united global durable equities fund - uob group · 2018. 8. 28. · vinci sa 5,509,386 3.48 intact...

United Global Durable Equities FundSemi Annual Report

for the half year ended 30th June 2018

MANAGERUOB Asset Management LtdRegistered Address:80 Raffles PlaceUOB PlazaSingapore 048624Company Registration No. : 198600120ZTel: 1800 22 22 228

DIRECTORS OF UOB ASSET MANAGEMENTLee Wai FaiEric Tham Kah JinPeh Kian HengThio Boon Kiat

TRUSTEEState Street Trust (SG) Limited168 Robinson Road#33-01, Capital TowerSingapore 068912

CUSTODIAN / ADMINISTRATOR / REGISTRARState Street Bank and Trust Company, acting through its Singapore Branch168 Robinson Road#33-01, Capital TowerSingapore 068912

AUDITORPricewaterhouseCoopers LLP7 Straits View, Marina OneEast Tower, Level 12Singapore 018936

SUB-MANAGERWellington Management Singapore Pte. Ltd.8 Marina Boulevard#03-01, Tower 1, Marina Bay Financial CentreSingapore 018981

United Global Durable Equities Fund(Constituted under a Trust Deed in the Republic of Singapore)

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A) Fund Performance

Class SGD Acc

Fund Performance/Benchmark Returns

3 mth%

Growth

6 mth%

Growth

1 yr%

Growth

3 yrAnn

CompRet

5 yrAnn

CompRet

10 yrAnn

CompRet

SinceInception5 August

2015Ann

CompRet

United Global Durable EquitiesFund 4.39 1.48 6.82 N/A N/A N/A 7.68Benchmark 4.54 1.59 9.65 N/A N/A N/A 7.63

Source: Morningstar.

Note: The performance returns of the Fund are in Singapore Dollar based on a NAV-to-NAV basis with dividends and distributionsreinvested, if any.The benchmark of the Fund: MSCI AC World Index.

Class SGD Dist


3 mth%

Growth

6 mth%

Growth

1 yr%

Growth

3 yrAnn

CompRet

5 yrAnn

CompRet

10 yrAnn

CompRet


2015Ann

CompRet

United Global Durable EquitiesFund 4.41 1.38 6.77 N/A N/A N/A 7.57Benchmark 4.54 1.59 9.65 N/A N/A N/A 7.63


Note: The performance returns of the Fund are in Singapore Dollar based on a NAV-to-NAV basis with dividends and distributionsreinvested, if any.The benchmark of the Fund: MSCI AC World Index.


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A) Fund Performance (continued)

Class USD Acc


3 mth%

Growth

6 mth%

Growth

1 yr%

Growth

3 yrAnn

CompRet

5 yrAnn

CompRet

10 yrAnn

CompRet


2015Ann

CompRet

United Global Durable EquitiesFund 0.40 -0.56 7.87 N/A N/A N/A 8.27Benchmark 0.53 -0.43 10.73 N/A N/A N/A 8.24


Note: The performance returns of the Fund are in United States Dollar based on a NAV-to-NAV basis with dividends and distributionsreinvested, if any.The benchmark of the Fund: MSCI AC World Index.

Class USD Dist


3 mth%

Growth

6 mth%

Growth

1 yr%

Growth

3 yrAnn

CompRet

5 yrAnn

CompRet

10 yrAnn

CompRet


2015Ann

CompRet

United Global Durable EquitiesFund 0.38 -0.57 7.85 N/A N/A N/A 8.31Benchmark 0.53 -0.43 10.73 N/A N/A N/A 8.46


Note: The performance returns of the Fund are in United States Dollar based on a NAV-to-NAV basis with dividends and distributionsreinvested, if any.The benchmark of the Fund: MSCI AC World Index.

For the six months ended 30 June 2018, the net asset value for Class SGDAcc and Class SGDDist of theFund rose 1.48% and 1.38% respectively, against an increase of 1.59% for the benchmark MSCI AllCountry World Index (in Singapore Dollar terms), while Class USD Acc and Class USD Dist of the Funddeclined 0.56% and 0.57% respectively, against a decrease of 0.43% for the benchmark (inUnited States Dollar terms).

The Fund is sub-managed by Wellington Management Singapore Pte Ltd and the commentary thatfollows reflects the views of the sub-manager.


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From a sector perspective, stock selection within Information Technology and Industrials contributedmost to performance, while stock picking within Materials and Consumer Discretionary detracted.Positioning within Consumer Staples also led to relative outperformance. In terms of country exposure,investments in United States generated most of the Fund’s outperformance while holdings in UnitedKingdom lagged.

The top positive contributors to returns were Motorola Solutions, STERIS, Cintas, HCA Healthcare,and Guangdong Investment.

The key detractors were RPC Group, Intact Financial, Daito Trust Construction, Middleby, andAmazon.com,

As of end June, the Fund had the following country asset allocation: United States (48.11%), Canada(12.73%), Japan (9.83%), France (6.27%), United Kingdom (3.52%), Germany (2.56%), Bermuda(2.10%), Ireland (1.67%), Hong Kong (1.66%), Spain (1.50%) and Belgium (1.00%), China (0.88%).The Fund had mostly maintained a low level of cash balances during the year.

Economic and Market Review

In the first quarter of 2018, global equities registered their first quarterly loss in eight quarters. A sharpcorrection in global markets and a large spike in volatility were initially triggered by concerns aboutescalating inflation risks in the US. Fears of a global trade war further unsettled financial markets after USPresident Donald Trump imposed stiff tariffs on steel and aluminium and announced plans to implementtariffs on Chinese imports while also enacting tighter restrictions on acquisitions and technologytransfers. As expected, the European Central Bank (ECB) kept interest rates unchanged but signalledthat it will begin to normalize monetary policy. The US Federal Reserve (Fed) increased the benchmarkfederal funds rate by 25 basis points (bps), noting that the US economic outlook strengthened in recentmonths. Tensions in Asia appeared to ease after North Korea’s leader Kim Jong Un pledged hiscommitment to denuclearization and agreed to meet with US officials. In a milestone development, theUK reached a joint agreement with the European Union on the legal terms of a Brexit transition deal.

In the second quarter, global equities rebounded from the first quarter’s decline, ending the first half of theyear with a gain. Trade concerns escalated, as US President Donald Trump threatened tariffs onEuropean autos in response to the European Union’s retaliatory tariffs on American products. The USalso imposed additional levies on Chinese goods, and China vowed retaliatory tariffs. On the monetaryfront, strong US economic data gave the Federal Reserve (Fed) confidence to raise interest rates in Juneand signal the potential for two additional hikes later this year. The European Central Bank (ECB)announced that quantitative easing will end in December 2018, but its June meeting had a very dovishundertone, as the Governing Council pledged to keep policy rates unchanged at least through thesummer of 2019. People’s Bank of China lowered the reserve-requirement ratio (RRR), the amount ofcash banks must keep on reserve, by 100 basis points (bps) in an effort to boost growth.


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Outlook and Fund Strategy

Our goal is to maximize the rate of value creation of the portfolio across a full business cycle withoutassuming undue valuation risk. To accomplish this goal, we choose to invest in companies that possesstwo key characteristics: (a) stable cash flows to serve as a platform for long-term compounding and(b) prudent capital allocation to create value through growth (organic or acquisition) and/or return ofcapital (dividends, share repurchase, debt reduction). We continue to target companies that can createvalue at ~10% per annum.

We believe some companies with these characteristics may be purchased at reasonable valuationmultiples because (a) they carry one or more financial characteristics (moderate return on investedcapital, no or low dividends, moderate financial leverage) that disqualifies them from traditional highquality investment approaches and/or (b) they operate in areas of the market not conventionallyassociated with stability (small-mid cap, volatile sectors, disfavored geographies).

We expect the companies we hold to grow and/or distribute value at a moderate rate in most years andavoid big drawdowns in profitability during difficult economic or market environments. Ideally, ourcompanies will also take advantage of occasional opportunities to create exceptional value throughacquisition or internal initiatives. Companies with this profile are unlikely to be top quartile growers (orstocks) in any single year but may deliver superior growth and value over the long-term. To be successful,we must be accurate in our assessments of business durability and management skill. Also, we musthave the courage to be patient and evaluate value creation and investment returns across the entirebusiness cycle.

We strongly believe that a portfolio of businesses that create value at ~10% per annum across a businesscycle, purchased at reasonable valuations, can deliver attractive investment returns to our clients – bothabsolute and relative to the broad market. We are mindful that value creation was unusually low for thebroad market between 2013 and 2016 (in fact, close to zero) and that the strong growth experienced in2017 may extend for some time. The current economic conditions are robust in most major economies aswe enter 2018. On one hand, we are forcing ourselves to be flexible and open-minded about businessesthat may meet our fundamental criteria; ideally, portfolio diversification by business type should increaseover time. On the other hand, we will remain focused on identifying and owning shares in businesses thatwe believe can grow value at an attractive rate across a business cycle, not only during very healthyenvironments like today.


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B) Investments at fair value and as a percentage of net asset value (“NAV”) as at 30 June 2018under review classified by

i) Country

Fair Value(S$)

% of NAV

Belgium 1,583,816 1.00Bermuda 3,329,941 2.10Canada 20,146,623 12.73China 1,394,948 0.88France 9,923,641 6.27Germany 4,047,049 2.56Hong Kong 2,621,390 1.66Ireland 2,640,079 1.67Japan 15,567,533 9.83Spain 2,370,939 1.50United Kingdom 5,577,908 3.52United States 76,159,912 48.11Portfolio of investments 145,363,779 91.83Other net assets/(liabilities) 12,928,734 8.17Total 158,292,513 100.00

ii) Industry

Fair Value(S$)

% of NAV

Consumer Discretionary 4,036,716 2.55Consumer Staples 5,107,821 3.23Financials 25,781,219 16.29Health Care 16,881,650 10.66Industrials 37,964,746 23.98Information Technology 15,983,592 10.10Materials 9,103,856 5.75Real Estate 7,437,249 4.70Telecommunication Services 6,745,742 4.26Utilities 16,321,188 10.31Portfolio of investments 145,363,779 91.83Other net assets/(liabilities) 12,928,734 8.17Total 158,292,513 100.00


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B) Investments at fair value and as a percentage of net asset value (“NAV”) as at 30 June 2018under review classified by (continued)

iii) Asset Class

Fair Value(S$) % of NAV

Quoted Equities 145,363,779 91.83Other net assets/(liabilities) 12,928,734 8.17Total 158,292,513 100.00

iv) Credit rating of quoted bonds

N/A

C) Top Ten Holdings

10 largest holdings as at 30 June 2018

Fair Value(S$)

Percentage oftotal net assetsattributable tounitholders

%

AMERICAN TOWER CORP 7,437,249 4.70MOTOROLA SOLUTIONS INC 6,867,418 4.34CINTAS CORP 5,770,326 3.64STERIS PLC 5,577,908 3.52VINCI SA 5,509,386 3.48INTACT FINANCIAL CORP 5,457,788 3.45AVANGRID INC 5,391,392 3.41WASTE CONNECTIONS INC 5,075,657 3.21CANADIAN NATIONAL RAILWAY CO 4,817,206 3.04FAIRFAX FINANCIAL HOLDINGS LTD 4,795,972 3.03


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C) Top Ten Holdings (continued)

10 largest holdings as at 30 June 2017

Fair Value

Percentage oftotal net assetsattributable tounitholders

(S$) %

AMERICAN TOWER CORP 3,463,333 4.17IRISH CONTINENTAL GROUP PLC 3,283,020 3.95RPC GROUP PLC 2,906,952 3.50DAITO TRUST CONSTRUCTION CO LTD 2,705,718 3.26CANADIAN NATIONAL RAILWAY CO 2,631,281 3.17AVANGRID INC 2,587,134 3.12MCKESSON CORP 2,556,129 3.08MOTOROLA SOLUTIONS INC 2,530,559 3.05WASTE CONNECTIONS INC 2,407,405 2.90CLEAN HARBORS INC 2,383,186 2.87

D) Exposure to derivatives

i) Fair value of derivative contracts and as a percentage of NAV as at 30 June 2018

Contract orunderlyingprincipalamount

Positivefair value % of NAV

Negativefair value % of NAV

$ $ $

Foreign currency contracts 362,110 - - 2,121 -*

* denotes amount less than 0.01%

ii) There was a net realised loss of SGD 61,029 on derivative contracts during the financial period from1 January 2018 to 30 June 2018.

iii) There was a net unrealised loss of SGD 2,121 on outstanding derivative contracts marked to marketas at 30 June 2018.

E) Amount and percentage of NAV invested in other schemes as at 30 June 2018

N/A


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F) Amount and percentage of borrowings to NAV as at 30 June 2018

N/A

G) Amount of redemptions and subscriptions for the financial period from 1 January 2018 to30 June 2018

Total amount of redemptions SGD 33,633,130Total amount of subscriptions SGD 85,548,269

H) The amount and terms of related-party transactions for the financial period from 1 January2018 to 30 June 2018

i) As at 30 June 2018, the Fund maintained current accounts with its related party as follows:

State Street Bank and Trust Company, Singapore BranchCash and bank balances SGD 10,593,981

ii) Investment in Initial Public Offerings managed by UOB Group

N/A

iii) As at 30 June 2018, there was no brokerage income earned by UOB Kay Hian Pte Ltd.


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I) Expense ratios

2018 2017$ $

Total operating expenses 2,592,540 1,986,419Average daily net asset value 117,178,091 95,566,824Expense ratio 2.21% 2.08%

Note: The expense ratio has been computed based on the guidelines laid down by the Investment Management Association ofSingapore (“IMAS”). The calculation of the Fund’s expense ratio at 30 June 2018 was based on total operating expensesdivided by the average net asset value respectively for the financial period. The total operating expenses do not include(where applicable) brokerage and other transaction costs, performance fee, interest expense, distribution paid out tounitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and taxdeducted at source or arising out of income received. The Fund does not pay any performance fee. The average net assetvalue is based on the daily balances.

J) Turnover ratios

2018 2017$ $

Lower of total value of purchases or sales 28,073,877 21,343,666Average daily net assets value 141,332,904 94,615,647

Turnover ratio 19.86% 22.56%

Note: The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective InvestmentSchemes. The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales ofthe underlying investments divided by the average daily net asset value.

K) Any material information that will adversely impact the valuation of the scheme such ascontingent liabilities of open contracts

N/A

L) For schemes which invest more than 30% of their deposited property in another scheme, thefollowing key information on the second-mentioned scheme (“the underlying scheme”)1

should be disclosed as well

i) Top 10 holdings at fair value and as percentage of NAV as at 30 June 2018 and 30 June 2017

N/A

ii) Expense ratios for the financial period ended 30 June 2018 and 30 June 2017

N/A


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L) For schemes which invest more than 30% of their deposited property in another scheme, thefollowing key information on the second-mentioned scheme (“the underlying scheme”)1should be disclosed as well (continued)

iii) Turnover ratios for the financial period ended 30 June 2018 and 30 June 2017

N/A

1 Where the underlying scheme is managed by a foreign manager which belongs to the same group of companies as, or hasa formal arrangement or investment agreement with, the Singapore manager, the above information should be disclosed onthe underlying scheme. In other cases, such information on the underlying scheme should be disclosed only if it is readilyavailable to the Singapore manager.

M) Soft dollar commissions/arrangements

UOB Asset Management has entered into soft dollars arrangements with selected brokers fromwhom products and services are received from third parties. The products and services relateessentially to computer hardware and software to the extent that they are used to support theinvestment decision making process, research and advisory services, economic and politicalanalyses, portfolio analyses including performance measurements, market analyses, data andquotation services, all of which are believed to be helpful in the overall discharge of UOB AssetManagement’s duties to clients. As such services generally benefit all of UOB Asset Management’sclients in terms of input into the investment decision making process, the soft credits utilised are notallocated on a specific client basis. The Manager confirms that trades were executed on a bestexecution basis and there was no churning of trades.

The Sub-Manager, Wellington Management Singapore Pte Ltd and their affiliates (collectively, the“Wellington Management group”) may utilize external research provided by broker/dealers andindependent, or third-party research firms in their investment decision-making process (“ResearchServices”). These Research Services include written research material, conversations with analystsat the research firms, meetings with corporate management and access to experts in a variety offields, such as government officials, doctors, researchers, lawyers and scientists.

N) Where the scheme offers pre-determined payouts, an explanation on the calculation of theactual payouts received by participants and any significant deviation from thepre-determined payouts

N/A


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STATEMENT OF TOTAL RETURN

For the half year ended 30 June 2018 (Un-audited)

30 June 30 June2018 2017$ $

IncomeDividends 1,452,803 1,172,269Interest 8,977 1,099Other income 317 104,666Total 1,462,097 1,278,034

Less: ExpensesManagement fee 1,223,192 821,694Trustee fee 25,495 17,704Audit fee 8,480 7,912Registrar fee 12,432 12,482Valuation fee 87,371 58,693Administration fee 52,423 35,215Custody fee 39,050 27,576Transaction costs 61,616 75,698Interest expenses - 514Other expenses 106,428 27,005Total 1,616,487 1,084,493

Net income/(losses) (154,390) 193,541

Net gains/(losses) on value of investments and financialderivativesNet gains/(losses) on investments 2,837,485 8,200,683Net gains/(losses) on financial derivatives (63,150) 1,932Net foreign exchange gains/(losses) 229,901 (3,471,573)

3,004,236 4,731,042

Total return/(deficit) for the period before income tax 2,849,846 4,924,583Less: Income tax (349,038) (197,496)Total return/(deficit) for the period 2,500,808 4,727,087


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STATEMENT OF FINANCIAL POSITION

As at 30 June 2018 (Un-audited)

30 June 31 December2018 2017$ $

AssetsPortfolio of investments 145,363,779 101,184,841Sales awaiting settlement 440,961 220,636Receivables 3,891,397 2,923,158Cash and bank balances 10,593,981 3,753,719Financial derivatives at fair value - 60Total assets 160,290,118 108,082,414

LiabilitiesPurchases awaiting settlement 436,870 250,401Payables 1,006,023 579,192Distribution payable 552,591 358,337Financial derivatives at fair value 2,121 11Total liabilities 1,997,605 1,187,941

EquityNet assets attributable to unitholders 158,292,513 106,894,473


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STATEMENT OF MOVEMENTS OF UNITHOLDERS’ FUNDS

For the half year ended 30 June 2018 (Un-audited)

30 June 31 December2018 2017$ $

Net assets attributable to unitholders at the beginning of thefinancial period/year 106,894,473 106,054,455

OperationsChange in net assets attributable to unitholders resulting fromoperations 2,500,808 9,522,455

Unitholders’ contributions/(withdrawals)Creation of units 85,548,269 71,681,865Cancellation of units (33,633,130) (76,769,515)

Change in net assets attributable to unitholders resulting from netcreation and cancellation of units 51,915,139 (5,087,650)

Distributions (3,017,907) (3,594,787)

Total increase/(decrease) in net assets attributable to unitholders 51,398,040 840,018

Net assets attributable to unitholders at the end of the financialperiod/year 158,292,513 106,894,473


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STATEMENT OF PORTFOLIO


Holdings at Fair value at

Percentage oftotal net assetsattributable tounitholders at

30 June2018

30 June2018$

30 June2018%

By Geography - Primary

Quoted Equities

BELGIUMACKERMANS & VAN HAAREN NV 6,745 1,583,816 1.00

BERMUDAENSTAR GROUP LTD 11,781 3,329,941 2.10

CANADACANADIAN NATIONAL RAILWAY CO 43,220 4,817,206 3.04FAIRFAX FINANCIAL HOLDINGS LTD 6,281 4,795,972 3.03INTACT FINANCIAL CORP 56,466 5,457,788 3.45WASTE CONNECTIONS INC 49,449 5,075,657 3.21

TOTAL CANADA 20,146,623 12.73

CHINACHINA LONGYUAN POWER GROUP CORP 1,270,000 1,394,948 0.88

FRANCERUBIS SCA 51,829 4,414,255 2.79VINCI SA 42,020 5,509,386 3.48

TOTAL FRANCE 9,923,641 6.27

GERMANYBRENNTAG AG 53,273 4,047,049 2.56

HONG KONGGUANGDONG INVESTMENT LTD 1,210,532 2,621,390 1.66


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30 June2018

30 June2018$

30 June2018%

By Geography - Primary (continued)Quoted Equities

IRELANDACCENTURE PLC 11,836 2,640,079 1.67

JAPANKDDI CORP 67,109 2,503,913 1.58MARUI GROUP CO LTD 69,100 1,985,324 1.25MATSUMOTOKIYOSHI HOLDINGS CO LTD 44,690 2,736,882 1.73NIPPON TELEGRAPH & TELEPHONE CORP 68,425 4,241,829 2.68SONY FINANCIAL HOLDINGS INC 157,388 4,099,585 2.59

TOTAL JAPAN 15,567,533 9.83

SPAINVISCOFAN SA 25,524 2,370,939 1.50

UNITED KINGDOMSTERIS PLC 38,957 5,577,908 3.52

UNITED STATESADT INC 140,144 1,652,897 1.04AMERICAN TOWER CORP 37,834 7,437,249 4.70AMETEK INC 41,516 4,084,766 2.58AUTOMATIC DATA PROCESSING INC 14,654 2,680,215 1.69AVANGRID INC 74,704 5,391,392 3.41BALL CORP 95,509 4,629,553 2.92CINTAS CORP 22,867 5,770,326 3.64CLEAN HARBORS INC 56,751 4,298,458 2.72


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30 June2018

30 June2018$

30 June2018%

By Geography - Primary (continued)Quoted Equities

UNITED STATES (continued)EDISON INTERNATIONAL 28,970 2,499,203 1.58FIDELITY NATIONAL INFORMATIONSERVICES INC 26,256 3,795,880 2.40HCA HEALTHCARE INC 29,653 4,148,309 2.62HOLOGIC INC 46,762 2,534,459 1.60MCKESSON CORP 4,260 774,855 0.49MOTOROLA SOLUTIONS INC 43,281 6,867,418 4.34PACKAGING CORP OF AMERICA 29,354 4,474,303 2.83TD AMERITRADE HOLDING CORP 43,558 3,252,863 2.05THE MIDDLEBY CORP 19,027 2,709,001 1.71TORCHMARK CORP 29,380 3,261,254 2.06UNIVERSAL HEALTH SERVICES INC 25,312 3,846,119 2.43US SERVICE CORP INTERNATIONAL 42,037 2,051,392 1.30

TOTAL UNITED STATES 76,159,912 48.11

Total Equities 145,363,779 91.83

Portfolio of investments 145,363,779 91.83Other net assets/(liabilities) 12,928,734 8.17Net assets attributable to unitholders 158,292,513 100.00


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Percentage oftotal net assetsattributable tounitholders at30 June2018%

Percentage oftotal net assetsattributable tounitholders at31 December

2017%

By Geography - Primary (Summary)Quoted Equities

Belgium 1.00 1.11Bermuda 2.10 2.05Canada 12.73 13.43China 0.88 -France 6.27 6.61Germany 2.56 -Hong Kong 1.66 1.64Ireland 1.67 1.67Japan 9.83 12.35Spain 1.50 1.46United Kingdom 3.52 6.92United States 48.11 47.42Portfolio of investments 91.83 94.66Other net assets/(liabilities) 8.17 5.34Net assets attributable to unitholders 100.00 100.00


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Fair value at30 June2018$

Percentage oftotal net assetsattributable tounitholders at30 June2018%

Percentage oftotal net assetsattributable tounitholders at31 December

2017%

By Industry - SecondaryQuoted Equities

Consumer Discretionary 4,036,716 2.55 3.57Consumer Staples 5,107,821 3.23 3.84Financials 25,781,219 16.29 14.17Health Care 16,881,650 10.66 9.02Industrials 37,964,746 23.98 20.88Information Technology 15,983,592 10.10 8.84Materials 9,103,856 5.75 11.75Real Estate 7,437,249 4.70 8.73Telecommunication Services 6,745,742 4.26 4.23Utilities 16,321,188 10.31 9.63Portfolio of investments 145,363,779 91.83 94.66Other net assets/(liabilities) 12,928,734 8.17 5.34Net assets attributable to unitholders 158,292,513 100.00 100.00


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united global durable equities fund - uob group · 2018. 8. 28. · vinci sa 5,509,386 3.48 intact...

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