UniFund. Annual Report. for the financial year ended 31 st December 2011

Transcription

1 Annual Report for the financial year ended 31 st December 2011

2

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 Tan Peng Chin LLC 30 Raffles Place #11-00, Chevron House Singapore SOLICITORS TO THE TRUSTEE Shook Lin & Bok LLP 1 Robinson Road #18-00, AIA Tower Singapore

4 A) Fund Performance Fund Performance/ Benchmark Returns 3 mth % Growth 6 mth % Growth 1 yr % Growth 3yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 2 June 1986 Ann Comp Ret 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 93: 100% DBS 50; Feb 93 Aug 98: 50% DBS 50, 50% KLEMAS; Sep 98 May 00: 100% DBS 50; Jun 00 May 06: 50% STI Index, 50% KLEMAS; Jun 06 Present: 50% STI Index, 50% KLCI. For the year ended 31 December 2011, the Fund declined 13.5% on a net-asset-value basis, compared to the 7.8% drop in the benchmark - comprising 50% FSSTI Index and 50% KLCI Index in Singapore dollar terms. The underperformance was mainly due to stock selection. Our overweight position in Capitaland and Noble Group, underweight position in Malaysia telecommunication sector, as well as our investments in Pacific Andes Resources and OUE contributed negatively to the performance. Meanwhile, our overweight position in Malayan Banking and Alliance Financial Group and our investment in Malaysia s oil & gas names such as Dialog Group, Kencana Petroleum and Sapuracrest Petroleum contributed positively to the performance. As at 31 December 2011, the Fund was 93.7% invested, with the balance in cash and cash equivalents. In term of sectors, the Fund s allocation stood at: Financials 39.3%, Industrials 19.3%, Consumer 19.5%, Telecommunication Services 9.4%, Energy 4.1%, and Others 2.1%. In term of geographical exposure, the fund was 46.7% invested in Malaysia and 42.6% invested in Singapore. We are taking a defensive stance and believe that Malaysia s economy is more resilient from external environment. Market Review Asian equity markets were extremely volatile during the period under review. The first part of 2011 was marked by various exogenous shocks such as geopolitical uncertainties and natural disasters. The European debt problems resurfaced in the second quarter and dominated market direction for the rest of the year. Ramifications of the European debt crisis posed an additional dampener on markets. Fresh concerns over Greek sovereign debt triggered fear of contagion to other peripheral European countries. The Euro zone plans to resolve its sovereign debt crisis in October provided the impetus for the sharp rally that brought major indices back towards August levels. However, the practical difficulties of executing the plan tempered the initial euphoria. 2

5 The Asian equity markets were also weighed down by concerns over a hard landing in China. Economic data such as the Purchasing Managers Index (PMI) showed signs of weakness while the property market started to cool. However, economic growth in Asia has been supported by robust domestic demand and a resilient financial sector. While Asian export growth moderated, the overall domestic economic conditions in the region stayed firm, providing a cushion against various external shocks. Singapore equity market was not spared from global sell-down. The Straits Times Index (FSSTI) closed the year 14% lower at 2, Singapore is more susceptible to external demand shocks given its export-oriented growth model. Based on advance estimates, 2011 GDP growth slowed to appreciably 4.8%, compared to 14.5% in On the other hand, KLCI rose 2.1% (in SGD terms) to 1, Bank Negara had forecast Malaysia s GDP growth to be between 5% and 6% in Weaker export growth was partially offset by resilient domestic demand. Private investment continued to grow as projects under Economic Transformation Programme (ETP) and 10 th Malaysia Plan (10MP) took off. Market Outlook and Strategy Given the uncertain global economic backdrop, our strategy is to stay defensive. We expect that the operating environment in Asia will be challenging in the next quarter. Inflation across the Asian markets looks to moderate, although we think that this may not be enough to offset the impact from the weakening external environment. Domestic consumption, which has hitherto held up and provided support for the Asian economies, has started showing signs of slowdown. We expect that there will be more downgrades to companies earnings as growth slows. The macro economic indicators in Asia have deteriorated again in recent months after a slight rebound in October. The latest PMI in most Asian economies including China, Japan, Korea, Singapore and Taiwan are showing contraction, while the leading New Orders PMI are also mostly showing contraction. In Singapore, we are overweight in offshore & marine sector and we like Keppel Corporation. Offshore oil and gas activities remain robust, supported by high oil prices. We are neutral on the banking sector. Although valuations of the banks are attractive, a slowdown in loan growth and increase in credit cost will impact earnings. We remain cautious on residential property developers in general given the potential for more government measures to control the rising house prices. We prefer REITs such as Mapletree Commercial Trust and CDL Hospitality Trust. In Malaysia, we are neutral on the banking sector and our preference is Malayan Banking. We expect muted earnings growth given weaker loan and fee income growth and increase in credit cost. We prefer sectors that will benefit from the domestic consumption story and the ETP. We like construction and oil & gas sector. Large scale infrastructure jobs under ETP and 10MP are likely to be awarded in 1H 2012 and this will benefit companies such as IJM Corporation and Gamuda. Petronas has committed to a five-year capex plan of RM300 billion. As demand for equipment and services increase in light of rising activities in the sector, we expect oil & gas service providers to enjoy sustainable growth. Our top pick in this sector is Sapuracrest Petroleum. In summary, given our cautious view of the Asian market, we will position our portfolio defensively. We are overweight in the REITs, offshore & marine and consumer staples sectors, neutral in the banks and underweight in the consumer discretionary sectors. 3

6 B) Investments at market value and as a percentage of NAV as at 31 December 2011 under review classified by i) Country Fair Value (S$) % of NAV Hong Kong 7,066, Malaysia 75,490, Singapore 68,818, Portfolio of investments 151,374, Other net assets 10,161, Total 161,536, ii) Industry Consumer Discretionary 12,881, Consumer Staples 18,552, Energy 6,583, Financials 63,410, Industrials 31,244, Materials 2,251, Telecommunication Services 15,265, Utilities 1,185, Portfolio of investments 151,374, Other net assets 10,161, Total 161,536, iii) Asset Class Equities 151,374, Other net assets 10,161, Total 161,536, iv) Credit rating of debt securities N/A 4

7 C) Top Ten Holdings The top 10 holdings as at 31 December 2011 and 31 December largest holdings at 31 December 2011 Percentage of total net assets attributable to Fair Value unitholders (S$) % MALAYAN BANKING BHD 9,932, AXIATA GROUP BERHAD 8,661, CIMB GROUP HOLDINGS BERHAD 7,283, DBS GROUP HOLDINGS LIMITED 7,135, OVERSEAS CHINESE BANKING CORP (LOCAL) 6,735, KEPPEL CORPORATION LIMITED 6,491, GENTING BERHAD 6,223, WILMAR INTERNATIONAL LIMITED 5,645, SIME DARBY BERHAD - NEW 5,167, UNITED OVERSEAS BANK LTD 4,930, largest holdings at 31 December 2010 Percentage of total net assets attributable to Fair Value unitholders (S$) % CIMB GROUP HOLDINGS BERHAD 14,189, MALAYAN BANKING BERHAD 14,145, OVERSEAS CHINESE BANKING CORPORATION 12,915, DBS GROUP HOLDINGS LIMITED 12,695, KEPPEL CORPORATION LIMITED 9,622, AXIATA GROUP BERHAD 9,158, CAPITALAND LIMITED 9,041, NOBLE GROUP LTD 7,246, GENTING BERHAD 7,072, UNITED OVERSEAS BANK LIMITED 6,810,

8 D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 31 December 2011 N/A ii) net gains/(losses) on derivative contracts realised during the financial year ended 31 December 2011 N/A iii) net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2011 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 31 December 2011 Fair Value (S$) % of NAV AXIS REAL ESTATE INVESTMENT TRUST 1,071, CDL HOSPITALITY TRUST 865, MAPLETREE COMMERCIAL TRUST 1,521, F) Amount and percentage of borrowings to net asset value (NAV) as at 31 December 2011 N/A G) Amount of redemptions and subscriptions for the financial year ended 31 December 2011 Total amount of redemptions SGD 51,460,950 Total amount of subscriptions SGD 15,834,649 H) The amount and terms of related-party transactions for the financial year ended 31 December 2011 i) As at 31 December 2011 the Fund maintained current accounts with the United Overseas Bank Limited as follows: Bank balances SGD 41,391 6

9 H) The amount and terms of related-party transactions for the financial year ended 31 December 2011 (continued) ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2011 N/A iii) Investment in Initial Public Offerings managed by UOB Group. N/A iv) As at 31 December 2011 the brokerage income earned by UOB Kay Hian Pte Ltd was SGD 24,069 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 7

10 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 2011 and 31 December 2010 N/A ii) expense ratios for the financial year ended 31 December 2011 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 financial year ended 31 December 2011 and 31 December 2010 N/A 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 the best available terms and there was no churning of trades. 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 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and to hold the assets of (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 (collectively referred to as the laws and regulations ), 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 which shall contain the matters prescribed by the laws and regulations as well as the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Certified Public Accountants of Singapore and the Trust Deed. 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 12 to 29 comprising the Statement of Total Return, Balance Sheet, Portfolio Statement and Notes to the Financial Statements, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed, laws and regulations and otherwise in accordance with the provisions of the Trust Deed. For and on behalf of the Trustee HSBC INSTITUTIONAL TRUST SERVICES (SINGAPORE) LIMITED Authorised signatory 19 March

12 STATEMENT BY THE MANAGER In the opinion of the directors of UOB Asset Management Ltd, the accompanying financial statements set out on pages 12 to 29, comprising the Statement of Total Return, Balance Sheet, Portfolio Statement and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the financial position of the Fund as at 31 December 2011 and the total deficit 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 Certified Public Accountants of Singapore. 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 19 March

13 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNIFUND We have audited the accompanying financial statements of (the Fund ) set out on pages 12 to 29, which comprise the Balance Sheet and Portfolio Statement as at 31 December 2011, the Statement of Total Return for the year then ended, and a summary of significant accounting policies and other explanatory information. Manager s Responsibility for the Financial Statements The Fund s Manager (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 Certified Public Accountants of Singapore, 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements 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 entity s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 31 December 2011 and the total deficit 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 Certified Public Accountants of Singapore. PricewaterhouseCoopers LLP Public Accountants and Certified Public Accountants Singapore, 19 March

14 STATEMENT OF TOTAL RETURN For the financial year ended 31 December Note $ $ Income Dividends 5,778,311 6,646,027 Interest ,778,353 6,646,069 Less: Expenses Management fee 9 1,901,033 2,292,770 Trustee fee 9 76,041 91,711 Audit fee 16,700 15,200 Registrar fee 9 15,000 15,000 Custody fee 182, ,466 Interest expenses - 3,928 Other expenses 141, ,715 2,333,085 2,782,790 Net income 3,445,268 3,863,279 Net gains or losses on value of investments Net realised gain on investments 11,800,339 22,890,327 Net change in fair value on investments (41,633,253) 15,202,870 Net foreign exchange gain/(loss) 298,591 (1,461,707) Net (loss)/gain on value of investments (29,534,323) 36,631,490 Total (deficit)/return for the year before income tax (26,089,055) 40,494,769 Less : Income tax 3 (337,396) (550,125) Total (deficit)/return for the year (26,426,451) 39,944,644 The accompanying notes form an integral part of these financial statements. 12

15 BALANCE SHEET As at 31 December 2011 ASSETS Note $ $ Portfolio of investments 151,374, ,689,374 Receivables 4 135,343 85,217 Sales awaiting settlement - 1,696,776 Cash and bank balances 10,825, ,438 Total Assets 162,335, ,454,805 LIABILITIES Payables 5 799,470 1,865,678 Net assets attributable to unitholders 6 161,536, ,589,127 Total Liabilities 162,335, ,454,805 The accompanying notes form an integral part of these financial statements. 13

16 PORTFOLIO STATEMENT As at 31 December 2011 By Geography - Primary Quoted Equities Percentage of total net assets attributable to Holdings at Fair value at unitholders at 31 December 31 December 31 December $ % HONG KONG HONGKONG LAND 558,000 3,284, JARDINE MATHESON HOLDINGS LTD 62,000 3,781, TOTAL HONG KONG 7,066, MALAYSIA ALLIANCE FINANCIAL GROUP BERHAD 1,350,000 2,175, AMMB HOLDINGS BERHAD 788,000 1,914, AXIATA GROUP BERHAD 4,160,200 8,661, AXIS REAL ESTATE INVESTMENT TRUST 1,000,000 1,071, CIMB GROUP HOLDINGS BERHAD 2,466,300 7,283, DIALOG GROUP BERHAD 1,000,000 1,063, EASTERN & ORIENTAL BERHAD 3,070,400 1,758, GAMUDA 1,250,000 1,717, GENTING MALAYSIA BHD 1,000,000 1,562, GENTING BERHAD 1,390,800 6,223, HONG LEONG BANK 300,000 1,330, IJM CORP BHD 1,126,946 2,599, IJM LAND BHD 1,063,500 1,000, IOI CORPORATION BERHAD 1,050,000 2,306, K L KEPONG BERHAD 324,000 3,000, MALAYAN BANKING BHD 2,929,193 9,932, MMC CORPORATION BERHAD 2,285,100 2,504, PETRONAS CHEMICALS GROUP BHD 894,900 2,251, PUBLIC BANK (FOREIGN) 499,800 2,674, RHB CAPITAL BERHAD 818,694 2,437, SAPURACREST PETROLEUM BERHAD 1,000,000 1,877, SIME DARBY BERHAD - NEW 1,396,000 5,167, TELEKOMS MALAYSIA BHD 1,260,000 2,556, TENAGA NASIONAL 498,000 1,185, UEM LAND HOLDINGS BHD 1,250,000 1,232, TOTAL MALAYSIA 75,490, The accompanying notes form an integral part of these financial statements. 14

17 PORTFOLIO STATEMENT As at 31 December 2011 By Geography - Primary (continued) Quoted Equities Percentage of total net assets attributable to Holdings at Fair value at unitholders at 31 December 31 December 31 December $ % SINGAPORE BOUSTEAD SINGAPORE LIMITED 3,500,000 2,835, CAPITALAND LTD 1,787,000 3,931, CDL HOSPITALITY TRUST 560, , DBS GROUP HOLDINGS LIMITED 619,369 7,135, FIRST RESOURCES LIMITED 1,408,000 2,112, FRASER AND NEAVE LTD 465,000 2,883, GENTING SINGAPORE PLC 1,400,000 2,114, GOLDEN AGRI-RESOURCES LTD 3,329,000 2,380, JARDINE CYCLE & CARRIAGE LTD 25,000 1,201, KEPPEL CORPORATION LIMITED 698,000 6,491, MAPLETREE COMMERCIAL TRUST 1,800,000 1,521, NOBLE GROUP LTD 1,525,272 1,723, OLAM INTERNATIONAL LTD 709,000 1,503, OVERSEAS CHINESE BANKING CORP (LOCAL) 860,163 6,735, OVERSEAS UNION ENTERPRISE LTD 848,000 1,780, PACIFIC ANDES RESOURCES DEVET LTD 8,273,759 1,605, SAKARI RESOURCES LTD 1,017,000 1,871, SEMBCORP INDUSTRIES LTD 459,000 1,858, SEMBCORP MARINE LTD 380,000 1,451, SINGAPORE LAND 397,000 2,195, SINGAPORE TELECOMMUNICATIONS LTD 1,310,000 4,047, UNITED OVERSEAS BANK LTD 322,917 4,930, WILMAR INTERNATIONAL LIMITED 1,129,000 5,645, TOTAL SINGAPORE 68,818, Portfolio of investments 151,374, Other net assets 10,161, Net assets attributable to unitholders 161,536, The accompanying notes form an integral part of these financial statements. 15

18 PORTFOLIO STATEMENT As at 31 December 2011 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 31 December % % China Hong Kong Malaysia Norway Singapore Portfolio of investments Other net assets Net assets attributable to unitholders The accompanying notes form an integral part of these financial statements. 16

19 PORTFOLIO STATEMENT As at 31 December 2011 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 31 December $ % % Consumer Discretionary 12,881, Consumer Staples 18,552, Energy 6,583, Financials 63,410, Industrials 31,244, Information Technology Materials 2,251, Telecommunication Services 15,265, Utilities 1,185, Portfolio of investments 151,374, Other net assets 10,161, Net assets attributable to unitholders 161,536, The accompanying notes form an integral part of these financial statements. 17

20 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2011 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General (the Fund ) is a Singapore registered trust fund constituted by a Trust Deed dated 18 April 1986 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 investment objective of the Fund is to achieve medium to long term capital growth through investment in shares listed or traded on the SGX-ST and the Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange) ( Bursa ). 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 the trade date. Investments are recorded at fair value on initial recognition. 18

21 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 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 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 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 dollar as 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 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 the fair value net gain or loss. 19

22 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. 3. Income tax $ $ Overseas income tax 308, ,626 Singapore income tax 29,361 84,499 Total income tax 337, ,125 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) (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 Singapore Income Tax Act); and dividends derived from outside Singapore and received in Singapore. The Singapore income tax represents tax deducted at source for Singapore sourced dividends. The overseas income tax represents tax deducted at source on dividends derived from outside Singapore. 20

23 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Receivables $ $ Amounts receivable for creation of units 37,622 50,782 Dividend receivable 97,721 34, ,343 85, Payables $ $ Amounts payable for cancellation of units 354,202 1,245,412 Amount due to Manager 409, ,605 Amount due to Trustee 16,341 22,810 Other creditors and accrued expenses 19,667 18, ,470 1,865,678 21

24 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Net assets attributable to unitholders $ $ At the beginning of the financial year 223,589, ,655,372 Operations Change in net assets attributable to unitholders resulting from operations (26,426,451) 39,944,644 Unitholders contributions/(withdrawals) Creation of units 15,834,649 27,106,737 Cancellation of units (51,460,950) (80,117,626) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (35,626,301) (53,010,889) Total decrease in net assets attributable to unitholders (62,052,752) (13,066,245) At the end of the financial year 161,536, ,589,127 Units in issue (Note 7) 109,840, ,957,027 $ $ Net assets attributable to unitholders per unit Units in issue Units at the beginning of the year 130,957, ,456,620 Units created 9,656,405 17,977,651 Units cancelled (30,772,807) (52,477,244) Units at the end of the year 109,840, ,957,027 22

25 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 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 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 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. 23

26 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) The table below summarises the on-balance sheet exposure to currency risks for the Fund. As at 31 December 2011 SGD MYR USD Total $ $ $ $ Assets Portfolio of investments 68,818,071 75,490,411 7,066, ,374,965 Receivables 106,972 8,641 19, ,343 Cash and bank balances 9,044,581 89,868 1,691,088 10,825,537 Total Assets 77,969,624 75,588,920 8,777, ,335,845 LIABILITIES Payables 660, , ,470 Net assets attributable to unitholders 161,536, ,536,375 Total Liabilities 162,196, , ,335,845 Net currency exposure (84,227,305) 75,588,920 8,638,385 As at 31 December 2010 SGD MYR USD Total $ $ $ $ Assets Portfolio of investments 110,104, ,332,388 6,252, ,689,374 Receivables 43,094 34,436 7,687 85,217 Sales awaiting settlement 1,696, ,696,776 Cash and bank balances 696,326 48, , ,438 Total Assets 112,541, ,415,458 6,498, ,454,805 LIABILITIES Payables 1,417, ,820 1,865,678 Net assets attributable to unitholders 223,589, ,589,127 Total Liabilities 225,006, , ,454,805 Net currency exposure (112,465,840) 106,415,458 6,050,382 24

27 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) 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. (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 2011 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 Net impact to Net impact to net assets net assets attributable attributable to unitholders to unitholders $ % $ % 50% STI Index, 50% KLCI 30,577, ,966, (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. Other than cash balances, the Fund s financial assets and liabilities are largely noninterest bearing. Hence, the Fund is not subjected to significant risk due to fluctuations in the prevailing levels of market interest rates. 25

28 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (b) Liquidity risk 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. 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 2011 Less than 3 months 1-5 Above 3 months to 1 year years 5 years $ $ $ $ Payables 799, Net assets attributable to unitholders 161,536, As at 31 December 2010 Less than 3 months 1-5 Above 3 months to 1 year years 5 years $ $ $ $ Payables 1,865, Net assets attributable to unitholders 223,589,

29 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (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 Manager. The table below summarises the credit rating of banks and custodians in which the Fund s assets are held as at 31 December 2011 and The credit ratings are based on the Bank Financial Strength ratings published by the rating agency. As at 31 December 2011 Credit rating Source of credit rating Bank State Street Bank & Trust Co. B Moody s United Overseas Bank Limited B Moody s Custodian State Street Bank & Trust Co. B Moody s As at 31 December 2010 Credit rating Source of credit rating Bank State Street Bank & Trust Co. B Moody s United Overseas Bank Limited B Moody s Custodian State Street Bank & Trust Co. 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. 27

30 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 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 Institutional Trust Services (Singapore) Limited, 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 year, the Fund maintained the following accounts with the related party: $ $ United Overseas Bank Limited Bank balances 41,391 1,622 (c) The following transactions took place during the financial year between the Fund and United Overseas Bank Limited at terms agreed between the parties: $ $ Bank charges (d) UOB Kay Hian Pte Ltd is an affiliate company of United Overseas Bank Limited. As at the end of the financial year, the Fund has brokerage fee paid or payable to UOB Kay Hian Pte Ltd as follows: $ $ Brokerage charges 24,069 16,314 28

31 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial ratios Expense ratio % 1.21% Turnover ratio % 54.72% 11. Comparatives For the financial year ended 31 December 2010, an amount of $30 has been reclassified from Other expenses to Registrar Fees in the Statement of Total Return. There is no impact to the net assets attributable to unitholders by this reclassification. 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. 29

32 This page has been intentionally left blank. 30

33 This page has been intentionally left blank. 31

34 This page has been intentionally left blank. 32

35

36 34