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For the quarter ended April 30, 2009, the Fund earned net investment income of approximately U.S. $385,000 (equivalent to income of U.S. $0.04 per share) resulting in net investment income for the six-month period of approximately U.S. $1,259,000 (equivalent to income of U.S. $0.13 per share). In addition, net realized and unrealized gains from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $8,967,000 (equivalent to a gain of U.S. $0.94 per share). As a result, the net realized and unrealized gains were approximately U.S. $4,709,000 (equivalent to a gain of U.S. $0.49 per share) for the six months ended April 30, 2009.
In comparison, during the quarter ended April 30, 2008, the Fund earned net investment income of approximately U.S. $849,000 (equivalent to income of U.S. $0.09 per share) resulting in net investment income for the six-month period of approximately U.S. $844,000 (equivalent to income of U.S. $0.09 per share). In addition, net realized and unrealized gains from investment activities and foreign currency transactions during that same three-month period was approximately U.S. $8,338,000 (equivalent to a gain of U.S. $0.89 per share). As a result, the net realized and unrealized loss decreased to approximately U.S. $40,161,000 (equivalent to a loss of U.S. $4.33 per share) for the six months ended April 30, 2008.
On April 30, 2009, total net assets of the Fund were approximately U.S. $85.1 million. The net asset value ("NAV") per share on that date was U.S. $8.97, based on 9,477,893 shares outstanding. Assuming the reinvestment of the U.S. $0.50 per share dividend paid on December 30, 2008, the Fund generated an investment return of 8.06% for the six months ended April 30, 2009, when measured against the NAV per share of U.S. $8.85 on October 31, 2008, based on 9,363,114 shares outstanding at that time. For the six months ended April 30, 2009, the Fund's benchmark, the Straits Times Index ("STI"), increased by 6.80% in U.S. dollar terms.
In comparison with the same quarter-end of the previous fiscal year, total net assets on April 30, 2008 were approximately U.S. $160.2 million, equivalent to a NAV of U.S. $17.11 per share, based on 9,363,114 shares outstanding.
As of April 30, 2009, the Fund had 83.52% of its net assets invested in Singapore equity securities, 3.65% invested in Malaysian equity securities, 3.06% invested in Indonesian equity securities and 2.09% invested in Thai equity securities. The balance of the Fund's net assets were in the form of time deposits and other cash equivalents denominated in Singapore Dollars ("SGD") (5.96%), U.S. Dollars (0.71%) and other assets less liabilities of 1.01%.
As of June 9, 2009, the Fund's NAV per share was U.S. $11.52, based on net assets of approximately U.S. $109.2 million. At the same date, the Fund's shares on the New York Stock Exchange closed at U.S. $10.32, representing a trading discount to NAV per share of 10.42%.
Singapore Market Review
The STI traded in a volatile range during the period under review, with the low at 940.8 and the high at 1306.2, representing a trading range of more than 38%. The oil & gas sector, industrial and S-Chips (Chinese companies listed in Singapore) did better than the market, despite their poor outlook and concern over corporate governance among S-Chips.
The Singapore economy contracted sharply during the last quarter of 2008 and the first quarter of 2009 on a combination of global credit crunch, weak global demand and poor corporate earnings. Real GDP contracted 4.2% year-on-year in the fourth quarter of 2008 and, based on flash estimates, contracted a further 11.5% year-on-year in the first quarter of this year. The contraction came on the back of sharp declines in non-oil domestic exports, industrial production and tourist arrivals.
The government rolled out an expansionary budget worth S$20.5bn to stimulate demand and to alleviate the credit crunch in the financial system. These measures include (1) a jobs credit, or a cash grant to companies of 12% on the first S$2,500 of monthly wages (equivalent to S$3,600 per annum per employee earning S$2,500/month or more); (2) a 40% property tax rebate; (3) a 1% corporate tax cut to 17%; (4) public infrastructure spending of S$18-20bn in 2009 compared to S$15bn in 2008; and (5) higher government risk-sharing of up to 80% in two lending programs, which would be administered by private sector banks.
In its latest policy statement, the Monetary Authority of Singapore (MAS) noted dissipating inflationary pressure amid the current global downturn. As expected, it maintained a zero percent appreciation of the SGD nominal effective exchange rate policy band, but re-centered the exchange rate by 150 basis points ("bps"), equivalent to a monetary easing.
As a result of training grants and job credits, unemployment inched up, adjusted from 2.5% at the end of 2008 to 3.2% at the end of March 2009, better than expected. This helped to support the property market. Despite falling capital and rental values, 2,650 new units were sold in the first quarter of 2009, representing about 60% of the total units sold in the entire year during 2008.
Outlook and Strategy
Benchmark Portfolio
(%) (%) Comments
---------- ---------- -------------------------
Sector limit of 25% is
applicable, and the Fund
is prohibited from
Financial Institutions 31.8 23.7 owning DBS Group.
---------- ---------- -------------------------
Neutral. Reasonable
valuation, but defensive
Telecommunications 13.8 13.6 nature cap upside.
---------- ---------- -------------------------
Underweight due to zero
weighting in defensives
such as ST Engineering,
Fraser & Neave and
Conglomerates 21.2 15.8 Sembcorp Industries.
---------- ---------- -------------------------
Zero weighting due to
concern over sector
outlook in aviation and
shipping. Took profit
on defensive land
transportation owing to
Transportation 7.1 0.0 unattractive valuation.
---------- ---------- -------------------------
Overweight due to
improving credit outlook
Property Development 12.3 16.9 for the sector.
---------- ---------- -------------------------
Uncertain order book
visibility, but
valuation attractive on
Shipyards 1.7 2.9 mid-cycle basis.
---------- ---------- -------------------------
Our stocks in this sector
are foreign stocks in
coal mining and steel
Industrial 1.1 3.1 fabrication.
---------- ---------- -------------------------
Food, Beverage & Tobacco 6.2 6.4 Neutral.
---------- ---------- -------------------------
Slight overweight owing
Communications - Media 2.9 3.9 to reasonable valuation.
---------- ---------- -------------------------
Our stocks in this sector
have resilient earnings
but trade at the low
range of multi-year
Technology 0.0 4.8 valuation.
---------- ---------- -------------------------
Improving credit market
Real Estate Investment alleviates refinancing
Trust 1.9 2.7 risks.
---------- ---------- -------------------------
The global financial markets have seen a return to risk taking on the back of stability in recent economic indicators, fueling hope that we might have seen the trough in the economic downturn. Stock markets globally have performed well since the middle of March 2009. Economic activities in the coming months will continue to be supported by implementation of stimulus packages announced globally over the past few months. Leading indicators in the Singapore economy suggests that the contraction in the first quarter of 2009 could have been the trough in economic contraction. Unemployment has not deteriorated as sharply as expected because of fiscal intervention; prices of mass-market housing are approaching a clearing level; signs of inventory restocking remain in motion as evidenced by the pick up in the new orders of major industrial countries.
We believe that the Singapore stock market is reasonably priced in earnings and in book value multiples, based on recent years' average. However, a favorable trend in stock market valuation could support current market levels. The momentum of downward earnings revisions appears to be subsiding, while investment analysts are moving away from trough valuation to mid-cycle valuation in their valuation models.
The Fund is tilted towards sectors poised to benefit from an increasing risk appetite. It has also invested in the other ASEAN countries, within its guidelines, to benefit from the wider diversity available in those markets.
The ten largest industry classifications of the Fund's equity investments held at April 30, 2009 were:
Percentage of
Industry Net Assets
-------- ----------
1. Banks 18.58%
2. Property Development 16.61
3. Telecommunications 13.36
4. Shipyards 8.01
5. Conglomerate 5.38
6. Food, Beverage, Tobacco 5.36
7. Diversified Financial 4.75
8. Communications-Media 3.88
9. Electronic Components 3.31
10. Diversified 3.00
The ten largest individual common stock holdings at the same date were:
Percentage of
Issue Net Assets
----- ----------
1. Singapore Telecommunications Ltd 13.36%
2. United Overseas Bank Ltd 9.37
3. Oversea-Chinese Banking Corp. Ltd 9.20
4. Jardine Matheson Holdings Ltd 5.38
5. Keppel Corp. Ltd 5.17
6. Singapore Exchange Ltd 4.75
7. Hongkong Land Holdings Ltd 4.35
8. Singapore Press Holdings Ltd 3.88
9. Venture Corp. Ltd 3.31
10. Capitaland Ltd 3.27
QUARTERLY RESULTS OF OPERATIONS
Net Realized
and Unrealized Net Increase
Gains (Losses) on (Decrease) in
Net Investment and Net Assets
For the Quarter Investment Foreign Currency Resulting
Ended Income (Loss) Transactions From Operations
--------------- ------------------ ------------------
Total Per Total Per Total Per
(000's) Share (000's) Share (000's) Share
------- ------- --------- ------- --------- -------
January 31, 2009 $ 385 $ 0.04 $ (4,258) $ (0.45) $ (3,873) $ (0.41)
April 30, 2009 874 0.09 8,967 0.94 9,841 1.03
------- ------- --------- ------- --------- -------
For the Six Months
Ended April 30,
2009 $ 1,259 $ 0.13 $ 4,709 $ 0.49 $ 5,968 $ 0.62
======= ======= ========= ======= ========= =======
January 31, 2008 $ (5)$ 0.00 $ (48,499) $ (5.22) $ (48,504) $ (5.22)
April 30, 2008 849 0.09 8,338 0.89 9,187 0.98
July 31, 2008 891 0.10 (16,713) (1.81) (15,822) (1.71)
October 31, 2008 774 0.08 (62,263) (6.63) (61,489) (6.55)
------- ------- --------- ------- --------- -------
For the Year Ended
October 31, 2008 $ 2,509 $ 0.27 $(119,137) $(12.77) $(116,628) $(12.50)
======= ======= ========= ======= ========= =======
PER SHARE SELECTED QUARTERLY FINANCIAL DATA
For the Quarter Net Asset Market Share
Ended Value Price* Volume*
--------------- --------------- ----------
High Low High Low (000)
------ ------ ------ ------ ----------
January 31, 2009 $ 9.26 $ 7.71 $ 8.84 $ 6.11 1,111
April 30, 2009 8.97 6.78 7.91 5.68 919
January 31, 2008 $22.92 $15.66 $20.49 $14.03 1,546
April 30, 2008 17.32 14.95 15.98 12.90 1,024
July 31, 2008 17.64 15.31 15.50 13.21 1,083
October 31, 2008 15.37 7.94 13.80 7.01 1,396
*As reported on the New York Stock Exchange.
Contact: John J. O'Keefe Telephone: (800) 933-3440 or (201) 915-3054 www.daiwast.com Email Contact
SOURCE: Singapore Fund
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