United Asia Active Allocation Fund

Transcription

1 United Asia Active Allocation Fund Semi Annual Report for the period 1 st January to 30 th June 2013

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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 State Street Financial Center One Lincoln Street Boston, Massachusetts 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 Drew & Napier LLC 10 Collyer Quay #10-01, Ocean Financial Centre Singapore

4 A) Fund Performance Fund Performance/ Benchmark Returns 3 mth % Growth 6 mth % Growth 1 yr % Growth 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 13 November 2007 Ann Comp Ret United Asia Active Allocation Fund NA Benchmark NA 0.58 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. The benchmark of the Fund: Feb 08- Jan 11; 40% MSCI AC FE Ex Japan, 20% MSCI AC Asia Pacific Ex Japan Small Cap Index and 40% JP Morgan Asia Credit Index TR; from Feb 11 Current; 40% MSCI AC FE ex Japan, 20% MSCI AC Asia Pacific ex Japan Mid Cap Index and 40% JP Morgan Asia Credit Index TR. For the six months ended 30 June 2013, the net asset value of the Fund increased by 1.8%, compared with the decline of 1.2% in the composite benchmark for a net outperformance of 3.0%. The fixed income portion, which took up 23.4% of the Fund on average, achieved a return of -2.6% versus the fixed income benchmark (a 40% weighting in the JPM Asia Credit Index) of -0.5% in the first half. The equity portion, which made up of 74.8% of the Fund, achieved a return of 8.5% versus the equity benchmark (40% MSCI Far East ex Japan and 40% MSCI AC Asia Pac ex Japan) return of -1.2%. The healthy performance over the past year has help raise its longer term track record. On a three year basis the Fund is up 0.6% over the benchmark with a return of 4.2% versus the benchmark return of 3.6%. The Fund stayed overweight Asian equities throughout the period, staying over 70% weighted in equities versus the benchmark weight of 60%. This allocation was based on the view that the global recovery remained on track, and that Asian growth should benefit from those trends. At the same time, we acknowledged the risks of rising interest rates alongside the recovery, and that they could exert pressure on fixed income Funds. As it turned out, both Asian equities and fixed income retreated as fears of QE tapering exerted pressure on Asian markets. For example, Asian equities were down -1.2% and Asian fixed income at -0.5% at the index levels. Overall, the Fund still outperformed due to good stock selection outperformance generated by the equity Funds. For example, the United Asian Growth Opportunities Fund achieved returns far ahead of its benchmark as the Fund was up 8.94%, while its benchmark was down 1.3%. United Asia Fund For the six months ended 30 June 2013, the net asset value of the Fund fell 1.5%, compared with a 2.1% decrease in the benchmark MSCI AC Asia ex-japan index in Singapore dollar terms. The Fund s outperformance was helped by positive sector allocation decisions, namely its overweight exposure in consumer staples and discretionary sectors which outperformed the market and its underweight positions in energy, material and industrial sectors which performed poorly during the review period. 2

5 However, performance was affected by securities selection, most notably in the energy and healthcare sectors. Stock counters that contributed to performance included AAC Technologies (IT), Thai Beverage (consumer staples), SaSa and Galaxy Entertainment (consumer discretionary), and Bank Rakyat Indonesia (financial). The key detractors were China Coal Energy (energy) and Celltrion (healthcare). The Fund kept its underweight exposure in cyclical sectors such as energy, materials and industrial sectors going into the second half of the year. As at end June 2013, the Fund had the following regional asset allocation: China (24.0%), Hong Kong (17.5%), South Korea (14.0%), India (6.7%), Thailand (5.3%), Taiwan (7.6%), Indonesia (9.9%), Singapore (6.0%), Others (5.0%) and the remainder in cash (4.0%). United Asian Growth Opportunities Fund For the six months ended 30 June 2013, the net asset value of the Fund increased by 8.9%, compared with a 1.3% decrease in the benchmark MSCI AC Asia Pacific ex-japan Mid-cap index 1 in Singapore dollar terms. The outperformance over this period was largely driven by contributions from Indonesia, Thailand, Hong Kong and Singapore. Over this period the Fund did well in terms of both stock selection and allocation effects. In terms of stock selection, we did less favorably in markets like Taiwan and China. Financials, consumer staples and consumer discretionary stocks contributed most to the performance of the Fund over the period. Our underweight in the information technology and healthcare sectors detracted from performance. Key contributors to performance included Super Group (consumer), Galaxy Entertainment (consumer) and Lippo Cikarang (property). Names that detracted from performance included PT Indomobil Sukses Internasional (consumer), Insyde Software (information technology) and Nexen Tire (consumer). For the period, the Fund benefited from an overweight in Southeast Asia (Asean) stocks, especially in the real estate and consumer sectors. In particular, we were overweight in Thailand, the Philippines and Indonesia. However, talk of a premature tapering of the Fed s Quantitative Easing (QE) policy spooked investors, and they took profits on Asean markets despite their stellar performance in previous years. In Indonesia, the government s move to cut its fuel subsidy also contributed to a decline in the stock market. As a result, the Fund gave back some of the performance made earlier in the year but still outperformed the index significantly for the review period. United Asian Bond Fund For the six months ended 30 June 2013, the Fund fell 2.6% on a net-asset-value basis, compared with a decline of 0.5% for the benchmark JP Morgan Asia Credit Index (JACI) Total Return Composite in Singapore dollar terms. 1 Previously (Dec 07-Jan11): MSCI AC Asia Pacific ex-japan Small Cap Index 3

6 The Fund s underperformance was due to its overweight in long duration bonds as well as exposure to local currency bonds. The Fund held several long duration bonds and these bonds took a severe hit as US treasury yield climb steeply in Q The Fund had exposure in SGD, AUD, NZD, CNY, EUR and GBP denominated Asian bonds. These six currencies strengthened against the USD by around 1.3%-4.3% in H but depreciated % against the USD in H As at end June 2013, the Fund had 40.7% in high grade credit, 42.9% in high yield and non-rated credits and around 16.45% in cash. It also carried an interest rate hedge of around 0.15% of NAV. As at end June 2013, the country allocation of the Fund was 22.54% in China, 10.86% in Australia, 23.65% in Hong Kong, 3.50% in Indonesia, 6.84% in Singapore, 2.51% in Mongolia and 1.01% in Philippines, and 11.60% in other countries. Market Review Since the end of the Global Financial Crisis, Asian markets regained their fast economic growth rates fairly quickly, and the investing community mostly focused on whether the developed markets could sustain their recovery. In many ways, the US appears to have established itself as achieving enough momentum to continue its recovery path. In particular, the US has been able to maintain its growth, despite significantly reducing its budget deficit from a peak of over 10% to the current year forecast of 4% according to the Congressional Budget Office. As a result, the US Fed Chairman indicated his confidence that the economic recovery is strong enough that the Fed can start reducing monetary policy support as well. Ironically, this statement of confidence by the US Fed has triggered strong negative movements in Asian stocks and bonds. The slight shift in US Fed s policy stance in possibly winding down some monetary policy support this year has had a fairly significant effect on the Asian equity and fixed income markets. The Asian economies in general were considered beneficiaries of the past several years of strong global liquidity and there have been increased concerns that they may suffer more as these policies are wound down. Historically, Asia has performed well during periods of policy tightening in the US, but this year there are concerns on US policy tightening coinciding with a slowing Asian economic cycle. Also, Asia has tended to benefit from better prospects in the developed markets and respond with even stronger performance, but this year bucked the trend with strong US markets weak Asian markets. The Asian market s weakness occurred as fund flows declined. This was because many investors viewed Asia as a beneficiary of US liquidity, and flow trends could reverse as US policy support wound down. Fundamentally, Asia has seen key economic metrics such as its current account levels and debt levels weaken, and there remains a lingering concern that a China slowdown could adversely affect most of Asia. In China, the country faces a number of key challenges such as a slowing economic growth and rising debt levels. The latest HSBC purchasing managers index (PMI) has been weak for several months in a row during the 1H13 period. This suggests that manufacturing growth momentum has weakened, and once again casts doubt on China s recovery. The latest consumption-related data, such as retail sales and disposable income growth, have also shown a softening trend. At the same time, while household debt level in China is still low, there has been a rapid rise in overall debt levels since 2009, especially through the non-bank financial channels. 4

7 Equities appear to have priced in most of these concerns, as the market valuation is now trading at well below its historical averages both on a price-to-earnings and price-to-book basis, and close to the lows of the global financial crisis in The structural growth opportunities in Asia remain underpinned by rising affluence, a huge population and favorable demographics. The MSCI Asia ex Japan Index declined 3.4% over the period. Fund Strategy and Outlook Our estimates suggest that long term expected return for Asian equities is still at a much higher level compared with fixed income, even though stock volatility is also higher. Our strategy remains to be generally biased to take advantage of the higher returns in equities, but with a view to tactically pull back equity exposures when there are spikes in volatility, correlations or financial stress. Throughout the first half of 2013, we had been overweight in equities due to signs that some of key risks in the world, such as a US double dip and Euro zone turmoil, were easing. Additionally, we saw rising duration risks for fixed income investments as the global economic recovery took hold. Asian equities were in fact outperforming fixed income markets through the middle of May. However, the pattern after the US Federal Reserve signaled that there could be an earlier than expected end to the QE. As many investors view Asia as a beneficiary of global fund flows from the US liquidity support, they are now concerned that Asian fixed income and equity markets might not hold up as these policies change. We see many long term strengths in many parts of Asia, but also believe that the investment markets will likely be volatile in Asia during this period of policy wind down. Investors will remain concerned that Asia s fundamentals are not as strong after several years of strong credit growth. The region will need some time and proof in economic data to convince investors that its fundamentals can hold up in the face of liquidity outflows back to the US. Our strategy would be to be more cautious in the second half of 2H13 and to neutralize the overweight in equities. We would expect to be close to a neutral weight in equities at 60% of the portfolio and a neutral weight in fixed income at 40% of the portfolio. At the same time, we would be looking out for evidence of either further deterioration in Asia s fundamentals to justify and underweight in equities or an improvement in Asia s fundamentals to justify an increase in the equity weight. In terms of regional allocation in Equities, we are overweight Southeast Asia as we continue to focus on countries with strong domestic consumers that should be more stable in the face to global economic volatility. Within the Fixed Income asset class, we are biased towards shorter duration, and we take on moderate credit risks in this environment. We maintain a focus on industrial and financial credits. Geographically, we are focusing on our top three markets of Hong Kong, China and Australia. We will seek out attractive yields across the region, but try to reduce our currency risks and keep our overall duration exposure moderate. 5

8 B) Investments at fair value and as a percentage of NAV as 30 June 2013 under review classified by i) Country Fair Value (S$) % of NAV Singapore 18,462, Portfolio of investments 18,462, Other net assets 344, Total 18,807, ii) Industry Unit Trust 18,462, Portfolio of investments 18,462, Other net assets 344, Total 18,807, iii) Asset Class Unit Trust 18,462, Other net assets 344, Total 18,807, iv) Credit rating of debt securities N/A C) Top Ten Holdings The top 3 holdings as at 30 June 2013 and 30 June largest holdings at 30 June 2013 Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED ASIA FUND 9,451, UNITED ASIAN GROWTH OPPORTUNITIES FUND 4,620, SGD Class UNITED ASIAN BOND FUND 4,390, There were only 3 holdings as at 30 June

9 C) Top Ten Holdings (continued) 3 largest holdings at 30 June 2012 Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED ASIA FUND 10,972, UNITED ASIAN BOND FUND 8,333, UNITED ASIAN GROWTH OPPORTUNITIES FUND 8,298, There were only 3 holdings as at 30 June 2012 D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 30 June 2013 N/A ii) net gains/(losses) on derivative contracts realised during the financial period ended 30 June 2013 N/A iii) net gains/(losses) on outstanding derivative contracts marked to market as at 30 June 2013 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 30 June Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED ASIA FUND 9,451, UNITED ASIAN GROWTH OPPORTUNITIES FUND 4,620, SGD Class UNITED ASIAN BOND FUND 4,390, F) Amount and percentage of borrowings to net asset value (NAV) as at 30 June 2013 N/A G) Amount of redemptions and subscriptions for the period 01 January 2013 to 30 June 2013 Total amount of redemptions SGD 5,796,066 Total amount of subscriptions SGD 706,272

10 H) The amount and terms of related-party transactions for the period 01 January 2013 to 30 June 2013 i) As at 30 June 2013 the Fund maintained current accounts with the United Overseas Bank Limited as follows: Bank balances SGD 45,807 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 30 June 2013 Affiliated Companies No. of Units Unit Price Market Value SGD SGD a) UOB Smart Asia Active Allocation Fund 16,502, ,667, iii) Investment in Initial Public Offerings managed by UOB Group. N/A iv) As at 30 June 2013 there was no brokerage income earned by UOB Kay Hian Pte Ltd. I) Expense ratios 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 ). This is the sum of the Fund s expense ratio and the weighted average of the Underlying Funds unaudited expense ratio of 1.30% (2012: 1.49%). The calculation of the expense ratio at 30 June 2013 was based on total operating expenses of $146,228 (2012: $230,707) divided by the average net asset value of $23,722,765 (2012: $31,440,162) 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 daily balances. The unaudited expense ratio of the underlying Funds are obtained from Underlying Funds Manager. J) Turnover ratios 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 $380,384 (2012: purchases of $8,329,030) divided by the average daily net asset value of $21,803,131 (2012: $30,072,721). K) Any material information that will adversely impact the valuation of the scheme such as contingent liabilities of open contracts N/A 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 i) top 10 holdings at fair value and as percentage of NAV as at 30 June 2013 and 30 June 2012 United Asia Fund 10 largest holdings at 30 June 2013 Percentage of total net assets attributable to Fair Value unitholders (S$) % SAMSUNG ELECTRONICS COMPANY LIMITED 6,948, TAIWAN SEMICONDUCTOR MFG CO LTD 4,594, KASIKORNBANK PCL - FOREIGN 3,990, AAC TECHNOLOGIES HOLDINGS LTD 3,297, HUTCHISON WHAMPOA 2,888, AIA GROUP LTD 2,762, ITC LTD 2,548, PT MATAHARI DEPARTMENT STORE TBK 2,535, PT BANK MANDIRI 2,442, MELCO INTERNATIONAL DEVELOPMENT LTD 2,373, largest holdings at 30 June 2012 Percentage of total net assets attributable to Fair Value unitholders (S$) % CNOOC LIMITED 5,030, SAMSUNG ELECTRONICS COMPANY LIMITED 4,649, HDFC BANK LIMITED 3,829, HON HAI PRECISION INDUSTRY 3,785, ITC LTD 3,524, HUTCHISON WHAMPOA LTD 3,475, PT BANK MANDIRI 3,471, HYUNDAI MOTOR COMPANY 3,342, PT SEMEN GRESIK (PERSERO) TBK 3,322, KASIKORNBANK PCL - FOREIGN 2,934, 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) ii) expense ratios for the financial period ended 30 June 2013 and 30 June 2012 United Asia Fund 30 June % 30 June % Note: The expense ratio is computed in accordance with the IMAS guidelines on disclosure of expense ratios dated 25 May It 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 on income received. The Fund does not pay any performance fees. iii) turnover ratios for the financial period ended 30 June 2013 and 30 June 2012 United Asia Fund 30 June % 30 June % Note: The turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. 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. 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 half year ended 30 June 2013 (Un-audited) 30 June 30 June $ $ Income Dividends 113, ,336 Less: Expenses Management fee 162, ,951 Less: Management fee rebate (136,402) (188,084) Trustee fee 4,324 5,999 Audit fee 6,299 6,332 Registrar fee 12,483 12,483 Valuation fee 13,511 18,746 Custody fee 2,999 1,829 Interest expenses Other expenses (9,490) ,521 84,006 Net income 57, ,330 Net gains or losses on value of investments Net gain on investments 417,179 1,019,270 Net foreign exchange gain 3,728 16, ,907 1,035,491 Total return for the period before income tax 478,361 1,159,821 Add: Tax refund - 67,959 Total return for the period 478,361 1,227,780 11

14 STATEMENT OF FINANCIAL POSITION As at 30 June 2013 (Un-audited) 30 June 31 December $ $ ASSETS Portfolio of investments 18,462,789 23,738,392 Receivables 79, ,580 Cash and bank balances 605, ,535 Total Assets 19,148,204 24,446,507 LIABILITIES Payables 100, ,361 Proposed distribution of income 239, ,891 Total Liabilities 340, ,252 EQUITY Net assets attributable to unitholders 18,807,679 23,921,255 12

15 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the half year ended 30 June 2013 (Un-audited) 30 June 31 December $ $ Net assets attributable to unitholders at the beginning of financial period/year 23,921,255 30,077,531 Operations Change in net assets attributable to unitholders resulting from operations 478,361 3,409,849 Unitholders contributions/(withdrawals) Creation of units 706,272 1,494,822 Cancellation of units (5,796,066) (9,742,313) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (5,089,794) (8,247,491) Distribution (502,143) (1,318,634) Total decrease in net assets attributable to unitholders (5,113,576) (6,156,276) Net assets attributable to unitholders at the end of financial period/year 18,807,679 23,921,255 13

16 STATEMENT OF PORTFOLIO As at 30 June 2013 (Un-audited) By Geography - Primary Percentage of total net assets attributable to Holdings at Fair value at unitholders 30 June 30 June at 30 June $ % SINGAPORE UNIT TRUST UNITED ASIA FUND 5,710,976 9,451, UNITED ASIAN BOND FUND 2,461,148 4,390, UNITED ASIAN GROWTH OPPORTUNITIES FUND - SGD Class 2,477,445 4,620, Portfolio of investments 18,462, Other net assets 344, Net assets attributable to unitholders 18,807, By Geography - Primary (Summary) Percentage of Percentage of total net assets total net assets attributable to attributable to unitholders unitholders at 30 June at 31 December % % SINGAPORE UNIT TRUST Portfolio of investments Other net assets Net assets attributable to unitholders As the Fund invests only into three underlying unit trusts, no secondary representation is provided.. 14

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