United Asia Fund. Annual Report. for the financial year ended 31 st December 2014

Transcription

1 United Asia 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 BNP Paribas Trust Services Singapore Limited 20 Collyer Quay #01-01 Singapore CUSTODIAN State Street Bank and Trust Company 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 Rodyk & Davidson LLP 80 Raffles Place #33-00, UOB Plaza 1 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 20 April 1992 Ann Comp Ret United Asia 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 92 Dec 11: MSCI AC FE ex Japan; Jan 12 to present: MSCI AC Asia ex Japan. Fund Performance For the year ended 31 December 2014, the net asset value of the Fund rose 5.6%, compared with a 10.0% increase in the benchmark MSCI AC Asia ex Japan index in Singapore dollar terms. The Fund s underperformance was due to negative allocation effect from overweighting consumer companies and poor stock selection particularly in China and Hong Kong markets. While the Fund benefitted from its underweight exposure in energy and material sectors, it was not sufficient to negate the weak performance of consumer stocks across the region. Key contributors to performance included China South Locomotive (China/Industrial); HDFC Bank (India/Financials); Sun Pharmaceutical (India/Healthcare); Sunny Optical (China/IT) and Coway (Korea/Consumer Discretionary). Key detractors included Sa Sa International (HK/Consumer Discretionary); China Modern Dairy (China/Consumer Staples); Hyundai Motor (Korea/Consumer Discretionary); Galaxy Entertainment and Melco International (Hong Kong/Consumer Discretionary). During the period under review, the Fund reduced exposure to the consumer sector, particularly Macau gaming. However the Fund remains overweight on consumer stocks given the longer term positive trends that underpin growth prospects, namely, growing affluence and favourable demographics. As at end December 2014, the Fund had the following sector allocation: information technology (22.2%), financials (29.7%), consumer discretionary (10.4%), consumer staples (8.4%), industrials (7.2%), energy (3.1%) and others (16.7%), with the remainder in cash (2.3%). The Fund had the following country asset allocation: China (27.6%), Hong Kong (12.2%), South Korea (17.5%), Taiwan (9.6%), India (9.8%), Indonesia (3.9%), Singapore (5.0%), Thailand (5.5%), Philippines (3.8%), Malaysia (2.8%) and the remainder (2.3%) in cash. 2

5 Economic and Market Review Asia equity markets gained in the 12-month period under review, performing on par with global equity markets. The economic outlook across the region was mixed, reflecting the uneven global recovery with concerns centred on the fluctuating and generally weak China economic data. GDP growth in 2014 was expected to accelerate in Hong Kong, Korea, Malaysia, Singapore and Taiwan, while China, India, Indonesia, the Philippines and Thailand were expected to see weaker growth. The outlook for 2015 was more uniformly positive with growth expected to pick up in all economies except China and Malaysia. Inflation across Asia generally stayed benign. Central bank action was mixed in the year with China, South Korea and Thailand cutting interest rates while Indonesia and Malaysia raised rates. Markets started the year 2014 on a weaker note, driven by global events such as the geopolitical tension in Ukraine/Russia and the Middle East. Markets steadily moved higher through the middle of the year as global economic data improved and emerging markets stabilized. A sharp sell-off occurred in September with the US dollar strengthening on expectations of the Federal Reserve s (Fed s) first rate hike, which sent most Asian currencies weaker. Diverging monetary policy with the US ending its quantitative easing (QE), while Japan expanded its QE, added to volatility. China unexpectedly cut interest rates in a bid to ease the interest burden on the corporate sector and revive its economy. In late 2014, oil prices declined substantially due to increased supply from the US/Saudi Arabia and weaker global demand. This, coupled with economic sanctions, caused a collapse of the Russian rouble and a sell-off in emerging market currencies. Oil-exporting countries such as Malaysia were hit by the oil price weakness. Oil-importing markets (Indonesia, South Korea and India) benefitted. The best-performing Asia ex-japan markets for the year were Indonesia, the Philippines and India. Thailand, Taiwan, China and Hong Kong also outperformed. Korea and Malaysia were the worstperforming markets with losses, while Singapore underperformed. In terms of sector performance, healthcare was by far the best-performer, while financials, utilities, telecommunications and information technology also outperformed with double-digit gains. Consumer discretionary, energy and materials were the worst-performing with losses, while consumer staples and industrials underperformed. Outlook and Fund Strategy Asia markets are trading at reasonable valuations with growth in 2015 expected to improve. China and Malaysia are exceptions, with both expected to record weaker growth. The tailwinds from lower energy prices have yet to be factored into earnings and this could present an upside surprise for the market. We expect most of the Asian economies to benefit from a drop in global oil prices, with the exception of Malaysia. The lower oil prices are expected to lift growth, ease inflation pressures and alleviate fiscal and current account concerns across Asia. An increase in US rates in 2015 may create some uncertainty, but Asian economies external positions are now less vulnerable. Historically, Asian markets have rallied in past US rate hike cycles when the starting yield was below five per cent, which is currently the case. 3

6 Structural challenges faced by China persist. While credit and economic growth continue to slow, the surprise cut in interest rates by the central bank in November last year could alleviate concerns of a hard landing. The first quarter of the year is typically a weak period for China equities and the Fund tactically reduced its overweight position. The Fund cut exposure to Hong Kong to an underweight as we believe earnings may be vulnerable to a US interest rate increase and weaker growth in China. We continue to be overweight in Thailand, Indonesia and the Philippines, which are expected to be the major beneficiaries of low oil prices. Similarly, we favour India, which is riding on macro tailwinds with lower energy and gold prices. Korea is raised to a neutral position as domestic tailwinds from lower oil prices are balanced against Korean exporters deteriorating competitiveness with the depreciating Japanese yen. The Fund remains overweight in the consumer sector, especially e-commerce companies and increased exposure to the healthcare sector to an overweight. We are underweight the energy, materials, telecommunications, utilities and real estate sectors. Asia s mostly favourable demographic trends and rising incomes underpin the long-term fundamental growth potential of the region, making it an attractive investment destination. Our strategy is to take advantage of these structural opportunities by investing in companies that have sound business models, are positioned in segments offering attractive growth and that have demonstrated operational and financial discipline in the way they manage their businesses. 4

7 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 China 21,727, Hong Kong 9,625, India 7,722, Indonesia 3,041, Malaysia 2,174, Philippines 3,017, Singapore 3,908, South Korea 13,793, Taiwan 7,524, Thailand 4,365, Portfolio of investments 76,900, Other net assets 1,806, Total 78,707, ii) Industry Consumer Discretionary 8,205, Consumer Staples 6,635, Energy 2,467, Financials 23,342, Healthcare 2,720, Industrials 5,652, Information Technology 17,426, Materials 2,145, Telecommunication Services 5,425, Unit Trusts 1,000, Utilities 1,880, Portfolio of investments 76,900, Other net assets 1,806, Total 78,707,

8 B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by (continued) iii) Asset Class Fair Value (S$) % of NAV Equities 76,900, Other net assets 1,806, Total 78,707, iv) Credit rating of debt securities N/A C) Top Ten Holdings The top 10 holdings as at 31 December 2014 and 31 December largest holdings at 31 December 2014 Percentage of total net assets attributable to Fair Value unitholders (S$) % SAMSUNG ELECTRONICS COMPANY LIMITED 3,863, TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 3,712, COWAY COMPANY LIMITED 2,808, HDFC BANK LIMITED 2,723, LG HOUSEHOLD & HEALTH CARE LIMITED 2,675, ITC LIMITED 2,089, CATCHER TECHNOLOGY CO., LTD 2,067, CHINA LIFE INSURANCE CO LTD - H 1,862, CHINA CONSTRUCTION BANK - H 1,835, SUN PHARMACEUTICALS INDUSTRIES LIMITED 1,735,

9 C) Top Ten Holdings (continued) 10 largest holdings at 31 December 2013 Percentage of total net assets attributable to Fair Value unitholders (S$) % SAMSUNG ELECTRONICS COMPANY LIMITED 6,166, GALAXY ENTERTAINMENT GROUP LIMITED 4,077, HUTCHISON WHAMPOA LIMITED 3,724, MELCO INTERNATIONAL DEVELOPMENT LTD 3,341, TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 3,271, HYUNDAI MOTOR COMPANY 3,225, AIA GROUP LIMITED 2,792, MEDIATEK INC 2,536, COWAY COMPANY LIMITED 2,493, BAIDU INC ADR 2,470, D) Exposure to derivatives i) Fair value of derivative contracts and as a percentage of NAV as at 31 December 2014 N/A ii) Net gains/(losses) on derivative contracts realised during the financial year ended 31 December 2014 N/A iii) Net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2014 N/A E) Amount and percentage of net asset value (NAV) invested in other schemes as at 31 December 2014 Fair Value (S$) % of NAV UNITED ASEAN INCOME FUND - CLASS USD ACC 1,000,

10 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 34,134,796 Total amount of subscriptions SGD 2,255,139 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 53,472 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2014 Holdings of United Asia Fund as at 31 December 2014 were as follows:- Affiliated Companies No. of Units Unit Price Market Value (S$) (S$) a) UOB Smart Asia Fund 6,655, ,438, b) UOB Kay Hian Private Limited 1, , c) United Asia Active Allocation Fund 2,447, ,574, iii) Investment in Initial Public Offerings managed by UOB Group N/A iv) As at 31 December 2014 the brokerage income earned by UOB Kay Hian Pte Ltd was SGD 2,457. 8

11 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 $1,379,059 (2013: $1,552,656) divided by the average net asset value of $85,315,480 (2013: $113,217,824) for the year. The total operating expenses do not include (where applicable) brokerage and other transaction costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received. The 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 purchases of $64,666,006 (2013: purchases of $90,629,539) divided by the average daily net asset value of $85,315,480 (2013: $113,217,824). 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 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. 9

12 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 10

13 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and hold the assets of United Asia 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 14 to 37, 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 BNP PARIBAS TRUST SERVICES SINGAPORE LIMITED Authorised signatory 24 March

14 STATEMENT BY THE MANAGER In the opinion of the directors of UOB Asset Management Ltd, the accompanying financial statements set out on pages 14 to 37, 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 Asia 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

15 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF UNITED ASIA FUND We have audited the accompanying financial statements of United Asia 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 14 to 37. 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

16 STATEMENT OF TOTAL RETURN For the financial year ended 31 December Note $ $ Income Dividends 2,175,151 2,563,893 Interest ,175,171 2,563,960 Less: Expenses Management fee 8 1,066,882 1,416,260 Less: Management fee rebate 8 (658) - Trustee fee 8 38,408 53,221 Audit fee 16,400 15,800 Registrar fee 15,000 15,000 Valuation fee 8 106, ,626 Custody fee 78,075 99,146 Interest expenses - 1,711 Transaction cost 704, ,260 Other expenses 58,264 (188,397) 2,083,240 2,540,627 Net income 91,931 23,333 Net gains or losses on value of investments Net gain on investments 4,542,913 7,331,434 Net foreign exchange loss (171,669) (248,374) 4,371,244 7,083,060 Total return for the year before income tax 4,463,175 7,106,393 Less: Income tax 3 (211,440) (258,336) Less: Capital gain tax 3 - (2,546) Total return for the year 4,251,735 6,845,511 The accompanying notes form an integral part of these financial statements. 14

17 STATEMENT OF FINANCIAL POSITION As at 31 December Note $ $ ASSETS Portfolio of investments 76,900, ,148,574 Receivables 4 4, ,616 Sales awaiting settlement 975,370 1,691,579 Cash and bank balances 1,233,404 1,284,334 Total Assets 79,114, ,414,103 LIABILITIES Payables 5 406, ,365 Purchases awaiting settlement - 2,389,370 Total Liabilities 406,570 3,078,735 EQUITY Net assets attributable to unitholders 6 78,707, ,335,368 The accompanying notes form an integral part of these financial statements. 15

18 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the financial year ended 31 December Note $ $ Net assets attributable to unitholders at the beginning of the financial year 106,335, ,157,613 Operations Change in net assets attributable to unitholders resulting from operations 4,251,735 6,845,511 Unitholders contributions/(withdrawals) Creation of units 2,255,139 5,734,277 Cancellation of units (34,134,796) (28,402,033) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (31,879,657) (22,667,756) Total decrease in net assets attributable to unitholders (27,627,922) (15,822,245) Net assets attributable to unitholders at the end of the financial year 6 78,707, ,335,368 The accompanying notes form an integral part of these financial statements. 16

19 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary Quoted Equities and Unit Trust Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % CHINA ALIBABA GROUP HOLDING LIMITED 11,000 1,515, BEIJING CAPITAL INTERNATIONAL AIRPORT - H 850, , CHINA CONSTRUCTION BANK - H 1,686,000 1,835, CHINA LIFE INSURANCE CO LTD - H 358,000 1,862, CHINA LONGYUAN POWER GROUP CORPORATION - H 681, , CHINA MOBILE LIMITED 90,000 1,391, CHINA OVERSEAS GRAND OCEANS GROUP LIMITED 1,100, , CHINA OVERSEAS LAND & INVESTMENT LIMITED 318,000 1,252, CSR CORPORATION LIMITED - H 875,000 1,560, INDUSTRIAL & COMMERCIAL BANK OF CHINA - H 1,680,000 1,624, JIANGXI COPPER COMPANY LIMITED - H 500,000 1,136, PETROCHINA COMPANY LIMITED - H 1,146,000 1,684, PING AN INSURANCE (GROUP) COMPANY OF CHINA LIMITED - H 90,000 1,216, SINOPHARM GROUP CO - H 210, , TENCENT HOLDINGS LIMITED 85,000 1,633, WANT WANT CHINA HOLDINGS LIMITED 827,000 1,444, TOTAL CHINA 21,727, The accompanying notes form an integral part of these financial statements. 17

20 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (continued) Quoted Equities and Unit Trust 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 AIA GROUP LIMITED 204,000 1,504, GALAXY ENTERTAINMENT GROUP LIMITED 170,000 1,267, GOLDPAC GROUP LIMITED 900, , HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED 2,044,000 1,145, HUTCHISON WHAMPOA LIMITED 98,000 1,494, SA SA INTERNATIONAL HOLDINGS LIMITED 1,054, , SANDS CHINA LIMITED 150, , SUN HUNG KAI PROPERTIES LIMITED 71,000 1,435, TOTAL HONG KONG 9,625, INDIA HDFC BANK LIMITED 122,380 2,723, INFOSYS LIMITED 28,360 1,174, ITC LIMITED 270,000 2,089, SUN PHARMACEUTICALS INDUSTRIES LIMITED 100,000 1,735, TOTAL INDIA 7,722, INDONESIA PT BANK MANDIRI 1,236,600 1,425, PT TELKOMUNIKASI INDONESIA 5,271,600 1,615, TOTAL INDONESIA 3,041, MALAYSIA 7-ELEVEN MALAYSIA HOLDINGS - BHD 750, , GAMUDA BHD 425, , TENAGA NASIONAL BHD 180, , TOTAL MALAYSIA 2,174, 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 and Unit Trust Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % PHILIPPINES BLOOMBERRY RESORTS CORPORATION 2,200, , METROPOLITAN BANK & TRUST COMPANY 525,944 1,293, SM PRIME HOLDINGS INC 1,815, , TOTAL PHILIPPINES 3,017, SINGAPORE CAPITALAND LIMITED 300, , DBS GROUP HOLDINGS LIMITED 50,000 1,030, KEPPEL CORPORATION LIMITED 100, , UNITED ASEAN INCOME FUND - CLASS USD ACC 761,788 1,000, TOTAL SINGAPORE 3,908, SOUTH KOREA COWAY COMPANY LIMITED 27,671 2,808, HYUNDAI MOTOR COMPANY 6,700 1,365, LG DISPLAY COMPANY LIMITED 22, , LG HOUSEHOLD & HEALTH CARE LIMITED 3,562 2,675, POSCO 3,038 1,009, SAMSUNG ELECTRONICS COMPANY LIMITED 2,415 3,863, SHINHAN FINANCIAL GROUP CO., LTD 22,000 1,178, TOTAL SOUTH KOREA 13,793, 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 and Unit Trust Holdings at 31 December 2014 Fair value at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2014 $ % TAIWAN CATCHER TECHNOLOGY CO., LTD 200,000 2,067, HON HAI PRECISION INDUSTRY 219, , RADIANT OPTO-ELECTRONICS CORPORATION 220, , TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 628,000 3,712, TOTAL TAIWAN 7,524, THAILAND ADVANCE INFO SERVICES - FOREIGN 125,800 1,271, CENTRAL PATTANA PUBLIC CO LTD - FOREIGN 423, , KASIKORNBANK PCL - FOREIGN 166,500 1,535, PTT PUBLIC COMPANY LIMITED - FOREIGN 60, , TOTAL THAILAND 4,365, Portfolio of investments 76,900, Other net assets 1,806, Net assets attributable to unitholders 78,707, The accompanying notes form an integral part of these financial statements. 20

23 STATEMENT OF PORTFOLIO As at 31 December 2014 By Geography - Primary (Summary) Quoted Equities and Unit Trust Percentage of total net assets attributable to unitholders at 31 December 2014 Percentage of total net assets attributable to unitholders at 31 December 2013 % % China Hong Kong India Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand Portfolio of investments Other net assets Net assets attributable to unitholders The accompanying notes form an integral part of these financial statements. 21

24 STATEMENT OF PORTFOLIO As at 31 December 2014 By Industry - Secondary Quoted Equities and Unit Trust 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 8,205, Consumer Staples 6,635, Energy 2,467, Financials 23,342, Healthcare 2,720, Industrials 5,652, Information Technology 17,426, Materials 2,145, Telecommunication Services 5,425, Unit Trusts 1,000, Utilities 1,880, Portfolio of investments 76,900, Other net assets 1,806, Net assets attributable to unitholders 78,707, The accompanying notes form an integral part of these financial statements. 22

25 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 Asia Fund (the Fund ) is a Singapore-registered trust fund constituted by a Trust Deed dated 25 January 1992 between UOB Asset Management Ltd (the Manager ) and BNP Paribas Trust Services Singapore Limited (the Trustee ). The Deed is governed by the laws of the Republic of Singapore. The Fund s investment objective is to achieve long term capital growth mainly through investing in the securities of corporations in, or corporations listed or traded on stock exchanges in, or corporations which derive a significant proportion of their revenue or profits from or have a significant proportion of their assets in, Asia (excluding Japan). The following classes of units are currently offered for subscriptions: - Class SGD - Class JPY Subscriptions and redemptions of the units of Class SGD 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. Subscriptions and redemptions of the units of Class JPY are denominated in Japanese Yen. No units of class JPY have been issued during the financial years ended 31 December 2014 and 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. 23

26 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (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. (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. The fair value of investments held in underlying funds is the quoted net asset value of the underlying fund as determined by the underlying fund s administrator. Net changes in fair value of investments are included in the Statement of Total Return in the year in which they arise. 24

27 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (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. (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. 25

28 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (continued) (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 211, ,201 Singapore income tax - 14,135 Total income tax 211, ,336 Capital gain tax - 2,546 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; (ii) interest (other than interest for which tax has been deducted under Section 45 of the Singapore Income Tax Act); and (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. 26

29 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Income tax and capital gains tax (continued) 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 tax 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 3, ,403 Dividend receivable - 25,213 Other receivable 661-4, ,616 27

30 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Payables $ $ Amounts payable for cancellation of units 105, ,806 Amount due to Manager 271, ,824 Amount due to Trustee 8,885 12,245 Other creditors and accrued expenses 20,223 25, , , 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 60,064,143 73,088,783 Units created 1,186,033 3,370,551 Units cancelled (19,143,853) (16,395,191) Units at the end of the year 42,106,323 60,064,143 * Included above are units denominated in USD 1,382,433 1,351,166 Net assets attributable to unitholders ($) 78,707, ,335,368 Net asset value per unit ($) 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. 28

31 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management The Fund s activities expose it to a variety of market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Fund s overall risk management programme seeks to minimise potential adverse effects on the Fund s financial performance. The Fund may use financial futures contracts, 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. The Fund s assets principally consist of financial instruments such as equity investments, money market 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. 29

32 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 HKD INR KRW TWD THB Others Total $ $ $ $ $ $ $ $ Assets Portfolio of investments 2,908,000 29,838,353 7,722,481 13,793,140 7,524,111 4,365,796 10,749,102 76,900,983 Receivables 3, ,259 Sales awaiting settlement - 757, , ,370 Cash and bank balances 896, ,877-30,048 1,233,404 Total Assets 3,807,719 30,596,313 7,722,481 13,793,233 7,830,988 4,365,796 10,997,486 79,114,016 Liabilities Payables 406, ,570 Total Liabilities 406, ,570 Net currency exposure 3,401,163 30,596,313 7,722,481 13,793,233 7,830,988 4,365,796 10,997,472 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) As at 31 December 2013 SGD HKD TWD KRW Others Total $ $ $ $ $ $ Assets Portfolio of investments 4,763,130 54,950,157 8,723,109 19,105,301 18,606, ,148,574 Receivables 263,519 25, ,616 Sales awaiting settlement - 632, , ,994 1,691,579 Cash and bank balances 808,547-55, ,101 1,284,334 Total Assets 5,835,196 55,608,010 8,778,704 19,894,337 19,297, ,414,103 Liabilities Payables 673,289 6, , ,365 Purchases awaiting settlement - 2,389, ,389,370 Total Liabilities 673,289 2,395, ,875 3,078,735 Net currency exposure 5,161,907 53,212,439 8,778,704 19,894,337 19,287,981 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. 31

34 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 Asia ex-japan 14,611, ,380, (iii) Interest rate risk (b) Liquidity 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 the 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. The Fund is exposed to daily cash redemptions and disbursements for the settlements of purchases. The Manager therefore ensures that the Fund maintains sufficient cash and cash equivalents and that it is able to obtain cash from the sale of investments held to meet its liquidity requirements. Reasonable efforts will be taken to invest in securities which are traded in a relatively active market and which can be readily disposed of. The Fund s investments in listed securities are considered to be readily realisable as they are listed on established regional stock exchanges. 32

35 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (b) Liquidity risk (continued) The Fund s investments in other funds are considered to be readily realisable as the net asset value is struck daily, and units are redeemable on demand at the published price. The table below analyses the Fund s financial liabilities into relevant maturity groupings based on the remaining period at the Statement of Financial Position date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. As at 31 December 2014 Less than 3 months $ Payables 406,570 As at 31 December 2013 Less than 3 months $ Payables 689,365 Purchases awaiting settlement 2,389,370 (c) Credit risk The Fund takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Fund s credit risk is concentrated on cash and bank balances, and amounts or securities receivable on the sale and purchase of investments respectively. In order to mitigate exposure to credit risk, all transactions in listed securities are settled/paid for upon delivery and transacted with approved counter parties using an approved list of brokers that are regularly assessed and updated by the Manager. 33

36 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (c) Credit risk (continued) The table below summarises the credit rating of banks and custodians in which the Fund s assets are held as at 31 December 2014 and The credit ratings are based on the Bank Financial Strength ratings published by the rating agency. As at 31 December 2014 Credit rating Source of credit rating Bank State Street Bank & Trust Co. B- Moody's United Overseas Bank Limited B Moody's Custodian State Street Bank & Trust Co. B- Moody s As at 31 December 2013 Credit rating Source of credit rating Bank State Street Bank & Trust Co. B- Moody s United Overseas Bank Limited B Moody s Custodian State Street Bank & Trust Co. B- Moody s The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. (d) Capital Management The Fund s capital is represented by the net assets attributable to unitholders. The Fund strives to invest the subscriptions of redeemable participating units in investments that meet the Fund s investment objectives while maintaining sufficient liquidity to meet unitholders redemptions. 34

37 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial risk management (continued) (e) Fair value estimation The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the reporting date. The quoted market price used for both financial assets and financial liabilities held by the Fund is the last traded market prices. The Fund classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The following table analyses within the fair value hierarchy the Fund s financial assets and liabilities (by class) measured at fair value at 31 December 2014 and 2013: As at 31 December 2014 Level 1 Level 2 Level 3 Total $ $ $ $ Assets Financial assets at fair value through profit or loss - Quoted equities 75,900, ,900,623 - Unit trust 1,000, ,000,360 As at 31 December 2013 Level 1 Level 2 Level 3 Total $ $ $ $ Assets Financial assets at fair value through profit or loss - Quoted equities 106,148, ,148,574 Investments whose values are based on quoted market prices in active markets, and therefore classified within Level 1, comprise active listed equities. The Fund does not adjust the quoted price for these instruments. 35