Select Asia Pacific (ex Japan) REITs and Infrastructure Fund

Transcription

1 Affin Hwang Select Asia Pacific (ex Japan) REITs and Infrastructure Fund Interim Report 31 October 2015 MANAGER Affin Hwang Asset Management Berhad ( T) TRUSTEE HSBC (Malaysia) Trustee Berhad (1281-T)

2 AFFIN HWANG SELECT ASIA PACIFIC (EX JAPAN) REITS AND INFRASTRUCTURE FUND Interim Report and Unaudited Financial Statements For the 6 Months Financial Period Ended 31 October 2015 Contents Page MANAGER S REPORT... 2 FUND PERFORMANCE DATA... 7 TRUSTEE'S REPORT... 8 STATEMENT OF COMPREHENSIVE INCOME... 9 STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE MANAGER DIRECTORY OF SALES OFFICE

3 MANAGER S REPORT (1) MANAGER S VIEW ON PORTFOLIO & MARKET Fund Type, Category, Objective and Distribution Policy Affin Hwang Select Asia Pacific (Ex-Japan) Reits and Infrastructure Fund (the Fund ), is a mixed securities fund that seeks to provide both income and capital appreciation over the medium to long term by investing in equity or equity-link securities of companies involved in infrastructure-related businesses, as well as real estate investment trust (REITs) in the Asia Pacific (ex Japan). The Fund endeavours to distribute income, where applicable, on an annual basis after the first financial year of the Fund. However, the amount available for distribution may fluctuate from time to time. Benchmark The benchmark used by the Manager in measuring the performance of the Fund is the 75% MSCI AC Asia ex Japan Infrastructure Index and 25% Bloomberg Asia Real Estate Investment Trust Index. (Source: MSCI All Country Asia ex Japan Infrastructure Index at and Bloomberg Asia Real Estate Investment Trust Index at Performance of the Fund (1 May 2015 to 31 October 2015) For the period under review from 1 May 2015 to 31 October 2015, the Fund registered a 5.42% return compared to the benchmark return of 4.11%. The Fund thus outperformed the Benchmark by 1.31%. The Net Asset Value ( NAV ) per unit of the Fund as at 31 October 2015 was RM compared to its NAV per unit as at 30 April 2015 was RM Since commencement, the Fund registered a 25.76% return versus the benchmark of 30.39% which translates to an underperformance of -4.63%. Given the performance during the period under review, we believe the Fund s objective is being met to provide investors with a regular income stream and high level of liquidity to meet cash flow requirement while maintaining capital preservation. Table 1: Performance of the Fund 6 Months (1/5/15-31/10/15) 1 Year (1/11/14-31/10/15) 3 Years (1/11/12-31/10/15) 5 Years (1/11/10-31/10/15) Since Commencement (16/5/07-31/10/15) Fund 5.42% 16.45% 46.60% 57.92% 25.76% Benchmark 4.11% 19.19% 42.73% 59.57% 30.39% Outperformance / (Underperformance) 1.31% (2.74%) 3.87% (1.65%) (4.63%) Source of Benchmark: Bloomberg Table 2: Average Total Return 1 Year (1/11/14-31/10/15) 3 Years (1/11/12-31/10/15) 5 Years (1/11/10-31/10/15) Since Commencement (16/5/07-31/10/15) Fund 16.45% 13.60% 9.56% 2.74% Benchmark 19.19% 12.59% 9.79% 3.18% Outperformance / (Underperformance) (2.74%) 1.01% (0.23%) (0.44%) Source of Benchmark: Bloomberg 2

4 Table 3: Annual Total Return FYE 2015 (01/5/14-30/4/15) FYE 2014 (01/5/13-30/4/14) FYE 2013 (01/5/12-30/4/13) FYE 2012 (01/5/11-30/4/12) FYE 2011 (01/5/10-30/4/11) Fund 17.01% 0.45% 29.82% (3.81%) 8.77% Benchmark 25.69% (3.10%) 26.09% (2.49%) 7.28% Outperformance / (Underperformance) (8.68%) 3.55% 3.73% (1.32%) 1.49% Source of Benchmark: Bloomberg Figure 1: Movement of the Fund versus the Benchmark since commencement Percentage Growth (%) Benchmark Affin Hwang Select Asia Pacific (ex Japan) REITs and Infrastructure Fund May-07 Oct-08 Mar-10 Jul-11 Dec-12 May-14 Oct-15 This information is prepared by Affin Hwang Asset Management Berhad for information purposes only. Past earnings or the Fund s distribution record is not a guarantee or reflection of the Fund s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. Source of benchmark is from Bloomberg. Benchmark: 50% MSCI Ac Asia ex Japan Infrastructure Index + 50% Bloomberg Asia REIT Index (Source: MSCI All Country Asia ex Japan Infrastructure Index at and Bloomberg Asia Real Estate Investment Trust Index at Investment Strategy (1 May 2015 to 31 October 2015) The Manager continued to employ an active asset allocation, country selection and stock picking strategy for the Fund. Broadly however, the Manager took a conservative view of the markets given the continued strengthening of the USD (that historically acts as a headwind for Emerging Market assets) and the continued economic weakness globally (ex-us). The sharp rise in yields in the US and Emerging Market High Yield sector was also a factor in contributing to the Manager s cautiousness. This is reflected in the high cash levels. During the period under review, the Manager decided to pare down exposure to most markets given the decent share price performance of some of the Fund s holdings. We shall revisit these ideas again should share prices consolidate. During the period under review, the Fund s exposure to China and Hong Kong was increased as China performed very strongly up till June. The Manager then trimmed exposure to China and Hong Kong towards the end of the period under review amidst global concerns on China s growth sustainability. 3

5 Asset Allocation As at 31 October 2015, the asset allocation of the Fund stood at 78.08% in equity sectors and the balance in cash. For a snapshot of the Fund s asset mix during the period under review at 31 October 2015, refer to Figure 2. Figure 2: Summary of Asset Allocation 31 Oct Oct Oct 2013 Infrastructure % - Construction & Engineering % Properties % - REITs 9.67% 10.02% 5.85% Trading / Services 2.41% 11.95% 7.05% Oil and Gas % - Industrials 2.20 % 3.89% 1.88% Foreign Investment 63.80% 56.39% 81.14% Equity 78.08% 88.33% 97.79% Cash 21.92% 11.67% 2.21% TOTAL % % % The Manager had substantially reduced the investment exposure domestically on both REITs and Infrastructure sector given the unfavourable conditions in the domestic market. However, a higher weight was made into foreign markets with the Manager raising exposure levels to 63.80% from 56.39% the year before. Given the uncertainties surrounding global financial markets, the Manager has raised cash levels to 21.92% from 11.67% in the previous year as a tactical asset allocation strategy to reduce market exposure, and mitigate market risk. Market Review (1 May 2015 to 31 October 2015) During the period under review, the Asian regional markets were volatile and remained challenging for investors. Oil prices stayed weak, global growth was benign, and the USD strength was not favorable for many Asian and emerging market currencies. The China market continued to ride on its strong momentum from last year, with the CSI 300 index rising by % over a 12-month period to 5, points (which was a 7-year high) in mid-june before undergoing a huge correction in early July, with the index falling to 3, points. During the entirety of the period under review, the A-share market was highly volatile, showing a promising rise from February to June before correcting sharply in July. We observed a period of equity bulls and economic bears where the stock market rose rapidly despite weak data, with the Gross Domestic Product (GDP) slowing to 7.00% yearon-year. Rapid increases in margin debt helped fuel the rally; while the Chinese government also intervened heavily, in their effort to support investment into the stock market amidst a slowing economy. Alarmed by margin excesses, the China Securities Regulatory Commission (CSRC) tightened margin requirements, which led to a violent sell-off. The Chinese government subsequently reacted to the correction by cutting rates further, and flooding the market with further liquidity in order to support the stock market. Elsewhere in the Asia (ex Japan) region, Korean equities ended lower as concerns rose amidst the outbreak of MERS virus. ASEAN markets posted losses over the period under review, due to weak economic data, as seen in the TIP markets (Thailand, Indonesia and Philippines). Indonesian stocks were the biggest losers due to weak corporate earnings and slowing growth as plans by the Jokowi Administration to revitalize the economy struggled to deliver. Overall, in Asian markets, we observed some revived concerns over reversal of fund flows on the back of potential rate hikes by the US Fed, and also amidst concerns over slowing growth in the Asian (ex Japan) region. Also not helping was the situation at Greece as investors braced themselves for a potential Greek debt default after a collapse in negotiations forced the nation to impose capital controls and kept its banks shut. Better-than-expected fourth quarter of 2014 (4Q14) GDP data helped to lift the FBM KLCI index to a first quarter of 2015 (1Q15) high of 1, points on 4 March 2015, although it then corrected to 1,

6 points as the market digested the implications of another lackluster December 2014 earnings quarter. Subsequently, the market recovered to a year to date (YTD) high of 1, points on 21 April 2015 helped by the stabilization of crude oil prices. Thereafter, the FBM KLCI index began to slide as the market continued to be broadsided by negative news flow. Political concerns, coupled with sliding oil prices and lackluster data did nothing to help the domestic market. On the currency front, the USD has been strengthening against all Asian currencies as the end of Quantitative Easing (QE) and divergence in monetary policies amongst major central banks make the USD the preferred currency. Similarly, the domestic Ringgit has weakened against the USD during the period under review, and has been seeing some volatility since then, which was not helped by the weak oil price environment. The MYR fell to MYR per USD at 31 August 2015, as compared to MYR per USD as at 1 January Investment Outlook It is a challenging environment we face given the heightened concerns surrounding the health of emerging market economies in general and China in particular, the looming US interest rate hike and the implications for emerging markets and currencies, as well as questions surrounding the availability of policy options to central banks and governments to stabilize the global economy. As such, we will maintain an active investment strategy aimed at achieving a reasonable rate of return for the Fund without taking excessive risks. Asia (and Emerging Markets) is at the epicenter of the current volatility. We think growth would be below trend for most countries. The north Asian export oriented countries will face headwinds to growth due to a soft global growth environment. The commodities exporters too are saddled with low commodities prices. Such is being reflected in the persistent earnings downgrades we see across most markets. Asian stock markets will unlikely outperform as we head into December which is when the US Federal Reserve is expected to hike policy rates for the first time post global financial crisis. At the moment, our primary concern revolves around China. The slowdown in growth, government intervention in the stock market, uncertainties surrounding the Yuan will have far reaching implications on the region in terms of currencies and asset prices. As for the US, her economy continues to grow but at a less than robust pace. Coupled with a sluggish European recovery, this ought to lead to a much slower pace of interest rate increases. We have seen the members of the Federal Reserve committee already revise downwards their forecasts of future interest rates. In summary, this is the new normal that we face. It is one where volatility across all major asset classes is high. It is one where growth is slow and where rates should stay low. It is one where pockets of fragility will lead to the occasional risk-off events. It is one where active asset and country allocation strategies, and diligent stock picking are best suited for. Low rates in general are beneficial to the sectors that the Fund invests in; the infrastructure and REITs sectors. 5

7 (2) SOFT COMMISSIONS RECEIVED FROM BROKERS As per the requirements of the Securities Commission s Guidelines on Unit Trust Funds and Guidelines on Compliance Function for Fund Management Companies., soft commissions received from brokers/dealers may be are retained by the management company only if the (i) (ii) goods and services provided are of demonstrable benefit to Unit holders of the Fund; and goods and services are in the form of research and advisory services that assists in the decisionmaking process. During the financial period under review, the management company had received on behalf of the Fund, soft commissions in the form of research materials, data and quotation services, investment-related publications, market data feed and industry benchmarking agencies which are of demonstrable benefit to Unitholders of the Fund (3) BREAKDOWN OF UNITHOLDERS BY SIZE AS AT 31 OCTOBER 2015 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below ,001 to 10, ,001 to 50, ,861 50,001 to 500, , ,001 and above ,516 Total ,421 *Note : Excluding Manager s Stock There is neither any significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the period under review. 6

8 FUND PERFORMANCE DATA Source: Bloomberg & HSBC Trustee As at 31 Oct 2015 As at 31 Oct 2014 As at 31 Oct 2013 Total NAV (RM million) NAV per Unit (RM) Unit in Circulation (million) Highest NAV Lowest NAV Return of the fund (%) iii Capital Return (%) i Income Return (%) ii NIL 3.57 NIL Gross Distribution per Unit (sen) NIL 1.50 NIL Net Distribution per Unit (sen) NIL 1.50 NIL Management Expense Ratio (%) Portfolio Turnover Ratio (times) Basis of calculation and assumption made in calculating the returns:- The performance figures are a comparison of the growth/decline in NAV for the stipulated period taking into account all the distribution payable (if any) during the stipulated period. An illustration of the above would be as follow:- Capital return = NAV per Unit end / NAV per Unit begin 1 Income return = Income distribution per Unit / NAV per Unit ex-date Total return = Capital return x Income return - 1 Capital Return i = {NAV per Unit@31/10/14 NAV per -1} x 100 = { } x 100 = 5.42% Total Income Return ii = {Income Distribution per Unit NAV per x 100 = Nil Return of the Fund iii = [{(1+Capital Return) x (1+Income Return)} -1] x 100 = [{( %)) x ( %)} 1] x 100 = 5.42% *Source HSBC Trustee Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. 1 MER increased from the previous year after volatile market conditions and cautious investors outlook on the market led to a dip in the Fund s NAV. 2 The PTR increased slightly from the previous period under review as the Manager took on more trades on the back of the volatile market conditions. 7

9 TRUSTEE'S REPORT TO THE UNITHOLDERS OF AFFIN HWANG SELECT ASIA PACIFIC (EX-JAPAN) REITS AND INFRASTRUCTURE FUND We have acted as Trustee of Affin Hwang Select Asia Pacific (Ex Japan) Reits and Infrastructure Fund ( the Fund ) for the financial period ended 31 October To the best of our knowledge, Affin Hwang Asset Management Berhad ( the Management Company ), has operated and managed the Fund in accordance with the following:- (a) (b) (c) limitations imposed on the investment powers of the Management Company and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur 16 December

10 STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2015 INVESTMENT INCOME 6 months 6 months financial financial period ended period ended Note RM RM Dividend income 1,152,431 2,120,976 Interest income 41,319 16,338 Net gain/(loss) foreign currency exchange 2,541,655 (154,786) Net loss on forward foreign currency contracts at fair value though profit or loss (597,725) - Net gain on financial assets at fair value through profit or loss 8 3,821,125 7,248,222 6,958,805 9,230,750 EXPENSES Management fee 4 (1,101,773) (1,123,421) Trustee fee 5 (42,847) (45,391) Auditors' remuneration (3,277) (3,277) Tax agent's fee (1,790) (3,796) Transaction cost (730,425) (563,387) Other expenses (143,970) (55,434) (2,024,082) (1,794,706) NET PROFIT BEFORE TAXATION 4,934,723 7,436,044 TAXATION 6 1,194,133 (110,264) NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE FINANCIAL PERIOD 6,128,856 7,325,780 Net profit after taxation is made up of the following: Realised amount 2,036,739 6,656,688 Unrealised amount 4,092, ,092 6,128,856 7,325,780 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 9

11 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2015 ASSETS Note RM RM Financial assets at fair value through profit or loss 8 90,520,093 97,462,552 Cash and cash equivalents 9 19,677,949 14,298,257 Dividend receivables 76, ,214 Amount due from Manager - creation of units 90,605 21,492 Amount due from brokers 8,337, ,000 Tax recoverable - 67,817 TOTAL ASSETS 118,702, ,745,332 LIABILITIES Forward foreign currency contracts at fair value though profit or loss ,261 - Amount due to Manager - management fee 180, ,364 - cancellation of units 1,603, ,806 Amount due to Trustee 7,023 6,547 Amount due to brokers 299,946 1,602,803 Auditors remuneration 3,277 3,277 Tax agent s fee 119,003 93,079 Other payables and accruals 29,550 3,528 TOTAL LIABILITIES 2,770,140 2,408,404 NET ASSET VALUE OF THE FUND 115,932, ,336,928 EQUITY Unitholders capital 213,479, ,932,207 Accumulated losses (97,547,114) (113,595,279) NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 115,932, ,336,928 NUMBER OF UNITS IN CIRCULATION ,424, ,427,000 NET ASSET VALUE PER UNIT (RM) The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2015 Unitholders Accumulated capital losses Total RM RM RM Balance as at 1 May ,483,708 (103,675,970) 125,807,738 Total comprehensive income for the financial period - 6,128,856 6,128,856 Movement in unitholders capital: Creation of units arising from applications 3,525,302-3,525,302 Cancellation of units (19,529,638) - (19,529,638) Balance as at 31 October ,479,372 (97,547,114) 115,932,258 Balance as at 1 May ,766,445 (116,379,629) 138,386,816 Total comprehensive income for the financial period - 7,325,780 7,325,780 Distribution (Note 7) - (4,541,430) (4,541,430) Movement in unitholders capital: Creation of units arising from applications 221, ,194 Creation of units arising from distribution 4,525,820-4,525,820 Cancellation of units (35,581,252) - (35,581,252) Balance as at 31 October ,932,207 (113,595,279) 110,336,928 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 STATEMENT OF CASH FLOWS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2015 CASH FLOWS FROM OPERATING ACTIVITIES Note RM RM Proceeds from sale of investments 95,965, ,718,473 Purchase of investments (81,126,565) (63,181,510) Dividends received 1,396,538 2,200,563 Interest received 41,319 16,338 Management fee paid (1,107,528) (1,163,265) Trustee fee paid (43,071) (48,098) Payment for other fees and expenses (142,489) (57,920) Realised loss on forward foreign currency contracts (70,464) - Net realised foreign exchange gains/(losses) 6,021,679 (291,737) Tax refund 1,273,060 - Net cash generated from operating activities 22,207,553 39,192,844 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 4,717, ,702 Payments for cancellation of units (18,356,574) (35,608,742) Payments for distribution - (15,610) Net cash used in financing activities (13,639,091) (35,424,650) NET INCREASE IN CASH AND CASH EQUIVALENTS 8,568,462 3,768,194 EFFECTS OF FOREIGN CURRENCY EXCHANGE 2,543, ,743 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 8,565,491 10,409,320 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 9 19,677,949 14,298,257 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2015 The following accounting policies have been used in dealing with items which are considered material in relation to the financial statements. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ), as modified by financial assets and liabilities (including derivatives) at fair value through profit or loss. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported financial period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note O. (a) The new standards and amendments to published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 May 2018 MFRS 15 Revenue from Contracts with Customers (effective from 1 January 2018) deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces MFRS 118 Revenue and MFRS 111 Construction Contracts and related interpretations. This amendment is not expected to have a significant impact on the Fund s financial statements. (ii) Financial year beginning on/after 1 May 2019 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. The complete version of MFRS 9 was issued in November MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (a) The new standards and amendments to published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (continued) (ii) Financial year beginning on/after 1 May 2019 (continued) A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. This standard is not expected to have a significant impact on the Fund s financial statements. B INCOME RECOGNITION Interest income from short-term deposits with a licensed financial institution is recognised on an effective interest rate method on an accrual basis. Dividend income is recognised on the ex-dividend date, when the right to receive the dividend has been established. For quoted investments, realised gains and losses on sale of investments are accounted for as the difference between the net disposal proceeds and the carrying amount of investments, determined on a weighted average cost basis. C DIVIDEND DISTRIBUTION A distribution to the Fund s unitholders is accounted for as a deduction from realised reserve. A proposed distribution is recognised as a liability in the period in which it is approved by the Trustee of the Fund. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D TRANSACTION COSTS Transaction costs are costs incurred to acquire financial assets or liabilities at fair value through profit or loss. They include the bid-ask spread, fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. E TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable profits earned during the financial period. Tax on dividend income from foreign quoted investments is based on the tax regime of the respective countries that the Fund invests in. F FUNCTIONAL AND PRESENTATION CURRENCY Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia, which is the Fund s functional and presentation currency. G FOREIGN CURRENCY TRANSLATION Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges. H FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in quoted investments as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Derivatives are financial assets/liabilities at fair value through profit or loss categorised as held for trading unless they are designated hedges (Note N). 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (i) Classification (continued) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s loans and receivables comprise cash and cash equivalents, dividend receivables, amount due from Manager and amount due from broker. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies accrued management fee, amount due to Manager, amount due to Trustee, amount due to brokers, auditors remuneration, tax agent s fee, and other payables and accruals as other financial liabilities. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date the date on which the Fund commits to purchase or sell the asset. Investments are initially recognised at fair value. Transaction costs are expensed in statement of comprehensive income. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expires. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category including the effects of foreign currency transactions are presented in the statement of comprehensive income within net gain/(loss) on financial assets at fair value through profit or loss in the period which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payments is established. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) If a valuation based on the market price does not represent the fair value of the securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the securities are valued as determined in good faith by the Manager, based on the methods or basis approved by the Trustee after appropriate technical consultation. Deposit with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the deposit. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If loans and receivables or a held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. I CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash and bank balances and deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES J AMOUNT DUE FROM/(TO) BROKERS Amounts due from and to brokers represent receivables for securities sold and payables for securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective profit method, less provision for impairment for amounts due from brokers. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant broker. Significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, profit income is recognised using the rate of profit used to discount the future cash flows for the purpose of measuring the impairment loss. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or loans expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. K CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unitholder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s Net Asset Value or NAV. The outstanding units are carried at the redemption amount that is payable as at the date of the statement of financial position if the unitholder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unitholder s option at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. L UNITHOLDERS CAPITAL The unitholders capital to the Fund meet the definition of puttable instruments classified as equity instruments under the MFRS 132 Financial Instruments: Presentation. The units in the Fund are puttable instruments which entitle the unitholders to a pro-rata share of the net asset of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units in the Fund over the life of the units are based on the change in the net asset of the Fund. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES M SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the strategic asset allocation committee of the Manager that makes strategic decisions. N DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. The Fund s derivative financial instruments comprise forward currency contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The fair value of forward foreign currency contracts is determined using forward exchange rates at the date of statement of financial position, with the resulting value discounted back to present value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held for trading and accounted for in accordance with the accounting policy set out in Note H. O CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES The preparation of financial statements in conformity with the Malaysian Financial Reporting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on the Manager s best knowledge of current events and actions, actual results could differ from those estimates. 19

21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES O CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED) The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information contents on the estimates, certain key variables that are anticipated to have material impacts to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgements are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 20

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER INFORMATION ON THE FUND The Unit Trust Fund was constituted under the name HwangDBS Global Infrastructure Fund (the Fund ) pursuant to the execution of a Deed dated 15 March 2007, First Supplemental Deed dated 18 June 2007 and Second Supplemental Deed dated 15 October The Fund has changed its name from HwangDBS Global Infrastructure Fund to Hwang Global Infrastructure Fund as amended by Third Supplemental Deed dated 18 January 2012, from Hwang Global Infrastructure Fund to Hwang Asia Pacific (Ex-Japan) Infrastructure Fund as amended by Fourth Supplemental Deed dated 2 May 2012 and from Hwang Asia Pacific (Ex-Japan) Infrastructure Fund to Hwang Asia Pacific (Ex-Japan) REITS and Infrastructure Fund as amended by Fifth Supplemental Deed dated 8 May 2013 and from Hwang Asia Pacific (Ex-Japan) REITS and Infrastructure Fund to Affin Hwang Select Asia Pacific (Ex-Japan) REITS and Infrastructure Fund as amended by the Sixth Supplemental Deed dated 27 June 2014 (the Deeds) entered into between Affin Hwang Asset Management Berhad (the Manager ) and HSBC (Malaysia) Trustees Berhad (the Trustee ). The Fund was commenced operations on 16 May 2007, and will continue its operation until terminated by the Manager or Trustee as provided under Clause 12.1 of the Deed. The Fund may invest in securities traded on Bursa Malaysia Securities Berhad and other markets considered as eligible markets, collective investment schemes, unlisted securities, futures contracts and any other investments not otherwise prohibited by the SC from time to time. All investments will be subjected to the SC s Guidelines on Unit Trust Funds, the Deeds and the objective of the Fund. The main objective of the Fund is to provide both income and capital appreciation over the medium to longterm by investing in equity and equity-linked securities of companies involved in infrastructure-related businesses, as well as real estate investment trusts (REITs), in the Asia Pacific (ex Japan). The Manager is a company incorporated in Malaysia. The principal activities of the Manager are establishment and management of unit trust funds and private retirement schemes as well as providing fund management services to private clients. The financial statements were authorised for issue by the Manager on xx December

23 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES Financial instruments are as follows: Financial assets/ (liabilities) at fair Loans and value through Note receivables profit or loss Total 2015 RM RM RM Quoted investments 8-90,520,093 90,520,093 Cash and cash equivalents 9 19,677,949-19,677,949 Dividend receivables 76,331-76,331 Amount due from Manager - creation of units 90,605-90,605 Amount due from broker 8,337,420-8,337,420 Forward foreign currency contracts 10 - (527,261) (527,261) Total 28,182,305 89,992, ,175, Quoted investments 8-97,462,552 97,462,552 Cash and cash equivalents 9 14,298,257-14,298,257 Dividend receivables 345, ,214 Amount due from Manager - creation of units 21,492-21,492 Amount due from broker 550, ,000 Total 15,214,963 97,462, ,677,515 All current liabilities are financial liabilities which are carried at amortised cost. The Fund is exposed to a variety of risks which include market risk,(including price risk, interest rate risk, currency risk), liquidity risk, credit risk and capital risk. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated by the SC s Guidelines on Unit Trust Funds. Market risk (a) Price risk Price risk arises mainly from the uncertainty about future prices of investments. It represents the potential loss the Fund might suffer through holding market positions in the face of price movements. The Manager manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio. 22

24 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Market risk (continued) (a) Price risk (continued) The Fund s overall exposure to price risk was as follows: RM RM Quoted Investments Quoted equities designated at fair value through profit or loss 90,520,093 97,462,552 The following table summarises the sensitivity of the Fund s profit after taxation and net asset value to price risk movements. The analysis is based on the assumptions that the market price increased by 5% and decreased by 5% with all other variables held constant. This represents management s best estimate of a reasonable possible shift in the quoted securities, having regard to the historical volatility of the prices. Impact on profit after % change in price Market value tax/nav RM RM RM % 85,994,088 (4,526,005) 0% 90,520,093 +5% 95,046,098 4,526, % 92,589,424 (4,873,128) 0% 97,462, % 102,335,680 4,873,128 23

25 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Market risk (continued) (b) Interest rate risk Interest rate risk arises from the effects of fluctuations in the prevailing levels of market interest rates on the fair value of financial assets and liabilities and future cash flows. The Fund s exposure to the interest rate risk is mainly confined to short term placement with a financial institution. The Manager overcomes this exposure by way of maintaining deposits on short term basis. The Fund s exposure to interest rate risk associated with deposit with a licensed financial institution is not material as the carrying value of the deposit is a reasonable estimate of fair value as the deposit are held on a short term basis. (c) Currency risk Currency risk is associated with investments denominated in foreign currencies. When the foreign currencies fluctuate in an unfavourable movement against Ringgit Malaysia, the investments will face currency losses in addition to the capital gain/loss. The Manager will evaluate the likely directions of a foreign currency versus Ringgit Malaysia based on considerations of economic fundamentals such as interest rate differentials, balance of payments position, debt levels, and technical chart considerations. The following table sets out the foreign currency risk concentrations and counterparties of the Fund: Forward foreign Cash Quoted currency and cash Other Other equities contracts equivalents assets* payables** Total 2015 RM RM RM RM RM RM Australian Dollar , ,975 Hong Kong Dollar 29,814,376-6,230,522 - (299,946) 35,744,952 Indonesian Rupiah 12,311, ,355,309-13,666,591 Philippine Peso 8,121, ,538-8,587,936 Singapore Dollar 17,417,049-1,909,698 5,260,466-24,587,213 Indian Rupee 2,388, ,388,143 Thai Baht 3,914, ,031,438-4,945,788 United states Dollar - (527,261) 10,159,767 - (110,163) 9,522,343 73,966,598 (527,261) 18,331,962 8,113,751 (410,109) 99,474,941 24

26 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Market risk (continued) (c) Currency risk (continued) Cash Quoted and cash Other Other equities equivalents assets* payables** Total 2014 RM RM RM RM RM Hong Kong Dollar 4,292,830 3,826,450 - (552,607) 7,566,673 Indonesian Rupiah 5,303, ,303,088 Singapore Dollar 38,005, , ,706-38,833,367 Philippine Peso 5,811, ,811,574 Thailand Baht 8,821, ,821,131 United States Dollar - 9,582,910 - (84,239) 9,498,671 62,234,051 13,870, ,706 (636,846) 75,834,504 *Other assets consist of dividend receivable and amount due from brokers **Other payables consist of amount due to brokers and tax agent s fee. The table below summarises the sensitivity of the Fund's profit after tax and net asset value to changes in foreign exchange movements. The analysis is based on the assumption that the foreign exchange rate changes by 5%, with all other variables remain constants. This represents management's best estimate of a reasonable possible shift in the foreign exchange rate, having regard to historical volatility of this rate. Any increase/decrease in foreign exchange rate will result in a corresponding decrease/increase in the net assets attributable to unitholders by approximately 5%. Disclosures below are shown in absolute terms, changes and impacts could be positive or negative. Impact on profit Change in after tax/ price NAV 2015 % RM Australian Dollar 1,599 Hong Kong Dollar 1,787,248 Indonesian Rupiah 683,329 Philippine Peso 429,397 Singapore Dollar 1,229,361 Indian Rupee 119,407 Thailand Baht 247,289 United States Dollar 476,117 4,973,747 25