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China (Aberdeen Greater China Fund, Inc.)*****: The MSCI Zhong Hua Index declined in December and was among the main regional laggards for the year. During the month, concerns over the possibility of new taxes, a lower full-year Gross Domestic Product (GDP) target, a spike in the interbank lending rate as well as a liquidity crunch hurt local equities, though the mainland central bank promptly intervened. The U.S. Federal Reserve’s (Fed) upcoming stimulus cut also weighed on Hong Kong stocks.

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Global Emerging Markets Update: Emerging market equities had a difficult time in 2013, underperforming their developed counterparts by a significant margin. The MSCI Emerging Markets Index ended about 2% lower in U.S. dollar terms, compared with the MSCI World Index which surged by around 23%. Latin America was the worst preforming region, with markets declining sharply except for Mexico, which ended flat. Turkey and the Czech Republic led losses in EMEA, while Indonesia and Thailand were the laggards in emerging Asia. Notably, concerns over the U.S. Federal Reserve’s (Fed) planned exit from quantitative easing (QE) kept investors on edge for much of 2013, prompting capital flight, sharp falls in currencies and monetary tightening. The economic slowdown across the developing world, particularly in the larger economies, at the time when expectations of growth in the developed world were improving, also hurt sentiment. Several countries saw widespread protests as growth failed to keep pace with popular aspirations that were raised during earlier phases of rapid expansion.

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Indonesia (Aberdeen Indonesia Fund, Inc.): Indonesian equities rose slightly in local currency terms as the rupiah continued to decline. Commodities firms earn revenues in U.S. dollars and hence sales in rupiah terms were boosted, while their costs are in local currency.

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Latin America (Aberdeen Latin America Equity Fund, Inc.): Latin American equities fell in December, owing to concerns that the U.S. Federal Reserve’s (Fed) upcoming reduction of its asset purchases would lead to increased outflows from the region.

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Asian Equities (The Asia Tigers Fund, Inc.): Compared with the strong gains of the previous year, Asian equity markets had a rather muted 2013. The MSCI AC Asia Pacific ex Japan Index rose by 3.64% in U.S. dollar terms, outperforming most peers in emerging markets but trailing the double-digit advances in developed markets. Notably, it was concerns over a reduction in U.S. asset purchases that triggered sharp falls in the middle of the year. The Federal Reserve (Fed) tried to reassure investors that it would maintain stimulus until economic recovery was more convincing. But uncertainty prevailed right up to December. Against a backdrop of improving U.S. data, the central bank decided conclusively then that it would reduce its monthly asset purchases starting from January. Investors were also cautiously optimistic when China ushered in a new leadership in March. Beijing promptly vowed to restructure the economy and narrow the wealth gap. A handful of markets were buffeted by domestic struggles. Faced with large deficits, Indonesia and India, along with their currencies, fell sharply during the year although India recovered somewhat. Thai stocks also lost ground, with declines exacerbated by spiralling political tensions.

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India (The India Fund, Inc.): Indian equities rose in December, despite faltering mid-month when the U.S. Federal Reserve (Fed) announced the start of tapering. The market returned to favor as upbeat news on the U.S. economy boosted Indian tech stocks in particular.

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***** As of 12/02/2013, Fund name changed from The Greater China Fund, Inc.

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