Phillip Asia Pacific Growth Fund. Annual Report Year ended 30 June 2015

Transcription

1 Phillip Asia Pacific Growth Fund Annual Report Year ended 30 June 2015

2 CONTENTS Page DIRECTORY 2 MANAGER S REPORT 4 REPORT OF THE TRUSTEE 12 STATEMENT BY THE MANAGER 13 AUDITORS REPORT 14 FINANCIAL STATEMENTS Statement of Total Return 16 Statement of Financial Position 17 Statement of Movements in Unitholders Funds 18 Statement of Portfolio 19 Notes to the Financial Statements 24 IMPORTANT INFORMATION 33 1

3 DIRECTORY MANAGER Phillip Capital Management (S) Ltd 250 North Bridge Road #06-00 Raffles City Tower Singapore (Company Registration Number: W) DIRECTORS OF THE MANAGER Lim Hua Min Loh Hoon Sun Jeffrey Lee Chay Khiong Linus Lim Wen Sheong Lee Ken Hoon TRUSTEE HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #10-02 HSBC Building Singapore (Company Registration Number: R) CUSTODIAN The Hongkong & Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong REGISTRAR HSBC Institutional Trust Services (Singapore) Limited 20 Pasir Panjang Road (East Lobby) #12-21 Mapletree Business City Singapore

4 AUDITORS KPMG LLP 16 Raffles Quay #22-00 Hong Leong Building Singapore SOLICITORS TO THE MANAGER Chan & Goh LLP 50 Craig Road #03-01 Singapore SOLICITORS TO THE TRUSTEE Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore

5 Manager s Report The Fund rose 10.1% for the full year ending 30 June 2015, outperforming its benchmark (MSCI AC Asia Pacific Index) which rose 8.5% on a SGD adjusted basis. Since its inception on 23 November 1995, the Fund is up by 131.4%, as compared to the benchmark which is up 19.4%. Asian markets had a volatile half-year from July to December There was a period of market calmness with gradual market appreciation, but concerns on a slowing global economy led to a broad market correction across most markets between September to October. This was followed by a V-shaped market rebound as fears ebbed, with the market eventually carding a flat return for the half year ending December Early 2015 saw strong gains for Asian markets, with a generally benign macro environment and optimism over lower oil prices and accommodative monetary policies in many countries (outside the US). In particular, the European Central Bank announced a massive quantitative easing program. Market momentum continued into the second calendar quarter of 2015 in certain markets while others languished. In particular, countries in North Asia were seen to have more compelling investment themes, such as accommodative monetary policies in Japan and China, the potential investment monies coming out of China into Hong Kong through the new Stock Connect, and also the perception that a more exporter-focused North Asia will be better positioned to benefit from a recovering global economy. ASEAN markets were laggards during this period. We have benefited from our high exposure to North Asian markets, particularly Japan. This was one of the major outperformers for the period. We had also reduced exposure to ASEAN markets in early 2015, and hence performance had not been dragged down as much by these laggard markets. Going forward, the baseline view is that of a US-driven economic recovery, albeit the expectation is that this will be relatively slow compared to previous economic upturns. Continued commodity price deflation may affect certain markets such as Australia and Malaysia, though. Our developed market exposure for the Fund remains primarily Japan. We continue to think from a structural point of view the country is emerging from a two decade long economic malaise. Although the three arrows of Abenomics (easy money, fiscal spending, structural reform) are taking time to work their way through the economy, business confidence has recovered and the deflation phenomenon which has dragged sentiment for so long appears to have reversed to modest inflation. The first of the three arrows (easy money) has had the most palpable impact, with a weak yen boosting the exports of the big Japanese manufacturers. One region that we have been allocating increasingly for the Fund is Greater India. We have been buying into India and Sri Lanka. India has a good reform story under its new Prime Minister Narendra Modi, is a key beneficiary of much cheaper oil prices since it is a key import, and has a good demographic growth story that will generate growth momentum from within 4

6 which makes it more resilient in a volatile economic climate. We expect it can continue to grow well while China falters (as recent economic data seem to suggest). Meanwhile, Sri Lanka has shaken off its civil war and political problems and valuations look cheap (for example, Distilleries of Sri Lanka which we own, controls 70% of the local spirits market and trades at just 10-11X PE). We continue to see the key risks as firstly, potential fallout from imminent rate hike by the Federal Reserve, and secondly the risk of China slowing down. At time of writing, there has been a recent disorderly exit of capital from Asia, due to these two concerns, and triggered by a devaluation of the Chinese renminbi to boost its exports. Our thinking is that while a renminbi devaluation is indeed a negative for the market as it raises the possibility of competitive currency devaluation by other countries (a cheaper currency is a way to boost a country s exports), the recent selldown may present opportunities to buy quality stocks as a disorderly exit tends to lead to indiscriminate broad-based selling which offers stock-picking opportunities. We do not expect an Asia-wide economic or currency crisis (such as in ) as Asia-Pacific countries have some of the highest foreign currency reserves (relative to GDP) in the world and are considerably less indebted after learning from lessons of the past. Hence we believe they are well able to handle any outflow of short-term foreign funds. 5

7 Disclosures on the Fund 1 a) I Investment Classified by Geography By Geography (Summary) Percentage of net assets attributable to Fair value unitholders as at 30/06/ /06/2015 S$ % Australia 1,073, China 2,388, Hong Kong 4,203, India 305, Indonesia 1,057, Japan 13,029, Malaysia 288, Philippines 776, Singapore 1,258, South Korea 1,764, Sri Lanka 130, Thailand 719, Portfolio of investments 26,998, Other net assets 1,514, Net assets attributable to unitholders 28,512, As required by the Code on Collective Investment Schemes 6

8 a) II Investment Classified by Industry By Industry (Summary) Percentage of net assets attributable to Fair value unitholders as at 30/06/ /06/2015 S$ % Automotive 1,305, Autos & Trucks 203, Bank 3,137, Buildings/construction material 1,869, Communications 487, Diversified resource 2,856, Engineering 604, Finance 2,597, Food & beverage 1,066, Insurance 1,346, Machine tools 2,189, Real estate 3,733, Retail 437, Telecom service 1,019, Tire & rubber 687, Transport 3,455, Portfolio of investments 26,998, Other net assets 1,514, Net assets attributable to unitholders 28,512,

9 Percentage of net assets attributable to a) III Asset Class Fair value 30/06/2015 unitholders as at 30/06/2015 S$ % Equities 26,998, Cash & cash equivalents 2,286, Other net current liabilities (772,010) (2.71) 28,512, b) Top Ten Holdings Percentage of net assets attributable 10 Largest Holdings as at 30 June 2015 Fair value 30/06/2015 to unit holders as at 30/06/2015 S$ % Kawasaki Heavy Industries Limited 2,189, Mitsubishi Heavy Industries Limited 2,070, Mitsubishi UFJ Financial Group Inc 2,055, Japan Exchange Group Inc 1,895, Daiwa House Industry Co Limited 1,353, AIA Group Limited 1,346, Mitsui O.S.K Lines Limited 1,256, SK Telecom Co Limited 1,018, Kerry Logistics Network Limited 946, Mazda Motor Corporation 798, ,931, Percentage of net assets attributable 10 Largest Holdings as at 30 June 2014 Fair value 30/06/2014 to unitholders as at 30/06/2014 S$ % Mitsubishi Heavy Industries Limited 2,302, Mitsubishi Company Limited 1,915, AIA Group Limited 1,725, Daiwa House Industry Co Limited 1,702, Taiwan Semiconductor Manufacturing Co Limited 1,690, Samsung Electronics Co Limited 1,616, Japan Exchange Group Inc 1,562, SK Telecom Co Limited 1,506, Mitsubishi UFJ Financial Group Inc 1,481, Bridgestone Corporation 1,381, ,883,

10 c) (i) Exposure to Derivatives as at 30 June 2015 Notional amount S$672,393 Fair value assets S$123 Fair value liabilities S$834 c) (ii) Loss on derivative contracts realised for the period from 1 July 2014 to 30 June 2015 S$ 32,643 c) (iii) Net losses on outstanding derivative contracts marked to market as at 30 June 2015 S$711 d) Amount and percentage of total fund size invested in other unit trusts, mutual funds and collective investment schemes as at 30 June Nil e) Amount and percentage of borrowings of total fund size as at 30 June Nil f) Amount of redemptions and subscriptions for the period 1 July 2014 to 30 June Total amount of redemptions S$ 4,112,900 Total amount of subscriptions S$ 1,270,887 g) Amount of Related-Party Transactions (for the period 1 July 2014 to 30 June 2015 Brokerage fees paid to a related party of the Manager S$ 9,516 Interest income received from a related party of the Trustee S$ 596 Bank balances held with related parties of the Trustee Amounts held with a related party of the Manager S$2,007,816 S$279,020 h) Performance of the Fund as at 30 June Months 6 Months 1 Year Since Inception 3 Years 5 Years 10 Years 23 Nov 1995 Cumulative % The Fund Benchmark Annualised % The Fund Benchmark Note: Returns are calculated in Singapore dollars on a bid-to-bid basis, with net dividends reinvested. Source: Bloomberg 9

11 Benchmark: MSCI AC Asia Pacific Index (SGD Basis) i) Expense Ratios 30 June June % 1.69% The expense ratio has been computed based on the guidelines laid down by the IMAS. The calculation of the expense ratio was based on total operating expenses of S$514,481 (2014: S$516,166) divided by the average net asset value of S$29,756,628 (2014: S$30,489,850) for the year. The total operating expenses do not include (where applicable) brokerage and other transaction costs, performance fees, interest expenses, 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 arising out of income received. The Fund does not pay any performance fees. The average net asset value is based on the daily balances. j) Turnover Ratios 30 June June % % The 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 lesser of purchases or sales of the underlying investments, being purchases of S$20,239,707 (2014: purchases of S$36,793,197), divided by the weighted average daily net asset value of S$29,756,628 (2014: S$30,489,850). Total value of purchases (or sales) do not include brokerage and other transaction costs. k) Any material information that will adversely impact the valuation of the scheme such as contingent liabilities of open contracts. Nil. 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 ) should be disclosed as well. (i) Top 10 holdings at market value and as percentage of NAV as at 30 June 2015 and 30 June 2014 Not applicable. (ii) Expense ratios for the period 30 June 2015 and 30 June A footnote should state (where applicable) that the expense ratio does not include brokerage and other transaction costs, performance fee, foreign exchange gains/losses, front or back end loads arising from or arising out of income received. Not applicable. (iii) Turnover ratios for the period 30 June 2015 and 30 June 2014 Not applicable. 10

12 m) Soft dollar arrangements The Manager is entitled to and intends to receive or enter into soft-dollar commissions or arrangements. The Manager will comply with applicable regulatory and industry standards on soft-dollars. The soft-dollar commissions which the Manager may receive include research and advisory services, economic and political analyses, portfolio analyses including valuation and performance measurements, market analyses, data and quotation services, computer hardware and software or any other information facilities to the extent that they are used to support the investment decision making process, the giving of advice, or the conduct of research or analysis and custodial service in relation to the investments managed for clients. The soft dollar credits utilised are not allocated on a specific client basis. The brokers also execute trades for other funds managed by the Manager. The Manager will not accept or enter into soft dollar commissions or arrangements unless such soft-dollar commissions or arrangements would, in the opinion of the Manager, assist the Manager in its management of clients funds, provided that the Manager shall ensure at all times that transactions are executed on the best available terms taking into account the relevant market at the time for transactions of the kind and size concerned, and that no unnecessary trades are entered into in order to qualify for such soft-dollar commissions or arrangements. The Manager does not, and is not entitled to, retain cash rebates for its own account in respect of rebates earned when transacting in securities for account of clients funds. During the period, soft dollar services received from each broker were investment research and publications, data and quotation services. Soft dollar services were received from the Manager s panel of brokers which executed transactions for the Fund and other funds managed by the Manager. 11

13 Report of the Trustee The Trustee is under a duty to take into custody and hold the assets of Phillip Asia Pacific Growth Fund in trust for the unitholders. In accordance with the Securities and Futures Act (Chapter 289), its subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor the activities of the Manager for compliance with the limitations imposed on the investment and borrowing powers as set out in the Trust Deed in each annual accounting period and report thereon to unitholders in an annual report. To the best knowledge of the Trustee, the Manager has, in all material respects, managed Phillip Asia Pacific Growth Fund during the period covered by these financial statements, set out on pages 16 to 32, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed. For and on behalf of the Trustee HSBC Institutional Trust Services (Singapore) Limited Authorised signatory 21 September

14 Statement by the Manager In the opinion of the directors of Phillip Capital Management (S) Ltd, the accompanying financial statements set out on pages 16 to 32, comprising the Statement of Total Return, Statement of Financial Position, Statement of Movements in Unitholders Funds, Statement of Portfolio and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the financial position of Phillip Asia Pacific Growth Fund as at 30 June 2015, 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 Phillip Asia Pacific Growth Fund will be able to meet its financial obligations as and when they materialise. For and on behalf of directors of the Manager Phillip Capital Management (S) Ltd Jeffrey Lee Chay Khiong Director 21 September

15 Independent auditors report Auditors Report to the Unitholders of Phillip Asia Pacific Growth Fund (Constituted under a Trust Deed in the Republic of Singapore) We have audited the financial statements of Phillip Asia Pacific Growth Fund (the Fund ), which comprise the Statement of Financial Position and Statement of Portfolio as at 30 June 2015, the Statement of Total Return and Statement of Movements in Unitholders Funds for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 16 to 32. Manager s responsibility for the financial statements The Fund s Manager (the Manager ) is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants, and for such internal controls 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. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Fund s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. 14

16 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 30 June 2015 and the total return and movements 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. KPMG LLP Public Accountants and Certified Public Accountants Singapore 21 September

17 Statement of Total Return Year ended 30 June 2015 Note S$ S$ Investment income Dividends 743, ,506 Interest , ,646 Less: Expenses Management fees (372,095) (383,233) Registration fees (15,298) (15,380) Trustee fees (59,535) (61,317) Custody fees (11,196) (14,531) Audit fees (17,002) (17,115) Transaction fees (130,145) (222,634) Other expenses (39,355) (24,590) (644,626) (738,800) Net income 99,500 42,846 Net gains or losses on value of investments and financial derivatives Net gains/(losses) on investments 2,946,162 (208,673) Net losses on financial derivatives (33,354) (15,268) Net losses on foreign exchange (11,168) (28,951) 2,901,640 (252,892) Total return for the year before income tax 3,001,140 (210,046) Less: Income tax 8 (89,646) (93,641) Total return/(deficit) for the year after income tax before distribution 2,911,494 (303,687) The accompanying notes form an integral part of these financial statements. 16

18 Statement of Financial Position As at 30 June 2015 Note S$ S$ Assets Portfolio of investments 26,998,010 27,676,528 Sales awaiting settlement 1,793, ,679 Receivables 3 51,636 48,151 Cash and cash equivalents 4 2,286,836 1,422,709 Financial derivatives, at fair value Total assets 31,130,478 29,269,067 Liabilities Payables 5 2,575, ,167 Purchase awaiting settlement 41, ,379 Financial derivatives, at fair value ,166 Total liabilities 2,617, ,712 Equity Net assets attributable to unitholders 7 28,512,836 28,443,355 The accompanying notes form an integral part of these financial statements. 17

19 Statement of Movement in Unitholders Funds Year ended 30 June 2015 Note S$ S$ Net assets attributable to unitholders at the beginning of financial year 28,443,355 32,066,389 Operations Change in net assets attributable to unitholders resulting from operations 2,911,494 (303,687) Unitholders contributions/(withdrawals) Creation of units 1,270, ,006 Cancellation of units (4,112,900) (3,479,353) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (2,842,013) (3,319,347) Total increase/(decrease) in net assets attributable to unitholders 69,481 (3,623,034) Net assets attributable to unitholders at the end of financial year 7 28,512,836 28,443,355 The accompanying notes form an integral part of these financial statements. 18

20 Statement of Portfolio As at 30 June 2015 By Geography (Primary) Holdings as at Fair value as at Percentage of total net assets attributable to unitholders as at 30/6/ /6/ /6/2015 S$ % Quoted Australia Carsales.com Limited 48, , Mirvac Group (Stapled) 296, , ,073, China China Communications Construction Company Limited 301, , China Communications Services Corporation Limited 720, , China Merchants Holdings International Company Limited 96, , China Overseas Land & Investment Limited 156, , ,388, Hong Kong AIA Group Limited 153,400 1,346, BOC Hong Kong (Holdings) Limited 138, , Chow Sang Sang Holdings International Limited 162, , Kerry Logistics Network Limited 446, , Orient Overseas International Limited 101, , ,203, India State Bank of India Limited 55, , , Indonesia Astra Otoparts Tbk PT 858, , Ciputra Property Tbk PT 10,367, , Indocement Tunggal Prakarsa Tbk PT 122, , ,057, The accompanying notes form an integral part of these financial statements. 19

21 By Geography (Primary) Quoted Holdings as at Fair value as at Percentage of total net assets attributable to unitholders as at 30/6/ /6/ /6/2015 S$ % Japan Bridgestone Corporation 13, , Daiwa House Industry Co Limited 43,200 1,353, Japan Exchange Group Inc 43,400 1,895, Kawasaki Heavy Industries Limited 349,000 2,189, Mazda Motor Corporation 30, , Mitsubishi Heavy Industries Limited 253,000 2,070, Mitsubishi UFJ Financial Group Inc 212,300 2,055, Mitsui O.S.K Lines Limited 292,000 1,256, Sekisui House Limited 33, , ,029, Malaysia Bursa Malaysia Bhd 99, , , Philippines Del Monte Pacific Limited 421, , Pepsi-Cola Products Philippines Inc 1,496, , Philippine Stock Exchange Inc 45, , , Singapore Wilmar International Limited 187, , Wing Tai Holdings Limited 338, , ,258, South Korea Shinhan Financial Group Company Limited 14, , SK Telecom Co Limited 3,390 1,018, ,764, The accompanying notes form an integral part of these financial statements. 20

22 Holdings as at Fair value as at Percentage of total net assets attributable to unitholders as at 30/6/ /6/ /6/2015 S$ % Sri Lanka Dialog Axiata Limited 1, * Distilleries Company of Sri Lanka Limited 33,010 89, John Keells Holdings PLC 20,000 41, , Thailand Amata Corporation Public Company Limited 459, , Quality Houses Public Company Limited 1,875, , Siam Cement Public Co Limited 12, , , Unquoted Singapore Japan Land Limited 1,482, Portfolio of investments 26,998, Other net assets 1,514, Net assets attributable to unitholders 28,512, * *denotes less than 0.01 The accompanying notes form an integral part of these financial statements. 21

23 By Geography (Summary) Percentage of total net assets attributable to unitholders as at Percentage of total net assets attributable to unitholders as at Fair value as at 30/6/ /6/ /6/2014 S$ % % Quoted Australia 1,073, China 2,388, Hong Kong 4,203, India 305, Indonesia 1,057, Japan 13,029, Malaysia 288, Philippines 776, Singapore 1,258, South Korea 1,764, Sri Lanka 130, Taiwan Thailand 719, ,998, Unquoted Singapore Portfolio of investments 26,998, Other net assets 1,514, Net assets attributable to unitholders 28,512, The accompanying notes form an integral part of these financial statements. 22

24 By Industry (Secondary) Percentage of total net assets attributable to unitholders as at Percentage of total net assets attributable to unitholders as at Fair value as at 30/6/ /6/ /6/2014 S$ % % Agriculture 4.63 Automotive 1,305, Autos & Trucks 203, Bank 3,137, Brewery 1.02 Buildings/construction material 1,869, Chemical 1.45 Communications 487, Diversified resource 2,856, Electrical and electronic Engineering 604, Finance 2,597, Food & beverage 1,066, Insurance 1,346, Investment 1.51 Machine tools 2,189, Oil & gas 2.99 Public utility 1.18 Real estate 3,733, Retail 437, Telecom service 1,019, Tire & rubber 687, Transport 3,455, Wholesale 6.74 Portfolio of investments 26,998, Other net assets 1,514, Net assets attributable to unitholders 28,512, The accompanying notes form an integral part of these financial statements. 23

25 Notes to the Financial Statements These notes form an integral part of the financial statements. 1 Domicile and activities Phillip Asia Pacific Growth Fund ( the Fund ) is an open-ended Unit Trust constituted pursuant to the Trust Deed dated 24 July 1995 together with its Amending and Restating Deeds and its Supplemental Deeds thereon (collectively referred to as the Trust Deed ) between Phillip Capital Management (S) Ltd (the Manager ) and HSBC Institutional Trust Services (Singapore) Limited (the Trustee ). The Trust Deed is governed by and construed in accordance with the laws of the Republic of Singapore.. The investment objective of the Fund is to achieve medium to long term capital appreciation through investing primarily in investments in or of companies with either assets wholly or partially in, or revenues wholly or partially derived from investment in countries and territories in the Asia Pacific region (including Japan, Australia and New Zealand) selected by the Manager for the purpose of investment. The Fund is benchmarked against the MSCI AC Asia Pacific Index. 2 Summary of significant accounting policies 2.1 Basis of financial statements preparation The financial statements, expressed in Singapore dollars, have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants. For the purposes of preparation of these financial statements, the basis used for calculating the expense ratio and turnover ratio are in accordance with the guidelines issued by the Investment Management Association of Singapore (the IMAS ) and the Code on Collective Investment Schemes under the Securities and Futures Act (Cap 289) (the Code ) respectively. 2.2 Basis of valuation of investments Quoted investments are stated at fair value based on the bid prices at the reporting date. Unrealised gains/losses on investments are represented by the difference between the fair value and the carrying value of investments and are recognised in the Statement of Total Return. Realised gains and losses upon disposal of investments are computed on the basis of the difference between the carrying value and the selling price of investments on trade date and are taken to the Statement of Total Return. 2.3 Financial derivatives Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the Statement of Total Return when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes in fair value therein are recognised in the Statement of Total Return. 24

26 2.4 Recognition of income Dividend income is recognised when declared and is stated gross of tax credits. Interest income is recognised using the effective interest method. 2.5 Foreign currency translation Transactions in foreign currencies are translated at the exchange rate at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at exchange rates at the reporting date. All exchange differences are recognised in the Statement of Total Return. 2.6 Income tax expenses The Fund is a designated unit trust under the Singapore Income Tax Act (Chapter 134). As a result, the following sources of income are not subjected to Singapore tax at the Fund level: (i) gains or profits derived from Singapore or elsewhere from the disposal of securities; (ii) interest (other than interest for which Singapore tax has been withheld); and (iii) dividend derived from outside Singapore and received in Singapore 2.7 Cash and cash equivalents Cash and cash equivalents comprise bank balances and amounts held with brokers. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. 2.8 Net assets attributable to unitholders Net assets attributable to unitholders are classified as equity. 3 Receivables S$ S$ Dividends receivable 51,636 48,151 51,636 48,151 4 Cash and cash equivalents S$ S$ Bank balances 2,007,816 1,027,514 Amounts held with brokers 279, ,195 2,286,836 1,422,709 The bank balances are placed with a financial institution related to the Trustee. 25

27 5 Payables S$ S$ Payable to unitholders for cancellation of units 2,461,111 10,484 Accrued expenses 114,180 98,683 2,575, ,167 6 Financial derivatives at fair value Financial derivative contracts comprise forward foreign exchange contracts due for settlement within 1 week (2014: 1 week) from the reporting date. The contract or underlying principal amount of these financial derivatives and their corresponding gross fair value at the reporting date are analysed below. Notional amount Fair value assets Fair value liabilities S$ S$ S$ 2015 Foreign exchange contracts 672, Foreign exchange contracts 443,075 1,166 7 Units in issue During the year ended 30 June the number of shares issued, redeemed and outstanding were as follows: Units at the beginning of the year 14,275,183 15,951,098 Units created 637,036 85,779 Units cancelled (1,899,744) (1,761,694) Units at the end of the year 13,012,475 14,275,183 Net assets attributable to unitholders S$ 28,512,836 28,443,355 Net asset value per unit S$ For subscriptions and redemption and for various fee calculations, investments are stated at the last traded price on the valuation day for the purpose of determining net asset value per unit while for reporting purpose, the investments are valued at the relevant bid market prices as at the reporting date. 26

28 The effect of bid market prices in the net assets attributable to unitholders is as follows: S$ S$ Net assets attributable to unitholders per financial statements 28,512,836 28,443,355 Effect for movement in the net asset value between the last dealing date and the end of the reporting period 550,259 Effect of adopting bid prices at fair value 62,752 48,559 Net assets attributable to unitholders for issuing/redeeming 29,125,847 28,491,914 8 Income tax S$ S$ Singapore income tax 7,719 Overseas income tax 89,646 85,922 89,646 93,641 The overseas income tax charge relates to withholding tax suffered on receipt of distributions from overseas investments. 9 Financial risk management The Fund s activities expose it to a variety of market risks (including price risk, interest rate risk and currency risk), liquidity risk and credit risk. The Fund s overall risk management programme seeks to minimise potential adverse effects on the Fund s financial performance. The Fund may use financial derivative instruments, subject to the terms of the Trust Deed to moderate certain risk exposures. Specific guidelines on exposures to individual securities and certain industries are in place for the Fund at any time as part of the overall financial risk management to reduce the Fund s risk exposures. a) Market risks Market risk is the risk of potential adverse change to the value of financial instruments because of changes in market conditions such as interest rate movements and volatility in securities' prices. The Manager manages the Sub-Funds' exposure to market risk through the use of risk management strategies and various analytical monitoring techniques. i. Price risk Price risk is the risk that the fair values of equities or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). 27

29 The investments of the Fund are subject to normal market fluctuations and the risks inherent in investing in securities markets and there can be no assurance that appreciation will occur. It is the policy of the Manager to maintain a diversified portfolio of investments so as to minimise the risk. The Manager s preferred strategy is to hold investments for the medium to long term. The Manager is therefore not concerned about the short-term price volatility with respect to its investments provided that the underlying business, economic and management characteristics of its investments remain favourable. ii. 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. The Fund is not subject to significant risk of fluctuations in the market interest rates as the Fund s financial assets and liabilities are largely non-interest bearing other than the cash and cash equivalents. iii. Currency risk The Fund is denominated in Singapore dollars. The Fund invests in underlying securities which are denominated in foreign currencies where fluctuations in the relevant exchange rates may have an impact on the income and value of the Fund. The Manager may seek to minimise exposure to foreign currency fluctuation to the extent practicable. As at 30 June 2015 and 2014, the concentration of the Fund s investments is set out in the Statement of Portfolio. Investments denominated in currencies other than the Fund s functional currency comprise the following: S$ S$ Australian Dollar 1,073,616 2,199,325 Hong Kong Dollar 6,592,553 3,007,250 Indian Rupee 305,569 Indonesian Rupiah 1,057,989 2,102,014 Japanese Yen 13,029,985 11,098,450 Korean Won 1,764,637 3,123,025 Malaysian Ringgit 288,691 1,956,899 Philippine Peso 627,199 1,073,033 Sri Lankan Rupee 130,414 Taiwan Dollar 1,690,146 Thai Baht 719, ,997 Cash and cash equivalents denominated in currencies other than the Fund s functional currency comprise the following: S$ S$ Hong Kong Dollar 166, ,958 Indian Rupee 500,037 28

30 S$ S$ Indonesian Rupiah 302,461 Japanese Yen 97, ,037 Others 5,351 81,121 The Fund s monetary assets/liabilities are measured for their sensitivity to exchange rate movements based on the balance of the monetary assets/liabilities, forecasted exchange rate movements and the net asset value of the Fund. As at 30 June 2015 and 2014, with respect to the monetary assets and monetary liabilities of the Fund, had the Singapore Dollar increased/decreased by 10% against foreign currencies, with all other variables remaining constant, the decrease/increase in net assets attributable to unitholders would be as follows: Currency rise by 10% Decrease in net assets attributable to unitholders S$ S$ Australian Dollar 107, ,933 Hong Kong Dollar 675, ,521 Indian Rupee 80,561 Indonesian Rupiah 136, ,201 Japanese Yen 1,312,792 1,122,749 Korean Won 176, ,303 Malaysian Ringgit 28, ,690 Philippine Peso 62, ,303 Sri Lankan Rupee 13,042 Taiwan Dollar 169,015 Thai Baht 71,981 86,100 b) Liquidity risk The Fund is exposed to daily redemption of units in the Fund. Therefore the majority of its assets are invested in investments that are traded in an active market and can be readily disposed of. c) Credit risk Credit risk is the risk that a counterparty will fail to perform contractual obligations, either in whole or in part, under a contract. The Fund is exposed to counterparty credit risk on trading derivative products, cash and cash equivalents and other receivable balances. 29

31 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. The Fund may also enter into derivative contracts to manage exposures to currency risk and price risk. Hence, the Fund is also exposed to the risk that amounts held with counterparties for derivative contracts may not be recoverable in the event of any default by the parties concerned. d) Fair value estimation Except for investments which are measured at fair value, at 30 June 2015 and 2014, the fair values of assets and liabilities approximate their carrying values on the Statement of Financial Position. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and securities) are based on quoted market prices at the close of trading on the reporting date. The quoted market price used for financial assets held by the Fund is the current bid price; the appropriate quoted market price for financial liabilities is the current asking price. When the Fund holds derivatives with offsetting market risks, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies this bid or asking price to the net open position, as appropriate. The Fund classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The following table analyses within the fair value hierarchy the Fund s financial assets and liabilities (by class) measured at fair value at 30 June 2015 and 2014: Level 1 Level 2 Level 3 Total S$ S$ S$ S$ 2015 Assets Portfolio of investments 26,998,010 26,998,010 Financial derivatives, at fair value ,998, ,998,133 Liabilities Financial derivatives, at fair value

32 Level 1 Level 2 Level 3 Total S$ S$ S$ S$ 2014 Assets Portfolio of investments 27,676,528 27,676,528 27,676,528 27,676,528 Level 1 Level 2 Level 3 Total S$ S$ S$ S$ 2014 Liabilities Financial derivatives, at fair value 1,166 1,166 1,166 1,166 Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities and exchange traded derivatives. The 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. Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. 10 Related parties In the normal course of business of the Fund, management fees and trustee fees have been paid or are payable to the Manager and the Trustee respectively as noted in the Statement of Total Return. In addition, the bank holding company and related parties of the Trustee have also provided custodian, banking, foreign exchange, fund administration and brokerage services to the Fund in the normal course of business at terms agreed between the parties and within the provisions of the Trust Deed. The Manager may also use the services of related parties to carry out transactions involving the purchase and sale of securities. Other than as disclosed in the financial statements, the following significant transactions took place between the Fund and its related parties during the year: 31

33 S$ S$ Brokerage fees paid to a related party of the Manager 9,516 1,595 Interest income received from a related party of the Trustee Bank balances held with related parties of the Trustee 2,007,816 1,027,514 Amounts held with related parties of the Manager 279, , Financial ratios Expense ratio Total operating expenses S$ 514, ,166 Average daily net asset value S$ 29,756,628 30,489,850 Expense ratio (Note 1) % Turnover ratio Lower of total value of purchases or sales S$ 20,239,708 36,793,197 Average daily net asset value S$ 29,756,628 30,489,850 Turnover ratio (Note 2) % Note 1 Note 2 The expense ratio has been computed based on the guidelines laid down by the IMAS. The calculation of the expense ratio was based on total operating expenses divided by the average net asset value for the year. The total operating expenses do not include (where applicable) brokerage and other transaction costs, performance fees, interest expenses, 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 arising out of income received. The Fund does not pay any performance fees. The average net asset value is based on the daily balances. The turnover ratio is calculated in accordance with the formula stated in the Code. The calculation of the portfolio turnover ratio was based on the total value of purchases (or sales) of the underlying investments divided by the weighted average daily net asset value. Total value of purchases (or sales) do not include brokerage and other transaction costs. 32

34 Important information Phillip Asia Pacific Growth Fund (the "Fund") is an open-ended umbrella unit trust authorised under the Securities and Futures Act, Chapter 289, by the Monetary Authority of Singapore. This document is published by Phillip Capital Management (S) Ltd, the manager of the Fund (the Manager ), for information only and it does not constitute a prospectus nor form part of any offer or invitation to subscribe for or to purchase, or solicitation of any offer to subscribe for or to purchase, any units in the Fund. All applications for units in the Fund must be made on the application forms accompanying the latest prospectus of the Fund (the Prospectus ). The information and opinions contained in this document have been obtained from public sources which the Manager believes to be reliable and accurate. However, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and it should not be relied upon as such. Opinions included herein constitute the judgement of the Manager at the time specified and may be subject to change without notice, they are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient and are not intended to provide the sole basis of evaluation of any investment. Neither the Manager nor the Fund, nor any of their respective associates, directors, officers or employees, accepts any liability whatsoever for any loss arising directly or indirectly from any use of this document or any information contained herein. Given the economic and market risks, there can be no assurance that the Fund will achieve their investment objectives. Investments in the Fund are not deposits or other obligations of, or guaranteed, or insured by the Manager or the distributors or their affiliates and are subject to investment risks, including the possible loss of the full principal amount invested. Returns may be affected by, among other things, the investment strategies or objectives of the Fund and material market and economic conditions. The value of the units and the income from them can fall as well as rise. Past performance is not necessarily indicative of the future performance of the Fund. This document should not be taken as a recommendation to buy or sell since it does not take into account the specific investment objectives, financial situation and the particular needs of any particular recipient of this document. Investors should seek advice from a financial advisor before purchasing units in the Fund. In any case, investors should read the Prospectus and consider the risks as well as suitability of the Fund before deciding whether to subscribe for units in the Fund. Copies of the Prospectus are available and may be obtained from the Manager. 33