UnitedEuropeanSmall and Mid Cap FundSemi Annual Report
for the half year ended 31st December 2017
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
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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A) Fund Performance
Fund Performance/Benchmark Returns
3 mth%
Growth
6 mth%
Growth
1 yr%
Growth
3 yrAnn
CompRet
5 yrAnn
CompRet
10 yrAnn
CompRet
SinceInception
10 April 2000Ann
CompRet
United EuropeanSmall and Mid CapFund -1.09 5.93 20.87 7.94 8.01 0.19 0.77
Benchmark 2.33 9.47 22.85 11.72 13.65 3.00 6.92
Source: Lipper, a Thomson Reuters Company, UOBAM.
Note: The performance returns of the Fund are in Singapore dollars based on a NAV-to-NAV basis with dividends and distributionsreinvested, if any.The benchmark of the Fund: Apr 00 - Dec 01: MSCI Europe Small Cap USD; Jan 02 - Jul 08: Citigroup Broad Market Index Europe< US$2 billion; Aug 08 - Nov 14: MSCI Europe Mid Cap; Dec 14 - Present: MSCI Europe Small Companies Index.
For the six months ended 31 December 2017, the net asset value of the Fund rose 5.93%, underperforming its benchmark theMSCI Europe Small Companies Index by 3.54%.
The Fund underperformed its benchmark, the MSCI Europe Small Companies Index during the second half of 2017. At sectorlevel, the Fund had a positive contribution from Consumer Discretionary and Telecommunication Services. In contrast,some of our holdings within Information Technology and Materials detracted.
WithinConsumerDiscretionary, our holding of auto componentmanufacturerFaureciawas a particularly rewarding position.During the quarter, the company issued a strong set of Q3 results which came in ahead of consensus expectations allowingthe share price to gain ground. In addition, our holding of gaming company Paddy Power Betfair posted gains. In November,the company issued a trading update forQ3which saw revenues grow by 9%. Encouragingly, the company experienced positiveinternational growth with both the U.S. and Australia helping sentiment towards the name.
In Information Technology, our holding of semiconductor manufacturer Dialog was the primary detractor. In November,investors became increasingly nervous after Apple (a key customer) was intent on designing its own power management chipsas early as 2018 – and should this come to pass, would be a clear headwind for the name. Also, our holding of Spanish IT anddefence systems company Indra Sistemas underperformed given the general weakness of Spanish names in the wake of thepolitical issues in the region during the month of October.
The Fund added gains within Telecommunication Services. At stock level, our holding of Sunrise performed well. Q3 resultsshowed that revenueswere a little light, however earnings exceeded expectations driven by solid performance in the company’smobile service division.
In Materials, our holding of plastic packaging manufacturer RPC Group appeared to be subject to some profit-taking in thewake of the recent good performance. The company reported a reassuring set of results in the first half of 2017 and we remaincomfortable with our investment case in the name. On a more positive light, our holdings of nutrition company ChristianHansen performedwell after results in the financial year exceeded expectations, and themessage surrounding the outlook waspositive.
Within Industrials, our holding of Rheinmetall performed well. The company reported a solid set of quarterly results whichhighlighted better margins coming through in the company’s defence business. Furthermore, an upbeat capital markets dayhelped to buoy the share price. On the other side, our holding of capital goods company FLSmidth underperformed. Thecompany noted that order intake in the company’s key cement business unit fell which dampened sentiment towards the name.
TheFinancials sector cost the Fund some relative performance. At a stock level, our holding of UK-basedProvident Financialwas the primary detractor. The company issued a significant profit warning in August, driven by its change in business model,resulting in a shortfall in collection activity. On top of this, the company’s CEO announced that he was leaving the company,which further fuelled nervousness around the name.Recognising the significant uncertainty going forward, we took the decisionto remove the position from the Fund.
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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A) Fund Performance (continued)
In theConsumer Staples sector, our holding of food processerGreencore underperformed. In August, it was announced thatthe company had lost a frozen food contract with a significant U.S. client. Investors are now concerned thatmore contracts couldbe lost in other areas of the product offering.
Finally, within Energy, the higher oil prices we saw during the final weeks of 2017 was a clear support for the sector. Againstthis backdrop our holding of oil field engineering companySchoeller-Bleckmann performed strongly, as did our holding of E&Pcompany Cairn Energy.
As at end December 2017, the Fund had the following sector allocation: Industrials (25.1%), Financials (15.2%), ConsumerDiscretionary (13.1%), Materials (11.3%), Information Technology (8.6%), Real Estate (6.6%), Health Care (5.5%),TelecommunicationServices (5.3%), Energy (4.2%), Consumer Staples (2.3%), Utilities (1.1%).
Note: The above holdings, performance and asset allocation pertain to that of the underlying Fund, Pioneer Funds – European Potential, whichthe United European Small & Mid Cap Fund invests all or substantially all of its assets into.
Pioneer Funds – European Potential is managed by Amundi SGR S.p.A and the commentary that follows reflects the views of the investmentmanager.
Economic and Market Review
From a macroeconomic standpoint, data continued to be strong with the purchasing managers index (PMI) pointing to anongoing expansion in the Eurozone economy. Perhaps the most interesting event was the European Central Bank (ECB)meeting in October. Investors had placed much focus on the potential for a more hawkish rhetoric given the more encouragingeconomic environment in the region. Instead, ECB President Mario Draghi vowed to continue the current pace of monetarystimulus to year-end, and while ECB purchases will be reduced next year, a very accommodative policy will remain in place aslong as necessary. This was naturally supportive for risk assets.
Given the strong performance of the asset class in 2017, valuations are clearly less attractive, in our view. As a result, the mostrecent Q3 earnings seasonwasmuch in focus as investors demand to see further evidence of robust earnings delivery to justifyshare prices.What we sawwas a slowdownof top line growthwhich can be attributed in part to the euro strength, while earningsper share (EPS) growth has remained on positive trajectory. In November, we saw some weakness as the slowing revenuegrowth grabbed headlines, however this was short lived as the market recovered the lost ground during the final weeks of theyear.
Outlook and Fund Strategy
As we enter 2018, we maintain our constructive outlook for European equity markets, where we see the delivery of earningsgrowth being the key catalyst to drive further upside.
2017 was a positive year for European markets, successfully navigating some potential hurdles such as key elections in bothFrance and Holland. As a result, investors now face a more benign political backdrop in 2018, with the Italian election the mainfocus. Away from politics, we have read much analysis about the potential impact a stronger euro could have on corporateprofitability, and ultimately on the Europeanmarket. Our view is that, while this is of course a potential headwind, the underlyingreasons for the strengthening euro should be viewed as a positive. Finally, the optimism that we saw in 2017 has pushedvaluations to fuller levels, and when we look at the Europeanmarket in absolute terms it is expensive. However, relative to othergeographies it is relatively attractive, and assuming we see the ongoing delivery of earnings growth this could act as a keysupport going forward.
Within our Fund, we remain alert of the potential for market rotations.With this in mind, we will focus on investment cases whichwe believe can continue to deliver improved profitability over the medium term.
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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B) Investments at fair value and as a percentage of net asset value (“NAV”) as at 31 December2017 under review classified by
i) Country
Fair Value(S$)
% of NAV
Luxembourg 6,152,798 99.13
Portfolio of investments 6,152,798 99.13
Other net assets/(liabilities) 53,824 0.87
Total 6,206,622 100.00
ii) Industry
N/A
iii) Asset Class
Fair Value(S$) % of NAV
Quoted unit trusts 6,152,798 99.13
Other net assets/(liabilities) 53,824 0.87
Total 6,206,622 100.00
iv) Credit rating of quoted bonds
N/A
C) Top Ten Holdings
10 largest holdings as at 31 December 2017
Fair Value(S$)
Percentage oftotal net assetsattributable tounitholders
%
PIONEER FUNDS - EUROPEAN POTENTIAL CLASS X EUR NONDISTRIBUTING 6,152,798 99.13
There was only 1 holding as at 31 December 2017.
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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C) Top Ten Holdings (continued)
10 largest holdings as at 31 December 2016
Fair Value
Percentage oftotal net assetsattributable tounitholders
(S$) %PIONEER FUNDS - EUROPEAN POTENTIAL CLASS X EUR NONDISTRIBUTING 5,948,279 99.59
There was only 1 holding as at 31 December 2016.
D) Exposure to derivatives
i) Fair value of derivative contracts and as a percentage of NAV as at 31 December 2017
N/A
ii) Net gains/(losses) on derivative contracts realised during the financial period from 01 July 2017 to 31 December 2017
N/A
iii) Net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2017
N/A
E) Amount and percentage of NAV invested in other schemes as at 31 December 2017
Please refer to the Statement of Portfolio.
F) Amount and percentage of borrowings to NAV as at 31 December 2017
N/A
G) Amount of redemptions and subscriptions for the financial period from 01 July 2017 to31 December 2017
Total amount of redemptions SGD 1,045,270
Total amount of subscriptions SGD 259,701
H) The amount and terms of related-party transactions for the financial period from 01 July 2017to 31 December 2017
i) As at 31 December 2017, the Fund maintained current accounts with State Street Bank and Trust Company as follows:
Bank balances SGD 100,775
ii) Investment in Initial Public Offerings managed by UOB Group
N/A
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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H) The amount and terms of related-party transactions for the financial period from 01 July 2017to 31 December 2017 (continued)
iii) As at 31 December 2017, there was no brokerage income earned by UOB Kay Hian Pte Ltd.
I) Expense ratios
2017 2016
$ $
Total operating expenses 231,564 193,488
Average daily net asset value 6,459,111 6,596,215
Weighted average of the Investee Fund’s expense ratio 0.07% 0.07%
Expense ratio 3.66% 3.07%
Note: The expense ratio has been computed based on the guidelines laid down by the Investment Management Association ofSingapore (“IMAS”). This is the sum of the Fund’s expense ratio and the weighted average of the Investee Fund’s unauditedexpense ratios. The unaudited expense ratio of the Investee Fund is obtained from Investee Fund’s Manager.The calculation ofthe Fund’s expense ratio at 31 December 2017 was based on total operating expenses divided by the average net asset valuerespectively for the financial period. The total operating expenses do not include (where applicable) brokerage and othertransaction costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, frontor back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received.The Fund does not pay any performance fee. The average net asset value is based on the daily balances.
J) Turnover ratios
2017 2016
$ $
Lower of total value of purchases or sales 842,089 -
Average daily net assets value 6,626,219 6,007,916
Turnover ratio 12.71% -
Note: The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes.The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales of the underlyinginvestments 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
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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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”)1
should be disclosed as well
i) Top 10 holdings at fair value and as percentage of NAV as at 31 December 2017 and 31 December 2016
10 largest holdings as at 31 December 2017
Pioneer Funds - European PotentialClass X EUR Non Distributing
Fair Value
Percentage oftotal net assetsattributable tounitholders
(EUR) %
ASR NEDERLAND NV 37,034,855 3.15
RHEINMETALL AG 35,810,325 3.05
UDG HEALTHCARE COMPANY PLC 33,386,529 2.84
RPC GROUP PLC 33,290,086 2.81
SUNRISE COMMUNICATIONS GROUP AG 32,212,881 2.74
LOGITECH INTERNATIONAL S.A. 31,485,060 2.68
GVC HOLDINGS PLC 31,332,547 2.67
FAURECIA S.A. 31,080,622 2.65
AMPLIFON S.P.A. 30,790,050 2.62
VALMET 30,747,288 2.62
10 largest holdings as at 31 December 2016
Pioneer Funds - European PotentialClass X EUR Non Distributing
Fair Value
Percentage oftotal net assetsattributable tounitholders
(EUR) %
RPC GROUP PLC 34,575,369 3.37
JOHN WOOD GROUP PLC 32,869,078 3.22
GAMESA CORPORACION TECNOLOGICA, S.A. 28,875,517 3.04
LOGITECH INTERNATIONAL S.A. 28,424,543 2.79
TRELLEBORG AB CLASS B 27,997,259 2.74
AAREAL BANK AG 27,585,437 2.70
DURR AG 26,360,143 2.58
SAAB AB CLASS B 25,692,647 2.52
RHEINMETALL AG 25,517,315 2.50
BOLIDEN AB 25,043,605 2.46
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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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)
ii) Expense ratios for the financial period ended 31 December 2017 and 31 December 2016
Pioneer Funds - European Potential Class X EUR Non Distributing
31 December 2017 0.07%
31 December 2016 0.07%
iii) Turnover ratios for the financial period ended 31 December 2017 and 31 December 2016
Pioneer Funds - European Potential Class X EUR Non Distributing
31 December 2017 42.00%
31 December 2016 42.00%
M) Soft dollar commissions/arrangements
UOB Asset Management has entered into soft dollars arrangements with selected brokers from whom products andservices are received from third parties. The products and services relate essentially to computer hardware and softwareto the extent that they are used to support the investment decision making process, research and advisory services,economic and political analyses, portfolio analyses including performance measurements, market analyses, data andquotation services, all of which are believed to be helpful in the overall discharge of UOB Asset Management’s duties toclients. As such services generally benefit all of UOB Asset Management’s clients in terms of input into the investmentdecision making process, the soft credits utilised are not allocated on a specific client basis. The Manager confirms thattrades were executed on a best execution basis and there was no churning of trades.
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
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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STATEMENT OF TOTAL RETURNFor the half year ended 31 December 2017 (Un-audited)
31 December 31 December
2017 2016
$ $
Income
Interest 1 -
Total 1 -
Less: Expenses
Management fee 58,418 53,031
Trustee fee 2,546 2,521
Audit fee 10,119 7,555
Registrar fee 7,582 7,531
Valuation fee 6,676 6,061
Custody fee 4,733 2,533
Other expenses 32,452 7,895
Total 122,526 87,127
Net income/(losses) (122,525) (87,127)
Net gains/(losses) on value of investments
Net gains/(losses) on investments 498,533 647,152
Net foreign exchange gains/(losses) (874) (695)
497,659 646,457
Total return/(deficit) for the period 375,134 559,330
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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STATEMENT OF FINANCIAL POSITIONAs at 31 December 2017 (Un-audited)
31 December 30 June
2017 2017
$ $
Assets
Portfolio of investments 6,152,798 6,496,354
Receivables 8,547 5,617
Cash and bank balances 100,775 173,826
Total assets 6,262,120 6,675,797
Liabilities
Payables 55,498 58,740
Total liabilities 55,498 58,740
Equity
Net assets attributable to unitholders 6,206,622 6,617,057
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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STATEMENT OF MOVEMENTS OF UNITHOLDERS’ FUNDSFor the half year ended 31 December 2017 (Un-audited)
31 December 30 June
2017 2017
$ $Net assets attributable to unitholders at the beginning of the financialperiod/year 6,617,057 6,052,721
Operations
Change in net assets attributable to unitholders resulting from operations 375,134 1,372,934
Unitholders’ contributions/(withdrawals)
Creation of units 259,701 556,697
Cancellation of units (1,045,270) (1,365,295)
Change in net assets attributable to unitholders resulting from net creation andcancellation of units (785,569) (808,598)
Total increase/(decrease) in net assets attributable to unitholders (410,435) 564,336
Net assets attributable to unitholders at the end of the financial period/year 6,206,622 6,617,057
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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STATEMENT OF PORTFOLIOAs at 31 December 2017 (Un-audited)
Holdings at Fair value at
Percentage oftotal net assetsattributable tounitholders at
31 December2017
31 December2017$
31 December2017%
By Geography - Primary
Quoted Unit Trusts
LUXEMBOURGPIONEER FUNDS - EUROPEAN POTENTIAL CLASS X EURNON DISTRIBUTING 2,769 6,152,798 99.13
Portfolio of investments 6,152,798 99.13
Other net assets/(liabilities) 53,824 0.87
Net assets attributable to unitholders 6,206,622 100.00
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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STATEMENT OF PORTFOLIOAs at 31 December 2017 (Un-audited)
Percentage oftotal net assetsattributable tounitholders at31 December
2017%
Percentage oftotal net assetsattributable tounitholders at30 June2017%
By Geography - Primary (Summary)
Quoted Unit Trust
Luxembourg 99.13 98.18
Portfolio of investments 99.13 98.18
Other net assets/(liabilities) 0.87 1.82
Net assets attributable to unitholders 100.00 100.00
As the Fund is invested wholly into a Quoted Unit Trust, it is not meaningful to classify the investments into industry segment.
United European Small and Mid Cap Fund(Constituted under a Trust Deed in the Republic of Singapore)
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