Aberdeen Life Global (Enhanced UK) Equity Fund

July 2010

Market review

• Global equity markets performed poorly in the second quarter, with the S&P 500 index down approximately 11%. Emerging markets, particularly in Asia, performed relatively better but were still down around 6% in local currency terms. The currency effect from holding overseas assets was slightly negative for the sterling investor. The concerns surrounding the sustainability of economic growth have intensified over the recent months. Investor focus has moved towards the sovereign credit risk with peripheral European countries coming under the greatest scrutiny. Large budget deficits, unstable economic conditions and interdependence within European banking systems have dented confidence in the stability of the common currency union and the financial system.

Fund review

• We reduced our exposure to overseas markets and invested the proceeds into UK equities. The resulting asset allocation is still a marginal overweight to Asia Pacific at the expense of the UK. Over the quarter, we exited the holding in Intesa Sanpaolo due to concerns about the Eurozone banking industry. We also topped up positions in Petrochina and Banco Bradesco on attractive valuations. 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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