United China Onshore Fixed Income Fund

Transcription

1 United China Onshore Fixed Income Fund Semi Annual Report for the period 8 th May 2015 to 30 th June 2016

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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 Goh Yu Min Thio Boon Kiat TRUSTEE / REGISTRAR HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #13-02, HSBC Building Singapore CUSTODIAN The Hongkong and Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong PRC CUSTODIAN Industrial and Commercial Bank of China Limited No. 55 FuXingMenNei Street Xicheng District, Beijing People s Republic of China 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

4 SOLICITORS TO THE TRUSTEE Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore SUB-MANAGER Ping An UOB Fund Management Company Ltd 01:419 Galaxy Center, Fuhua Third Road Futian District, Shenzhen People s Republic of China 2

5 A) Fund Performance Class RMB Dist 3 mth 6 mth 1 yr 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 14 December 2015 Ann Comp Ret Fund Performance/ Benchmark Returns % Growth % Growth % Growth United China Onshore Fixed Income Fund N/A N/A N/A N/A 1.10 Benchmark N/A N/A N/A N/A 1.56 Source: Lipper, a Thomson Reuters Company Note: The performance returns of the Fund are in RMB based on a NAV-to-NAV basis with net dividends and distributions reinvested, if any. The benchmark of the Fund: CSI Aggregate Bond Index. Class I RMB Acc 3 mth 6 mth 1 yr 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 14 December 2015 Ann Comp Ret Fund Performance/ Benchmark Returns % Growth % Growth % Growth United China Onshore Fixed Income Fund N/A N/A N/A N/A 1.41 Benchmark N/A N/A N/A N/A 1.56 Source: Lipper, a Thomson Reuters Company Note: The performance returns of the Fund are in RMB based on a NAV-to-NAV basis with net dividends and distributions reinvested, if any. The benchmark of the Fund: CSI Aggregate Bond Index. Class I USD Dist 3 mth 6 mth 1 yr 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 08 March 2016 Ann Comp Ret Fund Performance/ Benchmark Returns % Growth % Growth % Growth United China Onshore Fixed Income Fund N/A N/A N/A N/A N/A Benchmark N/A N/A N/A N/A N/A Source: Lipper, a Thomson Reuters Company Note: The performance returns of the Fund are in United State Dollar based on a NAV-to-NAV basis with net dividends and distributions reinvested, if any. The benchmark of the Fund: CSI Aggregate Bond Index. 3

6 For the six months ended 30 June the net asset value of the Fund rose 0.08% and 0.36% in RMB terms for RMB Distribution Class and RMB Accumulation I Class respectively, compared to the benchmark CSI Aggregate Bond Index which rose 0.80% during the same period. As at end June 2016, the top main sector allocations of the Fund were in the financial sector bonds (23.31%), consumer discretionary sector bonds (23.64%). Among the financial sector, 9.67% were allocated to policy bank bonds. Market and Portfolio Review For the last 12 months, the Chinese onshore bond market experienced another bullish run, in which bond yields and credit spreads hit their relative low points after the global financial crisis of We have seen expansionary monetary policies in action with three rounds of Reserve Requirement Ratio (RRR) and benchmark interest rate cuts. Market segmentation existed where medium to long duration interest rates fell more than short-term rates. Liquidity uncertainties had caused short duration yields to fluctuate in March and April. Strong first quarter credit and loan growth, together with rising inflation figures, gave the market a hint of a strong economic recovery. With the unprecedented People s Bank of China (PBOC) Macro Prudential Assessment of the banking sector in place, interbank liquidity contracted and caused a temporary hike in the cost of short term funds at the quarter end. A panicked sell-off of short duration fixed-income instruments occurred as the market liquidated assets to honour liabilities, but the condition soon recovered after PBOC Open Market Operations (OMO) intervened to inject liquidity. During the second quarter, worries over a contracting monetary policy and an increased number of credit events caused a quick correction in both the rate and credit markets. The 10-year Treasury bond and China Development Bank bond yields both reached a six-month high of 3.03% and 3.68% respectively. The United Kingdom s vote to leave the European Union (Brexit) and weak Chinese economic fundamentals caused increased market uncertainty and risk aversion in the final two months of the review period. This benefited the relatively-safe haven assets with long-term rates, high grade credits and local government financing vehicles (LGFV) bonds seeing their yields drop considerably. Market Outlook Looking ahead, we expect the Chinese central and local governments to step up fiscal efforts to support economic growth, especially in the infrastructure area. The capital will likely come from new municipal bonds and LGFV bond issues, which will increase the supply of high quality assets in the near-term. Therefore, we are optimistic about the credit spread of onshore high-grade bonds, which continue to present opportunities for investors to deploy their cash. As for the risk-free instruments, we expect positive market returns for long duration rates, as long term economic growth gradually declines. 4

7 We also remain concerned with the current PBOC stance in monetary policy and expect authorities to show strong determination in keeping short term funding rate at a relatively high level. The primary target of the PBOC at the moment is to maintain financial stability, and high funding rate will help lower the overall leverage of the financial sector and slow the growth of real asset prices. Secondary targets involve implementing structural reforms in overcapacity sectors and stabilizing the Yuan depreciation. With such a policy mentality, the market would see strong short term performance driven by investors ever-increasing need to allocate cash into the bond market, contributing to further compression in the credit spread. As such, our credit strategy is increasingly cautious on credit selection, with allocation seeking to avoid overcapacity sectors and lower grade issues. We expect the number of downgrades to increase and economic structural reform to progressively cause difficulties for inefficient firms seeking to refinance. On duration management, we are looking at engaging tactical allocations into long duration bonds if market experiences temporary supply and demand imbalances. 5

8 B) Investments at fair value and as a percentage of NAV as at 30 June 2016 under review classified by i) Country Fair Value (RMB) % of NAV China 94,739, Accrued interest receivable on quoted bonds 3,020, Portfolio of investments 97,759, Other net assets 5,332, Total 103,091, ii) Industry Consumer Discretionary 24,367, Consumer Staples 4,049, Financials 24,035, Government 9,971, Healthcare 7,956, Industrials 12,268, Materials 12,089, Accrued interest receivable on quoted bonds 3,020, Portfolio of investments 97,759, Other net assets 5,332, Total 103,091, iii) Asset Class Fixed income 97,759, Other net assets 5,332, Total 103,091, iv) Credit rating of debt securities of S&P AA 9,971, NR 84,767, Total 94,739, v) Credit rating of debt securities of Moody s Aa 9,971, NR 84,767, Total 94,739,

9 C) Top Ten Holdings The top 10 holdings as at 30 June largest holdings at 30 June 2016 Percentage of total net assets attributable to Fair Value unitholders (RMB) % CHINA DEVELOPMENT BANK FRN 3.22% DUE 05/03/2017 9,971, HUAFA DYED YARN DUE 18/11/2016 4,220, ZONGSHEN POWER MACH DUE 14/11/2017 4,187, SUNWODA ELECTRONIC DUE 29/07/2019 4,134, RED STAR MACALLINE GROUP 6.11% DUE 13/12/2017 4,099, JS KANGDE XIN COMPO 5.25% DUE 28/07/2018 4,096, CHENGDU COMM INVESTMENT GROUP FRN DUE 27/12/2017 4,072, SHANDONG THREE STAR GROUP CO LTD VAR DUE 23/10/2020 4,049, HUNAN TV & BROADCAST INTERMEDIARY CO LTD 3.59% DUE 18/04/2019 4,013, WEIGAO HOLDING CO LTD 4.08% DUE 18/01/2019 4,001, D) Exposure to derivatives i) Fair value of derivative contracts and as a percentage of NAV as at 30 June 2016 N/A ii) Net gains/(losses) on derivative contracts realised during the financial period ended 30 June 2016 N/A iii) Net gains/(losses) on outstanding derivative contracts marked to market as at 30 June 2016 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 30 June 2016 N/A F) Amount and percentage of borrowings to net asset value (NAV) as at 30 June 2016 N/A 7

10 G) Amount of redemptions and subscriptions for the period 01 January 2016 to 30 June 2016 Total amount of redemptions RMB 3,632,143 Total amount of subscriptions RMB 105,782,065 H) The amount and terms of related-party transactions for the period 01 January 2016 to 30 June 2016 i) As at 30 June 2016 the Fund maintained current accounts with the United Overseas Bank Limited and HSBC Group as follows: The Hongkong and Shanghai Banking Corporation Limited Bank balances RMB 6,766,700 United Overseas Bank Limited Bank balances RMB 52,313 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 30 June 2016 N/A iii) Investment in Initial Public Offerings managed by UOB Group N/A iv) As at 30 June 2016 there was no brokerage income earned by UOB Kay Hian Pte Ltd. I) Expense ratios For the financial period from 8 May 2015 (date of constitution) to 30 June 2016 RMB Class RMB Dist (annualised) Total operating expenses (without preliminary expenses) 25,409 Total operating expenses (with preliminary expenses) 30,197 Average net asset value 2,424,154 Expense ratio (without preliminary expenses) 1.92% Expense ratio (with preliminary expenses) 2.12% Class I RMB Acc (annualised) Total operating expenses (without preliminary expenses) 715,078 Total operating expenses (with preliminary expenses) 913,055 Average net asset value 100,235,054 Expense ratio (without preliminary expenses) 1.31% Expense ratio (with preliminary expenses) 1.51% 8

11 I) Expense ratios (continued) For the financial period from 8 May 2015 (date of constitution) to 30 June 2016 RMB Class I USD Dist (annualised) Total operating expenses (without preliminary expenses) 9,007 Total operating expenses (with preliminary expenses) 12,879 Average net asset value 1,960,629 Expense ratio (without preliminary expenses) 1.46% Expense ratio (with preliminary expenses) 1.66% Note: The expense ratios have been computed based on the guidelines laid down by the Investment Management Association of Singapore ( IMAS ). The calculation of the Fund s expense ratios at 30 June 2016 was based on total operating expenses divided by the average net asset value respectively for the period. 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 Fund does not pay any performance fee. The average net asset value is based on the daily balances. The expense ratio for Class RMB Dist, I RMB Acc and I USD Dist have been calculated based on annualised total operating expenses in accordance with the IMAS guidelines. J) Turnover ratios 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 sales of $46,094,953 divided by the average daily net asset value of $103,817,761. 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 2016 N/A ii) expense ratios for the financial period ended 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. 9

12 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) iii) turnover ratios for the financial period ended 30 June N/A M) Soft dollar commissions/arrangements UOB Asset Management and/or the Sub-manager may from time to time receive or enter into soft dollars commissions/arrangements in respect of the Fund. 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 valuation and 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. UOB Asset Management and/or the Sub-manager confirm that best execution is carried out for the transactions and there was no churning of trades. N) Where the scheme offers pre-determined payouts, an explanation on the calculation of the actual payouts received by participants and any significant deviation from the 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. 10

13 STATEMENT OF TOTAL RETURN For the financial period from 8 May 2015 (date of constitution) to 30 June 2016 (Un-audited) For the financial period from 8 May 2015 (date of constitution) to 30 June 2016 RMB Income Interest 37,224 Less: Expenses Management fee 349,505 Trustee fee 25,605 Audit fee 40,692 Registrar fee 71,124 Valuation fee 113,798 Custody fee 43,122 Preliminary expenses 205,054 Transaction cost 170 Other expenses 151,488 1,000,558 Net loss (963,334) Net gains or losses on value of investments Net gain on investments 2,014,117 Net foreign exchange gain 7,204 2,021,321 Total deficit for the period before income tax 1,057,987 Less: Income tax (116,231) Total return for the period 941,756 11

14 STATEMENT OF FINANCIAL POSITION As at 30 June 2016 (Un-audited) 30 June 2016 RMB ASSETS Portfolio of investments 97,759,515 Cash and bank balances 6,819,013 Total Assets 104,578,528 LIABILITIES Payables 1,486,850 Total Liabilities 1,486,850 EQUITY Net assets attributable to unitholders 103,091,678 12

15 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the financial period from 8 May 2015 (date of constitution) to 30 June 2016 (Un-audited) For the financial period from 8 May 2015 (date of constitution) to 30 June 2016 RMB Net assets attributable to unitholders at the beginning of the financial period - Operations Change in net assets attributable to unitholders resulting from operations 941,756 Unitholders contributions/(withdrawals) Creation of units 105,782,065 Cancellation of units (3,632,143) Change in net assets attributable to unitholders resulting from net creation and cancellation of units 102,149,922 Distribution - Total increase in net assets attributable to unitholders 103,091,678 Net assets attributable to unitholders at the end of the financial period 103,091,678 13

16 STATEMENT OF PORTFOLIO As at 30 June 2016 (Un-audited) By Industry - Primary Holdings at 30 June 2016 Fair value at 30 June 2016 Percentage of total net assets attributable to unitholders at 30 June 2016 RMB % CONSUMER DISCRETIONARY HUAFA DYED YARN DUE 18/11/2016 4,165,400 4,220, HUNAN TV & BROADCAST INTERMEDIARY CO LTD 3.59% DUE 18/04/2019 4,000,000 4,013, NANSHAN GROUP CO LTD 5.8% DUE 18/09/2018 4,000,000 3,946, NINGBO JOYSON ELECTR 3.89% DUE 17/09/2016 4,000,000 3,999, WANXIANG QIANCHAO CO LTD 3.98% DUE 27/08/2016 4,000,000 4,000, ZONGSHEN POWER MACH DUE 14/11/2017 4,000,000 4,187, TOTAL CONSUMER DISCRETIONARY 24,367, CONSUMER STAPLES SHANDONG THREE STAR GROUP CO LTD VAR DUE 23/10/2020 4,000,000 4,049, FINANCIALS CHENGDU COMM INVESTMENT GROUP FRN DUE 27/12/2017 4,000,000 4,072, CHONGQING DIMA INDUSTRY 7.3% DUE 19/10/2017 4,000,000 3,981, LYG CITY CONSTRUCTION INVESTMENT CO 2.83% DUE 11/03/2017 4,000,000 3,987, RED STAR MACALLINE GROUP 6.11% DUE 13/12/2017 4,000,000 4,099, YUZHOU GRAND FUTURE 6.70% DUE 15/10/2018 4,000,000 3,935, ZHONGTIAN URBAN DEV 8% DUE 28/09/2018 4,000,000 3,959, TOTAL FINANCIALS 24,035, GOVERNMENT CHINA DEVELOPMENT BANK FRN 3.22% DUE 05/03/ ,000,000 9,971,

17 STATEMENT OF PORTFOLIO As at 30 June 2016 (Un-audited) By Industry - Primary (continued) Holdings at 30 June 2016 Fair value at 30 June 2016 Percentage of total net assets attributable to unitholders at 30 June 2016 RMB % HEALTHCARE WEIGAO HOLDING CO LTD 4.08% DUE 18/01/2019 4,000,000 4,001, XIANGXUE PHARMACTCL 7.80% DUE 13/11/2017 4,000,000 3,955, TOTAL HEALTHCARE 7,956, INDUSTRIALS CHINA RAILWAY CORP FRN DUE 29/04/2017 4,000,000 3,977, GZ ZHIGUANG ELECTRIC DUE 23/03/ , , HENAN PINGGAO ELECTRIC 3.1% DUE 25/12/2016 4,000,000 3,997, SUNWODA ELECTRONIC DUE 29/07/2019 4,000,000 4,134, TOTAL INDUSTRIALS 12,268, MATERIALS FSPG HI TECH CO LTD 3.89% DUE 11/07/2016 4,000,000 4,000, GEM CO LTD 4.5% DUE 28/01/2017 4,000,000 3,993, JS KANGDE XIN COMPO 5.25% DUE 28/07/2018 4,000,000 4,096, TOTAL MATERIALS 12,089, Accrued interest receivable on quoted bonds 3,020, Portfolio of investments 97,759, Other net assets 5,332, Net assets attributable to unitholders 103,091,

18 STATEMENT OF PORTFOLIO As at 30 June 2016 (Un-audited) By Geography - Primary (Summary) Quoted Bonds Percentage of total net assets attributable to unitholders at 30 June 2016 % Consumer Discretionary Consumer Staples 3.93 Financials Government 9.67 Healthcare 7.72 Industrials Materials Accrued interest receivable on quoted bonds 2.93 Portfolio of investments Other net assets 5.17 Net assets attributable to unitholders

19 STATEMENT OF PORTFOLIO As at 30 June 2016 (Un-audited) By Geography - Secondary Quoted Bonds Fair value at 30 June 2016 Percentage of total net assets attributable to unitholders at 30 June 2016 RMB % China 94,739, ,739, Accrued interest receivable on quoted bonds 3,020, Portfolio of investments 97,759, Other net assets 5,332, Net assets attributable to unitholders 103,091,

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