United International Growth Fund

Transcription

1 United International Growth Fund Annual Report for the financial year ended 31 st December 2017

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3 MANAGER UOB Asset Management Ltd Registered Address: 80 Raffles Place UOB Plaza Singapore Company Registration No. : Z Tel: DIRECTORS OF UOB ASSET MANAGEMENT Lee Wai Fai Eric Tham Kah Jin Peh Kian Heng Thio Boon Kiat TRUSTEE State Street Trust (SG) Limited 168 Robinson Road #33-01, Capital Tower Singapore CUSTODIAN / ADMINISTRATOR / REGISTRAR State Street Bank and Trust Company, acting through its Singapore Branch 168 Robinson Road #33-01, Capital Tower Singapore AUDITOR PricewaterhouseCoopers LLP 7 Straits View, Marina One East Tower, Level 12 Singapore

4 A) Fund Performance 3 mth % Growth 6 mth % Growth 1 yr % Growth 3 yr Ann Comp Ret 5 yr Ann Comp Ret Since Inception 10 yr 07 April 1995 Ann Ann Comp Comp Ret Ret Fund Performance/ Benchmark Returns United International Growth Fund Benchmark Source: Note: Lipper, a Thomson Reuters Company. The performance returns of the Fund are in Singapore Dollar based on a NAV-to-NAV basis with dividends and distributions reinvested, if any. The benchmark of the Fund: Apr 95 Dec 96: DBS 50 Index; Jan 97 Dec 97: MSCI AC Far East; Jan 98 Present: MSCI AC World. For the full year ended 31 December 2017, the net asset value of the Fund rose 11.71%, compared with a 14.68% gain in the benchmark MSCI AC World index in Singapore Dollar terms. The Fund lagged the benchmark mainly due to negative stock selection although this was partially offset by positive sector allocation. On a stock selection basis, Financials and Industrials sectors contributed to the Fund performance while Consumer Discretionary and Energy sectors detracted from performance. On a sector allocation basis, the Fund benefited from its overweight position in Information Technology and underweight position in Telecommunication Services. The Fund was fully invested during the period under review, and ended the year with cash levels of 3.36%. Notable contributors to performance included: Alibaba (CN), Microsoft (US), Jungheinrich (DE), Alphabet (US) and Unitedhealth (US). Detractors from Fund performance included: Africa Oil (CN), Hess (US), Pandora (DK), Celgene (US) and Starbucks (US). As at 31 December 2017, the Fund was positioned as follows: By Country United States (53.17%), Asia ex-japan (16.80%), Europe (16.26%), United Kingdom (3.79%), Australia (2.88%), Latin America (2.47%) and Canada (1.27%) with the remainder in cash (3.36%). By Sector Information Technology (24.03%), Financials (23.06%), Consumer Discretionary (11.14%), Industrials (9.79%), Health Care (9.50%), Energy (7.71%), Consumer Staples (4.76%), Materials (4.62%) and Utilities (2.03%) with the remainder in cash (3.36%). Economic and Market Review Global equities ended the year higher, with Asia ex-japan and Europe markets outperforming while US lagged the broader index. Macroeconomic data in the global markets was broadly positive across most major indices. Leading economic indicators for most major regions moved higher while results were mixed for emerging markets. The purchasing managers index (PMIs) in most developed regions remained in expansionary mode and ended the review period strongly. Inflation remains benign despite the strong economic activities globally and central bank monetary policies remain dovish globally. In terms of sector performance, cyclical sectors such as Information Technology, Materials and Industrials Sectors outperformed, while defensive yield sectors such as Telecommunication Services and Utilities underperformed. The Energy sector was the only sector to decline during the review period despite a strong rally in the last few months. The Materials sector benefited from rising commodities prices while the Financials sector rallied on the back of yield curve steepening amidst an improving macro outlook. The Information Technology sector continued to benefit from rising corporate expenditure and -2-

5 A) Fund Performance (continued) an IT upgrade cycle which had been previously suppressed due to uncertainties. Meanwhile, the Health Care sector detracted from performance as concerns over drug pricing cuts continued while Consumer Staples were sold down along with other rate sensitive sectors such as Utilities and Telecommunication Services on the back of rising rate environment. US equities underperformed in the period under review despite better than expected economic data. The industrial production and retail sales both came in stronger than expected. We attribute the stronger industrial production numbers to increased oil drilling activities as a result of the higher oil prices and the cold weather during winter. Retail sales were also resilient reflecting the increase in consumer confidence and better labour conditions. Small business confidence was also elevated while the US housing market continues on its upward trend which should be positive for the economy. On the monetary front, the US Federal Reserve remains dovish despite three rate hikes in the year reiterating a gradual path to normalisation. Japan equities were broadly in line with the broader index as the economy benefited from the current global economic upcycle. Retail sales and industrial production were both above expectations during the period under review. Inflation data came in at 0.6% which remains below Bank of Japan s (BOJ) target. Progress on the implementation of structural reforms remains slow amidst headwinds such as an ageing population and declining labour force but incremental improvements are now being seen in corporate governance. European equities outperformed in the year under review with improving economic data. The recent softness in the region could be due to the strengthening of the Euro as investors fear a strong currency could present risks to the region s economic recovery and corporate earnings. Despite the stronger currency, economic data remains very strong with the Eurozone composite PMI reading reaching its highest print in December. The German IFO business confidence index remains elevated at while loan growth remains positive for the both corporate and consumers which bodes well for the region. Meanwhile, inflation in the currency bloc remains benign with the consumer price index (CPI) coming in at a healthy 1.5% rate and the European Central Bank remains dovish in its monetary policies. The emerging market performance was strong in the review period with Asia ex-japan leading the advance while LATAM and Emerging EMEA were roughly in line. Economic conditions in the emerging markets were broadly better with the uptick in global economic outlook. Within Asia ex-japan, performances across the region were mixed with China and Korea being the top performers on the back of better than expected economic data and the global technology upcycle. On the other hand, Indonesia and Philippines lagged on weaker economic data. EMEA benefited from the stronger oil prices while LATAM were mixed with Mexico lagging on weaker economic data but offset by strong performances from Chile and Peru. Outlook and Strategy The outlook on global equities remains positive as global economic growth continues to recover. Risk assets should outperform as the global economic outlook improves, inflation across the developed markets remains benign and fiscal and monetary policies remain accommodative. In terms of regional asset allocation, we maintain our neutral position on both Developed Markets (DM) and Emerging Markets (EM). Within the DM, we have an overweight in Europe juxtaposed against an underweight position in Japan. We retain our neutral stance in the US. Within DM, we continue to like US equities over the longer term and while valuations look fair on the broader index, we still see selective valuation plays within the market. A weakening dollar and recent tax reforms should be tailwinds to corporate profits while the positive market outlook in the longer term continues to be underpinned by better labour market trends and resilient corporate earnings. We are currently running an overweight position in Europe on the back of further economic recovery. A weaker euro has helped to lift confidence and boost economic activities. The region also has significant operating leverage to an upturn in economic activity with profit margins currently at trough levels. The backdrop of increasing geopolitical risks in the region appears to be subsiding and this would remove any overhang on the region. Concerns in Japan continue to linger. Economic data remains mixed but we believe that the Bank of Japan (BoJ) will remain accommodative, which would help to support the market. Despite disappointments on policy and the anaemic economic backdrop, there are some positive developments in corporate governance and corporate performance. A weak Yen also should be beneficial to the exporters and corporate earnings. However, we remain sceptical about any structural improvement in the economy in the longer term and hence we have an underweight position in Japan. Within the emerging world, we retain our overweight position on Asia ex-japan on valuation and weakening dollar while remaining underweight on EMEA and LATAM. Asia ex-japan equities continue to offer good investment opportunities driven by the rise of the regions consumer class, and valuations are broadly supportive. The region should also benefit from the -3-

6 A) Fund Performance (continued) current global upcycle as being net exporters to the rest of the world. On the other hand, we should see rising geopolitical risks in LATAM with Mexico and Brazil holding national elections in their respective countries. The continuation of rate hike cycle by the US Federal Reserve in coming quarters could trigger fiscal and monetary adjustments globally. This could adversely impact corporate earnings, capital flows and EM growth in the period ahead. Stock selection will be paramount to drive investment performance during this period of adjustment, which should reinforce the need for an active approach to portfolio management. We continue to allocate capital to high-quality and sustainable growth companies that are reasonably priced. The Fund continues to focus on companies with strong competitive advantages, healthy cash flow and proven track record. -4-

7 B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 31 December 2017 under review classified by i) Country Fair Value (S$) % of NAV Australia 1,875, Belgium 623, Canada 825, China 2,827, France 599, Germany 1,935, Hong Kong 1,007, India 2,378, Indonesia 1,799, Ireland 1,087, Mexico 846, Netherlands 1,048, Peru 762, Singapore 1,579, Spain 1,637, Sweden 1,646, Switzerland 2,026, Taiwan 1,360, United Kingdom 2,474, United States 34,670, Portfolio of investments 63,013, Other net assets/(liabilities) 2,192, Total 65,205,

8 B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 31 December 2017 under review classified by (continued) ii) Industry Fair Value (S$) % of NAV Consumer Discretionary 7,264, Consumer Staples 3,105, Energy 5,026, Financials 15,033, Health Care 6,193, Industrials 6,382, Information Technology 15,671, Materials 3,015, Utilities 1,320, Portfolio of investments 63,013, Other net assets/(liabilities) 2,192, Total 65,205, iii) Asset Class Fair Value (S$) % of NAV Quoted equities 63,013, Other net assets/(liabilities) 2,192, Total 65,205, iv) Credit rating of quoted bonds N/A -6-

9 C) Top Ten Holdings 10 largest holdings as at 31 December 2017 Fair Value (S$) Percentage of total net assets attributable to unitholders % MICROSOFT CORP 3,658, ALPHABET INC 2,604, UNITEDHEALTH GROUP INC 2,386, HESS CORP 2,214, HONEYWELL INTERNATIONAL INC 2,151, RAYTHEON CO 1,882, EVOLUTION MINING LTD 1,875, WELLS FARGO & CO 1,735, ASSA ABLOY AB 1,646, BANCO BILBAO VIZCAYA ARGENTARIA SA 1,637, largest holdings as at 31 December 2016 Percentage of total net assets attributable to Fair Value unitholders (S$) % MICROSOFT 8,851, ALPHABET INC-CL A 6,869, MERCK 5,953, CELGENE CORPORATION 5,618, SAMSUNG ELECTRONICS 5,388, DOLLAR GENERAL CORPORATION 5,243, WELLS FARGO & COMPANY 5,095, NXP SEMICONDUCTORS NV 4,998, PNC FINANCIAL SERVICES 4,984, US BANCORP 4,920,

10 D) Exposure to derivatives i) Fair value of derivative contracts and as a percentage of NAV as at 31 December 2017 Contract or underlying principal amount Positive fair value % of NAV Negative fair value $ $ $ % of NAV Foreign currency contracts 9, * 3 -* * denotes amount less than 0.01% ii) There was a net realised loss of SGD 36,869 on derivative contracts during the financial year ended 31 December iii) There was a net unrealised gain of SGD 8 on outstanding derivative contracts marked to market as at 31 December 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 year ended 31 December 2017 Total amount of redemptions SGD 160,552,756 Total amount of subscriptions SGD 21,742,925 H) The amount and terms of related-party transactions for the financial year ended 31 December 2017 Please refer to Note 9 of the Notes to the Financial Statements. I) Expense ratios Please refer to Note 10 of the Notes to the Financial Statements. J) Turnover ratios Please refer to Note 10 of the Notes to the Financial Statements. K) Any material information that will adversely impact the valuation of the scheme such as contingent liabilities of open contracts N/A -8-

11 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 31 December 2017 and 31 December 2016 N/A ii) Expense ratios for the financial year ended 31 December 2017 and 31 December 2016 N/A iii) Turnover ratios for the financial year 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 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. 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. N) Where the scheme offers pre-determined payouts, an explanation on the calculation of the actual payouts received by participants and any significant deviation from the pre-determined payouts N/A -9-

12 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and hold the assets of United International Growth Fund (the Fund ) in trust for the unitholders. In accordance with the Securities and Futures Act (Cap. 289), its subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor the activities of the Manager for compliance with the limitations imposed on the investment and borrowing powers as set out in the Trust Deed in each annual accounting year and report thereon to unitholders in an annual report. To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Fund during the financial year covered by these financial statements, set out on pages 14 to 36, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed. For and on behalf of the Trustee STATE STREET TRUST (SG) LIMITED Authorised signatory 29 March

13 STATEMENT BY THE MANAGER In the opinion of UOB Asset Management Ltd, the accompanying financial statements set out on pages 14 to 36, comprising the Statement of Total Return, Statement of Financial Position, Statement of Movements of Unitholders Funds, Statement of Portfolio and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the financial position and portfolio holdings of United International Growth Fund (the Fund ) as at 31 December 2017, and the financial performance and movements of unitholders funds for the year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants. At the date of this statement, there are reasonable grounds to believe that the Fund will be able to meet its financial obligations as and when they materialise. For and on behalf of the Manager UOB ASSET MANAGEMENT LTD THIO BOON KIAT Authorised signatory 29 March

14 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED INTERNATIONAL GROWTH FUND Our Opinion In our opinion, the accompanying financial statements of United International Growth Fund (the Fund ), are properly drawn up in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants, so as to present fairly, in all material respects, the financial position and portfolio holdings of the Fund as at 31 December 2017, and of the financial performance and movements of unitholders funds for the financial year ended on that date. What we have audited The financial statements of the Fund comprise: the Statement of Total Return for the financial year ended 31 December 2017; the Statement of Financial Position as at 31 December 2017; the Statement of Movements of Unitholders Funds for the financial year ended 31 December 2017; the Statement of Portfolio as at 31 December 2017; and the notes to the financial statements, including a summary of significant accounting policies. Basis for Opinion We conducted our audit in accordance with Singapore Standards on Auditing ( SSAs ). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence We are independent of the Fund in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities ( ACRA Code ) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. Other Information The Fund s Manager (the Manager ) is responsible for the other information. The other information comprises all sections of the annual report but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager for the Financial Statements The Manager is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants and for such internal control as the Manager determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. -12-

15 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED INTERNATIONAL GROWTH FUND In preparing the financial statements, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to terminate the Fund or to cease the Fund s operations, or has no realistic alternative but to do so. The Manager s responsibilities include overseeing the Fund s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. PricewaterhouseCoopers LLP Public Accountants and Chartered Accountants Singapore, 29 March

16 STATEMENT OF TOTAL RETURN For the financial year ended 31 December Note $ $ Income Dividends 3,136,877 3,478,473 Interest Total 3,137,639 3,478,518 Less: Expenses Management fee 9 1,519,931 1,709,488 Trustee fee 9 55,701 68,379 Audit fee 20,842 18,700 Registrar fee 9 15,072 15,000 Valuation fee 9 189, ,686 Custody fee 9 49,492 55,388 Transaction costs 809,584 1,146,948 Other expenses 83, ,821 Total 2,744,151 3,351,410 Net income/(losses) 393, ,108 Net gains/(losses) on value of investments Net gains/(losses) on investments 18,764,452 13,305,341 Net gains/(losses) on financial derivatives (36,861) - Net foreign exchange gains/(losses) (151,954) (114,618) 18,575,637 13,190,723 Total return/(deficit) for the year before income tax 18,969,125 13,317,831 Less: Income tax 3 (669,480) (789,520) Less: Capital gains tax 3 (1,776) (105,816) Total return/(deficit) for the year 18,297,869 12,422,495 The accompanying notes form an integral part of these financial statements. -14-

17 STATEMENT OF FINANCIAL POSITION As at 31 December Note $ $ Assets Portfolio of investments 63,013, ,778,574 Receivables 4 325,905 4,101,517 Cash and bank balances 2,170,176 5,837,037 Margin accounts 133,640 - Financial derivatives at fair value Total assets 65,643, ,717,128 Liabilities Payables 5 437, ,568 Financial derivatives at fair value Total liabilities 437, ,568 Equity Net assets attributable to unitholders 7 65,205, ,717,560 The accompanying notes form an integral part of these financial statements. -15-

18 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the financial year ended 31 December Note $ $ Net assets attributable to unitholders at the beginning of the financial year 185,717, ,742,887 Operations Change in net assets attributable to unitholders resulting from operations 18,297,869 12,422,495 Unitholders contributions/(withdrawals) Creation of units 21,742,925 25,285,210 Cancellation of units (160,552,756) (29,733,032) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (138,809,831) (4,447,822) Total increase/(decrease) in net assets attributable to unitholders (120,511,962) 7,974,673 Net assets attributable to unitholders at the end of the financial year 7 65,205, ,717,560 The accompanying notes form an integral part of these financial statements. -16-

19 STATEMENT OF PORTFOLIO As at 31 December 2017 Holdings at 31 December 2017 Fair value at 31 December 2017 $ Percentage of total net assets attributable to unitholders at 31 December 2017 % By Geography - Primary Quoted Equities AUSTRALIA EVOLUTION MINING LTD 677,100 1,875, BELGIUM ANHEUSER-BUSCH INBEV SA/NV 4, , CANADA AFRICA OIL CORP 550, , CHINA ALIBABA GROUP HOLDING LTD 5,750 1,325, SUNNY OPTICAL TECHNOLOGY GROUP 88,000 1,502, TOTAL CHINA 2,827, FRANCE VALEO SA 6, , GERMANY BAYER AG 7,400 1,235, JUNGHEINRICH AG 11, , TOTAL GERMANY 1,935, HONG KONG SANDS CHINA LTD 146,000 1,007, INDIA AXIS BANK LTD 89,600 1,057, POWER GRID CORP OF INDIA LTD 314,900 1,320, TOTAL INDIA 2,378, INDONESIA PT BANK NEGARA INDONESIA (PERSERO) TBK. 1,000, , The accompanying notes form an integral part of these financial statements. -17-

20 STATEMENT OF PORTFOLIO As at 31 December 2017 Holdings at 31 December 2017 Fair value at 31 December 2017 $ Percentage of total net assets attributable to unitholders at 31 December 2017 % By Geography - Primary (continued) Quoted Equities INDONESIA (continued) PT BANK RAKYAT INDONESIA (PERSERO) TBK. 2,300, , TOTAL INDONESIA 1,799, IRELAND BANK OF IRELAND GROUP PLC 95,500 1,087, MEXICO GRUPO FINANCIERO BANORTE SAB DE CV 115, , NETHERLANDS NXP SEMICONDUCTORS NV 6,700 1,048, PERU CREDICORP LTD 2, , SINGAPORE BROADCOM LTD 4,600 1,579, SPAIN BANCO BILBAO VIZCAYA ARGENTARIA SA 143,500 1,637, SWEDEN ASSA ABLOY AB 59,200 1,646, SWITZERLAND NESTLE SA 8, , UBS GROUP AG 42,600 1,048, TOTAL SWITZERLAND 2,026, TAIWAN TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD 132,000 1,360, The accompanying notes form an integral part of these financial statements. -18-

21 STATEMENT OF PORTFOLIO As at 31 December 2017 Holdings at 31 December 2017 Fair value at 31 December 2017 $ Percentage of total net assets attributable to unitholders at 31 December 2017 % By Geography - Primary (continued) Quoted Equities UNITED KINGDOM RIO TINTO PLC 16,000 1,140, ROYAL DUTCH SHELL PLC A SHARES 29,750 1,333, TOTAL UNITED KINGDOM 2,474, UNITED STATES ALPHABET INC 1,850 2,604, CELGENE CORP 8,600 1,199, CHEVRON CORP 3, , COMCAST CORP 12, , DISCOVER FINANCIAL SERVICES INC 11,500 1,182, DOLLAR GENERAL CORP 5, , HESS CORP 34,900 2,214, HONEYWELL INTERNATIONAL INC 10,500 2,151, MERCK & CO INC 18,250 1,372, MICROSOFT CORP 32,000 3,658, NVIDIA CORP 5,000 1,292, PEPSICO INC 5, , PHILIP MORRIS INTERNATIONAL INC 3, , PNC FINANCIAL SERVICES GROUP INC 6,600 1,272, RAYTHEON CO 7,500 1,882, RED HAT INC 8,100 1,300, STARBUCKS CORP 19,500 1,496, T ROWE PRICE GROUP INC 9,500 1,332, THE HOME DEPOT INC 4,370 1,106, THE PRICELINE GROUP INC 480 1,114, THE WALT DISNEY CO 4, , UNITEDHEALTH GROUP INC 8,100 2,386, US BANCORP 17,750 1,270, The accompanying notes form an integral part of these financial statements. -19-

22 STATEMENT OF PORTFOLIO As at 31 December 2017 Holdings at 31 December 2017 Fair value at 31 December 2017 $ Percentage of total net assets attributable to unitholders at 31 December 2017 % By Geography - Primary (continued) Quoted Equities UNITED STATES (continued) WELLS FARGO & CO 21,400 1,735, TOTAL UNITED STATES 34,670, Total Equities 63,013, Portfolio of investments 63,013, Other net assets/(liabilities) 2,192, Net assets attributable to unitholders 65,205, The accompanying notes form an integral part of these financial statements. -20-

23 STATEMENT OF PORTFOLIO As at 31 December 2017 Percentage of total net assets attributable to unitholders at 31 December 2017 % Percentage of total net assets attributable to unitholders at 31 December 2016 % By Geography - Primary (Summary) Quoted Equities Australia Belgium Canada China France Germany Hong Kong India Indonesia Ireland Mexico Netherlands Peru Singapore South Korea Spain Sweden Switzerland Taiwan United Kingdom United States Portfolio of investments Other net assets/(liabilities) Net assets attributable to unitholders The accompanying notes form an integral part of these financial statements. -21-

24 STATEMENT OF PORTFOLIO As at 31 December 2017 Fair value at 31 December 2017 $ Percentage of total net assets attributable to unitholders at 31 December 2017 % Percentage of total net assets attributable to unitholders at 31 December 2016 % By Industry - Secondary Quoted Equities Consumer Discretionary 7,264, Consumer Staples 3,105, Energy 5,026, Financials 15,033, Health Care 6,193, Industrials 6,382, Information Technology 15,671, Materials 3,015, Utilities 1,320, Portfolio of investments 63,013, Other net assets/(liabilities) 2,192, Net assets attributable to unitholders 65,205, The accompanying notes form an integral part of these financial statements. -22-

25 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2017 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1 General United International Growth Fund (the Fund ) is a Singapore-registered trust fund constituted under a Trust Deed dated 21 February 1995 between UOB Asset Management Ltd (the Manager ) and HSBC Institutional Trust Services (Singapore) Limited (the Retired Trustee ). The Deed is governed by the laws of the Republic of Singapore. With effect from 1 April 2017, the Trustee of the Fund has changed from HSBC Institutional Trust Services (Singapore) Limited to State Street Trust (SG) Limited (the Trustee ). The investment objective of the Fund is to invest mainly in shares in global developed and emerging markets, identified by the Manager as having good prospects for growth. Subscriptions and redemptions of the units are denominated in the Singapore Dollar and the United States Dollar. Investors may subscribe in the United States Dollar at the applicable rate of exchange from the Singapore Dollar. 2 Significant accounting policies (a) Basis of preparation The financial statements have been prepared under the historical cost convention, modified by the revaluation of financial assets held at fair value through profit or loss, and in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants. The Fund has adopted the following Singapore Financial Reporting Standards ( FRS ) and related amendments in accordance with the recommendations of the RAP 7 issued in March 2017 for annual periods beginning on or after 1 July 2016: (i) Consolidation and disclosure of interests in other entities FRS 110 Consolidated financial statements FRS 112 Disclosure of interests in other entities Amendments to FRS 110, FRS 112 and FRS 27 Investment entities FRS 110 and the amendments define an investment entity and introduce an exception from the consolidation requirements for investments entities. FRS 112 and the amendments require entities to disclose significant judgements and assumptions made in determining whether the entity controls, jointly controls, significantly influences or has some interests in other entities. Entities are also required to provide disclosure around certain structured entities. The amendments to FRS 112 introduce new disclosure requirements related to investment entities. (ii) Offsetting financial assets and liabilities disclosures Amendments to FRS 32 Financial instruments: Presentation - Offsetting financial assets and financial liabilities Amendments to FRS 107 Disclosures - Offsetting financial assets and financial liabilities The amendments to FRS 32 provide clarification on the offsetting criteria in FRS 32 and address inconsistencies in their application. The amendments to FRS 107 require additional disclosures to enable users of the financial statements to evaluate the effect or the potential effects of netting arrangements, including rights of set-off associated with an entity s recognised financial assets and recognised financial liabilities, on the entity s financial position. The adoption of these new or amended FRS impacted the Fund s level of disclosures in certain of the above noted areas, but did not result in substantial changes to the accounting policies of the Fund and had no material effect on the amounts reported for the current or prior years. -23-

26 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (b) Recognition of income Dividend income is recognised when the right to receive payment is established. Interest income is recognised on a time proportion basis using the effective interest method. (c) Investments Investments are classified as financial assets at fair value through profit or loss. (i) Initial recognition Purchases of investments are recognised on the trade date. Investments are recorded at fair value on initial recognition. (ii) Subsequent measurement Investments are subsequently carried at fair value. Net changes in fair value on investments are included in the Statement of Total Return in the year in which they arise. (iii) Derecognition Investments are derecognised on the trade date of disposal. The resultant realised gains and losses on the sale of investments are computed on the basis of the difference between the weighted average cost and selling price gross of transaction costs, and are taken up in the Statement of Total Return. (d) Basis of valuation of investments The fair value of financial assets and liabilities traded in active markets is based on quoted market prices at the close of trading on the financial year end date. The quoted market price used for investments held by the Fund is the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine the point within the bid-ask spread that is most representative of fair value. (e) Foreign currency translation (i) Functional and presentation currency The Fund s investors are mainly from Singapore with the subscriptions and redemptions of the units denominated in the Singapore Dollar and the United States Dollar. The performance of the Fund is measured and reported to the investors in the Singapore Dollar. The Manager considers the Singapore Dollar as the currency of the primary economic environment in which the Fund operate. The financial statements are presented in the Singapore Dollar, which is the Fund s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Total Return. Translation differences on non-monetary financial assets and liabilities are also recognised in the Statement of Total Return within Net gains/losses on investments. -24-

27 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (f) Expenses charged to the Fund All direct expenses relating to the Fund are charged directly to the Statement of Total Return. In addition, certain expenses shared by all unit trusts managed by the Manager are allocated to each fund based on the respective fund s net asset value. (g) Financial derivatives Financial derivatives including forwards and swaps may be entered into for the purposes efficient portfolio management, tactical asset allocation or specific hedging of financial assets held as determined by the Manager and in accordance with the provision of the Trust Deed and the Code on Collective Investment Schemes. Financial derivatives outstanding on the financial year end date are valued at the forward rate or at the current market prices using the mark-to-market method, as applicable, and the resultant gains and losses are taken up in the Statement of Total Return. (h) Distributions The Manager has the absolute discretion to determine whether a distribution is to be made. In such an event, an appropriate amount will be transferred to a distribution account, to be paid out on the distribution date. The amount shall not be treated as part of the property of the Fund. Distributions are accrued for at the financial year end date if the necessary approvals have been obtained and a legal or constructive obligation has been created. (i) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Fund or the counterparty. 3 Income tax $ $ Overseas income tax 669, ,520 Capital gains tax 1, ,816 The Fund was granted the status of Designated Unit Trust ( DUT ) in Singapore. The Trustee of the Fund ensures that the Fund fulfill their reporting obligations under the DUT Scheme. Under the DUT Scheme, subject to certain conditions and reporting obligations being met, certain income of the DUT Fund is not taxable in accordance with Sections 35(12) and 35(12A) of the Income Tax Act. Such income includes: (i) (ii) (iii) gains or profits derived from Singapore or elsewhere from the disposal of securities; interest (other than interest for which tax has been deducted under Section 45 of the Income Tax Act); dividends derived from outside Singapore and received in Singapore; -25-

28 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Income tax (continued) (iv) (v) (vi) gains or profits derived from foreign exchange transactions, transactions in futures contracts, transactions in interest rate or currency forwards, swaps or option contracts and transactions in forwards, swaps or option contracts relating to any securities or financial index; discount, prepayment fee, redemption premium and break cost from qualifying debt securities issued during the prescribed period; and distributions from foreign unit trusts derived from outside Singapore and received in Singapore. The overseas income tax represents tax withheld on foreign sourced income. The capital gains tax represents tax on realised capital gains sourced from India. The Fund is required to recognise a tax liability when it is probable that the tax laws of foreign countries require a tax liability to be assessed on the Fund s gains on investments sourced from such foreign countries, assuming the relevant taxing authorities have full knowledge of all the facts and circumstances. The tax liability is then measured at the amount expected to be paid to the relevant taxation authorities using the tax laws and rates that have been enacted or substantively enacted by the end of the financial year. There is sometimes uncertainty about the way enacted tax law is applied to offshore investment funds. This creates uncertainty about whether or not a tax liability will ultimately be paid by the Fund. Therefore when measuring any uncertain tax liabilities management considers all of the relevant facts and circumstances available at the time which could influence the likelihood of payment, including any formal or informal practices of the relevant tax authorities. As at 31 December 2017 and 2016, the Fund has uncertain taxes exposure with respect to gains on investment of which the tax liability is estimated to be nil. While this represents the Manager s best estimate, the estimated value could differ significantly from the amount ultimately payable. 4 Receivables $ $ Amounts receivable for creation of units 194,880 3,963,809 Dividends receivable 36,470 80,390 Other receivables 94,555 57, ,905 4,101,517 5 Payables $ $ Amount payable for cancellation of units 139, ,407 Amount due to the Manager 229, ,134 Amount due to Trustee 7,150 17,569 Tax payables 10,997 - Other creditors and accrued expenses 49,888 22, , ,

29 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Fair value of financial derivatives Financial derivatives contracts comprise foreign currency contracts for the sale and purchase of foreign currencies. The contract or underlying principal amounts of these financial derivatives and their corresponding gross positive or negative fair values at the financial year end date are analysed below. Contract or underlying principal amount Contract or underlying Positive Negative principal Positive fair value fair value amount fair value Negative fair value $ $ $ $ $ $ Foreign currency contracts 9, Units in issue During the financial year ended 31 December 2017 and 2016, the numbers of units issued, redeemed and outstanding were as follows: Units at the beginning of the financial year 81,149,419 83,511,718 Units created 8,990,586 11,968,213 Units cancelled (64,631,131) (14,330,512) Units at the end of the financial year* 25,508,874 81,149,419 *Included above are units denominated in USD 274,907 1,742,168 $ $ Net assets attributable to unitholders 65,205, ,717,560 Net assets value per unit There is no difference between the net assets attributable to unitholders per unit per financial statements and the net assets attributable to unitholders per unit for issuing/redeeming of units. 8 Financial risk management The Fund s activities expose it to a variety of market risks (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Fund s overall risk management programme seeks to minimise potential adverse effects on the Fund s financial performance. The Fund may use futures contracts, financial options contracts and/or foreign currency contracts subject to the terms of the Trust Deed to moderate certain risk exposures. Specific guidelines on exposures to individual securities and certain industries are in place for the Fund at any time as part of the overall financial risk management to reduce the Fund s risk exposures. -27-

30 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) The Fund s assets principally consist of financial instruments such as equity investments and cash. They are held in accordance with the published investment policies of the Fund. The allocation of assets between the various types of investments is determined by the Manager to achieve its investment objectives. (a) Market risk Market risk is the risk of loss arising from uncertainty concerning movements in market prices and rates, including observable variables such as interest rates, credit spreads, exchange rates, and others that may be only indirectly observable such as volatilities and correlations. Market risk includes such factors as changes in economic environment, consumption pattern and investor s expectation etc. which may have significant impact on the value of the investments. The Fund s investments are substantially dependent on changes in market prices and are monitored by the Manager on a regular basis so as to assess changes in fundamentals and valuation. Although the Manager makes reasonable efforts in the choice of investments, events beyond reasonable control of the Manager could affect the prices of the underlying investments and hence the asset value of the Fund. Guidelines are set to reduce the Fund s risk exposures to market volatility such as diversifying the portfolio by investing across various geographies, alternatively, the Fund may be hedged using derivative strategies. (i) Foreign exchange risk The Fund has monetary financial assets and liabilities denominated in currencies other than the Singapore Dollar and it may be affected favourably or unfavourably by exchange rate regulations or changes in the exchange rates between the Singapore Dollar and such other currencies. The Manager may at his discretion, implement a currency management strategy either to reduce currency volatility or to hedge the currency exposures of the Fund. The table below summarises the Fund s exposure to foreign currencies at the end of the financial year. As at 31 December 2017 SGD USD EUR AUD Others Total $ $ $ $ $ $ Assets Portfolio of investments - 39,385,178 5,883,727 1,875,535 15,869,069 63,013,509 Receivables 289,166 36, ,905 Cash and bank balances 2,134,846 35, ,170,176 Margin accounts - 133, ,640 Total Assets 2,424,012 39,590,704 5,883,737 1,875,535 15,869,242 65,643,230 Liabilities Payables 426,295 11, ,640 Total Liabilities 426,295 11, ,640 Foreign currency contracts (notional value) 5,073 (5,073) Net currency exposure 2,002,790 39,574,286 5,883,737 1,875,535 15,869,

31 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (a) Market risk (continued) (i) Foreign exchange risk (continued) As at 31 December 2016 SGD USD EUR AUD Others Total $ $ $ $ $ $ Assets Portfolio of investments - 114,933,536 15,945,499 10,890,061 35,009, ,778,574 Receivables 3,982, , ,072 4,101,517 Cash and bank balances 5,678, , ,837,037 Total Assets 9,660, ,206,343 15,945,499 10,890,061 35,014, ,717,128 Liabilities Payables 938,769 60, ,568 Total Liabilities 938,769 60, ,568 Net currency exposure 8,721, ,145,544 15,945,499 10,890,061 35,014,550 Investments, which is the significant item in the Statement of Financial Position is exposed to currency risk and other price risk. The other price risk sensitivity analysis includes the impact of currency risk on non-monetary investments. The Fund s net financial assets comprise significantly non-monetary investments, hence currency risk sensitivity analysis has not been performed on the remaining financial assets. (ii) Price risk Price risk is the risk of potential adverse changes to the value of financial investments because of changes in market conditions and volatility in security prices. The table below summarises the impact of increases/decreases from the Fund s investments in equities on the Fund s net assets attributable to unitholders at 31 December 2017 and The analysis is based on the assumption that the index components within the benchmark increased/decreased by a reasonable possible shift, with all other variables held constant and that the fair value of the Fund s investments moved according to the historical correlation with the index. Benchmark component 2017 Net impact to net assets attributable to unitholders 2016 Net impact to net assets attributable to unitholders $ % $ % MSCI AC WORLD 12,602, ,130, (iii) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. -29-