United Enhanced Income Fund

Transcription

1 United Enhanced Income Fund Semi Annual Report for the financial period 1 st July to 31 st December 2014

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3 MANAGER UOB Asset Management Ltd Registered Address: 80 Raffles Place UOB Plaza Singapore Company Registration No. : Z OPERATIONS ADDRESS 80 Raffles Place #06-00, UOB Plaza 2 Singapore Tel: DIRECTORS OF UOB ASSET MANAGEMENT Terence Ong Sea Eng Cheo Chai Hong Thio Boon Kiat TRUSTEE / REGISTRAR HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #10-02, HSBC Building Singapore CUSTODIAN State Street Bank and Trust Company One Lincoln Street Boston, MA United States of America AUDITORS PricewaterhouseCoopers LLP 8 Cross Street #17-00, PWC Building Singapore SOLICITORS TO THE MANAGER 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 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 02 July 2007 Ann Comp Ret United Enhanced Income Fund N/A Source: Lipper, a Thomson Reuters Company. Note: The performance returns of the Fund are in Singapore dollars based on a NAV-to-NAV basis with net dividends reinvested. For the second half of 2014, the s net asset value rose 0.4%. Over this period, the Fund adopted a defensive multi-asset class strategy in its investment. Manager s Outlook The US continues to lead the world in the global economic recovery. Although weak growth was reported in the first quarter of 2014, this was largely weather-related and full-year GDP expectations were revised down accordingly. However, the downward revisions hid the fact that the run rate of US growth is expected to return to three per cent levels on a quarterly basis and thus growth in the US is no longer sub-par. In fact, many economic indicators and data have posted strong jumps in recent periods and bode well for US prospects. Economic trends are more mixed around the rest of the world and many regions are counting on the strong US growth and the stronger US dollar to give them a boost. As US data improves and employment trends look healthier, expectations are that the US Federal Reserve (Fed) will finally start to normalize its monetary policy. In 2014, the Fed steadily wound down its quantitative easing (QE) programme, finally ending it in October In 2015 it will likely start a path of raising interest rates at a gradual pace. As US rates and US dollar direction heavily influence global currencies and rates, these trends will weigh on global markets. While there will be some volatility in fixed income and equity markets, we expect the path of increasing interest rates to be gradual and the volatility to be contained. The same upbeat assessment cannot be made for Europe. The European Central Bank (ECB) had aggressively expanded its balance sheet on the back of the long-term refinancing operation (LTRO) programme in 2012 but as banks paid down their LTROs in late 2013 and early 2014, the ECB s balance sheet has declined again. Despite the aggressive central bank policies, inflation in the developed markets remained very low. Europe s core CPI has fallen below one per cent and overall CPI has fallen to 0.5 per cent. The deflationary fear among investors is that if these aggressive central bank policies have not been able to stabilize inflation, deflation may be a bigger risk than expected. Also, the region at the greatest risk of deflation the Eurozone is also one where the central bank faces the most constraints. While the ECB has announced quantitative measures to extend a targeted LTRO programme and to purchase asset-backed securities (ABS), it remains unclear how fast and how large a scale these programmes will be implemented and if they will be enough to stop the deflationary trends. At the time of writing, expectations are for the ECB to announce a large-scale quantitative easing programme at its January meeting, which could provide a boost to the region. 2

5 In China, rising financial risks and a slowing property market remain near-term challenges. However, corporate profitability, which has been improving gradually, and reforms in the state-owned enterprises provide positive tailwinds for other segments of the market. The Chinese economy appeared to have bottomed some time in the second quarter of 2014, though weakness surfaced again in the fourth quarter. Nonetheless, we believe that the Chinese economy is now undergoing an incipient but very gradual economic recovery. In summary, the macroeconomic environment still offers healthy growth trends that are conducive to growth in corporate profitability. As macroeconomic conditions in the US continue to slowly improve, this should translate into investment opportunities in the markets. By continually allocating capital to the various asset classes, we believe that investors can capture the upside and yet minimize volatility. 3

6 B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by Fair Value (S$) % of NAV i) Country Singapore 6,606, Portfolio of investments 6,606, Other net assets 578, Total 7,185, ii) Industry Unit Trust 6,606, Portfolio of investments 6,606, Other net assets 578, Total 7,185, iii) Asset Class Unit Trust 6,606, Other net assets 578, Total 7,185, iv) Credit rating of debt securities of S&P N/A v) Credit rating of debt securities of Moody s N/A 4

7 C) Top Ten Holdings The top 10 holdings as at 31 December 2014 and 31 December largest holdings at 31 December 2014 Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED HIGH GRADE CORPORATE BOND FUND 5,077, UNITED SINGAPORE BOND FUND 1,040, UNITED HIGH GRADE CORPORATE BOND FUND (USD) 489, There were only 3 holdings as at 31 December largest holdings at 31 December 2013 Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED HIGH GRADE CORPORATE BOND FUND 6,640, UNITED SINGAPORE BOND FUND 1,482, UNITED HIGH GRADE CORPORATE BOND FUND (USD) 456, There were only 3 holdings as at 31 December

8 D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 31 December December 2014 Contracts or underlying principal Positive fair % of Negative fair % of amount value NAV value NAV (S$) (S$) (S$) Total Return Swaps 10,600, , % ii) iii) There was a net loss of SGD 41,053 on derivative contracts realised for the financial period ended 31 December There was a net loss of SGD 119,789 on outstanding derivative contracts marked to market as at 31 December E) Amount and percentage of net asset value (NAV) invested in other schemes as at 31 December 2014 Fair Value (S$) % of NAV UNITED HIGH GRADE CORPORATE BOND FUND 5,077, UNITED HIGH GRADE CORPORATE BOND FUND (USD) 489, UNITED SINGAPORE BOND FUND 1,040, F) Amount and percentage of borrowings to net asset value (NAV) as at 31 December 2014 N/A G) Amount of redemptions and subscriptions for the financial period 01 July 2014 to 31 December 2014 Total amount of redemptions SGD 1,244,013 Total amount of subscriptions SGD 99,715 6

9 H) The amount and terms of related-party transactions for the financial period 01 July 2014 to 31 December 2014 i) As at 31 December 2014 the Fund maintained current accounts with the United Overseas Bank Limited as follows: Bank balances SGD 17,251 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2014 N/A iii) Investment in Initial Public Offerings managed by UOB Group. N/A iv) As at 31 December 2014 there was no brokerage income earned by UOB Kay Hian Pte Ltd. I) Expense ratios 31 December % 31 December % Note: The expense ratios have been computed based on the guidelines laid down by the Investment Management Association of Singapore ( IMAS ). This is the sum of the Fund s expense ratio and the weighted average of the underlying funds expense ratio. Other than United Singapore Bond Fund, the rest of the underlying Funds expense ratios are unaudited. The calculation of the Fund s expense ratios at 31 December 2014 was based on total operating expenses of $133,100 (2013: $153,513) divided by the average net asset value of $8,295,924(2013: $9,973,923) for the year. The total operating expenses do not include (where applicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received. The Fund does not pay any performance fee. The average net asset value is based on the weekly balances. The expense ratios of the underlying funds are obtained from Underlying Funds Manager. United Singapore Bond Fund s expense ratio is audited while United High Grade Corporate Bond Fund s expense ratio is unaudited. The weighted average of the underlying Funds expense ratio is 1.31% (2013: 1.24%). J) Turnover ratios 31 December December % Note: The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales of the underlying investments, being Nil (2013: purchases of $1,042,033) divided by the average weekly net asset value of $7,841,927 (2013: $9,418,350). 7

10 K) Any material information that will adversely impact the valuation of the scheme such as contingent liabilities of open contracts N/A L) For schemes which invest more than 30% of their deposited property in another scheme, the following key information on the second-mentioned scheme ( the underlying scheme ) 1 should be disclosed as well i) top 10 holdings at fair value and as percentage of NAV as at 30 June 2014 and 30 June largest holdings at 30 June 2014 United High Grade Corporate Bond Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % AFLAC INC 8.50% DUE 15/05/ , RABOBANK NEDERLAND 4.125% DUE 14/09/ , GENERAL ELEC CAP CORP 6% DUE 07/08/ , PRUDENTIAL FINANCIAL INC 6% DUE 01/12/ , AMERICAN INTL GROUP 3.80% DUE 22/03/ , ENERGY TRANSFER PARTNERS 4.15% DUE 01/10/ , INGRAM MICRO INC 5% DUE 10/08/ , BUPA FINANCE PLC 3.375% DUE 17/06/ , GOLDCORP INC 3.625% DUE 09/06/ , APPLE INC 2.85% DUE 06/05/ , largest holdings at 30 June 2013 United High Grade Corporate Bond Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % BPCE SA 1.70% DUE 25/04/2016 1,260, CARREFOUR BANQUE 2.875% DUE 25/09/ , SWEDBANK AB 3% DUE 05/12/ , ALD INTERNATIONAL 1.875% DUE 13/06/ , AFLAC INC 8.50% DUE 15/05/ , BASF SE 1.875% DUE 04/02/ , ONEOK PARTNERS LP 8.625% DUE 01/03/ , ANHEUSER-BUSCH INBEV 7.75% DUE 15/01/ , ORIGIN ENERGY FINANCE 2.50% DUE 23/10/ , WESTPAC CAPITAL TRST III 5.819% DUE 29/12/49 757, 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 June 2014 holdings and ratios are disclosed as 31 December 2014 ones are not available 8

11 L) For schemes which invest more than 30% of their deposited property in another scheme, the following key information on the second-mentioned scheme ( the underlying scheme ) 1 should be disclosed as well (continued) ii) expense ratios for the financial period ended 30 June 2014 and 30 June United High Grade Corporate 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 expense ratio at 30 June 2014 was based on total operating expenses of $537,386 (2013: $454,041) divided by the average net asset value of $35,695,976 (2013: $30,040,416) for the year. The total operating expenses do not include (where applicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received. The Sub-Fund does not pay any performance fee. The average net asset value is based on the daily balances. iii) turnover ratios for the financial period ended 30 June 2014 and 30 June United High Grade Corporate Bond Fund 30 June % 30 June % Note: The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales of the underlying investments, being purchases of $84,899,520 (2013: sales of $59,382,830) divided by the average daily net asset value of $30,015,820 (2013: $33,184,209) June 2014 holdings and ratios are disclosed as 31 December 2014 ones are not available 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 were no soft dollar arrangements, rebates, commissions or other money incentives received by UOB Asset Management Ltd. 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 predetermined payouts. 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. 9

12 STATEMENT OF TOTAL RETURN For the half year ended 31 December 2014 (Un-audited) 31 December 31 December $ $ Income Interest Less: Expenses Management fee 59,263 71,087 Management fee rebate (33,793) (40,351) Trustee fee 2,521 2,521 Audit fee 7,058 6,804 Registrar fee 7,531 7,562 Custody fee 1,213 1,492 Valuation fee 4,939 5,924 Interest expenses Other expenses 7,016 19,958 55,911 75,091 Net loss (55,675) (74,833) Net gains or losses on value of investments and financial derivatives Net gain on investments 226, ,275 Net (loss)/gain on forward foreign exchange contracts (41,053) 11,147 Net (loss)/gain on total return swaps (119,789) 286,940 Net foreign exchange gain/(loss) 33,601 (11,876) 99, ,486 Total return for the period 44, ,653 10

13 STATEMENT OF FINANCIAL POSITION As at 31 December 2014 (Un-audited) 31 December 30 June $ $ ASSETS Portfolio of investments 6,606,969 7,639,975 Receivables 16,864 19,036 Cash and bank balances 208, ,128 Margin account 530, ,660 Financial derivatives at fair value - 35,113 Total Assets 7,362,433 8,353,912 LIABILITIES Payables 90,010 68,197 Financial derivatives at fair value 86,927 - Total Liabilities 176,937 68,197 Equity Net assets attributable to unitholders 7,185,496 8,285,715 11

14 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the half year ended 31 December 2014 (Un-audited) 31 December 30 June $ $ Net assets attributable to unitholders at the beginning of the financial period/year 8,285,715 9,955,356 Operations Change in net assets attributable to unitholders resulting from operations 44, ,698 Unitholders contributions/(withdrawals) Creation of units 99, ,777 Cancellation of units (1,244,013) (2,457,116) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (1,144,298) (2,255,339) Total decrease in net assets attributable to unitholders (1,100,219) (1,669,641) Net assets attributable to unitholders at the end of the financial period/year 7,185,496 8,285,715 12

15 STATEMENT OF PORTFOLIO As at 31 December 2014 (Un-audited) By Geography - Primary Quoted Unit Trust Percentage of total net assets attributable to Holdings at Fair value at unitholders at 31 December 31 December 31 December $ % SINGAPORE UNITED HIGH GRADE CORPORATE BOND FUND 3,814,904 5,077, UNITED HIGH GRADE CORPORATE BOND FUND (USD) 367, , UNITED SINGAPORE BOND FUND 786,254 1,040, TOTAL SINGAPORE 6,606, Portfolio of investments 6,606, Other net assets 578, Net assets attributable to unitholders 7,185,

16 STATEMENT OF PORTFOLIO As at 31 December 2014 (Un-audited) By Geography - Primary (Summary) Quoted Unit Trust Percentage of Percentage of total net assets total net assets attributable to attributable to unitholders at unitholders at 31 December 30 June % % Singapore Portfolio of investments Other net assets Net assets attributable to unitholders As the Fund invests only into unit trust, no secondary representation is considered necessary. 14

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