SOURCE: Singapore Fund

September 02, 2009 12:03 ET

The Singapore Fund Announces Third Quarter Earnings

JERSEY CITY, NJ--(Marketwire - September 2, 2009) - The Singapore Fund, Inc. (NYSE: SGF), a closed-end management investment company seeking long-term capital appreciation through investment primarily in Singapore equity securities, today announced its performance results for the three months ended July 31, 2009, the third quarter of its 2009 fiscal year.

For the quarter ended July 31, 2009, the Fund earned net investment income of approximately U.S. $98,000 (equivalent to income of U.S. $0.01 per share) resulting in net investment income for the nine-month period of approximately U.S. $1,357,000 (equivalent to income of U.S. $0.14 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. $39,272,000 (equivalent to a gain of U.S. $4.15 per share). As a result, the net realized and unrealized gains increased to approximately U.S. $43,981,000 (equivalent to a gain of U.S. $4.64 per share) for the nine months ended July 31, 2009.

In comparison, during the quarter ended July 31, 2008, the Fund earned net investment income of approximately U.S. $891,000 (equivalent to income of U.S. $0.10 per share) resulting in net investment income for the nine-month period of approximately U.S. $1,735,000 (equivalent to income of U.S. $0.19 per share). In addition, net realized and unrealized losses from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $16,713,000 (equivalent to a loss of U.S. $1.81 per share). As a result, the net realized and unrealized loss increased to approximately U.S. $73,550,000 (equivalent to a loss of U.S. $6.14 per share) for the nine months ended July 31, 2008.

On July 31, 2009, total net assets of the Fund were approximately U.S. $124.4 million. The net asset value ("NAV") per share on that date was U.S. $13.13, 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 58.17% for the nine months ended July 31, 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 nine months ended July 31, 2009, the Fund's benchmark, the Straits Times Index ("STI"), increased by 52.49% in U.S. dollar terms.

In comparison with the same quarter-end of the previous fiscal year, total net assets on July 31, 2008 were approximately U.S. $144.4 million, equivalent to a NAV of U.S. $15.42 per share, based on 9,363,114 shares outstanding.

As of July 31, 2009, the Fund had 89.38% of its net assets invested in Singapore equity securities, 4.21% invested in Malaysian equity securities, 2.78% invested in Indonesian equity securities and 1.89% 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") (0.31%), U.S. Dollars (0.25%) and other assets less liabilities of 1.18%.

As of September 1, 2009, the Fund's NAV per share was U.S. $13.08, based on net assets of approximately U.S. $124.0 million. On the same date, the Fund's shares on the New York Stock Exchange closed at U.S. $11.60, representing a trading discount to NAV per share of 11.31%.

Singapore Market Review

The Singapore stock market surged 42.8% in US$ terms during the three months ended July 31, 2009. The Fund did better than its benchmark return with a 46.3% increase in its NAV. The Singapore market rallied on the back of a strong residential property market and better than expected economic numbers. As a result, corporate earnings forecasts have been revised upwards since the beginning of 2Q09. The corporate reporting season, starting with the U.S. market, generally signaled a positive set of numbers. This further set the tone for additional earning upgrades. In Singapore, banks kicked off the reporting season with better-than-expected 1Q09 results, driven by better trading income, steady margins and good cost control.

After contracting 12.2% QOQ in 1Q09, the Singapore economy staged a sharp turnaround by expanding 20.7% in 2Q09 owing to global inventory restocking and aggressive policy stimulus. The manufacturing sector showed signs of stability with positive monthly expansion in 2Q09, reversing the series of monthly contraction witnessed since the beginning of 4Q08. However, the services sector remained weak, shrinking 5.1% YOY, similar to the rate seen in 1Q09. While the wholesale, retail trade and financial services sector saw smaller contractions, the hotels and restaurants sector was weighed down by a slump in tourist arrivals.

Domestic investor sentiment was led by a spike in residential property transactions. In the first seven months of the year, 10,017 new units of residential properties were sold. This looked set to breach the historical annual high of 14,811 units in 2007. As a result of stronger-than-expected new launches, developers have started to replenish their land bank, underpinning the sustainability of the real estate market.

Outlook and Strategy

A combination of easy monetary conditions, benign unemployment and higher affordability has driven the property market higher. As the take-up rates of new launches reaches the annual run-rate of peak year in 2007, stock market sentiment is expected to remain buoyant. We expect volumes for the rest of the year to remain strong, although we are more cautious about further upside in pricing owing to potential policy risks.

Singapore is likely to see one of the sharpest upswings in prospects amongst its Asian peers given its small, externally-led economy. The upturn in the global economy should also provide a well-timed window for the launch of the integrated resorts in Singapore in 1Q10. We expect corporate earnings forecasts to see further upgrades after the 2Q09 reporting season, the bulk of which will have been announced by August. Recent upward earnings revisions in the banks bear testimony to this. Stock market valuations could rise above historical averages. At 15.1 times 2010 earnings and 16.6% earnings growth, the Singapore market is now slightly more expensive than the five-year historical average. However, it is typical for markets to trade above historical valuations during early cyclical recoveries and at times of easy monetary conditions. We expect the Singapore market to trend above historical valuations in the current phase of economic recovery.

With economic activities continuing to improve and more earnings upgrades expected to be in the pipeline, the Singapore stock market is likely to be firmly supported. The Fund will maintain its overweight position in the cyclical sector at the macro level, while focusing on companies with earnings surprises from a bottom-up perspective. Investors are likely to pay a premium for companies able to deliver earnings surprises. We are overweight in the offshore marine and real estate sectors, as well as cyclical companies whose share prices are market laggards, such as Singapore Press Holdings.

                            Benchmark  Portfolio
                               (%)        (%)             Comments
                            ---------- ---------- -------------------------
                                                    Sector limit of 25% is
                                                  applicable, and the Fund
                                                  is prohibited from owning
                                                      DBS Group (benchmark
Financial Institutions            32.2       24.1          weight = 10.7%).
                            ---------- ---------- -------------------------
Telecommunications                13.2       13.1             Neutral view.
                            ---------- ---------- -------------------------
                                                        Underweight due to
                                                  negative view on specific
                                                   stocks such as Sembcorp
                                                        Industries (prefer
                                                  Sembcorp Marine), Fraser
                                                     & Neave (prefer purer
                                                   property developer) and
Conglomerates                     17.6       14.1      Noble (prefer Olam).
                            ---------- ---------- -------------------------
                                                  Negative view on aviation
                                                  and container shipping.
                                                   Domestic transportation
                                                    likely to underperform
                                                     given positive market
Transportation                     6.4        0.0                  outlook.
                            ---------- ---------- -------------------------
                                                  Easy monetary conditions
                                                      favor property asset
Property Development              14.5       19.5                    class.
                            ---------- ---------- -------------------------
                                                    Anticipate 2H09 to see
                                                   strong order flows into
Offshore Marine                    1.7        8.2                shipyards.
                            ---------- ---------- -------------------------
                                                  Stock specific preference
                                                          in Venture Corp.
                                                  (contract manufacturer in
                                                  electronic products) and
                                                            IJM (Malaysian
Industrial                         2.0        6.4              contractor).
                            ---------- ---------- -------------------------
                                                       Underweights are in
                                                    consumer discretionary
                                                      (Genting and Jardine
Consumer                           9.8        8.8                     C&C).
                            ---------- ---------- -------------------------
Communications - Media             2.6        4.4   Laggard cyclical stock.
                            ---------- ---------- -------------------------
                                                  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 ten largest industry classifications of the Fund's equity investments held at July 31, 2009 were:

                                                           Percentage of
         Industry                                            Net Assets
                                                             ----------
1.      Property Development                                      19.06%
2.      Banks                                                     19.04
3.      Telecommunications                                        12.88
4.      Shipyards                                                  7.64
5.      Electrical Products & Computers                            5.70
6.      Food, Beverage, Tobacco                                    5.07
7.      Conglomerate                                               4.67
8.      Diversified Financial                                      4.66
9.      Health & Personal Care                                     4.35
10.     Communications-Media                                       4.33

The ten largest individual common stock holdings at the same date were:

                                                           Percentage of
                Issue                                        Net Assets
                                                             ----------
1.      Singapore Telecommunications Ltd.                         12.88%
2.      United Overseas Bank Ltd.                                 10.16
3.      Oversea-Chinese Banking Corp. Ltd.                         8.88
4.      Hongkong Land Holdings Ltd.                                5.08
5.      Keppel Corp. Ltd.                                          4.68
6.      Jardine Matheson Holdings Ltd.                             4.67
7.      Singapore Exchange Ltd.                                    4.66
8.      Wilmar International Ltd.                                  4.35
9.      Singapore Press Holdings Ltd.                              4.33
10.     Venture Corp. Ltd.                                         4.08




QUARTERLY RESULTS OF OPERATIONS


                                       Net Realized
                                      and Unrealized
                                      Gains (Losses)      Net Increase
                                      on Investment       (Decrease) in
                         Net           and Foreign          Net Assets
For the Quarter       Investment        Currency          Resulting From
  Ended              Income (Loss)    Transactions          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
July 31, 2009            98    0.01    39,272     4.15     39,370     4.16
                     ------ ------- ---------  -------  ---------  -------

For the Nine Months
Ended July 31, 2009  $1,357 $  0.14 $  43,981  $  4.64  $  45,338  $  4.78
                     ====== ======= =========  =======  =========  =======


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 Ended         Net Asset Value  Market Price*  Share 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
July 31, 2009                   13.13     8.97   11.65    7.92        717

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.

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