising interest rates due to the recent period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. Interest rate fluctuations tend to have a greater impact on fixed income-securities with a greater time to maturity and/or lower coupon. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. In periods of market volatility, the market values of fixed income securities may be more sensitive to changes in interest rates.
o. | Issuer Risk |
The value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or service.
p. | Mid-Cap Securities Risk |
Securities of medium sized companies tend to be more volatile and less liquid than securities of larger companies.
q. | Management Risk |
Each Fund is subject to the risk that the Adviser may make poor security selections. The Adviser and its portfolio managers apply their own investment techniques and risk analyses in making investment decisions for a Fund and there can be no guarantee that these decisions will achieve the desired results for the Fund. In addition, the Adviser may select securities that underperform the relevant market or other funds with similar investment objectives and strategies. In addition, the Adviser’s judgment about the quality, relative yield or value of, or market trends affecting, a particular security or sector, or about interest rates generally, may be incorrect.
r. | Non-Diversified Fund Risk |
The Aberdeen Realty Income & Growth Fund’s performance may be more volatile than a diversified fund because it may invest a greater percentage of its total assets in the securities of a single issuer.
s. | Prepayment Risk |
This risk applies to the Aberdeen Realty Income & Growth Fund. As interest rates decline, debt issuers may repay or refinance their loans or obligations earlier than anticipated. The issuers of fixed income securities may, therefore, repay principal in advance. This forces the Fund to reinvest the proceeds from the principal prepayments at lower rates, which reduces the Fund’s income.
t. | REIT and Real Estate Risk |
Investment in REITs and real estate involves the risks that are associated with direct ownership of real estate and with the real estate industry in general. These risks include: declines in the value of real estate; risks related to local economic conditions, overbuilding and increased competition; increases in property taxes and operating expenses; changes in zoning laws; casualty or condemnation losses; variations in rental income, neighborhood values or the appeal of properties to tenants; changes in interest rates and changes in general economic and market conditions. REITs’ share prices may decline because of adverse developments affecting the real estate industry including changes in interest rates. The returns from REITs may trail returns from the overall market. Additionally, there is always a risk that a given REIT will fail to qualify for favorable tax treatment. REITs may be leveraged, which increases risk. Certain REITs charge management fees, which may result in layering the management fee paid by the fund.
u. | Sector Risk |
To the extent that a Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.
Real Estate Sector Risk. Each Fund concentrates its investments in the real estate industry. Please see “Concentration Risk” above for more information.
2018 Annual Report | 33 |
Notes to Financial Statements (continued)
October 31, 2018
v. | Small-Cap Securities Risk |
Securities of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
w. | Valuation Risk |
The price that a Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third-party service providers.
x. | Variable and Floating Rate Securities Risk |
This risk applies to the Aberdeen Realty Income & Growth Fund. For floating and variable rate obligations, there may be a lag between an actual change in the underlying interest rate benchmark and the reset time for an interest payment of such an obligation, which could harm or benefit the Fund, depending on the interest rate environment or other circumstances. Variable rate demand obligations (“VRDOs”) are floating rate securities that combine an interest in a long term municipal bond with a right to demand payment before maturity from a bank or other financial institution. If the bank or financial institution is unable to pay, the Fund may lose money.
Please read the prospectus for more detailed information regarding these and other risks.
6. Contingencies
In the normal course of business, the Funds may provide general indemnifications pursuant to certain contracts and organizational documents. The Funds’ maximum exposure under these arrangements is dependent on future claims that may be made against the Funds, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
7. Tax Information
At October 31, 2017 the breakdown of distributions per class from net investment income and from net realized gains were as follows:
Distributions from Net Income | Distributions from Net Realized Gains | |||||||||||||||
Fund | Class A | Institutional Class | Class A | Institutional Class | ||||||||||||
International Real Estate Equity Fund | $ | – | $ | (147,213 | ) | $ | – | $ | – | |||||||
Realty Income & Growth Fund | (96,932 | ) | (3,556,314 | ) | (66,187 | ) | (2,259,365 | ) |
As of October 31, 2018, the tax cost of securities and the breakdown of unrealized appreciation/(depreciation) for each Fund were as follows:
Tax Cost of Securities | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
International Real Estate Equity Fund | $ | 122,544,742 | $ | 4,830,009 | $ | (28,983,967 | ) | $ | (24,153,958 | ) | ||||||
Realty Income & Growth Fund | 61,257,313 | 25,582,334 | (1,408,679 | ) | 24,173,655 |
The tax character of distributions paid during the fiscal year ended October 31, 2018 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income | Net Long Term Capital Gains | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
International Real Estate Equity Fund | $ | 2,704,824 | $ | – | $ | 2,704,824 | $ | – | $ | – | $ | 2,704,824 | ||||||||||||
Realty Income & Growth Fund | 2,406,807 | 3,632,350 | 6,039,157 | – | – | 6,039,157 |
The tax character of distributions paid during the fiscal year ended October 31, 2017 was as follows (total distributions paid may differ from the Statements of Changes in Net Assets because for tax purposes dividends are recognized when actually paid):
34 | Annual Report 2018 |
Notes to Financial Statements (continued)
October 31, 2018
Distributions paid from | ||||||||||||||||||||||||
Fund | Ordinary Income | Net Long Term Capital Gains | Total Taxable Distributions | Tax Exempt Distributions | Return of Capital | Total Distributions Paid | ||||||||||||||||||
International Real Estate Equity Fund | $ | 147,213 | $ | – | $ | 147,213 | $ | – | $ | – | $ | 147,213 | ||||||||||||
Realty Income & Growth Fund | 1,971,942 | 4,006,856 | 5,978,798 | – | – | 5,978,798 |
As of October 31, 2018, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Fund | Undistributed Tax Exempt Income | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Distributions Payable | Late Year Ordinary and Post- October Capital Loss Deferrals | Other Temporary Differences | Unrealized Appreciation/ (Depreciation)* | Accumulated Capital and Other Losses** | Total Accumulated Earnings/ (Deficit) | ||||||||||||||||||||||||||||||
International Real Estate Equity Fund | $ | – | $ | 3,282,737 | $ | – | $ | – | $ | – | $ | – | $– | $ | (24,156,671 | ) | $ | (131,068,418 | ) | $ | (151,942,352 | ) | ||||||||||||||||||
Realty Income & Growth Fund | – | – | 25,020,208 | – | – | – | – | 24,173,652 | – | 49,193,860 |
* | The difference between the book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
** | As of October 31, 2018, for Federal income tax purposes, these Funds have capital loss carryforwards available to offset capital gains, if any, to the extent provided by the Treasury regulations. |
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards, as shown in the table below, were available to the extent provided by the regulations to offset future realized gains of each respective Fund.
Fund | Amount | Expires | ||||||
International Real Estate Equity | $ | 63,938,162 | 2019 (Short-Term) | |||||
International Real Estate Equity | $ | 706,772 | Unlimited (Short-Term) | |||||
International Real Estate Equity | $ | 66,423,484 | Unlimited (Long-Term) |
Amounts listed as “–” are $0 or round to $0.
Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred for an unlimited period. However, any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. The Predecessor Funds were similarly permitted to carry forward capital losses incurrent in taxable years beginning after December 22, 2010 under the Regulated Investment Company Modernization Act of 2010.
GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to foreign currency gain/(loss), litigation reclassification, non-taxable adjustment to income and non-deductible excise tax, and passive foreign investment company gain/(loss). These reclassifications have no effect on net assets or NAVs per share.
Fund | Paid-in Capital | Distributable Earnings/ (Accumulated Loss) | ||||||
International Real Estate Equity Fund | $ | (65,121,028 | ) | $ | 65,121,028 | |||
Realty Income & Growth Fund | 2,811,749 | (2,811,749 | ) |
8. Significant Shareholders
As of October 31, 2018, the Funds had shareholders with the percentage ownership indicated, which are considered significant shareholders (holdings greater than 5.0%) for financial reporting purposes:
Fund | Record Ownership % | Number of Account Owners | ||||
International Real Estate Equity Fund | 76.0 | % | 3 | |||
Realty Income & Growth Fund | 48.6 | 4 |
2018 Annual Report | 35 |
Notes to Financial Statements (concluded)
October 31, 2018
9. Line of Credit
The Trust, on behalf of each of the funds of the Trust (including the Funds) (the “Borrowers”), has entered into an agreement (the “Agreement”) with State Street Bank and Trust Company (the “Bank”), subject to annual renewal. The Agreement provides for a revolving credit facility (the “Credit Facility”) in the amount of $250,000,000 to be utilized for temporary or emergency purposes to fund shareholder redemptions or other short-term liquidity purposes.
Principal on each outstanding loan made under the Agreement bears interest at a variable rate per annum equal to the higher of (a) the Federal Funds Rate as in effect on that day (not less than zero) plus 1.25% or (b) the One-Month London Interbank Offered Rate as in effect on that day (not less than zero) plus 1.25%. In addition, the Borrowers shall pay to the Bank a commitment fee at the rate of 0.25% per annum on the daily unused portion of the Credit Facility, as applicable, which is allocated among the Borrowers in such manner as is determined by the Board to be reasonable. For each Fund that borrowed under the Credit Facility during the fiscal year ended October 31, 2018, the following table shows the average outstanding daily balance of the days the Fund utilized the Credit Facility and the average weighted interest rate paid by the Fund during the fiscal year ended October 31, 2018.
Average Outstanding Daily Balance | Average Weighted Interest Rate | Days Utilized | ||||||||||
International Real Estate Equity Fund* | $ | 895,665 | 3.34 | % | 14 | |||||||
Realty Income & Growth Fund* | 365,157 | 3.29 | % | 11 |
* | Prior to May 7, 2018, the Predecessor Funds had entered into a lending agreement with BNP Paribas (the “BNPP NY Agreement”). The amounts in the above table reflect the time period May 7, 2018 to October 31, 2018 and the terms of the State Street Agreement in effect at the time. |
10. Recent Accounting Pronouncements
On August 17, 2018, the SEC voted to adopt amendments to certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The SEC will also be referring certain SEC disclosure requirements that overlap with, but require information incremental to, U.S. GAAP to the FASB for potential incorporation into U.S. GAAP. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments became effective November 5, 2018.
On August 28, 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 includes removals, additions and modifications to the disclosure requirements for fair value measurements that are intended to improve the effectiveness of disclosures in the notes to financial statements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. Aberdeen has evaluated ASU 2018-13 and determined that there is no significant impact on the Trust’s financial statements. Aberdeen has early adopted the following ASU 2018-13 guidance in the Trust’s financial statements pertaining to the removal of (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and (ii) the policy for timing of transfers between levels.
11. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures and/or adjustments were required to the financial statements as of October 31, 2018.
36 | Annual Report 2018 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of Aberdeen Funds:
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of the Aberdeen International Real Estate Equity Fund and the Aberdeen Realty Income & Growth Fund, two of the funds comprising Aberdeen Funds (the Funds), including the statements of investments, as of October 31, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for the year then ended, and the related notes (collectively, the financial statements) and the financial highlights for the year then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of October 31, 2018, the results of their operations for the year then ended, the changes in their net assets for the year then ended, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. The statement of changes in net assets for the year ended October 31, 2017 and the financial highlights for each of the years in the three-year period ended October 31, 2017 were audited by other independent registered public accountants whose report, dated December 22, 2017, expressed an unqualified opinion on those changes in net assets and financial highlights. The financial highlights for the year ended October 31, 2014 were audited by other independent registered public accountants whose report, dated December 29, 2014, expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian, brokers, or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Aberdeen investment companies since 2009.
Philadelphia, Pennsylvania
December 27, 2018
2018 Annual Report | 37 |
Other Tax Information (Unaudited)
For the period ended October 31, 2018, certain dividends paid by the Funds may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2018 Form 1099-DIV.
For the year ended October 31, 2018, the following Funds paid qualified dividend income as follows:
Fund | Qualified Dividend Income | |||
International Real Estate Equity Fund | 50.45 | % | ||
Realty Income & Growth Fund | 0.46 | % |
For the taxable year ended October 31, 2018, the following percentage of income dividends paid by the Funds qualify for the dividends received deduction available to corporate shareholders:
Fund | Dividends Deduction | |||
International Real Estate Equity Fund | 14.29 | % | ||
Realty Income & Growth Fund | 0.44 | % |
The Funds intend to elect to pass through to their shareholders the credit for taxes paid in foreign countries during its fiscal year ended October 31, 2018. In accordance with the current tax laws, the foreign income and foreign tax per share (for a share outstanding as of October 31, 2018) were as follows:
Fund | Foreign Tax | |||
International Real Estate Equity Fund | $ | 0.0537 |
38 | Annual Report 2018 |
Shareholder Expense Examples (Unaudited)
As a shareholder of the Aberdeen Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) paid on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, transfer agent out-of-pocket expenses, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Aberdeen Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples assume that you had a $1,000 investment in the Class at the beginning of the reporting period, May 1, 2018 and continued to hold your shares at the end of the reporting period, October 31, 2018.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Actual Expenses Paid During Period” for the class of a Fund that you own to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of a Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the information for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
Beginning Account Value, May 1, 2018 | Actual Ending Account Value, October 31, 2018 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period*1 | Annualized Expense Ratio** | |||||||||||||||||||||
International Real Estate Equity Fund | Class A | $ | 1,000.00 | $ | 835.90 | $ | 1,016.94 | $ | 7.59 | $ | 8.34 | 1.64% | ||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 836.90 | $ | 1,018.25 | $ | 6.39 | $ | 7.02 | 1.38% | |||||||||||||||
Realty Income & Growth Fund | Class A | $ | 1,000.00 | $ | 1,031.20 | $ | 1,018.90 | $ | 6.40 | $ | 6.36 | 1.25% | ||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,032.30 | $ | 1,020.16 | $ | 5.12 | $ | 5.09 | 1.00% |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period multiplied by 184/365 (to reflect the one-half year period). |
** | The expense ratio presented represents a six-month, annualized ratio. |
1 | Represents the hypothetical 5% return before expenses. |
2018 Annual Report | 39 |
Management of the Funds (Unaudited)
As of October 31, 2018
Board of Trustees and Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are not interested persons (as defined in the 1940 Act) of the trust (“Independent Trustees”) | ||||||||
P. Gerald Malone**** Year of Birth: 1950 | Trustee since December 2007 Chairman of the Board | Mr. Malone is, by profession, a solicitor of over 40 years standing. As a member of the UK House of Commons, he served as a Minister of State in the United Kingdom Government. Mr. Malone currently serves as an independent director of Bionik Laboratories Corp., a US healthcare company, specializing in stroke rehabilitation using robotic devices. He is Chairman of the Board of Trustees of Aberdeen Funds, Chairman of the Board of Directors of Aberdeen Global Income Fund, Inc., Chairman of the Board of Directors of Aberdeen Asia-Pacific Income Fund, Inc. Chairman of the Board of Directors of Aberdeen Global Dynamic Dividend Fund, Chairman of the Board of Directors of Aberdeen Total Dynamic Dividend Fund, Chairman of the Board of Directors of Aberdeen Global Premier Properties Fund, Chairman of the Board of Directors of Aberdeen Income Credit Strategies Fund and a Director of Aberdeen Australia Equity Fund, Inc. He previously served as Independent Chairman of UK companies, Crescent OTC Ltd (pharmaceutical services) until February 2018; and fluidOil Ltd. (oil services) until June 2018; U.S. company Rejuvenan llc (wellbeing services) until September 2017 and as chairman of UK company, Ultrasis plc (healthcare software services company) until October 2014. | 32 | None. | ||||
Neville J. Miles**** Year of Birth: 1946 | Trustee since December 2011 | Mr. Miles is, and has been for over ten years, Chairman of Ballyshaw Pty. Ltd. (share trading, real estate development and investment). He is Chairman of the Board of Directors of Aberdeen Australia Equity Fund, Inc. He also is a non-executive director of a number of Australian and overseas companies. | 28 | None. | ||||
Rahn K. Porter**** Year of Birth: 1954 | Trustee since September 2016 | Mr. Porter has been the Chief Financial Officer of The Colorado Health Foundation since 2013. Previously, he was the Interim Chief Executive Officer of the Colorado Health Foundation from 2014 to 2015 and was Senior Vice President and Treasurer, Qwest Communications International Inc. (telecommunications) from 2008 to 2011. | 27 | Director, CenturyLink Investment Management Company, since 2006; Director, BlackRidge Financial Inc., since March, 2005. |
40 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Steven N. Rappaport**** Year of Birth: 1948 | Trustee since September 2016 | Mr. Rappaport has been a Partner of Lehigh Court, LLC (private investment firm) and RZ Capital LLC (private investment firm) since 2004. | 26 | Director of iCAD, Inc., since 2006; Director of Credit Suisse Funds (9) since 1999; Director of Credit Suisse Asset Management Income Fund, Inc. since 2005 and Director of Credit Suisse High Yield Bond Fund, Inc. since 2005. | ||||
Peter D. Sacks**** Year of Birth: 1945 | Trustee since December 2007 | Mr. Sacks was a Director and Founding Partner of Toron AMI International Asset Management (investment management) from 1988 to 2015. He is currently a Director of Aberdeen Asia-Pacific Income Fund Inc., Aberdeen Global Income Fund Inc., Aberdeen Australia Equity Fund Inc. and Tricon Capital Group Inc. | 28 | None. | ||||
Warren C. Smith**** Year of Birth: 1955 | Trustee since December 2007 | Mr. Smith has been a founding partner of MRB Partners Inc. (independent investment research and consultancy firm) since 2010. He has been a Director of Aberdeen Asia-Pacific Income Investment Company Limited (Canadian investment fund) since 1993. Mr. Smith was a Managing Editor with The Bank Credit Analyst Research Group (independent publishers of financial market research and publications, including The Bank Credit Analyst) from 1982 to 2009. | 26 | None. |
2018 Annual Report | 41 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee During Past 5 Years*** | ||||
Trustees who are interested persons (as defined in the 1940 Act) of the trust (“Interested Trustees”) | ||||||||
Martin Gilbert****† Year of Birth: 1955 | Trustee since December 2007 | Martin is the Co-Chief Executive of Standard Life Aberdeen PLC, the company formed as a result of the merger between Aberdeen Asset Management PLC and Standard Life plc in August 2017. Prior to this, Martin was a co-founder and the Chief Executive of Aberdeen Asset Management, which was established as a dedicated asset manager in 1983. | 32 | Chairman, Prudential Regulation Authority’s Practitioner Panel, Director, Institute of International Finance, Non-Executive Director, Glencore plc |
* | Each Trustee holds office for an indefinite term until his successor is elected and qualified. |
** | The Aberdeen Fund Complex consists of the Trust, which currently consists of 25 portfolios, Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Global Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds, which currently consists of 4 portfolios, and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios. |
*** | Directorships held in (1) any other investment companies registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange Act. |
**** | Each Trustee may be contacted by writing to the Trustee c/o Aberdeen Asset Management Inc., 1735 Market Street, 32nd Floor, Philadelphia, Pennsylvania 19103, Attn: Alan Goodson. |
† | Mr. Gilbert is considered to be an “interested person” of the Trust as defined in the 1940 Act because of his affiliation with the Adviser. |
42 | Annual Report 2018 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Officers of the Trust
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Bev Hendry** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1953 | President, Chief Executive Officer and Principal Executive Officer (Since September 2014) | Currently, Chairman- Americas for Standard Life Aberdeen plc (2018-present). Mr. Hendry was Chief Executive Officer–Americas for Aberdeen Asset Management PLC (2014-2018) and Chief Operating Officer for Hansberger Global Investors (2008-2014). | ||
Jeffrey Cotton** Aberdeen Asset Managers Limited 6 St Andrew Square Edinburgh EH2 2AH Year of Birth: 1977 | Vice President and Chief Compliance Officer (Since March 2011) | Currently, Interim Global Head of Conduct & Compliance for Standard Life Aberdeen plc. Mr. Cotton is also Vice President of Aberdeen Fund Distributors LLC. Mr. Cotton joined Aberdeen in 2010. | ||
Joseph Andolina** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President–Compliance (Since March 2017) | Currently, Head of Conduct & Compliance–Americas/Deputy Chief Risk Officer for Aberdeen Asset Management Inc. Prior to joining the Compliance Department, he was a member of Aberdeen’s Legal Department, where he served as U.S. Counsel and worked primarily on matters relating to Aberdeen’s registered funds. | ||
Andrea Melia** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1969 | Treasurer, Chief Financial Officer, and Principal Accounting Officer (Since September 2009) | Currently, Vice President and Head of Fund Operations, Traditional Assets–Americas for Aberdeen Asset Management Inc. (since 2009). | ||
Megan Kennedy** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Secretary and Vice President (Since September 2009) | Currently, Head of Product Management for Aberdeen Asset Management Inc. Ms. Kennedy joined Aberdeen Asset Management Inc. in 2005 as a Senior Fund Administrator. | ||
Lucia Sitar** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1971 | Vice President (Since December 2008) | Currently, Vice President and Managing U.S. Counsel for Aberdeen Asset Management Inc. Ms. Sitar joined Aberdeen Asset Management Inc. in July 2007. | ||
Alan Goodson** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | Vice President (Since March 2009) | Currently, Director, Vice President and Head of Product–Americas for Aberdeen Asset Management Inc., overseeing Product Management and Product Development for Aberdeen’s registered and unregistered investment companies in the U.S. and Canada. Mr. Goodson is Director and Vice President of Aberdeen Asset Management Inc. and joined Aberdeen in 2000. |
2018 Annual Report | 43 |
Management of the Funds (Unaudited) (continued)
As of October 31, 2018
Name, Address, and Year of Birth | Position(s) Held, Length of Time Served and Term of Office* | Principal Occupation During Past 5 Years | ||
Adam McCabe** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1979 | Vice President (Since March 2010) | Currently, Head of Asian Fixed Income. Mr. McCabe joined Aberdeen Asset Management via the acquisition of certain asset management businesses from Credit Suisse in 2009. | ||
Jennifer Nichols** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | Vice President (Since December 2007) | Currently, Head of Legal–Americas for Aberdeen Asset Management Inc. Director and Vice President for Aberdeen Asset Management Inc. (since October 2006). | ||
Hugh Young** Aberdeen Standard Investments (Asia) Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1958 | Vice President (Since June 2011) | Currently, Managing Director of Aberdeen Standard Investments (Asia) Limited (since 1991) and member of the Executive Management Committee and Director of Standard Life Aberdeen plc (since 1991 and 2011, respectively). Mr. Young joined Aberdeen in 1991. | ||
Ben Moser** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1979 | Vice President (Since September 2018) | Currently, Head of Investor Services–US. Mr. Moser joined Aberdeen Asset Management in July 2008. | ||
Brian O’Neill** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1968 | Assistant Treasurer (Since September 2008) | Currently, Senior Fund Administration Manager–U.S. for Aberdeen Asset Management Inc. Mr. O’Neill joined Aberdeen Asset Management Inc. in 2008. | ||
Eric Olsen** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1970 | Assistant Treasurer (Since December 2013) | Currently, Deputy Head of Fund Administration–U.S. for Aberdeen Asset Management Inc. Mr. Olsen joined Aberdeen Asset Management Inc. in August 2013. | ||
Andrew Kim** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1983 | Assistant Secretary (Since March 2017) | Currently, Senior Product Manager. Mr. Kim joined Aberdeen Asset Management Inc. in August 2013. | ||
Stephen Varga** Aberdeen Asset Management Inc. 1735 Market Street 32nd Floor Philadelphia, PA 19103 Year of Birth: 1985 | Assistant Secretary (Since March 2017) | Currently, Product Manager. Mr. Varga joined Aberdeen Asset Management Inc. in 2011. |
44 | Annual Report 2018 |
Management of the Funds (Unaudited) (concluded)
As of October 31, 2018
* | Each officer holds office for an indefinite term at the pleasure of the Board of Trustees and until his or her successor is elected and qualified. |
** | Mr. Hendry, Ms. Melia, Ms. Kennedy, Mr. Goodson, Ms. Nichols, Mr. Cotton, Mr. McCabe, Mr. Young, Ms. Sitar, Mr. Andolina, Mr. Moser, Mr. Olsen, Mr. O’Neill, Mr. Kim and Mr. Varga hold officer position(s) in one or more of the following: Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Australia Equity Fund, Inc., Aberdeen Global Income Fund, Inc., Inc., Aberdeen Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., Aberdeen Japan Equity Fund, Inc., Aberdeen Income Credit Strategies Fund, Aberdeen Global Dynamic Dividend Fund, Aberdeen Total Dynamic Dividend Fund, Aberdeen Global Premier Properties Fund, Aberdeen Investment Funds (consisting of 4 portfolios) and Aberdeen Standard Investments ETFs, which currently consists of 5 portfolios, each of which may also be deemed to be a part of the same “Fund Complex” as the Trust. |
2018 Annual Report | 45 |
Management Information
Trustees
P. Gerald Malone, Chairman
Martin J. Gilbert
Neville J. Miles
Rahn K. Porter
Steven N. Rappaport
Peter D. Sacks
Warren C. Smith
Officers
Bev Hendry, President and Chief Executive Officer
Jeffrey Cotton, Chief Compliance Officer and Vice President
Joseph Andolina, Vice President - Compliance
Andrea Melia, Treasurer and Chief Financial Officer
Megan Kennedy, Secretary and Vice President
Lucia Sitar, Vice President
Alan Goodson, Vice President
Adam McCabe, Vice President
Ben Moser, Vice President
Jennifer Nichols, Vice President
Hugh Young, Vice President
Eric Olsen, Assistant Treasurer
Brian O’Neill, Assistant Treasurer
Andrew Kim, Assistant Secretary
Stephen Varga, Assistant Secretary
Investment Manager
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Fund Administrator
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Transfer Agent
DST Asset Manager Solutions, Inc.
333 West 11th Street
Kansas City, MO 64105
Distributor
Aberdeen Fund Distributors LLC
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Sub-Administrator, Custodian & Fund Accountant
State Street Bank and Trust Company
1 Heritage Drive, 3rd Floor
North Quincy, MA 02171
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Fund Counsel
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Aberdeen Asset Management Inc. 1735 Market Street, 32nd Floor Philadelphia, PA 19103 aberdeen-asset.us |
AOE-0390-AR
Item 2. Code of Ethics.
(a) As of October 31, 2018, the Registrant had adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party (the “Code of Ethics”).
(c) There have been no amendments during the period covered by this report to a provision of the Code of Ethics.
(d) During the period covered by the report, the Registrant did not grant any waivers to the provisions of the Code of Ethics.
(f) The Code of Ethics is included with this Form N-CSR as Exhibit 13(a)(1).
Item 3. Audit Committee Financial Expert.
The Registrant’s Board of Trustees has determined that there is at least one member who qualifies as an “audit committee financial expert” serving on its Audit Committee. Mr. Rahn K. Porter is the “audit committee financial expert” and is considered to be an “Independent Trustee” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Fiscal Year Ended | (a) Audit Fees | (b) Audit-Related Fees | (c)1 Tax Fees | (d) All Other Fees | ||||
October 31, 2018 | $730,734 | $0 | $199,730 | $0 | ||||
October 31, 2017 | $509,550 | $0 | $147,000 | $0 |
1 | The Tax Fees are for the completion of the Registrant’s federal and state tax returns. |
(e)(1) Pre-Approval Policies and Procedures. Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Registrant’s (hereinafter, the “Trust”) Audit Committee Charter authorizes the Audit Committee (“Committee”) to annually select, retain or terminate the Trust’s independent auditor and, in connection therewith, to evaluate the terms of the engagement and the qualifications and independence of the independent auditor, including whether the independent auditor provides any consulting, auditing or tax services to the investment adviser (hereinafter, the “Adviser”) or a sub-adviser, and to receive the independent auditor’s specific representations as to their independence, delineating all relationships between the independent auditor and the Trust, consistent with PCAOB 3526 or any other applicable auditing standard. PCAOB Rule 3526 requires that, at least annually, the auditor: (1) disclose to the Committee in writing all relationships between the auditor and its related entities and the Trust and its related entities that in the auditor’s professional judgment may reasonably be thought to bear on independence; (2) confirm in its letter that, in its professional judgment, it is independent of the Trust within the meaning of the Securities Acts administered by the SEC; and (3) discuss the auditor’s independence with the Committee. The Committee is responsible for actively engaging in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor and for taking, or recommending that the full Board take, appropriate action to oversee the independence of the independent auditor. The Committee is also authorized to review in advance, and consider approval of, any and all proposals by management or the Adviser that the Trust, Adviser or their affiliated persons, employ the independent auditor to render
“permissible non-audit services” to the Trust and to consider whether such services are consistent with the independent auditor’s independence. The Committee may delegate to one or more of its members (“Delegates”) authority to pre-approve permissible non-audit services to be provided to the Trust. Any pre-approval determination of a Delegate shall be presented to the full Committee at its next meeting. The Committee shall communicate any pre-approval made by it or a Delegate to the Adviser, who will ensure that the appropriate disclosure is made in the Trust’s periodic reports required by Section 30 of the Investment Company Act of 1940, as amended, and other documents as required under the federal securities laws.
(e)(2) None of the services described in each of paragraphs (b) through (d) of this Item involved a waiver of the pre-approval requirement by the Audit Committee pursuant to Rule 2-01 (c)(7)(i)(C) of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the Registrant’s accountant for services to the Registrant and to the Registrant’s investment adviser and all entities controlling, controlled by, or under common control with the Adviser that provide services to the Registrant for the Registrant’s fiscal years ended October 31, 2018 and October 31, 2017 and were $946,335 and $803,351, respectively.
(h) The Registrant’s Audit Committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) or Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence and has concluded that it is.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Included as part of the Reports to Shareholders filed under Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
During the period ended October 31, 2018, there were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d15(b)).
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) The Code of Ethics of the Registrant for the period covered by this report as required pursuant to Item 2 of this Form N-CSR.
(a)(2) Certifications of the Registrant pursuant to Rule 30a-2(a) under the Act are exhibits to this report.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Certifications of the Registrant pursuant to Rule 30a-2(b) under the Act are exhibits to this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Aberdeen Funds | ||
By: | /s/ Bev Hendry | |
Bev Hendry | ||
Principal Executive Officer | ||
Aberdeen Funds | ||
Date: January 7, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Bev Hendry | |
Bev Hendry | ||
Principal Executive Officer | ||
Aberdeen Funds | ||
Date: January 7, 2019 |
By: | /s/ Andrea Melia | |
Andrea Melia | ||
Principal Financial Officer | ||
Aberdeen Funds | ||
Date: January 7, 2019 |