United Global Financials Fund - UOB GroupEric Tham Kah Jin Peh Kian Heng Thio Boon Kiat TRUSTEE...

UnitedGlobalFinancialsFundSemi 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 Global Financials 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

12 July 1996Ann

CompRet

United GlobalFinancials Fund 3.82 8.41 17.46 7.87 10.89 1.23 5.33

Benchmark 4.02 8.08 13.54 10.40 13.91 0.78 4.73

Source: Lipper, a Thomson Reuters Company.

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: Jul 96 – Present: MSCI World Finance.

For the six months to December 2017, the Fund rose by 8.41%, slightly ahead of the MSCI World Financials Index, whichadvanced 8.08% in Singapore dollar terms.

The Fund was flat vs the benchmark in the second half of the year, after outperforming in the first half of the year. For thecalendar year 2017, the Fund was up by 17.46% compared to the benchmark, which gained 13.54%. A strong Singapore dollardetracted in part from returns. During the period the Singapore dollar appreciated by 8.3% against the US dollar.

The Fund’s overweight on emerging market financials and underweight position in developed market was a key detractor.Japanese, European, Canadian and Australian financials rallied strongly in the final quarter, while emerging market financialsdid not.

Financial sector performance by sub-sector

In total return (net) terms, theMSCIWorld Financials Index rose 8% in the six months to December 2017. By sub-sector,Banksadvanced by 8%, Diversified Financials rallied by 10%, Insurance rose by 6%.

Financial sector performance by region

During the six months to December 2017, US financials registered gains of 11%, Japanese financials rose 5%, Europeanfinancials advanced 5%, Australian financials climbed 3%, and Canadian financials by 10%. Meanwhile, emerging marketfinancials outperformed developed markets financials, advancing 12% in the period. EMEA financials surged 17%, EM Asiafinancials rose 11%, while Latin America financials rose 9%.

Securities Level Contribution

Top Contributors to the Fund include:Mastercard (US), Visa (US), T Rowe Price Group (US),Bank Negara (Indonesia) andDiscover Financial (US).

Main Detractors from performance include: Grupo Financiero Banorte (Mexico), Bancolombia (Colombia), MagellanFinancials (Australia), Metlife (US), and Franklin Resources (US).


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A) Fund Performance (continued)

Asset Allocation

As at 31 December 2017, the sub-sector exposure of the Fund was as follows:Bank (59.5%),Diversified Financials (22.9%),Insurance (6.4%), Software & Services1 (9.9%), and Cash (1.3%).

Portfolio(%)

Benchmark(%)

ActiveWeight(Pct Pts)

Banks 59.5 52.9 +6.6

Diversified Financials 22.9 24.8 -1.9

Insurance 6.4 22.3 -15.9

Software & Services 9.9 - +9.9

Net Liquidity 1.3 - +1.3

Total 100.0 100.0

1Software & Services mainly reflects holdings in financial processing companies (eg. Visa & MasterCard)

The geographic exposure of the Fund was as follows: US (48.2%), Canada (2.4%), Europe (25.1%), Japan (0.4%), AsiaPacific ex-Japan (14.4%), Latin America (7.2%) and EMEA2 (1.0%) and Net Liquidity (1.3%).

Portfolio(%)

Benchmark(%)

ActiveWeight(Pct Pts)

US 48.2 48.1 +0.1

Canada 2.4 8.3 -5.9

Europe 25.1 27.7 -2.6

Japan 0.4 6.3 -5.9

Australia & NZ 1.5 5.8 -4.3

Asia (ex. Japan) – Developed - 3.8 -3.8

Asia (ex. Japan) – Emerging 12.9 - +12.9

Latin America 7.2 - +7.2

EMEA 1.0 - +1.0

Net Liquidity 1.3 - +1.3

Total 100.0 100.0

2EMEA represents Eastern Europe, Middle East and Africa

Invested levels averaged 98% during the reporting period. The Fund ended the period with a net liquidity position of 1.3%.


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A) Fund Performance (continued)

Outlook and Fund Strategy

Global economic performance improved in 2017, alongside growth figures which rose to 3.6% from 3.2% in 2016. The pickupwas driven by improved performance in all key advanced economies as growth increased from 1.7% in 2016 to 2.4% in 2017.Developing country growth also scaled up to 4.6% from 4.4% in 2016, the first broad based acceleration in growth since theglobal financial crisis in 2008.

The acceleration in growth and the narrowing of the output gap in the US is prompting the US Federal Reserve to removemonetary accommodation. Current projections forecast steady interest rate increases in 2017. This normalisation of interestrates will be positive for the majority of companies in the financials sector as it will underpin a widening of net interest marginsagainst a backdrop of improved loan demand and generally benign credit. Meanwhile tax and regulatory changes are becominga tailwind for the sector, supporting further profitability gains over the next few years. Against a backdrop of solid capitalpositions, the sector should continue to progress with higher dividend distribution rates, which should underpin valuations. TheFund currently has about half of its capital allocated to companies in US financial services.

Aggressive monetary accommodation has had the positive effect of jump starting European growth. Eurozone growth isforecast to accelerate to 2.4% in 2017, and unemployment is projected to fall to 9.1% in 2017 from 10% at the start of the year.While monetary accommodation has been a positive for the economy, it has been a negative for financial services companies.We are encouraged by the fact that the European Central Bank has suggested that it is likely to scale back its bond purchasesand begin a normalisation process for interest rates later this year. European banks witnessed a slower recovery compared totheir US peers, due in part to the lacklustre growth backdrop, lingering asset quality challenges, and low asset yields that hadcompressed profitability and limited dividend payout. Finally there is evidence that capital levels have been restored. A projectedpick up in profitability will enable European banks to re-incept cash dividends and slowly progress them higher. We have beenselectively adding to our positions in Europe banks. Currently the Fund has about a quarter of its capital deployed in Europe.

The broad based pick up in the growth of developing countries gives us comfort in the Fund’s emergingmarket positioning.Mostcountries are expected to experience a modest acceleration in growth over the next couple of years. This should drive a pickupin credit growth and drive revenue gains. The Fund is specifically targeting banks from regions with low credit penetration,attractive lending spreads and stable, or improving credit quality trends. The Fund has slightly more than 20%of its investmentsin emerging markets.

A relaxation of regulatory headwinds, a recovery in growth, and normalisation of interest rates are all positive trends that shoulddrive sector profitability higher. This should enable banks to further step up their capital return policies and help to underpinsector performance. US tax rate reductions implemented in 2018 should lift profitability and provide a one-off boost to profitsof 10 to 12 percent. Investors should expect further slow and steady gains from the sector in the period ahead.


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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

Australia 443,297 1.51

Canada 690,442 2.35

Colombia 874,527 2.98

Czech Republic 143,792 0.49

India 1,498,109 5.10

Indonesia 1,471,247 5.01

Ireland 1,468,755 5.00

Japan 106,391 0.36

Mexico 607,630 2.07

Peru 623,721 2.13

Poland 153,374 0.52

Spain 2,822,842 9.62

Switzerland 2,338,192 7.97

Thailand 828,002 2.82

United Kingdom 754,877 2.57

United States 14,150,710 48.20

Portfolio of investments 28,975,908 98.70

Other net assets/(liabilities) 381,961 1.30

Total 29,357,869 100.00

ii) Industry

Fair Value(S$)

% of NAV

Financials 26,063,430 88.78

Information Technology 2,912,478 9.92



Total 29,357,869 100.00

iii) Asset Class

Fair Value(S$) % of NAV

Quoted equities 28,975,908 98.70


Total 29,357,869 100.00


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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 (continued)

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

%

BANK OF IRELAND GROUP PLC 1,468,755 5.00

BANCO BILBAO VIZCAYA ARGENTARIA SA 1,438,035 4.90

WELLS FARGO & CO 1,418,889 4.83

BANCO SANTANDER SA 1,384,807 4.72

UBS GROUP AG 1,377,733 4.69

VISA INC 1,371,387 4.67

MASTERCARD INC 1,314,804 4.48

US BANCORP 1,306,779 4.45

PNC FINANCIAL SERVICES GROUP INC 1,205,182 4.11

BANCOLOMBIA SA 874,527 2.98

10 largest holdings as at 31 December 2016

Fair Value

Percentage oftotal net assetsattributable tounitholders

(S$) %

VISA INC CLASS A SHARES 1,690,732 4.61

PNC FINANCIAL SERVICES GROUP INC 1,689,721 4.61

MASTERCARD INC CLASS A SHARES 1,670,651 4.56

WELLS FARGO & CO 1,592,348 4.35

US BANCORP 1,558,499 4.25

BANCO BILBAO VIZCAYA ARGENTARIA SA 1,514,914 4.13

BANK OF IRELAND GROUP PLC 1,468,179 4.01

NORTHERN TRUST CORP 1,222,180 3.34

DISCOVER FINANCIAL SERVICES INC 1,166,462 3.18

UBS GROUP AG 1,133,614 3.09


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D) Exposure to derivatives

i) Fair value of derivative contracts and as a percentage of NAV as at 31 December 2017

Contract orunderlyingprincipalamount

Positivefair value % of NAV

Negativefair value % of NAV

$ $ $

Foreign currency contracts 395,889 290 -* 438 -*

* denotes amount less than 0.01%

ii) There was a net realised loss of SGD 28,644 on derivative contracts during the financial period from 01 July 2017 to31 December 2017.

iii) There was a net unrealised loss of SGD 148 on outstanding derivative contracts marked to market as at 31 December2017.

E) Amount and percentage of NAV invested in other schemes as at 31 December 2017

N/A

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 22,238,538

Total amount of subscriptions SGD 16,944,482

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 441,375

ii) Investment in Initial Public Offerings managed by UOB Group

N/A

iii) As at 31 December 2017, there was no brokerage income earned by UOB Kay Hian Pte Ltd.


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I) Expense ratios

2017 2016

$ $

Total operating expenses 742,209 658,889

Average daily net asset value 34,022,501 33,302,268

Expense ratio 2.18% 1.98%

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 31 December 2017 was based on total operating expensesdivided by the average net asset value respectively for the financial period. The total operating expenses do not include (whereapplicable) brokerage and other transaction costs, performance fee, interest expense, distribution paid out to unitholders, foreignexchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source orarising out of income received. The Fund does not pay any performance fee. The average net asset value is based on the dailybalances.

J) Turnover ratios

2017 2016

$ $

Lower of total value of purchases or sales 15,673,611 16,102,185

Average daily net assets value 34,283,006 32,470,001

Turnover ratio 45.72% 49.59%

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

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

N/A

ii) Expense ratios for the financial period ended 31 December 2017 and 31 December 2016

N/A

iii) Turnover ratios for the financial period ended 31 December 2017 and 31 December 2016

N/A

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


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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


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STATEMENT OF TOTAL RETURNFor the half year ended 31 December 2017 (Un-audited)

31 December 31 December

2017 2016

$ $

Income

Dividends 293,013 295,252

Interest 108 18

Total 293,121 295,270

Less: Expenses

Management fee 258,716 245,498

Trustee fee 6,041 6,547

Audit fee 8,761 7,103

Registrar fee 7,582 7,541

Valuation fee 21,560 20,458

Custody fee 32,202 13,998

Transaction costs 79,849 88,595

Other expenses 59,379 33,721

Total 474,090 423,461

Net income/(losses) (180,969) (128,191)

Net gains/(losses) on value of investments

Net gains/(losses) on investments 2,849,372 7,132,917

Net gains/(losses) on financial derivatives (28,792) -

Net foreign exchange gains/(losses) 27,775 301,779

2,848,355 7,434,696

Total return/(deficit) for the period before income tax 2,667,386 7,306,505

Less: Income tax (55,571) (57,925)

Less: Capital gains tax (8,489) -

Total return/(deficit) for the period 2,603,326 7,248,580


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STATEMENT OF FINANCIAL POSITIONAs at 31 December 2017 (Un-audited)

31 December 30 June

2017 2017

$ $

Assets

Portfolio of investments 28,975,908 30,678,488

Sales awaiting settlement 162,973 68,239

Receivables 426,685 1,327,601

Cash and bank balances 441,375 617,564

Financial derivatives at fair value 290 671

Total assets 30,007,231 32,692,563

Liabilities

Payables 648,924 643,958

Financial derivatives at fair value 438 6

Total liabilities 649,362 643,964

Equity

Net assets attributable to unitholders 29,357,869 32,048,599


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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 32,048,599 31,922,518

Operations

Change in net assets attributable to unitholders resulting from operations 2,603,326 9,814,829

Unitholders’ contributions/(withdrawals)

Creation of units 16,944,482 25,818,444

Cancellation of units (22,238,538) (35,507,192)

Change in net assets attributable to unitholders resulting from net creation andcancellation of units (5,294,056) (9,688,748)

Total increase/(decrease) in net assets attributable to unitholders (2,690,730) 126,081

Net assets attributable to unitholders at the end of the financial period/year 29,357,869 32,048,599


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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 Equities

AUSTRALIA

AUSTRALIA & NEW ZEALAND BANKING GROUP 4,500 135,184 0.46

MAGELLAN FINANCIAL GROUP LTD 5,500 154,992 0.53

PLATINUM ASSET MANAGEMENT LTD 19,000 153,121 0.52

TOTAL AUSTRALIA 443,297 1.51

CANADA

ROYAL BANK OF CANADA 2,750 301,089 1.02

THE BANK OF NOVA SCOTIA 4,500 389,353 1.33

TOTAL CANADA 690,442 2.35

COLOMBIA

BANCOLOMBIA SA 16,500 874,527 2.98

CZECH REPUBLIC

KOMERCNI BANKA AS 2,500 143,792 0.49

INDIA

AXIS BANK LTD 50,000 590,390 2.01

HDFC BANK LTD ADR 2,200 298,918 1.02

HOUSING DEVELOPMENT FINANCE CORP 17,000 608,801 2.07

TOTAL INDIA 1,498,109 5.10

INDONESIA

BANK MANDIRI PERSERO TBK PT 190,000 149,720 0.51

PT BANK NEGARA INDONESIA (PERSERO) TBK. 675,000 658,227 2.24

PT BANK RAKYAT INDONESIA (PERSERO) TBK. 1,850,000 663,300 2.26

TOTAL INDONESIA 1,471,247 5.01

IRELAND

BANK OF IRELAND GROUP PLC 129,000 1,468,755 5.00


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31 December2017

31 December2017$

31 December2017%

By Geography - Primary (continued)

Quoted Equities

JAPAN

CREDIT SAISON CO LTD 2,000 48,640 0.16

SUMITOMO MITSUI FINANCIAL GROUP 1,000 57,751 0.20

TOTAL JAPAN 106,391 0.36

MEXICO

GRUPO FINANCIERO BANORTE SAB DE CV 82,500 607,630 2.07

PERU

CREDICORP LTD 2,250 623,721 2.13

POLAND

POWSZECHNA KASA OSZCZEDNOSCI BANK POLSKI SA 9,000 153,374 0.52

SPAIN

BANCO BILBAO VIZCAYA ARGENTARIA SA 126,000 1,438,035 4.90

BANCO SANTANDER SA 157,500 1,384,807 4.72

TOTAL SPAIN 2,822,842 9.62

SWITZERLAND

CHUBB LTD 1,400 273,403 0.94

PARTNERS GROUP HOLDING AG 750 687,056 2.34

UBS GROUP AG 56,000 1,377,733 4.69

TOTAL SWITZERLAND 2,338,192 7.97

THAILAND

KASIKORNBANK PCL - FOREIGN 28,000 274,415 0.93

THE SIAM COMMERCIAL BANK PCL 90,000 553,587 1.89

TOTAL THAILAND 828,002 2.82


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31 December2017

31 December2017$

31 December2017%

By Geography - Primary (continued)

Quoted Equities

UNITED KINGDOM

ADMIRAL GROUP PLC 12,500 452,406 1.54

HSBC HOLDINGS PLC 11,000 152,505 0.52

STANDARD LIFE ABERDEEN PLC 19,000 149,966 0.51

TOTAL UNITED KINGDOM 754,877 2.57

UNITED STATES

AMERICAN EXPRESS CO 5,500 729,948 2.49

BANK OF AMERICA CORP 4,000 157,802 0.54

BB&T CORP 4,500 299,006 1.02

DISCOVER FINANCIAL SERVICES INC 7,000 719,571 2.45

FRANKLIN RESOURCES INC 6,500 376,390 1.28

JPMORGAN CHASE & CO 5,000 714,573 2.43

MASTERCARD INC 6,500 1,314,804 4.48

METLIFE INC 2,000 135,137 0.46

NORTHERN TRUST CORP 6,250 834,331 2.84

PAYPAL HOLDINGS INC 2,300 226,287 0.77

PNC FINANCIAL SERVICES GROUP INC 6,250 1,205,182 4.11

STATE STREET CORP 5,700 743,542 2.53

SUNTRUST BANKS INC 9,750 841,601 2.87

T ROWE PRICE GROUP INC 5,250 736,199 2.51

THE ALLSTATE CORP 3,250 454,787 1.55

THE PROGRESSIVE CORP 7,500 564,495 1.92

US BANCORP 18,250 1,306,779 4.45

VISA INC 9,000 1,371,387 4.67

WELLS FARGO & CO 17,500 1,418,889 4.83

TOTAL UNITED STATES 14,150,710 48.20

Total Equities 28,975,908 98.70



Net assets attributable to unitholders 29,357,869 100.00


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Percentage oftotal net assetsattributable tounitholders at31 December

2017%

Percentage oftotal net assetsattributable tounitholders at30 June2017%

By Geography - Primary (Summary)

Quoted Equities

Australia 1.51 2.46

Canada 2.35 4.35

Colombia 2.98 1.91

Czech Republic 0.49 0.51

India 5.10 5.31

Indonesia 5.01 4.71

Ireland 5.00 4.06

Japan 0.36 0.42

Mexico 2.07 1.92

Peru 2.13 1.93

Poland 0.52 0.68

Spain 9.62 7.22

Switzerland 7.97 8.09

Thailand 2.82 1.99

United Kingdom 2.57 1.97

United States 48.20 48.19

Portfolio of investments 98.70 95.72

Other net assets/(liabilities) 1.30 4.28

Net assets attributable to unitholders 100.00 100.00


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Fair value at31 December

2017$

Percentage oftotal net assetsattributable tounitholders at31 December

2017%

Percentage oftotal net assetsattributable tounitholders at30 June2017%

By Industry - Secondary

Quoted Equities

Financials 26,063,430 88.78 85.80

Information Technology 2,912,478 9.92 9.92

Portfolio of investments 28,975,908 98.70 95.72

Other net assets/(liabilities) 381,961 1.30 4.28

Net assets attributable to unitholders 29,357,869 100.00 100.00


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