AFFIN HWANG FLEXIBLE MATURITY INCOME FUND 9

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2 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 POSITION... 7 STATEMENT OF CHANGES IN EQUITY

3 QUARTERLY REPORT FUND INFORMATION Fund Name Affin Hwang Flexible Maturity Income Fund 9 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 5 October 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 5 October 2018 (Commencement Date) to 31 October 2018, the Fund has registered a return of 0.45%. Compared to the Benchmark return of 0.25%, the Fund thus outperformed its Benchmark by 0.20%. The Net Asset Value (NAV) per Unit of the Fund as at 31 October 2018 was RM while the NAV per Unit as at 4 October 2018 was RM On total NAV basis, the Fund s NAV stood at RM million as at 31 October 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 31 October 2018 Since Commencement (5/10/18-31/10/18) Fund 0.45% Benchmark 0.25% Outperformance / (Underperformance) 0.20% Table 2: Volatility as at 31 October Year Fund N/A The data for a 3-year annualized volatility as at 31 October 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 Oct 6-Oct 8-Oct 10-Oct 12-Oct 14-Oct 16-Oct 18-Oct 20-Oct 22-Oct 24-Oct 26-Oct 28-Oct 30-Oct 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 31 Oct 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 kept at a relatively high level to better navigate through heightening market volatility. Market Review In what has been a rather uninspiring year, the quarter ending October 2018 provided little to no comfort as global financial markets continued to endure the bumpy path laid out. Geopolitical tension 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. Amid 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 its 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 While initially having under-priced the Federal Reserve s guided rate-hike trajectory, markets swiftly recalibrated expectations in the following month which saw yields for the 10-year Treasury benchmark surged to a high of 3.23% in early October; its highest level since The erratic spike came in the wake of a couple of upbeat reports on (1) US private sector payrolls and (2) services sector, coupled with rosy remarks by Federal Reserve Chairman Jerome Powell. Yields for the 10-year benchmark stood at 3.14% as of end-october. Moving on to Europe, the bloc continues to be in limbo following the critical European Union ( EU ) Summit in mid-october, which provided little clarification to address the concerns surrounding Brexit. The Irish border remains a key reason for the impasse, where a feasible and acceptable divide between Northern Ireland and the Republic of Ireland has yet the surface. Brexit, however, is not the only thing the EU has to worry about. 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 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 3.40%, while the Euro fell against the USD to trade at the 1.13 level as at end-october. In the wake of rising debt concerns, Moody s Investors Service downgraded Italy s sovereign rating to Baa3. On the Asia front, uncertainties on global trade still dictated sentiment across Asia, as a sharp depreciation of the Chinese RMB exerted a further drag on regional currencies. In addition, Asian credits also had a softer showing amid the spike in US Treasury yields, as well as prevailing uncertainties revolving global trade and Brexit that have dampened sentiment across the region. HY names, particularly in the Chinese property space, bore the brunt of the sell-off. The cautious sentiment was also reflected in the secondary market, where credit spreads have widened markedly. And given the heavy supplies expected to roll into the market, most managers and investors have opted to stay side-lined awaiting for yields 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 Finance Minister YB Lim Guan Eng. Nevertheless, the nation s healthy current account surplus have somewhat shielded the local scene as well as the currency which closed the period under review at MYR4.18 against the greenback. Despite consecutive months of fatigue in foreign fund flows behind: (1) position trimming activities after GE14, as well as the (2) broader EM weakness, the MGS and GII space saw collectively inflow of MYR5 billion for the month of October 2018; as foreign share for MGS+GII rose to 25.0% from the 24.1% seen in September In addition, healthy domestic liquidity has provided much support for the local bond scene. Yields for the 10-year MGS benchmark held steady at around the 4.15% range as of end-october. On the other hand, the corporate segment has remained quite strong as well; buoyed by the lack of supply as well as domestic pick-up. Investment Outlook Caution remains a key theme for markets in this 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) 4

6 increasing policy divergence between US and the rest of the 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. And considering the heavy supply of new issuances that are expected to roll into the market in the coming months, we will refrain from redeploying too heavily as we await for better entry as yields correct further from here. 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. Ultimately, the Manager will be employing a cautious approach moving forward given the prevailing market uncertainties and jitters. The Fund will be maintaining moderate to high cash levels, 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. Nevertheless, 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 31 OCTOBER 2018 INVESTMENT INCOME Financial period ended RM Interest income 802,471 Net loss on foreign currency exchange (25,499) Net loss on forward foreign currency contracts at fair value through profit or loss (94,747) Net gain on financial assets at fair value through profit or loss 225,136 Exit fee income 6, ,881 EXPENSES Trustee fee (8,539) Auditors' remuneration (551) Tax agent's fee (241) Other expenses (207) (9,538) NET PROFIT BEFORE TAXATION 904,343 TAXATION - NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 904,343 Net profit after taxation is made up of the following: Realised amount 755,369 Unrealised amount 148, ,343 6

8 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER RM ASSETS Financial assets at fair value through profit or loss 152,900,845 Cash and cash equivalents 53,170,404 Forward foreign currency contracts at fair value through profit or loss 235,391 Exit fee receivable 2,721 TOTAL ASSETS 206,309,361 LIABILITIES Forward foreign currency contracts at fair value through profit or loss 330,138 Amount due to Manager - cancellation of units 90,414 Amount due to Trustee 8,539 Amount due to dealers 4,061,043 Auditors remuneration 551 Tax agent s fee 241 Other payables and accruals (66) TOTAL LIABILITIES 4,490,860 NET ASSET VALUE OF THE FUND 201,818,501 EQUITY Unitholders capital 200,914,158 Retained earnings 904,343 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 201,818,501 NUMBER OF UNITS IN CIRCULATION 200,915,000 NET ASSET VALUE PER UNIT (RM)

9 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 OCTOBER 2018 Unitholders Retained capital earnings Total RM RM RM Balance as at 18 September 2018 (date of launch) - - Total comprehensive income for the financial period - 904, ,343 Movement in unitholders capital: Creation of units arising from applications 201,131, ,131,000 Cancellation of units (216,842) - (216,842) Balance as at 31 October ,914, , ,818,501 8

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AFFIN HWANG FLEXIBLE MATURITY INCOME FUND 8

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