United International Growth Fund

Transcription

1 United International Growth Fund Annual Report for the financial year ended 31 st December 2014

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3 MANAGER UOB Asset Management Ltd Registered Address: 80 Raffles Place UOB Plaza Singapore Company Registration No. : Z OPERATIONS ADDRESS 80 Raffles Place #06-00, UOB Plaza 2 Singapore Tel: DIRECTORS OF UOB ASSET MANAGEMENT Terence Ong Sea Eng Cheo Chai Hong Thio Boon Kiat TRUSTEE / REGISTRAR HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #10-02, HSBC Building Singapore CUSTODIAN State Street Bank and Trust Company State Street Financial Center One Lincoln Street Boston, MA United States of America AUDITORS PricewaterhouseCoopers LLP 8 Cross Street #17-00, PWC Building Singapore SOLICITORS TO THE MANAGER Tan Peng Chin LLC 30 Raffles Place #11-00, Chevron House Singapore SOLICITORS TO THE TRUSTEE Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore

4 A) Fund Performance Fund Performance/ Benchmark Returns 3 mth % Growth 6 mth % Growth 1 yr % Growth 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 7 April 1995 Ann Comp Ret United International Growth Fund Benchmark Source: Lipper, a Thomson Reuters Company. Note: The performance returns of the Fund are in Singapore dollars based on a NAV-to-NAV basis with net dividends reinvested. The benchmark of the Fund: Apr 95 Dec 96: DBS 50 Index; Jan 97 Dec 97: MSCI AC Far East; Jan 98 Present: MSCI AC World. For the full year ended 31 Dec 2014, the net asset value of the Fund rose 6.6%, compared with a 9.3% gain in the benchmark MSCI AC World Free index in Singapore dollar terms. The Fund lagged the benchmark mainly due to its stock selection although this was partially offset by sector allocation. On a stock selection basis, consumer discretionary, technology and energy sectors detracted from performance while industrials and healthcare in the US contributed to the Fund performance. On a sector allocation basis, the Fund benefited from overweight positions in technology and healthcare, and underweight positions in materials and energy. The Fund was fully invested during the period under review, and ended the year with cash levels of 1.6%. Notable contributors to performance included: Visa Inc (US), Celgene (US), Bank Rakyat Indonesia (Indonesia), Wells Fargo (US), Union Pacific (US), Ashtead (UK), Eli Lilly (US), Gilead (US), Apple (US) and United Health Group (US). Detractors from Fund performance included: Africa Oil (Canada), Galaxy Entertainment Group (HK), Vermillion Energy (Canada), Yahoo Japan (Japan), BHP Billiton (Australia), Babcock International (UK), Banco Bilbao Vizcaya (Spain), BG Group (UK), Kansa City (US) and Oil Search (Australia). As at 31 Dec 2014, the Fund was positioned as follows: By Country United States (50.7%), Europe (24.2%), Japan (4.0%), Asia ex-japan (10.5%), Latin America (1.0%), Canada (4.0%) and Australia (4.0%) with the remainder in cash (1.6%). By Sector Consumer Discretionary (12.5%), Consumer Staples (9.8%), Energy (7.9%), Financials (21.2%), Healthcare (11.3%), Industrials (11.6%), Information Technology (17.5%), Materials (2.6%), Telecommunication Services (1.9%) and Utilities (2.1%) with the remainder in cash (1.6%). 2

5 Economic and Market Review Global equities ended the year higher, driven by the US market while Europe and Japan lagged. Mixed economic data in various regions reflected the uneven global recovery. Leading economic indicators for most major regions diverged with the US gaining momentum while Europe and Japan remained lacklustre. Purchasing managers indices (PMIs) in most developed regions remained in expansionary mode. Deflationary risks remain a concern in Europe despite the European Central Bank (ECB) introducing more easing measures. The Bank of Japan (BOJ) eased monetary policy while the Japanese government postponed a second value-added tax (VAT) hike to In terms of sector performance, healthcare, technology and utilities sectors outperformed, while energy and materials underperformed. The utilities sector, which tends to be interest-rate sensitive, rallied along with the US Treasuries. The technology sector continued to benefit from rising corporate expenditure and an IT upgrade cycle which had been previously suppressed due to uncertainties. The healthcare sector continued to deliver stronger revenue, earnings and cashflow generation growth and dividend yield. Meanwhile the Organisation of the Petroleum Exporting Countries (OPEC) announced price cuts in late 2014, which adversely impacted sentiment and drove a de-rating of the energy sector. The materials sector continued to underperform as a slowdown in demand from China remained a challenge. The US market was the top performer for the financial year. Despite some initial concerns over the economic impact of the cold weather in the early part of 2014, economic indicators and corporate earnings tracked ahead of expectations. Inflation remained benign, helped by lower oil prices. The end of quantitative easing (QE) in October 2014 was a non-event. Markets were supported by the Fed s continued dovish forward guidance of low interest rates. The Japanese equity market underperformed. Investors remain sceptical on the success of Abenomics. Economic data remains mixed though market sentiments were supported by the weaker yen as well as announced portfolio shifts towards domestic equities by the Japan s Government Pension Investment Fund (GPIF). The BOJ announced additional QE in November to manage inflationary expectations which had been falling. The Yen depreciated further as a result. The ruling Liberal Democratic Party (LDP) won an early election in December and delayed the second VAT hike due in This decision was viewed positively as the prior hike tipped the economy into recession. European equities underperformed in the period under review. Leading economic indicators were strong in early 2014 but started to soften in the latter half of the review period. While the PMI for most countries remain expansionary, France indicators turned down sharply. Meanwhile, deflation concerns increased with the CPI readings hovering near zero. Although some of this was attributed to the collapse in oil prices, inflation readings from prior months had remained below the ECB s 2% target. This was despite ECB s reduction of benchmark interest rate and deposit rate as well as targeted long-term refinancing operation (LTRO) programme to boost bank lending. Emerging market equities broadly underperformed. However, performance across the various countries diverged. Uneven economic growth trajectory, differing stages of the business cycle and monetary conditions explained much of this. Countries such as India and Indonesia which have made adjustments more promptly through appropriate fiscal and monetary policies benefitted from capital inflows. The Philippines remained a bright spot with its economy staying resilient on the back of strong domestic consumption and investments. Brazil continued to lag global markets with 3

6 its tighter monetary policies to target inflation amidst slowing economic activities. Net commodity exporters such as Columbia and Chile also underperformed due to lower oil and copper prices during the review period while Russia lagged on the back of increased sanctions imposed following its recent conflict with Ukraine. Outlook and Strategy We remain positive on global equities as global economic growth continues to recover. Risk assets should outperform as the economic outlook improves, inflation across the developed markets remains benign and fiscal and monetary policies remain loose. The US economic expansion picked up momentum throughout the course of After a very weak first quarter (due to weather-related disruptions), employment gains and modest wage increases drove steady demand increases. Meanwhile, modest inflation pressures are starting to build. The exit of the Fed s QE programme was offset by dovish forward guidance of low interest rates in the coming quarters. We expect that US monetary policy will normalize in 2015, with the first interest rate increase expected in mid While we do not anticipate a sharp increase in policy rates, the shift in policy will likely create near-term volatility across asset classes. Beyond increased foreign exchange volatility, we expect interest rates to slowly move higher during the course of the year. The Eurozone economies transitioned from recession to modest expansion in However, unemployment rates and the threat of deflation continue to present challenges. The spill-over effect of sanctions on Russia could adversely impact the outlook for the Eurozone in In addition, geopolitical risks may resurface as anti-euro parties gain support (eg Greece). The launch of a largescale QE by the ECB could provide the needed boost to the region. Economic activity in Japan has progressively softened following the sales tax increase in April Aggressive monetary expansion and a weaker yen have not yet translated into stronger export data. Weaker export markets have been a key factor that has dampened the external boost. Japan faces daunting demographic challenges. Inflation expectations continue to wane with the recent drop in oil prices and the BOJ s further easing in November aimed at re-anchoring inflation expectations. Economic performance for the emerging markets is more problematic and mixed. Growth has moderated with industrial production and retail sales slowing in countries from Brazil to China, while other Asian economies such as India, Indonesia and the Philippines look set to benefit from the decline in oil prices with the region being largely a net importer of oil. Countries such as India and Indonesia have taken the opportunity to enact fuel subsidy reforms to improve their government budgets. These structural reforms will benefit their economies in the long run. Against an improving global outlook, we continue to prefer developed markets over emerging markets. However we see selective opportunities in the emerging markets. The US market continues to stack up well fundamentally underpinned by steady earnings. The Fund s exposure in Europe is mainly through exporters which should benefit from a weaker Euro. Within Japan, we remain selective, focusing on exporters which will benefit from the devaluation of the Yen. Certain bright spots remain within emerging markets and we are positive towards selective countries where government and central bank policies are supportive. 4

7 Overall, the Fund s regional asset allocation strategy is to overweight developed markets over emerging markets. Within the developed markets, we are overweight the US and underweight Europe and Japan. For emerging markets, we are neutral Asia ex-japan while staying underweight on Latin America and EMEA. The Fund is overweight technology, industrials and healthcare sectors while underweight interest rate sensitive sectors such as telecommunications and utilities as well as deep cyclical sectors such as energy and materials. Finally, in this slow-growth environment, bottom-up stock selection remains critical to outperformance of the Fund. Our focus remains on high quality growth companies with sustainable competitive advantage and strong cash generation with proven management teams that are able to generate above normal return through time. 5

8 B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by i) Country Fair Value (S$) % of NAV Australia 6,836, Belgium 1,700, Canada 6,819, China 2,128, Germany 5,878, Hong Kong 6,412, India 2,040, Indonesia 1,794, Ireland 2,638, Japan 6,680, Mexico 842, Peru 849, Philippines 2,525, Poland 1,067, Singapore 1,696, Spain 3,219, Sweden 1,383, Switzerland 4,752, Thailand 952, United Kingdom 20,036, United States 85,157, Portfolio of investments 165,414, Other net assets 2,609, Total 168,024,

9 B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by (continued) ii) Industry Fair Value (S$) % of NAV Consumer Discretionary 21,079, Consumer Staples 16,491, Energy 13,340, Financials 35,613, Healthcare 18,894, Industrials 19,542, Information Technology 29,352, Materials 4,352, Telecommunication Services 3,254, Utilities 3,492, Portfolio of investments 165,414, Other net assets 2,609, Total 168,024, iii) Asset Class Equities 165,414, Other net assets 2,609, Total 168,024, iv) Credit rating of debt securities N/A 7

10 C) Top Ten Holdings The top 10 holdings as at 31 December 2014 and 31 December largest holdings at 31 December 2014 Fair Value Percentage of total net assets attributable to unitholders (S$) % QUALCOMM INC 6,500, VISA INC - CLASS A SHARES 5,559, VERMILION ENERGY INC 4,629, WELLS FARGO & COMPANY 4,358, US BANCORP 4,348, THE PRICELINE GROUP INC 3,928, HSBC HOLDINGS PLC 3,885, HONEYWELL INTL INC 3,680, GILEAD SCIENCES INC 3,622, RECKITT BENCKISER GROUP PLC 3,433, largest holdings at 31 December 2013 Fair Value Percentage of total net assets attributable to unitholders (S$) % VISA INC - CLASS A SHARES 4,498, APPLE INC 2,833, QUALCOMM INC 2,812, EBAY INC 2,806, CISCO SYSTEMS INC 2,806, JPMORGAN CHASE & COMPANY 2,805, US BANCORP 2,703, WELLS FARGO & COMPANY 2,579, INTEL CORP 2,425, DOLLAR GENERAL CORPORATION 2,399,

11 D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 31 December 2014 N/A ii) net gains/(losses) on derivative contracts realised for the financial year ended 31 December 2014 N/A iii) net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2014 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 31 December 2014 N/A F) Amount and percentage of borrowings to net asset value (NAV) as at 31 December 2014 N/A G) Amount of redemptions and subscriptions for the financial year ended 31 December 2014 Total amount of redemptions SGD 19,481,018 Total amount of subscriptions SGD 26,661,319 H) The amount and terms of related-party transactions for the financial year ended 31 December 2014 i) As at 31 December 2014 the Fund maintained current accounts with the United Overseas Bank Limited as follows : Bank balances SGD 43,923 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2014 Affiliated Companies No. of Units Unit Price Market Value SGD SGD a) UNION Offshore Insurance Fund 114, , b) United Overseas Insurance - Offshore Insurance Fund 1,269, ,647,

12 H) The amount and terms of related-party transactions for the financial year ended 31 December 2014 (continued) ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2014 (continued) Affiliated Companies No. of Units Unit Price Market Value SGD SGD c) United Overseas Insurance - Singapore Insurance Fund d) United Overseas Insurance - Shareholders Fund 5,336, ,127, ,553, ,409, e) UOB Kay Hian Pte Ltd , f) UOB Smart International Growth Fund 424, , iii) Investment in Initial Public Offerings managed by UOB Group. N/A iv) As at 31 December 2014 there was no brokerage income earned by UOB Kay Hian Pte Ltd. I) Expense ratios 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 expense ratio at 31 December 2014 was based on total operating expenses of $2,069,607 (2013: $1,657,560) divided by the average net asset value of $158,981,980 (2013: $140,337,974) for the year. The total operating expenses do not include (where applicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received. The Fund does not pay any performance fee. The average net asset value is based on the daily balances. J) Turnover ratios 31 December % 31 December % Note: The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales of the underlying investments, being sales of $154,234,209 (2013: purchases of $135,768,941) divided by the average daily net asset value of $158,981,980 (2013: $140,337,974). 10

13 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 2014 and 31 December 2013 N/A ii) expense ratios for the financial year ended 31 December 2014 and 31 December 2013 N/A iii) turnover ratios for the financial year ended 31 December 2014 and 31 December 2013 N/A 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 predetermined payouts N/A 1 where the underlying scheme is managed by a foreign manager which belongs to the same group of companies as, or has a formal arrangement or investment agreement with, the Singapore manager, the above information should be disclosed on the underlying scheme. In other cases, such information on the underlying scheme should be disclosed only if it is readily available to the Singapore manager. 11

14 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and hold the assets of United International Growth 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 year covered by these financial statements, set out on pages 15 to 38, 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 HSBC INSTITUTIONAL TRUST SERVICES (SINGAPORE) LIMITED Authorised signatory 24 March

15 STATEMENT BY THE MANAGER In the opinion of the directors of UOB Asset Management Ltd, the accompanying financial statements set out on pages 15 to 38, 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 of United International Growth Fund (the Fund ) as at 31 December 2014, and the total return and changes in 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 24 March

16 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED INTERNATIONAL GROWTH FUND We have audited the accompanying financial statements of United International Growth Fund (the Fund ), which comprise the Statement of Financial Position and Statement of Portfolio as at 31 December 2014, the Statement of Total Return and Statement of Movements of Unitholders Funds for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 15 to 38. Manager s Responsibility for the Financial Statements The Fund s Manager (the Manager ) is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Fund s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 31 December 2014 and the total return 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. PricewaterhouseCoopers LLP Public Accountants and Chartered Accountants Singapore, 24 March

17 STATEMENT OF TOTAL RETURN For the financial year ended 31 December Note $ $ Income Dividends 3,280,947 3,039,095 Interest ,280,993 3,039,145 Less: Expenses Management fee 8 1,589,374 1,403,161 Trustee fee 8 63,575 56,126 Audit fee 18,300 17,600 Registrar fee 8 15,000 15,000 Valuation fee 8 198, ,395 Custody fee 54,838 63,509 Interest expenses - 39 Transaction cost 721, ,706 Other expenses* 151,953 (24,523) 2,813,670 2,364,013 Net income 467, ,132 Net gains or losses on value of investments Net gain on investments 10,722,961 29,514,788 Net foreign exchange loss (161,407) (16,119) 10,561,554 29,498,669 Total return for the year before income tax 11,028,877 30,173,801 Less: Income tax 3 (648,652) (541,435) Less: Capital gains tax 3 (11,265) (40,548) Total return for the year 10,368,960 29,591,818 * Other expenses include GST rebate. The accompanying notes form an integral part of these financial statements. 15

18 STATEMENT OF FINANCIAL POSITION As at 31 December Note $ $ ASSETS Portfolio of investments 165,414, ,866,337 Receivables 4 252,095 6,635,110 Sales awaiting settlement 18,583 - Cash and bank balances 3,063,403 3,346,273 Total Assets 168,749, ,847,720 LIABILITIES Payables 5 724, ,463 Purchases awaiting settlement - 4,775,129 Total Liabilities 724,620 5,372,592 EQUITY Net assets attributable to unitholders 6 168,024, ,475,128 The accompanying notes form an integral part of these financial statements. 16

19 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the financial year ended 31 December Note $ $ Net assets attributable to unitholders at the beginning of financial year 150,475, ,086,725 Operations Change in net assets attributable to unitholders resulting from operations 10,368,960 29,591,818 Unitholders contributions/(withdrawals) Creation of units 26,661,319 20,770,501 Cancellation of units (19,481,018) (30,973,916) Change in net assets attributable to unitholders resulting from net creation and cancellation of units 7,180,301 (10,203,415) Total increase in net assets attributable to unitholders 17,549,261 19,388,403 Net assets attributable to unitholders at the end of financial year 6 168,024, ,475,128 The accompanying notes form an integral part of these financial statements. 17

20 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary Quoted Equities Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % AUSTRALIA AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 22, , CSL LIMITED 19,000 1,785, MAGELLAN FINANCIAL GROUP LIMITED 56,000 1,001, OIL SEARCH LIMITED 292,000 2,498, PLATINUM ASSET MANAGEMENT LIMITED 100, , TOTAL AUSTRALIA 6,836, BELGIUM ANHEUSER-BUSCH INBEV NV 11,300 1,700, CANADA AFRICA OIL CORP 206, , BANK OF NOVA SCOTIA 21,000 1,593, VERMILION ENERGY INC 71,000 4,629, TOTAL CANADA 6,819, CHINA LENOVO GROUP LTD 736,000 1,282, TENCENT HOLDINGS LIMITED 44, , TOTAL CHINA 2,128, GERMANY BAYER AG 7,500 1,358, CONTINENTAL AG 6,200 1,745, GEA GROUP AG 22,000 1,291, LINDE AG 6,000 1,483, TOTAL GERMANY 5,878, The accompanying notes form an integral part of these financial statements. 18

21 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (continued) Quoted Equities Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % HONG KONG GALAXY ENTERTAINMENT GROUP LTD 252,000 1,879, SAMSONITE INTERNATIONAL S.A. 240, , SANDS CHINA LTD 419,000 2,731, WYNN MACAU LTD 230, , TOTAL HONG KONG 6,412, INDIA TATA CONSULTANCY SERVICES LTD 38,000 2,040, INDONESIA PT BANK RAKYAT INDONESIA 1,440,000 1,794, IRELAND EATON CORP PLC 29,300 2,638, JAPAN AJINOMOTO CO INC 53,000 1,313, FUJI HEAVY INDUSTRIES LTD 28,000 1,330, RAKUTEN INC 42, , SAWAI PHARMACEUTICAL CO LTD 11, , SEVEN & I HOLDINGS CO LTD 24,000 1,156, YAHOO JAPAN CORPORATION 250,000 1,201, TOTAL JAPAN 6,680, MEXICO GRUPO FINANCIERO BANORTE SAB DE C V 115, , The accompanying notes form an integral part of these financial statements. 19

22 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (continued) Quoted Equities Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % PERU CREDICORP LIMITED 4, , PHILIPPINES METROPOLITAN BANK & TRUST COMPANY 673,010 1,654, UNIVERSAL ROBINA CORPORATION 150, , TOTAL PHILIPPINES 2,525, POLAND POWSZECHNA KASA OSZCZEDNOSCI BANK POLSKI 80,000 1,067, SINGAPORE SINGAPORE TELECOMMUNICATIONS LTD 435,000 1,696, SPAIN AMADEUS IT HOLDING SA -A 25,800 1,368, BANCO BILBAO VIZCAYA ARGENTARIA S.A. 147,000 1,851, TOTAL SPAIN 3,219, SWEDEN ASSA ABLOY AB-B 19,700 1,383, SWITZERLAND NESTLE SA 17,400 1,692, ROCHE HLDGS AG GENUSSCHEIN 8,500 3,059, TOTAL SWITZERLAND 4,752, The accompanying notes form an integral part of these financial statements. 20

23 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (continued) Quoted Equities Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % THAILAND SIAM COMMERCIAL BANK - FOREIGN 130, , UNITED KINGDOM ABERDEEN ASSET MANAGEMENT PLC 182,000 1,625, ASHTEAD GROUP PLC 130,000 3,094, BABCOCK INTERNATIONAL GROUP PLC 53,700 1,173, BHP BILLITON PLC 48,000 1,377, HSBC HOLDINGS PLC 309,000 3,885, INDIVIOR PLC 31,900 98, JOHNSON MATTHEY PLC 21,250 1,491, NATIONAL GRID PLC 86,000 1,631, RECKITT BENCKISER GROUP PLC 31,900 3,433, ROYAL DUTCH SHELL PLC - A SHARE 50,000 2,224, TOTAL UNITED KINGDOM 20,036, UNITED STATES APPLE INC 11,400 1,667, AT&T INC 35,000 1,557, CELGENE CORP 16,300 2,416, CHURCH & DWIGHT CO INC 30,000 3,132, CISCO SYSTEMS 46,000 1,695, COMCAST CORPORATION - CLASS A 25,000 1,921, CVS HEALTH CORPORATION 25,000 3,190, DOLLAR GENERAL CORPORATION 17,000 1,592, EBAY INC 40,000 2,974, ELI LILLY AND COMPANY 17,600 1,608, Balance Carried Forward 21,758, The accompanying notes form an integral part of these financial statements. 21

24 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (continued) Quoted Equities Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % UNITED STATES Balance Brought Forward 21,758, EOG RESOURCES INC 27,800 3,391, GENERAL ELECTRIC COMPANY 98,000 3,281, GILEAD SCIENCES INC 29,000 3,622, GOOGLE INC - CLASS A 3,600 2,531, HOME DEPOT INC 12,000 1,669, HONEYWELL INTL INC 27,800 3,680, MERCK N CO INC 31,000 2,332, NORTHERN TRUST CORPORATION 19,000 1,696, PNC FINANCIAL SERVICES 21,000 2,538, QUALCOMM INC 66,000 6,500, SOUTHERN COMPANY 28,600 1,861, STATE STREET CORP 16,600 1,726, T ROWE PRICE GROUP INC 20,000 2,275, THE PRICELINE GROUP INC 2,600 3,928, UNION PACIFIC CORPORATION 19,000 2,999, UNITEDHEALTH GROUP INC 12,800 1,714, US BANCORP 73,000 4,348, VERISIGN INC 22,300 1,684, VISA INC - CLASS A SHARES 16,000 5,559, WALT DISNEY 13,600 1,697, WELLS FARGO & COMPANY 60,000 4,358, TOTAL UNITED STATES 85,157, Portfolio of investments 165,414, Other net assets 2,609, Net assets attributable to unitholders 168,024, The accompanying notes form an integral part of these financial statements. 22

25 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (Summary) Quoted Equities Percentage of total net assets attributable to unitholders at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2013 % % Australia Belgium Brazil Canada Chile China Czech Republic Denmark Germany Hong Kong India Indonesia Ireland Japan Mexico Peru Philippines Poland Portugal Russia Singapore South Africa South Korea Spain Sweden Switzerland Thailand Turkey United Kingdom United States Portfolio of investments Other net assets Net assets attributable to unitholders The accompanying notes form an integral part of these financial statements. 23

26 STATEMENT OF PORTFOLIO As at 31 December 2014 By Industry - Secondary Quoted Equities Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2013 $ % % Consumer Discretionary 21,079, Consumer Staples 16,491, Energy 13,340, Financials 35,613, Healthcare 18,894, Industrials 19,542, Information Technology 29,352, Materials 4,352, Telecommunication Services 3,254, Utilities 3,492, Portfolio of investments 165,414, Other net assets 2,609, Net assets attributable to unitholders 168,024, The accompanying notes form an integral part of these financial statements. 24

27 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2014 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General United International Growth Fund (the Fund ) is a Singapore registered trust fund constituted by a Trust Deed dated 21 February 1995 between UOB Asset Management Ltd (the Manager ) and HSBC Institutional Trust Services (Singapore) Limited (the Trustee ). The Deed is governed by the laws of the Republic of Singapore. The primary activity of the Fund is to invest in shares in global emerging and developed markets, identified by the Manager as having good prospects for growth. Subscriptions and redemptions of the units are denominated in Singapore Dollar and United States Dollar. Investors may subscribe in United States Dollar at the applicable rate of exchange from 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 at fair value through profit or loss, and in accordance with the Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants. (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 Purchase of investments are recognised on the trade date. Investments are recorded at fair value on initial recognition. (ii) Subsequent measurement Investments are subsequently carried at fair value. Net change in fair value on investments are included in the Statement of Total Return in the year in which they arise. 25

28 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (c) Investments (continued) (iii) Derecognition Investments are derecognised on the trade date of disposal. The resultant realised gains and losses on the sales of investments are computed on the basis of the difference between the weighted average cost and selling price gross of transaction costs, and are taken up in the Statement of Total Return. (d) Basis of valuation of investments The fair value of financial assets and liabilities traded in active markets is based on quoted market prices at the close of trading on the reporting date. The quoted market price used for investments held by the Fund is the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine the point within the bid-ask spread that is most representative of fair value. (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 Singapore Dollar and United States Dollar. The performance of the Fund is measured and reported to the investors in Singapore Dollar. The Manager considers the Singapore Dollar as the currency of the primary economic environment in which the Fund operates. The financial statements are presented in Singapore Dollar, which is the Fund s functional and presentation currency. (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 such as equities are also recognised in the Statement of Total Return within the net gain or loss on investments. 26

29 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (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) Financial derivatives Financial derivatives including forwards and swaps are entered into for the purposes of 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 reporting 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. (h) 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 a part of the property of the fund. Distributions are accrued for at the reporting date if the necessary approvals have been obtained and a legal or constructive obligation has been created. 3. Income tax and capital gains tax $ $ Overseas income tax 648, ,145 Singapore income tax Total income tax 648, ,435 Capital gains tax 11,265 40,548 The Fund was granted the status of a Designated Unit Trust ( DUT ) in Singapore. 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) gains or profits derived from Singapore or elsewhere from the disposal of securities; 27

30 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Income tax and capital gains tax (continued) (ii) interest (other than interest for which tax has been deducted under Section 45 of the Singapore Income Tax Act); (iii) dividends derived from outside Singapore and received in Singapore; (iv) 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; (v) discount, prepayment fee, redemption premium and break cost from qualifying debt securities issued during the prescribed period; and (vi) 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. The overseas income tax represents tax withheld on foreign sourced income. The Fund is required to recognise a tax liability when it is probable that the tax laws of foreign countries require a tax liability to be assessed on the Fund s gains on investments sourced from such foreign countries, assuming the relevant taxing authorities have full knowledge of all the facts and circumstances. The tax liability is then measured at the amount expected to be paid to the relevant taxation authorities using the tax laws and rates that have been enacted or substantively enacted by the end of the reporting period. There is sometimes uncertainty about the way enacted tax law is applied to offshore investment funds. This creates uncertainty about whether or not a tax liability will ultimately be paid by the Fund. Therefore when measuring any uncertain tax liabilities, management considers all of the relevant facts and circumstances available at the time which could influence the likelihood of payment, including any formal or informal practices of the relevant tax authorities. As at 31 December 2014 and 2013, the Fund has uncertain taxes exposure with respect to gains on investment of which the tax liability is estimated to be nil. While this represents the Manager s best estimate, the estimated value could differ significantly from the amount ultimately payable. 4. Receivables $ $ Amounts receivable for creation of units 43,323 6,500,578 Dividend receivable 208, , ,095 6,635,110

31 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Payables $ $ Amounts payable for cancellation of units 220, ,755 Amount due to Manager 465, ,827 Amount due to Trustee 16,552 13,913 Other creditors and accrued expenses 22,081 21, , , Units in issue During the year ended 31 December 2014 and 2013, the number of units issued, redeemed and outstanding were as follows: Units at the beginning of the year 76,891,303 83,073,200 Units created 13,420,314 11,341,625 Units cancelled (9,724,395) (17,523,522) Units at the end of the year* 80,587,222 76,891,303 * Included above are units denominated in USD 1,479,129 2,069,181 Net assets attributable to unitholders ($) 168,024, ,475,128 Net asset value per unit ($) There is no difference between the net assets attributable to unitholders per financial statements and the net assets attributable to unitholders for issuing/redeeming of units. 7. Financial risk management The Fund s activities expose it to a variety of financial risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Fund s overall risk management programme seeks to minimise potential adverse effects on the Fund s financial performance. The Fund may use financial futures contracts, financial options contracts and/or currency forward contracts subject to the terms of the Prospectus 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. 29

32 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) The Fund s assets principally consist of financial instruments such as equity investments and cash. 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 their 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. The Fund s investments 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 has monetary financial assets and liabilities denominated in currencies other than Singapore Dollar and it may be affected favourably or unfavourably by exchange rate regulations or changes in the exchange rates between the Singapore Dollar and such other currencies. The Manager may at his discretion, implement a currency management strategy either to reduce currency volatility or to hedge the currency exposures of the Fund. 30

33 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) The table below summarises the Fund s exposure to foreign currencies as of the end of the financial year. As at 31 December 2014 SGD USD EUR GBP Others Total $ $ $ $ $ $ Assets Portfolio of investments 1,696,500 88,644,749 10,799,244 20,036,051 44,238, ,414,928 Receivables 69,979 84,778-82,668 14, ,095 Sales awaiting settlement , ,583 Cash and bank balances 2,852, , ,063,403 Total Assets 4,619,289 88,940,119 10,817,827 20,118,719 44,253, ,749,009 Liabilities Payables 697,646 26, ,620 Total Liabilities 697,646 26, ,620 Net currency exposure 3,921,643 88,913,145 10,817,827 20,118,719 44,253,055 31

34 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 2013 SGD USD EUR GBP Others Total $ $ $ $ $ $ Assets Portfolio of investments - 82,724,101 9,919,332 19,786,279 33,436, ,866,337 Receivables 6,289, ,747-60,900 7,091 6,635,110 Cash and bank balances 2,779, , ,444 3,346,273 Total Assets 9,068,887 83,538,128 9,919,366 19,847,179 33,474, ,847,720 Liabilities Payables 580,804 16, ,463 Purchases awaiting settlement - 2,771,819 93,977 1,483, ,540 4,775,129 Total Liabilities 580,804 2,787,860 93,977 1,483, ,158 5,372,592 Net currency exposure 8,488,083 80,750,268 9,825,389 18,363,386 33,048,002 Investments, which is the significant item in the Statement of Financial Position is exposed to currency risk and other price risk. The other price risk sensitivity analysis includes the impact of currency risk on non-monetary investments. The Fund s net financial assets comprise significantly non-monetary investments, hence currency risk sensitivity analysis has not been performed on the remaining financial assets. 32

35 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (a) Market risk (continued) (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 underlying investments in equities on the Fund s net assets attributable to unitholders at 31 December 2014 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 Net impact to Net impact to net assets net assets attributable to attributable to unitholders unitholders $ % $ % MSCI AC WORLD 32,421, ,714, (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. Other than cash balances, the Fund s financial assets and liabilities are largely non-interest bearing. Hence, the Fund is not subjected to significant risk due to fluctuations in the prevailing levels of market interest rates. 33