United Income Plus Fund. Annual Report 31 July 2018

Transcription

1 United Income Plus Fund Annual Report 31 July 2018

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3 UNITED INCOME PLUS FUND Audited Annual Report and Financial Statements For the Financial Year Ended 31 July 2018 TABLE OF CONTENTS PAGE NO (A) MANAGER S REPORT 2 (B) TRUSTEE S REPORT 11 (C) STATEMENT BY MANAGER 12 (D) INDEPENDENT AUDITORS' REPORT TO THE UNIT HOLDERS 13 (E) FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION 17 STATEMENT OF COMPREHENSIVE INCOME 18 STATEMENT OF CHANGES IN NET ASSET VALUE 19 STATEMENT OF CASH FLOWS 20 NOTES TO THE FINANCIAL STATEMENTS 21 (F) CORPORATE INFORMATION 50 1

4 (A) MANAGER S REPORT Dear Unitholders, We are pleased to present you the Manager s report and the audited accounts of United Income Plus Fund (the Fund ) for the financial year ended 31 July (1) Key Data of the Fund 1.1 Fund name United Income Plus Fund (the "Fund") 1.2 Fund category Fixed Income 1.3 Fund type Income & Growth 1.4 Investment The Fund seeks to provide investors with income and capital appreciation objective over the Medium to Long Term (i.e. a period of three (3) years or more) by investing primarily in fixed income securities with the remaining investing in equities and equity-related securities. 1.5 Performance With effective from 13 August 2015, the performance benchmark of the Fund benchmark has been changed as follows: 70% 12 month fixed deposit rate by Malayan Banking Berhad; (available at 30% FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) (available at Duration 1.7 Distribution policy 1.8 Breakdown of unit holdings by size Prior to that, the performance benchmark of the Fund was: 35% Quantshop All MGS Index; (available at 35% J.P. Morgan Asia Credit Investment Grade Index; (available at 15% FBM KLCI; and (available at 15% MSCI AC Asia Pacific ex Japan (available at The Fund was launched on 9 February 2015 and shall exist for as long as it appears to the Manager and Trustee that it is in the interests of the unit holders for it to continue. In some circumstances, the unit holders can resolve at a meeting to terminate the Fund. Subject to the availability of income, distribution will be paid on a quarterly basis. Distribution declared (if any) will be automatically reinvested into the unit holders accounts in the form of additional units in the Fund at no cost. As at 31 July 2018 Size of holding No. of No. of units held unit holders 5,000 and below 5,001 to 10,000 10,001 to 50,000 50,001 to 500, ,001 and above Total , ,218, ,357,

5 (2) Performance Data of the Fund 2.1 Portfolio composition Details of portfolio composition of the Fund for the financial years as at 31 July are as follows: Sectors, category of investments & cash holdings As at 31 July 2018 As at 31 July 2017 As at 31 July 2016 (%) (%) (%) Consumer Products Finance Industrial Products Trading / Services Infrastructure Construction Properties Information Technology Telecommunication Government Transport Trusts Energy Utilities ETF Cash Total Performance details Performance details of the Fund for the financial years ended 31 July are as follows: As at As at As at 31 July July July 2016 Net Asset Value ("NAV") (RM) 53,308, ,180, ,694,721 NAV per unit (RM) Units in circulation 102,357, ,749, ,605,635 Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) (3.88) (0.62) 8.89 Income distribution (%) Gross distribution (sen per unit) 2.26 # Net distribution (sen per unit) 2.26 # Management expense ratio ("MER") (%) 1 Portfolio turnover ratio ("PTR") (times) 2 Notes: # Date of distribution is shown in part Income distribution / Unit splits. 1 MER is higher against previous financial year mainly due to decrease in average fund size. 2 PTR is lower against previous financial year mainly due to lower trading activity. 3

6 2.2 Performance details (continued) Average total return As at 31 July 2018 (%) (Annualised) Since commencement 6.42 (2 March 2015) 1 year years years -- Annual total return The Fund (%) 1 August July August July August July 2016 Since commencement (2 March ) - 31 July 2015 Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures have been extracted from Bloomberg. 2.3 Has the Fund achieved its investment objective? The Fund registered a return of 23.67% since commencement, outperforming the benchmark return of 11.81%. The Fund achieved its investment objective of providing investors with income and capital appreciation. The Fund declared an income distribution of 2.26 sen per unit for the financial year under review. 2.4 Performance review For the financial year under review, the Fund registered a return of 0.28%, underperforming the benchmark return of 2.76%. The underperformance was mainly due to lower bond prices on the back of rising global bond yields. The Fund's equity positions also dragged the fund's performance. The key detractors were Wijaya Karya, an Indonesian contractor, Weibo, a China internet company and China Jinjiang Environment, a waste-to-energy company. Wijaya Karya was affected by financing hiccups for its infrastructure projects while Weibo and China Jinjiang Environment were impacted by weaker than expected results. We have since exited our positions in the three companies. For the financial year under review, the NAV per unit of the Fund decreased by 3.88% from RM to RM

7 2.4 Performance review (continued) The line chart below shows comparison between the performance of the Fund and its benchmark, 70% 12 month fixed deposit rate by Malayan Banking Berhad and 30% FBM KLCI, for the financial year ended 31 July % 25.00% 20.00% % 10.00% 5.00% 0.00% Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul % United Income Plus Fund Benchmark* * Benchmark (Since lauch to 12 August 2015) - 35% Quantshop All MGS Index; 35% J.P. Morgan Asia Credit Investment Grade Index; 15% FBM KLCI and 15% MSCI AC Asia Pacific ex Japan * Benchmark (With effective from 13 August 2015) - 70% 12 month fixed deposit rate by Malayan Banking Berhad and 30% FBM KLCI Source: UOBAM(M), Bloomberg as at 31 July Since month months months months commencement The Fund 0.62% 0.02% -2.66% 0.28% 23.67% Benchmark* 1.83% -0.78% -0.17% 2.76% 11.81% * The benchmark of the Fund is 70% 12 month fixed deposit rate by Malayan Banking Berhad (obtainable at and 30% FBM KLCI (obtainable at with effective from 13 August * Prior to that, the benchmark of the Fund was 35% Quantshop All MGS Index (obtainable at 35% J.P. Morgan Asia Credit Investment Grade Index (obtainable at 15% FBM KLCI (obtainable at and 15% MSCI AC Asia Pacific ex Japan (obtainable at Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures have been extracted from Bloomberg. 5

8 2.5 Strategies and policies employed Equities During the financial period under review, we focused on Malaysia and China. We favoured the Malaysian market given its defensiveness in times of heightened market volatility. We liked the export-oriented sectors like technology and gloves as they would benefit from a weak Ringgit. We had exposure to the construction sector prior to the general election but had since cleared our positions given the new government's plan to defer or cancel mega infrastructure projects. In China, we liked the banking sector as asset quality was improving and valuation was inexpensive. We also liked the e-commerce and internet space due to the strong growth it was experiencing and potential monetisation of various businesses. Nevertheless, we had cleared these positions when trade tension with the United States of America ("U.S.") escalated. Fixed Income 2.6 Asset allocation During the financial period under review, we invested in Ringgit corporate debts, Asian credits, and emerging market debts. We continued to favour Ringgit corporate debts as we expect the market to be supported by decent demand from local investors due to ample market liquidity, favorable demand supply dynamics, improved credit conditions, and stable policy rate. We disposed our positions in Asian credits and emerging market debts as we anticipated that the prices would weaken amid rising U.S. interest rates and widening of credit spreads. Since then, the prices of Asia and emerging market debts corrected as we had anticipated and it could look interesting on further price weakness. We remain constructive on Asian credits and emerging market debts given their improving fundamentals. Emerging markets have deployed both monetary and fiscal tools to improve their imbalances. In addition, emerging market debts offer relatively attractive yields which can act as a buffer against rising interest rates. This table below shows the asset allocation of the Fund for the financial years ended 31 July. Assets As at 31 As at 31 Changes July 2018 July 2017 (%) (%) (%) Equities Fixed income securities Cash Total Reason for the differences in asset allocation As at 31 July 2018, the asset allocation of the Fund stood at 25.47% in equities, 71.49% in fixed income securities and 3.04% in cash. The manager raised the exposure to fixed income securities as there were attractive investment opportunities after the recent correction. 6

9 2.7 Income distribution/ Unit splits 2.8 State of affairs 2.9 Rebates and soft commission 2.10 Market review For the financial year under review, the Fund has declared the following income distribution: Distribution Date Gross/Net Distribution per unit Cum - NAV per unit (RM) Ex - NAV per unit (RM) (RM) 27 October January April July Total The Fund did not carry out any unit split exercise during the financial year under review. There has been neither significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the financial year under review. It is our policy to channel all rebates to the Fund. Soft commissions received from brokers/dealers are retained by the Manager only if the goods and services provided are of demonstrable benefit to unit holders of the Fund and in the form of research and advisory services that assist in the decision making process relating to the Fund's investments and such dealings are executed on terms which are the most favourable for the Fund. During the financial year under review, the Manager had received on behalf of the Fund, soft commissions in the form of fundamental database, financial wire services, technical analysis software and stock quotation system incidental to investment management of the Fund. These soft commissions received by the Manager are deemed to be beneficial to the unit holders of the Fund. Equity During the financial period under review, the MSCI All Country World Index was up by 8.84%. This was driven by the developed markets MSCI World Index, which was up by 9.79%, outperforming the MSCI Emerging Markets Index, which was up by 1.99%. Among global markets, the U.S. was a top performer with the Standard & Poor's 500 ("S&P 500") up 14.01%. As for Emerging Markets, Korea and the Philippines were in negative territory while China s performance was subdued, with the Hang Seng China Enterprises Index posting a return of 1.82%. Global markets were moving on an upward trend in the first half of the period under review, with investors focusing on the robust global economic growth and strong corporate earnings. The start of the unwinding of the quantitative easing programme by the U.S. Federal Reserve ("Fed") in October 2017 did not dampen the mood of the market either. The U.S. market was boosted towards the end of 2017 by the approval of a tax reform package that saw a reduction in corporate tax rate from 35% to 21%. The rally continued into the New Year with the U.S. markets hitting multiple all-time highs in January

10 2.10 Market review (continued) Nevertheless, the trend started to change in February as global markets suffered a sell-off due to concerns that a strong U.S. wage growth would stoke inflation and lead to higher than expected bond yields. The concerns were compounded by the start of the trade tension between U.S. and China with both countries threatening to impose import tariffs against each other. The U.S. markets began to rebound in April 2018 as investors focused on the robust U.S. economy, strong earnings growth, and returning fund flows. On the other hand, Emerging Markets were under pressure impacted by capital outflows driven by the strength of the U.S. Dollar ("USD"). China was particularly affected due to its trade tension with the U.S., slowing economy, and deleveraging process. Meanwhile, Malaysia was sold down in May and June following the unexpected outcome of the general election. Investors were uncertain about government policy and fiscal pressure. The construction sector was significantly affected as the new government signaled its intention to defer or cancel mega infrastructure projects. The market staged a rebound in July on bargain hunting activities. Fixed Income Ringgit government bonds started the period under review on a positive tone bolstered by the positive performance of U.S. treasury ("UST") given the escalating geopolitical tensions in the Korean Peninsula. Bonds traded mostly lower in September amid global bond selloff on hawkish remarks from Fed chair Janet Yellen. Local debts rebounded towards year end driven by a stronger Ringgit but were under pressure towards late January as Bank Negara Malaysia ("BNM") hiked the Overnight Policy Rate ("OPR") by 25 basis points ("bps"). The weakness continued into February as a hawkish testimony by the new Fed chairman spurred expectation of more aggressive rate hikes in Ringgit debts were sold off in May as market sentiment was affected by policy transition under the new government as well as news that Malaysia s government debt has exceeded RM1 trillion. Debt market ended mixed in June due to the ongoing global trade tariff issues but rebounded in July with decent demand from local investors particularly post Monetary Policy Committee ("MPC") meeting and the release of the weaker-than-expected June headline inflation number. At the end of the period, the 3-years, 5-years, 7-years, 10-years and 20-years Malaysian Government Securities ("MGS") benchmarks yields rose by between 6 to 22 bps to 3.56%, 3.76%, 3.97%, 4.08% and 4.78% respectively. 8

11 2.10 Market review (continued) 2.11 Market outlook UST yields surged on the back of strong U.S. economic data and a more hawkish U.S. Fed. Benchmark 10-years treasury yield rose to a high of 3.11% in May before settling lower boosted by flight to safety flows due to escalating trade tensions between the U.S. and its trade partners. At close, the 10-years UST yield rose by 67 bps to 2.96%. On the Asian credit front, credit spread widened as market volatility spiked amid tightening of global monetary condition and selloff in emerging markets. The J.P. Morgan Asia Credit composite blended spread widened 17 bps to 251 bps at the end of the period. Equities We are cautious on equity markets in the near term in view of various external factors that could contribute to market volatility. The factors include rising interest rates, fund outflow from Emerging Markets, continued strength in the USD index and U.S.-China trade war. The U.S. market is expected to perform well supported by a robust economy, strong earnings growth and returning fund flows. On the other hand, sentiment could continue to weigh on China due to the trade tension with the U.S., slowing economy, and deleveraging process. As for Malaysia, we believe the market has gradually come to grips with the changes from the new government. With expected restraint on public sector spending needed to offset the reduction in tax revenue from Goods and Services Tax ("GST"), this would have a slight negative impact on economic growth. Nevertheless, the new government s push for reforms including greater transparency, reducing corruption and wastage, and strengthening government institutions is expected to be positive for Malaysia in the medium to long term. We continue to favour the Malaysian market as we believe it would do well given its defensiveness in this period of uncertainty in the global markets. Fixed Income According to the International Monetary Fund ("IMF"), the pace of expansion in some major economies appears to have peaked and growth projections for 2018 have been revised down for the Euro area, the United Kingdom ("U.K.") and Japan to 2.2%, 1.4% and 1.0% respectively. Meanwhile, the U.S. economy is expected to strengthen temporarily supported by fiscal stimulus and private demand. The IMF expects the U.S. economy to grow at 2.9% in 2018 and 2.7% in The Fed hiked the fed funds rate for the second time this year by 25 bps to % in June and raised its projection for a total of four hikes in Meanwhile, the median forecast implied another three hikes in 2019 and one more in

12 2.11 Market outlook (continued) BNM maintained the OPR at 3.25% at its monetary policy meeting in July as widely expected. BNM expects the global economy to expand though the intensification of global trade tensions could impact sentiment on trade, consumption, and investment. The domestic economy is expected to remain on a steady growth path supported by private sector activity and exports. Headline inflation is expected to moderate in 2018 following the government s decision to zero-rate the GST and fixed fuel price. The central bank views the current degree of monetary accommodativeness to be consistent with its policy stance. We expect the central bank to maintain its policy rate stable for the rest of Kuala Lumpur, Malaysia UOB Asset Management (Malaysia) Berhad 21 September

13 (B) TRUSTEE S REPORT TO THE UNIT HOLDERS OF UNITED INCOME PLUS FUND We have acted as Trustee for United Income Plus Fund ( the Fund ) for the financial year ended 31 July To the best of our knowledge, for the financial year under review, UOB Asset Management (Malaysia) Berhad ( the Manager ) has operated and managed the Fund in accordance with the following: (a) (b) (c) limitations imposed on the investment powers of the Manager under the Deed(s), the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; valuation and pricing for the Fund has been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements; and creation and cancellation of units for the Fund have been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements. We are of the view that the distributions made during this financial year ended 31 July 2018 by the Manager are not inconsistent with the objective of the Fund. For Deutsche Trustees Malaysia Berhad Soon Lai Ching Senior Manager, Trustee Operations Richard Lim Hock Seng Chief Executive Officer Kuala Lumpur, Malaysia 21 September

14 (C) STATEMENT BY MANAGER We, Lim Suet Ling and Seow Lun Hoo, being two of the directors of UOB Asset Management (Malaysia) Berhad, do hereby state that, in the opinion of the Manager, the accompanying financial statements set out on pages 17 to 49 are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of United Income Plus Fund as at 31 July 2018 and of its financial performance, changes in net asset value and cash flows for the financial year then ended and comply with requirements of the Deed(s). For and on behalf of the Manager, UOB Asset Management (Malaysia) Berhad LIM SUET LING Executive Director / Chief Executive Officer SEOW LUN HOO Director Kuala Lumpur, Malaysia 21 September

15 (D) Independent auditors report to the unitholders of United Income Plus Fund Report on the audit of the financial statements Opinion We have audited the financial statements of United Income Plus Fund ( the Fund ), which comprise the statement of financial position as at 31 July 2018, and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows of the Fund for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 17 to 49. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 July 2018 and of its financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). Basis for opinion We conducted our audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors' 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 opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial statements and auditors report thereon The Manager is responsible for the other information. The other information comprises the information included in the annual report of the Fund, but does not include the financial statements of the Fund and our auditors report thereon. The annual report is expected to be made available to us after the date of this auditors' report. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. 13

16 Independent auditors report to the unitholders of United Income Plus Fund (Continued) Information other than the financial statements and auditors report thereon (Continued) In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Manager of the Fund and take appropriate action. Responsibilities of the Manager and Trustee for the financial statements The Manager is responsible for the preparation and fair presentation of the financial statements of the Fund in accordance with MFRS and IFRS. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, 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 liquidate the Fund or to cease operations, or has no realistic alternative but to do so. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements. Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing 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. 14

17 Independent auditors report to the unitholders of United Income Plus Fund (Continued) Auditors responsibilities for the audit of the financial statements (Continued) As part of an audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: ª Identify and assess the risks of material misstatement of the financial statements of the Fund, 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. ª 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. ª Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. ª Conclude on the appropriateness of 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 auditors report to the related disclosures in the financial statements of the Fund 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 auditors' report. However, future events or conditions may cause the Fund to cease to continue as a going concern. ª Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements of the Fund 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. 15

18 Independent auditors report to the unitholders of United Income Plus Fund (Continued) Other matters This report is made solely to the unitholders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Chan Hooi Lam No /02/2020 J Chartered Accountant Kuala Lumpur, Malaysia 21 September

19 (E) FINANCIAL STATEMENTS UNITED INCOME PLUS FUND STATEMENT OF FINANCIAL POSITION AS AT 31 JULY Note RM RM ASSETS Investments 3 52,278, ,091,270 Forward foreign currency contracts 4-115,455 Dividend receivables 3, ,908 Deposits with licensed financial institutions 5-6,000,485 Cash at a bank 3,012,683 1,809,271 TOTAL ASSETS 55,294, ,323,389 LIABILITIES Amount due to Manager 6 248,387 1,081,898 Amount due to Trustee 7 3,247 9,360 Amount due to brokers 1,702,829 - Accruals 31,795 51,784 TOTAL LIABILITIES 1,986,258 1,143,042 UNITHOLDERS EQUITY Unitholders capital 8 50,336, ,597,979 Retained earnings 8 2,971,814 5,582,368 TOTAL EQUITY, REPRESENTING NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNITHOLDERS 8 53,308, ,180,347 TOTAL EQUITY AND LIABILITIES 55,294, ,323,389 UNITS IN CIRCULATION 8 (a) 102,357, ,749,971 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the financial statements. 17

20 UNITED INCOME PLUS FUND STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JULY Note RM RM INVESTMENT INCOME Dividend income from quoted equities 254, ,708 Income distributions from financial assets at fair value through profit or loss ( FVTPL ) 112,405 2,203,338 Interest income from unquoted fixed income securities 2,957,658 3,060,157 Interest income from deposits with licensed financial institutions 51, ,972 Net (loss)/gain on investments at FVTPL: 3 - net realised (loss)/gain on sale of investments at FVTPL (3,539,637) 12,081,551 - net unrealised gain/(loss) on changes in fair value 8(c) 728,781 (5,447,387) Amortisation of premium, net of accretion of discount (30,288) (49,105) Net realised gain/(loss) on forward foreign currency contracts 2,117,634 (5,494,441) Net realised loss on foreign currency exchange (609,167) (1,159,449) Net unrealised (loss)/gain on forward foreign currency contracts 8(c) (115,455) 519,791 Net unrealised loss on foreign currency exchange 8(c) (649) (805) 1,927,306 7,282,330 EXPENSES Manager s fee 9 (1,236,086) (2,034,446) Trustee s fee 10 (64,042) (131,740) Auditors remuneration (9,300) (9,000) Tax agent s fee (7,000) (6,500) Other expenses (110,931) (214,990) (1,427,359) (2,396,676) NET INCOME BEFORE TAXATION 499,947 4,885,654 Tax expense 11 (24,011) (76,606) NET INCOME AFTER TAXATION, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 475,936 4,809,048 Net income after taxation is made up of the following: Realised amount 8(b) (136,741) 9,737,449 Unrealised amount 8(c) 612,677 (4,928,401) 475,936 4,809,048 Distributions for the financial year 12 3,086,490 5,823,913 The accompanying notes form an integral part of the financial statements. 18

21 UNITED INCOME PLUS FUND STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 Unitholders Retained Total net asset capital earnings value Note RM RM RM Balance as at 1 August ,097,488 6,597, ,694,721 Movement in net asset value: Total comprehensive income for the financial year - 4,809,048 4,809,048 Creation of units 8(a) 80,523,848-80,523,848 Reinvestments of units 8(a) 5,823,913-5,823,913 Cancellation of units 8(a) (99,847,270) - (99,847,270) Distributions 12 - (5,823,913) (5,823,913) Balance as at 31 July ,597,979 5,582, ,180,347 Balance as at 1 August ,597,979 5,582, ,180,347 Movement in net asset value: Total comprehensive income for the financial year - 475, ,936 Creation of units 8(a) 4,782,541-4,782,541 Reinvestments of units 8(a) 3,086,490-3,086,490 Cancellation of units 8(a) (105,130,385) - (105,130,385) Distributions 12 - (3,086,490) (3,086,490) Balance as at 31 July ,336,625 2,971,814 53,308,439 The accompanying notes form an integral part of the financial statements. 19

22 UNITED INCOME PLUS FUND STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 JULY RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale/redemption of investments 141,767, ,228,100 Purchase of investments (49,984,670) (288,616,816) Cash received from capital reduction 426,546 1,255,935 Dividend received from quoted equities 559, ,389 Income distributions received from financial assets at FVTPL 112,405 2,203,338 Interest received from unquoted fixed income securities 3,421,035 2,601,191 Interest received from deposits with licensed financial institutions 51, ,972 Manager s fee paid (1,279,113) (2,078,609) Trustee s fee paid (70,155) (131,903) Tax agent s fee paid (6,548) (3,800) Auditors remuneration paid (9,001) (9,000) Payment of other fees and expenses (131,671) (216,089) Foreign withholding tax (24,011) - Net realised gain/(loss) on forward foreign currency contracts 2,117,634 (5,494,441) Net realised loss on foreign currency exchange (609,167) (1,159,449) Net cash generated from/(used in) operating and investing activities 96,341,254 (9,237,182) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 5,690,664 83,403,563 Payment for cancellation of units (106,828,991) (98,121,179) Net cash used in financing activities (101,138,327) (14,717,616) NET DECREASE IN CASH AND CASH EQUIVALENTS (4,797,073) (23,954,798) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 7,809,756 31,764,554 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 3,012,683 7,809,756 Cash and cash equivalents comprise the following: Deposits with licensed financial institutions (Note 5) - 6,000,485 Cash at a bank 3,012,683 1,809,271 3,012,683 7,809,756 The accompanying notes form an integral part of the financial statements. 20

23 UNITED INCOME PLUS FUND NOTES TO THE FINANCIAL STATEMENTS 1. INFORMATION ON THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES The United Income Plus Fund (hereinafter referred to as the Fund ) was constituted pursuant to the execution of the Deed dated 30 April 2014 as amended by a First Supplemental Deed dated 26 February 2015 (collectively referred to as the Deeds ) between UOB Asset Management (Malaysia) Berhad ( the Manager ) and Deutsche Trustees Malaysia Berhad ( the Trustee ). The Fund seeks to provide investors with income and capital appreciation over the medium to long term by investing primarily in fixed income securities with the remaining investing in equities and equity-related securities. The Fund was launched on 9 February 2015 and commenced for operation on 2 March As provided in the Master Deed, the accrual period or financial year shall end on 31 July. The Manager is a subsidiary of UOB Asset Management Limited, headquartered in Singapore. The financial statements were authorised for issue by the Manager on 21 September SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation of the financial statements The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below and are presented in Ringgit Malaysia ( RM ). 2.2 Changes in accounting policies Standards issued and effective The accounting policies adopted that could have material impact to the financial statements are consistent with those of the previous financial year. Standards issued but not yet effective The Fund has not yet adopted the MFRS and amendments to MFRS that have been issued but not yet effective as at the reporting date. The Manager expects that the adoption of these MFRS and amendments which have been issued but not yet effective will have no material impact on the financial statements in the period of initial application except as described below. The Fund is in the process of assessing financial implication for adopting the MFRS 9. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies (Continued) Standards issued but not yet effective (Continued) MFRS 9 Financial Instruments ( MFRS 9 ) In November 2014, MASB issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The standard introduces new requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. MFRS 9 Financial instruments: Classification and measurement MFRS 9 has three measurement categories - amortised cost, fair value through other comprehensive income, and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investment in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income (without recycling to profit or loss). All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For financial liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than in profit or loss, unless this creates an accounting mismatch. MFRS 9 Financial Instruments: Impairment The impairment requirements apply to financial assets measured at amortised cost and fair value through other comprehensive income (without recycling to profit or loss) and certain loan commitments as well as financial guarantee contracts. At initial recognition, allowance for impairment is required for expected credit losses ( ECL ). In the event of a significant increase in credit risk, allowance for impairment is required for ECL resulting from all possible default events over the expected life of the financial instrument. The assessment of credit risk, as well as the estimation of ECL, are required to be unbiased, probability-weighted and should incorporate all available information which is relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date. MFRS 9 Financial Instruments: Hedge Accounting The Fund has not applied hedge accounting under MFRS 139 nor will it apply hedge accounting under MFRS 9. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Summary of significant accounting policies (a) Financial assets Financial assets are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition, and the categories may include financial assets at FVTPL and loans and receivables. (i) Financial assets at FVTPL Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading by the Fund include equity securities and fixed income securities acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in Net gain or loss on financial assets at FVTPL. Dividend revenue and interest earned elements of such instruments are recorded separately in Dividend income from quoted equities, Income distribution from financial assets at FVTPL and Interest income from unquoted fixed income securities, respectively. For investments in local quoted securities, market value is determined based on the closing price quoted on Bursa Malaysia Securities Berhad and for investments in foreign listed securities, which are quoted in the respective stock exchanges, market value will be determined based on the published market price quoted by the respective stock exchanges at the end of each business day. For investments in foreign collective investment schemes, fair value is determined based on the closing net asset value per unit of the foreign collective investment schemes. The difference between the cost and fair value is treated as unrealised gain or loss and is recognised in the statement of comprehensive income. For investments in unquoted fixed income securities, fair value is determined based on indicative prices from Bond Pricing Agency Malaysia Sdn Bhd plus accrued interest, which includes the accretion of discount and amortisation of premium. Adjusted cost of investments relates to the purchase cost plus accrued interest, adjusted for amortisation of premium and accretion of discount, if any, calculated over the period from the date of acquisition to the date of maturity of the respective securities as approved by the Manager and the Trustee. Unrealised gains or losses recognised in the profit or loss are not distributable in nature. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Summary of significant accounting policies (Continued) (a) Financial assets (Continued) (i) Financial assets at FVTPL (Continued) On disposal of investments, the net realised gain or loss on disposal is measured as the difference between the net disposal proceeds and the carrying amount of the investments. The net realised gain or loss is recognised in the profit or loss. (ii) Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. The Fund includes dividend receivables, deposits with licensed financial institutions and cash at a bank in this classification. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Financial assets are derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition, the difference between the carrying amount and the sum of the consideration received is recognised in the profit or loss. (b) Impairment of financial assets The Fund assesses at each reporting date whether there is any objective evidence that its financial assets carried at amortised cost is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred; the Fund considers factors such as the probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in the profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the profit or loss. 24

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Summary of significant accounting policies (Continued) (c) Classification of realised and unrealised gains and losses Unrealised gains and losses comprise changes in the fair value of financial instruments at FVTPL. Realised gains and losses on disposals of financial instruments at FVTPL are calculated using weighted average method. They represent the difference between an instrument s initial carrying amount and disposal amount. Return on investments, income distribution from collective investment schemes, foreign exchange translation differences of cash at bank balances denominated in foreign currencies and accrued interest on deposits which have not matured as at the reporting date are classified as realised income in the financial statements. (d) Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liabilities. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial liabilities are classified as other financial liabilities. The Fund s financial liabilities which include the amount due to brokers, amount due to Manager and amount due to Trustee are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in the profit or loss when the liabilities are derecognised, and through the amortisation process. (e) Derivative financial instruments Derivatives are financial assets or liabilities at FVTPL categorised as held for trading unless they are designated hedges. The Fund s derivative financial instruments comprise forward foreign currency contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held for trading and accounted for in accordance with the accounting policy set out in Note 2.3(a)(i). 25

28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Summary of significant accounting policies (Continued) (f) Functional and presentation currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the functional currency ). The financial statements are presented in RM, which is also the Fund s functional currency. (g) Foreign currency translation Transactions in currencies other than the Fund s functional currency (foreign currencies) are recorded in the functional currency using exchange rates prevailing at the transaction dates. At each reporting date, foreign currency monetary items are translated into RM at exchange rates ruling at the reporting date. All exchange gains or losses are recognised in the profit or loss. (h) Unitholders capital Unitholders capital of the Fund meets the definition of puttable instruments classified as equity instruments under the revised MFRS 132 Financial Instruments: Presentation and is classified as equity instruments. Any distribution to unitholders is recorded as a reduction from retained earning within equity. (i) Distribution of income Distribution of income is made at the discretion of the Manager. A distribution to the Fund s unitholders is accounted for as a deduction from realised reserves except where distribution is sourced out of distribution equalisation which is accounted for as a deduction from unitholders capital. A proposed distribution is recognised as a liability in the period in which it is approved. (j) Cash and cash equivalents Cash and cash equivalents comprise cash at a bank and deposits with licensed financial institutions with a maturity of less than 3 months which have an insignificant risk of changes in value. (k) Income recognition Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Dividend income from quoted equities and income distribution from collective investment schemes, are recognised when the Fund's right to receive payment are established. Interest income from deposits with licensed financial institutions and interest income from unquoted fixed income securities are recognised using the effective interest method. 26