AFFIN HWANG SELECT CASH FUND

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2 AFFIN HWANG SELECT CASH FUND Interim Report and Unaudited Financial Statements For the 6 Months Financial Period Ended 31 May 2018 Contents Page FUND INFOATION... 2 FUND PERFOANCE DATA... 3 MANAGER S REPORT... 5 TRUSTEE'S REPORT... 9 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE MANAGER DIRECTORY OF SALES OFFICE

3 FUND INFOATION Fund Name Affin Hwang Select Cash Fund Fund Type Income Fund Category Money Market Investment Objective The Fund aims to provide investors with a regular income stream and high level of liquidity to meet cash flow requirement whilst maintaining capital preservation Benchmark The performance benchmark of the Fund is the Maybank Overnight Repo Rate Distribution Policy The Fund endeavours to distribute income on a monthly basis BREAKDOWN OF UNITHOLDERS BY SIZE CLASS AS AT 31 MAY 2018 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below ,001 to 10, ,001 to 50, ,001 to 500, , ,001 and above 129 1,336,264 Total 246 1,347,745 * Note: Excluding Manager s stock 2

4 FUND PERFOANCE DATA Category As at 31 May 2018 (%) As at 31 May 2017 (%) As at 31 May 2016 (%) Portfolio Composition Unquoted fixed income securities local - Bonds Commercial papers Total unquoted fixed income securities local Cash & cash equivalent Total Total NAV ( million) 1, , , NAV per Unit () Unit in Circulation (million) 1, , Highest NAV Lowest NAV Return of the fund iii (%) Capital Return i (%) Income Return ii (%) Gross Distribution per Unit (sen) Net Distribution per Unit (sen) Management Expense Ratio (%) Portfolio Turnover Ratio (times) 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 31/05/18 NAV per 30/11/17* - 1} x 100 = { } x 100 = 0.15% Income = {Income distribution per Unit NAV per Unit on ex- date} + 1 ex-date = { /12/17} +1 = = { /12/17} +1 = = { /01/18} +1 = = { /01/18} +1 = = { /02/18} +1 = = { /02/18} +1 = = { /03/18} +1 = = { /03/18} +1 = = { /04/18} +1 = = { /04/18} +1 = = { /05/18} +1 = The Fund s MER remained unchanged during the period under review. 2 The Fund s PTR was slightly higher than previous year due to higher average sum of acquisition and disposal of during the period under review. 3

5 = { /05/18} +1 = Income Return ii = {Income ex-date x Income ex-date} -1 x 100 = { x x x x x x x x x x x } 1 x 100 = 1.57 % Return of the = [{(1+Capital Return) x (1+Income return)} - 1] x 100 Fund iii = [{( %) x ( %)} 1] x 100 = 1.73% * Source HSBC Trustee Table 1: Performance of the Fund 6 Months (1/12/17-31/5/18) 1 Year (1/6/17-31/5/18) 3 Years (1/6/15-31/5/18) 5 Years (1/6/13-31/5/18) Since Commencement (6/4/05-31/5/18) Fund 1.73% 3.47% 11.03% 18.41% 51.21% Benchmark 0.87% 1.75% 5.64% 9.67% 27.18% Outperformance / (Underperformance) 0.86% 1.72% 5.39% 8.74% 24.03% Source of Benchmark: Maybank Table 2: Average Total Return 1 Year (1/6/17-31/5/18) 3 Years (1/6/15-31/5/18) 5 Years (1/6/13-31/5/18) Since Commencement (6/4/05-31/5/18) Fund 3.47% 3.55% 3.43% 3.19% Benchmark 1.75% 1.84% 1.86% 1.84% Outperformance / (Underperformance) 1.72% 1.71% 1.57% 1.35% Source of Benchmark: Maybank Table 3: Annual Total Return FYE 2017 (01/12/16-30/11/17) FYE 2016 (01/12/15-30/11/16) FYE 2015 (01/12/14-30/11/15) FYE 2014 (01/12/13-30/11/14) FYE 2013 (01/12/12-30/11/13) Fund 3.53% 3.59% 3.54% 3.12% 3.15% Benchmark 1.75% 1.91% 2.00% 1.88% 1.80% Outperformance / (Underperformance) 1.78% 1.68% 1.54% 1.24% 1.35% Source of Benchmark: Maybank Past performance is not necessarily indicative of future performance and that Unit prices and investment returns may go down, as well as up. 4

6 MANAGER S REPORT Performance Review For the period under review from 1 December 2017 to 31 May 2018, the Fund registered a 1.73% return compared to the benchmark Maybank Overnight Repo Rate which yielded a return of 0.87%. The Fund thus outperformed the Benchmark by 0.86%. The Net Asset Value ( NAV ) per unit of the Fund as at 31 May 2018 was while the NAV per unit as at 30 November 2017 was During the period under review, the Fund has declared a total income distribution of per unit by way of reinvestment in the form of additional units. (See Table 1 for performance of the Fund and Figure 1 for the movement of the Fund versus the Benchmark respectively). Figure 1: Movement of the Fund versus the Benchmark Affin Hwang Select Cash Fund Benchmark Apr-05 May-06 Jun-07 Jul-08 Aug-09 Sep-10 Oct-11 Dec-12 Jan-14 Feb-15 Mar-16 Apr-17 May-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: Maybank Benchmark: Maybank Overnight Repo Rate 5

7 Income Distribution / Unit Split Affin Hwang Asset Management Berhad declared a gross distribution of per Unit for investors of the Affin Hwang Select Cash Fund over the period under review. The Net Asset Value per Unit prior and subsequent to the distributions was as follows: Cum-Date Ex-Date Cum-distribution () No unit split was declared for the financial period ended 31 May Distribution per Unit () Ex-distribution () 12 Dec Dec Dec Dec Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Apr Apr Apr Apr May May May May 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 31 May May May 2016 (%) (%) (%) Unquoted fixed income securities local Cash & cash equivalent Total As at 31 May 2018, the asset allocation of the Fund stood at 33.73% of the Fund s NAV in fixed income instruments while the balance was held in cash and cash equivalent. During the period under review, the manager had decreased the Fund s exposure in fixed income securities by 6.34 percentage points from 40.07% a year ago. Allocation to commercial papers remained relatively unchanged at 4.06% while allocation to bonds was reduced to 29.67% over the same period. Correspondingly, cash level of the Fund increased to 66.27%. Strategies Employed Over the period under review, the Fund has generally maintained a higher exposure into money market placements in order to maintain high liquidity to meet investors cash flow requirements. Additionally, the Manager also held on some exposure into short-term commercial papers to enhance portfolio yield. Market Review The period under review can be summed up as a relatively softer outing for global financial markets. Following stronger showings from the year before, the bullish sentiment subsequently took a breather in early February 2018 as markets entered correction territory following an overly-robust US labour report and 6

8 inflation data for the month of January 2018; sparking concerns that US Federal Reserve officials would prematurely accelerate the pace of interest rate hikes. Market jitters did quell briefly following the US Federal Reserve s decision to deliver a 25-basis point hike in March 2018, without shifting its dot plot guidance of 3 rate hikes in totality by the end of Along with a new range of 1.50%-1.75% for the US benchmark rate, the central bank painted a more upbeat economic picture and affirmed its confidence that the US economy remains on steady footing buoyed by additional boost from the recently implemented tax reforms. Furthermore, new chair Jerome Powell signalled policy continuity from predecessor Janet Yellen; emphasising on further gradual adjustments in its monetary policy stance. The calm however, was short-lived as geopolitical tensions took centre stage. In March, uncertainty escalated on the global trade front as US President Donald Trump announced a slew of protectionist measures including steel and aluminium tariff imports, before scoping its aim to target USD60 billion worth of Chinese imports in key strategic sectors as identified by Beijing in its Made in China 2025 plan. China sought to retaliate with its own tit-for-tat measure by imposing tariffs worth up to USD3 billion on US imports. While both countries have since hinted at possible trade discussions and willingness to negotiate, the uncertainties caused by weeks of back-and-forth rhetoric, coupled with rising inflationary pressure prompted a broad sell-off as a bond rout deepened; which lifted the 10-year US Treasury yield to touch 3.11% in mid- May 2018 subsequently leading most global bonds to follow suit. On the Asia front, sentiment has also turned cautious for regional credits amid the surge in treasury yields, as well as the broader Emerging Market ( EM ) weakness arising from fractious developments in Turkey and Argentina which have sent both their currencies into free fall. 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. Position trimming activities associated with GE14 on top of the broader EM weakness were evident as the domestic bond space endured a softer showing; lifting yields for the 3- and 10-year MGS benchmark to 3.79% and 4.18% respectively as at end May The MGS and GII space saw a combined outflow of MYR9.9 billion as total foreign holdings declined to 25.9% 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. Additionally, the local currency has remained relatively resilient throughout the period under review; closing at MYR3.98 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. Nonetheless, inflation data would be a key focal point to monitor in the coming months as an aggressive uptick in inflation could spell for an accelerated pace in rate hikes by the US Federal Reserve. For the near-term, markets will likely have to endure continuous ramping-up of trade protectionist rhetoric and politicking as President Donald Trump attempts to rile up support in the lead up to the US midterm elections slated in November Nonetheless, our base case is that the outcome will be more modest than the intended threats or rhetoric used, as both the US and China will have to bring all their bargaining 7

9 chips onto the negotiation table before eventually arriving at middle ground. Having said that, we are not dismissing the risk especially due to the severity of the sell-down. 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 is slated to be zerorated 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. We will continue to keep abreast on market developments as we tread into 2H2018. 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) (ii) goods and services provided are of demonstrable benefit to Unit holders of the Fund; and 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. Cross Trade Cross trade transactions have been carried out during the reported period and the Investment Committee of the Fund has reviewed that such transaction are in the best interest of the Fund, transacted in the normal course of business at agreed terms and on a fair value basis. 8

10 TRUSTEE'S REPORT TO THE UNITHOLDERS OF AFFIN HWANG SELECT CASH FUND We have acted as Trustee of Affin Hwang Select Cash ( the Fund ) for the financial period ended 31 May To the best of our knowledge, Affin Hwang Asset Management Berhad ( the Management Company ), has operated and managed the Fund in accordance with the following:- a) limitations imposed on the investment powers of the Management Company and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and c) creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. During this financial period, a total distribution of 1.63 sen per unit (gross) has been distributed to the unitholders of the Fund. We are of the view that the distribution is not inconsistent with the objective of the Fund. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur 19 July

11 STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY 2018 INVESTMENT INCOME 6 months 6 months financial financial period ended period ended Note Interest income 4 28,913,190 29,797,850 Net (loss)/gain on financial assets at fair value through profit or loss 9 (506,211) 1,508,058 28,406,979 31,305,908 EXPENSES Management fee 5 (3,461,902) (3,710,205) Trustee fee 6 (249,077) (266,040) Auditors' remuneration (3,491) (3,491) Tax agent's fee (1,846) (1,943) Other expenses (224,630) (241,548) (3,940,946) (4,223,227) NET PROFIT BEFORE TAXATION 24,466,033 27,082,681 TAXATION NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 24,466,033 27,082,681 Net profit after taxation is made up of the following: Realised amount 24,155,024 25,205,745 Unrealised amount 311,009 1,876,936 24,466,033 27,082,681 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 STATEMENT OF FINANCIAL POSITION FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY 2018 Note ASSETS Financial assets at fair value through profit or loss 9 474,941, ,149,351 Deposits with licensed financial institutions 9 942,739, ,337,045 Cash and cash equivalents 15,436 6,587 Amount due from dealer 299,931 - TOTAL ASSETS 1,417,996,813 1,533,492,983 LIABILITIES Amount due to Manager - management fee 599, ,914 Amount due to Trustee 41,939 45,704 Amount due to dealer 9,021,678 - Auditors remuneration 3,491 3,491 Tax agent s fee 6,146 5,643 Other payables and accruals 54,099 56,223 TOTAL LIABILITIES 9,726, ,975 NET ASSET VALUE OF THE FUND 1,408,270,337 1,532,729,008 EQUITY Unitholders capital 1,344,518,423 1,469,244,440 Retained earnings 63,751,914 63,484,568 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 1,408,270,337 1,532,729,008 NUMBER OF UNITS IN CIRCULATION 10 1,347,748,000 1,466,923,000 NET ASSET VALUE PER UNIT () The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY 2018 Unitholders Retained capital earnings Total Balance as at 1 December ,499,345,929 61,386,233 1,560,732,162 Total comprehensive income for the financial period - 24,466,033 24,466,033 Distribution (Note 8) - (22,100,352) (22,100,352) Movement in unitholders capital: Creation of units arising from applications 506,247, ,247,738 Creation of units arising from distributions 22,100,352-22,100,352 Cancellation of units (683,175,596) - (683,175,596) Balance as at 31 May ,344,518,423 63,751,914 1,408,270,337 Balance as at 1 December ,021,940,020 67,435,974 1,089,375,994 Total comprehensive income for the financial period - 27,082,681 27,082,681 Distribution (Note 8) - (31,034,087) (31,034,087) Movement in unitholders capital: Creation of units arising from applications 1,031,334,094-1,031,334,094 Creation of units arising from distributions 15,718,087-15,718,087 Cancellation of units (599,747,761) - (599,747,761) Balance as at 31 May ,469,244,440 63,484,568 1,532,729,008 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 STATEMENT OF CASH FLOWS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY 2018 CASH FLOWS FROM OPERATING ACTIVITIES 6 months 6 months financial financial period ended period ended Proceeds from sale of investments 504,810, ,424,001 Purchase of investments (416,432,273) (523,589,562) Placement of deposits with licensed financial institutions (17,041,847,868) (16,461,551,039) Proceeds from maturity of deposits with licensed financial institutions 17,107,861,386 16,164,835,793 Interest received 26,254,621 20,401,984 Management fee paid (3,522,072) (3,503,429) Trustee fee paid (253,288) (251,566) Payment for other fees and expenses (235,099) (233,802) Net cash generated from/(used in) operating activities 176,636,333 (417,467,620) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 506,247,738 1,016,018,094 Payments for cancellation of units (683,175,596) (599,747,761) Net cash (used in)/generated from financing activities (176,927,858) 416,270,333 NET DECREASE IN CASH AND CASH EQUIVALENTS (291,525) (1,197,287) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 306,961 1,203,874 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 15,436 6,587 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY 2018 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 revenue and expenses during the reported financial year. 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 K. (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 Dec 2017: Amendments to MFRS 107 Statement of Cash Flows Disclosure initiative The adoption of these amendments did not have any impact on the current year and is not likely to affect future years. (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 Dec 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". 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). 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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) (i) Financial year beginning on/after 1 Dec 2018 (continued) 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 has reviewed its financial assets and liabilities and does not expect any impact from the adoption of the new standard on 1 Dec There will be no impact on the Fund s accounting for financial assets as the Fund s equity investments currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9. There will be no impact on the Fund s accounting for financial liabilities as the Fund s investments in forward foreign currency contracts will continue to be measured on the same basis under MFRS 9. The new impairment model requires the recognition of impairment provisions based on expected credit losses ( ECL ) rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assessments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B INCOME RECOGNITION Interest income from short term deposits with licensed financial institutions is recognised on an effective interest method on an accruals 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. C DISTRIBUTION A distribution to the Fund s unitholders is accounted for as a deduction from realised reserve. A proposed distribution is recognised as a liability in the period in which it is approved by the Trustee of the Fund. D TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable profits earned during the financial period. E 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. 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. 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 equivalents and amount due from dealer. 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 dealer, auditors remuneration, tax agent s fee, and other payables and accruals as other financial liabilities. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 are presented in the statement of comprehensive income within net gain/(loss) on financial assets at fair value through profit or loss in the period 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 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) (ii) (iii) records its basis for using non-bpa price; obtains necessary internal approvals to use the non-bpa price; and keeps an audit trail of all decisions and basis for adopting the market yield. 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 deposits. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. (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. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (iii) Impairment (continued) 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 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 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 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 AMOUNT DUE FROM/(TO) DEALERS Amounts due from and to dealers 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. 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 dealer is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant dealer. Significant financial difficulties of the dealer, probability that the broker will enter bankruptcy or financial reorganisation, 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 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H AMOUNT DUE FROM/(TO) DEALERS (CONTINUED) 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 unitholders 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 unitholder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unitholder s option 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. 19

21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. K 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 as 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 contents on the estimates, certain key variables that are anticipated to have material impacts 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. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC s Guidelines on Unit Trust Funds. 20

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY INFOATION ON THE FUND The Unit Trust Fund was constituted under the name HwangDBS Select Cash Fund (the Fund ) pursuant to the execution of a Deed dated 21 March 2005 as amended by First Supplemental Deed dated 29 December 2005, Second Supplemental Deed dated 18 June 2007, Third Supplemental Deed dated 15 October 2008, Fourth Supplemental Deed dated 19 March 2010 and Seventh Supplemental Deed dated 19 December The Fund has changed its name from HwangDBS Select Cash Fund to Hwang Select Cash Fund as amended by Fifth Supplemental Deed dated 18 January 2012 and from Hwang Select Cash Fund to Affin Hwang Select Cash Fund as amended by Sixth Supplemental Deed dated 27 June 2014 (the Deeds ) entered into between Affin Hwang Asset Management Berhad (the Manager ), HSBC (Malaysia) Trustees Berhad (the Trustee ) and the registered unitholders of the Fund. The Fund commenced operations on 31 March 2005 and will continue its operations until terminated by the Trustee as provided under Clause 3.1 of the Deed. The Fund may invest in any of the following assets, subject to the Deed, the Fund s objective, the Guidelines, the requirements of the Securities Commission ( SC ) and all relevant laws: (a) (b) (c) (d) (e) (f) (g) Debentures Unlisted securities, including without limitation, securities that have been approved by the relevant regulatory authorities for the listing of and quotation of such securities Money market instruments Deposits Derivatives Units or shares in collective investment schemes Any other form of investments as may be permitted by the SC from time to time which are in line with the objective of the fund All investments will be subjected to the SC s Guidelines on Unit Trust Funds, the Deeds and the objective of the Fund. The main objective of the Fund is to provide investors with a regular income stream and high level of liquidity to meet cash flow requirement while maintaining capital preservation. 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 19 July

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 MAY FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments of the fund are as follows: 2018 Financial assets at fair Loans and value through Note receivables profit or loss Total Unquoted fixed income securities 9-474,941, ,941,487 Deposits with licensed financial institutions 9-942,739, ,739,959 Cash and cash equivalents 15,436-15,436 Amount due from dealer 299, ,931 Total 315,367 1,417,681,446 1,417,996, Unquoted fixed income securities 9-614,149, ,149,351 Deposits with licensed financial institutions 9-919,337, ,337,045 Cash and cash equivalents 6,587-6,587 Total 6,587 1,533,486,396 1,533,492,983 All current liabilities 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 and interest rate 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

24 NOTES TO THE FINANCIAL STATEMENTS 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: Unquoted investments Unquoted fixed income securities designated at fair value through profit or loss* 474,941, ,149,351 * Include interest receivable 5,659,106 (2017: 6,157,957) 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 the unquoted investments, having regard to the historical volatility of the prices. Impact on profit after % change in price Market value tax/nav % 445,818,262 (23,464,119) 0% 469,282, % 492,746,500 23,464, % 577,591,824 (30,399,570) 0% 607,991, % 638,390,964 30,399,570 23

25 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (b) Interest rate risk In general, when interest rates rise, unquoted fixed income securities prices 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 securities till 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 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 % (121,592) (142,256) - 1% 118, ,555 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

26 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk Credit risk refers to the ability of an issuer or counterparty to make timely payments of interest, principals and proceeds from realisation of investments. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. Credit risk arising from placements of 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 Securities Commission 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 Securities Commission s Guideline on Unit Trust Funds. The following table sets out the credit risk concentration and counterparties of the Fund: 2018 Unquoted Deposits fixed with licensed Cash income financial and cash securities institutions equivalents Total Consumer goods AA2 8,113, ,113,668 AA3 44,696, ,696,036 Consumer services AAA 40,778,899-15,436 40,794,335 AA- 66,052, ,052,188 Financials AAA - 602,072, ,072,582 AA1 9,085,004 20,146,203-29,231,207 AA2-40,042,411-40,042,411 AA3 100,850, ,632, ,482,839 AA 15,223, ,223,466 AA- 69,259, ,259,933 A1-118,844, ,844,616 P1 54,233, ,233,973 NR - 20,001,945-20,001,945 Health Care MARC-1 2,883, ,883,228 Industrials AA3 29,134, ,134,788 AA- 28,610, ,610,178 Oil & Gas AA- 3,015, ,015,725 25

27 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) The following table sets out the credit risk concentration of the Fund: (continued) 2018 Unquoted Deposits fixed with licensed Cash income financial and cash securities institutions equivalents Total Telecommunications AA+ 3,003, ,003, ,941, ,739,959 15,436 1,417,696, Consumer goods AA2 25,500, ,500,547 AA+ 20,327, ,327,833 Consumer services AAA 27,646, ,646,690 AA- 35,640, ,640,105 Financials AAA 85,903, ,860,084 6, ,770,282 AA1 5,009,949 54,332,689-59,342,638 AA2 30,315, ,168, ,483,941 AA3 82,570, ,376, ,947,501 AA 10,126, ,126,622 AA- 38,840, ,840,940 A1-30,599,590-30,599,590 NR 122,791, ,791,378 Industrials AAA 4,056, ,056,204 AA2 3,055, ,055,399 AA3 14,167, ,167,506 AA 4,015, ,015,385 AA- 35,100, ,100,575 Telecommunications AA- 30,228, ,228,378 Utilities AA+ 10,173, ,173,356 AA- 28,678, ,678, ,149, ,337,045 6,587 1,533,492,983 The financial assets of the Fund are neither past due nor impaired. 26

28 NOTES TO THE FINANCIAL STATEMENTS 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 to one year Total Amount due to Manager - management fee 599, ,123 Amount due to Trustee 41,939-41,939 Amount due to brokers 9,021,678-9,021,678 Auditors remuneration - 3,491 3,491 Tax agent s fee - 6,146 6,146 Other payables and accruals 38,464 15,635 54,099 9,701,204 25,272 9,726, Amount due to Manager - management fee 652, ,914 Amount due to Trustee 45,704-45,704 Auditors remuneration - 3,491 3,491 Tax agent s fee - 5,643 5,643 Other payables and accruals 41,917 14,306 56, ,535 23, ,975 27

29 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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. 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 (i.e. exit price). 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. 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. 28