United Gold & General Fund

Transcription

1 United Gold & General Fund Semi Annual Report for the period 1 st July to 31 st December 2010

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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 Yeo Eng Cheong Thio Boon Kiat TRUSTEE HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #14-01, HSBC Building Singapore 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 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 28 July 1995 Ann Comp Ret United Gold & General Fund Benchmark Source: Lipper, a Thomson Reuters Company, Bloomberg 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: Since inception Jan 97: 100% FT Gold Mines; Feb 97 June 01: 75% MSCI Gold Mines, 25% MSCI Metals Non-Ferrors; July 01 Present: 70% FT Gold, 30% HSBC GM. For the half year ended 31 December 2010, the unit price of the Fund increased by 19.0% on a net asset value basis. This compares with a 15.8% gain by the composite benchmark index (70% FT Gold Mines Index & 30% HSBC Global Mining Index), in Singapore dollar terms. On an individual basis, the FT Gold Mines Index rose by 6.7% for the half year, compared with a 35.4% gain by the HSBC Global Mining Index. By comparison, physical gold increased by 5.0% in Singapore dollar terms. The Fund held a marginally overweight position in gold equities relative to the composite benchmark index for the majority of the reporting period. As at 31 December 2010, the Fund held 68% in gold equities, 20% in general mining equities, 9% in energy equities and 3% in cash. In terms of country allocation, the Fund was invested 37% in Canada, 22% in the US, 17% in Australia, 8% in the United Kingdom, 4% in South Africa, 9% in other countries and held 3% cash. Market Review Physical gold began the period under review at US$1,242/oz and ended the calendar year at US$1,421/oz, an increase of 14.4% in US dollar terms. After initially correcting to US$1,168/oz by end- July 2010, the gold price rallied strongly to US$1,381/oz by mid-october 2010 on news of additional US stimulus measures. Gold then traded in a more volatile but still upwards pattern to year-end. Gold continued to benefit from strong investment demand, with gold exposure being recommended for portfolio diversification purposes given its historically low correlation with other financial asset classes. Investors remained nervous of the underlying macroeconomic fundamentals underpinning a variety of major currencies. For example, the Euro remained under sustained selling pressure as the funding problems experienced by Greece in 1H10 spread to Ireland, Portugal and other peripheral European economies. Economic data from the United States was also disappointing, causing the Federal Reserve to embark on a second round of monetary easing ( QE ) in order to stimulate growth. 2

5 Investor sentiment towards gold as an asset class was supported by additional central bank purchases over the reporting period. Data from the World Gold Council now shows that central banks have been net buyers of gold for the past six consecutive quarters. In December 2010, the IMF completed its earmarked sale of 403 tonnes of gold reserves, with the gold being purchased by a diverse range of central banks. Central bank gold purchases emphasize the broader move in the gold demand from jewellery buying towards investment-related buying. Gold Exchange Traded Funds (ETFs) grew in size, increasing to 2,138 tonnes (+3.2%) over the reporting period. Investor interest in the COMEX gold futures markets remained at elevated levels, even if total long gold positions decreased to 1,075 tonnes (-7.3%) over the review period. Strong futures interest influenced the spot market due to the potential for actual physical delivery upon contract expiration. The Fund is invested in over 30 gold-producing companies that provide attractive operating margins at current gold price levels, as well as positive production profiles. The Fund benefited from its investment in mid-size and junior gold producers with Agnico-Eagle, Centerra Gold, Medusa Mining, and Yamana Gold being leading performance contributors. Improving profitability saw increased M&A activity over the reporting period, with the Fund benefiting from its holdings in Avoca Resources and Red Back Mining. The Fund increased its exposure to Newcrest Mining and Kinross Gold, two mid-size producers that strengthened their production profiles through acquisitions. The Fund increased its holdings in gold-related exploration companies. These companies offer potential significant exploration upside, and are probable M&A targets, given their relatively low US dollar valuations per resource ounce. Exploration companies owned by the Fund during the reporting period included International Tower Hill, Intrepid Mines, Lake Shore Gold, Papillon Resources and Perseus Mining. The Fund retained its exposure to large producers such as Barrick Gold, Goldcorp and Newmont Mining. These three companies represent a significant portion of the gold equity universe by market capitalization, and are often the first companies to benefit from allocation inflows into the gold sector. The HSBC Global Mining Index rose by 38.3% in Singapore Dollar terms, supported by rising spot prices for a wide range of commodities. In particular, commodity prices reacted positively to the November 2010 announcement by the Federal Reserve of additional monetary liquidity measures. While QE2 is designed to fight deflationary pressures in the US economy, leakage of US dollars into developing markets is expected to boost growth prospects for the global economy. The Fund benefited from its holdings in base metal and bulk commodity companies such as Antofagasta, Capstone Mining, Freeport McMoRan and Xstrata. Oil & gas prices strengthened along with other commodity prices, with strong OPEC production discipline enabling inventory levels to fall from multi-year highs. Within energy equities, the Fund retained its positioning in E&P companies such as QEP and Tullow Oil that should benefit from reserve growth and potential M&A interest, irrespective of energy price movements. The Fund also positioned for the typical year-end seasonal recovery in US natural gas prices by investing in Encana and Southwestern Energy. In the last 6 months, new additions to the portfolio included Catalpa Resources, Centamin Egypt, G-Resources, Kingsgate Consolidated, Intrepid Mines, Perseus Mining and Silver Wheaton. 3

6 Outlook and Strategy There are several positive catalysts for physical gold and gold equities. These include: 1) positive demand and supply fundamentals; 2) continuation of potentially inflationary stimulus policies in the US and other countries; 3) concern over the viability of national currencies; 4) continuing investment demand for gold; and 5) improved operating profits and cashflow for gold producers, suggesting more M&A activity. The financial markets have been engaged in an inflation versus deflation debate over the past year. Following the US Federal Reserve s statement that it will purchase US$600 billion of US treasuries by June 2011, together with a commitment to purchase additional securities after that date dependant upon economic conditions, the outlook has now swung in favour of the inflation camp. We expect US interest rates and monetary policy to remain accommodative throughout This should be positive for commodity prices generally and for gold in particular, given gold s perceived role in protecting against inflation. Currency volatility is likely to remain a feature of the financial markets in While concerns over the fiscal position and national debt levels of peripheral Euro zone economies have temporarily abated, these will return if economic fundamentals deteriorate beyond the scope of current supportive measures. In the United States, the government is also running a large fiscal deficit. Moreover, some view the Federal Reserve s actions as a deliberate attempt to weaken the US dollar to improve economic competitiveness. Fiscal deficits typically have negative implications for national currencies, and goldrelated assets represent a way of hedging against currency weakness. Central bank and private investor demand for gold is expected to remain supportive for gold. Central banks in developing economies continue to have significantly lower gold holdings than developed economies and are likely to raise their gold weightings. For private investors, 1H11 is likely to see continued uptrend in gold purchases. The strongest buying is expected in China, where new investment products targeted at the gold market continue to be launched. Gold remains a small asset class in relation to the aggregate global market value of stocks and bonds, and further increases in official and private investment demand is likely to produce a positive reaction in the physical gold price. The majority of listed gold companies ended 2010 in a stronger financial position, with high operating margins and debt-free balance sheets. For this reason, M&A activity in the gold sector is likely to increase, and the Fund will continue to invest in mid-size and junior producers that have sizeable existing reserves with additional exploration potential. The Fund is expected to maintain a relatively neutral position in general mining equities relative to benchmark. Improved demand from China and other developing economies should produce higher prices across the commodity spectrum, but particularly in supply-constrained sectors such as coal, copper, iron ore and uranium. The Fund will continue to hold exploration & production companies within the energy sector. Energy is a leading percentage of operating cost for all mining companies, and exposure to energy companies provides portfolio protection in the event of an escalation in energy prices. We note that the performances of gold-backed assets and of commodities generally - are typically volatile, and investors should expect both sharp rallies and corrections. Such corrections should be viewed as good buying opportunities given expectations of continued low interest rates and a recovering global economy. 4

7 B) Investments at fair value and as a percentage of NAV as at 31 December 2010 under review classified by Fair Value % of NAV (S$) i) Country Australia 45,414, Brazil 6,198, Canada 98,479, China 6,151, Germany 7,298, Russia 2,334, South Africa 9,894, United Kingdom 22,095, United States 58,302, Portfolio of investments 256,169, Other net assets 8,848, Total 265,017, ii) Industry Energy 20,430, Information Technology 1,511, Materials 234,227, Portfolio of investments 256,169, Other net assets 8,848, Total 265,017, iii) Asset Class Equities 256,169, Other net assets 8,848, Total 265,017, iv) Credit rating of debt securities N/A 5

8 C) Top Ten Holdings The top 10 holdings as at 31 December 2010 and 31 December largest holdings at 31 December 2010 Percentage of total net assets attributable to Fair Value unitholders (S$) % BARRICK GOLD CORPORATION 20,437, KINROSS GOLD CORPORATION 16,292, NEWMONT MINING CORPORATION (NEW) 14,160, FREEPORT-MCMORAN COPPER & GOLD 11,537, YAMANA GOLD INC 11,497, GOLDCORP INC 10,330, AGNICO-EAGLE MINES 9,889, NEWCREST MINING LIMITED 9,558, ANGLOGOLD ASHANTI LIMITED 7,893, K+S AG 7,298, largest holdings at 31 December 2009 Percentage of total net assets attributable to Fair Value unitholders (S$) % BARRICK GOLD CORPORATION 25,432, NEWMONT MINING CORPORATION (NEW) 18,929, GOLDCORP INC 15,766, AGNICO-EAGLE MINES 9,146, CIA VALE DO RIO DOCE - ADR 8,145, YAMANA GOLD INC 7,995, FRANCO-NEVADA CORPORATION 7,512, MEDUSA MINING LIMITED 7,045, IAMGOLD CORPORATION 6,616, ROYAL GOLD INC 6,608, D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 31 December 2010 N/A ii) net gains/(losses) on derivative contracts realised during the financial period ended 31 December 2010 N/A 6

9 D) Exposure to derivatives (continued) iii) net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2010 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 31 December 2010 N/A F) Amount and percentage of borrowings to net asset value (NAV) as at 31 December 2010 N/A G) Amount of redemptions and subscriptions for the period 01 July 2010 to 31 December 2010 Total amount of redemptions SGD 164,024,563 Total amount of subscriptions SGD 154,489,589 H) The amount and terms of related-party transactions for the period 01 July 2010 to 31 December 2010 i) As at 31 December 2010 the Fund maintained current accounts with the United Overseas Bank Limited and HSBC Group as follows : United Overseas Bank Limited Bank balances SGD 17,887 HSBC Group Bank balances SGD 9,844,141 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2010 Affiliated Companies No. of Units Unit Price Market Value SGD SGD a) OSK-UOB Gold And General Fund 19,148, ,637, iii) Investment in Initial Public Offerings managed by UOB Group. N/A iv) As at 31 December 2010 there was no brokerage income earned by UOB Kay Hian Pte Ltd. 7

10 I) Expense ratios 31 December % 31 December % Note : The expense ratio is computed in accordance with the IMAS guidelines on disclosure of expense ratios dated 25 May Brokerage and other transaction costs, interest expense, foreign exchange gains/losses, tax deducted at source or arising on income received and dividends paid to unitholders are not included in the expense ratio. The Fund does not pay any performance fees. J) Turnover ratios 31 December % 31 December % Note: The turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. 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 31 December 2010 and 31 December 2009 N/A ii) expense ratios for the period ended 31 December 2010 and 31 December A footnote should state (where applicable) that the expense ratio does not include brokerage and other transaction costs, performance fee, foreign exchange gains/losses, front or back end loads arising from or arising out of income received. N/A iii) turnover ratios for the period ended 31 December 2010 and 31 December 2009 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 product 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 the best available terms and there was no churning of trades. 9

12 STATEMENT OF TOTAL RETURN For the half year ended 31 December 2010 (Un-audited) 31 December 31 December Note $ $ Income Dividends 1,025, ,829 Interest ,025, ,196 Less: Expenses Management fee 10 1,881,377 1,600,517 Trustee fee 10 50,170 60,091 Audit fee 5,948 6,478 Registrar fee , ,200 Custody fee 20,066 25,894 Interest expenses 9,326 7,409 Other expenses 140,662 20,004 2,270,320 1,862,593 Net loss (1,244,377) (1,224,397) Net gains or losses on value of investments Net realised gain on investments 17,927,513 22,985,629 Net change in fair value on investments 30,867,152 19,864,768 Net realised gain on financial derivatives - 277,910 Net foreign exchange loss (460,007) (129,839) Net gain on value of investments 48,334,658 42,998,468 Total return for the period before tax 47,090,281 41,774,071 Less : Income tax 3 (178,655) (104,545) Less : Capital gain tax - (35,302) Total return for the period 46,911,626 41,634,224 The accompanying notes form an integral part of these financial statements. 10

13 BALANCE SHEET As at 31 December 2010 (Un-audited) 31 December 30 June Note $ $ Assets Portfolio of investments 256,169, ,479,715 Sales awaiting settlement 1,358,982 1,211,381 Receivables 5 3,869,957 1,999,341 Cash and bank balances 4 9,862,028 3,484,626 Total Assets 271,260, ,175,063 LIABILITIES Purchases awaiting settlement 3,477, ,074 Payables 6 2,764,592 3,094,677 Net assets attributable to unitholders 7 265,017, ,641,312 Total Liabilities 271,260, ,175,063 The accompanying notes form an integral part of these financial statements. 11

14 PORTFOLIO STATEMENT As at 31 December 2010 (Un-audited) Percentage of total net assets attributable to Holdings at Fair value at unitholders at 31 December 31 December 31 December By Geography - Primary $ % Quoted Equities AUSTRALIA AQUARIUS PLATINUM LIMITED 170,390 1,197, CATALPA RESOURCES LTD 713,274 1,835, CENTAMIN EGYPT LIMITED 1,000,000 3,509, CGA MINING LIMITED 800,000 3,186, GOLD ONE INTERNATIONAL LTD 8,376,951 3,575, INTREPID MINES LIMITED 595,000 1,562, KINGSGATE CONSOLIDATED 100,000 1,428, MEDUSA MINING LIMITED 600,000 5,089, NEWCREST MINING LIMITED 180,000 9,558, PALADIN ENERGY LIMITED 500,000 3,230, PAPILLON RESOURCES LTD 1,446,661 1,092, PERSEUS MINING LTD 610,685 2,710, SANDFIRE RESOURCES NL 194,174 2,067, SARACEN MINERAL HOLDINGS LTD 1,033,435 1,133, STRAITS RESOURCES LIMITED 1,433,633 4,235, TOTAL AUSTRALIA 45,414, BRAZIL CIA VALE DO RIO DOCE - ADR 140,000 6,198, The accompanying notes form an integral part of these financial statements. 12

15 PORTFOLIO STATEMENT As at 31 December 2010 (Un-audited) Percentage of total net assets attributable to Holdings at Fair value at unitholders at 31 December 31 December 31 December By Geography - Primary (continued) $ % Quoted Equities CANADA AGNICO-EAGLE MINES 100,333 9,889, CAPSTONE MINING CORP 650,000 3,762, CENTERRA GOLD INC 100,000 2,556, ELDORADO GOLD CORPORATION 300,000 7,151, ENCANA CORP 65,000 2,433, EQYUBIX MINERALS LTD - CDI 283,333 2,224, FRANCO-NEVADA CORPORATION 100,000 4,288, GAMMON GOLD INC 500,000 5,234, GOLDCORP INC 175,000 10,330, IAMGOLD CORPORATION 200,000 4,576, JAGUAR MINING INC 300,000 2,738, KINROSS GOLD CORPORATION 670,040 16,292, KINROSS GOLD CORP WARRANT DUE 17/9/14 19, , LA MANCHA RESOURCES INC 96, , LAKE SHORE GOLD CORP 900,000 4,826, PAN AMERICAN SILVER CORPORATION 100,000 5,279, SILVER WHEATON CORPORATION 100,000 5,001, YAMANA GOLD INC 700,000 11,497, TOTAL CANADA 98,479, CHINA G-RESOURCES GROUP LTD 15,285,000 1,511, WINSWAY COKING COAL HOLDINGS 3,000,000 2,303, ZIJIN MINING GROUP CO LIMITED 2,000,000 2,336, TOTAL CHINA 6,151, GERMANY K+S AG 75,000 7,298, RUSSIA POLYUS GOLD - ADR 50,000 2,334, The accompanying notes form an integral part of these financial statements. 13

16 PORTFOLIO STATEMENT As at 31 December 2010 (Un-audited) Percentage of total net assets attributable to Holdings at Fair value at unitholders at 31 December 31 December 31 December By Geography - Primary (continued) $ % Quoted Equities SOUTH AFRICA ANGLOGOLD ASHANTI LIMITED 125,000 7,893, HARMONY GOLD MINING 125,000 2,001, TOTAL SOUTH AFRICA 9,894, UNITED KINGDOM ANTOFAGASTA PLC 150,000 4,849, BG GROUP PLC 100,000 2,599, BHP BILLITON PLC 60,000 3,069, PETROPAVLOVSK PLC 130,000 2,982, RIO TINTO PLC - REG 20,000 1,799, XSTRATA PLC 225,000 6,793, TOTAL UNITED KINGDOM 22,095, UNITED STATES BARRICK GOLD CORPORATION 300,000 20,437, FREEPORT-MCMORAN COPPER & GOLD 75,000 11,537, NEWMONT MINING CORPORATION (NEW) 180,000 14,160, QEP RESOURCES INC 55,000 2,558, SCHLUMBERGER 45,000 4,813, SOUTHWESTERN ENERGY COMPANY 100,000 4,794, TOTAL UNITED STATES 58,302, Portfolio of investments 256,169, Other net assets 8,848, Net assets attributable to unitholders 265,017, The accompanying notes form an integral part of these financial statements. 14

17 PORTFOLIO STATEMENT As at 31 December 2010 (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 31 December 30 June % % Australia Brazil Canada China Germany Russia South Africa United Kingdom United States Portfolio of investments Other net assets Net assets attributable to unitholders 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 31 December 31 December 30 June $ % % Energy 20,430, Information Technology 1,511, Materials 234,227, Portfolio of investments 256,169, Other net assets 8,848, Net assets attributable to unitholders 265,017, The accompanying notes form an integral part of these financial statements. 15

18 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General United Gold & General Fund (the Fund ) is a Singapore registered trust fund constituted by a Trust Deed dated 1 June 1995 between UOB Asset Management Ltd (the Manager ) and HSBC Institutional Trust Services (Singapore) Limited (the Trustee ). The Deed is governed by the laws of the Republic of Singapore. The primary activity is that of investment trading. The main objective of the Fund is to achieve returns on investment mainly in (i) securities of corporations (whether or not listed on any stock exchange, and in any part of the world) whose business (in any part of the world) is or is substantially in the mining or extraction of gold, silver or precious metals or base metals of all kinds, and the mining or extraction of oil, gas or other minerals, and (ii) to the extent permitted by any applicable law, regulations, guidelines or codes any precious metals or base metals (including, but not limited to gold and silver) or any physical commodities (including but not limited to oil and gas) and including spot contracts, and other authorised investments. 2. Significant accounting policies (a) Basis of accounting The financial statements have been prepared under the historical cost convention, modified by the revaluation of financial assets at fair value through profit or loss, and in accordance with the Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts ( RAP 7 ) issued by the Institute of Certified Public Accountants of Singapore. The financial statements are expressed in Singapore dollars. (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 Purchase of investments are recognised on trade date. Investments are recorded at fair value on initial recognition. 16

19 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 2. Significant accounting policies (continued) (c) Investments (continued) (ii) Subsequent measurement Investments are subsequently carried at fair value. Net change in fair value on investments are included in the Statement of Total Return in the period 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 net of transaction costs, and are taken up in the Statement of Total Return. (d) Basis of valuation of investments The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price for these investments held by the Fund is the current market quoted bid price. (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 Singapore dollars and United States dollars. The performance of the Fund is measured and reported to the investors in Singapore dollars. The Manager considers the Singapore dollars to be the currency of the primary economic environment in which the Fund operates. The financial statements are presented in Singapore dollars, 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 period-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 the fair value net gain or loss. 17

20 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 2. 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. 3. Income tax 31 December 31 December $ $ Overseas income tax 178, ,545 The Fund was granted the status of a Designated Unit Trust and, therefore, the following income is exempt from tax in accordance with Section 35(12) of the Income Tax Act (Cap 134): (i) gains or profits derived from Singapore or elsewhere from the disposal of securities; (ii) interest (other than interest for which tax has been deducted under Section 45 of the Singapore Income Tax Act); and (iii) dividends derived from outside Singapore and received in Singapore. The overseas income tax represents tax withheld on foreign sourced income. 4. Cash and bank balances 31 December 30 June $ $ Cash at bank 9,862,028 3,484,626 18

21 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 5. Receivables 31 December 30 June $ $ Amount due from unitholders 3,793,386 1,914,987 Dividend receivable 61,384 69,409 Other receivable 15,187 14,945 3,869,957 1,999, Payables 31 December 30 June $ $ Amount due to unitholders 1,441,362 2,001,462 Amount due to Manager 1,204, ,513 Amount due to Trustee 25,553 24,403 Other creditors and accrued expenses 92,900 87,299 2,764,592 3,094,677 19

22 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 7. Net assets attributable to unitholders 31 December 30 June $ $ At the beginning of the financial period/year 227,641, ,471,498 Operations Change in net assets attributable to unitholders resulting from operations 46,911,626 52,334,186 Unitholders contributions/(withdrawals) Creation of units 154,489, ,220,824 Cancellation of units (164,024,563) (246,385,196) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (9,534,974) 15,835,628 Total increase in net assets attributable to unitholders 37,376,652 68,169,814 At the end of the financial period/year 265,017, ,641,312 Units in issue (Note 8) 104,440, ,852,826 $ $ Net assets attributable to unitholders per unit Units in issue 31 December 30 June Units at beginning of the period/year 106,852,826 94,784,922 Units created 68,674, ,972,057 Units cancelled (71,086,982) (117,904,153) Units at end of the period/year 104,440, ,852,826 20

23 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 9. Financial risk management The Fund s activities expose it to a variety of financial risk (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 financial futures contracts, financial options contracts and/or currency forward contracts subject to the terms of the Prospectus 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. The Fund s assets principally consist of financial instruments such as equity investments, money market 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 their 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. The Fund s investments 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 securities denominated in currencies other than the Singapore dollars and it may be affected favourably or unfavourably by exchange rate regulations or changes in the exchange rates between the Singapore dollars 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. 21

24 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 9. Financial risk management (continued) (a) Market risk (continued) (i) Foreign exchange risk (continued) The table below summarises the on-balance sheet exposure to currency risks for the Fund. As at 31 December 2010 AUD CAD SGD USD Others Total $ $ $ $ $ $ Assets Portfolio of investments 40,942,314 89,161,202-77,115,687 48,950, ,169,355 Sales awaiting settlement ,358,982 1,358,982 Receivables 22,889 2,444,205 1,387,676 15,187 3,869,957 Cash and bank balances - 14,296 7,245,098 2,601, ,862,028 Total Assets 40,942,314 89,198,387 9,689,303 81,105,158 50,325, ,260,322 Liabilities Purchases awaiting settlement ,477,766 3,477,766 Payables - - 2,074, ,421-2,764,592 Net assets attributable to unitholders ,017, ,017,964 Total Liabilities ,092, ,421 3,477, ,260,322 Net currency exposure 40,942,314 89,198,387 (257,402,832) 80,414,737 46,847,394 22

25 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 9. Financial risk management (continued) (a) Market risk (continued) (i) Foreign exchange risk (continued) As at 30 June 2010 AUD CAD SGD USD Others Total $ $ $ $ $ $ Assets Portfolio of investments 21,012,133 86,052,864-88,757,128 28,657, ,479,715 Sales awaiting settlement - 1,211, ,211,381 Receivables - 42,385 1,119, ,866-1,999,341 Cash and bank balances 8,386 13,397 2,246,807 1,125,975 90,061 3,484,626 Total Assets 21,020,519 87,320,027 3,365,897 90,720,969 28,747, ,175,063 Liabilities Purchases awaiting settlement 439, ,074 Payables 5,393-2,003,917 1,085,367-3,094,677 Net assets attributable to unitholders ,641, ,641,312 Total Liabilities 444, ,645,229 1,085, ,175,063 Net currency exposure 20,576,052 87,320,027 (226,279,332) 89,635,602 28,747,651 Investments, which is the significant item in the balance sheet 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. 23

26 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 9. Financial risk management (continued) (a) Market risk (continued) (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 underlying investments in equities on the Fund s net assets attributable to unitholders at 31 December 2010 and 30 June 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 Fund s investments moved according to the historical correlation with the index. 31 December June 2010 Benchmark components Net impact to Net impact to net assets net assets attributable to attributable to unitholders unitholders $ % $ % 70% FT Gold, 30% HSBC GM 71,471, ,997, (iii) Interest rate risk (b) Liquidity risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Fund s financial assets and liabilities are largely non-interest bearing. Hence, the Fund is not subjected to risk due to fluctuations in the prevailing levels of market interest rates. The Fund is exposed to daily cash redemptions and disbursements for the settlements of purchases. The Manager therefore ensures that the Fund maintains sufficient cash and cash equivalents and that it is able to obtain cash from the sale of investments held to meet its liquidity requirements. Reasonable efforts will be taken to invest in securities which are traded in a relatively active market and which can be readily disposed of. The Fund s investments in listed securities are considered to be readily realisable as they are listed on established regional stock exchanges. 24

27 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 9. Financial risk management (continued) (b) Liquidity risk (continued) The table below analyses the Fund s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. As at 31 December 2010 Less than 3 months 1-5 Above 3 months to 1 year years 5 years $ $ $ $ Purchases awaiting settlement 3,477, Payables 2,764, Net assets attributable to unitholders 265,017, As at 30 June 2010 Less than 3 months 1-5 Above 3 months to 1 year years 5 years $ $ $ $ Purchases awaiting settlement 439, Payables 3,094, Net assets attributable to unitholders 227,641, (c) Credit risk The Fund takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Fund s credit risk is concentrated on cash and bank balances, and amounts or securities receivable on the sale and purchase of investments respectively. In order to mitigate exposure to credit risk, all transactions in listed securities are settled/paid for upon delivery and transacted with approved counterparties using an approved list of brokers that are regularly assessed and updated by the Investment Manager. 25

28 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 9. Financial risk management (continued) (c) Credit risk (continued) The table below summarises the credit rating of banks in which the Fund s assets are held as at 31 December 2010 and 30 June As at 31 December 2010 Credit rating Source of credit rating Bank HSBC Group B+ Moody s United Overseas Bank Limited B Moody s Custodian HSBC Group B+ Moody s As at 30 June 2010 Credit rating Source of credit rating Bank HSBC Group B+ Moody s United Overseas Bank Limited B Moody s Custodian HSBC Group B+ Moody s The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. (d) Capital management The Fund s capital is represented by the net assets attributable to unitholders. The Fund strives to invest the subscriptions of redeemable participating units in investments that meet the Fund s investment objectives while maintaining sufficient liquidity to meet unitholder redemptions. 26

29 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 10. Related party transactions (a) The Manager and the Trustee of the Fund are UOB Asset Management Ltd and HSBC Institutional Trust Services (Singapore) Limited respectively. UOB Asset Management Ltd is a subsidiary of United Overseas Bank Limited and HSBC Institutional Trust Services (Singapore) Limited is a subsidiary of HSBC Holdings Plc. Management fee is paid to the Manager, while trustee fee is paid to the Trustee and the registrar fee is paid to HSBC Securities Services (Transfer Agency) Pte Ltd, a subsidiary of HSBC Holdings Plc. These fees paid or payable by the Fund shown in the Statement of Total Return and in the respective Notes to the Financial Statements are on terms set out in the Trust Deed. All other related party transactions are shown elsewhere in the financial statements. (b) As at the end of the financial period/year, the Fund maintained the following accounts with the related parties: 31 December 30 June $ $ United Overseas Bank Limited Bank balances 17,887 7,233 HSBC Group Bank balances 9,844,141 3,477,393 (c) The following transactions took place during the financial period between the Fund and related parties at terms agreed between the parties as follows: 31 December 31 December $ $ United Overseas Bank Limited Interest income - - Bank charges Interest expenses HSBC Group Interest income Bank charges 27, Interest expenses 9,326 7,182 27

30 NOTES TO THE FINANCIAL STATEMENTS For the half year ended 31 December 2010 (Un-audited) 11. Financial ratios 31 December 31 December Expense ratio % 1.83% Turnover ratio % 45.86% 1 The expense ratio is computed in accordance with the IMAS guidelines on disclosure of expense ratios dated 25 May Brokerage and other transaction costs, interest expense, foreign exchange gains/losses, tax deducted at source or arising on income received and dividends paid to unitholders are not included in the expense ratio. The Fund does not pay any performance fees. 2 The turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. 28

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