AFFIN HWANG USD CASH FUND

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2 AFFIN HWANG USD CASH FUND Quarterly Report and Financial Statements As at 30 June 2018 Contents Page QUARTERLY REPORT... 2 STATEMENT OF COMPREHENSIVE INCOME... 6 STATEMENT OF FINANCIAL POSITION... 7 STATEMENT OF CHANGES IN EQUITY

3 QUARTERLY REPORT FUND INFORMATION Fund Name Fund Type Category Objective Benchmark Distribution Policy Affin Hwang USD Cash Fund Income Money Market Wholesale (open-ended) The Fund seeks to provide investors with a regular income stream and liquid access to their investments The Fund shall benchmark itself against the Malayan Banking Berhad Foreign Currency Account Overnight USD rate Subject to the availability of income, the Fund will distribute income on a monthly basis. Distribution, if any, would be automatically reinvested based on the NAV per Unit at the income payment date, which is two (2) Business Days after the distribution date. There is no incidental cost associated with the reinvestment. Performance Review For the period under review from 1 April 2018 to 30 June 2018, the Fund registered a return of 0.44%. Compared to the benchmark return of 0.42%, the Fund thus outperformed the Benchmark by 0.02%. The Net Asset Value (NAV) per Unit of the Fund as at 30 June 2018 was USD while the NAV per Unit as at 31 March 2018 was USD On total NAV basis, the Fund s NAV stood at USD million as at 30 June (See Table 1 for performance of the Fund and Figure 1 for movement of the Fund versus the Benchmark respectively). Table 1: Performance as at 30 June Months (1/4/18-30/6/18) 6 Months (1/1/18-30/6/18) 1 Year (1/7/17-30/6/18) Since Commencement (1/10/15-30/6/18) Fund 0.44% 0.82% 1.49% 3.11% Benchmark 0.42% 0.77% 1.36% 2.15% Outperformance / (Underperformance) 0.02% 0.05% 0.13% 0.96% Table 2: Volatility as at 30 June Year Fund N/A The data for a 3-year annualized volatility as at 30 June 2018 is not available as the Fund has yet to record 3 years of performance data. A 3-year annualized volatility is a global standard used to report on Fund volatility as shorter time period would not provide a stable representation as well as being too sensitive to additional data points. 2

4 Figure 1: Movement of the Fund versus the Benchmark Affin Hwang USD Cash Fund Benchmark Sep-15 Jan-16 Apr-16 Jul-16 Oct-16 Feb-17 May-17 Aug-17 Nov-17 Mar-18 Jun-18 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 Bloomberg. Benchmark: Malayan Banking Berhad Foreign Currency Account Overnight USD Asset Allocation For a snapshot of the Fund s asset mix during the period under review, kindly refer to Figure 2. Figure 2: Asset Allocation of the Fund 30 Jun Mar Dec 2017 (%) (%) (%) Cash & Money Market Total Strategies Employed The Manager maintained a high level of investment in USD-denominated deposit placements to provide investors with regular income stream and liquid access to their respective investments. Market Review The period under review can be summed up as relatively bumpy one, as geopolitical tensions in particular the ongoing trade duel between US and China remained on centre stage and imbued further uncertainty across global financial markets. Although both countries have initially hinted at possible trade discussions and willingness to negotiate, positive developments took a sudden swerve and escalated into an outright confrontation as US President Donald Trump erratically revived its 25.0% tariff plan; directing towards USD50 billion worth of Chinese imports in key strategic sectors as identified by Beijing in its Made in China 2025 plan. In a swift rebuke, China retaliated with its own tit-for-that measure by imposing similar tariffs on US goods. 3

5 In the wake of heightening volatility, investors vastly flocked towards safe haven instruments for refuge; which saw yields for the 10-year treasury benchmark closed the period under review lower at 2.86% from the 3.00% levels seen in May Amidst the trade dispute, the US Federal Reserve proceeded to deliver its second 25-basis-point-hike for the year in June 2018; effectively bringing the US benchmark interest rate to a new range of 1.75%-2.00%. Market attention however, was zoomed in on the central bank s dot plot projection which was upgraded to 4 total increases for 2018 as compared to the previous forecast of only 3 hikes. In its meeting minutes, the central bank painted a more upbeat economic picture, and attributed the increased pace of rate hike to an inflation that is nearing its 2.00% target. Nevertheless, Federal Reserve officials still see the long-run fund rate at 2.90% after peaking at 3.40% in In a separate geopolitical development, ensuing peace in the Korean peninsula appears to be gaining ground at least on the surface. North Korea s leader Kim Jong Un and South Korean President met at a historical summit in April 2018 that saw the two leaders commit to peace efforts and pledged to a new era of co-prosperity. Moreover, markets also witnessed improving bilateral relations between the US and North Korea following Trump s own unprecedented meeting with Kim Jong Un in early June Despite warming signs in Korea, uncertainties on global trade still dictated sentiment across Asia. Performance of regional markets were also dampened by the broader Emerging Market weakness arising from: (1) a growing divergence in policy stance between the hawkish US Federal Reserve and most other major central banks, as well as (2) fractious developments in Turkey and Argentina which have sent both their currencies into free fall. Risk appetite remains muted for the Asian bond space throughout the period under review. While credit spreads have widened on the back of heavy issuances coming from the primary segment, support remains relatively soft given that markets are still slowly readjusting to the price correction; whereby most manager and investors have opted to stay side-lined in the interim awaiting for evident stability. On the local front, the 14th General Election ( GE14 ) concluded with jaw-dropping results that stunned political pundits and pollsters. In a watershed election, the opposition won GE14 by wrestling traditionally held strongholds from the incumbent by taking over states such as Johor, Kedah, and Melaka. Markets were well-behaved in the initial stages of the power transition, though it suffered a sell-down towards the end of May which was prompted by large foreign outflows following the MYR1 trillion debt revelation by newly minted Finance Minister YB Lim Guan Eng. Nonetheless, concerns about the country s fiscal position and off-balance sheet financing isn t new whereby the domestic outflows were exacerbated further by the broader EM weakness, as well as strengthening of the USD. The domestic bond space endured a softer showing behind position trimming activities associated with GE14, on top of the broader EM weakness which lifted yields for the 3- and 10-year MGS benchmark to 3.64% and 4.21% respectively as at end June The MGS and GII space saw a combined outflow of MYR16.6 billion throughout May and June 2018, as total foreign holdings declined to 24.7% as compared to the 27.7% seen in April But despite the fatigue in foreign fund flows, local liquidity and demand has been largely supportive. More importantly, the local currency has remained relatively resilient throughout the period under review; closing at MYR4.03 against the greenback. Investment Outlook While the broad normalisation of monetary policy across global central banks may pose some liquidity challenges for the fixed income market, we believe that a gradual and accommodative normalisation of interest rates alongside bond yields would still be manageable given that better coupons and income derived from higher rates would be quintessential for a longer term perspective. Back home, markets will look to further clarity from the new government on policy direction of its fiscal and debt management. This includes covering a revenue shortfall from GST collection that has been zero-rated effective June Nonetheless, proactive measures taken thus far to cut operating expenditure including salary deduction for ministers, plugging of leakages and revamps across ministries could stem the bleeding. While change appears to be painful for the short-term, we are optimistic that a solid framework of governance, coupled with forthcoming clarity on policies, should eventually bring foreign interest back to the local scene. Nonetheless, we expect the domestic bond space to remain buoyed by the lack of supply in the market, as well as strong local liquidity. On monetary policy, Bank Negara Malaysia is expected to keep rates steady for the rest of 2018 given the relatively subdued inflation. 4

6 Regardless, the Manager will look to maintain a high level of investment in USD-denominated deposit placements that we are comfortable with in respect of the underlying bank s credit and fundamentals. 5

7 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 INVESTMENT INCOME Financial Financial period ended period ended USD USD Interest income 772, ,571 Net (loss)/ gain on foreign currency exchange (2) 3 772, ,574 EXPENSES Management fee (120,690) (110,043) Trustee fee (12,069) (11,004) Auditors remuneration (1,324) (1,269) Tax agent s fee (653) (671) Other expenses (9,300) (9,843) (144,036) (132,830) NET PROFIT BEFORE TAXATION 628, ,744 TAXATION - - NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 628, ,744 Net profit after taxation is made up of the following: Realised amount 628, ,744 6

8 STATEMENT OF FINANCIAL POSITION FOR THE FINANCIAL PERIOD ENDED 30 JUNE USD USD ASSETS Financial assets at financial assets at fair value through profit or loss 61,849,006 46,131,262 Cash and cash equivalents 38,800 16,724 TOTAL ASSETS 61,887,806 46,147,986 LIABILITIES Amount due to Manager - management fee 15,151 12,476 Amount due to trustee 1,515 1,248 Auditors remuneration 1,307 1,273 Tax agent s fee 1,770 1,746 Other payables and accruals 1,594 2,011 TOTAL LIABILITIES 21,337 18,754 NET ASSET VALUE OF THE FUND 61,866,469 46,129,232 EQUITY Unitholders capital 61,380,819 45,867,760 Retained earnings 485, ,472 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 61,866,469 46,129,232 NUMBER OF UNITS IN CIRCULATION 61,271,000 45,886,000 NET ASSET VALUE PER UNIT (USD)

9 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Unitholders Retained capital earnings Total USD USD USD Balance as at 1 October ,488, ,399 52,828,474 Total comprehensive income for the financial period - 628, ,355 Distributions - (483,104) (483,104) Movement in unitholders capital: Creation of units arising from applications 40,376,283-40,376,283 Creation of units arising from distribution 483, ,104 Cancellation of units (31,966,643) - (31,966,643) Balance as at 30 June ,380, ,650 61,866,469 Balance as at 1 October ,810, ,103 63,151,787 Total comprehensive income for the financial period - 376, ,744 Distributions - (456,375) (456,375) Movement in unitholders capital: Creation of units arising from applications 21,644,141-21,644,141 Creation of units arising from distribution 456, ,375 Cancellation of units (39,043,440) - (39,043,440) Balance as at 30 June ,867, ,472 46,129,232 8

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