AFFIN HWANG FIXED MATURITY INCOME FUND XIV · 2018-01-26 · Benchmark: 3-years Malayan Banking...

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AFFIN HWANG FIXED MATURITY INCOME FUND XIV Interim Report and Unaudited Financial Statements For The Financial Period Ended 30 November 2017

Contents Page

FUND INFORMATION ................................................................................................................ 2

FUND PERFORMANCE DATA ................................................................................................... 3

MANAGER’S REPORT ............................................................................................................... 5

TRUSTEE’S REPORT ................................................................................................................ 8

STATEMENT OF COMPREHENSIVE INCOME ......................................................................... 9

STATEMENT OF FINANCIAL POSITION ................................................................................. 10

STATEMENT OF CHANGES IN EQUITY ................................................................................. 11

STATEMENT OF CASH FLOWS .............................................................................................. 12

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ........................................................ 13

NOTES TO THE FINANCIAL STATEMENTS ........................................................................... 20

STATEMENT BY THE MANAGER ........................................................................................... 44

DIRECTORY OF SALES OFFICE ............................................................................................ 45

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FUND INFORMATION

Fund Name Affin Hwang Fixed Maturity Income Fund XIV

Fund Type Income

Fund Category Fixed Income (close-ended)

Investment Objective The Fund aims to provide income through investments in fixed income instruments

Duration of the Fund Three (3) years close-ended Fund

Termination Date 20 April 2018

Benchmark 3‐years Malayan Banking Berhad fixed deposit rate as at Investment Date

Distribution Policy Depending on the level of income the Fund generates, the Fund will provide distribution on an annual basis

BREAKDOWN OF UNITHOLDERS BY SIZE AS AT 30 NOVEMBER 2017

Size of holdings (units)

No. of unitholders No. of units held * (‘000)

5,000 and below 17 54

5,001 to 10,000 13 112

10,001 to 50,000 43 1,489

50,001 to 500,000 51 9,411

500,001 and above 15 208,631

Total 139 219,697

* Note: Excluding Manager’s stock

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FUND PERFORMANCE DATA

Category As at

30 Nov 2017 (%)

As at 30 Nov 2016

(%)

As at 30 Nov 2015

(%)

Portfolio composition

Unquoted fixed income securities – local - Bonds 47.13 1.72 - - Commercial papers - 2.11 1.23 Total unquoted fixed income securities – local 47.13 3.83 1.23 Unquoted fixed income securities – foreign - Bonds 49.30 97.09 103.46 Total unquoted fixed income securities – foreign 49.30 97.09 103.46 Cash & cash equivalent 3.57 -0.92 -4.69

Total 100.00 100.00 100.00

Total NAV (RM’million) 236.997 235.920 235.714 NAV per Unit (RM) 1.0787 1.0450 1.0257 Unit in Circulation (million) 219.700 225.759 229.812 Highest NAV 1.0787 1.0528 1.0282 Lowest NAV 1.0505 1.0412 0.9918 Return of the Fund (%)

iii 2.76 3.50 2.57

- Capital Growth (%)i 2.76 3.50 2.57

- Income Distribution (%)ii Nil Nil Nil

Gross Distribution per Unit (sen) Nil Nil Nil Net Distribution per Unit (sen) Nil Nil Nil Management Expense Ratio (%)

1 0.04 0.04 0.04

Portfolio Turnover Ratio (times)2

0.62 0.31 0.84

Basis of calculation and assumption made in calculating the returns:- The performance figures are a comparison of the growth/decline in NAV for the stipulated period taking into account all the distribution payable (if any) during the stipulated period. An illustration of the above would be as follow:- Capital return = NAV per Unit end / NAV per Unit begin – 1 Income return = Income distribution per Unit / NAV per Unit ex-date Total return = (1+Capital return) x (1+Income return) – 1 Capital Return

i = (NAV per Unit @ 30/11/17 ÷ NAV per Unit @ 31/5/17* - 1) x 100

= (1.0787 ÷ 1.0497 – 1) x 100 = 2.76% Total Income Return

ii = Nil

Return of the Fund

iii = [{(1 + Capital Return) x (1 + Income Return)} – 1] x 100

= [{(1 + (2.76%)) x (1 + 0.00%)} – 1] x 100 = 2.76% * Source – TMF Trustees Malaysia Bhd

1The MER of the Fund remained unchanged during the period under review.

TThe Fund’s PTR increased over the period under reviewas the Fund’s trading activities increased over the period.

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Table 1: Performance of the Fund

6 Months (1/6/17 - 30/11/17)

1 Year (1/12/16 - 30/11/17)

Since Commencement

(20/4/15 - 30/11/17)

Fund 2.76% 8.08% 18.52%

Benchmark 1.64% 3.30% 8.88%

Outperformance / (Underperformance) 1.12% 4.78% 9.64%

Source of Benchmark: Maybank

Table 2: Average Total Return

1 Year (1/12/16 - 30/11/17)

Since Commencement (20/4/15 - 30/11/17)

Fund 8.08% 6.70%

Benchmark 3.30% 3.30%

Outperformance / (Underperformance) 4.78% 3.40%


Table 3: Annual Total Return

FYE 2017 (1/6/16 - 31/5/17)

FYE 2016 (20/4/15 - 31/5/16)

Fund 8.85% 5.96%

Benchmark 3.30% 3.70%

Outperformance / (Underperformance) 5.55% 2.26%


Past performance is not necessarily indicative of future performance and that Unit prices and investment returns may go down, as well as up.

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MANAGER’S REPORT Performance Review For the period 1 June 2017 to 30 November 2017, the Fund registered a return of 2.76%. The Fund outperformed the Benchmark by 1.12 percentage points compared to the Benchmark return of 1.64% for the same period. (See Table 1 for performance of the Fund and Figure 1 for movement of the Fund versus the Benchmark respectively). The Net Asset Value (NAV) per unit of the Fund as at 30 November 2017 was RM1.0787 while the NAV per unit as at 31 May 2017 was RM1.0497. Figure 1: Movement of the Fund versus the Benchmark

“This information is prepared by Affin Hwang Asset Management Berhad (AFFINHWANGAM) for information purposes only. Past earnings or the fund’s distribution record is not a guarantee or reflection of the fund’s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. Source of Benchmark is from Maybank.” Benchmark: 3-years Malayan Banking Berhad fixed deposit rate as at Investment Date

Income Distribution / Unit Split No income distribution or unit split was declared for the financial period ended 30 November 2017.

-1.5

0.5

2.5

4.5

6.5

8.5

10.5

12.5

14.5

16.5

18.5

20.5

May-15 Sep-15 Jan-16 Jun-16 Oct-16 Feb-17 Jun-17 Nov-17

Affin Hwang Fixed Maturity Income Fund XIV

Benchmark

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Asset Allocation For a snapshot of the Fund’s asset mix during the period under review, please refer to Figure 2. Figure 2: Asset allocation of the Fund

30 Nov 2017 30 Nov 2016 30 Nov 2015

(%) (%) (%)

Unquoted fixed income securities – local 47.13 3.83 1.23

Unquoted fixed income securities – foreign 49.30 97.09 103.46

Cash & cash equivalent* 3.57 -0.92 -4.69

Total 100.00 100.00 100.00

During the period under review, the Manager had de-risk the portfolio by reducing the Fund’s exposure into bonds and increased its allocations into money market instruments. As at 30 November 2017, investments into bonds nd commercial papers are evenly distributed at 47.13% and 49.30% respectively. In turn, cash level of the Fund was maintained at a low level of 3.57% over the same period. *Note: The exposure of bond exceeded 100% because of the currency hedge employed by the Fund. The hedged position has decreased in value as it is more out of the money and caused the end portfolio to increase in value. Strategies Employed The Manager maintained a high level of investments in a portfolio consisting regional bonds, with some cash buffer for liquidity purposes. Foreign currency exposures were hedged back to Ringgit Malaysia to mitigate currency risk. To date, all the bonds within the Fund’s portfolio have continued to meet their respective financial obligations in respect of their outstanding debt. Market Review Global financial markets continued to trend higher on the back of encouraging economic data flowing out of global economies. The “Goldilocks” zone where the economy is seeing a steady growth rate, relatively benign inflation, and liquidity support by global central banks have continued to be supportive for financial markets. The improved optimism on the outlook for global growth has led to global bond yields inching higher over the period under review. A surprise debt ceiling deal between the US President and the Democrat leaders, as well as the Federal Reserve’s announcement on the beginning of its balance sheet normalisation program had also helped pushed yields higher. The US Treasury yields ended the period under review at 2.42%, leading most global bonds to take the same route. Investors were seen taking on a more cautious approach on the market ahead of the Federal Reserve chair appointment. The announcement of Jerome Powell as the next Fed chairperson was taken as a market positive as Jerome Powell was viewed to be similarly dovish as Janet Yellen. Malaysia Bond markets continued to see inflow, boosted by the hawkish MPC statement, with market players anticipating and positioning towards a stronger Ringgit. Total foreign holdings on MGS totalled to 44.3% in November after the MYR 6.7 billion flows into Malaysia bond market. On the domestic front, the Ringgit strengthened by 4.4% against the US Dollar, and ended the period under review at MYR 4.09 to a US Dollar. The strength of the Ringgit, coupled with the stability in oil prices had kept the domestic bourse well supported. Oil price closed the month at USD 57.40 per barrel, rising 18.8% in local currency terms over the period under review. Fundamentals for the economy had remained supportive for the domestic bourse, with a broad based recovery in imports leading to a narrowed surplus. Retail sales had also strengthened, recording a 4.9% year-on-year growth in the second quarter of 2017 against the -1.2% seen in the first quarter. Bank Negara had maintained its Overnight Policy Rate (OPR) at 3.0% - reiterating its view that the economy was on a firm growth path, and that inflation remained contained. Yields for the 10-year MGS closed the

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period under review at 3.90%, whilst the 3-year papers were at 3.40%. Foreign reserves for the country rose over the period under review, and stood at USD 101.5 billion as at mid-November. This was sufficient in financing 7.5 months of retained profit, and 1.1X short term external debts. Current account surplus also surged ahead to MYR 12.5 billion in the third quarter – a gradual improvement from the MYR 9.6 billion in the second quarter, and MYR 5.3 billion in the first quarter. Investment Outlook We anticipate the markets to be relatively quiet in the near term as we approach the end of the year - both on the primary as well as the secondary market front. We believe that pricing has turned more expensive, and will be more selective when participating into the market. The steady foreign inflows into the market, which has been flowing into shorter dated bonds, will likely provide support for the market. Foreign investors, who have previously underweighted Malaysia, is expected to gradually move back into the market on the back of the more stable Ringgit. Nevertheless, we remain wary of possible profit taking risk. We will generally be taking on a more cautious approach with the portfolio given the uncertainties that continue to prevail. Nonetheless, we remain comfortable with the current portfolio holdings, and will continue to keep a watchful eye on market. State of Affairs of the Fund There is neither any significant change to the state affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the period under review. Soft Commissions received from Brokers As per the requirements of the Securities Commission’s Guidelines on Unit Trust Funds and Guidelines on Compliance Function for Fund Management Companies, soft commissions received from brokers/dealers may be retained by the management company only if the – (i) goods and services provided are of demonstrable benefit to Unit holders of the Fund; and (ii) goods and services are in the form of research and advisory services that assists in the decision making process. During the financial period under review, the management company had received on behalf of the Fund, soft commissions in the form of research materials, data and quotation services, investment-related publications, market data feed and industry benchmarking agencies which are of demonstrable benefit to Unitholders of the Fund.

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TRUSTEE’S REPORT TO THE UNITHOLDERS OF

AFFIN HWANG FIXED MATURITY INCOME FUND XIV We have acted as Trustee of Affin Hwang Fixed Maturity Income Fund XIV for 6 months financial period ended 30 November 2017. To the best of our knowledge, Affin Hwang Asset Management Berhad, the Manager, has managed the Fund in accordance with the limitations imposed on the investment powers of the management company and the trustee under the Deeds, other provisions of the Deeds, the Capital Markets and Services Act 2007, the Securities Commission’s Guidelines on Unit Trust Funds and other applicable laws during the period then ended. We have also ensured the following: (a) the procedures and processes employed by Affin Hwang Asset Management Berhad to value

and/or price the units of the Fund are adequate and that such valuation/pricing is carried out in accordance with the Deed of the Fund and other regulatory requirements; and

(b) the creation and cancellation of units have been carried out in accordance with the Deed and

relevant regulatory requirements. For TMF Trustees Malaysia Berhad (Company No.: 610812-W) Norhayati Binti Azit DIRECTOR – FUND SERVICES Kuala Lumpur 17 January 2018

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STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 6 months 6 months financial financial period ended period ended Note 30.11.2017 30.11.2016 RM RM INVESTMENT INCOME Interest income 4 5,818,500 6,310,664 Exit fee income 25,418 73,756 Net loss on foreign currency exchange (2,744,457) (1,387,755) Net gain/(loss) on forward foreign currency contracts at fair value through profit or loss 8,192,985 (13,231,831) Net (loss)/gain on financial assets at fair value through profit or loss 8 (4,792,398) 16,429,730 ───────── ─────────

6,500,048 8,194,564 ───────── ─────────

EXPENSES Trustee fee 6 (47,193) (47,531) Auditors' remuneration (4,011) (3,510) Tax agent's fee (1,855) (1,855) Other expenses (32,475) (34,977) ───────── ─────────

(85,534) (87,873) ───────── ─────────

NET PROFIT BEFORE TAXATION 6,414,514 8,106,691 TAXATION 7 (5,920) (17,496) ───────── ─────────

NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 6,408,594 8,089,195 ═════════ ═════════

Net profit after taxation is made up of the following: Realised amount (1,688,450) 11,669,872 Unrealised amount 8,097,044 (3,580,677) ───────── ─────────

6,408,594 8,089,195 ═════════ ═════════

The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements.

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STATEMENT OF FINANCIAL POSITION FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 Note 2017 2016 RM RM ASSETS Financial assets at fair value through profit or loss 8 228,537,688 238,079,770 Cash and cash equivalents 9 6,210,838 32,633,890 Tax recoverable 26,517 - Exit fee receivable - 20,231 Forward foreign currency contracts at fair value through profit or loss 10 2,248,778 33,787 ───────── ─────────

TOTAL ASSETS 237,023,821 270,733,891 ───────── ─────────

LIABILITIES Forward foreign currency contracts at fair value through profit or loss 10 - 30,226,999 Amount due to Manager - cancellation of units - 1,011,345 Amount due to Trustee 7,783 7,816 Amount due to brokers - 3,564,980 Auditors’ remuneration 4,011 3,510 Tax agent’s fee 10,156 9,955 Provision for taxation - 11,298 Other payables and accruals 4,550 11,934 ───────── ─────────

TOTAL LIABILITIES 26,500 34,814,050 ───────── ─────────

NET ASSET VALUE OF THE FUND 236,997,321 235,919,841 ═════════ ═════════

EQUITY Unitholders’ capital 219,192,757 225,609,403 Retained earnings 17,804,564 10,310,438 ───────── ─────────

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 236,997,321 235,919,841 ═════════ ═════════

NUMBER OF UNITS IN CIRCULATION 11 219,700,000 225,759,000 ═════════ ═════════

NET ASSET VALUE PER UNIT (RM) 1.0787 1.0450 ═════════ ═════════


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STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 Unitholders’ Retained capital earnings Total RM RM RM Balance as at 1 June 2017 221,633,181 11,395,970 233,029,151 Total comprehensive income for the financial period - 6,408,594 6,408,594 Movement in unitholders’ capital: Cancellation of units (2,440,424) - (2,440,424) ────────── ────────── ──────────

Balance as at 30 November 2017 219,192,757 17,804,564 236,997,321 ══════════ ══════════ ══════════

Balance as at 1 June 2016 229,281,683 2,221,243 231,502,926 Total comprehensive income for the financial period - 8,089,195 8,089,195 Movement in unitholders’ capital: Cancellation of units (3,672,280) - (3,672,280) ────────── ────────── ──────────

Balance as at 30 November 2016 225,609,403 10,310,438 235,919,841 ══════════ ══════════ ══════════


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STATEMENT OF CASH FLOWS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 6 months 6 months financial financial period ended period ended Note 30.11.2017 30.11.2016 RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sale of investments 145,327,225 78,111,770 Purchase of investments (150,605,899) (69,642,046) Interest received 6,535,160 6,878,902 Exit fee income received 25,418 73,756 Trustee fee paid (47,328) (47,509) Custodian fee paid (19,496) (24,298) Tax paid - (7,149) Payment for other fees and expenses (19,302) (12,213) Realised loss on forward foreign currency contracts (11,388,583) (860,127) Net realised gain on foreign currency exchange 2,628,210 6,410,277 ───────── ─────────

Net cash (used in)/generated from operating activities (7,564,595) 20,881,363 ───────── ─────────

CASH FLOWS FROM FINANCING ACTIVITIES Payments for cancellation of units (2,491,385) (2,691,053) ───────── ─────────

Net cash used in financing activities (2,491,385) (2,691,052) ───────── ─────────

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (10,055,980) 18,190,310 EFFECTS OF FOREIGN CURRENCY EXCHANGE - (793,330) CASH AND CASH EQUIVALENTS AT THE FINANCIAL PERIOD 16,266,818 15,236,910 ───────── ─────────

CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 9 6,210,838 32,633,890 ═════════ ═════════


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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 The following accounting policies have been used in dealing with items which are considered material in relation to the financial statements.

A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention except as disclosed in the summary of significant accounting policies and comply with Malaysian Financial Reporting Standards (“MFRS”) and International Financial Reporting Standards (“IFRS”). The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial period. It also requires the Manager to exercise their judgment in the process of applying the Fund’s accounting policies. Although these estimates and judgment are based on the Manager’s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note L. (a) Standards, amendments to published standards and interpretations that are effective

The Fund has applied the following amendments for the first time for the financial year beginning on 1 June 2017: • Amendments to MFRS 101 ‘Presentation of financial statements’ – Disclosure initiative • Annual Improvements to MFRSs 2012 – 2014 Cycle The adoption of these amendments did not have any impact on the current year or any prior period and is not likely to affect future periods.

(b) The new standards and amendments to the published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 June 2018

Amendments to MFRS 107 ‘Statement of Cash Flows – Disclosure Initiative’ (effective from 1 January 2017) introduce an additional disclosure on changes in liabilities arising from financing activities.

(ii) Financial year beginning on/after 1 June 2019

MFRS 9 ‘Financial Instruments’ (effective from 1 January 2018) will replace MFRS 139 ‘Financial Instruments: Recognition and Measurement’.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 (CONTINUED)

A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

(b) The new standards and amendments to published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (continued)

(ii) Financial year beginning on/after 1 June 2019 (continued)

MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity's business model and the cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised.

The Fund will apply these standards when effective. These standards are not expected to have a significant impact on the Fund’s financial statements.

B INCOME RECOGNITION Interest income from short term deposits with a licensed financial institution and unquoted fixed income securities are recognised based on effective interest rate method on an accrual basis. For unquoted fixed income securities, realised gains and losses on sale of investments are accounted for as the difference between the net disposal proceeds and the carrying amount of investments, determined on cost adjusted for accretion of discount or amortisation of premium on investments. Exit fee income is a redemption fee charged to unitholders on cancellation of units before the maturity date and is recognised upon cancellation of units.

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C TAXATION

Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. Tax on investment income from foreign unquoted fixed income securities is based on the tax regime of the respective countries that the Fund invests in.

D FUNCTIONAL AND PRESENTATION CURRENCY Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Fund’s functional and presentation currency.

E FOREIGN CURRENCY TRANSLATION Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges.

F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification

The Fund designates its investment in unquoted fixed income securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Derivatives are financial assets/liabilities at fair value through profit or loss categorised as held-for-trading unless they are designated hedges (Note K). Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund’s loans and receivables comprise cash and cash equivalent and exit fee receivable. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, amount due to Trustee, amount due to brokers, auditors’ remuneration, tax agent’s fee and other payables and accruals as other financial liabilities.

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F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Fund commits to purchase or sell the asset. Investments are initially recognised at fair value. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category including the effects at foreign currency transactions are presented in the statement of comprehensive income within ‘net gain/(loss) on financial assets at fair value through profit and loss ’ in the financial period in which they arise. Unquoted fixed income securities denominated in Ringgit Malaysia are revalued on a daily basis based on fair value prices quoted by a bond pricing agency (“BPA”) registered with the SC as per the SC’s Guidelines on Unit Trust Funds. Where such quotation are not available or where the Manager is of the view that the price quoted by the BPA for a specific unquoted fixed income securities differs from the market price by more than 20 basis points, the Manager may use the market price, provided that the Manager: (i) records its basis for using non-BPA price; (ii) obtains necessary internal approvals to use the non-BPA price; and (iii) keeps an audit trail of all decisions and basis for adopting the market yield. Unquoted fixed income securities denominated in foreign currencies are revalued at least twice a week by reference to the mid price quoted in Bloomberg. We use the Composite Bloomberg Bond Trader (CBBT) which is a weighted average bid and ask of price contributions submitted by Bloomberg Dealers. However if such quotations are not available, the fair value shall be determined by reference to the bid and offer prices quoted by independent and reputable financial institutions. Deposits with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the deposit. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method.

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F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued)

Derivative investment consists of forward foreign currency contracts. Financial derivative position will be “marked to market” at the close of each valuation day. Foreign exchange gains and losses on the derivative financial instrument are recognised in profit or loss when settled or at the date of the statement of financial position at which time they are included in the measurement of the derivative financial instrument.

(iii) Impairment For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If ‘loans and receivables’ or a “add to maturity investment’ has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent financial year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined.

G CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash and bank balances and deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value

H 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 financial position date respectively.

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H AMOUNTS DUE FROM/(TO) BROKERS (CONTINUED) These amounts are recognised initially at fair value and subsequently measured at amortised cost using the

effective interest method, less provision for impairment for amounts due from brokers. A provision for impairment of amount due from brokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant broker. Significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial re-organisation, and default in payments are considered indicators that the amount due from brokers is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or loans expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

I UNIT HOLDERS’ CAPITAL The unit holders’ contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 “Financial Instruments: Presentation”. Those criteria include:

the units entitle the holder to a proportionate share of the Fund’s net assets value;

the units are the most subordinated class and class features are identical;

there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and

the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund.

The outstanding units are carried at the redemption amount that is payable at each financial year if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund’s net asset value per unit at the time of creation or cancellation. The Fund’s net asset value per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units.

J SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the strategic asset allocation committee of the Manager that makes strategic decisions.

19


K DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. The Fund’s derivative financial instruments comprise forward currency contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The fair value of forward foreign currency contracts is determined using forward exchange rates at the date of statement of financial position, with the resulting value discounted back to present value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held-for-trading and accounted for in accordance with the accounting policy set out in Note F.

L CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES The preparation of financial statements in conformity with the Malaysian Financial Reporting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial period. Although these estimates are based on the Manager’s best knowledge of current events and actions, actual results could differ from those estimates. The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund’s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgments are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

20

NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017

1 INFORMATION ON THE FUND The Unit Trust Fund was constituted under the name Affin Hwang Fixed Maturity Income Fund XIV (the “Fund”) pursuant to the execution of a Deed dated 14 October 2014 (the “Deed”) entered into between Affin Hwang Asset Management Berhad (the “Manager”) and TMF Trustees Malaysia Berhad (the “Trustee”). The Fund commenced operations on 20 April 2015 and will continue its operations until terminated by the Trustee as provided under Clause 12.1 of the Deed or on maturity date of the Fund which falls on the third anniversary of the investment date of the Fund. The Fund may invest in any of the following investments: (a) Malaysian government securities, treasury bills, Bank Negara Malaysia monetary notes, investment

certificates and Cagamas notes/ bonds; (b) Other fixed income securities issued or guaranteed by the Malaysian government, Bank Negara

Malaysia, Malaysian state governments or Malaysian government-related agencies; (c) Sovereign issued or sovereign backed bonds by foreign government; (d) Bonds; (e) Money market instruments; (f) Placement of fixed deposits with financial institutions; (g) Derivatives; and (h) Any other form of investments permitted by the SC from time to time. All investments will be subjected to the SC’s Guidelines on Unit Trust Funds, the Deed and the objective of the Fund. The main objective of the Fund is to provide income through investments predominantly in fixed income instruments. The Manager is a company incorporated in Malaysia. The principal activities of the Manager are establishment and management of unit trust funds and private retirement schemes as well as providing fund management services to private clients The financial statements were authorised for issue by the Manager on 17 January 2018.

21

NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 30 NOVEMBER 2017 (CONTINUED)

2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments are as follows: Financial assets/ (liabilities) at fair Loans and value through Note receivables profit or loss Total RM RM RM 2017 Unquoted fixed income securities 8 - 228,537,688 228,537,688 Cash and cash equivalents 9 6,210,838 - 6,210,838 Forward foreign currency contracts 10 - 2,248,778 2,248,778 ────────── ────────── ──────────

Total 6,210,838 230,786,466 236,997,304 ══════════ ══════════ ══════════

2016 Unquoted fixed income securities 8 - 238,079,770 238,079,770 Cash and cash equivalents 9 32,633,890 - 32,633,890 Forward foreign currency contracts 10 - (30,193,212) (30,193,212) Exit fee receivable 20,231 - 20,231 ────────── ────────── ──────────

Total 32,654,121 207,886,558 240,540,679 ══════════ ══════════ ══════════

All current liabilities, except for provision for taxation and forward foreign currency contracts are financial liabilities which are carried at amortised cost. The Fund is exposed to a variety of risks which include market risk (including price risk, interest rate risk and currency risk), credit risk, liquidity risk and capital risk. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated by the SC’s Guidelines on Unit Trust Funds. Market risk (a) Price risk Price risk arises mainly from the uncertainty about future prices of investments. It represents the

potential loss the Fund might suffer through holding market positions in the face of price movements. The Manager manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio.

22


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued)

(a) Price risk (continued)

The Fund’s overall exposure to price risk was as follows:

2017 2016 RM RM Unquoted Investment Unquoted fixed income securities designated at fair value through profit or loss * 228,537,688 238,079,770 ═════════ ═════════

* Include interest receivable of RM1,959,264 (2015: RM2,595,424). The following table summarises the sensitivity of the Fund’s profit after taxation and net asset value to price risk movements. The analysis is based on the assumptions that the market price increased by 5% and decreased by 5% with all other variables held constant. This represents management’s best estimate of a reasonable possible shift in unquoted investments, having regard to the historical volatility of the prices.

Impact on profit after % change in price Market value tax/NAV RM RM 2017 -5% 215,249,503 (11,328,921) 0% 226,578,424 - +5% 237,907,345 11,328,921 ═════════ ═════════

2016 -5% 247,258,563 (11,774,217) 0% 235,484,346 - +5% 223,710,129 11,774,217 ═════════ ═════════

23


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Market risk (continued) (b) Interest rate risk In general, when interest rates rise, prices of unquoted fixed income securities will tend to fall and

vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold an unquoted fixed income security until maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis.

This risk is crucial in an unquoted fixed income securities fund since unquoted fixed income

securities portfolio management depends on forecasting interest rate movements. Prices of unquoted fixed income securities move inversely to interest rate movements, therefore as interest rates rise, the prices of unquoted fixed income securities decrease and vice versa. Furthermore, unquoted fixed income securities with longer maturity and lower yield coupon rates are more susceptible to interest rate movements.

Investors should note that unquoted fixed income securities and money market instruments are

subject to interest rate fluctuations. Such investments may be subject to unanticipated rise in interest rates which may impair the ability of the issuers to make payments of interest income and principal, especially if the issuers are highly leveraged. An increase in interest rates may therefore increase the potential for default by an issuer.

The table below summarises the sensitivity of the Fund’s profit after taxation and net asset value to

movements in prices of unquoted fixed income securities held by the Fund as a result of movement in interest rate. The analysis is based on the assumptions that the interest rate increased and decreased by 1% (100 basis points) with all other variables held constant.

% Change in interest rate Impact on profit after tax/NAV 2017 2016 RM RM + 1% (146,253) (1,457,245) - 1% 146,893 1,476,182 ═════════ ═════════

The Fund’s exposure to interest rate risk associated with deposit with a licensed financial institution

is not material as the deposit are held on a short term basis.

24


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Market risk (continued) (c) Currency risk Currency risk is associated with investments denominated in foreign currencies. When the foreign

currencies fluctuate in an unfavourable movement against Ringgit Malaysia, the investments will face currency losses in addition to the capital gain/(loss). The Manager will evaluate the likely directions of a foreign currency versus Ringgit Malaysia based on considerations of economic fundamentals such as interest rate differentials, balance of payments position, debt levels and technical chart considerations.

The following table sets out the foreign currency risk concentrations and counterparties of the Fund: Forward Unquoted foreign Cash fixed income currency and cash

securities contracts equivalents Total RM RM RM RM 2017 European Euro 7,515,949 149,546 1,210 7,666,705 Chinese Yuan - 58,164 3,392,418 3,450,582 Singapore Dollar 2,266,276 40,299 - 2,306,575 United States Dollar 107,051,826 2,000,769 397,360 109,449,955

───────── ──────── ──────── ─────────

116,834,051 2,248,778 3,790,988 122,873,817 ═════════ ════════ ════════ ═════════

Forward Unquoted foreign Cash Amount fixed income currency and cash due to

securities contracts equivalents brokers Total RM RM RM RM RM

2016 European Euro 7,428,808 (171,200) - - 7,257,608 Chinese Yuan 3,317,390 (364,836) 218,690 - 3,171,244 Singapore Dollar 29,975,166 (1,108,729) 320,490 - 29,186,927 United States Dollar 188,325,680 (28,548,447) 13,608,934 (3,564,980) 169,821,187

───────── ──────── ──────── ──────── ─────────

229,047,044 (30,193,212) 14,148,114 (3,564,980) 209,436,966 ═════════ ════════ ════════ ════════ ═════════

25


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (c) Currency risk (continued)

The table below summarises the sensitivity of the Fund's profit after tax and net asset value to changes in foreign exchange movements. The analysis is based on the assumption that the foreign exchange rate changes by 5%, with all other variables held constants. This represents management's best estimate of a reasonable possible shift in the foreign exchange rate, having regard to historical volatility of this rate. Any increase/ (decrease) in foreign exchange rate will result in a corresponding (decrease)/ increase in the net assets attributable to unitholders by approximately 5%. Disclosures below are shown in absolute terms, changes and impacts could be positive or negative. Impact on Change profit after in price tax/NAV % RM 2017 Euro +/-5 +/- 383,335 Chinese Yuan +/- 5 +/- 172,529 Singapore Dollar +/- 5 +/- 115,329 United States Dollar +/- 5 +/- 5,472,498 ══════════

2016 Euro +/-5 +/- 362,880 Chinese Yuan +/- 5 +/- 158,562 Singapore Dollar +/- 5 +/- 1,459,346 United States Dollar +/- 5 +/- 8,491,059 ══════════

Credit risk Credit risk refers to the ability of an issuer or counterparty to make timely payments of profit, principals and proceeds from realisation of investment. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. Credit risk arising from placements on deposits in licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. For unquoted fixed income securities, the manager regularly reviews the rating assigned to the issuer so that necessary steps can be taken if the rating falls below those described by the Deeds and SC’s Guidelines on Unit Trust Funds. The settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the SC’s Guideline on Unit Trust Funds.

26


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) The settlement terms of amount due from brokers are assigned by the relevant rules and regulations as prescribed by the respective stock exchanges.

Unquoted Forward Fixed foreign Cash Income currency and cash securities contracts equivalents Total RM RM RM RM

2017 Basic Materials - Baa2 20,947,828 - - 20,947,828 Consumer Services - AAA 5,109,965 - - 5,109,965 - AA2 5,090,688 - - 5,090,688 Financials - AAA - 1,549,886 2,404,716 3,954,602 - AA1 - - 3,806,122 3,806,122 - AA2 10,254,744 - - 10,254,744 - AA3 10,163,953 - - 10,163,953 - A1 4,075,982 - - 4,075,982 - A- 2,266,276 - - 2,266,276 - BB+ 14,821,847 - - 14,821,847 - Baa2 6,193,712 - - 6,193,712 - Ba2 13,341,402 - - 13,341,402 - Ba3 8,297,345 - - 8,297,345 - NR 40,797,536 698,892 - 41,496,428 Indusrials - AA2 1,017,617 - - 1,017,617 - AA- 35,193,152 - - 35,193,152 - BBB 4,227,418 - - 4,227,418 - Baa1 7,515,949 - - 7,515,949 - Baa3 14,370,383 - - 14,370,383 - NR 24,851,891 - - 24,851,891

─────────────────────────── ──────── 228,537,688 2,248,778 6,210,838 236,997,304 ═══════════════════════════ ════════

27


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued)

Unquoted Forward Fixed foreign Cash Exit Income currency and cash fee securities contracts equivalents receivable Total RM RM RM RM RM

2016 Financials - Ba1 21,891,690 - - - 21,891,690 - Baa2 4,491,996 - - - 4,491,996 - Baa3 26,156,331 - - - 26,156,331 - BBB+ 6,927,162 - - - 6,927,162 Building - Baa3 10,938,575 - - - 10,938,575 Consumer goods - P1 4,987,712 - - - 4,987,712 Finance - AAA - (14,675,179) 18,449,020 - 3,773,841 - AA3 - (8,088,560) - - (8,088,560) - AA1 - (371,180) 14,184,870 - 13,813,690 - A3 4,591,129 - - - 4,591,129 - A2 2,714,399 - - - 2,714,399 - A1 4,045,014 - - - 4,045,014 - BBB+ 16,499,269 - - - 16,499,269 - BBB- 3,171,363 - - - 3,171,363 - BB+ 18,762,840 - - - 18,762,840 - Baa3 19,587,493 - - - 19,587,493 - Baa2 21,265,085 - - - 21,265,085 - Ba2 12,408,776 - - - 12,408,776 - Ba1 2,307,022 - - - 2,307,022 - B1 2,415,991 - - - 2,415,991 - NR 24,003,063 (7,058,293) - - 16,944,770 Insurance - A3 4,469,717 - - - 4,469,717 Leisure/Amusement - Baa2 12,702,036 - - - 12,702,036 Oil and Gas - Baa3 13,743,107 - - - 13,743,107 Others - NR - - - 20,231 20,231

──────────────────────────────────── ──────── 238,079,770 (30,193,212) 32,633,890 20,231 240,540,679 ════════════════════════════════════ ════════

The financial assets of the Fund are neither past due nor impaired.

28


2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of units by unitholders. Liquid assets comprise cash, deposits with a licensed financial institution and other instruments, which are capable of being converted into cash within 7 days. The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table below are the contractual undiscounted cash flows: Between Within one month one month and one year Total RM RM RM 2017 Amount due to Trustee 7,783 - 7,783 Auditors’ remuneration - 4,011 4,011 Tax agent’s fee - 10,156 10,156 Other payables and accruals 467 4,083 4,550 ───────── ───────── ─────────

8,250 18,250 26,500 ═════════ ═════════ ═════════

2016 Amount due to Manager - cancellation of units 1,011,345 - 1,011,345 Amount due to Trustee 7,816 - 7,816 Amount due to broker 3,564,980 - 3,564,980 Auditors’ remuneration - 3,510 3,510 Tax agent’s fee - 9,955 9,955 Other payables and accruals 469 11,465 11,934 Forward foreign currency contracts at fair value through profit or loss 1,240,911 28,986,088 30,226,999 ───────── ───────── ─────────

5,825,521 29,011,018 34,836,539 ═════════ ═════════ ═════════

Capital risk The capital of the Fund is represented by equity consisting of unitholders’ capital and retained earnings. The amount of equity can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unitholders. The Fund’s objective when managing capital is to safeguard the Fund’s ability to continue as a going concern in order to provide returns for unitholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund.

29


3 FAIR VALUE ESTIMATION Financial instruments comprise financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets traded in active markets (such as trading securities) is based on quoted market prices at the close of trading on the year end date. An active market is a market in which transactions for the asset take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. (i) Fair value hierarchy

The table below analyses financial instruments carried at fair value. The different levels have been defined as follows:

Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1)

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)

Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3)

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability (i) Fair value hierarchy (continued)

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.

30


3 FAIR VALUE ESTIMATION (CONTINUED)

(i) Fair value hierarchy (continued)

The following table analyses within the fair value hierarchy the Fund’s financial assets (by class) measured at fair value:

Level 1 Level 2 Level 3 Total RM RM RM RM 2017 Financial assets at fair value through profit or loss at inception - unquoted fixed income securities - 228,537,688 - 228,537,688 - forward foreign currency contracts - 2,248,778 - 2,248,778 ────────── ────────── ────────── ──────────

- 230,786,466 - 230,786,466 ══════════ ══════════ ══════════ ══════════

2016 Financial assets at fair value through profit or loss at inception - unquoted fixed income securities - 238,079,770 - 238,079,770 ══════════ ══════════ ══════════ ══════════

Financial liabilities at fair value through profit or loss - forward foreign currency contracts - (30,193,212) - (30,193,212) ══════════ ══════════ ══════════ ══════════

Financial instruments that trade in markets that are considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include unquoted fixed income securities and forward foreign currency contracts. As Level 2 instruments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

(ii) The carrying values of cash and cash equivalents, amount due from brokers and all current liabilities

except for provision for taxation and forward foreign currency contracts are a reasonable approximation of the fair values due to their short term nature.

31


4 INTEREST INCOME 6 months 6 months financial financial period ended period ended 30.11.2017 30.11.2016 RM RM Interest income from: - short-term deposits 125,423 164,960 - unquoted fixed income securities 5,693,077 6,145,704 ───────── ─────────

5,818,500 6,310,664 ════════ ════════

5 MANAGEMENT FEE In accordance with the Pospectus, the Manager is entitled to a management fee at a rate not exceeding 3.00% per annum on the NAV of the Fund calculated on daily basis. The Manager does not intend to impose any management fee in respect of this Fund.

6 TRUSTEE FEE In accordance with the Prospectus, the Trustee is entitled to an annual fee at a rate not exceeding 0.10% per annum on the NAV of the Fund, exclusive of foreign custodian fees. For the financial period ended 30 November 2017, the Trustee fee is recognised at a rate of 0.04% (2016: 0.04%) per annum on the NAV of the Fund calculated on a daily basis, exclusive of foreign custodian fees. There will be no further liability to the Trustee in respect of trustee fee other than the amounts recognised above.

7 TAXATION 6 months 6 months financial financial period ended period ended 30.11.2017 30.11.2016 RM RM Current taxation:

- local 5,920 17,496 ───────── ─────────

5,920 17,496 ═════════ ═════════

32


7 TAXATION (CONTINUED) The numerical reconciliation between net profit before taxation multiplied by the Malaysian statutory tax rate and tax expense of the Fund is as follows: 6 months 6 months financial financial period ended period ended 30.11.2017 30.11.2016 RM RM Net profit before taxation 6,414,514 8,106,691 ───────── ─────────

Tax at Malaysian statutory rate of 24% (2016: 24%) 1,539,483 1,945,606 Tax effects of: Investment income not subject to tax (1,553,911) (1,948,993) Expenses not deductible for tax purposes 18,723 19,030 Restriction on tax deductible expenses for Unit Trust Funds 1,625 1,853 ───────── ─────────

Tax expense for the financial period 5,920 17,496 ═════════ ═════════

8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2017 2016 RM RM Designated at fair value through profit or loss at inception: - unquoted fixed income securities - local 116,834,051 9,032,726 - unquoted fixed income securities - foreign 111,703,637 229,047,044 ───────── ─────────

228,537,688 238,079,770 ═════════ ═════════

Net (loss)/gain on financial assets at fair value through profit or loss:

- realised gain on sale of investments 6,369,071 5,680,028 - change in unrealised (loss)/gain (11,161,469) 10,749,702

───────── ─────────

(4,792,398) 16,429,730 ═════════ ═════════

33


8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (a) Unquoted fixed income securities - local (i) Unquoted fixed income securities - local as at 30 November 2017 is as follows:

Nominal Adjusted Fair Percentage Name of issuer value cost value of NAV

RM RM RM % BONDS

6.30% Malayan Banking Bhd (Call: 25.09.2018) (AA2) 10,000,000 10,130,905 10,254,744 4.33 6.80% Mah Sing Group Bhd (Call: 31.03.2020) (NR) 1,500,000 1,502,972 1,527,056 0.64 5.80% CIMB Group Holdings Bhd (Call: 25.05.2021) (A1) 4,000,000 4,041,919 4,075,982 1.72 6.90% Mah Sing Group Bhd (Call: 04.04.2022) (NR) 7,000,000 7,028,013 7,094,034 2.99 4.75% Berjaya Land Berhad (15.12.2017) (AAA) 5,000,000 5,000,120 5,109,965 2.16 4.20% WCT Holdings Bhd (09.04.2018) (AA-) 35,000,000 34,972,266 35,193,152 14.85 4.80% Media Chinese Intl Ltd (25.02.2019) (AA2) 5,000,000 5,012,864 5,090,688 2.15 6.50% Eco World Capital Assets Bhd (12.08.2022) (NR) 10,000,000 10,000,000 10,252,610 4.32 6.25% Ambank (M) Bhd (Call: 09.04.2018) (AA3) 10,000,000 10,064,698 10,163,953 4.29 4.40% Lafarge Cement Sdn Bhd (15.01.2018) (AA2) 1,000,000 1,000,000 1,017,617 0.43 COMMERCIAL PAPERS 0.00% Pac Lease Bhd (22.12.2017) (NR) 10,000,000 9,977,096 9,977,096 4.21 0.00% Pac Lease Bhd (09.01.2018) (NR) 12,000,000 11,946,740 11,946,740 5.04 ────────── ────────── ────────── ──────────

Total unquoted fixed income securities – local 110,500,000 110,677,593 111,703,637 47.13 ══════════ ══════════ ══════════

Accumulated unrealised gain on unquoted fixed income securities – local 1,026,044 ──────────

Total unquoted fixed income securities - local 111,703,637 ═════════

34


8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (a) Unquoted fixed income securities – local (continued) (ii) Unquoted fixed income securities - local as at 30 November 2016 is as follows:


RM RM RM % BONDS

5.80% CIMB Group Holdings Bhd 25.05.2021 (A1) 4,000,000 4,056,345 4,045,014 1.72 ────────── ────────── ────────── ──────────

COMMERCIAL PAPERS

0.00% Tan Chong Motor Holdings Bhd 23.12.2016 (P1) 5,000,000 4,987,712 4,987,712 2.11 ────────── ────────── ────────── ──────────

Total unquoted fixed income securities – local 9,000,000 9,044,057 9,032,726 3.83 ══════════ ══════════ ══════════

Accumulated unrealised loss on unquoted fixed income securities – local (11,331) ──────────

Total unquoted fixed income securities - local 9,032,726 ═════════

(b) Unquoted fixed income securities - foreign (i) Unquoted fixed income securities - foreign as at 30 November 2017 are as follows:


RM RM RM % BONDS

3.75% Hutchison Whampoa Europe Fin. (call: 10.05.2018) (Baa1) 7,259,250 6,905,428 7,515,949 3.17 3.00% Manulife Financial Corp (Call: 21.11.2024) (A-) 2,271,450 2,310,367 2,266,276 0.96 4.50% Tewoo Group Finance No 2 Ltd (16.12.2019) (BBB) 4,089,500 4,422,659 4,227,418 1.78

35


8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) Unquoted fixed income securities – foreign (continued) (i) Unquoted fixed income securities - foreign as at 30 November 2017 are as follows

(continued):


RM RM RM % BONDS

3.50% Wing Lung Bank Ltd (Call: 07.11.2017) (Baa2) 6,134,250 6,018,829 6,193,712 2.61 5.00% Sinochem Global Capital Co Ltd (Call: 02.11.2018) (Baa2) 12,268,500 11,460,692 12,528,933 5.29 8.25% Societe Generale SA (Call: 29.11.2018) (Ba2) 8,179,000 8,123,024 8,626,051 3.64 7.125% Majid Al Futtaim Holding LLC (Call: 29.10.2018) (BB+) 14,313,250 14,285,630 14,821,847 6.26 6.50% Chong Hing Bank Ltd (Call: 25.09.2019) (Ba2) 4,498,450 5,087,475 4,715,351 1.99 2.875% Beijing Capital Polaris Inv Co (01.04.2018) (Baa3) 14,313,250 14,617,092 14,370,383 6.06 4.375% Bluestar Finance Holdings Ltd (Call: 17.12.2018) (Baa2) 8,179,000 8,855,490 8,418,895 3.55 5.50% Global Prime Capital Pte Ltd (Call: 18.10.2020) (Ba3) 8,179,000 8,770,957 8,297,345 3.50 7.00% Yinson TMC Sdn Bhd (Call: 25.09.2020) (NR) 24,537,000 25,534,178 24,851,891 10.49 ────────── ────────── ────────── ──────────

Total unquoted fixed income securities – foreign 114,221,900 116,391,821 116,834,051 49.30 ══════════ ══════════ ══════════

Accumulated unrealised gain on unquoted fixed income securities – foreign 442,230 ──────────

Total unquoted fixed income securities - foreign 116,834,051 ══════════

36


8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) Unquoted fixed income securities – foreign (continued) (ii) Unquoted fixed income securities - foreign as at 30 November 2016 are as follows:


RM RM RM % BONDS

6.375% Aquarius & Invt Plc for Swiss 01.09.2019 (BBB+) 11,163,750 10,834,205 11,867,485 5.03 2.95% China Jingye Cons Eng Sg Pte L 21.05.2017 (Baa3) 10,964,800 9,842,622 10,938,575 4.64

4.00% China Life Insurance Co. Ltd 03.07.2075 (A3) 4,465,500 4,273,844 4,469,717 1.90

8.875% CIFI Holdings Group Co Ltd 27.01.2017 (B1) 2,232,750 2,317,370 2,415,991 1.02

4.25% CLP Power HK Financing Ltd 07.11.2019 (A3) 4,465,500 4,356,561 4,591,129 1.95

4.25% Far East Horizon Ltd 30.10.2017 (BBB-) 3,132,800 2,717,866 3,171,363 1.34

5.55% Far East Horizon Ltd 23.06.2017 (NR) 1,339,650 1,290,061 1,389,027 0.59 5.375% Franshion Brilliant Ltd 17.10.2018 (Baa3) 15,629,250 13,070,287 16,424,301 6.96 5.125% Genting Singapore Plc 12.09.2017 (Baa2) 12,531,200 11,500,024 12,702,036 5.38 5.625% HSBC Holdings Plc 17.01.2020 (Baa3) 26,793,000 23,449,649 26,156,331 11.09 3.75% Hutchison Whampoa Europe Fin 10.05.2018 (Baa2) 7,135,800 6,963,771 7,428,808 3.15 4.50% Indust & Comm Bank of China Asia 10.10.2023 (BBB+) 6,698,250 6,102,557 6,927,162 2.94 5.90% Julius Baer Group Ltd 18.11.2020 (Baa3) 3,132,800 2,961,684 3,163,192 1.34 6.75% Longfor Properties Co Ltd 28.05.2018 (Ba2) 3,238,000 3,007,628 3,317,390 1.41 7.125% Majid Al Futtaim Holding LLC 29.10.2018 (BB+) 17,862,000 16,617,103 18,762,840 7.95 6.00% OCBC Wing Hang Bank Ltd 20.04.2017 (A2) 2,679,300 2,718,150 2,714,399 1.15 4.875% PTT Exploration & Production 18.06.2019 (Baa3) 13,396,500 11,540,609 13,743,107 5.83

37


8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) Unquoted fixed income securities – foreign (continued) (ii) Unquoted fixed income securities - foreign as at 30 November 2016 are as follows

(continued):


RM RM RM % BONDS (continued) 5.00% Sinochem Global Capital Co Ltd 02.11.2018 (Baa2) 13,396,500 11,601,036 13,836,277 5.86 8.25% Societe Generale SA 29.11.2018 (Ba2) 8,931,000 8,210,641 9,091,386 3.85 6.50% Standard Chartered PLC 02.04.2020 (Ba1) 24,113,700 20,360,074 21,891,690 9.28 4.75% UBS AG 22.05.2018 (BBB+) 4,465,500 4,271,695 4,631,784 1.96 7.125% UBS AG 10.08.2021 (Ba1) 2,232,750 2,078,185 2,307,022 0.98 3.50% Wing Lung Bank Ltd 07.11.2017 (Baa2) 4,465,500 3,878,418 4,491,996 1.90 7.00% Yinson TMC Sdn Bhd 25.09.2020 (NR) 22,327,500 21,080,736 22,614,036 9.59 ────────── ────────── ────────── ──────────

Total unquoted fixed income securities – foreign 226,793,300 205,044,776 229,047,044 97.09 ══════════ ══════════ ══════════

Accumulated unrealised gain on unquoted fixed income securities - foreign 24,002,268 ──────────

Total unquoted fixed income securities - foreign 229,047,044 ══════════

38


9 CASH AND CASH EQUIVALENTS 2017 2016 RM RM Cash and bank balances 3,806,122 14,184,870 Deposit with a licensed financial institution 2,404,716 18,449,020 ───────── ─────────

6,210,838 32,633,890 ═════════ ═════════

Weighted average effective interest rates per annum and weighted average maturity of deposit with licensed a financial institution is as follows: 2017 2016 % % Deposit with a licensed financial institution 3.05 3.25 ═════════ ═════════

The deposits have an average maturity of 4 days (2016: 3 days).

10 FORWARD FOREIGN CURRENCY CONTRACTS As at 30 November 2017, there are 8 (2016: 22) forward currency contracts outstanding. The notional principal amount of the outstanding forward currency contracts amounted to RM116,610,860 (2016: RM202,702,043). The forward currency contracts entered into during the financial period were for hedging against the currency exposure arising from the investment in the foreign unquoted fixed income securities denominated in Singapore Dollar, Chinese Yuan Reminbi, Euro and United States Dollar. As the Fund has not adopted hedge accounting during the financial period, the change in the fair value of the forward currency contract is recognised immediately in the statement of comprehensive income.

11 NUMBER OF UNITS IN CIRCULATION 2017 2016 No. of units No. of units At the beginning of the financial period 221,992,000 229,283,000 Cancellation of units during the financial period (2,292,000) (3,524,000) ────────── ─────────

At the end of the financial period 219,700,000 225,759,000 ══════════ ═════════

39


12 TRANSACTIONS WITH BROKES/DEALERS AND FINANCIAL INSTITUTIONS (i) Details of transactions with the top 10 brokers and dealers for the 6 months financial period ended

30 November 2017 are as follows: Value Percentage of trade of total trade RM % Name of dealers

OCBC Bank (Malaysia) Berhad 31,858,395 14.86 Standard Chartered Bank Malaysia Berhad 28,430,912 13.26 Barclays Capital Inc 21,880,009 10.21 PT Bank CIMB Niaga, TBK 19,966,000 9.31 CIMB Bank Berhad 14,993,356 6.99 Hong Leong Bank Berhad 14,976,000 6.99 Haitong International Securities Co Ltd 10,360,471 4.83 Affin Hwang Investment Bank Berhad 10,000,000 4.67 Nomura Securities International Inc. 7,312,711 3.41 Citibank,N.A 6,738,300 3.14 Others 47,882,044 22.33

─────────── ────────

214,398,198 100.00 ═══════════ ════════

(ii) Details of transactions with the top 10 brokers and dealers for the 6 months financial period ended

30 November 2016 are as follows: Value Percentage of trade of total trade RM % Name of dealers JP Morgan Securities Ltd London 38,003,284 26.21 UBS AG London 14,228,877 9.81 Bank Of America Merrill Lynch 10,875,240 7.50 Morgan Stanley And Co. International Plc, London Branch 10,303,156 7.11 Nomura Securities Singapore Pte Ltd 10,235,943 7.06 Citigroup Global Markets Inc 8,098,545 5.59 HSBC Singapore 7,633,015 5.27 Mizuho 6,108,869 4.21 CIMB Bank Berhad 4,967,945 3.43 BNP Paribas London Branch 4,665,500 3.22 Others 29,855,723 20.59 ═══════════ ════════

144,976,097 100.00 ═══════════ ════════

Note: *Group wide

40


12 TRANSACTIONS WITH BROKES/DEALERS AND FINANCIAL INSTITUTIONS (CONTINUED) Included in transaction with brokers and dealers are trades with Affin Hwang Investment Bank Berhad related to the Manager amounting to RM 10,000,000 (2016: RM4,057,600). The Manager is of the opinion that all transactions with the related company were carried out at arm’s length. There is no brokerage fee paid to the dealers. # Included in the transaction with brokers and dealers are cross trades conducted between the Fund, other funds and private mandates managed by the Manager amounting to: 2017 2016 RM RM

Name of brokers/dealers Nomura Group* - 5,861,223 RHB Investment Bank Bhd - 4,125,940

────────── ──────────

- 9,987,163 ══════════ ══════════

The cross trades are conducted between the Fund, other fund and private mandates managed by the Manager as follows: 2017 2016 RM RM Affin Hwang Select Income Fund - 2,062,970 Affin Hwang Select Balanced Fund - 5,047,088 Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund - 814,135 Affin Hwang Select SGD Income Fund - 2,062,970 ────────── ──────────

- 9,987,163 ══════════ ══════════

41


13 UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER The related parties of and their relationship with the Fund are as follows: Related parties Relationship Affin Hwang Asset Management Berhad The Manager Affin Hwang Investment Bank Berhad Holdings company of the Manager Affin Holdings Berhad (AHB) Ultimate holding company of the

Manager Subsidiaries and associates of AHB as Subsidiary and associated companies disclosed in its financial statements of the ultimate holding company of the Manager

Director of Affin Hwang Asset Management Director of the Manager Berhad

Non-Executive Chairman of Affin Holdings Berhad Non-Executive Chairman of the ultimate holding company of the Manager

2017 2016 No. of units RM No. of units RM

The Manager:

Affin Hwang Asset Management Berhad (The units are held legally for booking purposes) 2,843 3,067 2,526 2,640

════════ ════════ ════════ ════════

42


14 MANAGEMENT EXPENSE RATIO (“MER”) 6 months 6 months financial financial period ended period ended 30.11.2017 30.11.2016 % % MER 0.04 0.04 ════════ ════════

MER is derived from the following calculation: MER = (A + B + C + D + E) x 100 ______________________ F A = Management fee B = Trustee fee C = Auditors’ remuneration D = Tax agent’s fee E = Other expenses F = Average NAV of the Fund calculated on a daily basis The average NAV of the Fund for the financial period calculated on a daily basis is RM 235,319,197 (2016: RM237,007,374).

15 PORTFOLIO TURNOVER RATIO (“PTR”) 6 months 6 months financial financial period ended period ended 30.11.2017 30.11.2016 PTR (times) 0.62 0.31 ════════ ════════

PTR is derived from the following calculation:

(Total acquisition for the financial period + total disposal for the financial period) 2 Average NAV of the Fund for the financial period calculated on a daily basis where: total acquisition for the financial period = RM 148,433,042 (2016: RM69,080,026) total disposal for the financial period = RM 142,063,689 (2016: RM79,436,444)

43


16 SEGMENT INFORMATION The strategic asset allocation committee of the Investment 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 that are used to make strategic decisions. The committee is responsible for the Fund’s entire portfolio and considers the business to have a single operating segment. The committee’s asset allocation decisions are based on a single, integrated investment strategy and the Fund’s performance is evaluated on an overall basis. The reportable operating segments derive their income by seeking investments to achieve targeted returns consummate with an acceptable level of risk within each portfolio. These returns consist of interest and gains on the appreciation in the value of investments, and is derived from unquoted fixed income securities in Malaysia, Europe, Singapore, China and United States. There were no changes in the reportable segments during the financial period. The internal reporting provided to the committee for the Fund’s assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of MFRS and IFRS.

44

AFFIN HWANG FIXED MATURITY INCOME FUND XIV

STATEMENT BY THE MANAGER I, Teng Chee Wai, as the Director of Affin Hwang Asset Management Berhad, do hereby state that in my opinion as the Manager, the financial statements set out on pages 9 to 43 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 30 November 2017 and of its financial performance, changes in equity and cash flows for the 6 months financial period ended 30 November 2017 in accordance with the Malaysian Financial Reporting Standards and International Financial Reporting Standards. For and on behalf of the Manager, AFFIN HWANG ASSET MANAGEMENT BERHAD TENG CHEE WAI EXECUTIVE DIRECTOR Kuala Lumpur 17 January 2018

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DIRECTORY OF SALES OFFICE HEAD OFFICE Affin Hwang Asset Management Berhad Ground Floor Tel : 03 – 2116 6000 Menara Boustead Fax : 03 – 2116 6100 69, Jalan Raja Chulan Toll free no : 1-800-88-7080 50200 Kuala Lumpur Email:[email protected] SELANGOR Affin Hwang Asset Management Berhad A-7-G Jaya One No. 72A, Jalan Universiti 46200 Petaling Jaya Tel: 03-7620 1290 Selangor Fax: 03-7620 1298 PENANG Affin Hwang Asset Management Berhad No. 10-C-24 Precinct 10 Jalan Tanjung Tokong Tel : 04 – 899 8022 10470 Penang Fax : 04 – 899 1916 PERAK Affin Hwang Asset Management Berhad 13A Persiaran Greentown 7 Greentown Business Centre Tel : 05 – 241 0668 30450 Ipoh Perak Fax : 05 – 255 9696 MELAKA Affin Hwang Asset Management Berhad Ground Floor, No. 584, Jalan Merdeka Taman Melaka Raya Tel : 06 – 281 2890 / 3269 75000 Melaka Fax : 06 – 281 2937 JOHOR Affin Hwang Asset Management Berhad 1

st Floor, Lot 93

Jalan Molek 1/29, Taman Molek 81100 Johor Bahru Tel : 07 – 351 5977 Johor Fax : 07 – 351 5377 SABAH Affin Hwang Asset Management Berhad Lot No. B-2-09, 2

nd Floor

Block B, Warisan Square Jalan Tun Fuad Stephens 88000 Kota Kinabalu Tel : 088 – 252 881 Sabah Fax : 088 – 288 803

46

DIRECTORY OF SALES OFFICE (CONTINUED) SARAWAK Affin Hwang Asset Management Berhad Ground Floor, No. 69 Block 10, Jalan Laksamana Cheng Ho 93200 Kuching Tel : 082 – 233 320 Sarawak Fax : 082 – 233 663 Affin Hwang Asset Management Berhad 1

st Floor, Lot 1291

Jalan Melayu, MCLD 98000 Miri Tel : 085 – 418 403 Sarawak Fax : 085 – 418 372

AFFIN HWANG FIXED MATURITY INCOME FUND XIV · 2018-01-26 · Benchmark: 3-years Malayan Banking...

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Transcript of AFFIN HWANG FIXED MATURITY INCOME FUND XIV · 2018-01-26 · Benchmark: 3-years Malayan Banking...