Select Asia Pacific (Ex Japan) REITs and Infrastructure Fund

Transcription

1 Affin Hwang Select Asia Pacific (Ex Japan) REITs and Infrastructure Fund (Formerly known as Hwang Asia Pacific (Ex Japan) REITs and Infrastructure Fund) Annual Report 30 April 2015 MANAGER Affin Hwang Asset Management Berhad ( T) (Formerly known as Hwang Investment Management Berhad) TRUSTEE HSBC (Malaysia) Trustee Berhad (1281-T)

2 AFFIN HWANG SELECT ASIA PACIFIC (EX JAPAN) REITS AND INFRASTRUCTURE FUND Annual Report and Audited Financial Statements For the Financial Year Ended 30 April 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 AUDITORS REPORT 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 2014 to 30 April 2015) For the period under review from 1 May 2014 to 30 April 2015, the Fund registered a 17.01% return compared to the benchmark return of 25.69%. The Fund thus underperformed the Benchmark by 8.68%. The Net Asset Value ( NAV ) per unit of the Fund as at 30 April 2014 was RM compared to its NAV per unit as at 30 April 2015 was RM Since commencement, the Fund registered a 19.30% return versus the benchmark of 25.25% which translates to an underperformance of 5.95%. The Fund has declared a total gross income distribution of RM0.75 per unit to date. 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 1 Year (1/5/14-30/4/15) 3 Years (1/5/12-30/4/15) 5 Years (1/5/10-30/4/15) Since Commencement (16/5/07-30/4/15) Fund 17.01% 52.58% 59.64% 19.30% Benchmark 25.69% 53.57% 60.64% 25.25% Outperformance (8.68%) (0.99%) (1.00%) (5.95%) Source of Benchmark: Bloomberg Table 2: Average Total Return 1 Year (1/5/14-30/4/15) 3 Years (1/5/12-30/4/15) 5 Years (1/5/10-30/4/15) Since Commencement (16/5/07-30/4/15) Fund 17.01% 15.12% 9.80% 2.24% Benchmark 25.69% 15.37% 9.94% 2.87% Outperformance (8.68%) (0.25%) (0.14%) (0.63%) Source of Benchmark: Bloomberg 2

4 Table 3: Annual Total Return FYE 2015 FYE 2014 FYE 2013 FYE 2012 FYE 2011 (01/5/14 - (01/5/13 - (01/5/12 - (01/5/11 - (01/5/10-30/4/15) 30/4/14) 30/4/13) 30/4/12) 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. This information is prepared by Affin Hwang Asset Management Berhad (formerly known as Hwang Investment 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 Strategies Employed (1 May 2014 to 30 April 2015) The strategy for the Fund has remained consistent with focus on Real Estate Investment Trusts (REITs) that provide attractive dividend yields with growth potential. The infrastructure holdings are picked for their ability to deliver sustainable growth and supported by decent dividend yields. A bottoms-up strategy is employed where emphasis is placed on the sustainability and growth of dividends i.e. portfolio comprises companies that are able to grow their dividends over the medium-term, has healthy balance sheets, strong business franchise and capable management. REITs form a major portion of the portfolio. We continue to prefer REITs which does not only give decent dividend yields but have the ability to grow the dividends through asset enhancement strategies, healthy rental reversion potentials and low gearing to allow accretive acquisitions. Within the infrastructure sector, the Fund is over-weighted on clean energy concessionaires in the wind and waste water treatment segment in China. Another sector over-weighted is the telecommunication sector with holdings in Indonesia and Philippines. 3

5 Asset Allocation As at 30 April 2015, the asset allocation of the Fund stood at 89.41% in equity sectors and the balance in cash. For a snapshot of the Fund s asset mix during the period under review at 30 April 2015, refer to Figure 2. Figure 2: Asset Mix of Fund 30 Apr 2015 (%) 30 Apr 2014 (%) 30 Apr 2013 (%) Construction Financial Industrials Infrastructure Oil & Gas REITs Telecommunications Trading/Services Healthcare 0.78 Technology 2.55 Property & Real Estate Utilities Equity Cash Total The Fund s asset allocation maintained at almost fully invested over the period under review as the Fund Manager took a more positive stance of the market. Market Review (1 May 2014 to 30 April 2015) Signs of global growth faltering were evidently more visible as both the World Bank and the IMF cut global growth forecasts for 2015 and US GDP for fourth Quarter 2014 was below expectation (2.6% vs 3.2%). To arrest weakening growth and avert deflation fears, nervous central banks globally have started to respond. The U.S and Asian markets were boosted by the much awaited announcement by the ECB of the EUR1.1 trillion asset purchase program. European equities were simultaneously pushed up on the back of the Quantitative Easing (QE) announcement. In addition to the Eurozone, at least nine countries cut rates in January, most of them unexpected. The North Asian markets of Hong Kong, China, Korea and Taiwan have been the standout performer in recent months. The Hong Kong and China s outperformance in particular was on the back of continued reform and targeted easing measures to arrest their growth slowdown. In November, the PBoC s surprise move in cutting it s lending and deposit rates helped pare losses in Chinese equities. In January, Chinese equities continued rising despite a sell-off after regulators, concerned that the surge in stocks is unsustainable, tightened control on margin investing. As the government continues to be concerned with the weak economic data, measures continue to be taken to drive economic growth. Spending on railway has been increased, property restrictions have been relaxed and interest rates have been cut several times. The PBoC has also continued to inject liquidity into the financial system using RMB60 billion of reverse repos and increasing its relending quota by RMB50 billion to support the agriculture sector and SMEs. On the currency front, the US dollar (USD) has been strengthening against all major currencies as the end of QE and divergence in monetary policies amongst major central banks make the USD the preferred currency. With this in mind, the Fund has increased exposure to the Hong Kong market as the Hong Kong Dollar is pegged to the USD. This gives the Fund additional performance uplift through the currency gains versus the base currency in Malaysian Ringgit. 4

6 Investment Outlook Going forward, we are cautiously optimistic amidst the regional market uncertainty. Markets are currently driven by the various monetary easing measures to counter the weak growth. Low oil price has been supportive of these measures as it has reduced inflation expectations and thus provides the central banks the ability to lower interest rates. Savings from oil imports also improve the government balance sheets and increase the flexibility to spend on the infrastructure sector to stimulate the economies. The Fund has maintained selective exposure into Indonesia, Thailand, Philippines and Singapore markets within the ASEAN region and also into the Hong Kong and China markets in North Asia. The Fund has a higher exposure to the Hong Kong and China markets currently due to the on-going fiscal stimulus and monetary easing by the government. Exposure are into dividend yielding infrastructure companies which show promise of earnings growth and ability to increase the dividends over time due to strong cash flow management. (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 30 APRIL 2015 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below ,001 to 10, ,001 to 50, ,595 50,001 to 500, , ,001 and above ,116 Total ,343 *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. 5

7 INCOME DISTRIBUTION Affin Hwang Asset Management Berhad (formerly known as Hwang Investment Management Berhad) recently declared a gross and net distribution of RM0.02 sen per unit for investors of the Affin Hwang Select Asia Pacific (Ex Japan) Reits and Infrastructure Fund. All unit holders registered as at 8 December 2014 will be eligible to receive this distribution. The Net Asset Value per Unit prior and subsequent to the distributions was as follows: Distribution Date Cum-Date Distribution Date Ex- Date Cum-distribution (RM) Distribution per Unit (RM) Ex-distribution (RM) 20 April April April April December December June June December December

8 FUND PERFORMANCE DATA Source: HSBC Trustee As at 30 April 2015 As at 30 April 2014 As at 30 April 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 (%) Gross Distribution per Unit (sen) Net Distribution per Unit (sen) 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@30/4/15 NAV per -1} x 100 = { } x 100 = 11.75% Income = {Income Distribution per Unit NAV per Unit on ex-date} + 1 ex-date = { /06/14} + 1 = = { /12/14} + 1 = ii Total Income = {Income x Income Return = { x } -1 x 100 = 4.708% Return of the Fund iii = [{(1+Capital Return) x (1+Income Return)} -1] x 100 = [{( %) x ( %)} 1] x 100 = 17.01% *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 The Fund s MER is consistent with prior years. 2 The Fund s PTR increased over the period under review as there was active trading undertaken to capitalize on the volatile markets. 7

9 TRUSTEE'S REPORT TO THE UNITHOLDERS OF AFFIN HWANG SELECT ASIA PACIFIC (EX-JAPAN) REITS AND INFRASTRUCTURE FUND (Formerly known as Hwang 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 (formerly known as Hwang Asia Pacific (Ex-Japan) Reits and Infrastructure Fund) ( the Fund ) for the financial year ended 30 April To the best of our knowledge, Affin Hwang Asset Management Berhad (formerly known as Hwang Investment 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. During this financial year, a total distribution of 2.00 sen per unit (gross) has been distributed to the unitholders of the Fund. We are of the view that the distribution is not inconsistent with the objective of the Fund. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur Date: 23 June

10 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 APRIL 2015 INVESTMENT INCOME Note RM RM Dividend income 3,744,833 5,339,890 Interest income 104, ,683 Net gain on foreign currency exchange 621, ,714 Net gain/(loss) on financial assets at fair value through profit or loss 8 17,878,112 (2,911,979) 22,348,505 2,994,308 EXPENSES Management fee 4 (2,151,317) (2,986,477) Trustee fee 5 (85,365) (132,732) Auditors' remuneration (6,500) (6,500) Tax agent's fee (5,556) (363,969) Transaction costs (1,096,009) (1,672,125) Other expenses (245,602) (108,219) (3,590,349) (5,270,022) NET PROFIT /(LOSS) BEFORE TAXATION 18,758,156 (2,275,714) TAXATION 6 (311,512) 443,961 NET PROFIT/(LOSS) AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE FINANCIAL YEAR 18,446,644 (1,831,753) Net profit/(loss) after taxation is made up of the following: Realised amount 14,227,710 13,748,886 Unrealised amount 4,218,934 (15,580,639) 18,446,644 (1,831,753) 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 30 APRIL 2015 Note RM RM ASSETS Financial assets at fair value through profit or loss 8 112,478, ,855,923 Cash and cash equivalents 9 8,565,491 10,409,320 Dividend receivable 399, ,072 Amount due from Manager - creation of units 1,282,786 - Amount due from brokers 3,829,573 1,389,746 Tax recoverable - 40,810 TOTAL ASSETS 126,555, ,257,871 LIABILITIES Amount due to Manager - management fee 186, ,208 - cancellation of units 430, ,296 Amount due to Trustee 7,247 9,254 Auditors remuneration 6,500 6,500 Tax agent s fee 98,270 88,650 Other payables and accruals 18, TOTAL LIABILITIES 747, ,055 NET ASSET VALUE OF THE FUND 125,807, ,386,816 EQUITY Unitholders capital 229,483, ,766,445 Accumulated losses (103,675,970) (116,379,629) NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 125,807, ,386,816 NUMBER OF UNITS IN CIRCULATION ,346, ,218,000 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 FINANCIAL YEAR ENDED 30 ARRIL 2015 Unitholders Accumulated capital losses Total RM RM RM Balance as at 1 May ,766,445 (116,379,629) 138,386,816 Total comprehensive income for the financial year - 18,446,644 18,446,644 Distribution (Note 7) - (5,742,985) (5,742,985) Movement in unitholders capital: Creation of units arising from applications 18,294,187-18,294,187 Creation of units arising from distribution 5,722,870-5,722,870 Cancellation of units (49,299,794) - (49,299,794) Balance as at 30 April ,483,708 (103,675,970) 125,807,738 Balance as at 1 May ,617,186 (107,151,456) 144,465,730 Total comprehensive loss for the financial year - (1,831,753) (1,831,753) Distribution (Note 7) - (7,396,420) (7,396,420) Movement in unitholders capital: Creation of units arising from applications 67,882,840-67,882,840 Creation of units arising from distribution 7,370,956-7,370,956 Cancellation of units (72,104,537) - (72,104,537) Balance as at 30 April ,766,445 (116,379,629) 138,386,816 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 FINANCIAL YEAR ENDED 30 APRIL 2015 CASH FLOWS FROM OPERATING ACTIVITIES Note RM RM Proceeds from sale of investments 202,560, ,303,564 Purchase of investments (175,593,336) (199,908,453) Dividends received 3,636,838 4,626,241 Interest received 104, ,683 Management fee paid (2,173,180) (2,972,785) Trustee fee paid (87,372) (132,123) Payment for other fees and expenses (229,485) (554,612) Net realised foreign exchange gains 1,756, ,952 Tax refund - 856,241 Net cash generated from/(used in) operating activities 29,974,594 (4,280,292) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 17,011,401 71,000,487 Payments for cancellation of units (49,427,664) (71,546,241) Payments for distributions (20,115) (25,464) Net cash used in financing activities (32,436,378) (571,218) NET DECREASE IN CASH AND CASH EQUIVALENTS (2,461,784) (4,851,510) EFFECTS OF FOREIGN CURRENCY EXCHANGE 617,955 42,873 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 10,409,320 15,217,957 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 9 8,565,491 10,409,320 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 FINANCIAL YEAR ENDED 30 APRIL 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 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 revenues and expenses during the reported financial year. 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 judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note N. (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 2017 MFRS 15 Revenue from contracts with customers (effective from 1 January 2017) 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 standard is not expected to have a significant impact on the Fund s financial statements. (ii) Financial year beginning on/after 1 May 2018 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

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 2018 (continued) 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). 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 Dividend income is recognised on the ex-dividend date, when the right to receive the dividend has been established. Interest income from short term deposit with licensed financial institutions is recognised based on effective interest rate method on an accrual basis. For quoted investments, realised gain and losses on sale of investment is accounted for as the difference between the net disposal proceeds and the carrying amount of investments, determined on a weighted average cost basis. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C 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. D 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. 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 year. Tax on investment income from foreign 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 re-measured. 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. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in quoted securities 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. 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 brokers. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, amount due to Trustee, 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 the 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 transactions are presented in the statement of comprehensive income within net gain/(loss) on financial assets at fair value through profit and 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 LIABITIES (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. Deposits with a licensed financial institution is 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 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 financial 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. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 interest 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, interest income is recognised using the rate of interest 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. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES L UNITHOLDERS CAPITAL The unitholders capital to the Fund meet the definition of puttable instruments classified as equity instruments under 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. 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 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 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. 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 judgments 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. 19

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 APRIL 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 (formerly known as Hwang Investment 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 Manager has merged with Affin Fund Management Berhad and the merged entity is operating under a new name, Affin Hwang Asset Management Berhad, effective from 22 September The financial statements were authorised for issue by the Manager on 23 June

22 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES Financial instruments are as follows: Financial assets at fair Loans and value through Note receivables profit or loss Total 2015 RM RM RM Quoted investments 8-112,478, ,478,011 Cash and cash equivalents 9 8,565,491-8,565,491 Dividend receivable 399, ,365 Amount due from Manager - creation of units 1,282,786-1,282,786 Amount due from brokers 3,829,573-3,829,573 Total 14,077, ,478, ,555, Quoted investments 8-126,855, ,855,923 Cash and cash equivalents 9 10,409,320-10,409,320 Dividend receivables 562, ,072 Amount due from brokers 1,389,746-1,389,746 Total 12,361, ,855, ,217,061 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 and 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. 21

23 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 112,478, ,855,923 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 % 106,854,110 (5,623,901) 0% 112,478, % 118,101,912 5,623, % 120,513,127 (6,342,796) 0% 126,855, % 133,198,719 6,342,796 (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 is held on a short term basis. 22

24 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Market risk (continued) 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 the 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: Cash Quoted and cash Other equities equivalents assets* Total 2015 RM RM RM RM Hong Kong Dollar 27,845,046 4,107,801 1,950,819 33,903,666 Indonesian Rupiah 9,777,071-1,940,173 11,717,244 Korean Won 6,740, ,740,390 Philippine Peso 14,818,646-4,956 14,823,602 Singapore Dollar 19,448, , ,943 20,016,670 Thailand Baht 11,468,952 48,047 11,516,999 United States Dollar - 91,238-91,238 90,098,243 4,482,628 4,228,938 98,809, Hong Kong Dollar 18,969,338 5,171, ,632 24,653,413 Indonesian Rupiah 8,258, ,114 9,135,627 Philippine Peso 9,462,818-17,298 9,480,116 Singapore Dollar 48,982,465 20, ,774 49,548,157 Thailand Baht 5,227, ,227,200 United States Dollar - 4,619,145-4,619,145 90,900,334 9,811,506 1,951, ,663,658 * Other assets consist of dividend receivable and amount due from brokers. 23

25 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Market risk (continued) c) Currency risk (continued) 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 Hong Kong Dollar 5 1,695,183 Indonesian Rupiah 5 585,862 Korean Won 5 337,020 Philippine Peso 5 741,180 Singapore Dollar 5 1,000,834 Thailand Baht 5 575,850 United States Dollar 5 4,562 4,940, Hong Kong Dollar 5 1,232,671 Indonesian Rupiah 5 456,781 Philippine Peso 5 474,006 Singapore Dollar 5 2,477,408 Thailand Baht 5 261,360 United States Dollar 5 230,957 5,133,183 24

26 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Credit risk Credit risk refers to the ability of an issuer or counterparty to make timely payments of interest, principals and proceeds from realisation of investment. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. The settlement terms of amount due from brokers are governed by the relevant rules and regulations as prescribed by the respective stock exchanges. Credit risk arising from placements on deposits in licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. The settlement terms of the proceeds from the creation of units' receivable from the Manager are governed by the Securities Commission's Guidelines on Unit Trust Funds. Cash and cash Other equivalents assets* Total 2015 RM RM RM AAA 8,565,491-8,565,491 Others - 5,511,724 5,511,724 8,565,491 5,511,724 14,077, AAA 10,409,320-10,409,320 Others - 1,951,818 1,951,818 10,409,320 1,951,818 12,361,138 * Other assets consist of dividend receivable, amount due from Manager and amount due from brokers. The Fund s financial assets are neither past due nor impaired. Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of units by unitholders. Liquid assets comprise cash, deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days. 25

27 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Liquidity risk (continued) The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table below are the contractual undiscounted cash flows Between Within one month one month to one year Total RM RM RM Amount due to Manager - management fee 186, ,345 - cancellation of units 430, ,426 Amount due to Trustee 7,247-7,247 Auditors remuneration - 6,500 6,500 Tax agent s fee - 98,270 98,270 Other payables and accruals - 18,700 18, , , , Amount due to Manager - management fee 208, ,208 - cancellation of units 558, ,296 Amount due to Trustee 9,254-9,254 Auditors remuneration - 6,500 6,500 Tax agent s fee - 88,650 88,650 Other payables and accruals ,758 95, ,055 Capital risk The capital of the Fund is represented by equity consisting of unitholders capital and retained earnings. The amount of equity can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unitholders. The Fund s objective when managing capital is to safeguard the Fund s ability to continue as a going concern in order to provide returns for unitholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. 26

28 NOTES TO THE FINANCIAL STATEMENTS 3 FAIR VALUE ESTIMATION Financial instruments comprise financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets traded in active markets (such as trading securities) is based on quoted market prices at the close of trading on the period end date. An active market is a market in which transactions for the asset take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. (i) Fair value hierarchy The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market 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 and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market. 27