United Asia Active Allocation Fund

Transcription

1 United Asia Active Allocation Fund Annual Report for the financial year ended 31 st December 2017

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3 MANAGER UOB Asset Management Ltd Registered Address: 80 Raffles Place UOB Plaza Singapore Company Registration No. : Z Tel: DIRECTORS OF UOB ASSET MANAGEMENT Lee Wai Fai Eric Tham Kah Jin Peh Kian Heng Thio Boon Kiat TRUSTEE State Street Trust (SG) Limited 168 Robinson Road #33-01, Capital Tower Singapore CUSTODIAN / ADMINISTRATOR / REGISTRAR State Street Bank and Trust Company, acting through its Singapore Branch 168 Robinson Road #33-01, Capital Tower Singapore AUDITOR PricewaterhouseCoopers LLP 7 Straits View, Marina One East Tower, Level 12 Singapore

4 A) Fund Performance 3 mth % Growth 6 mth % Growth 1 yr % Growth 3 yr Ann Comp Ret 5 yr Ann Comp Ret Since Inception 13 November 10 yr 2007 Ann Ann Comp Comp Ret Ret Fund Performance/ Benchmark Returns United Asia Active Allocation Fund N/A Benchmark N/A Source: Note: Lipper, a Thomson Reuters Company. The performance returns of the Fund are in Singapore Dollar based on a NAV-to-NAV basis with net dividends and distributions reinvested, if any. The benchmark of the Fund: Feb 08 Jan 11; Composite of 40% MSCI AC FE Ex Japan, 20% MSCI AC Asia Pacific Ex Japan Small Cap Index and 40% JP Morgan Asia Credit Index TR; Feb 11 - Nov 16; 40% MSCI AC FE ex Japan, 20% MSCI AC Asia Pacific ex Japan Mid Cap Index and 40% JP Morgan Asia Credit Index TR. Nov16-Current; Composite of 60% MSCI AC Asia ex Japan and 40% JP Morgan Asia Credit Index Total Return Composite. For the year ended 31 December 2017, the net asset value of the Fund increased by 15.47%, compared with an increase of 16.77% in the composite benchmark, consisting of 40% JPM Asia Credit Index, 40% MSCI Far East ex Japan and 20% MSCI AC Asia Pacific ex Japan Mid Cap Index. The fixed income fund (United Asian Bond Fund), in which the Fund is invested, achieved a return of -2.1% versus the fixed income benchmark (JPM Asia Credit Index) of -2.2% in the review period. The United Asia Fund achieved a return of 31.0% and the United Asian Growth Opportunities Fund achieved a return of 16.2% during the period. During the period the Fund benefited from being overweight on equities with each of the underlying funds slightly below their respective benchmarks. As of the end of the period the Fund was invested 58.59% in the United Asia Fund, 30.31% in the United Asian Bond Fund and10.86% in the United Asian Growth Opportunities Fund (for a total equity weight of 69.45%). This positioning was an overweight on equities compared to the benchmark which constitutes 60% equities and 40% bonds. The Fund was overweight on equities throughout the first half of Economic and Market Review For the full year 2017, global equities posted a strong performance, with the MSCI World All Country Index delivering a 15.1% return in Singapore Dollar (SGD) terms. Asian equity markets were among the stronger performs with the MSCI Asia ex Japan Index gaining 31% in SGD terms. Asian markets saw strong double digit returns across all markets. The Indian market was up 29%, Korea was up 27%, Taiwan was up 20%, China H shares were up 20% and Singapore was up 22%. Measured in USD, global fixed income returns were reasonable. Broad indices including the Barclays Global Aggregate yielded a return of 1.5% in USD terms (if hedged to SGD). On an unhedged basis, the fixed income returns would fall 1.4% measured in SGD terms. This underscores the importance of hedging strategies when investing in fixed income. Financial markets showed major divergences going into The US Dollar, which had appreciated sharply after the US Presidential election in November 2016 in anticipation of stronger growth and higher interest rates, started to weaken in early US Treasury (UST) yields, which had spiked post-election, also began to ease, as the new Trump administration was seen to unable to push through some of its policy initiatives. Asian equity markets performed strongly throughout 2017, as investors took comfort in improving regional economic data and corporate earnings. Global equity markets took the cue from the US and climbed the wall of worries, shrugging off geo-political risks in the form of missile testing in North Korea, a French Presidential election that could have elected an anti-euro right-wing candidate, a political spat between Saudi Arabia and Qatar in the Middle East, and a series of political missteps and allegations of possible misconducts by the new US President. -2-

5 A) Fund Performance (continued) By the second half of the year, equity markets gained even more confidence as geo-political risks subsided. Meanwhile, economic data showed continued momentum and synchronized growth globally, with most Purchasing Manager Indices (PMIs) across the world reaching multi-year highs. Asia ex-japan stood out as an outperformer as China s economy slowed down less than market expected, and the country saw a smooth leadership transition within the Central Politburo. Strong performance in global technology companies further supported Asia as both Asian hardware and internet companies drove the positive equity market performance. The US Federal Reserve hiked interest rates three times during the year, and began to shrink its balance sheet in October by gradually reducing the amount it would reinvest as its bond holdings mature. While these would have previously been seen as monetary tightening measures and cause UST yield to spike, bond markets took it in good stride with 10-year UST yield rising only marginally in the fourth quarter. This put upward pressure on regional rates and Asian fixed income issues that are based in USD. The upward rate trends were partly offset by tightening credit spreads throughout the year and Asian fixed income markets were able to produce positive results in local currency issues, or if in the case of USD issues, if currency hedging strategies were employed. Outlook and Fund Strategy The current cycle is mature by historical standards and at a stage when market observers are monitoring for signs of a slowdown. As it is into its ninth year, and veering close to the record of 10 years of expansion set in the 1990 s, some investors view this as a cause for concern and reason to cut risk exposure. However, our checklist of indicators are telling us that the cycle has not yet peaked nor about to come to an end. The checklist includes the shape of the yield curve, momentum of leading indicators, recession probability models, excessive credit expansion, financial stress indicators, market indicators such as asset correlations, as well as spreads between investment grade and high yield bonds, with none signaling that recession is imminent. Our view is that because the pace of this recovery cycle has been more modest than usual, we suspect this length of this cycle will extend for a couple of more years. We do not have the evidence of overheating which usually indicates the start of the next downturn. Instead, economic momentum continues to surprise to the upside, with growth being broad-based and synchronised globally. Continued global growth is a positive backdrop for Asian equity markets. While Asian economies have become less dependent on exports to markets like the US and more dependent on domestic consumption, broad based global demand will still be a net positive. Asian markets are benefiting from a healthy balance of improving domestic consumption, improving net exports, stronger currencies, and more stable commodity markets. With such as backdrop, we will therefore start 2018 with the recommendation to overweight equities and commodities, and to underweight fixed income and cash. We continue to believe that Asia s mostly favourable demographic trends and rising incomes underpin the long-term growth and investment case. Our strategy is to take advantage of these structural opportunities by investing in companies that have sound business models, are positioned in segments offering attractive growth and that have demonstrated operational and financial discipline in the way they manage their businesses. -3-

6 B) Investments at fair value and as a percentage of net asset value ( NAV ) as at 31 December 2017 under review classified by i) Country Fair Value (S$) % of NAV Singapore 4,263, Portfolio of investments 4,263, Other net assets/(liabilities) 10, Total 4,273, ii) Industry N/A iii) Asset Class Fair Value (S$) % of NAV Quoted unit trusts 4,263, Other net assets/(liabilities) 10, Total 4,273, iv) Credit rating of quoted bonds N/A C) Top Ten Holdings 10 largest holdings as at 31 December 2017 Fair Value (S$) Percentage of total net assets attributable to unitholders % UNITED ASIA FUND 2,503, UNITED ASIAN BOND FUND - CLASS SGD 1,295, UNITED ASIAN GROWTH OPPORTUNITIES FUND 463, There were only 3 holdings as at 31 December

7 C) Top Ten Holdings (continued) 10 largest holdings as at 31 December 2016 Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED ASIA FUND 2,375, UNITED ASIAN BOND FUND - CLASS SGD 2,242, UNITED ASIAN GROWTH OPPORTUNITIES FUND 956, There were only 3 holdings as at 31 December D) Exposure to derivatives i) Fair value of derivative contracts and as a percentage of NAV as at 31 December 2017 N/A ii) Net gains/(losses) on derivative contracts realised during the financial year ended 31 December 2017 N/A iii) Net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2017 N/A E) Amount and percentage of NAV invested in other schemes as at 31 December 2017 Please refer to the Statement of Portfolio. F) Amount and percentage of borrowings to NAV as at 31 December 2017 N/A G) Amount of redemptions and subscriptions for the financial year ended 31 December 2017 Total amount of redemptions SGD 2,005,147 Total amount of subscriptions SGD 280,840 H) The amount and terms of related-party transactions for the financial year ended 31 December 2017 Please refer to Note 10 of the Notes to the Financial Statements. I) Expense ratios Please refer to Note 11 of the Notes to the Financial Statements. -5-

8 J) Turnover ratios Please refer to Note 11 of the Notes to the Financial Statements. 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 31 December 2017 and 31 December largest holdings as at 31 December 2017 United Asia Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % SAMSUNG ELECTRONICS CO LTD 4,468, TENCENT HOLDINGS LTD 4,164, ALIBABA GROUP HOLDING LTD 3,686, TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD 3,091, NCSOFT CORP 1,737, AIA GROUP LTD 1,709, PING AN INSURANCE GROUP CO OF CHINA 1,668, CELLTRION HEALTHCARE CO LTD 1,587, UNITED OVERSEAS BANK LTD 1,519, CITY DEVELOPMENTS LTD 1,498,

9 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) i) Top 10 holdings at fair value and as percentage of NAV as at 31 December 2017 and 31 December 2016 (continued) 10 largest holdings as at 31 December 2016 United Asia Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % SAMSUNG ELECTRONICS CO LTD 4,289, TENCENT HOLDINGS LTD 2,651, TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD 1,871, ALIBABA GROUP HOLDING LTD 1,839, CNOOC LTD 1,445, UNITED OVERSEAS BANK LTD 1,376, ANHUI CONCH CEMENT CO LTD 1,376, TAIWAN MOBILE CO LTD 1,165, SUN HUNG KAI PROPERTIES LTD 1,132, SHINHAN FINANCIAL GROUP 1,082, largest holdings as at 31 December 2017 United Asian Bond Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED ASIAN HIGH YIELD BOND FUND - CLASS SGD DIST 11,391, IND + COMM BK OF CHINA SUBORDINATED REGS 09/ ,083, PERUSAHAAN LISTRIK NEGAR SR UNSECURED REGS 05/ ,710, KOREA GAS CORP SR UNSECURED REGS 07/ ,148, RHB BANK SR UNSECURED REGS 10/ ,002, PERUSAHAAN LISTRIK NEGAR SR UNSECURED REGS 11/ ,355, YESTAR HEALTHCARE HLD CO SR UNSECURED REGS 09/ ,139, DAH SING BANK LTD SUBORDINATED REGS 01/24 VAR 4,086, EHI CAR SERVICES LTD COMPANY GUAR REGS 08/ ,079, SHOUGANG CORP SR UNSECURED REGS 12/ ,018,

10 L) For schemes which invest more than 30% of their deposited property in another scheme, the following key information on the second-mentioned scheme ( the underlying scheme ) 1 should be disclosed as well (continued) i) Top 10 holdings at fair value and as percentage of NAV as at 31 December 2017 and 31 December 2016 (continued) 10 largest holdings as at 31 December 2016 United Asian Bond Fund Percentage of total net assets attributable to Fair Value unitholders (S$) % UNITED ASIAN HIGH YIELD BOND FUND CLASS SGD DIST 12,200, NDUSTRIAL & COMMERCIAL BANK OF CHINA LIMITED 4.875% DUE 21/09/2025 7,409, CHINA RAILWAY XUNJIE COMPANY LIMITED 3.25% DUE 28/07/2026 6,834, KOREA GAS CORPORATION 3.5% DUE 21/07/2025 5,541, RHB BANK BERHAD 2.503% DUE 06/10/2021 5,252, PERUSAHAAN LISTRIK NEGARA PT 5.5% DUE 22/11/2021 4,643, DAH SING BANK LIMITED 5.25% DUE 29/01/2024 4,476, YESTAR INTERNATIONAL HOLDINGS COMPANY LIMITED 6.9% DUE 15/09/2021 4,428, MPM GLOBAL PRIVATE LIMITED 6.75% DUE 19/09/2019 4,427, TINGYI CAYMAN ISLANDS HOLDING CORPORATION 3.875% DUE 20/06/2017 4,360, ii) Expense ratios for the financial year ended 31 December 2017 and 31 December 2016 United Asia Fund 31 December % 31 December % United Asian Bond Fund - Class SGD 31 December % 31 December % 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 underlying scheme s expense ratio at 31 December 2017 was based on total operating expenses divided by the average net asset value respectively for the financial year. 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 underlying scheme does not pay any performance fee. The average net asset value is based on the daily balances. -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) iii) Turnover ratios for the financial year ended 31 December 2017 and 31 December 2016 United Asia Fund 31 December % 31 December % United Asian Bond Fund 31 December % 31 December % Note: 1 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 divided by the average daily net asset value. 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. 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. 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 pre-determined payouts N/A -9-

12 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and hold the assets of United Asia Active Allocation 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, the Trustee shall monitor the activities of the Manager for compliance with the limitations imposed on the investment and borrowing powers as set out in the Trust Deed in each annual accounting year and report thereon to unitholders in an annual report. To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Fund during the financial year covered by these financial statements, set out on pages 14 to 31, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed. For and on behalf of the Trustee STATE STREET TRUST (SG) LIMITED Authorised signatory 29 March

13 STATEMENT BY THE MANAGER In the opinion of UOB Asset Management Ltd, the accompanying financial statements set out on pages 14 to 31, comprising the Statement of Total Return, Statement of Financial Position, Statement of Movements of Unitholders Funds, Statement of Portfolio and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the financial position and portfolio holdings of United Asia Active Allocation Fund (the Fund ) as at 31 December 2017, and the financial performance and movements of unitholders funds 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 Singapore Chartered Accountants. At the date of this statement, there are reasonable grounds to believe that the Fund will be able to meet its financial obligations as and when they materialise. For and on behalf of the Manager UOB ASSET MANAGEMENT LTD THIO BOON KIAT Authorised signatory 29 March

14 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED ASIA ACTIVE ALLOCATION FUND Our Opinion In our opinion, the accompanying financial statements of United Asia Active Allocation Fund (the Fund ), are properly drawn up in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants, so as to present fairly, in all material respects, the financial position and portfolio holdings of the Fund as at 31 December 2017, and of the financial performance and movements of unitholders funds for the financial year ended on that date. What we have audited The financial statements of the Fund comprise: the Statement of Total Return for the financial year ended 31 December 2017; the Statement of Financial Position as at 31 December 2017; the Statement of Movements of Unitholders Funds for the financial year ended 31 December 2017; the Statement of Portfolio as at 31 December 2017; and the notes to the financial statements, including a summary of significant accounting policies. Basis for Opinion We conducted our audit in accordance with Singapore Standards on Auditing ( SSAs ). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence We are independent of the Fund in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities ( ACRA Code ) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. Other Information The Fund s Manager (the Manager ) is responsible for the other information. The other information comprises all sections of the annual report but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager for the Financial Statements 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 Singapore Chartered Accountants 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. -12-

15 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED ASIA ACTIVE ALLOCATION FUND In preparing the financial statements, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to terminate the Fund or to cease the Fund s operations, or has no realistic alternative but to do so. The Manager s responsibilities include overseeing the Fund s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. PricewaterhouseCoopers LLP Public Accountants and Chartered Accountants Singapore, 29 March

16 STATEMENT OF TOTAL RETURN For the financial year ended 31 December Note $ $ Income Dividends 71, ,162 Total 71, ,162 Less: Expenses Management fee 10 74,722 87,543 Less: Management fee rebate 10 (60,731) (68,575) Trustee fee 10 5,025 5,000 Audit fee 16,043 14,900 Registrar fee 10 15,224 15,000 Valuation fee 10 6,228 7,295 Custody fee 10 4,317 1,864 Interest expenses - 37 Other expenses 58,613 27,445 Total 119,441 90,509 Net income/(losses) (48,163) 13,653 Net gains/(losses) on value of investments Net gains/(losses) on investments 763,292 44,966 Net foreign exchange gains/(losses) 523 (1,185) 763,815 43,781 Total return/(deficit) for the year before income tax 715,652 57,434 Income tax 3 12,761 (18,902) Total return/(deficit) for the year 728,413 38,532 The accompanying notes form an integral part of these financial statements. -14-

17 STATEMENT OF FINANCIAL POSITION As at 31 December Note $ $ Assets Portfolio of investments 4,263,412 5,575,148 Receivables 5 26,755 36,214 Cash and bank balances 82,121 65,872 Total assets 4,372,288 5,677,234 Liabilities Payables 6 49, ,301 Distribution payable 4 48,747 69,353 Total liabilities 98, ,654 Equity Net assets attributable to unitholders 7 4,273,787 5,493,580 The accompanying notes form an integral part of these financial statements. -15-

18 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the financial year ended 31 December Note $ $ Net assets attributable to unitholders at the beginning of the financial year 5,493,580 6,300,899 Operations Change in net assets attributable to unitholders resulting from operations 728,413 38,532 Unitholders contributions/(withdrawals) Creation of units 280, ,766 Cancellation of units (2,005,147) (861,022) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (1,724,307) (546,256) Distributions 4 (223,899) (299,595) Total increase/(decrease) in net assets attributable to unitholders (1,219,793) (807,319) Net assets attributable to unitholders at the end of the financial year 7 4,273,787 5,493,580 The accompanying notes form an integral part of these financial statements. -16-

19 STATEMENT OF PORTFOLIO As at 31 December 2017 Holdings at 31 December 2017 Fair value at 31 December 2017 $ Percentage of total net assets attributable to unitholders at 31 December 2017 % By Geography - Primary Quoted Unit Trusts SINGAPORE UNITED ASIA FUND 1,036,852 2,503, UNITED ASIAN BOND FUND - CLASS SGD 720,223 1,295, UNITED ASIAN GROWTH OPPORTUNITIES FUND 201, , TOTAL SINGAPORE 4,263, Portfolio of investments 4,263, Other net assets/(liabilities) 10, Net assets attributable to unitholders 4,273, The accompanying notes form an integral part of these financial statements. -17-

20 STATEMENT OF PORTFOLIO As at 31 December 2017 Percentage of total net assets attributable to unitholders at 31 December 2017 % Percentage of total net assets attributable to unitholders at 31 December 2016 % By Geography - Primary (Summary) Quoted Unit Trusts Singapore Portfolio of investments Other net assets/(liabilities) 0.24 (1.48) Net assets attributable to unitholders As the Fund invests only into three underlying Quoted Unit Trusts, no secondary representation is provided. The accompanying notes form an integral part of these financial statements. -18-

21 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2017 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1 General United Asia Active Allocation Fund (the Fund ) is a Singapore-registered trust fund constituted under a Trust Deed dated 15 August 2007 between UOB Asset Management Ltd (the Manager ) and HSBC Institutional Trust Services (Singapore) Limited (the Retired Trustee ). The Deed is governed by the laws of the Republic of Singapore. With effect from 1 April 2017, the Trustee of the Fund has changed from HSBC Institutional Trust Services (Singapore) Limited to State Street Trust (SG) Limited (the Trustee ). The investment objective of the Fund is to provide investors with medium to long term capital growth and regular distributions through investments in Asian large capitalisation companies equities, Asian small capitalisation companies equities, Asian fixed income and money market instruments. The assets of the Fund will primarily be invested into three Singapore-authorised open-ended collective investment schemes constituted in Singapore which are also managed by the Manager, namely the United Asia Fund, the United Asian Growth Opportunities Fund and the United Asian Bond Fund (a sub fund under the Singapore umbrella fund known as the United Choice Portfolios) (collectively, the Underlying Funds and each, an Underlying Fund ). Subscriptions and redemptions of the units are denominated in the Singapore Dollar and the United States Dollar. Investors may subscribe in the United States Dollar at the applicable rate of exchange from the Singapore Dollar. 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 held 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 Singapore Chartered Accountants. The Fund has adopted the following Singapore Financial Reporting Standards ( FRS ) and related amendments in accordance with the recommendations of the RAP 7 issued in March 2017 for annual periods beginning on or after 1 July 2016: (i) Consolidation and disclosure of interests in other entities FRS 110 Consolidated financial statements FRS 112 Disclosure of interests in other entities Amendments to FRS 110, FRS 112 and FRS 27 Investment entities FRS 110 and the amendments define an investment entity and introduce an exception from the consolidation requirements for investments entities. FRS 112 and the amendments require entities to disclose significant judgements and assumptions made in determining whether the entity controls, jointly controls, significantly influences or has some interests in other entities. Entities are also required to provide disclosure around certain structured entities. The amendments to FRS 112 introduce new disclosure requirements related to investment entities. (ii) Offsetting financial assets and liabilities disclosures Amendments to FRS 32 Financial instruments: Presentation - Offsetting financial assets and financial liabilities Amendments to FRS 107 Disclosures - Offsetting financial assets and financial liabilities The amendments to FRS 32 provide clarification on the offsetting criteria in FRS 32 and address inconsistencies in their application. -19-

22 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (a) Basis of preparation (continued) (ii) Offsetting financial assets and liabilities disclosures (continued) The amendments to FRS 107 require additional disclosures to enable users of the financial statements to evaluate the effect or the potential effects of netting arrangements, including rights of set-off associated with an entity s recognised financial assets and recognised financial liabilities, on the entity s financial position. The adoption of these new or amended FRS impacted the Fund s level of disclosures in certain of the above noted areas, but did not result in substantial changes to the accounting policies of the Fund and had no material effect on the amounts reported for the current or prior years. (b) Recognition of income Dividend income is recognised when the right to receive payment is established. Interest income is recognised on a time proportion basis using the effective interest method. (c) Investments Investments are classified as financial assets at fair value through profit or loss. (i) Initial recognition 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 changes in fair value on investments are included in the Statement of Total Return in the year in which they arise. (iii) Derecognition Investments are derecognised on the trade date of disposal. The resultant realised gains and losses on the sale of investments are computed on the basis of the difference between the weighted average cost and selling price gross of transaction costs, and are taken up in the Statement of Total Return. (d) Basis of valuation of investments The fair value of investments held in underlying funds is the quoted net asset value of the underlying funds as determined by the underlying funds administrator. Net changes in fair value of investments are included in the Statement of Total Return in the year in which they arise. (e) Foreign currency translation (i) Functional and presentation currency The Fund s investors are mainly from Singapore with the subscriptions and redemptions of the units denominated in the Singapore Dollar and the United States Dollar. The performance of the Fund is measured and reported to the investors in the Singapore Dollar. The Manager considers the Singapore Dollar as the currency of the primary economic environment in which the Fund operate. The financial statements are presented in the Singapore Dollar, which is the Fund s functional and presentation currency. -20-

23 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (e) Foreign currency translation (continued) (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Total Return. Translation differences on non-monetary financial assets and liabilities are also recognised in the Statement of Total Return within Net gains/losses on investments. (f) Expenses charged to the Fund All direct expenses relating to the Fund are charged directly to the Statement of Total Return. In addition, certain expenses shared by all unit trusts managed by the Manager are allocated to each fund based on the respective fund s net asset value. (g) Management fee rebates The management fees charged on investments in underlying funds managed by the Manager are rebated to the Fund. (h) Financial derivatives Financial derivatives including forwards and swaps may be entered into for the purposes efficient portfolio management, tactical asset allocation or specific hedging of financial assets held as determined by the Manager and in accordance with the provision of the Trust Deed and the Code on Collective Investment Schemes. Financial derivatives outstanding on the financial year end date are valued at the forward rate or at the current market prices using the mark-to-market method, as applicable, and the resultant gains and losses are taken up in the Statement of Total Return. (i) Distributions The Manager has 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. Distributions are accrued for at the financial year end date if the necessary approvals have been obtained and a legal or constructive obligation has been created. (j) Structured entities A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes: (a) restricted activities, (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors, (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). The Fund considers all of their investments in other funds ( Investee Funds ) to be investments in unconsolidated structured entities. The Fund invests in Investee Funds whose objectives range from achieving short to long term capital growth and whose investment strategy does not include the use of leverage. The Investee Funds are managed by unrelated/related asset managers and the Investee Funds apply various investment strategies to accomplish their respective investment objectives. The Investee Funds finance their operations by issuing redeemable shares which are puttable at the holder s option and entitles the holder to a proportional stake in the respective fund s net assets. The Fund holds redeemable shares in each of its Investee Funds. -21-

24 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (j) Structured entities (continued) The change in fair value of the Investee Funds are included in the Statement of Total Return within Net gains/losses on investments. 3 Income tax $ $ - Current income tax 8,312 18,902 - Over-provision of prior year s income tax (21,073) - Singapore income tax (12,761) 18,902 The Fund was granted the status of Designated Unit Trust ( DUT ) in Singapore. The Trustee of the Fund ensures that the Fund fulfill their reporting obligations under the DUT Scheme. Under the DUT Scheme, subject to certain conditions and reporting obligations being met, certain income of the DUT Fund is not taxable in accordance with Sections 35(12) and 35(12A) of the Income Tax Act. Such income includes: (i) (ii) (iii) (iv) (v) (vi) 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; 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; discount, prepayment fee, redemption premium and break cost from qualifying debt securities issued during the prescribed period; and distributions from foreign unit trusts derived from outside Singapore and received in Singapore. The Singapore income tax represents tax deducted at source for Singapore sourced dividends. -22-

25 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Distributions Per 100 units Amount Per 100 units Amount $ $ $ $ March interim distribution on units outstanding as at 3 April 2017 (2016: 1 April 2016) , ,070 June interim distribution on units outstanding as at 3 July 2017 (2016: 1 July 2016) , ,332 September interim distribution on units outstanding as at 2 October 2017 (2016: 3 October 2016) , ,840 December final distribution on units outstanding as at 2 January 2018 (2017: 3 January 2017) , , , ,595 5 Receivables $ $ Amounts receivable for creation of units - 1,097 Dividends receivable 5,420 9,346 Management fee rebate receivable 13,719 16,849 Other receivables 7,616 8,922 26,755 36,214 6 Payables $ $ Amount payable for cancellation of units - 42,060 Amount due to the Manager 18,462 23,279 Amount due to Trustee 1,274 1,249 Tax payables 9,900 - Other creditors and accrued expenses 20,118 47,713 49, ,

26 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Units in issue During the financial year ended 31 December 2017 and 2016, the numbers of units issued, redeemed and outstanding were as follows: Units at the beginning of the financial year 8,576,298 9,433,574 Units created 416, ,520 Units cancelled (2,923,690) (1,349,796) Units at the end of the financial year* 6,068,666 8,576,298 *Included above are units denominated in USD 537, ,855 $ $ Net assets attributable to unitholders 4,273,787 5,493,580 Net assets value per unit Distributions are accrued for at the financial year end date if the necessary approvals have been obtained and a legal or constructive obligation has been created, for the purpose of determining the accounting net asset values in the financial statements. A reconciliation of the net assets attributable to unitholders per unit per the financial statements and the net assets attributable to unitholders per unit for issuing/redeeming units at the financial year end date is prepared below: $ $ Net assets attributable to unitholders per financial statements per unit Effect of distribution payable Effect of movement in the net asset value between the last dealing date and the end of the reporting period* Effect of dividend receivable (0.001) - Net assets attributable to unitholders for issuing/redeeming per unit * The net asset value for the purpose of processing unit subscription and redemption was established in accordance with the methodology indicated in the Fund s Prospectus. This item reflects the movement in net asset value between such date and the end of the financial year. 8 Financial risk management The Fund s activities expose it to a variety of market risks (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 futures contracts, financial options contracts and/or foreign currency 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. -24-

27 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) The Fund s assets principally consist of investments in the Underlying Funds which are managed by UOB Asset Management Limited as provided in Note 1 to the financial statements. They are held in accordance with the published investment policies of the Fund. The allocation of assets between the various types of investments is determined by the Manager to achieve its investment objectives. (a) Market risk Market risk is the risk of loss arising from uncertainty concerning movements in market prices and rates, including observable variables such as interest rates, credit spreads, exchange rates, and others that may be only indirectly observable such as volatilities and correlations. Market risk includes such factors as changes in economic environment, consumption pattern and investor s expectation etc. which may have significant impact on the value of the investments. The Fund s investments are substantially dependent on changes in market prices and are monitored by the Manager on a regular basis so as to assess changes in fundamentals and valuation. Although the Manager makes reasonable efforts in the choice of investments, events beyond reasonable control of the Manager could affect the prices of the underlying investments and hence the asset value of the Fund. Guidelines are set to reduce the Fund s risk exposures to market volatility such as diversifying the portfolio by investing across various geographies, alternatively, the Fund may be hedged using derivative strategies. (i) Foreign exchange risk The Fund s assets and liabilities are significantly denominated in the Singapore Dollar, being the functional currency of the Fund. Consequently, the Fund has not disclosed any currency risk sensitivity analysis. The table below summarises the Fund s exposure to foreign currencies as of the end of the financial year. As at 31 December 2017 SGD USD Total $ $ $ Assets Portfolio of investments 4,263,412-4,263,412 Receivables 26,755-26,755 Cash and bank balances 81, ,121 Total Assets 4,371, ,372,288 Liabilities Payables 49,754-49,754 Distribution payable 44,730 4,017 48,747 Total Liabilities 94,484 4,017 98,501 Net currency exposure 4,277,258 (3,471) -25-

28 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (a) Market risk (continued) (i) Foreign exchange risk (continued) As at 31 December 2016 SGD USD Total $ $ $ Assets Portfolio of investments 5,575,148-5,575,148 Receivables 36,214-36,214 Cash and bank balances 64,458 1,414 65,872 Total Assets 5,675,820 1,414 5,677,234 Liabilities Payables 114, ,301 Distributions payable 65,205 4,148 69,353 Total Liabilities 179,506 4, ,654 Net currency exposure 5,496,314 (2,734) (ii) Price risk Price risk is the risk of potential adverse changes to the value of financial investments because of changes in market conditions and volatility in security prices. The table below summarises the impact of increases/decreases from the Fund s investments in Investee Funds on the Fund s net assets attributable to unitholders at 31 December 2017 and The analysis is based on the assumption that the index components within the benchmark increased/decreased by a reasonable possible shift, with all other variables held constant and that the fair value of the Fund s investments moved according to the historical correlation with the index. Benchmark component 2017 Net impact to net assets attributable to unitholders 2016 Net impact to net assets attributable to unitholders $ % $ % JP Morgan Asia Credit Index Total Return Composite (Benchmark of United Asian Bond Fund) 249, , MSCI AC Asia ex Japan (Benchmark of United Asia Fund) 500, , MSCI AC Asia Pacific ex Japan Mid Cap Index (Benchmark of United Asian Growth Opportunities Fund) 88, ,

29 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (a) Market risk (continued) (iii) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Investment funds that invest in equity securities may be subject to interest rate risk as any interest rate change may affect the equity risk premium though at varying degrees. To manage this risk, the Manager analyses how interest rate changes may affect different industries and securities and then seeks to adjust the Fund s portfolio investments accordingly. However, the effects of changes in interest rates on the Fund s portfolio may not be quantified as the relationship between the interest rates and the value of equity securities is indirect. Other than the cash and bank balances which are at short term market interest rates, and therefore subject to insignificant interest rate risk, the Fund s financial assets and liabilities are largely non-interest bearing. Hence, no sensitivity analysis has been presented separately. (b) Liquidity risk The Fund is exposed to daily cash redemptions and disbursements for the settlements of purchases. The Manager therefore ensures that the Fund maintains sufficient cash and cash equivalents and that it is able to obtain cash from the sale of investments held to meet its liquidity requirements. Reasonable efforts will be taken to invest in securities which are traded in a relatively active market and which can be readily disposed of. The Fund s investments in other funds are considered to be readily realisable as the net asset value is struck daily, and units are redeemable on demand at the published price. The table below analyses the Fund s financial liabilities into relevant maturity groupings based on the remaining period at the financial year end date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. Less than 3 months 3 months to 1 year Over 1 year $ $ $ As at 31 December 2017 Payables 49, Distribution payable 48, Less than 3 months 3 months to 1 year Over 1 year $ $ $ As at 31 December 2016 Payables 114, Distribution payable 69,