Portfolio Statement continuedBuy Sell SettlementBuyAmountSellAmountUnrealisedgains/(losses)€’000Percentageof total netassets %EUR CHF 11/08/11 119,547 124,682 (5) (0.04)EUR CHF 11/08/11 120,825 118,940 2 0.02EUR USD 11/08/11 59,000 59,000 - -EUR GBP 11/08/11 24,803 24,377 - -EUR SEK 11/08/11 120,338 119,432 1 0.01EUR USD 11/08/11 59,000 57,543 1 0.01EUR USD 11/08/11 59,000 57,183 2 0.02EUR ZAR 11/08/11 56,704 57,716 (1) (0.01)MXN EUR 11/08/11 62,367 60,981 1 0.01SEK EUR 11/08/11 119,760 119,358 - -USD CHF 11/08/11 58,047 58,239 - -USD CHF 11/08/11 58,091 58,239 - -USD CHF 11/08/11 57,973 60,700 (3) (0.03)USD CLP 25/08/11 60,086 60,184 - -USD EUR 11/08/11 219,587 214,996 5 0.04USD EUR 11/08/11 58,592 59,025 - -ZAR USD 11/08/11 57,716 56,850 1 0.01Unrealised gains on forward currency exchange contracts 6 0.06Unrealised gains on financial derivative instruments 5 0.05Total investments 11,274 95.26Other net assets 561 4.74Total 11,835 100.0048 <strong>Aberdeen</strong> <strong>Global</strong> <strong>II</strong>Euro Aggregate Bond
Euro Corporate BondFor the year ended 30 June 2011PerformanceFor the year ended 30 June 2011, the value of Euro Corporate Bond -Z Accumulation shares increased by 3.60% compared to an increaseof 2.68% in the benchmark, Barclays Capital European AggregateCorporate Index.Source : BNP Paribas, Total Return, EUR.Manager’s reviewInvestors had much to digest over the year. Core government bondyields rose steadily into 2011 from their summer/autumn lowsas greater levels of risk appetite returned to the table. Significantvolatility was experienced in core government bonds early in2011 due to ongoing political tensions in North Africa and theMiddle East, the tragic earthquake in Japan, concerns over theUS debt profile and a resurfacing of concerns over the eurozonesovereign debt crisis. These factors, particularly the latter eurozonewoes, ultimately weighed on investors minds and core yields fellsignificantly towards the end of the period.Unsurprisingly, the story in peripheral markets was very different.After an initial calm within peripheral European sovereign debtmarkets in early 2011, concerns took centre stage once again -with Greece requiring a second bout of IMF/ECB-backed financialassistance. Whilst remaining elevated throughout 2011, Europeanperipheral government bond spreads widened to record levels inMay and June as the crisis intensified. Credit fundamentals wereincreasingly overlooked over the year as markets and risk sentimentwere driven by events in peripheral Europe.During the year, the ECB became increasingly hawkish and increasedrates for the first time in nearly three years in April, moving theRefi rate (refinancing rate) up to 1.25%. The eurozone as a whole isexperiencing a recovery and the aggregate inflation level is abovetarget. However, the risk remains that tighter monetary policy inresponse to inflationary concerns in the core countries could lead todouble-dip recession in some of the lower-growth countries.Portfolio reviewThe Fund significantly outperformed the benchmark over the year.Our overweight positions to subordinated bank and insurance bondmade a positive contribution to this outperformance, as did ourunderweight to Portuguese issuers. Our overweight to issuers inSpain, both in financials and telecoms, contributed significantly toperformance volatility.OutlookThe spread tightening that has occurred will likely continue in theshort-term due to positioning and favourable supply dynamics,particularly in the likes of Spain and Italy. However, in the mediumterm,the Greek situation is not sustainable and very visible publicanger about austerity measures may make it difficult for thesemeasures to be implemented fully. As a result, we will look to usefurther tightening to initiate short positions.With European fiscal imbalances and talk of sovereign defaultdominating markets, credit spreads are likely to remain volatileover the coming months. High severity tail risks abound and thedirection of markets over the short to medium term is as likely tobe driven by politics and public reaction to austerity as much as bycorporate fundamentals and economic growth. Indeed, in the US,Congress is approaching the August deadline for approval of anincrease in the US debt ceiling or risk having to begin defaulting onobligations. While a low probability, failure to agree would clearlyhave significant global implications. We maintain a small overweightposition in credit, believing that strong corporate fundamentalsand recovering economies will drive spreads tighter by the end ofthe year.<strong>Aberdeen</strong> <strong>Global</strong> <strong>II</strong> 49Euro Corporate Bond