AFFIN HWANG FLEXIBLE MATURITY INCOME FUND 8

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2 AFFIN HWANG FLEXIBLE MATURITY INCOME FUND 8 Quarterly Report and Financial Statements As at 30 September 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 Affin Hwang Flexible Maturity Income Fund 8 Fund Type Fund Category Investment Objective Duration of the Fund Income Wholesale Fixed Income (Close-ended) The Fund aims to provide income through investments in fixed income instruments Three (3) years Termination Date 30 August 2021 Benchmark Distribution Policy 3-years Malayan Banking Berhad fixed deposit rate as at Investment Date Depending on the level of income the Fund generates, the Fund will provide distribution on an annual basis Performance Review For the period under review from 28 August 2018 (Commencement Date) to 30 September 2018, the Fund has registered a return of 0.58%. Compared to the Benchmark return of 0.31%, the Fund thus outperformed its Benchmark by 0.27%. The Net Asset Value (NAV) per Unit of the Fund as at 30 September 2018 was RM while the NAV per Unit as at 27 August 2018 was RM On total NAV basis, the Fund s NAV stood at RM million as at 30 September 2018 (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 September 2018 Since Commencement (28/8/18-30/9/18) Fund 0.58% Benchmark 0.31% Outperformance / (Underperformance) 0.27% Table 2: Volatility as at 30 September Year Fund N/A The data for a 3-year annualized volatility as at 30 September 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 Flexible Maturity Income Fund Benchmark Aug 31-Aug 4-Sep 8-Sep 12-Sep 16-Sep 20-Sep 24-Sep 28-Sep 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. Benchmark: 3-years Malayan Banking Berhad fixed deposit rate 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 Sep 2018 (%) Fixed Income Cash & money market Total Strategies Employed Over the period under review, the Manager maintained a focus on high conviction credit names across both domestic and regional space. To date, the Fund s bond holdings have continued to meet their respective financial obligations in respect of their outstanding debt. Cash buffer was also raised to a high level to better navigate through heightening market volatility. Market Review In what has been a rather uninspiring year, the quarter ending September 2018 provided little no comfort as global financial markets continued to endure the bumpy path laid out. Geopolitical tensions in particular the ongoing trade duel between US and China remained on centre stage; inflicting further uncertainty and volatility across markets. Despite initially hinting at possible trade negotiations, positive developments took a sudden swerve and escalated into an outright confrontation. Markets witnessed a fresh round of tariffs kicked-in on 24 September 2018, where the Trump administration imposed a 10.0% duty on US$200 billion worth of Chinese 3

5 imports. Washington had initially toyed with the idea of imposing a 25.0% tariff rate, but that was subsequently postponed to China swiftly retaliated by imposing tariffs of their own on US$60 billion worth of US goods ranging between %. Prior to this, the two global powerhouses have already slapped tariffs on US$50 billion worth of goods. Amidst the trade dispute, the US Federal Reserve followed the script to deliver its third 25-basis-point rate hike for the year in end September 2018; effectively bringing up the US benchmark interest rate to a new range of %. Interestingly, the central bank ceased usage of the word accommodative in its policy statement, therefore suggesting that monetary policy is reaching a more neutral rate. Despite so, the central bank continued to emphasise on its optimism regarding the US economy, and retained its guidance for another rate hike in 2018 and 3 more in Federal Reserve officials see the long-run fund rate at 2.90% after peaking at 3.40% in Rising interest rates alongside a strengthening greenback have created an evident disparity in growth between the US economy and the rest of the world; thus prompting investors to plough money back to US assets. On treasuries, yield for the 10-year benchmark trended upwards to stand at 3.05% as of end September. European markets have also endured a rather turbulent period in part due to developments in Italy. Contrary to a prudent budget that was initially pledged, the ruling coalition in Italy agreed to run a budget deficit in 2019 that is equal to 2.4% of the Italian GDP; markedly higher than the 2.0% that was previously guided. The budget may steer Italy on a potential collision course with the European Commission, as well as the European Central Bank which holds more than 300 billion Euros worth of Italian government bonds. The news reignited fears of a fiscal slippage in Italy, thus prompting a widespread risk-off mode across European markets. Yields for the 10-year Italian govvy sold-off sharply to above 3.2%, while the Euro fell against the USD to trade at the 1.16 level as at end-september. Moving across to Asia, uncertainties on global trade still dictated sentiment across Asia, as a sharp depreciation of the Chinese RMB exerted a further drag on regional currencies. Efforts to bolster the RMB were seen in August, as the People s Bank of China ( PBoC ) sought to tweak its methodology which dictates the daily pricing of its currency. Nevertheless, performance of regional markets remained pressured 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 freefall. On top of the contagion effect, appetite for Asian bonds were relatively muted for the most part due to the increasing number of default occurrences in China. Positive sentiment rekindled for a while in July following PBoC s announcement to ease lending measures so as to boost investments in lower-rated corporate debts and reduce financial risks. Albeit briefly, markets were notably upbeat on the back of the news. Nevertheless, we continue to see heavy supplies being issued into the market. Technical support haven t been too strong, in which most managers and investors are believed to be awaiting for valuations to correct further for better entry. Back home, the local market has seen a jolt in volatility following a swathe of reforms and deleveraging efforts including spending cuts to pare down the country s debts which exceeded MYR1 trillion according to newly minted Finance Minister YB Lim Guan Eng. Nevertheless, stabilising oil prices coupled with the nation s healthy current account surplus have provided some support to the local scene as well as the currency which closed the period under review at MYR4.13 against the greenback. The domestic bond space also endured a softer showing behind a few factors: (1) position trimming activities associated with GE14, (2) broader EM weakness, as well as (3) several bond maturities. But despite the fatigue in foreign fund flows over the period under review, healthy domestic liquidity has provided much support for the local bond scene. Yields for the 3- and 10-year MGS benchmark stood at 3.61% and 4.07% respectively as at end September. 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 from a longer term perspective. Nonetheless, inflation data remains a key focal point to monitor in the coming months. 4

6 Caution remains a key theme as we enter the final quarter of Emerging economies including those in Asia will likely remain challenged by: (1) the ongoing trade dispute between US and China, as well as (2) increasing policy divergence between US and the rest of world. These factors, if prolonged, could further derail buying activities and currencies in the region; especially for nations with twin deficits and high external debts. Domestically, 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 replaced by the narrower SST in September 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. On monetary policy, Bank Negara Malaysia is expected to keep rates steady for the rest of 2018 given the relatively subdued inflation. The Manager will be employing a more cautious approach moving forward given the prevailing market uncertainties and jitters. The Fund will be maintaining high cash level, and a relatively shorter duration in light of the current rate-hiking cycle by the US Federal Reserve. In terms of placements, preference shall lean towards Investment Grade issuances. Nonetheless, the Manager remains comfortable with the Fund s portfolio holdings, and will continue to keep a vigilant watch on market developments. 5

7 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 30 SEPTEMBER 2018 INVESTMENT INCOME Financial period ended RM Interest income 982,403 Net loss on foreign currency exchange (81,567) Net gain on forward foreign currency contracts at fair value through profit or loss 237,445 Net gain on financial assets at fair value through profit or loss 41,716 1,179,997 EXPENSES Trustee fee (10,772) Auditors' remuneration (682) Tax agent's fee (298) Other expenses (256) (12,008) NET PROFIT BEFORE TAXATION 1,167,989 TAXATION - NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 1,167,989 Net profit after taxation is made up of the following: Realised amount 793,477 Unrealised amount 374,512 1,167,989 6

8 STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER RM ASSETS Financial assets at fair value through profit or loss 118,470,032 Cash and cash equivalents 82,588,352 Forward foreign currency contracts at fair value through profit or loss 237,445 TOTAL ASSETS 201,295,829 LIABILITIES Amount due to Trustee 6,604 Auditors remuneration 682 Tax agent s fee 298 Other payables and accruals 256 TOTAL LIABILITIES 7,840 NET ASSET VALUE OF THE FUND 201,287,989 EQUITY Unitholders capital 200,120,000 Retained earnings 1,167,989 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 201,287,989 NUMBER OF UNITS IN CIRCULATION 200,120,000 NET ASSET VALUE PER UNIT (RM)

9 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 30 SEPTEMBER 2018 Unitholders Retained capital earnings Total RM RM RM Balance as at 1 August 2018 (date of launch) Total comprehensive income for the financial period - 1,167,989 1,167,989 Movement in unitholders capital: Creation of units arising from applications 200,120, ,120,000 Balance as at 30 September ,120,000 1,167, ,287,989 8

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AFFIN HWANG FLEXIBLE MATURITY INCOME FUND 9

AFFIN HWANG FLEXIBLE MATURITY INCOME FUND 9 Quarterly Report and Financial Statements As at 31 October 2018 Contents Page QUARTERLY REPORT... 2 STATEMENT OF COMPREHENSIVE INCOME... 6 STATEMENT OF FINANCIAL