Aberdeen Life UK Growth Fund

July 2010

Market review

• UK equities fell in the second quarter, weighed down by lingering fears that Greece’s debt woes may spark a fullblown regional crisis and concerns that the government’s austerity measures could dent the fragile domestic recovery. Uncertainty over the general election, which ended with a coalition government, coupled with potential credit ratings downgrades in light of the country’s deteriorating fiscal wellbeing, exacerbated market jitters. Economic indicators were muted: business and consumer confidence dipped in the wake of the planned government spending cuts. The manufacturing sector’s recent recovery was short-lived as factory output dropped, while export growth slowed, depressed by the Continent’s debt woes and the falling euro.

Fund review

• During the quarter, we sold Arriva after the transport operator accepted Deutsche Bahn’s takeover offer, and disposed of life assurance group Resolution to invest in more attractive long-term opportunities elsewhere. In addition, we took advantage of the recent market weakness to top up several stocks, including Unilever, Tesco, Sage and HSBC, all of which are well-managed companies with diverse exposures and clear prospects for sustainable future growth. We also added to BP after conducting extensive due diligence in the wake of the Deepwater Horizon accident, and to John Wood Group, given its attractive positioning in the oil services market, strong balance sheet and appealing valuation.

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