United Global Portfolios

Transcription

1 United Global Portfolios United Singapore Bond Fund United Global Dividend Balanced Fund United Renminbi Bond Fund Annual Report for the financial year ended 30 th June 2017

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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 Lee Wai Fai Eric Tham Kah Jin Goh Yu Min 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 8 Cross Street #17-00, PWC Building Singapore SOLICITOR TO THE MANAGER Tan Peng Chin LLC 30 Raffles Place #11-00, Chevron House Singapore SOLICITOR TO THE TRUSTEE Shook Lin & Bok LLP 1 Robinson Road #18-00, AIA Tower Singapore

4 United Singapore Bond Fund A) Fund Performance 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 26 November 2004 Ann Comp Ret Fund Performance/ Benchmark Returns United Singapore Bond Fund Benchmark Source: Note: Lipper, a Thomson Reuters Company. The performance returns of the Fund are in Singapore dollars based on a NAV-to-NAV basis with dividends and distribution reinvested, if any. The benchmark of the Fund: Since Inception-May 17 : Singapore Government Bond Index All UOB ; Jun 17-Present: TR/SGX SFI Government Bond Index. For the full year ended 30 June 2017, the Fund rose 1.96% on a net-asset-value basis, outperforming benchmark* that returned 1.49%. The Fund outperformed during the period due to overweight in corporate bonds for enhanced yield. Portfolio duration was kept neutral to benchmark. As at 30 June 2017, 54.5% of the Fund was invested in Corporate Bonds, 43.9% invested in Singapore Government Securities (SGS) and the balance in Cash & Cash equivalents. The Fund had a yield-to-maturity of 2.96% and effective duration of 6.85 years. * The UOB Singapore Government Bond Index (SGBIALL Index) was terminated and replaced by the Thomson Reuters/SGX Singapore Fixed Income Index (SFI) effective from 1st June Market Review It was a tale of three chapters in the last 12 months as financial markets struggled to find its footing after: (1) the EU referendum on 23rd June 2016 where investors was concerned with the Euro area and the global economic impact from Brexit; (2) Donald Trump s win at the US presidential election on 8th November 2016 that prompted expectations of fiscal policies to boost growth; and (3) the unwinding of Trump s reflation trade as investors re-focused on still-lacklustre economic data. The 10-year US Treasury (UST) yield took a roller-coaster ride with these events. It hitting a low at 1.32% post Brexit in July 2016, then kicked off with a vengeance to a high at 2.64% in December 2016 before moderating down to 2.30% by end June Meanwhile, the US Federal Reserve (Fed) executed its well-telegraphed plan to raise interest rates by 25 basis points (bps) each time in December 2016, March 2017 and June 2017 on the back of a tighter labour market despite lower than expected inflation numbers. The Singapore economy grew 1.8% year-on-year (yoy) for the whole of 2016 (FY2015: 1.9%). GDP growth was mainly driven by manufacturing, supported by electronics and biomedical manufacturing clusters. The economy continued to improve in 1Q17 and registered a 2.7% yoy GDP growth. Headline inflation finally turned around at +1.4% in May 2017 from -1.6% in May Core inflation also rose to +1.6% from +1.0%. Both headline and core inflation increased due to higher electricity and gas prices led by higher energy prices, as well as the impact from administrative price increases. New issuance volume in the Singapore Dollar corporate bond market was 17% lower in 2016 compared to 2015 as investors stayed relatively risk-off throughout the year. Sector wise, financial and government related issuers dominated supply given their sound fundamentals and capital needs. While new issuances in the first half of 2017 continued to lag the same period in 2016, there was greater diversity with well-established issuers both from local and overseas. The stabilised issuance market also encouraged the return of high-yielding small property issuers as well corporate perpetual issuances from non-financial sectors such as real estate investment trusts (REITs) and corporates. Secondary performance was well supported as investors continued to search for yield coupled with low broker inventories. -2-

5 United Singapore Bond Fund A) Fund Performance (continued) Market Outlook & Strategy The Ministry of Trade and Industry (MTI) maintained the growth forecast for 2017 at 1.0% to 3.0% (FY2016: 2%) on the back of resilient performance of Singapore economy as well as improved global growth outlook. Headline inflation is projected to pick up to 0.5% to 1.5% (2016: -0.5%) and core inflation is projected to average 1% to 2% (2016: 0.9%), that can be attributed to the positive contribution of energy-related components and the impact of administrative price increases (e.g. water price adjustment starting in July 2017). In the SGD bond market, investors are expected to be selective on the back of rising funding cost, headwinds to the economic outlook, as well as ongoing geo-political uncertainties. Supply is likely to be skewed towards high quality issuers as investors continue to prefer quality issuers with leading market share, stable cash flows, professional management as well as good access to capital markets. We expect one more Fed rate hike in the second half of 2017 in addition to a balance sheet reduction (BSR) by year end. The upward pressure on interest rates from the Fed s gradual unwinding of the balance sheet is likely to be offset by mixed US economic data and the lack of fiscal policies from the Trump administration. As such, we are neutral on duration and expect interest rates to be range-bound. Given that the direction of the SGS tracks that of US Treasuries, we expect SGS yields to move in tandem with UST yields to trade sideways. Disclosures The foreign currency exposure in the Fund is partially hedged using foreign exchange forward contracts. Commitment Approach with Netting Arrangements is used to calculate the global exposure to financial derivative instruments. -3-

6 United Singapore Bond Fund B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 30 June 2017 under review classified by i) Country Fair Value (S$) % of NAV China 5,007, Hong Kong 3,791, India 5,196, Netherlands 5,244, Singapore 179,341, Switzerland 5,202, United Kingdom 5,073, Accrued interest receivable on quoted bonds 1,972, Portfolio of investments 210,831, Other net assets/(liabilities) 3,313, Total 214,144, ii) Industry Fair Value (S$) % of NAV Consumer Discretionary 16,375, Consumer Staples 3,342, Energy 5,196, Financials 25,566, Government 93,542, Industrials 15,488, Real Estate 44,308, Telecommunication Services 5,038, Accrued interest receivable on quoted bonds 1,972, Portfolio of investments 210,831, Other net assets/(liabilities) 3,313, Total 214,144, iii) Asset Class Fair Value (S$) % of NAV Quoted bonds 208,858, Accrued interest receivable on quoted bonds 1,972, Other net assets/(liabilities) 3,313, Total 214,144,

7 United Singapore Bond Fund B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 30 June 2017 under review classified by (continued) iv) Credit rating of quoted bonds of S & P Fair Value (S$) % of NAV AAA 93,542, BBB- 5,244, Non-rated 110,071, Total 208,858, v) Credit rating of quoted bonds by Moody s Fair Value (S$) % of NAV Aa1 4,144, Aaa 93,542, Baa1 8,799, Baa2 10,273, Baa3 24,407, Non-rated 67,691, Total 208,858, C) Top Ten Holdings 10 largest holdings as at 30 June 2017 Fair Value (S$) Percentage of total net assets attributable to unitholders % SINGAPORE GOVERNMENT SR UNSECURED 03/ ,642, SINGAPORE GOVERNMENT SR UNSECURED 07/ ,572, SINGAPORE GOVERNMENT SR UNSECURED 09/ ,362, SINGAPORE GOVERNMENT SR UNSECURED 04/ ,364, SINGAPORE GOVERNMENT SR UNSECURED 09/ ,452, SINGAPORE GOVERNMENT SR UNSECURED 03/ ,013, FCL TREASURY PTE LTD COMPANY GUAR REGS 07/ ,215, OVERSEA EDUCATION SR UNSECURED REGS 04/ ,034, SINGAPORE GOVERNMENT SR UNSECURED 09/ ,466, ABN AMRO BANK NV SUBORDINATED REGS 04/26 VAR 5,244,

8 United Singapore Bond Fund C) Top Ten Holdings (continued) 10 largest holdings as at 30 June 2016 Percentage of total net assets attributable to Fair Value unitholders (S$) % SINGAPORE GOVERNMENT BOND 3% DUE 01/09/ ,890, SINGAPORE GOVERNMENT BOND 3.50% DUE 01/03/ ,763, SINGAPORE GOVERNMENT BOND 2.75% DUE 01/04/2042 8,642, SINGAPORE GOVERNMENT BOND 2.875% DUE 01/09/2030 7,036, SINGAPORE GOVERNMENT BOND 3.375% DUE 01/09/2033 5,663, SINGAPORE GOVERNMENT BOND 2.375% DUE 01/06/2025 4,282, EZION HOLDINGS LTD 3.65% DUE 05/08/2020 4,228, SINGAPORE GOVERNMENT BOND 2.125% DUE 01/06/2026 3,975, INDONESIA EXIMBANK 4.135% DUE 03/11/2020 3,945, ASCOTT REIT MTN PTE LTD 4.205% DUE 23/11/2022 3,924, D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 30 June 2017 Contract or underlying principal amount Positive fair value % of NAV Negative fair value $ $ $ % of NAV Foreign currency contracts 11,863,877 93, , ii) There was a net realised gain of SGD 70,447 on derivative contracts during the financial year ended 30 June iii) There was a net unrealised gain of SGD 1,906 on outstanding derivative contracts marked to market as at 30 June E) Amount and percentage of NAV invested in other schemes as at 30 June 2017 N/A F) Amount and percentage of borrowings to NAV as at 30 June 2017 N/A G) Amount of redemptions and subscriptions for the financial year ended 30 June 2017 Total amount of redemptions SGD 31,276,230 Total amount of subscriptions SGD 94,349,634-6-

9 United Singapore Bond Fund H) The amount and terms of related-party transactions for the financial year ended 30 June 2017 Please refer to Note 11 of the Notes to the Financial Statements. I) Expense ratios Please refer to Note 12 of the Notes to the Financial Statements. J) Turnover ratios Please refer to Note 12 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 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 2017 and 30 June 2016 N/A ii) expense ratios for the financial year ended 30 June 2017 and 30 June 2016 N/A iii) turnover ratios for the financial year ended 30 June 2017 and 30 June 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. There are no soft dollars, rebates, commissions or other monetary incentives generated by the Sub-Fund. 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 -7-

10 United Global Dividend Balanced Fund A) Fund Performance 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 November 2005 Ann Comp Ret Fund Performance/ Benchmark Returns United Global Dividend Balanced 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: 50% MSCI AC World Index & 50% 1 month SIBID. For the twelve months ended 30 June 2017, the net asset value of the Fund rose 6.82%, compared to an increase in the composite benchmark of 50% MSCI AC World Index which gained 21.6%, and 50% 1-month Singapore Interbank Bid Rate (SIBID) which returned 0.72% during the period in Singapore dollar terms. As at 30 June 2017, the exposure to equities was 64%, with the exposure to fixed income at 34%, with 2% in cash. The equity exposure was represented by the United Global Dividend Equity Fund and the fixed income was comprised of a 16% exposure to the United SGD Fund and a 18% exposure in the United Asian Bond Fund. During the period, the equity exposure represented by the United Global Dividend Equity Fund underperformed the MSCI AC World Index as the global market rally proved to be a cyclical rally in which safer dividend paying equities did not perform as well. We continue to expect that dividend equities provided returns in line with the market over the cycle and with the benefit of steady distributions. The equity strategy (United Global Dividend Equity Fund) seeks to offer investors a source of income and capital appreciation by investing in a globally diversified portfolio that offers attractive dividend yields and potential for capital appreciation. The fixed income weight was represented by the United SGD Fund and United Asian Bond Fund where both have strategies to provide Asian fixed income credit exposure. The United SGD Fund focuses on shorter term credits with durations of less than 3 years and currencies exposures that are hedged back to Singapore dollars. The United Asian Bond Fund provides broader Asian credit exposure in line with a JPM Asia Credit Index benchmark. During this period of rising interest rates the Fund is overweight on the United SGD Fund which focuses on short duration bonds and that will be less affected by rising rates. The equity and fixed income exposures for the Fund are thus heavily income focused and the Fund aims to achieve a balance between safe lower duration income returns and equity income that provides a balance of stable dividends and some exposure to growing dividends. Economic and Market Review Financial markets showed major divergences going into The US Dollar, which had appreciated sharply after the US Presidential election in November 2016 in anticipation of stronger growth and higher interest rates, started to weaken in early The US Treasury (UST) yield, which had spiked post-election, also began to ease, as the new Trump administration failed to push through numerous policy initiatives, including repealing the Affordable Care Act, tightening trade policies and introducing tax reforms. On the other hand, the US equity markets continued to set record highs, as investors took comfort in improving economic data and corporate earnings. Global equity markets also took the cue from the US and climbed the wall of worries, including geo-political risks in the form of missile testing in North Korea, a French Presidential election that could have elected an anti-euro right-wing candidate, a political spat between Saudi Arabia and Qatar in the Middle East, and a series of political missteps and allegations of possible misconducts by the new US President. -8-

11 United Global Dividend Balanced Fund A) Fund Performance (continued) In spite of the above risks, the US Federal Reserve hiked interest rates in March and June 2017, and began communicating plans to shrink its balance sheet by gradually reducing the amount it would reinvest as its bond holdings mature. While these would have previously been seen as monetary tightening measures, causing the UST yield to rise, the bond markets remained unconvinced while UST yields eventually fell to a post-us election low in June. Global bond yields started climbing in late June as the European Central Bank (ECB) signalled that it was preparing to phase out its monetary easing measures, including its asset purchase programme (often referred to as quantitative easing, or QE). In the first half of 2017, Asian equities posted positive returns, with the MSCI Asia ex Japan Index gaining 12.9% in Singapore Dollar (SGD) terms. The JPM Asia Credit Index gained 0.9%, in SGD terms. Outlook and Fund Strategy We turn marginally more cautious entering the second-half of 2017, as we find evidence that positive macro trends have largely been priced into equity markets and economic trends may be shifting. We continue to highlight better broad-based gross domestic product (GDP) growth in 2017 which is supporting strong global corporate earnings. However, valuations are no longer attractive and leading indicators are less impressive with the reflation theme fading. Previously, we had highlighted that reflation, or the normalisation of inflation, growth and interest rates was a trend that was very favourable for equities and a headwind for fixed income. Over recent months, economic growth has remained favourable and supportive of equities. However, as inflation trends have disappointed, long term government bond yields have declined and global fixed income markets have been performing as well. As the reflation theme fades, the risk of normalisation of interest rates decreases. This means the outlook for fixed income outlook turns more attractive on a risk-adjusted basis, while the prospects for equities on a risk-return basis turn marginally weaker after the sharp rally. After peaking in January 2017, oil prices have seen 3 rounds of sharp corrections and rebounds, each more than 10% in magnitudes. This suggests a tug-o-war of views on the supply-demand balance in the energy sector. We believe this brings in additional uncertainty in financial markets, as investors assess the impact on inflation (and hence interest rates) as well as the prospects of the energy industry, which is a not insignificant part of global indices as well as a major borrower in the bond market and banking system. On the whole, despite the many positives, valuations of global equities have risen above average levels, implying that market expectations might be outpacing earnings improvements and investors are counting on positive surprises to maintain the rally. This makes it harder for economic and earnings trends to surprise on the positive side, and for equity market to repeat its strong performance, in the near term. -9-

12 United Global Dividend Balanced Fund B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 30 June 2017 under review classified by i) Country Fair Value (S$) % of NAV Singapore 14,410, Portfolio of investments 14,410, Other net assets/(liabilities) 297, Total 14,708, ii) Industry N/A iii) Asset Class Fair Value (S$) % of NAV Unit trusts 14,410, Other net assets/(liabilities) 297, Total 14,708, iv) Credit rating of quoted bonds N/A C) Top Ten Holdings 10 largest holdings as at 30 June 2017 Fair Value (S$) Percentage of total net assets attributable to unitholders % UNITED GLOBAL DIVIDEND EQUITY FUND 9,327, UNITED ASIAN BOND FUND - CLASS SGD 2,707, UNITED SGD FUND CLASS A (ACC) SGD 2,375, There were only 3 holdings as at 30 June

13 United Global Dividend Balanced Fund C) Top Ten Holdings (continued) 10 largest holdings as at 30 June 2016 Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED GLOBAL DIVIDEND EQUITY FUND 10,874, UNITED SGD FUND CLASS A (ACC) SGD 4,742, UNITED ASIAN BOND FUND - CLASS SGD 689, There were only 3 holdings as at 30 June D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 30 June 2017 N/A ii) There was a net realised gain of SGD 3 on derivative contracts during the financial year ended 30 June iii) net gains/(losses) on outstanding derivative contracts marked to market as at 30 June 2017 N/A E) Amount and percentage of NAV invested in other schemes as at 30 June 2017 Please refer to the Statements of Portfolio. F) Amount and percentage of borrowings to NAV as at 30 June 2017 N/A G) Amount of redemptions and subscriptions for the financial year ended 30 June 2017 Total amount of redemptions SGD 3,229,965 Total amount of subscriptions SGD 366,170 H) The amount and terms of related-party transactions for the financial year ended 30 June 2017 Please refer to Note 11 of the Notes to the Financial Statements. I) Expense ratios Please refer to Note 12 of the Notes to the Financial Statements. J) Turnover ratios Please refer to Note 12 of the Notes to the Financial Statements. -11-

14 United Global Dividend Balanced Fund 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 2017 and 30 June largest holdings as at 30 June 2017 United Global Dividend Equity Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % HONEYWELL INTERNATIONAL INC 605, VISA INC 503, MICROSOFT CORP 493, POWER GRID CORP OF INDIA LTD 466, HESS CORP 465, MERCK & CO INC 458, TENCENT HOLDINGS LTD 448, JOHNSON & JOHNSON 437, HOUSING DEVELOPMENT FINANCE CO 409, PFIZER INC 393, largest holdings as at 30 June 2016 United Global Dividend Equity Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITEDHEALTH GROUP INCORPORATION 605, MICROSOFT CORPORATION 516, APPLE INCORPORATION 501, SIMON PROPERTY GROUP INCORPORATION 496, EXTRA SPACE STORAGE INCORPORATION 485, PUBLIC STORAGE 481, HONEYWELL INTERNATIONAL INCORPORATION 469, ROYAL DUTCH SHELL PUBLIC LISTED COMPANY 427, CVS HEALTH CORPORATION 399, VISA INCORPORATION 399,

15 United Global Dividend Balanced Fund 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 (continued) ii) expense ratios for the financial year ended 30 June 2017 and 30 June 2016 United Global Dividend Equity Fund 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 underlying scheme s expense ratio at 30 June 2017 was based on total operating expenses divided by the average net asset value respectively for the financial year. The total operating expenses do not include (where applicable) brokerage and other transaction 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 underlying scheme does not pay any performance fee. The average net asset value is based on the daily balances. iii) turnover ratios for the financial year ended 30 June 2017 and 30 June 2016 United Global Dividend Equity Fund 30 June % 30 June % Note: 1 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 divided by the average daily net asset value. 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. There are no soft dollars, rebates, commissions or other monetary incentives generated by the Sub-Fund. 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 -13-

16 United Renminbi Bond Fund A) Fund Performance SGD Class 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 03 May 2011 Ann Comp Ret United Renminbi Bond Fund N/A 4.24 Benchmark N/A 4.10 Source: Note: Lipper, a Thomson Reuters Company, Bloomberg. The performance returns of the Fund are in Singapore dollar based on a NAV-to-NAV basis with dividends and distribution reinvested, if any. The benchmark of the Fund: Since Inception Jul 12: CNY 1 Year Offshore Deposit Rate; Aug 12-Feb 13: CNH 12 Month Deposit Rate; Feb 13- Apr 16: HSBC Offshore Renminbi Bond Index; May 16- Current: Citi Dim Sum (Offshore CNY) Bond Index. USD Class 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 03 May 2011 Ann Comp Ret United Renminbi Bond Fund N/A 2.32 Benchmark N/A 2.16 Source: Note: Lipper, a Thomson Reuters Company, Bloomberg. The performance returns of the Fund are in Singapore dollar based on a NAV-to-NAV basis with dividends and distribution reinvested, if any. The benchmark of the Fund: Since Inception Jul 12: CNY 1 Year Offshore Deposit Rate; Aug 12-Feb 13: CNH 12 Month Deposit Rate; Feb 13- Apr 16: HSBC Offshore Renminbi Bond Index; May 16- Current: Citi Dim Sum (Offshore CNY) Bond Index. For the twelve months ended 30 June 2017, the Fund s NAV rose 2.4% in SGD terms compared with an increase of 2.9% for the Citi Dim Sum Bond Index. The Fund s NAV rose 3.6% in the second half of 2016 in SGD terms versus an increase of 2.9% for the benchmark. In the first half of 2017, the Fund declined 1.2% while the benchmark increased 0.2%. During the period under review, the Fund s underperformance versus its benchmark was due to its tactical cash and FX positioning. As of the end of June 2017, the Fund had a 74.6% weight in CNH Bonds, 18.8% in USD Bonds and 6.6% in Cash. Investment grade credits comprised 62.7% weight of the Fund s NAV, with 30.7% allocated to non-investment grade credits and the remainder to cash. Within investment grade, the Fund had more credits in the BBB bucket at 43.4% vs 19.3% in the A and higher buckets. The Fund had a 49.8% allocation to Greater China (including Hong Kong) for the month of June, with 8.6% in Singapore, 8.0% to Hungary, 7.9% to Australia and the remainder in other countries and Cash. As at the end of June, the Fund had an average yield of 5.11% and effective duration of 2.2 years, with an average credit rating of BBB comprising 22 bond issues. -14-

17 United Renminbi Bond Fund A) Fund Performance (continued) Economic and Market Review For the twelve months to June 2017, the Citi Dim Sum Bond Index returned 2.3% in CNH (China Offshore Renminbi) terms, while it returned 0.6% in US Dollar (USD) terms and 2.9% in Singapore Dollar (SGD) terms. The weaker performance in USD terms was due to broad USD strength during this period. CNH fell -1.6% against the USD while the CNY declined -2.0% against the USD. Meanwhile, the SGD declined -2.1% against USD during the same period. Other Asian currencies were also affected by the USD strength, with the HKD depreciating -0.6%, IDR -0.8%, MYR -6.1%, PHP -6.7% and JPY -8.2%. The remaining currencies such as the TWD (+6.1%), INR (+4.6%), THB (+3.5%) and KRW (+0.7%) appreciated against the USD during the same period. The average yield for the Citi Dim Sum Bond Index declined just 1 basis point (bp) to 4.45% as at the end of June 2017, from 4.46% as of end June During this period, the average yield for the China Government Bond Index rose 76 bps to 4.1%, while investment grade rose 66 bps to 4.3%. As several high yield and unrated bonds continued to roll off the benchmark, the high yield / unrated index average yield declined 93 bps during the same period. Economic and Market Outlook On May 26, China s Foreign Exchange Trade System released a statement stating it was considering adding a counter-cyclical adjustment factor into its daily currency fixing methodology, to address the herd mentality bias towards RMB depreciation. This saw the USDCNH decline from a high of 6.88 on 23 May to 6.82 on 29 May, as markets interpreted this announcement as China s low tolerance for volatility in its currency. On May 31, the People s Bank of China (PBOC) had likely intervened in the CNH market, as a funding squeeze saw USDCNH decline further to 6.74 and the overnight CNH Hibor surge to 43% on June 1. The previous instance of such a funding squeeze in the CNH market occurred in January The USDCNH drifted to a high of 6.85 on June 26 before the currency was pushed back down to end June 2017 at 6.78 against the USD. Given two sharp swings in the currency in a span of one month, we anticipate further interventions from the PBOC in the offshore FX market to curb speculative positions in the RMB as China heads into its 19th National Congress at the end of 3Q17. Looking ahead, we continue to expect demand for Dim Sum bonds to be uncertain as global interest rates continue to rise and a lack of corporate bond supply in general. While the latter lends a short-term positive technical support, the continued shrinkage on benchmark eligible bonds are negative in the long run. Hence, we maintain a defensive carry strategy, focused on stringent credit selection and monitoring. We remain an overweight position in corporate bonds over government bonds to benefit from the wide yield differentials. We continue to favour an overweight position in investment grade over non-investment grade credit as a more defensive positioning amidst tightening liquidity in both onshore and offshore money markets and uncertain credit outlook with industries facing over-capacity. We continue to remain positioned in certain non-china domiciled issues for diversification. We remain defensive in our credit selection and prefer issuers with defensible balance sheets and where technical support factors remain supportive. Disclosures The Fund s global exposure to financial derivatives is calculated using the Commitment Approach with netting arrangements and has never exceeded 100% of the Fund s NAV at all times. As at the end of June 2017, the currency hedge was 12% of the Fund s NAV. -15-

18 United Renminbi Bond Fund B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 30 June 2017 under review classified by i) Country Fair Value (S$) % of NAV Ireland 4,423, Portfolio of investments 4,423, Other net assets/(liabilities) 252, Total 4,675, ii) Industry N/A iii) Asset Class Fair Value (S$) % of NAV Unit trusts 4,423, Other net assets/(liabilities) 252, Total 4,675, iv) Credit rating of quoted bonds N/A C) Top Ten Holdings 10 largest holdings as at 30 June 2017 Fair Value (S$) Percentage of total net assets attributable to unitholders % UOB UNITED RENMINBI BOND FUND (SGD) 4,272, UOB UNITED RENMINBI BOND FUND (USD) 150, There were only 2 holdings as at 30 June

19 United Renminbi Bond Fund C) Top Ten Holdings (continued) 10 largest holdings as at 30 June 2016 Percentage of total net assets attributable to Fair Value unitholders (S$) % UOB UNITED RENMINBI BOND FUND (SGD) 10,034, UOB UNITED RENMINBI BOND FUND (USD) 818, There were only 2 holdings as at 30 June D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 30 June 2017 N/A ii) There was a net realised loss of SGD 2,426 on derivative contracts during the financial year ended 30 June iii) net gains/(losses) on outstanding derivative contracts marked to market as at 30 June 2017 N/A E) Amount and percentage of NAV invested in other schemes as at 30 June 2017 Please refer to the Statements of Portfolio. F) Amount and percentage of borrowings to NAV as at 30 June 2017 N/A G) Amount of redemptions and subscriptions for the financial year ended 30 June 2017 Total amount of redemptions SGD 7,411,163 Total amount of subscriptions SGD 913,177 H) The amount and terms of related-party transactions for the financial year ended 30 June 2017 Please refer to Note 11 of the Notes to the Financial Statements. I) Expense ratios Please refer to Note 12 of the Notes to the Financial Statements. J) Turnover ratios Please refer to Note 12 of the Notes to the Financial Statements. -17-

20 United Renminbi Bond Fund 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 2017 and 30 June largest holdings as at 30 June 2017 UOB United Renminbi Bond Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % HUNGARY GOVERNMENT INTERNATIONAL BOND 6.25% 25/04/ , TINGYI CAYMAN ISLANDS HOLDING CORP 4.38% 06/08/ , VALUE SUCCESS INTERNATIONAL LTD 4.75% 04/11/ , CHINA CONSTRUCTION BANK CORP 4.90% 12/11/ , BOC AVIATION LTD 4.20% 05/11/ , CENTRAL AMERICAN BANK FOR ECONOMIC INTEGRATION 4.20% 21/09/ , FANTASIA HOLDINGS GROUP CO LTD 9.50% 04/05/ , LONGFOR PROPERTIES CO LTD 6.75% 28/05/ , COMMONWEALTH BANK OF AUSTRALIA 5.15% 11/03/ , TMB BANK PCL/CAYMAN ISLANDS 5.50% 09/03/ , largest holdings as at 30 June 2016 UOB United Renminbi Bond Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % TINGYI CAYMAN ISL 4.375% 06/08/2018 1,095, TMB BANK PCL/CAY 5.50% 09/03/ , RICHTEX HLDGS. VIA 5.25% 07/07/ , AUSTRALIA & NEW ZEAL F2V 30/01/ , BESTGAIN REAL ESTA 4.50% 04/12/ , CAGAMAS GBL. 3.70% 22/09/ , CATERPILLAR FINL. 3.55% 23/06/ , LONGFOR PROPS. 6.75% 28/05/ , SK GBL. CHEM. INV 4.125% 26/09/ , PANDA FUNDING INVE 3.9% 17/12/ ,

21 United Renminbi Bond Fund 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 (continued) ii) expense ratios for the financial year ended 30 June 2017 and 30 June 2016 UOB United Renminbi Bond Fund 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 underlying scheme s expense ratio at 30 June 2017 was based on total operating expenses divided by the average net asset value respectively for the financial year. The total operating expenses do not include (where applicable) brokerage and other transaction 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 underlying scheme does not pay any performance fee. The average net asset value is based on the daily balances. iii) turnover ratios for the financial year ended 30 June 2017 and 30 June 2016 UOB United Renminbi Bond Fund 30 June % 30 June % Note: 1 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 divided by the average daily net asset value. 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. There are no soft dollars, rebates, commissions or other monetary incentives generated by the Sub-Fund. 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 -19-

22 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and hold the assets of the sub-funds of United Global Portfolios, namely United Singapore Bond Fund, United Global Dividend Balanced Fund and United Renminbi Bond Fund (collectively referred to as the Sub-Funds ) 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 Sub-Funds during the year covered by these financial statements, set out on pages 24 to 67, 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 27 September

23 STATEMENT BY THE MANAGER In the opinion of UOB Asset Management Ltd, the accompanying financial statements set out on pages 24 to 67, comprising the Statements of Total Return, Statements of Financial Position, Statements of Movements of Unitholders Funds, Statements of Portfolio and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the financial positions and portfolio holdings of the sub-funds of United Global Portfolios, namely United Singapore Bond Fund, United Global Dividend Balanced Fund and United Renminbi Bond Fund (collectively referred to as the Sub-Funds ) as at 30 June 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 Sub-Funds will be able to meet their financial obligations as and when they materialise. For and on behalf of the Manager UOB ASSET MANAGEMENT LTD THIO BOON KIAT Authorised signatory 27 September

24 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED GLOBAL PORTFOLIOS Our Opinion In our opinion, the accompanying financial statements of the sub-funds of United Global Portfolios, namely United Singapore Bond Fund, United Global Dividend Balanced Fund and United Renminbi Bond Fund (collectively referred to as the Sub-Funds ), 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 positions and portfolio holdings of the Sub-Funds as at 30 June 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 Sub-Funds comprise: the Statements of Total Return for the financial year ended 30 June 2017; the Statements of Financial Position as at 30 June 2017; the Statements of Movements of Unitholders Funds for the financial year ended 30 June 2017; the Statements of Portfolio as at 30 June 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 Sub-Funds 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 Sub-Funds 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. -22-

25 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED GLOBAL PORTFOLIOS In preparing the financial statements, the Manager is responsible for assessing the Sub-Funds abilities 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 Sub-Funds or to cease the Sub-Funds operations, or has no realistic alternative but to do so. The Manager s responsibilities include overseeing the Sub-Funds 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 Sub-Funds 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 Sub-Funds abilities 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 Sub-Funds 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, 27 September