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Aberdeen American Opportunities Fund Annual report to 30 September 2014

Performance Review The Aberdeen American Opportunities Fund rose by 12.77% in Singapore dollar terms for the year under review, compared with the 20.68% return of its benchmark, the MSCI North America Index.

Market Review Investor optimism was buoyed by generally positive corporate earnings reports and a steady improvement in economic data. This offset geopolitical concerns in Ukraine and the Middle East and, towards the end of the period, worries over slowing economic growth in Europe and Asia.

Markets were volatile early on, amid speculation over the Federal Reserve’s possible tapering of monetary stimulus and the change in command at the central bank, as Janet Yellen succeeded Ben Bernanke in February. The Fed kicked off its tapering in January, reducing its $85 billion-per-month asset purchase programme in $10 billion increments through to the end of the reporting period. It is expected to cease asset purchases through this programme completely by the end of October 2014. The US economy had its ups and downs over the year in review. Standing between healthy GDP growth in the fourth quarter of 2013 and the second quarter of 2014, the first quarter saw a contraction, as severe winter weather hit consumer spending. Elsewhere, the labour market was largely upbeat. Payrolls increased, while the unemployment rate fell. However, less positively, the labour force participation rate dropped to its lowest level in more than 36 years.

Portfolio Review For the majority of the period, the market favoured lower quality companies. This proved difficult for us, given our focus on the best. In sector terms, performance varied widely. The more cyclical semiconductors and technology hardware subsectors led the market, while consumer staples and certain consumer discretionary names, particularly in autos, lagged.

At the stock level, our holding in Emerson Electric hindered performance as the industrial company delivered tepid revenues despite improving orders. Investor concerns about slower growth overseas also weighed on the stock price. Elsewhere, health benefits provider Aflac’s core businesses in Japan and the US came under pressure, while it also faced currency headwinds from a weaker yen. The lack of exposure to Apple also detracted from performance.

Conversely, drugstore operator CVS Health (formerly CVS Caremark) was the primary contributor, with its pharmacy services unit proving particularly robust. Biopharmaceutical firm Gilead Sciences continued to benefit from demand for Solvadi, its hepatitis C treatment, which currently accounts for more than half of its total product sales. Finally, freight railroad operator Canadian National Railway’s results were bolstered by good revenue growth, partly attributable to increased shipments of oil and chemicals.

In portfolio activity, we introduced flavours and fragrances developer International Flavors & Fragrances; credit reporting company Equifax; American Express; and PVH Corp, which markets Calvin Klein and Tommy Hilfiger. Conversely, we sold packaged foods company Kellogg; office products retailer Staples; Procter & Gamble; and transport equipment manufacturer Bombardier.

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


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