1349 Ｅ－ＳＳＧＡ－ＳＩＮ 2020-09-24 15:40:00
令和2年6月期 アジア国債・公債ＥＴＦ（正式名称：ＡＢＦ汎アジア債券インデックス・ファンド）決算短信 [pdf]
令和 2 年 6 月期 決算短信（令和元年 7 月 1 日～令和 2 年 6 月 30 日）
令和 2 年 9 月 24 日
フ ABF 汎アジア債券インデックス・ファンド
ァ ン ド 名 上場取引所 東京証券取引所
コ ー ド 番 号
1349
連 動対象指標Markit iBoxx® ABF パン・アジア指数
主 要投資資産有価証券
売 買 単 位
1口
管 理 会 社
ステート・ストリート・グローバル・アドバイザーズ・シンガポール・リミテッド
URL http://www.abf-paif.com/
代 表 者 （役職名）ディレクター （氏名）オン・ホイ・ヤオ
問合せ先責任者 （役職名）代理人（氏名）伊東 啓 (TEL) (03)6250－6200
有価証券報告書提出予定日 令和 2 年 12 月 18 日
Ⅰファンドの運用状況
１．2020 年 6 月期の運用状況（令和元年 7 月 1 日～令和 2 年 6 月 30 日）
(1)資産内訳 （百万円未満切捨て）
主要投資資産 現金・預金・その他の資産 合計（純資産）
（負債控除後）
金額 構成比 金額 構成比 金額 構成比
百万円 ％ 百万円 ％ 百万円 ％
2020 年 6 月期 380,766（100） 240（-） 381,007（100）
2019 年 6 月期 388,234（100） 400（-） 388,634（100）
(2)設定・交換実績 (千口未満四捨五入)
前計算期間末 当計算期間末
発行済口数(①) 設定口数(②) 交換口数(③) 発行済口数
（①+②-③）
千口 千口 千口 千口
2020 年 6 月期 31,636 1,129 2,450 30,315
2019 年 6 月期 32,679 1,437 2,480 31,636
(3)基準価額 （百万円未満切捨て）
総資産 負債 純資産 1 口当たり基準価額
（①） （②） （③(①－②)） （③/当計算期間末発行済口数×1 口）
百万円 百万円 百万円 円
2020 年 6 月期 387,968 6,960 381,007 12,568
2019 年 6 月期 394,815 6,180 388,634 12,285
(4)分 配 金
１口当たり分配金
＊ ＊円 (米ドル)
2020 年 6 月期 2020 年 7 月 22 日 128 (1.23)
2019 年 12 月期 2020 年 1 月 22 日 148 (1.42)
2019 年 6 月期 2019 年 7 月 22 日 171 (1.64)
2018 年 12 月期 2019 年 1 月 22 日 184 (1.76)
＊ 各期間における分配のための基準日を記載しております。
＊ 日本円への換算は下記(注)記載の換算率で計算されており(円位未満切捨て)、 実際に受益者に分配される金
額とは異なることがあります。
(注) 日本円への換算は、1 米ドル＝104.84 円の換算率(2020 年 9 月 18 日に株式会社三菱 UFJ 銀行が発表した対
顧客電信売・買相場の仲値)により計算されています。
２．会計方針の変更
① 会計基準等の改正に伴う会計方針の変更 有・無
② ①以外の会計方針の変更 有・無
1
CONTENTS
Page
Statement of Net Assets 11
Statement of Comprehensive Income 12
Statement of Changes in Net Assets Attributable to
Unitholders 13
Statement of Cash Flows 14
Notes to the Financial Statements 16
ABF Pan Asia Bond Index Fund
Annual Report 2020
STATEMENT OF NET ASSETS
As at 30th June 2020
30.06.2020 30.06.2019
Notes US$ US$
Assets
Current assets
Investments 8(f),
10(b)&(c) 3,631,886,293 3,703,115,036
Amounts receivable on subscription of units – 3,514,602
Amounts due from brokers 59,839,372 46,958,408
Other receivables 22,809 7,187
Cash at banks 8(e) 8,828,282 12,287,784
Total assets 3,700,576,756 3,765,883,017
Liabilities
Current liabilities
Amounts payable on redemption of units – 1,167,325
Amounts due to brokers 58,639,086 50,001,330
Audit fee payable 65,163 70,862
Trustee fee payable 8(d) 158,657 140,560
Management fee payable 8(c) 675,608 1,003,519
Index license fee payable 9(a) 208,473 205,597
Other payables 6,649,248 6,361,400
Liabilities (excluding net assets attributable
to unitholders) 66,396,235 58,950,593
Net assets attributable to unitholders 3 3,634,180,521 3,706,932,424
HSBC Institutional Trust State Street Global Advisors
Services (Singapore) Limited Singapore Limited
The notes on pages 16 to 52 form part of these financial statements.
11
ABF Pan Asia Bond Index Fund
Annual Report 2020
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30th June 2020
For the For the
year ended year ended
30.06.2020 30.06.2019
Notes US$ US$
Income
Interest income on bank deposits 8(e) 58,703 103,622
Net gain on investments 6 195,219,332 261,409,145
Net foreign exchange loss (1,636,139) (464,569)
Security lending income 5, 8(g) 216,370 21,325
Other income 5 248,186 407,074
Total investment income 194,106,452 261,476,597
Expenses
Management fee 8(c) 4,203,379 4,275,241
Trustee fee 8(d) 1,834,195 1,831,470
Index license fee 9(a) 352,876 349,040
Publication and printing expenses 44,852 41,092
Audit fee 72,901 72,108
Processing agent fee 9(b) 14,373 16,467
Safe custody and bank charges 8(e) 17,711 16,960
Legal and professional fees 329,692 430,894
Annual insurance premium 29,425 29,425
Other operating expenses 13,376 15,112
Total operating expenses 6,912,780 7,077,809
Operating profit 187,193,672 254,398,788
Finance costs
Distributions to unitholders 12 (95,672,992) (117,396,320)
Interest expense 8(e) (15,564) (20,228)
(95,688,556) (117,416,548)
Profit after distributions and before tax 91,505,116 136,982,240
Taxation 7 (8,978,949) (9,653,841)
Profit after distributions and tax/increase
in net assets attributable to
unitholders from operations 82,526,167 127,328,399
The notes on pages 16 to 52 form part of these financial statements.
12
ABF Pan Asia Bond Index Fund
Annual Report 2020
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
For the year ended 30th June 2020
For the For the
year ended year ended
30.06.2020 30.06.2019
US$ US$
Balance at beginning of the year 3,706,932,424 3,701,022,228
Issuance of units 132,497,438 162,556,561
Redemption of units (287,775,508) (283,974,764)
Net redemption of units (155,278,070) (121,418,203)
Increase in net assets attributable to unitholders 82,526,167 127,328,399
Balance at the end of the year 3,634,180,521 3,706,932,424
The notes on pages 16 to 52 form part of these financial statements.
13
ABF Pan Asia Bond Index Fund
Annual Report 2020
STATEMENT OF CASH FLOWS
For the year ended 30th June 2020
For the For the
year ended year ended
30.06.2020 30.06.2019
US$ US$
Cash flows from operating activities
Increase in net assets attributable to unitholders 82,526,167 127,328,399
Adjustment for:
Interest income on bank deposits (58,703) (103,622)
Interest expense 15,564 20,228
Distributions to unitholders 95,672,992 117,396,320
Taxation 8,978,949 9,653,841
Revaluation loss/(gain) in foreign exchange 1,830,207 (211,742)
Operating profit before working capital changes 188,965,176 254,083,424
Net decrease/(increase) in investments 71,228,743 (23,508)
Net (increase)/decrease in amounts due from brokers (12,880,964) 34,334,500
Net increase in other receivable (15,622) (7,187)
Net increase/(decrease) in amounts due to brokers 8,637,756 (37,975,134)
Net (decrease)/increase in accounts payable and accrued
expenses (197,320) 14,290
Cash generated from operations 255,737,769 250,426,385
Interest income on bank deposits received 58,703 103,622
Taxes paid (8,806,418) (9,448,649)
Net cash generated from operating activities 246,990,054 241,081,358
Cash flows from financing activities
Distributions paid to unitholders (95,672,992) (117,396,320)
Interest expense paid (15,564) (20,228)
Issuance of units 136,012,040 159,041,959
Redemption of units (288,942,833) (283,939,890)
Net cash used in financing activities (248,619,349) (242,314,479)
Net decrease in cash and cash equivalents (1,629,295) (1,233,121)
Effect of currency translation (1,830,207) 211,742
Cash and cash equivalents at the beginning of the year 12,287,784 13,309,163
Cash and cash equivalents at the end of the year 8,828,282 12,287,784
Analysis of balance of cash and cash equivalents:
Cash at banks 8,828,282 12,287,784
The notes on pages 16 to 52 form part of these financial statements.
14
ABF Pan Asia Bond Index Fund
Annual Report 2020
STATEMENT OF CASH FLOWS (Continued)
For the year ended 30th June 2020
Reconciliation of liabilities arising from financing activities
For the For the
year ended year ended
30.06.2020 30.06.2019
US$ US$
At 1st July 1,167,325 1,132,451
Changes from financing cash flows
Redemption paid (288,942,833) (283,939,890)
Other changes
Redemption of units 287,775,508 283,974,764
At 30th June – 1,167,325
The notes on pages 16 to 52 form part of these financial statements.
15
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
ABF Pan Asia Bond Index Fund (the “Fund”) is a Singapore unit trust authorised under Section 286
of the Securities and Futures Act (Cap. 289) of Singapore and Section 104 of the Securities and
Futures Ordinance (Cap. 571) of Hong Kong. The Fund was constituted by a trust deed dated 21st
June 2005 between State Street Global Advisors Singapore Limited and HSBC Institutional Trust
Services (Singapore) Limited (the “Trust Deed”). The Trust Deed was amended and restated by an
Amending and Restating Deed on 28th June 2006, a Second Amending and Restating Deed dated
28th June 2007, a supplemental deed dated 27th June 2008, a Third Amending and Restating
Deed dated 24th June 2011, a Fourth Amending and Restating Deed dated 10th July 2018 and a
Fifth Amending and Restating Deed dated 27 December 2019. The Trust Deed and all supplemental
deeds are governed in accordance with the laws of Singapore. The Fund is also listed on The
Stock Exchange of Hong Kong Limited and Tokyo Stock Exchange. The date of commencement of
operation of the Fund was 29th June 2005.
The investment objective of the Fund is to seek to provide investment results that correspond closely
to the total return of the Markit iBoxx ABF Pan-Asia Index (the “Underlying Index”), before fees
and expenses. The Underlying Index is determined and composed by Markit Indices GmbH (formerly
known as Markit Indices Limited) (the “Index Provider”). The Underlying Index is an indicator
of investment returns of debt obligations denominated in China Renminbi, Hong Kong Dollar,
Indonesian Rupiah, Korean Won, Malaysian Ringgit, Philippine Peso, Singapore Dollar or Thai Baht
(each an “Asian Currency”) issued or guaranteed by government, quasi-government organizations
or supranational financial institutions, in each case as determined by the Index Provider and which
are for the time being constituent securities of the Underlying Index.
16
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
(a) Basis of preparation
The financial statements of the Fund have been prepared in accordance with International
Financial Reporting Standards (“IFRSs”). The financial statements have been prepared under
the historical cost convention, as modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) held at fair value through profit or loss.
The preparation of financial statements in conformity with IFRSs requires the use of certain
critical accounting estimates. It also requires the Manager to exercise their judgment in the
process of applying the Fund’s accounting policies. 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 4.
New and amended standards that are effective in the current year and have been adopted by
the Fund
There are no standards, amendments to standards or interpretations that are effective for
annual periods beginning on 1st July 2019 that have a material effect on the financial
statements of the Fund.
New standards and amendments to the standards that are relevant to the Fund but are
effective after 1st July 2019 and have not been early adopted by the Fund
A number of new standards, amendments to standards and interpretations are effective for
annual periods beginning after 1st July 2019, and have not been adopted in preparing these
financial statements. None of these are expected to have a material effect on the financial
statements of the Fund.
17
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Investments
Classification
Assets
The Fund classifies its investments based on both the Fund’s business model for managing
those financial assets and the contractual cash flow characteristics of the financial assets. The
portfolio of financial assets is managed and performance is evaluated on a fair value basis.
The Fund is primarily focused on fair value information and uses that information to assess
the assets’ performance and to make decisions. The contractual cash flows of the Fund’s debt
securities are solely principal and interest, however, these securities are neither held for the
purpose of collecting contractual cash flows nor held both for collecting contractual cash flows
and for sale. The collection of contractual cash flows is only incidental to achieving the Fund’s
business model’s objective. Consequently, all investments are measured at fair value through
profit or loss.
As such, the Fund classifies all of its investment portfolio as financial assets at fair value
through profit or loss.
Recognition, derecognition and measurement
Purchases and sales of investments are accounted for on the trade date basis – the date on
which the Fund commits to purchase or sell the investment. Investments are initially recognised
at fair value, excluding transaction costs which are expensed as incurred, and are subsequently
re-measured at fair value. Realised and unrealised gains and losses on investments are included
in the statement of comprehensive income in the year in which they arise. Investments are
derecognised when the rights to receive cash flows from the investments have expired or the
Fund has transferred substantially all risks and rewards of ownership.
Subsequent to initial recognition, all financial assets and financial liabilities at fair value through
profit or loss are measured at fair value. Gains and losses arising from changes in the fair value
of the “financial assets or financial liabilities at fair value through profit or loss” category are
presented in the statement of comprehensive income within net gain/(loss) on investments in
the period in which they arise.
18
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Investments (Continued)
Fair value estimation
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 and participants at the measurement date. The fair value of
financial assets and liabilities traded in active markets are based on quoted market prices at the
close of trading on the reporting date.
Investments that are listed or traded on an exchange are fair valued based on quoted bid prices.
Investments which are not listed on an exchange are valued by using quotes from brokers. The
investments are fair valued based on quoted bid prices inclusive of accrued interests.
Transfers between levels of the fair value hierarchy
Transfers between levels of the fair value hierarchy are deemed to have occurred at the
beginning of the reporting period.
(c) Income
Interest income on bank deposits is recognised on a time-proportionate basis using the effective
interest method. Interest income on investments is accounted for as part of net gain/loss on
investments in the Statement of Comprehensive Income. Security lending income and other
income are accounted for in the Statement of Comprehensive Income on an accrual basis.
(d) Expenses
Expenses are accounted for in the Statement of Comprehensive Income on an accrual basis.
(e) Taxation
No provision for Hong Kong profits tax has been made as the Fund was authorised as a
collective investment scheme under Section 104 of the Hong Kong Securities and Futures
Ordinance and is therefore exempted from profits tax under Section 26A(1A) of the Hong Kong
Inland Revenue Ordinance.
The Fund may potentially be liable to pay PRC withholding income tax on the PRC sourced
capital gains and interest income, unless reduced or exempted under relevant tax treaty.
Withholding taxes are disclosed separately in the Statement of Comprehensive Income.
19
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) Cash and cash equivalents
Cash and cash equivalents include cash in hand and demand deposits with original maturities
of three months or less.
(g) Amounts 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 Net Assets date respectively. The amounts due from brokers balance is held for
collection.
These amounts are recognised initially at fair value and subsequently measured at amortised
cost. At each reporting date, the Fund shall measure the loss allowance on amounts due
from brokers at an amount equal to the lifetime expected credit losses if the credit risk has
increased significantly since initial recognition. If, at the reporting date, the credit risk has not
increased significantly since initial recognition, the Fund shall measure the loss allowance at
an amount equal to 12-month expected credit losses. Significant known financial difficulties
of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and
default in payments are all considered indicators that a loss allowance may be required. If the
credit risk increases to the point that it is considered to be credit impaired, interest income
will be calculated based on the gross carrying amount adjusted for the loss allowance. For the
purposes of measurement for presentation in the financial statements, a significant increase in
credit risk is defined as any contractual payment which is more than 30 days past due, and any
contractual payment which is more than 90 days past due is considered credit impaired. The
Manager has measures in place to monitor exposures and increase in credit risk.
20
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Securities lending
Securities on loan are included in the investment portfolio of the Fund as the Fund is entitled
to the interest income from the fixed income securities on loan and retain substantially all
the risks and rewards. Relevant securities lending income received by the Fund is included in
security lending income in the Statement of Comprehensive Income.
Collateral received for the purpose of securities on loan generally consists of fixed income
securities collateral. Fixed income securities collateral received is treated as an off-balance sheet
transaction and is therefore not included in the Statement of Net Assets because the Fund is
not entitled to the interest income from the fixed income securities collateral and do not retain
substantially all the risks and rewards. Interest received from fixed income securities collateral is
paid to the counterparty that provides the collateral to the Fund.
(i) Translation of foreign currencies
Functional and presentation currency
The Fund’s subscription and redemption of units are denominated in United States Dollar
(“US$”). The performance of the Fund is measured and reported to the investors in the United
States Dollar, which is the Fund’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are
translated into the functional currency using the exchange rate prevailing at the year end date.
Foreign exchange gains and losses arising from translation are included in the Statement of
Comprehensive Income.
Foreign exchange gains and losses relating to cash and cash equivalents are presented in the
Statement of Comprehensive Income within ‘net foreign exchange gains or losses’.
21
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Redeemable units
The Fund issues redeemable units, which are redeemable at the unitholder’s option and are
classified as financial liabilities. Redeemable units can be put back to the Fund for cash equal
to a proportionate share of the Fund’s net asset value. The redeemable unit is carried at the
redemption amount that is payable at the date of redemption if the unitholder exercises the
right to put the unit back to the Fund.
Redeemable units are issued and redeemed at the unitholder’s option at prices based on the
Fund’s net asset value per unit at the time of issue or redemption. The Fund’s net asset value
per unit is calculated by dividing the net assets attributable to the unitholders with the total
number of outstanding redeemable units.
(k) Segmental information
Operating segments are reported in a manner consistent with the internal reporting used by the
chief operating decision-maker. The Manager, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the chief operating
decision-maker that makes strategic decisions.
(l) Distributions
Proposed distributions to unitholders are recognised in the Statement of Comprehensive Income
when they are appropriately authorised. The distribution on redeemable units is recognised as a
finance cost in the Statement of Comprehensive Income.
(m) Changes to presentation and comparative information
When the presentation or classification items in the financial statements is amended,
comparative amounts have been updated to conform with the current year’s presentation or
classification.
22
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
3. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AND NUMBER OF UNITS IN ISSUE
Net assets attributable to unitholders
The Fund’s capital is represented by the units in the Fund, and is shown as net assets attributable to
unitholders in the Statement of Net Assets. In accordance with the Fund’s Trust Deed, redeemable
units are generally only issued and redeemed in blocks of 10,000 units with effect from 20th June
2013 or in whole multiples thereof. Subscriptions and redemptions of units during the year are
shown in the Statement of Changes in Net Assets Attributable to Unitholders. In order to achieve
the investment objectives, the Fund endeavors to invest its capital in accordance with the defined
investment policies, whilst maintaining sufficient liquidity to meet redemption requests.
Net assets attributable to unitholders represent a liability in the Statement of Net Assets, carried
at the redemption amount that would be payable at the Statement of Net Assets date if the
unitholders exercised the right to redeem units in the Fund.
Number of units in issue
30.06.2020 30.06.2019
units units
Units in issue at the beginning of the year 31,635,774 32,678,844
Issuance of units 1,128,840 1,436,930
Redemption of units (2,450,000) (2,480,000)
Units in issue at the end of the year 30,314,614 31,635,774
2020 2019
US$ US$
Net assets attributable to unitholders 3,634,180,521 3,706,932,424
Net assets attributable to unitholders (per unit) 119.88 117.18
Net asset value per Creation unit
(1 Creation unit is equivalent to 10,000 units) 1,198,821 1,171,753
23
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The Manager makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. Estimates are continually
evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The Manager is of the opinion that the Fund has no critical accounting estimates and assumptions
during the financial year.
5. SECURITY LENDING INCOME AND OTHER INCOME
Security lending income is calculated daily, determined on the closing value of loaned securities at
agreed lending fee rate.
For each application for the subscription or redemption of units, the Fund is entitled to receive a
transaction fee of HK$1,000 (approximately US$128) per application and 0.23% for creation of
units and 0.29% (Prior to 8th April 2020: 0.125%) for redemption of units dilution charges from
authorised participants. Transaction fee received by the Fund is recognised within “Other income”
in the Statement of Comprehensive Income.
6. NET GAINS ON INVESTMENTS
2020 2019
US$ US$
Change in unrealised gain/(loss) in value of investments 104,324,399 167,007,478
Realised gain on sale of investments 90,894,933 94,401,667
195,219,332 261,409,145
24
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
7. TAXATION
Hong Kong tax
No provision for Hong Kong profits tax has been made as the Fund is authorised as a collective
investment scheme under Section 104 of the Hong Kong Securities and Futures Ordinance and
is therefore exempted from profits tax under Section 26A(1A) of the Hong Kong Inland Revenue
Ordinance.
Singapore tax
The Fund is also a designated unit trust in Singapore and therefore, the following income is
exempted from tax in accordance with sections 35(12) and (12A) of the Income Tax Act (Cap 134):
(a) gains or profits derived from Singapore or elsewhere from the disposal of securities;
(b) interest (other than interest for which tax has been deducted under section 45 of the Income
Tax Act);
(c) dividends derived from outside Singapore and received in Singapore;
(d) gains or profits derived from foreign exchange transactions, transactions in future contracts,
transactions in interest rate or currency forwards, swaps or option contracts and transactions in
forwards, swaps or option contracts relating to any securities of financial index; and
(e) distributions from foreign unit trusts derived from outside Singapore and received in Singapore.
Unless otherwise exempt from tax, any income or gains that do not fall within the above list
of specified income (i.e. non-specified income) will generally be subject to tax at the prevailing
corporate tax rate.
25
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
7. TAXATION (Continued)
People’s Republic of China tax
The Fund invests in debt securities in People’s Republic of China (“PRC”) and therefore subject to
a) withholding income tax on capital gains derived from disposal of debt securities, b) withholding
income tax on interest income received from its debt securities and c) value-added tax on capital
gains and interest income received from its debt securities.
(a) Withholding income tax on capital gains on debt securities in PRC
Under the general tax provision of PRC Corporate Income Tax Law (“PRC CIT Law”), the non-
PRC residents with no place of effective management, establishment or place of business
in the PRC may be subject to 10% PRC withholding income tax (“WIT”) on the capital gain
derived from disposal of securities, unless exempt or reduced under current PRC tax laws and
regulations or relevant tax treaties.
The Fund invests in RMB denominated bonds (“RMB bonds”) in the China Inter bank Bond
Market (“CIBM”) in the PRC. Under the prevailing PRC tax regulations, there are no specific
rules or regulations governing the taxation of the disposal of RMB bonds by foreign institutional
investors. Under the general taxing provision of the Corporate Income Tax Law, the Fund may
potentially be liable to pay PRC withholding income tax on the PRC sourced capital gains at
the rate of 10%, unless reduced or exempted under relevant tax treaty. Based on the current
verbal interpretation of the PRC State Taxation Administration (“STA”) and the local PRC tax
authorities, the authorities are with the view that capital gains derived by foreign institutional
investors from disposal of PRC debt securities should not be treated as PRC sourced income
and thus should not be subject to PRC withholding income tax. However, there are no written
tax regulations issued by the PRC tax authorities to confirm this interpretation. As a matter
of practice, PRC withholding income tax on capital gains realised by non-PRC tax resident
enterprises from the trading of debt securities has not been strictly enforced by the PRC tax
authorities.
The Manager has assessed the likelihood of such exposure and believes that there is no material
tax exposure on the basis that no collection has been made by the China tax authority since the
commencement of operation of the Fund. As such, no provision was made for taxation from
such gains in the financial statements.
However, there is a possibility that the PRC tax authorities may change their current
interpretation or issue specific regulation to clarify the tax treatment on bond trading gains.
The Manager continues to monitor the position and will make an appropriate adjustment if and
when it is considered that there are sufficient grounds to do so.
26
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
7. TAXATION (Continued)
People’s Republic of China tax (Continued)
(b) Withholding income tax on interest income on debt securities in PRC
The non-PRC residents with interest income derived from the debt securities will be subject
to 10% WIT. Pursuant to the PRC CIT Law, debt securities issuers in the PRC are obligated
to withhold the 10% PRC WIT on interest income for those foreign debt securities holders.
However, interest income derived from government bonds issued by the State Council’s finance
departments and/or local government bonds approved by the State Council is exempt from PRC
WIT under the PRC CIT Law.
On 7th November 2018, the Ministry of Finance and the PRC STA jointly issued a notice
Caishui [2018] No.108 (“Circular 108”) which stipulates that foreign institutional investors are
temporarily exempted from PRC withholding tax and Value Added Tax (“VAT”) in respect of
bond interest income received from 7th November 2018 to 6th November 2021.
Pursuant to the letter to the unitholders of the Fund dated 28th February 2020 the Manager
and the Trustee have decided to change the tax provision policy of the Fund and ceased to
make provisions for PRC withholding tax on the interest income received from PRC non-
government bonds from 7th November 2018 to 6th November 2021. The Manager will retain
the PRC withholding tax provision in respect of bond interest income received before 7th
November 2018 until new developments and interpretation of the relevant regulations are
available.
As at 30th June 2020, the Fund made provision of US$3,845,812 for 10% withholding income
tax on interest income from PRC non-government securities received up to 6th November 2018
(as at 30th June 2019: US$4,621,376 for withholding income tax on interest income from
PRC non-government securities received up to 30th June 2019). As a result of the change of
the PRC withholding tax provision policy the Fund has reversed the withholding income tax
provision of US$802,784 for the period from 7th November 2018 to 31st December 2019. The
amount is included in “Other payables” in the Statement of Net Assets.
27
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
7. TAXATION (Continued)
People’s Republic of China tax (Continued)
(c) Value added tax on capital gains and interest income on debt securities in PRC
According to the notice Caishui [2016] No. 36 (“Circular 36”), VAT at 6% shall be levied
on the difference between the selling and buying prices of those marketable securities
effective from 1st May 2016. In addition, if VAT is applicable, local surtaxes including Urban
Maintenance and Construction Tax (currently at the rate ranging from 1% to 7%), Education
Surcharge (currently at the rate of 3%) and Local Education Surcharge (currently at the rate of
2%) are imposed based on the VAT liabilities (the “VAT related taxes”). However, the gains
derived from trading of RMB denominated debt securities by the foreign institutional investors
recognised by People’s Bank of China in CIBM are exempted from VAT in the PRC under
Circular 36 and Caishui [2016] No. 70.
According to Circular 36, interest received from government bonds and local government bonds
are exempted from VAT. As mentioned above, according to Circular 108, foreign institutional
investors are temporarily exempted from VAT in respect of bond interest income received from
7th November 2018 to 6th November 2021. However, the prevailing VAT regulations do not
specifically exempt VAT on interest received by foreign institutional investors for the period
from 1st May 2016 to 6th November 2018. Hence, interest income derived during the period
from 1st May 2016 to 6th November 2018 on non-government bonds (including corporate
bonds) would be subject to 6.72% VAT and VAT related taxes.
Pursuant to the letter to the unitholders of the Fund dated 28th February 2020, the Manager
has considered the current PRC tax provisioning policy of the Trust and after consultation with
an independent and professional tax advisor, the Fund made a VAT provision of US$1,052,306
for the bond interest income received from the Trust’s investments in PRC non-government
bonds, for the period between 1st May 2016 and 6th November 2018.
Other taxes
The Fund invests in debt securities in Philippines and Indonesia and therefore subject to withholding
income tax on interest income.
28
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
7. TAXATION (Continued)
Overall tax exposure
The Fund had incurred taxes of US$8,978,949 (2019: US$9,653,841) during the year ended 30th
June 2020. The amount includes withholding taxes from China, Philippines and Indonesia totalling
US$7,911,443 (2019: US$9,535,008), PRC VAT provision in respect of bond interest income of
US$1,052,306 (2019: NIL), and the remaining portion of US$15,200 (2019: US$118,833) relates to
payments of Singapore corporate income tax and other taxes.
During the years ended 30th June 2020 and 2019, the movement in current tax liabilities for the
Fund are as follows:
2020 2019
US$ US$
Current tax liabilities
At 1st July 6,243,894 6,038,702
Charged to the Statement of Comprehensive Income 9,781,733 9,653,841
Reversal on provision of PRC withholding tax (802,784) –
Tax paid (8,806,418) (9,448,649)
At 30th June 6,416,425 6,243,894
As at 30th June 2020, the tax liabilities for the Fund were US$5,364,119 (2019: US$6,243,894) and
US$1,052,306 (2019: Nil) in related to withholding taxes and PRC VAT provision respectively.
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES INCLUDING THE MANAGER AND
ITS CONNECTED PERSONS
Connected Persons of the Manager are those as defined in the Code on Unit Trusts and Mutual
Funds established by the Securities and Futures Commission of Hong Kong (the “SFC Code”). The
Manager and the Trustee of the Fund are State Street Global Advisors Singapore Limited and HSBC
Institutional Trust Services (Singapore) Limited respectively. State Street Global Advisors Singapore
Limited is a subsidiary of State Street Corporation. HSBC Institutional Trust Services (Singapore)
Limited is a subsidiary of HSBC Holdings Plc. All transactions entered into during the year between
the Fund and the related parties including the Manager and its Connected Persons were carried out
in the ordinary course of business and on normal commercial terms. To the best of the Manager’s
knowledge, the Fund does not have any other transactions with the Connected Persons of the
Manager except for those disclosed below.
29
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES INCLUDING THE MANAGER AND
ITS CONNECTED PERSONS (Continued)
(a) Foreign currency transactions with connected persons of the Manager and the Trustee
During the year ended 30th June 2020, the Manager transacted in foreign currency transactions
totalling US$969,581,418 (2019: US$878,441,978) through its affiliated party, State Street
Global Markets, LLC and the Trustee’s affiliated parties, The Hongkong and Shanghai Banking
Corporation Limited and The Hongkong and Shanghai Banking Corporation Limited Sydney
Branch, for the Fund’s investments and settlement purpose. The amount represents 100%
(2019: 100%) of the Fund’s foreign currency transactions during the year ended 30th June
2020.
Aggregate value % of total foreign
of foreign currency currency
Name of company transactions transactions
US$ %
2020
State Street Global Markets, LLC 54,700,000 5.64
The Hongkong and Shanghai Banking
Corporation Limited 249,056,833 25.69
The Hongkong and Shanghai Banking
Corporation Limited, Sydney Branch 665,824,585 68.67
2019
State Street Global Markets, LLC 60,280,000 6.86
The Hongkong and Shanghai Banking
Corporation Limited 216,618,143 24.66
The Hongkong and Shanghai Banking
Corporation Limited, Sydney Branch 601,543,835 68.48
During the years ended 30th June 2020 and 2019, the Connected Persons of the Manager
and the Trustee as listed above had included normal bid-offer spread for the foreign currency
transactions entered with the Fund, which were carried out in the ordinary course of business
and on normal commercial terms. There were no direct commissions paid to Connected Persons
of the Manager or the Trustee during the years ended 30th June 2020 and 2019.
30
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES INCLUDING THE MANAGER AND
ITS CONNECTED PERSONS (Continued)
(b) Holdings of units
As at 30th June 2020, the directors and officers of the Manager did not hold any units in the
Fund (2019: Nil). The Hong Kong and Shanghai Banking Corporation Limited, a related party of
the Trustee, held 28,083,247 units (2019: 27,155,314 units) of the Fund as nominee on behalf
of its clients, representing 92.64% (2019: 85.84%) of the Fund’s net assets.
(c) Management fee
The Fund pays the Manager a management fee*, monthly in arrears and accrued daily,
determined on the average daily net assets of the Fund at the rate as follows:
For first US$1 billion 0.13%
For next US$250 million 0.12%
For next US$250 million 0.11%
Thereafter 0.10%
* This fee may be increased to a maximum of 0.25% per annum upon three months’ notice in writing to
unitholders.
(d) Trustee fee
The Fund pays the Trustee a trustee fee*, monthly in arrears and accrued daily, of 0.05% per
annum of the average daily net assets of the Fund.
* This fee may be increased to a maximum of 0.15% per annum upon three months’ notice in writing to
unitholders.
31
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES INCLUDING THE MANAGER AND
ITS CONNECTED PERSONS (Continued)
(e) Bank balances
The bank balance of the Fund is held with a related party of the Trustee, (i.e. The Hongkong
Shanghai Banking Corporation Limited). The details of such transactions are as follows:
As at As at
30.06.2020 30.06.2019
US$ US$
Bank balances 8,828,282 12,287,784
During the year ended 30th June 2020 and 2019, the below income and expenses related
to the bank balance of the Fund stated in Statement of Comprehensive Income was earned/
paid from/to a related party of the Trustee, (i.e. The Hongkong Shanghai Banking Corporation
Limited).
For the year ended For the year ended
30.06.2020 30.06.2019
US$ US$
Interest income 58,703 103,622
Interest expenses 15,564 20,228
(f) Investments
As at 30th June 2020 and 2019, the Fund placed investments with a related party of the
Trustee, (i.e. HSBC Institutional Trust Services (Asia) Limited). The details of such investments
are as follows:
As at As at
30.06.2020 30.06.2019
US$ US$
Investments 3,631,886,293 3,703,115,036
32
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES INCLUDING THE MANAGER AND
ITS CONNECTED PERSONS (Continued)
(g) Security Lending Arrangement
During the year ended 30th June 2020 and 2019, the Fund put in place a securities lending
arrangement with a related party of the Trustee (i.e. HSBC Bank Plc) as a security lending
agent. The details of such transactions are as follows:
For the year ended For the year ended
30.06.2020 30.06.2019
US$ US$
Collateral held by HSBC Bank Plc in
segregated accounts 92,691,825 72,241,674
Aggregate securities lending transactions
through HSBC Bank Plc 626,350,260 136,330,050
(h) Bond transactions with connected persons of the Manager and the Trustee
(i) During the year ended 30th June 2020 and 2019, the Fund transacted in bond trades
through Trustee’s affiliated party as buyers or sellers as follows:
Aggregate value Aggregate value
of purchase of sale
Name of company transactions transactions
US$ US$
2020
HSBC Bank (China) Company Limited 47,353,499 66,168,745
The Hongkong and Shanghai Banking
Corporation Limited 47,118,681 13,852,972
The Hongkong and Shanghai Banking
Corporation Limited, Singapore 139,132,276 97,045,142
2019
HSBC Bank (China) Company Limited 36,139,035 –
The Hongkong and Shanghai Banking
Corporation Limited, Singapore 176,125,390 175,296,692
33
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. TRANSACTIONS AND BALANCES WITH RELATED PARTIES INCLUDING THE MANAGER AND
ITS CONNECTED PERSONS (Continued)
(h) Bond transactions with connected persons of the Manager and the Trustee (Continued)
(ii) During the year ended 30th June 2020 and 2019, the Fund transacted in bond trades
through Trustee’s affiliated party as delivering or receiving agents as follows:
Aggregate value Aggregate value
of transactions of transactions
Name of company 30.06.2020 30.06.2019
US$ US$
HSBC Bank (China) Company Limited 113,522,244 36,139,035
HSBC Bank Malaysia Berhad 55,739,887 9,107,655
PT Bank HSBC Indonesia 52,769,162 38,162,900
The Hongkong and Shanghai Banking
Corporation Limited 67,375,046 52,604,243
The Hongkong and Shanghai Banking
Corporation Limited, Bangkok 50,524,759 35,516,051
The Hongkong and Shanghai Banking
Corporation Limited, Seoul Branch 48,020,913 141,352,470
The Hongkong and Shanghai Banking
Corporation Limited, Singapore 45,040,885 94,866,401
The Hongkong and Shanghai Banking
Corporation Ltd – Philippine Branch 33,582,724 13,082,916
9. OTHER EXPENSES
(a) Index license fee
The index license fee is paid to the Index Provider of the Underlying Index. The index license
fee is calculated at a scale rate with a maximum of 0.0175% per annum (2019: 0.0175% per
annum) on the daily average net asset value of the Fund, subject to a minimum of US$184,000
per annum (2019: US$184,000 per annum). The index license fee is accrued daily and is
payable quarterly in arrears.
(b) Processing agent fee
The processing agent fee is paid to Hong Kong Conversion Agency Services Limited. The
processing agent performs, through Hong Kong Securities Clearing Company Limited, certain
of its services in connection with the subscription and redemption of Units by authorised
participants including facilitating the deposit of units into Central Clearing and Settlement
System (“CCASS”) upon creation of units and the withdrawal of units from CCASS upon
redemption.
A monthly retainer fee of HK$5,000 is also charged to the Fund.
34
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT
(a) Strategy in using financial instruments
The investment objective of the Fund is to seek to provide investment results that correspond
closely to the total return of the Underlying Index, before fees and expenses. The Underlying
Index is determined and composed by the Index Provider. The Underlying Index is an indicator
of investment returns of Asian Currency denominated debt obligations issued or guaranteed
by an Asian government, quasi Asian government organisations or supranational financial
institutions, in each case as determined by the Index Provider and which are for the time being
constituent securities of the Underlying Index.
The Fund is exposed to risks including market price risk, interest rate risk, credit risk, liquidity
risk, currency risk and emerging market risk.
These risks, and the respective risk management policies employed by the Fund to manage
these risks, are discussed below:
(b) Market price risk
Market price risk is the risk that the value of a financial instrument will fluctuate as a result
of changes in market prices, whether those changes are caused by factors specific to the
individual instrument or factors affecting all instruments in the market.
The Fund is designated to track the performance of the Markit iBoxx ABF Pan-Asia Index,
therefore the exposures to market risk in the Fund will be substantially the same as the tracked
index. The Manager manages the Fund’s exposures to market risk by ensuring that the key
characteristics of the portfolio, are closely aligned with the characteristics of the tracked index.
As at year end, the overall market exposures were as follows:
2020 2019
Fair value Cost % of Fair value Cost % of
US$ US$ net assets US$ US$ net assets
Investments
– Debt securities 3,631,886,293 3,579,994,418 99.94 3,703,115,036 3,755,547,560 99.90
3,631,886,293 3,579,994,418 99.94 3,703,115,036 3,755,547,560 99.90
35
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(b) Market price risk (Continued)
Market exposures
The following table shows the market exposure the Fund has to various markets, incorporating
the underlying market risk through all financial assets and liabilities held by the Fund.
2020 2019
US$ equivalent US$ equivalent
Markets exposed to
China 912,466,936 871,695,396
Hong Kong 308,998,779 317,541,716
Indonesia 282,523,479 294,238,106
Malaysia 417,782,801 436,970,965
Philippines 213,102,425 207,064,750
Singapore 570,539,673 589,996,952
South Korea 570,973,705 611,539,891
Thailand 355,498,495 374,067,260
3,631,886,293 3,703,115,036
There were investments issued by a single issuer with market value exceeding 10% of the
Fund’s net asset value at 30th June 2020 or 2019, as follows:
2020 2019
% %
China Government 18.32 18.36
Korea Treasury 12.15 16.03
Singapore Government 13.68 13.90
During the year ended 30th June 2020, the Underlying Index increased by 5.57% (1 year return
as of 30th June 2019: increased by 7.33%), while the returns of the Fund including dividends
increased by 5.01% (1 year return as of 30th June 2019: increased by 6.80%).
36
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(b) Market price risk (Continued)
Market exposures (Continued)
The table below summarises the impact on net assets attributable to unitholders as a result
of increases/decreases of the Underlying Index to which the Fund is exposed. The analysis is
based on the assumption that the Underlying Index had increased/decreased by the respective
percentage with all other variables held constant and the Fund’s investments moved according
to the historical correlation with the Underlying Index.
2020 2019
Change in Change in
market index Impact market index Impact
% US$ % US$
+/- +/- +/- +/-
Markit iBoxx ABF Pan-Asia
Index in US$ 5.00 181,594,315 6.00 222,186,902
Assumption: The change is based on the annualised return of the Underlying Index since
inception and takes into consideration the Fund’s historical correlation with the Underlying
Index, which would be revised when there is evidence that the Underlying Index have become
significantly more volatile.
The Manager has used their view of what would be a “reasonable shift” in each key market to
estimate the change for use in the market sensitivity analysis above.
Disclosures above are shown in absolute terms, changes and impacts could be positive or
negative. Changes in market index % are revised annually depending on management’s current
view of market volatility and other relevant factors.
(c) Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes
in market interest rates. Interest rate risk is generally lower for shorter-term investments and
higher for longer-term investments.
The majority of the Fund’s financial assets and liabilities are interest bearing; as a result, the
Fund is subject to significant amounts of risk due to fluctuations in the prevailing levels of
market interest rates. Any excess cash and cash equivalents are invested at short-term market
interest rates.
37
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(c) Interest rate risk (Continued)
The Manager manages the investment portfolio by ensuring that the Fund replicates the
Underlying Index movements effectively based on market exposures as well as duration risks
across the yield curve.
The table below summarises the Fund’s exposure to interest rate risk. It includes the Fund’s
assets and liabilities at fair values, categorised by the earlier of contractual repricing or maturity
dates.
As at 30.06.2020
Non-interest
Up to 1 year 1-5 years Over 5 years bearing Total
US$ US$ US$ US$ US$
Assets
Investments 95,203,521 1,372,483,329 2,164,199,443 – 3,631,886,293
Cash at banks 8,828,282 – – – 8,828,282
Amounts due from brokers – – – 59,839,372 59,839,372
Other receivables – – – 22,809 22,809
Total assets 104,031,803 1,372,483,329 2,164,199,443 59,862,181 3,700,576,756
Liabilities
Amounts due to brokers – – – (58,639,086) (58,639,086)
Audit fee payable – – – (65,163) (65,163)
Trustee fee payable – – – (158,657) (158,657)
Management fee payable – – – (675,608) (675,608)
Index license fee payable – – – (208,473) (208,473)
Other payables – – – (6,649,248) (6,649,248)
Net assets attributable to
unitholders – – – (3,634,180,521) (3,634,180,521)
Total liabilities – – – (3,700,576,756) (3,700,576,756)
Total interest
sensitivity gap 104,031,803 1,372,483,329 2,164,199,443
38
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(c) Interest rate risk (Continued)
As at 30.06.2019
Non-interest
Up to 1 year 1-5 years Over 5 years bearing Total
US$ US$ US$ US$ US$
Assets
Investments 194,449,342 1,387,393,459 2,121,272,235 – 3,703,115,036
Cash at banks 12,287,784 – – – 12,287,784
Amounts receivable on
subscription of units – – – 3,514,602 3,514,602
Amounts due from brokers – – – 46,958,408 46,958,408
Other receivables – – – 7,187 7,187
Total assets 206,737,126 1,387,393,459 2,121,272,235 50,480,197 3,765,883,017
Liabilities
Amounts payable on
redemption of units – – – (1,167,325) (1,167,325)
Amounts due to brokers – – – (50,001,330) (50,001,330)
Audit fee payable – – – (70,862) (70,862)
Trustee fee payable – – – (140,560) (140,560)
Management fee payable – – – (1,003,519) (1,003,519)
Index license fee payable – – – (205,597) (205,597)
Other payables – – – (6,361,400) (6,361,400)
Net assets attributable to
unitholders – – – (3,706,932,424) (3,706,932,424)
Total liabilities – – – (3,765,883,017) (3,765,883,017)
Total interest
sensitivity gap 206,737,126 1,387,393,459 2,121,272,235
At 30th June 2020, should interest rates have lowered/risen by 50 basis points (2019: 50
basis points) with all other variables remaining constant, the increase/decrease in net assets
attributable to unitholders for the year would amount to approximately US$138,862,038
and US$128,759,016 respectively (2019: US$133,011,421 and US$123,722,914), arising
substantially from the increase/decrease in market values of debt securities.
Assumption: The change is based on the historical interest rate fluctuations and would be
revised when there is evidence that interest rates have become significantly more volatile.
39
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(d) Credit and counterparty risk
Credit and counterparty risk is the risk that an issuer or counterparty will be unable or unwilling
to pay amounts in full when due.
All transactions in securities are settled/paid for upon delivery using approved brokers. The risk
of default from transactions is considered minimal, as delivery of securities sold is only made
when the broker has received payment. Payment is made on a purchase when the securities
have been received by the broker. The trade will fail if either party fails to meet its obligation.
The Fund’s financial assets which are potentially subject to concentration of counterparty
risk consist principally of bank deposits, assets held and collateral securities held with the
custodians.
The table below summarises the assets placed with banks, custodians and custodians of
collateral securities at 30th June 2020 and 2019:
As at 30.06.2020
Source of
US$ Credit rating credit rating
Custodians and Banks
The Hongkong & Shanghai
Banking Corporation Limited 3,640,714,575 Aa3 Moody’s
Custodians of collateral securities
HSBC Bank Plc 92,691,825 Aa3 Moody’s
JP Morgan Bank Luxembourg S.A.1 262,828,451 Aa1 Moody’s
1
JP Morgan Bank Luxembourg S.A. is a triparty collateral manager to whom the Securities Lending Agent,
HSBC Bank Plc, delegates certain of its collateral management, margining and custodial functions.
As at 30.06.2019
Source of
US$ Credit rating credit rating
Custodians and Banks
The Hongkong & Shanghai
Banking Corporation Limited 3,715,402,820 Aa1 Moody’s
Custodian of collateral securities
HSBC Bank Plc 72,241,674 Aa2 Moody’s
40
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(d) Credit and counterparty risk (Continued)
The table below categorised the investment portfolio by credit rating sourced from Standard &
Poor’s or iBoxx.
Portfolio by rating category
Rating (Markit iBoxx) 2020 2019
% of Investment % of Investment
AAA 14 15
AA 24 25
A 38 36
BBB 18 18
Non-rated 6 6
Total 100 100
During the year ended 30th June 2020 and 2019, the Fund put in place a securities lending
arrangement. Any securities lending activities for the Fund would be carried out for the sole
purpose of efficient portfolio management, which aims to generate additional income for
the scheme with minimal increase in risk. At the time that any securities are lent or proposed
to be lent, the amount of securities of that issue being lent must not be more than 50% of
the aggregate market holding of securities. The Fund will only lend securities to a borrower
approved by the Trustee. Borrowers will be restricted to persons who satisfy the criteria for
a counterparty to a securities lending agreement as required under all applicable laws and
regulations. At present, borrowers of security lending transactions are required to have a
minimum long-term rating of ‘A’ by Moody’s, ‘A’ by Standard and Poor’s or ‘A’ by Fitch. For
more details, please refer to the Details of Security Lending Arrangements (Unaudited).
As part of its securities lending transactions, the Fund will receive collateral, the value of
which, during the duration of the securities lending agreement, will exceed 100% of the
global valuation of the securities lent, marked to market on a daily basis. The collateral that
is to be acquired in respect of securities lending shall comprise securities of the underlying
index, non-index securities and/or other high quality cash equivalent investments approved
by the Trustee and permitted under the Trust Deed. For non-cash collateral, eligible collateral
includes government debt or supranational debt with a minimum long-term rating of ‘A’ by
Moody’s, ‘A’ by Standard and Poor’s or ‘A’ by Fitch. The Fund will only accept cash collateral
in circumstances where collateral is accepted through the Euroclear SA collateral management
system, and the collateral substitution process for the system requires the interstitial acceptance
of cash collateral. No interest would be paid on such cash collateral, which would be held by
HSBC Bank Plc as banker. The Fund will not reinvest collateral received in connection with its
securities lending.
41
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(d) Credit and counterparty risk (Continued)
The table below categorised the securities on loan by credit rating of the collateral provider
sourced from Moody’s Rating Services.
As at 30.06.2020
Credit rating of the Fair value
Collateral provider collateral provider2 of collateral Securities on loan
US$ US$
BNP Paribas London Aa3 13,872,021 13,193,294
Credit Suisse Securities
(Europe) Limited A1 248,956,430 236,920,207
Nomura International PLC Baa1 92,691,825 88,046,787
355,520,276 338,160,288
As at 30.06.2019
Credit rating of the Fair value
Collateral provider collateral provider2 of collateral Securities on loan
US$ US$
BNP Paribas London Aa3 72,241,674 67,676,811
72,241,674 67,676,811
2
Credit ratings of long term counterparty risk by Moody’s Rating Services
42
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(d) Credit and counterparty risk (Continued)
The maximum exposure to credit and counterparty risk as at 30th June 2020 and 2019 is the
carrying amount of the financial assets as set out below:
2020 2019
US$ US$
Investments 3,631,886,293 3,703,115,036
Amounts receivable on subscription of units – 3,514,602
Amounts due from brokers 59,839,372 46,958,408
Other receivable 22,809 7,187
Cash at banks 8,828,282 12,287,784
3,700,576,756 3,765,883,017
The Manager limits the Fund’s exposure to counterparty risk by transacting the majority of
its securities and contractual commitment activities with broker-dealers, banks and regulated
exchanges with high credit ratings and that the Manager considers to be well established.
The Fund measures credit risk and expected credit losses using probability of default, exposure
at default and loss given default. At 30th June 2020 and 2019, other receivables, amounts due
from brokers, amount receivable on subscription of units, cash at banks are due to be settled
within 1 month. Management consider both historical analysis and forward looking information
in determining any expected credit loss. Management consider the probability of default to be
close to zero as the counterparties have a strong capacity to meet their contractual obligations
in the near term. As a result, no loss allowance has been recognised based on 12-month
expected credit losses as any such impairment would be wholly insignificant to the Fund.
(e) Liquidity risk
Liquidity risk is the risk that the Fund will encounter difficulty or incur higher costs in settling a
liability, including a redemption request.
The Fund is exposed to daily redemptions of units in the Fund. The Manager invests the
majority of the Fund’s assets in investments that are traded in an active market which can be
readily disposed of. During the year ended 30th June 2020 and 2019, the Fund put in place
securities lending transactions. As at 30th June 2020, investments of US$338,160,288 (2019:
US$67,676,811) were lent to the borrower and recallable on demand.
43
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(e) Liquidity risk (Continued)
The table below analyses the Fund’s non-derivative financial liabilities into relevant maturity
groupings based on the remaining period at the year-end date to the contractual maturity date.
The amounts in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying balances, as the impact of discounting is not significant.
Less than 1 month to less Over
1 month than 3 months 3 months
US$ US$ US$
As at 30.06.2020
Amounts due to brokers 58,639,086 – –
Audit fee payable – 65,163 –
Trustee fee payable – 158,657 –
Management fee payable – 675,608 –
Index license fee payable – 208,473 –
Other payables 176,196 56,627 6,416,425
Net assets attributable to unitholders 3,634,180,521 – –
Contractual cash out flows 3,692,995,803 1,164,528 6,416,425
As at 30.06.2019
Amounts payable on
redemption of units 1,167,325 – –
Amounts due to brokers 50,001,330 – –
Audit fee payable – 70,862 –
Trustee fee payable – 140,560 –
Management fee payable – 1,003,519 –
Index license fee payable – 205,597 –
Other payables 37,668 79,838 6,243,894
Net assets attributable to unitholders 3,706,932,424 – –
Contractual cash out flows 3,758,138,747 1,500,376 6,243,894
44
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(e) Liquidity risk (Continued)
Units are redeemed on demand at the unitholder’s option. However, the Trustee and the
Manager do not envisage that the contractual maturity disclosed in the tables above will be
representative of the actual cash outflows, as the unitholders typically retain their units for the
medium to long term. At 30th June 2020 there was 1 unitholder (2019; 2), which were the
nominee account unitholders of the Fund holding more than 10% of the Fund’s units. Please
refer to note 13 for details.
The Fund manages its liquidity risk by investing in investments that it expects to be able to
liquidate within one month or less. The following table illustrates the expected liquidity of
assets held:
Less than 1 month 1-12 months
US$ US$
As at 30.06.2020
Total assets 3,700,576,756 –
Less than 1 month 1-12 months
US$ US$
As at 30.06.2019
Total assets 3,765,883,017 –
(f) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in
foreign exchange rates.
The Fund has assets and liabilities denominated in currencies other than US dollars, the
functional currency. The Fund is therefore exposed to currency risk, as the value of the assets
and liabilities denominated in other currencies will fluctuate due to changes in exchange rates.
Although the Fund has not actively engaged in hedging activities, the Manager may enter
into spot and forward foreign exchange contracts from time to time to hedge against the
fluctuations in exchange rates in relation to the settlement of subscription and redemption of
units, and other operational uses such as covering the Fund’s exposure to currency risk from re-
balancing the portfolios prior to market closure due to holiday.
45
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(f) Currency risk (Continued)
The table below summarises the Fund’s monetary exposure to currency risks:
2020 2019
US$ US$
equivalents equivalents
Hong Kong Dollar 310,408,976 318,166,675
Indonesian Rupiah 284,486,170 294,480,902
Malaysian Ringgit 416,589,366 434,833,778
Philippine Peso 212,642,078 206,829,532
Renminbi 910,195,461 875,080,442
Singapore Dollar 573,248,181 591,742,465
South Korean Won 570,934,316 612,308,613
Thai Baht 356,009,041 374,204,705
The table below summarises the impact on net assets attributable to unitholders as a result of
increases/decreases of key exchange rates on the exposures tabled above, to which the Fund
is exposed. The analysis is based on the assumption that the exchange rates had increased/
decreased by the respective percentage (based on historical currency fluctuations and would be
revised when the currency have become significantly more volatile) with all other variables held
constant.
2020 2019
Change Impact Change Impact
% US$ % US$
+/- +/- +/- +/-
Hong Kong Dollar 1 3,104,090 1 3,181,667
Indonesian Rupiah 12 34,138,340 12 35,337,708
Malaysian Ringgit 12 49,990,724 12 52,180,053
Philippine Peso 12 25,517,049 12 24,819,544
Renminbi 11 100,121,501 11 96,258,849
Singapore Dollar 8 45,859,854 8 47,339,397
South Korean Won 12 68,512,118 12 73,477,034
Thai Baht 12 42,721,085 12 44,904,565
46
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(g) Emerging market risk
The Fund invests in certain Asian bond markets that are considered to be emerging markets.
These markets are subject to special risks associated with foreign investment in these emerging
markets including, but not limited to: generally less efficient securities markets; generally
greater price volatility; exchange rate fluctuations and exchange controls; imposition of
restrictions on the expatriation of funds or other assets; less publicly available information
about issuers; the imposition of taxes; higher transaction and custody costs; settlement delays
and risk of loss; difficulties in enforcing contracts; lesser regulation of securities markets;
smaller market capitalization; different accounting and disclosure standards; governmental
interference; greater risk of market shutdown; the risk of expropriation of assets; higher
inflation; and social, economic and political uncertainties.
The Fund is designed to track the performance of the Underlying Index, a broad Asian local
currency bond index; therefore the exposure to emerging market risk in the Fund will be
substantially the same as the Underlying Index. As an index fund, the Manager manages
the Fund’s exposure to emerging market risk by ensuring that the key characteristics of the
Fund, such as market weights and duration, are closely aligned to the characteristics of the
Underlying Index.
(h) Capital risk management
The Fund’s capital is represented by the net assets attributable to unitholders. The amount of
net assets attributable to unitholders can change significantly on a daily basis as the Fund is
subject to daily subscriptions and redemptions at the discretion of the unitholders. The Fund’s
objectives when managing capital are to safeguard the Fund’s ability to continue as a going
concern in order to provide returns for the unitholders and benefits for other stakeholders and
to maintain a strong capital base to support the development of the investment activities of the
Fund.
In order to maintain or adjust the capital structure, the Fund’s policy is to perform the
following:
– monitor the level of daily subscriptions and redemptions relative to the liquid assets; and
– redeem and issue units in accordance with the Trust Deed and supplemental deeds.
The Trustee and Manager monitor capital on the basis of the value of net assets attributable to
unitholders.
47
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(i) Fair value estimation
The fair value of financial assets and liabilities traded in active markets are based on quoted
market prices at the close of trading on the year end date. The quoted market price used for
financial assets held by the Fund is the current bid price.
A financial instrument is regarded as quoted in an active market if quoted prices are readily
and regularly available from an exchange, dealer, broker, industry group, pricing service, or
regulatory agency, and those prices represent actual and regularly occurring market transactions
on an arm’s length basis.
The carrying value less impairment provision of other receivables and payables are assumed
to approximate their fair values. The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the current market interest rate
that is available to the Fund for similar financial instruments.
IFRS 13, requires the Fund to classify fair value measurements using a fair value hierarchy
that reflects the significance of the inputs used in making the measurements. The fair value
hierarchy has the following levels:
– Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund
can access at the measurement date (Level 1).
– Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).
– Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (Level 3).
The 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.
48
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. FINANCIAL RISK MANAGEMENT (Continued)
(i) Fair value estimation (Continued)
The following table analyses within the fair value hierarchy the Fund’s investments (by class)
measured at fair value at 30th June 2020 and 2019:
As at 30.06.2020 Level 1 Level 2 Level 3 Total balance
US$ US$ US$ US$
Investments
– Debt securities – 3,631,886,293 – 3,631,886,293
– 3,631,886,293 – 3,631,886,293
As at 30.06.2019 Level 1 Level 2 Level 3 Total balance
US$ US$ US$ US$
Investments
– Debt securities – 3,703,115,036 – 3,703,115,036
– 3,703,115,036 – 3,703,115,036
Investments whose values are based on quoted market prices in active markets are classified
within Level 1. As of 30th June 2020 and 2019, the Fund did not hold any investments
classified in Level 1.
Financial instruments that trade in markets that are valued based on quoted market prices,
dealer quotations or alternative pricing sources supported by observable inputs are classified
within Level 2. As of 30th June 2020 and 2019, the Fund held investments in debt securities
which were classified in Level 2.
Investments classified within Level 3 have significant unobservable inputs, as they trade
infrequently. As of 30th June 2020 and 2019, the Fund did not hold any investments classified
in Level 3.
There was no transfer between levels for the years ended 30th June 2020 and 2019.
The assets and liabilities included in the Statement of Net Assets, except for investments, are
carried at amortised cost; their carrying values are a reasonable approximation of fair value.
49
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
11. SOFT DOLLAR PRACTICES
The Manager may effect transactions, provided that any such transaction is consistent with
standards of “best execution”, by or through the agency of another person for the account of the
Fund with whom the Manager or any of its Connected Persons have an arrangement under which
that party will from time to time provide to or procure for the Manager or any of its Connected
Persons goods, services or other benefits (such as research and advisory services, computer
hardware associated with specialised software or research services and performance measures) the
nature of which is such that their provision can reasonably be expected to benefit the Fund as a
whole and may contribute to an improvement in the performance of the Fund. For the avoidance
of doubt, such goods and services may not include travel, accommodation, entertainment,
general administrative goods or services, general office equipment or premises, membership fees,
employees’ salaries or direct money payments.
The Manager has not participated in any soft dollar arrangements in respect of any transactions for
the account of the Fund during the years ended 30th June 2020 and 2019.
12. DISTRIBUTIONS
2020 2019
US$ US$
Interim distribution
– US$1.42 on 30,861,354 units paid
on 5th February 2020 43,823,123 –
– US$1.76 on 32,757,754 units paid
on 31st January 2019 – 57,653,647
Final distribution
– US$1.64 on 31,615,774 units paid
on 1st August 2019 51,849,869 –
– US$1.84 on 32,468,844 units paid
on 2nd August 2018 – 59,742,673
Total distribution 95,672,992 117,396,320
50
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
13. SEGMENT INFORMATION
The Manager makes the strategic resource allocations on behalf of the Fund. The Fund has
determined the operating segments based on the reports reviewed by the Manager, which are used
to make strategic decisions.
The Manager is responsible for the Fund’s entire portfolio and considers the business to have a
single operating segment. The Manager’s asset allocation decisions are based on a single, integrated
investment strategy and the Fund’s performance is evaluated on an overall basis.
The investment objective of the Fund is to seek to provide investment results that correspond to the
total return of the Markit iBoxx ABF Pan-Asia Index, before fees and expenses.
The internal reporting provided to the Manager for the Fund’s assets, liabilities and performance is
prepared on a consistent basis with the measurement and recognition principles of IFRSs.
There were no changes in the reportable segments during the years ended 30th June 2020 and
2019.
All activities of the Fund are in a single business of investment activities conducted mainly in the
Asia Pacific region. The Fund’s income is from investments in debt securities issued by organisations
in the Asia Pacific region.
The Fund has no assets classified as non-current assets. The Fund has a diversified portfolio of
investments. Please refer to note 10 for investment holdings issued by a single issuer that account
for more than 10% of the Fund’s net assets.
The underlying index of the Fund namely Markit iBoxx ABF Pan-Asia Index, did not have any
constituent stock that accounted for more than 10% of the index as at 30th June 2020 (2019: Nil).
The Fund also has a diversified unitholder population. As at 30th June 2020, there was one
unitholder, which were the nominee account unitholders of the Fund (2019: two unitholders)
holding more than 10% of the Fund’s units. The nominee account unitholder holds 93% (2019:
86% and 10%) of the Fund’s units as at 30th June 2020.
51
ABF Pan Asia Bond Index Fund
Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (Continued)
14. SUPPLEMENTAL RATIOS
2020 2019
Expense ratio3 0.19% 0.19%
Turnover ratio4 24.32% 21.15%
3
The expense ratio has been computed based on the guidelines laid down by the Investment Management
Association of Singapore (“IMAS”). The calculation of the expense ratio at financial year end was based on
total operating expenses of US$6,912,780 (2019: US$7,077,809) divided by the average net asset value of
US$3,638,494,333 (2019: US$3,671,577,409) for the year. The total operating expenses do not include (where
applicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to
unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other
funds and tax deducted at source or arising out of income received. The Fund does not pay any performance
fee. The average net asset value is based on the daily balances.
4
The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective
Investment Schemes. The calculation of the portfolio turnover ratio was based on the lower of the total
value of purchases or sales, being purchases of US$884,984,816 (2019: purchases of US$776,605,239)
of the underlying investments, divided by the average daily net asset value of US$3,638,494,333 (2019:
US$3,671,577,409). In line with Statement of Recommended Accounting Practice 7 “Reporting framework for
Unit Trusts” (“RAP 7”) issued by the Institute of Singapore Chartered Accountants, total value of purchases or
sales for the current year do not include brokerage and other transaction costs.
15. EVENT OCCURRING AFTER YEAR END DATE
Subsequent to the year end, the Fund announced a dividend distribution of US$1.23 per unit on 7th
July 2020. The dividend was paid on 3rd August 2020. The net assets attributable to unitholders as
at 30th June 2020 has not accrued the dividend distribution payable as mentioned above.
16. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Trustee and the Manager on 23rd September 2020.
52