LionGlobal Bond Fund Annual Report For the financial year ended 30 June 2012

Transcription

1 Annual Report For the financial year ended 30 June 2012

2 Managers Lion Global Investors Limited 65 Chulia Street #18-01 OCBC Centre Singapore Directors of Lion Global Investors Limited Mr Ching Wei Hong (Chairman) Mr Christopher Brian Wei (Deputy Chairman) Mr Gerard Lee How Cheng (CEO) Mr Cheong Jin Keat Mr Yoon Mun Thim Mr Norman Ip Ka Cheung Mr Tan Siew Peng Mr George Lee Lap Wah Trustee/Registrar HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #10-02 HSBC Building Singapore Custodian The Hongkong and Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong Independent Auditor PricewaterhouseCoopers LLP 8 Cross Street #17-00 PWC Building Singapore

3 PERFORMANCE OF THE FUND For the year ended 30 June 2012 Cumulative returns for the Fund are calculated up to 30 June 2012 in SGD terms, on a single pricing basis with dividends reinvested net of all charges payable upon reinvestment. Time Period Fund Returns (%) LionGlobal Bond Fund Benchmark* Returns (%) Class A 3 months months year years** years** years** Since Inception** (22 March 1991) Source: Morningstar/Lion Global Investors Ltd *Benchmark 1-month SGD Interbank Bid Rate: Inception 6 August month SGD Interbank Bid Rate: From 7 August 2006 ** Returns of more than 1 year are annualised 1

4 FUND AND MARKET REVIEW For the year ended 30 June 2012, the Fund gained 1.1%, outperforming the benchmark 12-month SGD Interbank Bid Rate which returned 0.3%, in Singapore Dollar terms. During the period, interest rates continued to trend lower, especially in the second quarter. This was on the back of weakening growth, both globally and in Singapore. The major central banks around the world adopted an easier monetary stance which pushed interest rates lower. At the same time, slowing growth and continuing uncertainty over the resolution of the Eurozone situation also led investors towards sources of visible and steady returns, such as corporate bonds. Flows into corporate bonds resulted in a tightening of credit spreads. The Fund was positioned by the Manager to benefit from both the lower interest rates and credit spread tightening. As such, the performance of the Fund benefitted from these market trends. STRATEGY AND OUTLOOK The second half of 2012 is likely to see a continuation of slow growth. The uncertainty over the Eurozone situation is unlikely to go away. In addition, there are concerns regarding a possible fiscal cliff in the US as tax breaks expire and spending cuts take hold if US policymakers do not agree to extend aspects of last year s fiscal deal. This could be a drag on US growth. Central banks are likely to keep monetary policy easy, keeping interest rates low for longer. Bond yields have some scope, albeit on a limited basis to fall from present levels. The Manager is looking for returns to come more from yield carry than from price appreciation. The strategy of the Fund is to focus on high quality corporate bonds with sound credit fundamentals as a source of yield carry. At the same time, the Manager will look to enhance returns through risk-controlled, opportunistic positions in duration, yield curve, credit and currency as these opportunities present themselves. 2

5 DISCLOSURES ON THE FUND 1 For the financial year ended 30 June DISTRIBUTION OF INVESTMENTS AS AT 30 JUNE 2012 a) By Asset Class 1 As required by the Code on Collective Investment Schemes Percentage of total net assets attributable Fair Value to unitholders $ % Debt Securities (including accrued interest on debt securities) 38,596, Financial Derivatives at fair value 118, Cash and cash equivalents 437, Net assets attributable to unitholders 39,152, b) By Credit Rating of Debt Securities Aa3 857, A1 3,509, A2 2,087, A3 3,830, Baa1 2,211, Baa2 2,085, Baa3 947, Unrated (Singapore - incorporated debt securities) 22,736, Accrued interest on debt securities 330, ,596, c) By Derivative Type Forward foreign exchange contract 91, Spot foreign exchange contracts (3,418) * Futures contract 30, , The net realised losses and unrealised gains at the end of the year were SGD793,522 and SGD118,373 respectively. 3

6 2. TOP 10 HOLDINGS As at 30 June 2012 Percentage of total net assets attributable Fair Value to unitholders $ % Hana Bank 3.5% due 25/10/2017 1,949, Capitaland Limited Series Capl (Reg) 2.95% due 20/06/2022 1,441, CapitaCommercial Trust Convertible 2% due 06/05/2013 1,360, Sun Hung Kai PPT Capital Series EMTN 4.5% due 14/02/2022 1,271, DBS Capital Funding II Var Perpetual due 15/06/2018 1,069, Malayan Banking Berhad Var Perpetual 1,060, Standard Chartered PLC EMTN Var due 10/04/2023 1,055, CapitaMalls Asia Treasury EMTN 3.95% due 24/08/2017 1,025, Citigroup Incorporated EMTN 4.98% due 20/06/2013 1,024, Malayan Banking Berhad EMTN (Reg) Var due 28/04/2021 1,007,

7 As at 30 June 2011 Percentage of total net assets attributable Fair Value to unitholders $ % Ascott Capital Private Limited MTN 4.38% due 14/08/2012 1,544, Capitaland Limited Series Capl (Reg) 2.95% due 20/06/2022 1,420, Bank CIMB Niaga/Cayman EMTN Var due 22/11/2016 1,169, DBS Capital Funding II Var Non-Cumulative Guaranteed Preference Shares 1,090, Malayan Banking Berhad Var Perpetual 1,059, Citigroup Incorporated EMTN 4.98% due 20/06/2013 1,056, CapitaMalls Asia Treasury EMTN 3.95% due 24/08/2017 1,031, GE Capital Australia Funding EMTN 4.515% due 12/06/2012 1,030, Sengkang Mall Limited Series A 4.88% due 20/11/2012 1,030, Standard Chartered PLC EMTN Var due 10/04/2023 1,029,

8 3. GLOBAL EXPOSURE The global exposure relating to derivative instruments is calculated using the commitment approach by converting the derivative positions into equivalent positions in the underlying assets embedded in those derivatives. The global exposure of the Fund to financial derivative instruments or embedded financial derivative instruments will not exceed 100% of the net asset value of the Fund at any time. 4. COLLATERAL Nil 5. SECURITIES LENDING OR REPURCHASE TRANSACTIONS Nil 6. INVESTMENT IN OTHER UNIT TRUSTS, MUTUAL FUNDS AND COLLECTIVE INVESTMENT SCHEMES Nil 7. BORROWINGS Nil 8. SOFT DOLLAR COMMISSION RECEIVED BY THE MANAGERS The soft dollar commissions from various brokers for the year were utilised on research and advisory services, economic and political analyses, portfolio analyses, market analyses, data and quotation analyses and computer hardware and software used for and in support of the investment process of fund managers. Goods and services received were for the benefit of the scheme and there was no churning of trades. These brokers also execute trades for other funds managed by the managers. The trades are conducted on best available terms and in accordance with best practices. 9. OTHER MATERIAL INFORMATION There is no other material information that will adversely impact the valuation of the Fund. 10. SUPPLEMENTAL INFORMATION ON UNDERLYING SUB-FUNDS Not applicable 6

9 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and to hold the assets of LionGlobal Bond Fund (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 Managers for compliance with the limitations imposed on the investment and borrowing powers as set out in the Trust Deed in each annual accounting period 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 Managers have, in all material respects, managed the Fund during the year covered by these financial statements, set out on pages 11 to 37 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 26 September

10 STATEMENT BY THE MANAGERS In the opinion of the directors of Lion Global Investors Limited, the accompanying financial statements set out on pages 11 to 37, 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 LionGlobal Bond Fund (the Fund ) as at 30 June 2012 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 directors of LION GLOBAL INVESTORS LIMITED GERARD LEE HOW CHENG CEO 26 September

11 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF LIONGLOBAL BOND FUND (Constituted under a Trust Deed in the Republic of Singapore) We have audited the accompanying financial statements of LionGlobal Bond Fund (the Fund ) set out on pages 11 to 37, which comprise the Balance Sheet and Portfolio Statement as at 30 June 2012, 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 control. 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. 9

12 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 30 June 2012 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, 26 September

13 STATEMENT OF TOTAL RETURN For the financial year ended 30 June Note $ $ Income Interest on cash and bank balances 1, Other income - 5,618 1,055 6,471 Less: Expenses Audit fee 17,651 17,913 Custodian fees 6,924 7,789 Management fee 371, ,170 Professional fees 21,372 15,852 Registration fee 23,607 23,561 Trustee fee 19,955 20,006 Valuation and administration fees 15,033 16,244 Miscellaneous expenses 5,331 29, , ,368 Net expenses (480,386) (530,897) Net gains or losses on investments Net realised gains on investments 503,095 2,620,586 Net realised (losses)/gains on financial derivatives (793,522) 229,169 Net change in fair value of investments 1,199,148 (764,415) Net unrealised gains on financial derivatives 118,373 29,744 Net foreign exchange losses (93,986) (37,950) 933,108 2,077,134 Total return for the year before income tax 452,722 1,546,237 Less: Taxation 3 (7,102) (12,642) Total return for the year after income tax before distribution 445,620 1,533,595 Less: Distribution 4 (457,645) (784,094) Total (deficit)/return for the year (12,025) 749,501 The accompanying notes form an integral part of these financial statements. 11

14 BALANCE SHEET As at 30 June Note $ $ ASSETS Portfolio of investments 38,596,344 36,153,683 Receivables 5 526,033 38,227 Due from brokers 6 52, ,137 Financial derivatives at fair value 7 121,791 29,744 Cash and bank balances 8 444,894 1,605,594 Total assets 39,741,438 38,126,385 LIABILITIES Payables 9 87, ,620 Due to broker 497, ,000 Financial derivatives at fair value 7 3,418 - Net assets attributable to unitholders 10 39,152,680 37,656,765 Total liabilities 39,741,438 38,126,385 The accompanying notes form an integral part of these financial statements. 12

15 PORTFOLIO STATEMENT As at 30 June 2012 By Geography (Primary) Percentage of total net assets Notional attributable to amounts at Fair value at unitholders at 30 June June June 2012 $ % QUOTED DEBT SECURITIES SINGAPORE Capitaland Limited Series Capl (Reg) 2.95% due 20/06/2022 1,500,000 1,441, CapitaCommercial Trust Convertible 2% due 06/05/2013 1,250,000 1,360, DBS Capital Funding II Var Perpetual due 15/06/2018 1,000,000 1,069, CapitaMalls Asia Treasury EMTN 3.95% due 24/08/2017 1,000,000 1,025, Ascott Capital Private Limited MTN 4.38% due 14/08/2012 1,000,000 1,006, Sengkang Mall Limited Series A 4.88% due 20/11/2012 1,000,000 1,005, Street Square Private Limited 3.02% due 05/05/2014 1,000,000 1,000, Ezion Holdings Limited Series MTN 5.25% due 22/05/ , , Savu Investments Limited MTN 3.83% due 17/01/ , , United Overseas Bank Limited 5.796% Perpetual 500, , F&N Treasury Private Limited MTN 5.5% due 18/03/ , , Capitamall Trust Convertible 1% due 02/07/ , , Suntec REIT Convertible 3.25% due 20/03/ , , The accompanying notes form an integral part of these financial statements. 13

16 Percentage of total net assets Notional attributable to amounts at Fair value at unitholders at 30 June June June 2012 $ % United Overseas Bank Limited (Reg) Cl E Non-Cumulative 5.05% Preference Shares 5, , SembCorp Financial Services MTN % due 09/04/ , , United Engineers Limited Series MTN 4.2% due 26/01/ , , Mapletree Treasury Services MTN 3.75% due 26/01/ , , F&N Treasury Private Limited MTN 4.55% due 05/08/ , , Hotel Properties Limited MTN 4.75% due 08/10/ , , Capitamall Trust Convertible 2.125% due 19/04/ , , WBL Corporation Limited MTN 3.173% due 29/07/ , , Keppel Land Limited Convertible 1.875% due 29/11/ , , Keppel Land Limited Convertible 2.5% due 23/06/ , , Osim International Limited Convertible 2.75% due 05/07/ , , DBS Bank Limited FRN due 15/07/ , , SP Powerassets Limited EMTN 4.19% due 18/08/ , , SembCorp Financial Services MTN 5% due 21/04/ , , Midpoint Properties Series MTN 5.1% due 21/05/ , , The accompanying notes form an integral part of these financial statements. 14

17 Percentage of total net assets Notional attributable to amounts at Fair value at unitholders at 30 June June June 2012 $ % Singapore Press Holdings Limited MTN 2.81% due 02/03/ , , Overseas Union Enterprise Limited 3.36% due 27/09/ , , Mapletree Industrial Trust MTN 3.75% due 08/03/ , , Straits Trading Company Limited Series EMTN 4.3% due 09/11/ , , Singapore Airlines MTN 3.22% due 09/07/ , , Singapore Post Limited Var Perp 250, , Boc Aviation Pte Limited Series MTN 3% 06/08/ , , Keppel Corp Limited Series MTN 3.1% due 12/10/ , , Ascendas Real Estate Investment Trust Series MTN 4% due 03/02/ , , ,381, The accompanying notes form an integral part of these financial statements. 15

18 Percentage of total net assets Notional attributable to amounts at Fair value at unitholders at 30 June June June 2012 $ % HONG KONG Sun Hung Kai PPT Capital Series EMTN 4.5% due 14/02/2022 1,000,000 1,271, HK Land Treasury SG 3.65% due 05/10/ , , Dah Sing Bank Limited Series EMTN (Reg) 4.875% due 09/02/ , , Henderson Land MTN EMTN 3.865% due 11/11/ , , Bank of East Asia Limited Series EMTN Var due 13/09/ , , Wharf Finance No 1 Limited Series EMTN 2.995% due 20/07/ , , Henderson Land MTN Private Limited Series EMTN 4% due 19/09/ , , CK Bond SEC Limited due 5.125% Perpetual 500, , Swire Properties MTN Financing Limited EMTN 4.375% due 18/06/ , , Joyous King Group Limited Convertible 3.3% due 22/10/2014 1,000, , ,453, MALAYSIA Malayan Banking Berhad Var Perpetual 1,000,000 1,060, Malayan Banking Berhad EMTN (Reg) Var due 28/04/2021 1,000,000 1,007, Hong Leong Bank Series EMTN 3.125% due 19/04/ , , RHB Bank EMTN 3.25% due 11/05/ , , ,148, The accompanying notes form an integral part of these financial statements. 16

19 Percentage of total net assets Notional attributable to amounts at Fair value at unitholders at 30 June June June 2012 $ % SOUTH KOREA Hana Bank 3.5% due 25/10/2017 1,500,000 1,949, CHINA Sinopec Group Oversea % due 17/05/ , , Yancoal International Resources Development 4.461% due 16/05/ , , Sinopec Group Oversea % due 17/05/ , , Tingyi Holdings 3.875% due 20/06/ , , ,159, GREAT BRITAIN Standard Chartered PLC EMTN Var due 10/04/2023 1,000,000 1,055, UNITED STATES OF AMERICA Citigroup Incorporated EMTN 4.98% due 20/06/2013 1,000,000 1,024, AUSTRALIA Qbe Funding Trust Convertible 0% due 12/05/2030 1,250,000 1,002, INDIA Ascendas India Trust MTN 5.255% due 09/11/ , , RUSSIA VTB Capital 4.2% due 11/08/ , , The accompanying notes form an integral part of these financial statements. 17

20 Percentage of total net assets Notional attributable to amounts at Fair value at unitholders at 30 June June June 2012 $ % INDONESIA Pertamina 4.875% due 03/05/ , , TAIWAN Hon Hai Precision Industry Co Limited (Reg) Conv 0% due 12/10/ , , THAILAND Pttep Canada International Fin 6.35% due 12/06/ , , Accrued interest receivable on debt securities 330, Portfolio of investments 38,596, Other net assets 556, Net assets attributable to unitholders 39,152, The accompanying notes form an integral part of these financial statements. 18

21 By Geography (Summary) Percentage of total net assets attributable to unitholders at 30 June June 2011 % % Singapore Hong Kong Malaysia South Korea China Great Britain United States of America Australia India Russia Indonesia Taiwan Thailand United Arab Emirates Macau Accrued interest receivable on debt securities Portfolio of investments Other net assets Net assets attributable to unitholders The accompanying notes form an integral part of these financial statements. 19

22 By Industry (Secondary) Percentage of total net assets Fair value at attributable to unitholders at 30 June June June 2011 $ % % Financial 30,128, Industrial 4,113, Energy 1,352, Technology 1,001, Consumer, Cyclical 758, Consumer, Non Cyclical 640, Utilities 269, Sovereign Basic materials Communications ,265, Accrued interest receivable on debt securities 330, Portfolio of investments 38,596, Other net assets 556, Net assets attributable to unitholders 39,152, The accompanying notes form an integral part of these financial statements. 20

23 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2012 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. GENERAL LionGlobal Bond Fund (the Fund ) is a unit trust constituted by a Deed of Trust dated 13 February 1991 together with its Supplemental Deeds thereon (thereafter referred to as Trust Deed ) between Lion Global Investors Limited (the Managers ) and HSBC Institutional Trust Services (Singapore) Limited (the Trustee ). The Trust Deed is governed by the laws of the Republic of Singapore. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation 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 recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Certified Public Accountants of Singapore ( ICPAS ). (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) Financial derivatives Financial derivatives are entered into for the purposes of efficient portfolio management, tactical asset allocation or specific hedging of financial assets held as determined by the Managers and in accordance with the provisions of the Trust Deed. Financial derivatives outstanding at the end of the financial year are measured at their fair values using the marked-to-market method, and the resultant gains and losses are taken up in the Statement of Total Return. 21

24 (d) Distribution The Managers have the absolute discretion to determine whether a distribution is to be made. In such an event, an appropriate amount will be transferred to a distribution account to be paid out on the distribution date. The amount shall not be treated as part of the property of the Fund. (e) Investments Investments are classified as financial assets at fair value through profit or loss. (i) Initial recognition Purchases of investments are recognised on the trade date. Investments are recorded at fair value on initial recognition. (ii) Subsequent measurement Investments are subsequently carried at fair value. Net change in the fair value of 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 sales 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. (f) Basis of valuation of investments The fair value of investments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price for the investments held by the Fund is the current market quoted bid price. Accrued interest is included within the fair value of fixed income instruments. (g) Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables are initially recognised at their fair value and subsequently carried at amortised cost using the effective interest method. 22

25 (h) Foreign currencies (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. The primary activity of the Fund is to invest in Singapore and international bonds, high quality interest rate securities, real estate investment trusts, business trusts and other related securities. The performance of the Fund is measured and reported to the investors in Singapore dollars. The Managers consider the Singapore Dollar as the currency which most faithfully represents the economic effects of the underlying transactions, events and conditions. The Fund s functional and presentation currency is the Singapore Dollar. (ii) Transactions and balances 3. INCOME TAX 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 such as equities are also recognised in the Statement of Total Return within the fair value net gain or loss. The Fund was granted the status of a Designated Unit Trust and, therefore, the following income is exempted from tax in accordance with Section 35(12) and (12A) of the Income Tax Act (Cap 134): (a) (b) (c) 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 Income Tax Act); dividends derived from outside Singapore and received in Singapore; 23

26 (d) (e) gains or profits derived from foreign exchange transactions, transactions in futures contracts, transactions in interest rate or currency forwards, swaps or option contracts and transactions in forwards, swaps or option contracts relating to any securities or financial index; and distributions from foreign unit trusts derived from outside Singapore and received in Singapore. 4. DISTRIBUTION $ $ Overseas income tax 7,089 12,642 Capital gains tax 13 - Total taxation 7,102 12,642 The overseas income tax represents tax deduced at source on dividends derived from outside Singapore. On 23 November 2011, the Fund made a distribution of $457,645 (2011: $784,094) being $2.00 per 100 units (2011: $3.00 per 100 units) to unitholders on the register as at 31 October RECEIVABLES $ $ Amount receivable for creation of units 526,033 38, DUE FROM BROKERS $ $ Margin deposits 52, ,137 The margin deposits are placed with a financial institution which is a non-related company. 24

27 7. FINANCIAL DERIVATIVES AT FAIR VALUE Financial derivative contracts comprise futures, spot and forward foreign exchange contract due for settlement within 3 months (2011: 1 month) from the balance sheet date. The contract or underlying principal amounts of these financial derivatives and their corresponding gross fair values at the balance sheet date are analysed below. 30 June 2012 Contract or underlying principal Fair value amount Asset Liability $ $ $ Spot foreign exchange contracts 497,732-3,418 Forward foreign exchange contract 9,119,706 91,190 - Futures contract 3,411,373 30, ,791 3, June 2011 Contract or underlying principal Fair value amount Asset Liability $ $ $ Forward foreign exchange contracts 9,848,000 29, CASH AND BANK BALANCES The cash and bank balances are placed with a financial institution related to the Trustee. 25

28 9. PAYABLES $ $ Amount payable for cancellation of units 13, ,915 Amount due to the Managers 31,198 31,544 Amount due to the Trustee 3,172 3,504 Amount due to the Custodian Amount due to the Registrar 6,412 5,983 Other payables 32,765 28,688 87, , NET ASSETS ATTRIBUTABLE TO UNITHOLDERS $ $ At beginning of financial year 37,656,765 40,725,413 Operations Change in net assets attributable to unitholders resulting from operations (12,025) 749,501 Unitholders' contributions/(withdrawals) Creation of units 10,352,839 8,232,597 Cancellation of units (8,844,899) (12,050,746) Change in net assets attributable to unitholders resulting from net creation and cancellation of units 1,507,940 (3,818,149) Total increase/(decrease) in net assets attributable to unitholders 1,495,915 (3,068,648) At end of financial year 39,152,680 37,656,765 Units in issue (see Note 11) 24,675,288 23,722,765 Net assets attributable to unitholders per unit Reconciliation of net assets attributable to unitholders per unit for issuing/ redeeming units at financial year-end and the net assets attributable to unitholders per unit per the financial statements: 26

29 $ $ Net assets attributable to unitholders per unit for issuing/ redeeming units Effect of adopting bid prices as fair value (0.004) (0.005) Net assets attributable to unitholders per unit per the financial statements Quoted investments have been valued at the current bid prices in accordance with the recommendations of Statement of Recommended Accounting Practice 7. For the purpose of the net assets attributable to unitholders per unit calculation for the issuance and redemption of units, quoted investments are stated at the last available transacted price, in accordance with the Code on Collective Investment Schemes. 11. UNITS IN ISSUE Units Units Units at beginning of the year 23,722,765 26,140,503 Units created 6,555,814 5,192,276 Units cancelled (5,603,291) (7,610,014) Units at end of the year 24,675,288 23,722,765 of which, units denominated in - Class 'A' 24,675,288 23,722, FINANCIAL RISK MANAGEMENT The Fund s activities expose it to a variety of market 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, options and/or currency forward contracts subject to the terms of the Trust Deed 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. 27

30 The Fund s assets principally consist of investments in debt and derivative securities. 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 Managers to achieve their investment objectives. The following is a summary of the main risks and risk management policies: (a) Market risk Market risk is the risk of loss to the value of financial investments because of changes in market conditions like interest and currency rate movements and volatility in security prices. External factors such as changes in economic environment, consumption patterns and investor s expectation contribute to market risk which may have a significant impact on the asset s value. The Fund s investments are substantially dependent on changes in market prices. The Managers monitor the Fund s investments closely so as to assess changes in fundamentals and valuation. Although the Managers make reasonable efforts in the choice of investments, events beyond reasonable control of the Managers 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/industries. The Fund s market risk is affected primarily by three main components: changes in actual market prices, interest rate volatilities and foreign exchange movements. (i) Price risk Price risk primarily results from exposure to volatility of equities prices. The Fund does not hold any equities as of 30 June 2012 and (ii) 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. It affects the value of fixed income securities more directly than equities. As interest rates rise, prices of fixed income securities may fall and vice versa. The rationale is that as interest rates increase, the opportunity cost of holding a fixed income security increases since investors are able to realise 28

31 greater yields by switching to other investments that reflect the higher interest rate. The Managers will regularly assess the economic condition, monitor changes in interest rates outlook and take appropriate measures accordingly to control the impact of interest rate risk. The table below summarises the Fund s exposure to interest rate risks. They include the Fund s assets and liabilities at fair value, categorised by interest rate types. 30 June 2012 Variable Fixed Non-interest Total rates rates bearing $ $ $ $ Assets Portfolio of investments 5,232,655 33,033, ,481 38,596,344 Receivables , ,033 Due from brokers ,376 52,376 Financial derivatives at fair value , ,791 Cash and bank balances 444, ,894 Total assets 5,677,549 33,033,208 1,030,681 39,741,438 Liabilities Payables ,646 87,646 Due to broker , ,694 Financial derivatives at fair value - - 3,418 3,418 Net assets attributable to unitholders ,152,680 39,152,680 Total liabilities ,741,438 39,741,438 29

32 30 June 2011 Variable Fixed Non-interest Total rates rates bearing $ $ $ $ Assets Portfolio of investments 9,337,374 26,454, ,662 36,153,683 Receivables ,227 38,227 Due from brokers , ,137 Financial derivatives at fair value ,744 29,744 Cash and bank balances 1,605, ,605,594 Total assets 10,942,968 26,454, ,770 38,126,385 Liabilities Payables , ,620 Due to broker , ,000 Net assets attributable to unitholders ,656,765 37,656,765 Total liabilities ,126,385 38,126,385 The duration, a measure of the sensitivity of the price of a fixed income security to a change in interest for the 12 month period is 3.84 (2011: 3.69). As of 30 June 2012, should interest rates lower or rise by 1% (2011: 1%) with all other variables remaining constant, the increase or decrease in net assets attributable to unitholders would be as follows: Impact of 1% (2011: 1%) movement in interest rates on net assets attributable to the unitholders Fund $ $ LionGlobal Bond Fund 1,268, ,176 (iii) Currency risk The Fund has monetary assets/liabilities denominated in currencies other than Singapore dollars and the Fund may be affected favourably or unfavourably by exchange rate regulations or changes in the exchange rates between the Singapore Dollar and such other currencies. The Fund may enter into foreign currency contracts designed to either hedge some or all of this exposure, or alternatively increase exposure to preferred foreign currencies. 30

33 The table below summarises the Fund s exposure to key currencies at the end of the financial year. Monetary and non-monetary items have been taken into the account for the analysis. 30 June 2012 USD HKD SGD Others Total $ $ $ $ $ Assets Portfolio of investments 9,313, ,214 29,118,983-38,596,344 Receivables , ,033 Due from brokers 52, ,376 Cash and bank balances 7,965 2, ,598 7, ,894 Total assets 9,373, ,909 30,071,614 7,636 39,619,647 Liabilities Payables ,266-87,646 Due to broker 497, ,694 Net assets attributable to unitholders ,152,680-39,152,680 Total liabilities 498,074-39,239,946-39,738,020 Net financial assets/ (liabilities) 8,875, ,909 (9,168,332) 7,636 (118,373) Fair value of currency forwards and financial derivatives (8,336,895) (163,287) 8,618, ,373 Currency exposure 538,519 3,622 (549,777) 7,636 31

34 30 June 2011 USD IDR CNY SGD Others Total $ $ $ $ $ $ Assets Portfolio of investments 13,195, , ,575 20,563, ,772 36,153,683 Receivables ,227-38,227 Due from brokers , ,137 Cash and bank balances 894,641-2, ,667 14,855 1,605,594 Total assets 14,090, , ,006 21,594, ,627 38,096,641 Liabilities Payables , ,620 Due to broker , ,000 Net assets attributable to unitholders ,656,765-37,656,765 Total liabilities ,125,796-38,126,385 Net financial assets/ (liabilities) 14,089, , ,006 (16,531,742) 793,627 (29,744) Fair value of currency forwards and financial derivatives (9,818,256) - - 9,848,000-29,744 Currency exposure 4,271, , ,006 (6,683,742) 793,627 The Fund s monetary assets/liabilities are measured for their sensitivity to exchange rate movements based on the balance of the monetary assets/ liabilities, forecasted exchange rate movements and the net asset value of the Fund. As of 30 June 2012 and 2011, the Fund s exposure to foreign currency fluctuations is not considered to be significant except for the currency presented in the table below which shows the Fund s sensitivity to exchange rate movements on significant monetary assets/liabilities denominated in foreign currencies, should this currency increase by a reasonable possible shift with all other variables held constant. This sensitivity analysis is not 32

35 presented separately should this currency decrease as it is the reversal of the impact disclosed below. Impact of increase in FX rates on net assets Reasonable possible FX movement attributable to the unitholders Currency % % $ $ USD , ,564 (b) Liquidity risk The Fund is exposed to daily redemption of units in the Fund. It therefore invests the majority of its assets in investments that are traded in an active market and can be readily disposed of. 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 tables are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. 30 June 2012 Less than 3 months- 1-5 Above 3 months 1 year years 5 years S$ S$ S$ S$ Payables 87, Due to broker 497, Financial derivatives at fair value 3, Net assets attributable to unitholders* 39,152, June 2011 Less than 3 months- 1-5 Above 3 months 1 year years 5 years S$ S$ S$ S$ Payables 269, Due to broker 200, Net assets attributable to unitholders* 37,656, *Net assets attributable to unitholders are repayable on demand. 33

36 (c) Credit risk Credit risk is the risk that counterparty will fail to perform contractual obligations, either in whole or in part, under a contract. Concentrations of credit risk are minimised primarily by: ensuring counterparties, together with the respective credit limits, are approved, ensuring that transactions are undertaken with a large number of counterparties, and ensuring that the majority of transactions are undertaken on recognised exchanges. The Fund invests mostly in financial assets, which have an investment grade as rated by Standard and Poor s or Moody s. The credit ratings are reviewed regularly. The table below analyses the Fund s investments by credit ratings % % Aa2-6.3 Aa A A A Baa Baa Baa Ba1-8.5 Ba2-4.6 Ba3-1.7 B1-3.6 B2-3.4 B3-1.5 Unrated (comprise primarily corporate debts issued by Singapore companies) Accrued interest on debt securities Total debt securities All transactions in listed securities are settled/paid upon delivery using approved brokers. The risk of default is considered minimal, as delivery of 34

37 securities is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation. Credit risk also arises from cash and cash equivalents and assets held with financial institutions. The Fund may also enter into derivatives to manage its exposures to currency risk and price risk, including foreign exchange forward contracts and options. Hence, the Fund is also exposed to the risk that its derivatives held with counterparties may not be recoverable in the event of any default by the parties concerned. The Managers minimise the Fund s credit risk by undertaking transactions with banks that are part of banking groups with good credit-ratings assigned by international credit rating agencies. The table below summarises the credit rating of banks and custodian in which the Fund s assets are held as at 30 June 2012 and June 2012 Credit Rating ## Source of Credit Rating Custodian HSBC Institutional Trust Services (Singapore) Limited A+ S&P Bank The Hongkong and Shanghai Banking S&P Corporation Limited A+ Deutsche Bank AG A+ S&P 30 June 2011 Custodian HSBC Institutional Trust Services (Singapore) Limited Credit Rating ## AA- Source of Credit Rating S&P Bank The Hongkong and Shanghai Banking Corporation Limited AA- S&P Deutsche Bank AG A+ S&P The credit ratings are based on the Long-Term Issuer Ratings published by the rating agency. 35

38 The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. ## Group credit ratings are presented for unrated subsidiaries. (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 unitholders redemptions. 13. RELATED PARTY TRANSACTIONS In addition to the related party information shown elsewhere in the financial statements, the following significant transaction took place during the financial year between the Fund and related parties at terms agreed between the parties and within the provisions of the Trust Deed: $ $ Registration fee charged by a related company of the Trustee 23,607 23,561 36

39 14. FINANCIAL RATIOS % % Expense ratio Portfolio turnover ratio The expense ratio does 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. 2 The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. 37

40 Disclaimer This publication is for information only. It is not an offer or solicitation for the purchase or sale of any securities/investments and does not have regard to your specific investment objectives, financial situation or particular needs. All applications for units in our funds must be made on application forms accompanying the prospectus. You should read the prospectus, available from Lion Global Investors Limited ( Lion Global Investors ) or any of its approved distributors, before deciding whether to subscribe for or purchase units of the Fund. Investments in the Fund are not obligations of, deposits in, guaranteed or insured by Lion Global Investors or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The value of units in the Fund and the income accruing to the units, if any, may rise or fall. Past performance, as well as any prediction, projection, or forecast on the economy, securities market, or the economic trends of the markets are not necessarily indicative of the future or likely performance of the funds. Any opinion or view presented is subject to change without notice. Accordingly, no warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on any information, opinion, forecast, or estimate contained herein. You may wish to seek advice from a financial adviser before making a commitment to purchase the Fund. In the event that you choose not to seek advice from a financial adviser, you should consider carefully whether the Fund is suitable for you. Lion Global Investors, its related companies, their directors and/or employees (collectively known as Related Persons ) may have positions in the products mentioned in this publication. Lion Global Investors and its Related Persons may be engaged in purchasing or selling the products mentioned in this publication for themselves or their client. Lion Global Investors does not take into consideration the tax implications of the income earned as the tax position of each person is different. You are advised to seek independent tax advice on your personal tax position arising from investing in the product in question. Lion Global Investors Limited. All rights reserved. Lion Global Investors Limited is a Singapore incorporated company, and is not related to any corporation or trading entity that is domiciled in Europe or the United States (other than entities owned by its holdings companies). This publication may be translated into the Chinese language. In the event of any ambiguity, discrepancy or omission between the English and Chinese versions, the English version shall apply and prevail. In the event of any ambiguity, discrepancy or omission between this publication and the prospectus, the contents of the prospectus shall apply and prevail.

41 Lion Global Investors Limited 65 Chulia Street #18-01, OCBC Centre Singapore Tel: (65) Fax: (65) Co Reg No: D A member of the OCBC Group