United Global Telecoms Fund

Transcription

1 United Global Telecoms Fund Semi Annual Report for the period 1 st January to 30 th June 2014

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3 MANAGER UOB Asset Management Ltd Registered Address: 80 Raffles Place UOB Plaza Singapore Company Registration No. : Z OPERATIONS ADDRESS 80 Raffles Place #06-00, UOB Plaza 2 Singapore Tel: DIRECTORS OF UOB ASSET MANAGEMENT Terence Ong Sea Eng Cheo Chai Hong Thio Boon Kiat TRUSTEE / REGISTRAR HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #10-02, HSBC Building Singapore CUSTODIAN State Street Bank and Trust Company One Lincoln Street Boston, MA United States of America AUDITORS PricewaterhouseCoopers LLP 8 Cross Street #17-00, PWC Building Singapore SOLICITORS TO THE MANAGER Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore SOLICITORS TO THE TRUSTEE Shook Lin & Bok LLP 1 Robinson Road #18-00, AIA Tower Singapore

4 A) Fund Performance Fund Performance/ Benchmark Returns 3 mth % Growth 6 mth % Growth 1 yr % Growth 3yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 16 August 1999 Ann Comp Ret United Global Telecoms Fund Benchmark Source: Lipper, a Thomson Reuters Company. Note: The performance returns of the Fund are in Singapore dollars based on a NAV-to-NAV basis with net dividends reinvested. The benchmark of the Fund: MSCI ACWI Telecoms. For the half year ended 30 June 2014, the net asset of the Fund declined 0.6% against an increase of 0.7% for the benchmark MSCI AC World Telecom Index (in Singapore dollar terms). The Fund underperformed during the period mainly due to negative stock selection in the US. However, this was partially mitigated by positive contribution from our securities selection in Europe. The top contributors to the Fund s performance included Telekomunikasi Indonesia, Vodafone Group, and DirectTV. Key detractors were America Movil, Verizon Communications and Softbank. As at 30 June 2014, the Fund had the following regional asset allocation: US (35.6%), UK (10.0%), Japan (9.4%), Indonesia (5.7%), China (4.3%), Sweden (4.2%), others (30.1%) and the remainder in cash (0.7%). In terms of sub-sector allocation, our Fund had a 91.0% weight in telecom service providers and 8.3% weight in the cable & satellite operators, with the remainder (0.7%) in cash. Market Review The telecommunications (telecom) sector saw muted share price gains for the first half of 2014 after a strong rally in On a relative basis, US and Asia Pacific ex-japan telecom operators were the top share price performers while Japanese operators were the key performance detractors. The share price outperformance of US telecom operators was partially driven by increased investor s appetite for yield stocks. During the period, the wireless industry in the region saw a heightened level of competition, especially in the first quarter of After multiple mobile plan rate revisions, the pricing gaps between most telecom operators generally narrowed by the middle of the year. 2

5 While operating trends for telecom operators in Europe remained weak in the first half of 2014, a significant step towards consolidation of the fragmented telecom market in the region took place. In early July 2014, the European Commission approved the merger of Germany s third- and fourth-largest mobile operators. This in-market consolidation potentially reduces competitive pressure in the German mobile market, and is likely to spur further consolidation in other European telecom markets. After a strong price performance last year, the telecom sector in Japan reversed some of the gains in the first half of this year on the back of profit taking. In addition, reduced investment appetite for the region also tampered demand for risk assets, resulting in the weak performance. On the operational front, a notable event was the announcement by the nation s dominant fixed-line Internet operator to start providing fibre access wholesaling services to mobile carriers. This new distribution model opened up a new revenue stream for mobile-only operators to bundle and cross-sell broadband services. Share prices of telecom operators in other parts of Asia Pacific performed relatively well during the first six month of this year. In particular, Indonesian operators outperformed mainly due to strong data revenue growth momentum. The market as a whole also benefitted from improved investor sentiment as the government and central bank introduced fiscal and monetary policies which helped to stabilize the rupiah and reduce the current account deficit. Meanwhile Chinese operators continued to underperform in the face of increased competition and declining profitability. US-based cable/satellite operators in the Fund, namely Comcast and DirecTV, delivered strong share price performance, partially driven by merger and acquisition activities within the sub-sector. On the operational front, both companies continue to execute well, expanding both top and bottom lines, keeping pace with a recovering US economy. Economic data in the country continues to strengthen into the second quarter after a weak first quarter caused by cold weather and this bodes well for increased discretionary spending which plays into the stocks that we hold. Outlook and Strategy We remain overweight the telecom, cable and satellite sectors in the US. Despite the recent intensifying wireless telecommunication competition, we expect the large mobile operators to stay dominant in the long run due to their robust competitive advantages in terms of scale, network and brand. Within the market, our preference is for telecom operators with a solid competitive edge and sustainable dividend payouts. We view the European Commission s recent approval of in-market consolidation as an encouraging initial step towards the sector s consolidation in Europe. However, we note that financial trends of the operators have generally not shown a significant improvement. Against this backdrop, we remain highly selective in our stock selection and prefer operators with good earnings visibility. We maintain our underweight position in this region. We remain overweight in selected Asia Pacific ex-japan markets. The region remains a bright spot within the sector for secular growth in the longer term given its positive demographic trends and consumption pattern with improving wage growth. We favour telecom operators with improving competitive positions and growing business momentum. We maintain our underweight position in Japan due to its poor competitive landscape of a secular decline in consumption and lower growth environment. 3

6 In summary, the Fund s focus is to invest in high quality firms with strong franchises such as superior networks through scale or differentiating technologies against competitors. The firm has to exhibit the ability to outperform in a highly competitive and tough regulatory environment with profitability that commensurate with the capital invested. We will maintain a focus on companies with strong cash flow generation, resilient balance sheet and stable growing dividend. The Fund is invested in telecom names within developed markets which would provide strong stable growing dividends and emerging markets telecom operators and cable/ satellite operators that provide both growth and defensive characteristics at reasonable valuation. 4

7 B) Investments at fair value and as a percentage of NAV as at 30 June 2014 under review classified by i) Country Fair Value (S$) % of NAV Australia 490, Canada 279, Chile 199, China 991, France 890, Germany 830, Indonesia 1,296, Japan 2,143, Mexico 646, Netherlands 181, Norway 681, Singapore 739, South Africa 892, Spain 747, Sweden 957, Switzerland 289, United Kingdom 2,290, United States 8,142, Portfolio of investments 22,690, Other net assets 157, Total 22,847, ii) Industry Consumer Discretionary 1,907, Telecommunication Services 20,783, Portfolio of investments 22,690, Other net assets 157, Total 22,847, iii) Asset Class Equities 22,690, Other net assets 157, Total 22,847, iv) Credit rating of debt securities N/A 5

8 C) Top Ten Holdings The top 10 holdings as at 30 June 2014 and 30 June largest holdings at 30 June 2014 Percentage of total net asset attributable to Fair Value unitholders (S$) % AT & T INC 3,306, VERIZON COMMUNICATIONS INC** 2,378, VODAFONE GROUP PLC 1,384, PT TELKOMUNIKASI INDONESIA 1,296, COMCAST CORPORATION - CLASS A 1,271, SOFTBANK CORP 1,262, CHINA MOBILE LIMITED 991, BT GROUP PLC 906, MTN GROUP LIMITED 892, DEUTSCHE TELEKOM REG 830, largest holdings at 30 June 2013 Percentage of total net asset attributable to Fair Value unitholders (S$) % AT & T INC 3,589, VODAFONE GROUP PLC 1,944, DIRECTV, LLC 1,874, COMCAST CORPORATION - CLASS A 1,586, CHINA MOBILE LIMITED 1,525, AMERICA MOVIL - ADR SERIES L 1,378, VERIZON COMMUNICATIONS INC ** 1,340, MTN GROUP LIMITED 1,262, BAIDU INC ADR 1,198, MILLICOM INTERNATION CELLULAR SA-SDR 1,198, ** Listed on New York Stock Exchange 6

9 D) Exposure to derivatives i) Fair value of derivative contracts and as a percentage of NAV as at 30 June 2014 N/A ii) Net gains/(losses) on derivative contracts realised during the financial period ended 30 June 2014 N/A iii) Net gains/(losses) on outstanding derivative contracts marked to market as at 30 June 2014 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 30 June 2014 N/A F) Amount and percentage of borrowings to net asset value (NAV) as at 30 June 2014 N/A G) Amount of redemptions and subscriptions for the period 01 January 2014 to 30 June 2014 Total amount of redemptions SGD 2,446,163 Total amount of subscriptions SGD 64,375 H) The amount and terms of related-party transactions for the period 01 January 2014 to 30 June 2014 i) As at 30 June 2014 the Fund maintained current accounts with the United Overseas Bank Limited as follows: Bank balances SGD 16,424 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 30 June 2014 N/A iii) Investment in Initial Public Offerings managed by UOB Group. N/A iv) As at 30 June 2014 there was no brokerage income earned by UOB Kay Hian Pte Ltd. 7

10 I) Expense ratios 30 June % 30 June % Note: The expense ratio has been computed based on the guidelines laid down by the Investment Management Association of Singapore ( IMAS ). The calculation of the expense ratio at 30 June 2014 was based on total operating expenses of $506,459 (2013: $497,638) divided by the average net asset value of $23,941,337 (2013: $24,835,267) for the year. The total operating expenses do not include (where applicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or 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 30 June % 30 June % 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 underlying investments, being purchases of $6,365,931 (2013: purchases of $3,828,948) divided by the average daily net asset value of $23,962,679 (2013: $23,917,799). K) Any material information that will adversely impact the valuation of the scheme such as contingent liabilities of open contracts N/A L) For schemes which invest more than 30% of their deposited property in another scheme, the following 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 2014 and 30 June 2013 N/A ii) expense ratios for the financial period ended 30 June 2014 and 30 June 2013 N/A iii) turnover ratios for the financial period ended 30 June 2014 and 30 June 2013 N/A 1 where the underlying scheme is managed by a foreign manager which belongs to the same group of companies as, or has a formal arrangement or investment agreement with, the Singapore manager, the above information should be disclosed on the underlying scheme. In other cases, such information on the underlying scheme should be disclosed only if it is readily available to the Singapore manager. 8

11 M) Soft dollar commissions/arrangements UOB Asset Management has entered into soft dollars arrangements with selected brokers from whom products and services are received from third parties. The products and services relate essentially to computer hardware and software to 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 and quotation services, all of which are believed to be helpful in the overall discharge of UOB Asset Management s duties to clients. As such services generally benefit all of UOB Asset Management s clients in terms of input into the investment decision making process, the soft credits utilised are not allocated on a specific client basis. The Manager confirms that trades were executed on a best execution basis and there was no churning of trades. 9

12 STATEMENT OF TOTAL RETURN For the half year ended 30 June 2014 (Un-audited) 30 June 30 June $ $ Income Dividends 489, ,756 Interest , ,757 Less: Expenses Management fee 178, ,979 Trustee fee 4,751 4,746 Audit fee 8,083 7,339 Registrar fee 7,490 7,490 Valuation fee 14,847 14,832 Custody fee 8,866 9,008 Interest expenses Transaction cost 26,888 19,648 Other expenses 37,632 13, , ,218 Net income 202, ,539 Net gains or losses on value of investments Net (loss)/gain on investments (206,451) 843,208 Net foreign exchange (loss)/gain (75,197) 7,436 (281,648) 850,644 Total (deficit)/return for the period before income tax (78,728) 994,183 Less: Income tax (103,046) (62,510) Total (deficit)/return for the period (181,774) 931,673 10

13 STATEMENT OF FINANCIAL POSITION As at 30 June 2014 (Un-audited) 30 June 31 December $ $ ASSETS Portfolio of investments 22,690,620 25,136,647 Receivables 32,503 94,592 Sales awaiting settlement 941,333 - Cash and bank balances 238, ,008 Total Assets 23,902,880 25,591,247 LIABILITIES Payables 346, ,985 Purchases awaiting settlement 709,165 - Total Liabilities 1,055, ,985 EQUITY Net assets attributable to unitholders 22,847,700 25,411,262 11

14 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the half year ended 30 June 2014 (Un-audited) 30 June 31 December $ $ Net assets attributable to unitholders at the beginning of the financial period/year 25,411,262 24,542,500 Operations Change in net assets attributable to unitholders resulting from operations (181,774) 4,304,545 Unitholders contributions/(withdrawals) Creation of units 64, ,362 Cancellation of units (2,446,163) (4,259,145) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (2,381,788) (3,435,783) Total (decrease)/increase in net assets attributable to unitholders (2,563,562) 868,762 Net assets attributable to unitholders at the end of the financial period/year 22,847,700 25,411,262 12

15 STATEMENT OF PORTFOLIO As at 30 June 2014 (Un-audited) By Geography - Primary Quoted Equities Percentage of total net assets attributable to Holdings at Fair value at unitholders at 30 June 30 June 30 June $ % AUSTRALIA TELSTRA CORP 80, , CANADA TELUS CORPORATION 6, , CHILE EMPRESA NACIONAL DE TELECOM 13, , CHINA CHINA MOBILE LIMITED 82, , FRANCE ORANGE SA 22, , VIVENDI SA 15, , TOTAL FRANCE 890, GERMANY DEUTSCHE TELEKOM REG 38, , INDONESIA PT TELKOMUNIKASI INDONESIA 5,000,000 1,296, JAPAN KDDI CORP 5, , NTT DOCOMO 23, , SOFTBANK CORP 13,600 1,262, TOTAL JAPAN 2,143, MEXICO AMERICA MOVIL- ADR SERIES L 25, , NETHERLANDS KONINKLIKJE KPN NV 40, ,

16 STATEMENT OF PORTFOLIO As at 30 June 2014 (Un-audited) By Geography - Primary (continued) Quoted Equities Percentage of total net assets attributable to Holdings at Fair value at unitholders at 30 June 30 June 30 June $ % NORWAY TELENOR ASA 24, , SINGAPORE SINGAPORE TELECOMMUNICATIONS LTD 192, , SOUTH AFRICA MTN GROUP LIMITED 34, , SPAIN TELEFONICA SA 35, , SWEDEN MILLICOM INTERNATIONAL CELLULAR SA-SDR 6, , TELIASONERA AB 30, , TOTAL SWEDEN 957, SWITZERLAND SWISSCOM AG- REG , UNITED KINGDOM BT GROUP PLC 110, , VODAFONE GROUP PLC 333,000 1,384, TOTAL UNITED KINGDOM 2,290,

17 STATEMENT OF PORTFOLIO As at 30 June 2014 (Un-audited) By Geography - Primary (continued) Quoted Equities Percentage of total net assets attributable to Holdings at Fair value at unitholders at 30 June 30 June 30 June $ % UNITED STATES AT & T INC 75,000 3,306, COMCAST CORPORATION - CLASS A 19,000 1,271, DIRECTV, LLC 6, , VERIZON COMMUNICATIONS INC* 9, , VERIZON COMMUNICATIONS INC** 39,000 2,378, TOTAL UNITED STATES 8,142, Portfolio of investments 22,690, Other net assets 157, Net assets attributable to unitholders 22,847, * Listed on London Stock Exchange ** Listed on New York Stock Exchange 15

18 STATEMENT OF PORTFOLIO As at 30 June 2014 (Un-audited) By Geography - Primary (Summary) Quoted Equities Percentage of Percentage of total net assets total net assets attributable to attributable to unitholders at unitholders at 30 June 31 December % % Australia Canada Chile China France Germany Indonesia Japan Mexico Netherlands Norway Singapore South Africa Spain Sweden Switzerland United Kingdom United States Portfolio of investments Other net assets Net assets attributable to unitholders

19 STATEMENT OF PORTFOLIO As at 30 June 2014 (Un-audited) By Industry - Secondary Quoted Equities Percentage of Percentage of total net assets total net assets attributable to attributable to Fair value at unitholders at unitholders at 30 June 30 June 31 December $ % % Consumer Discretionary 1,907, Information Technology Telecommunication Services 20,783, Portfolio of investments 22,690, Other net assets 157, Net assets attributable to unitholders 22,847,

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