United Global Recovery Funds - UOB GroupUnited China-India Dynamic Growth Fund 10.33 17.22 28.13...

United Global RecoveryFunds United China-India Dynamic Growth Fund United High Grade Corporate Bond Fund

Annual Report

for the financial year ended 31st December 2014

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United Global Recovery Funds(Constituted under a Trust Deed in the Republic of Singapore)

MANAGERUOB Asset Management LtdRegistered Address:80 Raffles PlaceUOB PlazaSingapore 048624Company Registration No. : 198600120Z

OPERATIONS ADDRESS80 Raffles Place#06-00, UOB Plaza 2Singapore 048624Tel: 1800 22 22 228

DIRECTORS OF UOB ASSET MANAGEMENTTerence Ong Sea EngCheo Chai HongThio Boon Kiat

TRUSTEE / REGISTRARHSBC Institutional Trust Services (Singapore) Limited21 Collyer Quay#10-02, HSBC BuildingSingapore 049320

CUSTODIANThe Hongkong and Shanghai Banking Corporation Limited1 Queen’s Road CentralHong Kong

AUDITORSPricewaterhouseCoopers LLP8 Cross Street#17-00, PWC BuildingSingapore 048424

SOLICITORS TO THE MANAGERTan Peng Chin LLC30 Raffles Place#11-00, Chevron HouseSingapore 048622

SOLICITORS TO THE TRUSTEEAllen & Gledhill LLPOne Marina Boulevard#28-00Singapore 018989

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United China-India Dynamic Growth Fund(Constituted under a Trust Deed in the Republic of Singapore)

A) Fund Performance

SGD Class

Fund Performance/ Benchmark Returns

3 mth

%Growth

6 mth

%Growth

1 yr

%Growth

3 yrAnn

CompGrowth

5 yrAnn

CompGrowth

10 yrAnn

CompGrowth

SinceInception

22 February 2010Ann

CompRet

United China-India Dynamic Growth Fund 10.33 17.22 28.13 16.70 N/A N/A 4.42Benchmark 7.34 11.98 21.84 14.16 N/A N/A 3.70

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: 50% MSCI China and 50% MSCI India.

JPY Class


3 mth

%Growth

6 mth

%Growth

1 yr

%Growth

3 yrAnn

CompGrowth

5 yrAnn

CompGrowth

10 yrAnn

CompGrowth

SinceInception

21 December 2009Ann

CompRet

United China-India Dynamic Growth Fund 16.33 31.21 40.59 149.64 66.01 N/A 75.32Benchmark 12.84 24.60 32.35 126.82 52.50 N/A 63.37

Source: UOBAM

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: 50% MSCI China and 50% MSCI India.

For the year ended 31 December 2014, the net asset value (NAV) of the Fund (SGD Class) rose 28.1%, compared with an increase of 21.8% in the benchmark comprising 50% MSCI China and 50% MSCI India (SGD terms). During the period under review, MSCI China rose 13.6% (SGD terms), while MSCI India appreciated by 29.8% (SGD terms).

(For JPY Class)For the year ended 31 December 2014, the NAV of the Fund (JPY Class) appreciated 40.6%, compared with a rise of 32.4% in the benchmark comprising 50% MSCI China and 50% MSCI India (JPY terms).

In China, the Fund’s performance was lifted by CNR Corp, Sunny Optical, Tencent, Bank of China and Greatwall Motor. Stocks that detracted from performance included: China Oilfield Services, Biostime, Hydoo International, Xinyi Glass and Galaxy Entertainment. The industrials sector contributed positively, while energy, consumer and utilities detracted from performance.

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In India, the top contributors to the Fund’s performance were Shree Cement, HDFC Bank, Axis Bank and Torrent Pharmaceuticals. Jindal Steel & Power, Shoppers Stop and Wipro were the main detractors. The sectors that contributed positively were consumer discretionary, financials, materials, industrials and healthcare while energy detracted from performance.

At the beginning of the period, the Fund was neutral on both China and India. From October 2014, the weight in India was raised to slightly overweight. As at 31 December 2014, exposure in India was 53.5 per cent and 45.0 per cent in China/Hong Kong, with the remainder (1.5%) in cash.

At the end of the period, the top three overweight sectors were: industrials, financials and healthcare. The top three underweight sectors were energy, telecommunication services and consumer staples.

The top five holdings in China were Tencent, Industrial and Commercial Bank of China, China Construction Bank, China Mobile and CNR Corp. The top five holdings in India were Infosys, HDFC Bank, Tata Consultancy Services, Housing Development Finance and ITC.

Economic and Market Review

2014 was characterised as a year of diverging markets, where developed markets again outperformed emerging markets. China and India were exceptions to this characterisation with both markets performing strongly. The strength of the US recovery stood out compared to the growth stagnation in Europe and Japan. Within emerging markets there were diverging performances with India standing tall, while the commodity exporting countries in South America and Russia suffered from growth slowdown, rising deficits and tumbling currencies.

In India, the key change was the landslide election victory of the market friendly BJP party led by Prime Minister Modi. The government embarked on a programme of improving the efficiency of the State bureaucracy and is expected to execute key reforms. At the same time, India is also recovering from the bottom of its investment cycle and is facing macro tailwinds from falling energy prices and inflation.

In China, the whole year was characterized as a tug of war between concerns on slowing growth and optimism on reforms. The market had generally been range bound for most of the year despite some targeted easing efforts. In late November when the central bank cut interest rates for the first time in more than two years, the market surged, especially the domestic ‘A’ share market.

ChinaThe China market gained in the 12-month period under review, slightly outperforming global equity markets. After underperforming for most of the year on weak economic data, the China market staged a late rally as the central bank cut interest rates. After a brief surge in the middle of the year, the private sector HSBC purchasing managers’ index (PMI) dipped back into contraction. Other activity indicators such as retail sales, industrial production, also remained soft compared to earlier in the year. Property continued to be at risk with oversupply in many tier-2 and 3 cities and many developers faced cash flow problems with the sales slowdown. The decline in oil prices in the second half of 2014 caused a sell-off in emerging market currencies but China being a net oil importer, benefitted with their currency remaining relatively resilient.

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In terms of sector performance, financials was the best-performer, while information technology and telecommunications also outperformed with double-digit gains. After being lacklustre for most of the year, financials rallied strongly in the last six weeks of the year following China’s interest rate cut and the strong performance of the domestic ‘A’ share market. Information technology, the internet sector also performed strongly thanks to better-than-expected earnings and the high-profile listing of Alibaba. Consumer and energy sectors were the worst-performing posting declines. The government’s anti-corruption crackdown continued to negatively impact the luxury retail and gaming sectors. Retailers face heightened competition from e-commerce competition. The China energy sector performed well through most of the year on SOE reforms, but tumbled in the last quarter as oil prices plummeted.

IndiaThe Indian equity market rallied strongly with the initial leg of the rally centred on the election results which saw the emergence of a very strong government giving hopes of reforms and a consequent revival of the economy. The positive momentum continued in the later part of the year due to various reform initiatives and improving economic data signalling an economic revival.

The mandate given to the BJP led National Democratic Alliance (NDA) government is the strongest in the previous two and a half decades. Since 1984, no single party has been able to get a clear majority on its own, which had significantly restricted any government’s ability to enact material reforms and take critical decisions. The NDA’s clear mandate has enabled the government to push through important policy decisions. They have already started streamlining the administration and are expected to kick start other important reforms to improve efficiency and accelerate GDP growth.

Inflation moderated consistently over the last year, aided by a fall in global commodity prices. Wholesale Price inflation (WPI) moderated sharply. The Reserve Bank of India (RBI) is expected to lower policy rates in 2015 which should boost consumer discretionary spending as well as capital investments.

Economic data has turned incrementally positive. GDP growth for the first two quarters of FY15 (end March) have been 5.7% and 5.3%. This is an improvement over 4.7% witnessed for full year FY14 (end March). Even the Index of Industrial Production has been consistently clocking positive growth compared to the falling trend of the previous year.

Outlook and Fund Strategy

ChinaChinese policy makers face a difficult challenge of reforming the economy and achieving growth targets. Evidence so far suggest that efforts to reform the economy and weed out corruption will likely continue into 2015 and beyond. The push to reform combined with demographic realities, implies that growth expectations for China will likely be reduced in the periods ahead. This shift will have a significant bearing on our investment strategy in the years ahead.

Achieving stable growth while restraining credit growth will be particularly difficult. China’s debt to GDP exploded to over 240% of GDP as of September 2014 from less than 150% in 2008. Even amidst this robust credit growth, GDP growth slowed from over 10% to 7% currently. While the central government balance sheet is still healthy, local government and SOE corporate balance sheets are stretched. Financial risks are rising given the slowdown in the property market and the acceleration of non-performing loans (NPLs).

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Sectors that had flourished against a backdrop of excessive fixed asset investment, real estate investment and credit growth are likely to face challenges as economic drivers shift. The Chinese economy faces an urgent need to reduce overcapacity, restructure SOEs, and clean up the environment.

While policy easing could temporarily help support the financial and real estate markets, it is clear that the drivers of future opportunities in China have already shifted. The policy driven sectors of the earlier development phase in China will not be where the opportunities lie in the future.

As China has transitioned from a low income to middle income economy, the rising disposable income of the household sector is where future opportunities will arise. The birth of the internet has created significant opportunities in retail and media sectors. Meanwhile, household patterns in the consumption of services is evolving, new business segments are emerging and opportunities for investment have already shifted to cater for evolving consumer demands.

This transition in the underlying growth backdrop and shift in the structure and character of the economy will create winners and losers. Picking the right stocks in this challenging macro-environment will be critical.

We are positive on China. We believe that the macro challenges have been reflected in share prices, with stock valuations at well below their 10-year mean on price-to-earnings metrics (close to 2008 global financial crisis levels on price-to-book metrics). China is the cheapest market in Asia. Nonetheless, we remain vigilant in tracking operating conditions with the slowdown in growth having an uneven impact across industries.

Within China, we like technology, particularly the internet – social media and ecommerce, which are facilitating a sea change in consumer spending patterns. We are also overweight in selected industrials stocks, which are gaining in competitiveness against international peers, are leveraged to structurally positive trends such as increased travel, and benefit from lower energy prices. We have turned tactically positive on the financial sector given the tailwinds of monetary easing. However, we are cognizant that the banks still face challenges – contracting profit and net interest margins, non-bank disintermediation and rising NPLs. Within financials, we prefer insurance and securities companies. We remain underweight energy and materials given the weaker growth backdrop and overcapacity challenges.

IndiaIndian equities have seen a complete turnaround in sentiment post the May 2014 elections and have rallied to a new high. The sharp decline in crude oil price is an important positive development as not only will it improve the current account and inflation, there will also be an increase in consumers’ disposable income. Companies using crude oil as a raw material will also see an improvement in profit margins.

Domestic growth appears to have bottomed out. Softer energy and commodity prices (especially food), and potential monetary easing should support a recovery. Nonetheless, much will depend on the government’s efforts to revive the investment cycle. The government will need to address the structural issues in the economy including labour laws and land acquisition, unlock capital from stalled projects, and improve productivity. The market has rallied quite sharply and valuations have crossed long term average levels, but we believe the prospects for the economy remain healthy and present an opportunity for the market to re-rate further.

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The Fund continues to be bullish on banking & financial services, information technology, healthcare and consumer (automobiles) sectors. We continue to remain cautious in the industrials and materials sectors.

We are overweight on the financial sector as we believe that there is significant under-penetration of banking and financial services. We prefer private sector banks, whose asset quality has improved. We focus on those with high returns on equity (ROEs), are gaining market share and do not have to undergo government-directed lending. We stay positive on the information technology sector, where companies have robust business models with very high ROEs and huge free cash flow generation. IT outsourcing that started from the US is now gaining traction in Europe, Japan and some emerging markets.

We are overweight the healthcare sector as it is uniquely positioned to cater to the huge emerging domestic market and branded products going off-patent globally. Many Indian healthcare companies are entering low competition niche generic markets and tying up with global majors for contract manufacturing and custom synthesis. Besides the US, they are now diversifying into other developed markets and emerging markets.

We are positive on the consumer sector where rising wages, high savings and significant under penetration in many niche segments present strong demographic tailwinds. The sector has the best return ratios and highest free cash flows across all industry classes. Valuations in general are expensive, but we will use any correction as an opportunity to increase exposure. We highlight the auto and auto ancillary subsector as a favoured niche as the penetration levels are low compared to global standards. A gradual reduction in interest rates and pent-up demand should lead to strong growth in the coming years.

We are underweight the energy sector due to pricing regulations on the public sector oil & gas players in India. Although the government has deregulated pricing of fuel, we still believe the government might continue to intervene in the price determination and profitability of this sector to manage its own fiscal deficit. Within materials, we are underweight the metals and mining subsector, given the weak global demand for various commodities.

ConclusionWhile challenges from China’s restructuring and macroeconomic imbalances, and India’s twin deficits persist, we remain positive on the longer term outlook of both markets. The Fund is now tactically overweight India versus China as we believe the current macro tailwinds in India will support the market while the cyclical weakness in China’s economy serves as a dampener.

In the longer term, we believe that both China and India’s domestic economies are rising in importance. The large and growing middle class, high savings rates and low public debt present compelling opportunities. Both countries now have in place new governments that are committed to deliver reforms to improve sustainable growth and efficiency. We believe the Fund is strategically positioned to tap into the growth potential of two of the largest emerging economies in the world.

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B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by

Fair Value % of NAV(S$)

i) Country

China 14,413,060 45.00India 17,144,386 53.53

Portfolio of investments 31,557,446 98.53Other net assets 470,626 1.47

Total 32,028,072 100.00

ii) Industry

Consumer Discretionary 2,800,648 8.75Consumer Staples 1,672,457 5.23Energy 2,084,151 6.51Financials 9,820,467 30.65Healthcare 2,759,938 8.62Industrials 3,605,855 11.26Information Technology 5,601,493 17.50Materials 1,558,387 4.85Telecommunication Services 1,350,681 4.21Utilities 303,369 0.95

Portfolio of investments 31,557,446 98.53Other net assets 470,626 1.47

Total 32,028,072 100.00

iii) Asset Class

Equities 31,557,446 98.53Other net assets 470,626 1.47

Total 32,028,072 100.00

iv) Credit rating of debt securities

N/A

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C) Top Ten Holdings

The top 10 holdings as at 31 December 2014 and 31 December 2013

10 largest holdings at 31 December 2014

Fair Value

Percentage oftotal net assetsattributable to

unitholders(S$) %

TENCENT HOLDINGS LIMITED 1,345,630 4.20INFOSYS LIMITED 1,334,108 4.17HDFC BANK LIMITED 1,291,732 4.03INDUSTRIAL & COMMERCIAL BANK OF CHINA LIMITED - H 1,208,931 3.77CHINA CONSTRUCTION BANK CORP - H 1,197,312 3.74TATA CONSULTANCY SERVICES LTD 1,185,840 3.70HOUSING DEVELOPMENT FINANCE CORP LTD 1,069,466 3.34CHINA MOBILE LIMITED 1,051,557 3.28CHINA CNR CORP LTD - H 1,016,562 3.17BANK OF CHINA LTD 866,193 2.70


Fair Value


unitholders(S$) %

TENCENT HOLDINGS LIMITED 1,932,944 4.84INFOSYS LIMITED 1,823,858 4.57HDFC BANK LIMITED 1,561,663 3.91INDUSTRIAL & COMMERCIAL BK OF CHINA LIMITED - H 1,552,947 3.89CHINA CONSTRUCTION BANK CORP - H 1,543,209 3.87TATA CONSULTANCY SERVICES LTD 1,422,357 3.56HOUSING DEVELOPMENT FINANCE CORP LTD 1,233,576 3.09CHINA MOBILE LIMITED 981,909 2.46BANK OF CHINA LTD 909,780 2.28CNOOC LTD 880,543 2.21

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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

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 18,104,318Total amount of subscriptions SGD 1,801,501

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 and HSBC Group as follows:

United Overseas Bank LimitedBank balances SGD 75,412

HSBC GroupBank balances SGD 887,954

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(S$) (S$)

a) UOB Smart China India Fund 1,288,613.66 1.239 1,596,592.32

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H) The amount and terms of related-party transactions for the financial year ended 31 December 2014 (continued)

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 771.

I) Expense ratios

SGD Class31 December 2014 2.39%31 December 2013 2.09%

JPY Class31 December 2014 1.70%31 December 2013 1.38%

Note: The expense ratios have been computed based on the guidelines laid down by the Investment Management Association of Singapore (“IMAS”). The calculation of the Sub-Funds’ expense ratios at 31 December 2014 was based on total operating expenses divided by the average net asset value respectively 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 Sub-Funds do not pay any performance fee. The average net asset value is based on the daily balances.

J) Turnover ratios

31 December 2014 42.36%31 December 2013 56.54%

Note: The portfolio turnover ratios are 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 total value of purchases or sales of the underlying investments divided by the average daily net asset value.

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

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.

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L) For schemes which invest more than 30% of their deposited property in another scheme, the following key information on the second-mentioned scheme (“the underlying scheme”)1 should be disclosed as well (continued)

ii) expense ratios for the financial 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 product and services relate essentially to computer hardware and software to the extent that they are used to support the investment decision making process, research and advisory services, economic and political analyses, portfolio analyses including performance measurements, market analyses, data and quotation services, all of which are believed to be helpful in the overall discharge of UOB Asset Management’s duties to clients. As such services generally benefit all of UOB Asset Management’s clients in terms of input into the investment decision making process, the soft credits utilised are not allocated on a specific client basis. The Manager confirms that trades were executed on a best execution basis and there was no churning of trades.

N) Where the scheme offers pre-determined payouts, an explanation on the calculation of the actual payouts received by participants and any significant deviation from the pre-determined payouts

N/A


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United High Grade Corporate Bond Fund(Constituted under a Trust Deed in the Republic of Singapore)

A) Fund Performance


3 mth

%Growth

6 mth

%Growth

1 yr

%Growth

3 yrAnn

CompRet

5 yrAnn

CompRet

10 yrAnn

CompRet

Since Inception

24 July 2009 Ann

Comp Ret

United High Grade Corporate Bond Fund 3.82 3.50 7.08 6.29 4.91 N/A 5.41Benchmark 3.07 2.64 5.45 5.20 2.77 N/A 3.30

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: Merrill Lynch Global Large Cap Corporate Index, 1-10 yrs.

For the twelve months ended 31 December 2014, the net asset value of the Fund rose 7.1%, outperforming the benchmark Merrill Lynch Global Large Cap Corporate 1-10 years index, which returned 5.5% during the same period.

The Fund’s outperformance was attributed mainly to sector allocation and credit selection. During the review period, the Fund remained overweight in diversified financials including insurance and financial services, and increased utilities and technology to an overweight position.

From an overweight position in consumer cyclical (mainly automotive), the Fund gradually reduced its position to neutral as valuations became stretched. The Fund also reduced energy to underweight from overweight and basic industry from neutral to underweight while remaining underweight REITs and banking. The move to an underweight position in energy (mainly oil and gas) and basic industry (mainly metals & mining) helped the Fund to outperform as oil and commodity prices collapsed.

The Fund took a tactical position to generate alpha through credit selection. The credits that outperformed included Ingram Micro, Aflac Inc, Lloyds, General Electric, Apple Inc, Energy Transfer, Dai-Ichi, Oracle, Krung Thai Bank, UBS, Toyota and WPP.

During the first half of the year, the Fund maintained its underweight position in Europe and in the US on relative valuation. At the same time, the Fund also increased its position in Asia to overweight while it remained underweight in Latin America.

Throughout most of the second half of the year, the Fund increased its position in US dollar to overweight, while gradually reducing its Euro dollar weight to underweight from slightly underweight. This tactical strategy to reduce the Euro dollar position benefitted the Fund as the EUR/SGD dropped from 1.7071 at end-June 2014 to 1.6036 at end-Dec 2014. On the other hand, the US dollar rose from USD/SGD 1.2466 at end-June 2014 to 1.3255 at end Dec-2014.

During the first quarter of the year, the Fund was underweight in duration when rates were tightening. In the second half, the Fund adopted a tactical strategy to reduce its underweight position and gradually moved to neutral duration against the benchmark. At end-June 2014, the

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Fund was about 4% underweight in duration against the benchmark versus a 10% underweight in the first quarter. At end-Dec 2014, the Fund had a cash equivalent position of 8.23%. This cash position was raised partly in preparation to meet some redemption.

As at end Dec 2014, the Fund had the following regional asset allocation: United States (32.08%), Europe (21.53%), Asia Pacific (21.18%), UK (12.66%) and others (4.32%) and the remainder in cash and equivalent (8.23%).

Economic and Market Review

In the first half of 2014, the market consensus was going for a solid growth trajectory for the US economy but was disappointed due to a combination of factors including a drawdown of inventories and severe weather conditions. The US GDP declined one per cent in the first quarter, worse than the initial expectations, making 1Q 2014 the worst quarter in three years. The US Federal Reserve (Fed) continued to highlight the slack in the labour market on the long-term unemployment rate and the need to maintain an accommodative policy for a “considerable” amount of time. The US Treasuries (UST) rallied over a combination of factors, including the “risk-off” trade arising from tensions in Ukraine and the European Central Bank (ECB) setting the stage for quantitative easing.

The second half saw the 10-year UST yields dropping from 2.60% in the first half to 2.172% at end-Dec. Several factors caused this outperformance. Despite the US economy showing signs of accelerating, the divergence in global growth has raised the prospects of deflation across major parts of the world mainly Europe and Japan. In June, the ECB cut interest rates and announced other stimulus measures designed to increase bank lending. As a result, the Bund-US Treasury yield divergence widened even further and stood at 136 basis points (bps) in Dec from 125 bps in June, making the UST more attractive on a relative value basis.

Along with the safe haven trade due to the geopolitical (Russia/Ukraine) tensions followed by the collapse in oil prices in the second half, the US rates’ further rally raised concerns over its negative impact on emerging markets.

Economic growth in the United Kingdom was flat in the second half after a promising start in the first half. Nevertheless, we still expect Gilts to get ahead of the Bank of England with the curve steepening and 10-year yields rising to 2.75-2.90%.

Outlook and Fund Strategy

The US economy showed signs of accelerating in the second half of the year. As US macro data improves and employment trends look healthier, we expect the US Federal Reserve (Fed) to finally start to normalize its monetary policy. In 2014, the Fed has steadily unwound its quantitative easing (QE) programme (which ended in Oct 2014) and we believe it will likely raise interest rates at a gradual pace in the second half of 2015.

In terms of Fund strategy, we aim to be defensively positioned for higher rates in two ways – sector and credit curve positioning. We will look to trim our very overweight position in financials and insurance to slight overweight given their outperformance. At the same time, we expect most performance to come from carry (in terms of yield). Both senior and subordinate credit spreads

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have tightened but new supply may provide some opportunities. Therefore, we look to participate in new issues that are attractively priced. We will maintain our active tactical strategy in duration and currency positioning.

In terms of regions, we look to maintain an overweight in Asia on relative valuation; and keep an underweight position in Europe, while we aim to move towards a less underweight position in the US. Our portfolio rebalancing will take into consideration the Fund’s switch to the new benchmark replacing the previous benchmark which has been withdrawn.

Disclosure:“As the Fund is in SGD and the benchmark is in US dollar (USD), we had an overlay of currency hedges during the year, but the effect was largely neutral on the portfolio. Our global exposure to financial derivatives is calculated based on the commitment approach. This is done by adding the exposure of each financial derivative (for those with and without netting arrangement) and cash collateral values under certain cases.”

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B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by


i) Country

Australia 1,546,737 6.45 China 789,298 3.29 France 1,123,905 4.69 Germany 983,698 4.11 Guernsey 419,280 1.75 India 764,966 3.19 Ireland 1,386,176 5.79 Israel 615,417 2.57 Japan 554,554 2.31 Malaysia 527,206 2.20 Netherlands 512,948 2.14 Singapore 259,446 1.08 South Korea 638,718 2.66 Spain 352,090 1.47 Sweden 260,822 1.09 Switzerland 535,726 2.24 United Kingdom 3,034,855 12.66 United States 7,688,601 32.08 Accrued interest receivable on quoted bonds 268,835 1.12

Portfolio of investments 22,263,278 92.89 Other net assets 1,704,709 7.11

Total 23,967,987 100.00

ii) Industry

Consumer Discretionary 1,048,253 4.38 Consumer Staples 1,121,890 4.68 Energy 1,591,690 6.64 Financials 11,109,420 46.35 Healthcare 1,332,802 5.57 Industrials 851,677 3.55 Information Technology 2,319,389 9.68 Telecommunication Services 391,835 1.63 Utilities 2,227,487 9.29 Accrued interest receivable on quoted bonds 268,835 1.12


Total 23,967,987 100.00

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B) Investments at fair value and as a percentage of NAV as at 31 December 2014 under review classified by (continued)


iii) Asset Class

Fixed Income 21,994,443 91.77 Accrued interest receivable on quoted bonds 268,835 1.12 Other net assets 1,704,709 7.11

Total 23,967,987 100.00

iv) Credit rating of debt securities by S & P

AA 2,669,443 11.15A 4,783,246 19.96BBB 11,997,952 50.05NR 2,543,802 10.61

21,994,443 91.77

iv) Credit rating of debt securities by Moody's

Aa 1,094,579 4.57A 7,192,806 30.02Baa 10,578,679 44.12NR 3,128,379 13.06

21,994,443 91.77

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C) Top Ten Holdings

The top 10 holdings as at 31 December 2014 and 31 December 2013


Fair Value


unitholders(S$) %

AFLAC INC 8.50% DUE 15/05/2019 831,387 3.47GENERAL ELEC CAP CORP 6.00% DUE 07/08/2019 771,232 3.22PRUDENTIAL FINANCIAL INC 6.00% DUE 01/12/2017 742,948 3.10INGRAM MICRO INC 5.00% DUE 10/08/2022 706,655 2.95ENERGY TRANSFER PARTNERS 4.15% DUE 01/10/2020 680,971 2.84APPLE INC 2.85% DUE 06/05/2021 677,398 2.83ORACLE CORP NOTE 2.80% DUE 08/07/2021 671,414 2.80SK E&S CO LTD 4.875% DUE 29/11/2049 638,718 2.66WALGREENS BOOTS ALLIANCE 2.875% DUE 20/11/2020 631,223 2.63LLOYDS BANK PLC 6.50% DUE 14/09/2020 616,880 2.57


Fair Value


unitholders(S$) %

SWEDBANK AB 3% DUE 05/12/2022 886,219 2.61K+S AG 3.125% DUE 06/12/2018 843,335 2.48AFLAC INC 8.50% DUE 15/05/2019 807,061 2.38CSSC CAPITAL 2013 LTD 2.75% DUE 12/12/2016 758,993 2.23GENERAL ELEC CAP CORP 6% DUE 07/08/2019 741,566 2.18PRUDENTIAL FINANCIAL INC 6% DUE 01/12/2017 725,430 2.14RABOBANK NEDERLAND 4.125% DUE 14/09/2022 720,560 2.12HCP INC 7.072% DUE 08/06/2015 683,014 2.01AMERICAN INTL GROUP 3.80% DUE 22/03/2017 673,915 1.98PCI CAPITAL LTD 5.875% DUE 17/12/2014 658,818 1.94

18


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

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 13,842,563Total amount of subscriptions SGD 1,956,500

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 and HSBC Group as follows:

United Overseas Bank LimitedBank balances SGD 13,340

HSBC GroupBank balances SGD 1,096,562

19


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

Holdings of United High Grade Corporate Bond Fund as at 31 December 2014 were as follows:

Affiliated Companies No. of Units Unit Price Market Value(S$) (S$)

a) United Overseas Insurance Ltd - Shareholders’ Fund

160,536.09 1.331 213,673.54

b) United Overseas Insurance - Overseas Insurance Fund

138,950.12 1.331 184,942.61

c) United Enhanced Income Fund 3,814,904.33 1.331 5,077,637.66

Affiliated Companies No. of Units Unit Price Market Value(US$) (US$)

a) United Enhanced Income Fund 367,647.05 1.004 369,117.64

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


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 $425,686 (2013: $539,541) divided by the average net asset value of $27,588,081 (2013: $37,271,243) 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 Sub-Fund does not pay any performance fee. The average net asset value is based on the daily balances.

J) Turnover ratios


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 $133,235,069 (2013: sales of $136,155,015) divided by the average daily net asset value of $27,588,081 (2013: $37,271,243).

20


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.

There were no soft dollar arrangements, rebates, commissions or other money incentives generated by the Sub-Fund.

N) Where the scheme offers pre-determined payouts, an explanation on the calculation of the actual payouts received by participants and any significant deviation from the pre-determined payouts

N/A


21


REPORT OF THE TRUSTEE

The Trustee is under a duty to take into custody and to hold the assets of the sub-funds of United Global Recovery Funds (the “Sub-Funds”) 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 (collectively referred to as the “laws and regulations”), 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 Sub-Funds during the financial year covered by these financial statements, set out on pages 24 to 64, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed.

For and on behalf of the TrusteeHSBC INSTITUTIONAL TRUST SERVICES (SINGAPORE) LIMITED

____________________________________Authorised signatory

24 March 2015

22


STATEMENT BY THE MANAGER

In the opinion of the directors of UOB Asset Management Ltd, the accompanying financial statements set out on pages 24 to 64, comprising the Statements of Total Return, Statements of Financial Position, Statements of Movements of Unitholders’ Funds, Statements 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 Global Recovery Funds (the “Sub-Funds”) 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 ManagerUOB ASSET MANAGEMENT LTD

____________________________________THIO BOON KIATAuthorised signatory

24 March 2015

23


INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF UNITED GLOBAL RECOVERY FUNDS(Constituted under a Trust Deed in the Republic of Singapore)

We have audited the accompanying financial statements of the sub-funds of United Global Recovery Funds (the “Sub-Funds”), which comprise the Statements of Financial Position and Statements of Portfolio as at 31 December 2014, the Statements of Total Return and Statements 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 24 to 64.

Manager’s Responsibility for the Financial Statements

The Sub-Funds’ 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 Sub-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 Sub-Fund’s internal controls. 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 Sub-Funds 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 LLPPublic Accountants and Chartered Accountants

Singapore, 24 March 2015

24


The accompanying notes form an integral part of these financial statements.

STATEMENTS OF TOTAL RETURNFor the financial year ended 31 December 2014

United China-India Dynamic Growth Fund

2014 2013Note $ $

IncomeDividends 778,355 960,851

Less: ExpensesManagement fee 8 465,400 598,945 Administration fee 8 67,839 85,122 Trustee fee 8 13,773 18,030 Audit fee 14,400 13,900 Registrar fee 8 25,000 25,000 Valuation fee 8 41,215 53,587 Custody fee 8 16,682 20,525 Interest expenses 786 382 Transaction cost 249,119 351,497 Other expenses 130,308 46,362

1,024,522 1,213,350

Net loss (246,167) (252,499)

Net gains or losses on value of investmentsNet gain on investments 8,759,610 3,327,760 Net foreign exchange (loss)/gain (43,165) 282,738

8,716,445 3,610,498

Total return for the year before income tax 8,470,278 3,357,999 Less: Income tax 3 (40,129) (50,166)Less: Capital gains tax 3 (1) 2,069

Total return for the year 8,430,148 3,309,902

25



STATEMENTS OF TOTAL RETURNFor the financial year ended 31 December 2014

United High Grade Corporate Bond Fund2014 2013

Note $ $IncomeInterest 481 1,508

Less: ExpensesManagement fee 8 276,055 372,528 Administration fee 8 34,507 46,566 Trustee fee 8 11,042 14,901 Audit fee 13,300 12,900 Registrar fee 8 25,000 25,000 Valuation fee 8 34,507 46,566 Custody fee 8 4,825 6,123 Interest expenses 526 183 Transaction cost 10,249 10,631 Other expenses 26,450 14,957

436,461 550,355

Net loss (435,980) (548,847)

Net gains or losses on value of investmentsNet gain on investments 2,332,442 2,416,379 Net foreign exchange (loss)/gain (857) 55,168

2,331,585 2,471,547

Total return for the year before income tax 1,895,605 1,922,700 Less: Income tax 3 (11,961) (1,624)

Total return for the year 1,883,644 1,921,076

26



STATEMENTS OF FINANCIAL POSITIONAs at 31 December 2014


2014 2013Note $ $

ASSETSPortfolio of investments 31,557,446 39,617,229 Receivables 4 - 450 Cash and bank balances 963,366 782,152

Total Assets 32,520,812 40,399,831

LIABILITIESPayables 5 242,895 492,239 Purchases awaiting settlement 249,845 6,851

Total Liabilities 492,740 499,090

EQUITYNet assets attributable to unitholders 6 32,028,072 39,900,741

27



STATEMENTS OF FINANCIAL POSITIONAs at 31 December 2014

United High Grade Corporate Bond Fund2014 2013

Note $ $ASSETSPortfolio of investments 22,263,278 31,789,089 Receivables 4 664,503 2 Margin deposits 30,467 29,030 Cash and bank balances 1,109,902 2,300,185

Total Assets 24,068,150 34,118,306

LIABILITIESPayables 5 100,163 147,900

Total Liabilities 100,163 147,900

EQUITYNet assets attributable to unitholders 6 23,967,987 33,970,406

28


STATEMENTS OF MOVEMENTS OF UNITHOLDERS’ FUNDSFor the financial year ended 31 December 2014


United High Grade Corporate Bond Fund

2014 2013 2014 2013Note $ $ $ $

Net assets attributable to unitholders at the beginning of the financial year 39,900,741 53,355,038 33,970,406 28,688,375

OperationsChange in net assets attributable

to unitholders resulting from operations 8,430,148 3,309,902 1,883,644 1,921,076

Unitholders’ contributions/(withdrawals)

Creation of units 1,801,501 1,289,700 1,956,500 24,372,781 Cancellation of units (18,104,318) (18,053,899) (13,842,563) (21,011,826)

Change in net assets attributable to unitholders resulting from net creation and cancellation of units (16,302,817) (16,764,199) (11,886,063) 3,360,955

Total (decrease)/increase in net assets attributable to unitholders (7,872,669) (13,454,297) (10,002,419) 5,282,031

Net assets attributable to unitholders at the end of the financial year 6 32,028,072 39,900,741 23,967,987 33,970,406


29


STATEMENTS OF PORTFOLIOAs at 31 December 2014


Holdings at31 December

2014

Fair value at31 December

2014

Percentage oftotal net assetsattributable tounitholders at 31 December

2014$ %

By Geography - PrimaryQuoted Equities

CHINAAGRICULTURAL BANK OF CHINA - H 400,000 267,930 0.84 AIR CHINA LIMITED - H 630,000 674,968 2.11 ALIBABA GROUP HOLDING LTD 40 5,509 0.02 BANK OF CHINA LTD 1,160,000 866,193 2.70 BEIJING CAPITAL INTERNATIONAL AIRPORT CO LTD 350,000 372,590 1.16 CHINA CNR CORP LTD - H 535,000 1,016,562 3.17 CHINA CONSTRUCTION BANK CORP - H 1,100,000 1,197,312 3.74 CHINA LIFE INSURANCE CO LTD - H 106,000 551,529 1.72 CHINA LONGYUAN POWER GROUP CORP 220,000 303,369 0.95 CHINA MOBILE LIMITED 68,000 1,051,557 3.28 CHINA OVERSEAS GRAND OCEANS GROUP LTD 114,000 76,750 0.24 CHINA OVERSEAS LAND & INVESTMENT LTD 142,000 559,287 1.75 CHINA PETROLEUM & CHEMICAL CORP - H 416,000 444,272 1.39 CHINA SOUTH CITY HOLDINGS LTD 520,000 314,544 0.98 CNOOC LTD 200,000 356,784 1.11 GREAT WALL MOTOR COMPANY LTD 68,000 512,416 1.60 HAIER ELECTRONICS GROUP CO LTD 80,000 252,346 0.79 INDUSTRIAL & COMMERCIAL BANK OF CHINA

LIMITED - H 1,250,000 1,208,931 3.77 JIANGXI COPPER COMPANY LTD - H 150,000 340,893 1.06 PETROCHINA COMPANY LIMITED 426,000 626,013 1.96 PICC PROPERTY & CASUALTY CO LTD 172,000 443,206 1.38 SINOPHARM GROUP CO - H 87,200 409,010 1.28 TENCENT HOLDINGS LIMITED 70,000 1,345,630 4.20 TENWOW INTERNATIONAL HOLDING LTD 370,000 135,298 0.43 TONGDA GROUP HOLDINGS LTD 1,700,000 267,247 0.83 WANT WANT CHINA HOLDINGS LIMITED 255,000 445,314 1.39 YY INC - ADR 4,450 367,600 1.15

TOTAL CHINA 14,413,060 45.00


30





2014


2014


2014$ %

By Geography - Primary (continued)Quoted Equities

INDIAAMARA RAJA BATTERIES LTD 12,750 219,851 0.69 ASIAN PAINTS LIMITED 10,000 157,927 0.49 ASTRAL POLY TECHNIK LTD 9,000 74,364 0.23 AXIS BANK LIMITED 36,015 379,837 1.19 BHARTI AIRTEL LIMITED 40,400 299,124 0.93 BOSCH LTD 422 172,389 0.54 CADILA HEALTHCARE LTD 10,871 365,067 1.14 CERA SANITARYWARE LTD 2,400 89,965 0.28 CRISIL LTD 5,750 229,235 0.72 CUMMINS INDIA LIMITED 7,200 132,132 0.41 DABUR INDIA LTD 29,000 142,303 0.44 DIVI’S LABORATORIES LTD 8,950 323,769 1.01 ECLERX SERVICES LIMITED 11,514 315,960 0.99 FAG BEARINGS (INDIA) LIMITED 1,870 140,582 0.44 GRINDWELL NORTON LIMITED 13,033 168,644 0.53 HAVELLS INDIA LIMITED 55,400 320,228 1.00 HDFC BANK LIMITED 58,050 1,291,732 4.03 HERO MOTORCORP LTD 4,472 291,648 0.91 HINDUSTAN ZINC LIMITED 67,500 241,527 0.75 HOUSING DEVELOPMENT FINANCE CORP LTD 44,850 1,069,466 3.34 ICICI BANK LIMITED 65,250 483,663 1.51 INDUSIND BANK LIMITED 21,177 356,736 1.11 INFO EDGE (INDIA) LIMITED 12,924 230,720 0.72 INFOSYS LIMITED 32,218 1,334,108 4.17 IPCA LABORATORIES LTD 15,559 238,875 0.75 ITC LTD 98,870 765,248 2.39 JINDAL STEEL & POWER LIMITED 21,550 68,695 0.21 JUBILANT FOODWORKS LIMITED 4,250 122,853 0.38

Balance carried forward 10,026,648 31.30


31





2014


2014


2014$ %

By Geography - Primary (continued)Quoted Equities

Balance brought forward 10,026,648 31.30KOTAK MAHINDRA BANK LIMITED 5,350 141,949 0.44 LARSEN & TOUBRO LTD (INR) 8,550 268,269 0.84 LUPIN LIMITED 12,850 385,195 1.20 MARICO LIMITED 27,000 184,294 0.58 MARUTI SUZUKI INDIA LIMITED 5,335 372,921 1.17 MINDTREE LIMITED 3,500 94,282 0.30 MOTHERSON SUMI SYSTEMS LIMITED 38,723 371,899 1.16 OIL & NATURAL GAS CORP LTD 26,300 188,460 0.59 ORACLE FINANCIAL SERVICES SOFTWARE LTD 1,900 134,118 0.42 PAGE INDUSTRIES LIMITED 1,458 359,757 1.12 PIDILITE INDUSTRIES LTD 19,834 226,107 0.71 RELIANCE INDUSTRIES LIMITED 25,050 468,622 1.46 SHREE CEMENT LIMITED 2,650 523,238 1.63 SUN PHARMACEUTICALS INDUSTRIES LTD 37,322 647,587 2.02 SYMPHONY LTD 1,700 69,396 0.22 TATA CONSULTANCY SERVICES LTD 22,081 1,185,840 3.70 THERMAX INDIA LIMITED 5,695 127,700 0.40 TITAN CO LTD 33,000 275,023 0.86 TORRENT PHARMACEUTICALS LTD 16,454 390,435 1.22 WIPRO LIMITED 27,497 320,479 1.00 YES BANK LTD 23,580 382,167 1.19

TOTAL INDIA 17,144,386 53.53

Portfolio of investments 31,557,446 98.53 Other net assets 470,626 1.47

Net assets attributable to unitholders 32,028,072 100.00


32




Percentage of total net assetsattributable tounitholders at31 December

2014

Percentage oftotal net assetsattributable tounitholders at31 December

2013% %

By Geography - Primary (Summary)Quoted Equities

China 45.00 45.42 Hong Kong - 3.92 India 53.53 49.95

Portfolio of investments 98.53 99.29 Other net assets 1.47 0.71

Net assets attributable to unitholders 100.00 100.00


33





2014


2014

Percentage of total net assetsattributable to unitholders at31 December

2013$ % %

By Industry - SecondaryQuoted Equities

Consumer Discretionary 2,800,648 8.75 10.93 Consumer Staples 1,672,457 5.23 5.80 Energy 2,084,151 6.51 9.97 Financials 9,820,467 30.65 31.15 Healthcare 2,759,938 8.62 7.15 Industrials 3,605,855 11.26 5.12 Information Technology 5,601,493 17.50 18.57 Materials 1,558,387 4.85 4.37 Telecommunication Services 1,350,681 4.21 3.93 Utilities 303,369 0.95 2.30

Portfolio of investments 31,557,446 98.53 99.29 Other net assets 470,626 1.47 0.71

Net assets attributable to unitholders 32,028,072 100.00 100.00


34




Nominal Holdings at

31 December2014


2014


2014$ %

By Geography - PrimaryQuoted Bonds

AUSTRALIAAGL ENERGY LTD 5.00% DUE 11/05/2021 100,000 111,325 0.46 AUSTRALIA & NEW ZEALAND BANKING GROUP

4.50% DUE 19/03/2024 300,000 409,751 1.71 NATIONAL CAPITAL TR II 5.486% DUE 29/12/2049 200,000 266,993 1.11 QBE INSURANCE GROUP LTD 6.75% DUE

02/12/2044 200,000 268,001 1.12 WESFARMERS LTD 1.25% DUE 07/10/2021 300,000 490,667 2.05

TOTAL AUSTRALIA 1,546,737 6.45

CHINAALIBABA GROUP HOLDING 3.60% DUE

28/11/2024 200,000 263,922 1.10 EASTERN CREATION II INV 2.625% DUE

20/11/2017 400,000 525,376 2.19

TOTAL CHINA 789,298 3.29

FRANCEBPCE SA 5.70% DUE 22/10/2023 200,000 285,991 1.19 GDF SUEZ 3.875% DUE 02/06/2049 300,000 511,613 2.14 SOCIETE DES AUTOROUTES 1.875% DUE

15/01/2025 200,000 326,301 1.36

TOTAL FRANCE 1,123,905 4.69

GERMANYBAYER AG 3.00% DUE 01/07/2075 300,000 494,850 2.07 MERCK KGAA 2.625% DUE 12/12/2074 300,000 488,848 2.04

TOTAL GERMANY 983,698 4.11


35




Nominal Holdings at

31 December2014


2014


2014$ %

By Geography - Primary (continued)Quoted Bonds

GUERNSEYCSG GUERNSEY I LTD 7.875% DUE 24/02/2041 300,000 419,280 1.75

INDIAAXIS BANK LTD 3.25% DUE 21/05/2020 300,000 394,440 1.64 RELIANCE INDUSTRIES LTD 10.375% DUE 24/06/2016 250,000 370,526 1.55

TOTAL INDIA 764,966 3.19

IRELANDGE CAPITAL EURO FUNDING 2.875% DUE 18/06/2019 300,000 531,342 2.22 IRISH LIFE ASSURANCE PLC 5.25% DUE 29/12/2049 300,000 496,063 2.07 VNESHECONOMBANK 5.375% DUE 13/02/2017 300,000 358,771 1.50

TOTAL IRELAND 1,386,176 5.79

ISRAELISRAEL ELECTRIC CORP LTD 5.00% DUE 12/11/2024 200,000 266,313 1.11 TEVA PHARM FIN IV BV 2.875% DUE 15/04/2019 200,000 349,104 1.46

TOTAL ISRAEL 615,417 2.57

JAPANDAI-ICHI MUTUAL LIFE 5.10% DUE 29/10/2049 400,000 554,554 2.31

MALAYSIACAGAMAS GLOBAL 2.745% DUE 10/12/2019 400,000 527,206 2.20

NETHERLANDSVOLKSWAGEN INTL FIN NV 3.875% DUE 04/09/2049 300,000 512,948 2.14


36




Nominal Holdings at

31 December2014


2014


2014$ %


SINGAPOREDBS GROUP HOLDINGS LTD 4.70% DUE 29/12/2049 250,000 259,446 1.08

SOUTH KOREASK E&S CO LTD 4.875% DUE 29/11/2049 500,000 638,718 2.66

SPAINENAGAS FINANCIACIONES SA 2.50% DUE

11/04/2022 200,000 352,090 1.47

SWEDENSKANDINAVISKA ENSKILDA 5.75% DUE 29/11/2049 200,000 260,822 1.09

SWITZERLANDUBS AG 5.125% DUE 15/05/2024 400,000 535,726 2.24

UNITED KINGDOMBARCLAYS BANK PLC 5.14% DUE 14/10/2020 200,000 288,180 1.20 HSBC HOLDINGS PLC 5.25% DUE 29/12/2049 200,000 321,887 1.34 LLOYDS BANK PLC 6.50% DUE 14/09/2020 400,000 616,880 2.57 NGG FINANCE PLC 4.25% DUE 18/06/2076 200,000 347,428 1.45 RSA INSURANCE GROUP PLC 6.701% DUE

29/05/2049 200,000 442,227 1.85 STANDARD CHARTERED PLC 4.00% DUE 21/10/2025 200,000 340,315 1.42 STANDARD CHARTERED PLC 5.20% DUE 26/01/2024 300,000 414,923 1.73 WPP FINANCE 2010 3.625% DUE 07/09/2022 195,000 263,015 1.10

TOTAL UNITED KINGDOM 3,034,855 12.66


37




Nominal Holdings at

31 December2014


2014


2014$ %


UNITED STATESAFLAC INC 8.50% DUE 15/05/2019 500,000 831,387 3.47 AMAZON.COM INC 3.80% DUE 05/12/2024 200,000 272,290 1.14 APPLE INC 2.85% DUE 06/05/2021 500,000 677,398 2.83 ENERGY TRANSFER PARTNERS 4.15% DUE

01/10/2020 500,000 680,971 2.84 GENERAL ELEC CAP CORP 6.00% DUE

07/08/2019 500,000 771,232 3.22 GOLDMAN SACHS GROUP INC 3.375% DUE

01/02/2018 300,000 353,874 1.48 INGRAM MICRO INC 5.00% DUE 10/08/2022 500,000 706,655 2.95 ORACLE CORP NOTE 2.80% DUE 08/07/2021 500,000 671,414 2.80 PRUDENTIAL FINANCIAL INC 6.00% DUE

01/12/2017 500,000 742,948 3.10 SPECTRA ENERGY PARTNERS 2.95% DUE

25/09/2018 400,000 540,193 2.25 TOYOTA MOTOR CREDIT CORP 3.40% DUE

15/09/2021 300,000 417,181 1.74 VERIZON COMMUNICATIONS 3.00% DUE

01/11/2021 300,000 391,835 1.63 WALGREENS BOOTS ALLIANCE 2.875% DUE

20/11/2020 300,000 631,223 2.63

TOTAL UNITED STATES 7,688,601 32.08

Accrued interest receivable on quoted bonds 268,835 1.12


Net assets attributable to unitholders 23,967,987 100.00


38





2014

Percentage oftotal net assetsattributable tounitholders at31 December

2013% %

By Geography - Primary (Summary)Quoted Bonds

Australia 6.45 4.06 Canada - 2.23 China 3.29 2.23 Finland - 1.01 France 4.69 4.64 Germany 4.11 4.09 Guernsey 1.75 - Hong Kong - 4.18 India 3.19 1.80 Ireland 5.79 3.11 Israel 2.57 1.06 Italy - 4.25 Japan 2.31 - Malaysia 2.20 - Mexico - 1.04 Netherlands 2.14 4.24 Qatar - 0.75 Singapore 1.08 1.14 South Korea 2.66 1.08 Spain 1.47 1.55 Sweden 1.09 3.81 Switzerland 2.24 1.37 Thailand - 1.14 United Kingdom 12.66 10.20 United States 32.08 33.68

Accrued interest receivable on quoted bonds 1.12 0.92

Portfolio of investments 92.89 93.58 Other net assets 7.11 6.42

Net assets attributable to unitholders 100.00 100.00


39






2014


2014

Percentage of total net assetsattributable to unitholders at31 December

2013$ % %

By Industry - SecondaryQuoted Bonds

Consumer Discretionary 1,048,253 4.38 6.07 Consumer Staples 1,121,890 4.68 1.85 Energy 1,591,690 6.64 7.02 Financials 11,109,420 46.35 58.56 Healthcare 1,332,802 5.57 1.06 Industrials 851,677 3.55 5.39 Information Technology 2,319,389 9.68 2.79 Materials - - 5.45 Telecommunication Services 391,835 1.63 2.35 Utilities 2,227,487 9.29 2.12

Accrued interest receivable on quoted bonds 268,835 1.12 0.92

Portfolio of investments 22,263,278 92.89 93.58 Other net assets 1,704,709 7.11 6.42

Net assets attributable to unitholders 23,967,987 100.00 100.00

40


NOTES TO THE FINANCIAL STATEMENTSFor 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 Global Recovery Funds (the “Fund”) is a Singapore registered umbrella Fund constituted by a Trust Deed dated 30 January 2009 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 Fund currently offers two Sub-Funds namely United China-India Dynamic Growth Fund and United High Grade Corporate Bond Fund.

United China-India Dynamic Growth FundThe investment objective of the Sub-Fund is to achieve medium to long term capital appreciation through investing mainly in the securities of corporations in, or corporations listed or to be listed on stock exchanges in, or corporations (wherever located) which, in the opinion of the Managers, derive significant revenue or profits from or have significant assets or business interests in, the People’s Republic of China (“China”) or the Republic of India (“India”).

The Sub-Fund offers the following classes of units for subscription:a) class SGD (available for subscription in SGD and USD)b) class JPY

Class JPY units will be offered only to collective investments schemes established in Japan.

United High Grade Corporate Bond FundThe primary activity of the Sub-Fund is to maximise returns over the long term through investments in a portfolio which consists mainly of investment grade corporate bonds issued globally.

Subscriptions and redemptions of the units of the United High Grade Corporate Bond Fund 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.

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2. Significant accounting policies (continued)

(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 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 Statements of Total Return in the year in which they arise.

(iii) Derecognition

Investments are derecognised on the trade date of disposal. The resultant realised gains and losses on the sale of investments are computed on the basis of the difference between the weighted average cost and selling price gross of transaction costs, and are taken up in the Statements of Total Return.

(d) Basis of valuation of investments

The fair value of financial assets and liabilities traded in active markets is based on last traded market prices for equities and market mid prices for debt securities on the reporting date. Accrued interest or discount or premium on debt securities at the reporting date are included in the fair value of debt securities. Interest income on debt securities is presented within net gains or losses on investments on the Statement of Total Return.

(e) Foreign currency translation

(i) Functional and presentation currency

The Sub-Funds’ investors are mainly from Singapore with the subscriptions and redemptions of the units denominated in Singapore Dollar, United States Dollar and Japanese Yen.

The performance of the Sub-Funds are measured and reported to the investors in Singapore Dollar. The Manager considers the Singapore Dollar to be the currency of the primary economic environment in which the Sub-Funds operate. The financial statements are presented in Singapore Dollar, which is the Sub-Funds’ functional and presentation currency.

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2. Significant accounting policies (continued)

(e) Foreign currency translation (continued)

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statements of Total Return. Translation differences on non-monetary financial assets and liabilities are also recognised in the Statements of Total Return within the fair value net gain or loss on investments.

(f) Financial derivatives

Financial derivatives including forwards and futures are entered into for the purpose of efficient portfolio management, tactical asset allocation or specific hedging of financial assets held as determined by the Manager and in accordance with the provisions of the Trust Deed.

Financial derivatives outstanding at the reporting date are valued at forward rates or at current market prices using the “mark-to-market” method, as applicable, and the resultant gains and losses are taken up in the Statements of Total Return.

(g) Expenses charged to the Sub-Funds

All direct expenses relating to the Sub-Funds are charged directly to the Statements of Total Return. In addition, certain expenses shared by all unit trusts managed by the Manager are allocated to each Sub-Fund based on the respective Sub-Fund’s net asset value.

(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. This amount shall not be treated as part of the property of the Sub-Funds. Distributions are accrued for at the reporting date if the necessary approvals have been obtained and a legal or constructive obligation has been created.

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3. Income tax & capital gains tax



2014 2013 2014 2013$ $ $ $

Overseas income tax 40,129 50,166 11,961 1,624 Capital gains tax 1 (2,069) - -

The Sub Funds were 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);

(iii) dividends derived from outside Singapore and received in Singapore;

(iv) gains or profits derived from foreign exchange transactions, transactions in future contracts, transactions in interest rate or currency forwards, swaps or option contracts and transactions in forwards, swaps or option contracts relating to any securities of financial index; and

(v) distributions from foreign unit trusts derived from outside Singapore and received in Singapore.

The overseas income tax represents tax witheld on foreign sourced income.

The Sub-Funds are 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 Sub-Funds’ 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 Sub-Funds. 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 Sub-Funds have 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.

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4. Receivables



2014 2013 2014 2013$ $ $ $

Amounts receivable for creation of units - 450 664,500 -

Interest receivable - - 3 2

- 450 664,503 2

5. Payables



2014 2013 2014 2013$ $ $ $

Amounts payable for cancellation of units 87,250 293,961 - -

Amount due to Manager 129,779 168,763 76,713 123,485 Amount due to Trustee 3,141 4,069 2,455 3,951 Other creditors and accrued expenses 22,725 25,446 20,995 20,464

242,895 492,239 100,163 147,900

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6. Units in issue

During the year ended 31 December 2014 and 2013 the number of units issued, redeemed and outstanding were as follows:

United China-India Dynamic Growth Fund2014 2013 2014 2013

SGD class JPY class

Units at beginning of the year 32,773,254 42,993,101 546,018 1,079,000 Units created 1,542,192 1,418,279 - - Units cancelled (14,166,345) (11,638,126) (182,288) (532,982)

Units at end of the year# 20,149,101 32,773,254 363,730 546,018

# Included above are units denominated in USD 1,312,008 3,232,155

$ $ JPY JPY

Net assets attributable to unitholders 24,980,357 31,721,213 637,676,999 680,903,681

Net asset value per unit 1.239 0.967 1,753 1,247


2014 2013SGD class

Units at beginning of the year 27,327,185 24,362,872 Units created 1,500,000 20,150,130 Units cancelled (10,832,370) (17,185,817)

Units at end of the year* 17,994,815 27,327,185

* Included above are units denominated in USD 367,647 367,647

Net assets attributable to unitholders ($) 23,967,987 33,970,406

Net asset value per unit ($) 1.331 1.243

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.

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7. Financial risk management

The Sub-Funds’ activities expose it to a variety of market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Sub-Funds’ overall risk management programme seeks to minimise potential adverse effects on the Sub-Funds’ financial performance. The Sub-Funds 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 Sub-Funds at any time as part of the overall financial risk management to reduce the Sub-Funds’ risk exposures.

The Sub-Funds’ assets principally consist of financial instruments such as equity investments, fixed interest investments and cash. They are held in accordance with the published investment policies of the Sub-Funds. 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 Sub-Funds’ investments are substantially dependent on changes in market prices. The Sub-Funds’ 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 Sub-Funds. Guidelines are set to reduce the Sub-Funds’ risk exposures to market volatility such as diversifying the portfolio by investing across various geographies, alternatively, the Sub-Funds may be hedged using derivative strategies.

(i) Foreign exchange risk

The Sub-Funds have monetary financial assets and liabilities denominated in currencies other than the Singapore Dollar and 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 Sub-Funds.

47



7. Financial risk management (continued)

(a) Market risk (continued)

(i) Foreign exchange risk (continued)

The table below summarises the Sub-Funds’ exposure to foreign currencies as at the end of the financial year.


As at 31 December 2014

HKD INR SGD Others Total $ $ $ $ $

AssetsPortfolio of

investments 14,039,951 17,144,386 - 373,109 31,557,446 Cash and bank

balances 36,697 152,523 753,898 20,248 963,366

Total Assets 14,076,648 17,296,909 753,898 393,357 32,520,812

Liabilities Payables - - 240,821 2,074 242,895 Purchases awaiting

settlement 249,845 - - - 249,845

Total Liabilities 249,845 - 240,821 2,074 492,740

Net currency exposure 13,826,803 17,296,909 513,077 391,283

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United China-India Dynamic Growth Fund (continued)


HKD INR SGD Others Total $ $ $ $ $

AssetsPortfolio of

investments 19,407,194 19,932,162 - 277,873 39,617,229 Receivables - - 450 - 450 Cash and bank

balances 7,555 248,225 523,778 2,594 782,152

Total Assets 19,414,749 20,180,387 524,228 280,467 40,399,831

LiabilitiesPayables - - 306,752 185,487 492,239 Purchases awaiting

settlement - 6,851 - - 6,851

Total Liabilities - 6,851 306,752 185,487 499,090

Net currency exposure 19,414,749 20,173,536 217,476 94,980

49








EUR USD GBP SGD Others Total $ $ $ $ $ $

AssetsPortfolio of

investments 5,648,510 14,790,278 1,093,253 260,380 470,857 22,263,278 Receivables - - - 664,500 3 664,503 Margin deposits - 30,467 - - - 30,467 Cash and bank

balances 5,409 639,576 225,159 52,376 187,382 1,109,902

Total Assets 5,653,919 15,460,321 1,318,412 977,256 658,242 24,068,150

LiabilitiesPayables - 1,445 - 98,718 - 100,163

Total Liabilities - 1,445 - 98,718 - 100,163

Net currency exposure 5,653,919 15,458,876 1,318,412 878,538 658,242

50






United High Grade Corporate Bond Fund (continued)


EUR USD GBP SGD Others Total $ $ $ $ $ $

AssetsPortfolio of

investments 10,897,654 19,094,153 824,162 247,225 725,895 31,789,089 Receivables - - - - 2 2 Margin deposits - 29,030 - - - 29,030 Cash and bank

balances 1,514,034 412,863 257,594 45,575 70,119 2,300,185

Total Assets 12,411,688 19,536,046 1,081,756 292,800 796,016 34,118,306

LiabilitiesPayables - 1,238 - 146,662 - 147,900

Total Liabilities - 1,238 - 146,662 - 147,900

Net currency exposure 12,411,688 19,534,808 1,081,756 146,138 796,016

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Investments, which is the significant item in the Statements of Financial Position is exposed to currency risk, other price risk and interest rate risk. Price risk sensitivity analysis includes the impact of currency risk on non-monetary investments. Consequently, currency risk sensitivity analysis is prepared and disclosed only for monetary assets and liabilities. The table below summarises the sensitivity of the Sub-Funds’ monetary assets and liabilities to changes in foreign exchange movements as at 31 December 2014 and 2013. The analysis is based on the assumptions that the functional currency increased / decreased to the relevant foreign exchange rates as disclosed below. This represents the Manager’s best estimate of a reasonable possible shift in the foreign exchange rates, having regard to historical volatility of those rates.

2014 2013Currency Net impact to

net assets attributable

to unitholders

Net impact to net assets attributable

to unitholders$ % $ %


EUR 395,774 7 992,935 8USD 618,355 4 1,172,088 6


Currency risk sensitivity analysis has not been disclosed for United China-India Dynamic Growth Fund as the Sub-Fund’s net financial assets comprise primarily non-monetary investments.

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(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 Sub-Fund’s underlying investments in equities on the Sub-Fund’s net assets attributable to unitholders at 31 December 2014 and 2013. The analysis is based on the assumption that the index component within the benchmark increased / decreased by a reasonable possible shift, with all other variables held constant and that the fair value of the Sub-Funds’ investments moved according to the historical correlation with the index.

2014 2013Benchmark component Net impact to


to unitholders




50% MSCI China and 50% MSCI India 883,608 20 10,399,523 25

(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.

United China-India Dynamic Growth Fund’s financial assets and liabilities are largely non-interest bearing. Hence, the Sub-Fund is not subjected to significant risk due to fluctuations in the prevailing levels of market interest rates.

53





(iii) Interest rate risk (continued)

Interest rate risk arises from the effects of fluctuations in the prevailing levels of markets interest rates on the fair value of financial assets and liabilities and future cash flow. United High Grade Corporate Bond Fund holds interest bearing securities that expose the Sub-Fund to fair value interest rate risk. The Sub-Fund holds securities of varying maturities and interest rate sensitivities. Movement in market interest rates will affect the valuation of the Sub-Fund’s securities by varying degrees. The Sub-Fund’s policy requires the Manager to manage this risk by measuring the mismatch of the interest rate sensitivity gap of financial assets and liabilities and calculating the average duration of the portfolio of fixed interest securities.

The table below summarises United High Grade Corporate Bond Fund’s exposure to interest rate risks. They include the Sub-Fund’s assets and trading liabilities at fair value, categorised by the earlier of contractual re-pricing or maturity dates. All variable rate financial instruments are reset within a month.



Variablerates

Fixed rates

Non-interestbearing Total

$ $ $ $AssetsPortfolio of investments 6,623,993 15,370,450 268,835 22,263,278 Receivables - - 664,503 664,503 Margin deposits - 30,467 - 30,467 Cash and bank balances 1,109,902 - - 1,109,902

Total Assets 7,733,895 15,400,917 933,338 24,068,150

Liabilities Payables - - 100,163 100,163

Total Liabilities - - 100,163 100,163

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(iii) Interest rate risk (continued)

United High Grade Corporate Bond Fund (continued)


Variablerates

Fixed rates

Non-interestbearing Total

$ $ $ $AssetsPortfolio of investments 5,547,774 25,929,213 312,102 31,789,089 Receivables - - 2 2 Margin deposits - 29,030 - 29,030 Cash and bank balances 2,300,185 - - 2,300,185

Total Assets 7,847,959 25,958,243 312,104 34,118,306

Liabilities Payables - - 147,900 147,900

Total Liabilities - - 147,900 147,900

As at 31 December 2014 and 2013, should interest rates have lowered or risen by respective percentages as disclosed below with all other variables remaining constant, the increase or decrease in net assets attributable to unitholders for the year would be as follows:

2014 2013Currency Net impact to


to unitholders



EUR 151,098 0.5 257,730 0.5 USD 742,472 1.0 693,118 1.0

The Sub-Fund has direct exposure to interest rate changes on the valuation and cash flows of its interest bearing assets and liabilities. However, it may also be indirectly affected by the impact of changes on the earnings of certain companies in which the Sub-Fund invests and impact on the valuation of certain over-the-counter derivative products that use market interest rates as an input. Therefore, the above sensitivity analysis may not fully indicate the total effect on the Sub-Fund’s net assets attributable to unitholders of future movements in interest rates.

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(b) Liquidity risk

The Sub-Funds are exposed to daily cash redemptions and disbursements for the settlements of purchases. The Manager therefore ensures that the Sub-Funds maintain 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 Sub-Funds’ investments in listed securities are considered to be readily realisable as they are listed on established regional stock exchanges.

The table below analyses the Sub-Funds’ 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 2014Less than3 months

$

Payables 242,895 Purchases awaiting settlement 249,845


$

Payables 492,239 Purchases awaiting settlement 6,851

56




(b) Liquidity risk (continued)



$

Payables 100,163


$

Payables 147,900

(c) Credit risk

Credit risk is the risk that counterparty will fail to perform contractual obligations, either in whole or in part, under a contract.

Concentrations of credit risk are minimised primarily by:

- ensuring counterparties, together with the respective credit limits, are approved,- ensuring that transactions are undertaken with a large number of counterparties, and- ensuring that the majority of transactions are undertaken on recognised exchanges.

As such, the Sub-Funds do not have a concentration of credit risk that arises from an exposure to a single counterparty. Furthermore, the Sub-Funds do not have a material exposure to group of counterparties which are expected to be affected similarly by changes in economic or other conditions.

United High Grade Corporate Bond Fund invests in financial assets, which have an investment grade as rated by Moody’s. The credit ratings are reviewed regularly.

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(c) Credit risk (continued)

The table below analyses the Sub-Funds’ investments by credit ratings expressed as a percentage of net assets attributable to unitholders.


As at 31 December 2014Aa1 Aa3 A1 A2 A3 Baa1

Fixed rate securities 1% 1% 7% 3% 7% 7%Floating rate securities - - 2% - 5% 5%

Baa2 Baa3 Non rated

Fixed rate securities 9% 19% 10%Floating rate securities 7% 2% 6%

As at 31 December 2013Aa1 Aa3 A1 A2 A3 Baa1

Fixed rate securities 2% 3% 8% 8% 8% 15%Floating rate securities - 1% 1% - 2% 1%

Baa2 Baa3 Non rated

Fixed rate securities 14% 12% 7%Floating rate securities 2% 2% 7%

All transactions in listed securities are settled/paid upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation.

Credit risk also arises from cash and cash equivalents and derivative positions held with financial institutions. The table below summarises the credit rating of banks and custodians in which the Sub-Funds’ assets are held as at 31 December 2014 and 2013.

The credit ratings are based on the Bank Financial Strength ratings published by its rating agency.

58






As at 31 December 2014Source of

Credit rating credit rating

BankHSBC Group B Moody'sUnited Overseas Bank Limited B Moody's

CustodianHSBC Group B Moody’s



BankHSBC Group B Moody’sUnited Overseas Bank Limited B Moody’s


59








BankHSBC Group B Moody'sUnited Overseas Bank Limited B Moody's


Margin DepositJP Morgan Chase Bank NA C Moody’s



BankHSBC Group B Moody’sUnited Overseas Bank Limited B Moody’s


Margin DepositJP Morgan Chase Bank NA C Moody’s

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets.

60




(d) Capital management

The Sub-Funds’ capital is represented by the net assets attributable to unitholders. The Sub-Funds strive to invest the subscriptions of redeemable participating units in investments that meet the Sub-Funds’ investment objectives while maintaining sufficient liquidity to meet unitholders’ redemptions.

(e) Fair value estimation

The Sub-Funds classify 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 Sub-Funds’ 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$ $ $ $

AssetsFinancial assets at fair value through profit or loss - Quoted equities 31,557,446 - - 31,557,446


AssetsFinancial assets at fair value through profit or loss - Quoted equities 39,617,209 - - 39,617,209 - Unquoted equities - - 20 20

39,617,209 - 20 39,617,229

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(e) Fair value estimation (continued)



AssetsFinancial assets at fair value through profit or loss - Quoted bonds - 22,263,278 - 22,263,278


AssetsFinancial assets at fair value through profit or loss - Quoted bonds - 31,789,089 - 31,789,089

Investments whose values are based on quoted market prices in active markets, and therefore classified within Level 1, comprise active listed equities and exchange traded derivatives. The Sub-Fund does not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment grade corporate bonds and over the counter derivatives.

Financial instruments that were unquoted and not tradable as at 31 December 2013 were classified within Level 3. These comprised 720 shares of Marico Kaya Enterprises Limited (“Marico Kaya”), which were inherited on 1 November 2013 due to a demerger of the skin care segment by Marico Limited. Marico Kaya shares were disposed off during the year ended 31 December 2014.

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(e) Fair value estimation (continued)

The following table presents the movement in Level 3 instruments for the year by class of financial instruments.

2014 2013$ $

Balance at the beginning of the year 20 - Granted during the year - 20 Disposed off during the year (4,675) - Net gains recognised in profit or loss 4,655 -

Balance at the end of the year - 20

Except for cash and cash equivalents and margin deposits which are classified as Level 1, the Sub-Funds’ assets and liabilities not measured at fair value at 31 December 2014 and 2013 have been classified as Level 2. The carrying amounts of these assets and liabilities approximate their fair values as at the Statement of Financial Position date.

8. Related party transactions

(a) The Manager and the Trustee of the Sub-Funds are UOB Asset Management Ltd and HSBC Institutional Trust Services (Singapore) Limited respectively. UOB Asset Management Ltd is a subsidiary of United Overseas Bank Limited and HSBC Institutional Trust Services (Singapore) Limited is a subsidiary of HSBC Holdings Plc.

Management, administration and valuation fees are paid to the Manager, while trustee fee is paid to the Trustee and the registrar fee is paid to HSBC Institutional Trust Services (Singapore) Limited, a subsidiary of HSBC Holdings Plc. The custodian of the Sub-Fund is The Hongkong and Shanghai Banking Corporation, to which custodian fees are paid. These fees paid or payable by the Sub-Funds shown in the Statements of Total Return and in the respective Notes to the Financial Statements are on terms set out in the Trust Deed. All other related party transactions are shown elsewhere in the financial statements.

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8. Related party transactions (continued)

(b) As at the end of the financial year, the Sub-Funds maintained the following accounts with the related parties:



2014 2013 2014 2013$ $ $ $

United Overseas Bank LimitedBank balances 75,412 78,502 13,340 22,628

HSBC GroupBank balances 887,954 703,650 1,096,562 2,277,557

(c) The following transactions took place during the financial year between the Sub-Funds and related parties as terms agreed between the parties:



2014 2013 2014 2013$ $ $ $

United Overseas Bank LimitedBank charges 30 30 80 30 Interest expenses - - - 10

HSBC GroupBank charges 3,373 4,653 - - Interest income - - 481 1,508 Interest expense 786 382 526 173

(d) UOB Kay Hian Pte Ltd is an affiliate company of United Overseas Bank Limited.

As at the end of the financial year ended 31 December 2014, the Sub-Funds have brokerage fee paid or payable to UOB Kay Hian Pte Ltd as follows:


2014 2013$ $

Brokerage charges 771 -

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9. Financial ratios



2014 2013 2014 2013

Expense ratio1 (SGD Class) 2.39% 2.09% 1.54% 1.45%Expense ratio1 (JPY Class) 1.70% 1.38% - - Turnover ratio2 42.36% 56.54% 482.94% 365.31%

1 The expense ratios have been computed based on the guidelines laid down by the Investment Management Association of Singapore (“IMAS”). The calculation of the Sub-Funds’ expense ratios at 31 December 2014 was based on total operating expenses divided by the average net asset value respectively 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 Sub-Funds do not pay any performance fee. The average net asset value is based on the daily balances.

Total operating expenses and average net asset value are as below:



2014 2013 2014 2013

$ $ $ $

Total operating expenses

- SGD Class 650,823 709,097 425,686 539,541

- JPY Class 123,794 152,374 - -

Average net asset value

- SGD Class 27,186,792 34,001,434 27,588,081 37,271,243

- JPY Class 7,299,806 11,009,705 - -

2 The portfolio turnover ratios are 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 total value of purchases or sales of the underlying investments divided by the average daily net asset value respectively as below:



2014 2013 2014 2013

$ $ $ $

Total value of purchases or sales of the underlying investments 14,607,185 25,447,750 133,235,069 136,155,015

Average daily net asset value 34,486,598 45,011,139 27,588,081 37,271,243

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