PRS Moderate Fund. Interim Report 31 January MANAGER Affin Hwang Asset Management Berhad ( T)

Transcription

1 Affin Hwang PRS Moderate Fund Interim Report 31 January 2017 MANAGER Affin Hwang Asset Management Berhad ( T) TRUSTEE CIMB Commerce Trustee Berhad ( A)

2 AFFIN HWANG PRS MODERATE FUND Interim Report and Unaudited Financial Statements 6 Months Financial Period Ended 31 January 2017 Contents Page PROVIDER S REPORT... 2 FUND PEFORMANCE DATA... 7 SCHEME TRUSTEE S REPORT... 8 STATEMENT OF COMPREHENSIVE INCOME... 9 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 PROVIDER DIRECTORY OF SALES OFFICE

3 PROVIDER S REPORT (1) PROVIDER S VIEW ON PORTFOLIO AND MARKET Fund Type, Category, Objective, Distribution Policy and Benchmark Fund Type Category Objective Distribution Policy Benchmark Growth & Income Core (Moderate) The Fund seeks income and capital growth from its investments to facilitate the accumulation of retirement savings for Members retirement needs The Fund will endeavour to declare distribution on a semi-annual basis after the end of its first financial year, subject to the availability of income 30% FTSE Bursa Malaysia Top 100 Index + 30% Dow Jones / Asia Pacific Select Dividend 30 Index + 40% Maybank 12-Month Fixed Deposit Rate Performance of the Fund (1 August January 2017) For the period from 1 August 2016 to 31 January 2017, the Fund registered a return of 4.74%. The Benchmark for the period registered a return of 4.42%. The Fund thus outperformed the Benchmark by 0.32 percentage points. The Net Asset Value (NAV) per unit of the Fund as at 31 January 2017 was RM while the NAV at 31 July 2016 was RM (See Table 1 for performance of the Fund and Figure 1 for the movement of the Fund versus the Benchmark respectively). Since commencement, the Fund has gained 30.26%, compared to the benchmark that rose 17.11%. The Fund outperformed the Benchmark by percentage points. The Fund has declared a total gross income distribution of RM per unit to date. As such, the Manager believes that the Fund s objective of achieving consistent capital appreciation over the long term has been met. Table 1: Performance of the Fund 6 Months (1/8/16-31/1/17) 1 Year (1/2/16-31/1/17) 3 Years (1/2/14-31/1/17) Since Commencement (23/11/12-31/1/17) Fund 4.74% 13.06% 20.66% 30.26% Benchmark 4.42% 12.62% 9.08% 17.11% Outperformance / (Underperformance) 0.32% 0.44% 11.58% 13.15% Source of Benchmark: Bursa Malaysia Table 2: Average Total Return 1 Year (1/2/16-31/1/17) 3 Years (1/2/14-31/1/17) Since Commencement (23/11/12-31/1/17) Fund 13.06% 6.45% 6.51% Benchmark 12.62% 2.94% 3.84% Outperformance / (Underperformance) 0.44% 3.51% 2.67% Source of Benchmark: Bursa Malaysia 2

4 Table 3: Annual Total Return FYE 2016 (01/8/15-31/7/16) FYE 2015 (01/8/14-31/7/15) FYE 2014 (01/8/13-31/7/14) FYE 2013 (23/11/12-31/7/13) Fund 5.00% 1.83% 9.44% 6.29% Benchmark 3.61% (3.50%) 5.39% 6.43% Outperformance / (Underperformance) 1.39% 5.33% 4.05% (0.14%) Source of Benchmark: Bursa Malaysia Figure 1: Movement of the Fund versus the Benchmark Affin Hwang PRS Moderate Fund Benchmark -1.0 Nov-12 Sep-13 Jul-14 May-15 Mar-16 Jan-17 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: 30% FTSE Bursa Malaysia Top 100 Index, 30% Dow Jones / Asia Pacific Select Dividend 30 Index, 40% Maybank 12- Month Fixed Deposit Rate Strategies Employed (1 August January 2017) The Fund had remained into a portfolio of Collective Investment Schemes (CIS) managed by the Provider. The Manager believes that the portfolio of CIS provides the PRS Members with sufficient diversification across asset classes, and geographical reach that is necessary to mitigate concentration risk. The portfolio of investments is reviewed on a quarterly basis. Nevertheless, the Manager holds the flexibility to rebalance the portfolio, depending on the prevailing market conditions. 3

5 Asset Allocation As at 31 January 2017, the Fund s exposure to the collective investment schemes stood at 99.78% of the Fund s NAV, with the balance in cash. For a snapshot of the Fund s asset mix as at 31 January 2017, please refer to Figure 2. Figure 2: Summary of Asset Allocation Asset Allocation Collective Investment Schemes: 31 January January January 2015 Affin Hwang Select Balanced Fund % 11.77% Affin Hwang Select Bond Fund 15.27% 25.69% 28.67% Affin Hwang Select Dividend Fund 10.02% 15.11% 20.34% Affin Hwang Select Asia (ex Japan) Opportunity Fund 10.70% 14.15% 19.02% Affin Hwang Select Asia Pacific (Ex Japan) Balanced Fund 28.39% 24.28% 9.81% Affin Hwang Select Asia Pacific (Ex Japan) Dividend Fund % Affin Hwang Global Equity Fund 35.40% 9.31% % 99.85% 99.51% Cash 0.22% 0.15% 0.49% Total % % % Over the period under review, the Provider had increased its global equities weighting via higher exposure into the Affin Hwang Global Equity Fund. As of 31 January 2017, investment level into the Affin Hwang Global Equity Fund had increased substantially to 35.40% from previous year s 9.31%. Meanwhile, exposure into regional equities was reduced as investments into Affin Hwang Select Bond Fund, Affin Hwang Select Dividend Fund and Affin Hwang Select Asia (ex Japan) Opportunity Fund was lowered to 15.27%, 10.02% and 10.70% respectively over the same period. Review of Market (1 August January 2017) Market sentiment had improved at the start of the period under review. Nevertheless, politics and policy moves had remained an influential factor for the better part of the period under review. The improving economic conditions in the US had kept markets guessing as to the timeline of the US Federal Reserve s next rate hike which finally took place in December. However, the move was largely overshadowed by the political environment in the US. While polls had remained divided, the surprise win by Donald Trump in the US Presidential race took markets by surprise. Expectations of higher inflation, and signs that the US economy was back on its growth track had boosted market sentiment. The S&P 500 rose 4.8% in local currency terms over the period under review. The lack of clarity provided by the Trump administration on its trade and foreign policy, and the strength of the US Dollar took its toll on emerging markets, causing it to reverse the stronger returns gained in the earlier part of the year. The MSCI Emerging Market Index slid 4.6% in local currency terms in 4Q2016 to end the period under review with a marginal gain of 4.1%. The Asian region took the brunt of the hit, tumbling 6.6% in local currency terms in the final quarter, but still ended marginally higher with a gain of 3.7% for the year. Improved sentiment for the China equity market nudged the MSCI China to end the period as one of the stronger performers with a gain of 8.9% in local currency terms. Stronger than expected economic growth in the fourth quarter of the year, as well as signs of economic stability had propelled the market. While the demise of King Bhumibol of Thailand had an immediate negative market effect, a smooth succession to the throne appeased markets. The military junta that has ruled the government since 2014, put in place plans to reignite the economy s growth engine with major infrastructure projects said to be in a tune of USD40 billion. The Thailand Stock Exchange Index ended the period under review with a 4.7% gain in local currency terms. 4

6 The Philippines equity market turned around from its upward trend after investors sentiment was dampened by the Duterte administration s stance on foreign policy. The Philippines Composite Index tumbled 9.2% in local currency terms over the period under review. Closer to home, optimism that the OPEC and non-opec countries will follow through with its agreement to curb oil production helped push oil prices back into the USD50 per barrel range and provided support for the oil and gas sector. A surprise overnight policy rate (OPR) cut by the central bank in July, while shocking to markets, was taken in positive light by investors. Despite concerns surrounding the 1MDB debacle which continued to cloud over the market as well as the weakness of the Ringgit against the US Dollar, support by domestic investors and the improved oil price had kept the KLCI afloat. The KLCI rose 1.1% in local currency terms over the period under review. On the fixed income front, government bond yields continued to trend higher on the back of higher inflation expectations, and political overhang from up-coming elections in Europe. Yields for the US 10-year Treasuries ended the year at approximately 2.45% - close to where it started. Asian credits had remained relatively more resilient against its developed market counterparts. Similarly, the domestic bond market continued to see robust demand despite the more sizeable issuances, with onshore investors providing steady support. Investment Outlook We expect politics and policies to remain as a key focal point for global markets. The lack of clarity from the Trump administration on their trade and foreign policies, as well as the uncertainties surrounding the upcoming European elections will likely keep global markets challenging. Global economic momentum has been strong, and this has helped corporates deliver better earnings, which we believe, would be supportive of markets. Infrastructure spending will likely be a key driver for growth as regional governments set aside higher spending. Besides the US Federal Reserve, we anticipate global central banks to maintain an accommodative monetary policy thus benefitting financial markets. Advocating a more diversified portfolio, the Manager will look to maintain a wider range of exposure for the Fund. While we expect the infrastructure sector to remain a key theme, we do believe that there will be tactical opportunities to participate in. We do believe the rising interest rate environment stemming out of the US may be beneficial to the banking, and insurance sector. Nevertheless, we maintain our focus on selection investments based on our bottom-up stock picking strategy, and will continue to look out for quality investment opportunities as we build a sustainable long term investment portfolio. 5

7 (2) 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 decisionmaking 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. (3) BREAKDOWN OF UNITHOLDERS BY SIZE AS AT 31 JANUARY 2017 Size of holdings (Units) No. of Unitholders No. of Units held* ( 000) 5,000 and below 1,207 2,669 5,001 to 10,000 1,751 10,716 10,001 to 50,000 2,106 39,677 50,001 to 500, , ,001 and above 3 2,520 Total 5,125 62,414 *Note: Excluding Manager s Stock There is neither any significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the period under review. 6

8 FUND PEFORMANCE DATA Source: CIMB Commerce Trustee Berhad As at As at As at 31 January January January 2015 Total NAV (RM million) NAV per Unit (RM) Units in Circulation (million) Highest NAV Lowest NAV Return of the Fund (%) iii Capital Return (%) i Income Return(%) ii Nil 0.90 Nil Gross Distribution per Unit (sen) Nil 0.50 Nil Net Distribution per Unit (sen) Nil 0.50 Nil Management Expenses 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 31/01/17 NAV per 31/07/16*-1} x 100 = { } x 100 = 4.74% Total Income Return ii = {Income distribution per Unit NAV per ex-date} x 100 = Nil Return of the Fund iii = [{(1 + Capital Return) x (1 + Total Income Return)} 1] x 100 = [{( %) x ( %)} 1] x 100 = 4.74% *Source: CIMB Commerce Trustee Berhad Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. 1 The Fund s MER was lower than previous year due to higher average Net Asset Value per unit over the period under review. 2 The Fund s PTR was higher for the period under review as higher portfolio activities were being carried out compared to the previous period. 7

9 SCHEME TRUSTEE S REPORT TO THE MEMBERS OF AFFIN HWANG PRS MODERATE FUND We, CIMB Commerce Trustee Berhad ( Scheme Trustee ) being the Scheme Trustee of Affin Hwang PRS Moderate Fund ( the Fund ) are of the opinion that Affin Hwang Asset Management Berhad ( the PRS Provider ), acting in the capacity as PRS Provider of the Fund, has fulfilled its duties in the following manner for the 6 months financial period ended 31 January a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the PRS Provider and the Scheme Trustee under the Deeds, the Securities Commission Malaysia s Guidelines on Private Retirement Scheme, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable; b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deeds and relevant regulatory requirements; and c) Creation and cancellation of units have been carried out in accordance with the Deeds and relevant regulatory requirements. For and on behalf of CIMB Commerce Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 20 March

10 STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 INVESTMENT INCOME/ (LOSS) 6 months 6 months financial financial period ended period ended Note RM RM Dividend income 729, ,006 Interest income 3,475 - Net gain/ (loss) on financial assets at fair value through profit or loss 9 737,889 (1,037,974) 1,471,212 (648,968) EXPENSES Management fee 4 (12,570) (11,051) Trustee fee 5 (5,994) (3,930) PPA administration fee 6 (5,994) (3,930) Auditors' remuneration (4,275) (4,283) Tax agent's fee (1,861) (1,789) Other expenses (6,120) (3,827) (36,814) (28,810) NET PROFIT/ (LOSS) BEFORE TAXATION 1,434,398 (677,778) TAXATION NET PROFIT/ (LOSS) AFTER TAX AND TOTAL COMPREHENSIVE INCOME/ (LOSS) FOR THE FINANCIAL PERIOD 1,434,398 (677,778) Net profit/ (loss) after taxation is made up of the following: Realised amount 690, ,221 Unrealised amount 743,664 (1,057,999) 1,434,398 (677,778) The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 9

11 STATEMENT OF FINANCIAL POSITION FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 Note RM RM ASSETS Financial assets at fair value through profit or loss 9 37,189,119 22,063,958 Cash and cash equivalents 33,123 53,581 Amount due from Provider - creation of units 100,715 7,499 - Collective Investment Scheme ( CIS ) trade settlement 20,000 - TOTAL ASSETS 37,342,957 22,125,038 LIABILITIES Amount due to Provider - cancellation of units 45, management fee 2,496 1,418 Amount due to Trustee 1, Amount due to PPA 2, Auditors remuneration 4,275 12,783 Tax agent s fee 5,961 5,339 Other payables and accruals 9,166 5,721 TOTAL LIABILITIES 71,135 27,321 NET ASSET VALUE OF THE FUND 37,271,822 22,097,717 EQUITY Members capital 34,197,727 22,074,130 Retained earnings 3,074,095 23,587 NET ASSETS ATTRIBUTABLE TO MEMBERS 37,271,822 22,097,717 NUMBER OF UNITS IN CIRCULATION 10 62,435,000 41,474,000 NET ASSET VALUE PER UNIT (RM) 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 CHANGES IN EQUITY FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 Members Retained capital earnings Total RM RM RM Balance as at 1 August ,196,829 1,639,697 25,836,526 Total comprehensive income for the financial period - 1,434,398 1,434,398 Movement in members capital: Creation of units arising from applications 10,437,737-10,437,737 Cancellation of units (436,839) - (436,839) Balance as at 31 January ,197,727 3,074,095 37,271,822 Balance as at 1 August ,360, ,955 17,243,456 Total comprehensive loss for the financial period - (677,778) (677,778) Distribution (Note 8) - (181,590) (181,590) Movement in members capital: Creation of units arising from applications 5,569,469-5,569,469 Creation of units arising from distribution 181, ,590 Cancellation of units (37,430) - (37,430) Balance as at 31 January ,074,130 23,587 22,097,717 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 CASH FLOWS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 CASH FLOW FROM OPERATING ACTIVITIES 6 months 6 months financial financial period ended period ended RM RM Proceeds from sale of investments 4,885,012 2,830,147 Purchase of investments (15,684,860) (8,939,153) Dividends received 729, ,006 Interest received 3,475 - Management fee paid (11,566) (11,450) Trustee s fee paid (5,598) (3,748) Payment for other fees and expenses (17,923) (6,356) Net cash used in operating activities (10,101,612) (5,741,554) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from creation of units 10,370,667 5,892,033 Payments for cancellation of units (391,193) (36,894) Payment for distribution - (181,590) Net cash generated from financing activities 9,979,474 5,673,549 NET DECREASE IN CASH AND CASH EQUIVALENTS (122,138) (68,005) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 155, ,586 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 33,123 53,581 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 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 Provider to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Provider 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 J. (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 August 2016: Amendments to MFRS 101 Presentation of financial statements - Disclosure initiative Annual Improvements to MFRSs Cycle The adoption of these amendments did not have any impact on the current period 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 August 2017 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 August 2018 MFRS 15 Revenue from contracts with customers (effective from 1 January 2018) replaces MFRS 118 Revenue and MFRS 111 Construction contracts and related interpretations. The standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of goods or services, and thus has the ability to direct the use of and obtain the benefits from the goods or services. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (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 (continued): (ii) Financial year beginning on/after 1 August 2018 (continued): 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). 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 Dividend income is recognised on the ex-dividend date, when the right to receive the dividend has been established. For collective investment schemes ( CIS ), realised gains and losses on sale of investments are accounted for as the difference between the net disposal proceeds and the carrying amount of the investments, determined on a weighted average cost basis C DIVIDEND DISTRIBUTION A distribution to the Fund s members is accounted for 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. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) D 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. 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 the Fund s functional and presentation currency. F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in CIS 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 Provider. Financial liabilities are classified according to the substance of the contractual arrangements entered into the definitions of a financial liability. The Fund classifies amount due to Provider, amount due to Trustee, amount due to PPA, auditors remuneration, tax agent s fee and other payables and accruals as other financial liabilities. (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 de-recognised 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 de-recognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) F FINANCIAL ASSETS AND FINAICIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) 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. Investment in CIS is valued at the last published net asset value ( NAV ) per unit at the date of the statement of financial position. Deposit 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 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 year 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 held-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 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 at bank which is subject to an insignificant risk of changes in value. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) H MEMBERS CAPITAL The members 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 member 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 period if member 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 members with the total number of outstanding units. In accordance with the SC Guidelines on Private Retirement Schemes, investment positions are valued based on the last traded market price for the purpose of determining the net asset value per unit for creations and cancellations. I 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 Provider that makes strategic decisions. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) J CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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 year. Although these estimates are based on the Provider 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 judgements are continually evaluated by the Provider 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 Guidelines on Private Retirement Scheme. 18

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY INFORMATION ON THE FUND The Private Retirement Scheme ( PRS ) was constituted under the name Hwang PRS Moderate Fund (the Fund ) pursuant to the execution of a Deed dated 25 October 2012 as modified by Supplement Deed dated 17 June 2013 and Third Supplement Deed dated 17 October The Fund has changed its name from Hwang PRS Moderate Fund to Affin Hwang PRS Moderate Fund as amended by the Second Supplemental Deed dated 24 July 2014 (the Deeds ) entered into between Affin Hwang Asset Management Berhad (the Provider ) and CIMB Commerce Trustees Berhad (the Trustee ). The Fund commenced operations on 2 November 2012 and will continue its operations until terminated by the Trustee as provided under Clause 14.4 of the Deed. The Fund may invest in any of the following investment: a) Listed securities, b) Fixed deposit with Financial Institutions; c) Money market instruments such as negotiable certificates of deposits and bankers acceptance; d) Government bonds, treasury bills and other government approved or guaranteed bonds; e) Debentures including private debt securities and bonds; f) Structured products and equity linked notes; g) Units/ shares in collective investment schemes, both local and foreign; h) Derivatives; and i) Any other form of investments permitted by Securities Commission from time to time. All investments will be subjected to the SC s Guidelines on Private Retirement Schemes, the Deed and the objective of the Fund. The main objective of the Fund is to seek income and capital growth from its investment to facilitate the accumulation of retirement savings for members retirement needs. The Provider is a company incorporated in Malaysia. The principal activities of the Provider 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 Provider on 20 March

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments are as follows: Financial assets at fair Loans and value through Note receivables profit or loss Total 2017 RM RM RM Collective investment scheme 9-37,189,119 37,189,119 Cash and cash equivalents 33,123-33,123 Amount due from Provider - creation of units 100, ,715 - Collective Investment Scheme (CIS) trade settlement 20,000-20,000 Total 153,838 37,189,119 37,342, Collective investment scheme 9-22,063,958 22,063,958 Cash and cash equivalents 53,581-53,581 Amount due from Provider - creation of units 7,499-7,499 Total 61,080 22,063,958 22,125,038 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, capital risk and collective investment scheme risk. Financial risk management is carried out through internal control processes adopted by the Provider and adherence to the investment restrictions as stipulated by the SC Guidelines on Private Retirement Schemes. 20

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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 Provider manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio. The Fund s overall exposure to price risk was as follow: RM RM Collective investment schemes Collective investment schemes designated at fair value through profit or loss 37,189,119 22,063,958 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 CIS, having regard to the historical volatility of the prices. Impact on profit after % change in price Market value tax/nav RM RM % 35,329,663 (1,859,456) 0% 37,189, % 39,048,575 1,859, % 20,960,760 (1,103,198) 0% 22,063, % 23,167,156 1,103,198 21

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (b) Interest rate risk Interest rate risk arises from the effects of fluctuations in the prevailing levels of market interest rates on the fair value of financial assets and liabilities and future cash flows. The Fund s exposure to the interest rate risk is mainly confined to short term placement with a financial institution. The Manager overcomes this exposure by way of maintaining deposits on a short term basis. The Fund s exposure to interest rate risk associated with deposit with a licensed financial institution is not material as the deposit is held on a short term basis. 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 Provider manages the credit risk by undertaking credit evaluation to minimise risk. The settlement terms of the proceeds from the creation of units receivable from the Provider are governed by the SC Guidelines on Private Retirement Schemes. The following table sets out the credit risk concentration of the Fund: 2017 Cash Amount and cash due from equivalents Provider Total RM RM RM Finance - AAA 33,123-33,123 Others - NR - 120, ,715 33, , , Finance - AAA 53,581-53,581 Others - NR - 7,499 7,499 53,581 7,499 61,080 The financial assets of the Fund are neither past due nor impaired. 22

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 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 Provider manages this risk by maintaining sufficient level of liquid assets to meet anticipated payment and cancellations of unit by members. Liquid assets comprise cash 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 RM RM RM Amount due to Provider - management fee 2,496-2,496 - cancellation units 45,646-45,646 Amount due to Trustee 1,253-1,253 Amount due to PPA 2,338-2,338 Auditors remuneration - 4,275 4,275 Tax agent s fee - 5,961 5,961 Other payables and accruals 365 8,801 9,166 52,098 19,037 71, Amount due to Provider - management fee 1,418-1,418 - cancellation units Amount due to Trustee Amount due to PPA Auditors remuneration - 12,783 12,783 Tax agent s fee - 5,339 5,339 Other payables and accruals 177 5,544 5,721 3,655 23,666 27,321 23

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Capital risk The capital of the Fund is represented by equity consisting of members 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 members. 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 members and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. Collective investment scheme risk This risk is associated with the Fund s investment in CIS exposing the Fund to the inherent investment risks faced by the CIS. The Fund may also be exposed to liquidity risk which may arise from the inability of the CIS to meet redemption amounts, as well as the risk of not being aligned with the Fund s mandate in the event the CIS that the Fund is invested into breaches it s asset allocation limits. Therefore, should any of the risks faced by the CIS materialised, the performance of the Fund will be affected. 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 period 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) 24

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 3 FAIR VALUE ESTIMATION (CONTINUED) (i) Fair value hierarchy (continued) 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. The following table analyses within the fair value hierarchy the Fund s financial assets (by class) measured at fair value: 2017 Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss at inception - collective investment schemes 37,189, ,189, Financial assets at fair value through profit or loss at inception - collective investment schemes 22,063, ,063,958 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include collective investment schemes. The Fund does not adjust the quoted prices for these instruments. (ii) The carrying values of cash and cash equivalents, amount due from Provider and all current liabilities are a reasonable approximation of the fair values due to their short term nature. 25

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 4 MANAGEMENT FEE In accordance with the Deed, the Provider is entitled to a management fee at a rate not exceeding 3.00% per annum on the NAV of the Fund calculated on a daily basis. For the financial period ended 31 January 2017, the management fee is recognised at a rate of 1.50% (2016: 1.50%) per annum on the NAV of the Fund, calculated on a daily basis. As this Fund invests in units of the Affin Hwang Select Asia (ex Japan) Opportunity Fund, Affin Hwang Select Bond Fund, Affin Hwang Select Dividend Fund, Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund and Affin Hwang World Series - Global Equity Fund, any management fee charged to CIS are fully refunded to this Fund. Accordingly, there is no double charging of management fee. There will be no further liability to the Provider in respect of management fee, other than the amounts recognised above. 5 TRUSTEE FEE In accordance with the Deed, the Trustee is entitled to an annual fee at a rate not exceeding 1.00% per annum on the NAV of the Fund. For the financial period ended 31 January 2017, the Trustee s 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. There will be no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 6 PRIVATE PENSION ADMINISTRATOR ( PPA ) ADMINISTRATION FEE For the financial period ended 31 January 2017, the PPA administration 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. There will be no further liability to the PPA in respect of the PPA administration fee other than the amount recognised above. 26

28 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 7 TAXATION 6 months 6 months financial financial period ended period ended RM RM Current taxation - local - - The numerical reconciliation between net profit/ (loss) 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 RM RM Net profit/ (loss) before taxation 1,434,398 (677,778) Tax at Malaysian statutory rate of 24% (2016: 24%) 344,256 (162,667) Tax effects of: (Investment income not subject to tax)/ Investment loss exempt from tax (353,091) 155,753 Expenses not deductible for tax purposes 8,359 6,450 Restriction on tax deductible for expenses for PRS Tax expense

29 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2017 (CONTINUED) 8 DISTRIBUTION Distribution to member are from the following sources: 6 months 6 months financial financial period ended period ended RM RM Previous year s realised income - 199,749 Less: Expenses - (18,159) - 181,590 Gross and net distribution per unit (sen) Ex date Gross distribution per unit is derived from gross realised income less expenses dividend by the number of units in circulation, while net distribution per unit is derived from gross realised income less expenses and taxation divided by the number of units in circulation. Included in distribution for the financial year is an amount of RM Nil (2016: RM199,749) made from previous year s realised income. 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss at inception: - collective investment scheme local 37,189,119 22,063,958 Net gain /(loss) on assets at fair value through profit or loss - realised (loss)/ gain on sale of investments (5,775) 20,025 - unrealised gain/ (loss) 743,664 (1,057,999) 737,889 (1,037,974) 28