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Aberdeen Global Opportunities Fund Annual report to 30 September 2014

Performance Review The Aberdeen Global Opportunities Fund rose by 8.75% in Singapore dollar terms for the year under review, compared with its benchmark, the MSCI World Index’s total return of 14.64%.

Market Review Global equities rallied during the year under review, largely thanks to improved economic data in the US as well as loose monetary policy in the developed world. Notably, the US Federal Reserve’s commitment to keep interest rates low for a longer period, as well as the European Central Bank’s unexpected rate cuts and fresh stimulus measures reassured investors. In Japan, the yen’s weakness and expectations of further economic stimulus lifted equity markets. However, doubts over the efficacy of prime minister Abe’s ‘third arrow’ stimulus measures as well as the impact of the consumption tax hike that was implemented in April pared gains. Towards the end of the period, the prospect of rising US interest rates spooked investors, while worsening tensions in Ukraine, escalating military activity in the Middle East and generally weak manufacturing and services data in Europe and China dented sentiment.

Portfolio Review Our non-benchmark exposure to Brazil was a key detractor to performance, as miner Vale was affected by lower iron ore prices. Stock selection in the UK was weak as well. Standard Chartered’s interim results were in line with the downgrade in its pre-close update. While the outlook is challenging due to weaker sentiment in emerging markets, this has been reflected in the bank’s valuation at less than one time book value. Elsewhere, Australian insurer QBE fell on the back of the company’s profit warning in financial year 2013. This followed a strategic review of its North American operations which resulted in additional provisions, restructuring charges and a goodwill write-down.

Benefiting the fund was US health care company CVS Health, which rallied after it boosted its dividend and approved a significant share buyback. It also reported better-than-expected earnings. Meanwhile, Canadian National Railway was lifted by better-than-expected profits, thanks to greater market share and increased grain shipments; and Zurich Insurance was underpinned by broker rating upgrades, while investors were reassured by its commitment to maintain its dividend payout. Furthermore, Novartis’ share price reacted positively to favourable drug trial data related to the treatment of heart failure.

In portfolio activity, we introduced US payment services company Visa, UK aircraft engine manufacturer Rolls Royce, and Japan Tobacco. Visa has a high-return business with an established market position and attractive growth drivers; Rolls Royce has an attractive high recurring revenue model, high barriers to entry and positive structural growth potential; while Japan Tobacco benefits from a strong portfolio of brands and an improving market share in countries such as Turkey and Russia.

Against this, we sold Verizon Communications, which the fund received from the return of cash and shares from Vodafone after it sold its stake in the Verizon Wireless joint venture. We also divested our position in US healthcare company Quest Diagnostics, in view of its increasingly challenging environment and lower growth visibility. Furthermore, we sold out of the remaining small position in Australia’s QBE Insurance, in view of more attractive investment opportunities elsewhere.

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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