AFFIN HWANG AIIMAN GROWTH FUND

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2 AFFIN HWANG AIIMAN GROWTH FUND Interim Report and Unaudited Financial Statements For the 6 Months Financial Period Ended 28 February 2018 Content Page FUND INFORMATION... 2 FUND PERFORMANCE DATA... 3 MANAGER S REPORT... 5 TRUSTEE S REPORT... 8 SHARIAH ADVISER 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 INFORMATION Fund Name Affin Hwang Aiiman Growth Fund Fund Type Growth Fund Category Investment Objective Benchmark Distribution Policy Equity (Shariah) To achieve consistent capital appreciation over medium to long term by investing in equities and other approved investments which harmonise with Islamic philosophy and laws FTSE Bursa Malaysia Emas Shariah Index (FBMSHA), which is obtainable from Bursa Malaysia. The Fund endevours to distribute income, if any, on an annual basis. However, the amount of income available for distribution may fluctuate from year to year. BREAKDOWN OF UNITHOLDERS BY SIZE RM CLASS AS AT 28 FEBRUARY 2018 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below 108, ,433 5,001 to 10,000 1,339 9,393 10,001 to 50,000 1,622 34,326 50,001 to 500, , ,001 and above ,140 Total 111, ,415 * Note: Excluding Manager s stock 2

4 FUND PERFORMANCE DATA Category As at 28 Feb 2018 (%) As at 28 Feb 2017 (%) As at 29 Feb 2016 (%) Portfolio composition Shariah-compliant quoted equities local - Basic materials Construction Consumer products Consumer services Finnce Healthcare Industrials Infrastructure Oil & gas Planttion Properties REITs Technology Telecommunications Trading / services Utilities Warrant Total Shariah-compliant quoted equities local Shariah-compliant collective investment scheme local - TradePlus Shariah Gold Tracker Total Shariah-compliant quoted collective investment scheme local Cash & cash equivalent Total Total NAV (RM million) NAV per Unit (RM) Unit in Circulation (million) Highest NAV Lowest NAV Return of the Fund (%) iii Capital Growth (%) i Income Distribution (%) ii Nil Nil Nil Gross Distribution per Unit (sen) Nil Nil Nil Net Distribution per Unit (sen) Nil Nil Nil 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 1 The MER of the Fund was lower than previous year due to higher average net asset value of the Fund for the financial period. 2 The increase in the Fund s PTR was due to higher average sum of acquisition and disposal during the period under review. 3

5 Capital Return i = (NAV per 28/02/18 NAV per 31/8/17* - 1) x 100 = ( ) x 100 = 2.71% Total Income Return ii = Nil Return of the Fund iii = [{(1 + Capital Return) x (1 + Income Return)} 1] x 100 = [{( %) x ( %)} 1] x 100 = 2.71% * Source HSBC Trustee Table 1: Performance of the Fund 6 Months (1/9/17-28/2/18) 1 Year (1/3/17-28/2/18) 3 Years (1/3/15-28/2/18) 5 Years (1/3/13-28/2/18) Since Commencement (29/10/02-28/2/18) Fund 2.71% 9.78% 13.49% 46.56% % Benchmark 5.32% 8.39% 2.34% 20.91% % Outperformance / (Underperformance) (2.61%) 1.39% 11.15% 25.65% % Source of Benchmark: Bursa Malaysia Table 2: Average Total Return 1 Year (1/3/17-28/2/18) 3 Years (1/3/15-28/2/18) 5 Years (1/3/13-28/2/18) Since Commencement (29/10/02-28/2/18) Fund 9.78% 4.30% 7.94% 12.02% Benchmark 8.39% 0.77% 3.87% 6.98% Outperformance / (Underperformance) 1.39% 3.53% 4.07% 5.04% Source of Benchmark: Bursa Malaysia Table 3: Annual Total Return FYE 2017 (01/9/16-31/8/17) FYE 2016 (01/9/15-31/8/16) FYE 2015 (01/9/14-31/8/15) FYE 2014 (01/9/13-31/8/14) FYE 2013 (01/9/12-31/8/13) Fund 11.25% 8.19% (11.27%) 17.26% 14.56% Benchmark 2.56% 8.63% (13.44%) 9.74% 5.88% Outperformance / (Underperformance) 8.69% (0.44%) 2.17% 7.52% 8.68% Source of Benchmark: Bursa Malaysia 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 1 September 2017 to 28 February 2018, the Fund registered a return of 2.71%. The Net Asset Value (NAV) per unit of the Fund as at 28 February 2018 was RM while the NAV at 31 August 2017 was RM The Benchmark for the period registered a return of 5.32%. The Fund underperformed the Benchmark by 2.61 percentage points (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 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 Bursa Malaysia. Benchmark: FTSE Bursa Malaysia Emas Shariah Index (FBMSHA) Income Distribution / Unit Split No income distribution or unit split was declared for the financial period ended 28 February

7 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 28 Feb Feb Feb 2016 (%) (%) (%) Shariah-compliant quoted equities local Shariah-compliant collective investment scheme local Cash & cash equivalent Total As at 28 February 2018, the Fund was 78.64% invested with 77.48% in Shariah-compliant equities, 1.16% in Shariah-compliant collective investment scheme (CIS), and the remaining was held in cash and cash equivalent. During the period under review, the Manager had substantially reduced its investment holdings, especially within the construction and trading/services sector which stood at 9.01% and 16.34% respectively as at end February Meanwhile, the Manager had added allocations into TradePlus Shariah Gold Tracker by 1.16% over the same period. Correspondingly, cash level of the Fund increased to a high level of 21.36% over the same period. Strategies Employed We are shifting the portfolio towards a rising inflation environment, which should mean stronger growth, higher rates and better commodity performance. We would express this view in our portfolios through the banks & insurance companies, which are geared towards economic growth and rising rates, large cap oil & gas stocks and net cash companies. With the return of volatility in markets, we are gradually raising our cash holdings but continue to remain invested to capture growth. As we approach the late stage of the cycle after a long economic run since 2009 with massive liquidity in the system, markets tend to give the sweetest performance at late stage rallies. We want to capture some of these returns but careful also not to overstay. Market Review With the return of growth, the year 2017 has seen an economic upswing that has lifted both global and regional markets in terms of asset returns and earnings recovery. Accelerating growth, but benign inflation has kept policy tightening at bay, creating the right conditions for risk-assets to perform well under a Goldilocks environment. Global benchmarks including the S&P 500 and the Dow Jones Industrial Index vaulted by over 13% (local currency terms) in the period under review. Supportive macroeconomic data, improving fundamentals and a positive earnings revision cycle have whet investors appetite leading to a boost in sentiment. In Europe, growth has become more entrenched as its economy expanded at its fastest pace in a decade, growing by 2.5% in Tightening labour conditions, a strong cyclical momentum and broad improvement in business sentiment indicators point to healthy expansion, despite uncertainties surrounding ongoing Brexit negotiations and political risks arising from elections in France, Germany and Netherlands. In China, an acceleration in public-private partnership (PPP) projects drove infrastructure spending demand, whilst supply-side and SOE capacity reforms helped reflate raw material and commodity prices which spurred restocking activities. Rising household consumption and increased urbanisation through strong wage increases will place the planks for a long growth runway for its new economy sectors. The MSCI China gained 14.2% in the period under review, whilst the Hang Seng Index returned 10.3% driven by performance from tech and strong earnings momentum from the sector. South Korea s Kospi rallied by 21.8% in 2017, as prospects of improved capital repayment following chaebol reforms in the country could potentially unlock value for shareholders. Possibility of a long-drawn-out conflict with its belligerent northern neighbour, including outward displays of military force and continued sabrerattling did little to sour the market s rally, having little or any significant long-term impact. 6

8 On the domestic-front, the benchmark FBMKLCI climbed 9.5% to close at 1, points in Fuelled by exports growth and the strengthening Ringgit, the local market staged a strong performance last year, though still lagged behind other Asian markets. Overall, the local market reached an inflection point with earnings growing by 7% in 2017 as opposed to negative growth recorded from , for 3 consecutive years. The entry of a new management into Permodalan Nasional Berhad (PNB) which subsequently led to a series of strategic corporate and restructuring exercises within its stable of companies proved effective as well in helping unlock value within its investee companies and became a major investment theme in The strong market rally subsequently took a breather in early-february 18, as markets entered correction territory as strong inflation & labour data prompted concerns that the US Federal Reserve would accelerate the pace of interest rate hikes. After a strong start to the year, global equities were broadly down as a bond rout deepened which lifted US Treasury Yields to a 4-year high of 2.84%. Nonetheless, the current pullback is likely an overdue correction, as markets begin to reprice itself and settle to more healthy levels. The broad economic fundamentals has not shifted significantly, and a positive earnings revision cycle continue to underpin and provide support for valuations. Investment Outlook Volatility could pick-up in the year, as markets adjust to a reversal of a rate-cut cycle, with global central banks expected to gradually lift interest rates and embark on their balance-sheet unwinding. The gradual withdrawal of monetary stimulus would be a key focal point in markets, where markets are seen underpricing the impact of rate hikes by the US Federal Reserve, and tighter liquidity conditions. Inflation data may be a key-data point to monitor in coming quarters, especially if inflation picks up more than market s expectation, which would lead to an acceleration in rate hikes. In the domestic market, we expect growth to spread as positive spillover effects from exports are starting to trickle down into domestic demand, which would be supportive of growth. With also less selling pressure going into 2018 and with potentially better micro support for the GDP number, we think market prospects for the KLCI should be more vibrant. Markets will look to better earnings growth as catalyst, where we expect the positive momentum will carry through into 2018 as strong GDP data and Ringgit strength will support consensus forecast of 5-7% growth this year. Though markets could turn more volatile, in the lead up to the 14th General Election (GE14) which is due by August 18. 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. 7

9 TRUSTEE S REPORT TO THE UNITHOLDERS OF AFFIN HWANG AIIMAN GROWTH FUND We have acted as Trustee of Affin Hwang Aiiman Growth Fund ( the Fund ) for the financial period ended 28 February 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. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur 18 April

10 SHARIAH ADVISER S REPORT TO THE UNITHOLDERS OF AFFIN HWANG AIIMAN GROWTH FUND We have acted as the Shariah Adviser of Affin Hwang Aiiman Growth Fund. Our responsibility is to ensure that the procedures and processes employed by Affin Hwang Asset Management Berhad and the provisions of the Deed dated 3 October 2002, First Supplemental Deed dated 29 December 2005, Second Supplemental Deed dated 18 June 2007, Third supplemental Deed dated 23 September 2008, Fourth Supplemental Deed dated 20 November 2008, Fifth Supplemental Deed dated 18 January 2012, Sixth Supplemental Deed dated 27 June 2014 and Seventh Supplemental Deed dated 30 November 2017 are in accordance with Shariah principles. In our opinion, Affin Hwang Asset Management Berhad has managed and administered Affin Hwang Aiiman Growth Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the financial period ended 28 February In addition, we also confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission ( SACSC ). As for the securities which are not certified by the SACSC, we have reviewed the said securities and opine that these securities are designated as Shariah-compliant. For Amanie Advisors Sdn Bhd DATUK DR MOHD DAUD BAKAR Executive Chairman Kuala Lumpur 18 April

11 STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 INVESTMENT INCOME 6 months 6 months financial financial period ended period ended Note RM RM Dividend income 5,834,382 5,276,213 Profit from short term Shariah-based deposits 928, ,867 Net gain on financial assets at fair value through profit or loss 7 7,607,512 11,934,391 Rebate of management fee 99,345-14,469,772 18,168,471 EXPENSES Management fee 4 (3,009,889) (2,718,341) Trustee fee 5 (140,461) (128,365) Auditors' remuneration (3,719) (3,273) Tax agent's fee (1,985) (1,985) Transaction cost (964,846) (421,801) Other expenses (244,548) (295,073) (4,365,448) (3,568,838) NET PROFIT BEFORE TAXATION 10,104,324 14,599,633 TAXATION 6 (27,758) (20,696) NET PROFIT AFTER TAX AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 10,076,566 14,578,937 Net profit after taxation is made up of the following: Realised amount 14,669,040 (11,765,147) Unrealised amount (4,592,474) 26,344,084 10,076,566 14,578,937 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 28 FEBRUARY 2018 Note RM RM ASSETS Financial assets at fair value through profit or loss 7 381,862, ,063,525 Cash and cash equivalents 8 104,055,168 31,861,315 Dividend receivables 79, ,025 Amount due from Manager - creation of units 559, rebate of management fee receivables 5, ,793 Amount due from brokers - 954,829 TOTAL ASSETS 486,561, ,616,487 LIABILITIES Amount due to Manager - management fee 557, ,653 - cancellation of units 358,274 - Amount due to Trustee 26,012 19,770 Amount due to brokers - 2,403,802 Auditors remuneration 3,719 3,273 Tax agent s fee 5,535 5,385 Other payables and accruals 39,053 32,214 TOTAL LIABILITIES 989,983 2,888,097 NET ASSET VALUE OF THE FUND 485,571, ,728,390 EQUITY Unitholders capital 426,653, ,307,208 Retained earnings 58,917,738 31,421,182 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 485,571, ,728,390 NUMBER OF UNITS IN CIRCULATION 9 427,806, ,409,000 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. 11

13 STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 Unitholders Retained capital earnings Total RM RM RM Balance as at 1 September ,893,088 48,841, ,734,260 Total comprehensive income for the financial period - 10,076,566 10,076,566 Movement in unitholders capital: Creation of units 178,612, ,612,546 Cancellation of units (54,852,031) - (54,852,031) Balance as at 28 February ,653,603 58,917, ,571,341 Balance as at 1 September ,098,915 16,842, ,941,160 Total comprehensive income for the financial period - 14,578,937 14,578,937 Movement in unitholders capital: Creation of units 15,285,587-15,285,587 Cancellation of units (37,077,294) - (37,077,294) Balance as at 28 February ,307,208 31,421, ,728,390 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 28 FEBRUARY 2018 CASH FLOW FROM OPERATING ACTIVITIES 6 months 6 months financial financial period ended period ended Note RM RM Proceeds from sale of Shariah-compliant investments 135,193,722 75,888,083 Purchase of Shariah-compliant investments (189,190,169) (92,949,240) Dividends received 6,065,353 4,930,028 Profit from short term Shariah-based deposits 928, ,867 Rebate of management received 93,706 - Management fee paid (2,901,967) (2,781,611) Trustee s fee paid (135,424) (131,318) Payment for other fees and expenses (1,213,027) (727,031) Net cash used in operating activities (51,159,273) (14,813,222) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from creation of units 178,143,435 14,464,794 Payments for cancellation of units (54,690,251) (37,100,552) Net cash generated from/(used in) financing activities 123,453,184 (22,635,758) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 72,293,911 (37,448,980) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 31,761,257 69,310,295 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 8 104,055,168 31,861,315 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 28 FEBRUARY 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 period. 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 L. (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 September 2017: Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative. The adoption of these amendments did not have any impact on the current period and is not likely to affect future years. (b) The new standard and amendments to the published standard that is applicable to the Fund but not yet effective and has not been early adopted is as follows: (i) Financial year beginning on/after 1 September 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 standard and amendments to the published standard that is applicable to the Fund but not yet effective and has not been early adopted is as follows: (continued) (i) Financial year beginning on/after 1 September 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 September 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 new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Fund does not have any such liabilities. 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 Profit from short term Shariah-based deposits is recognised based on effective profit rate method on an accrual basis. Dividend income from Shariah-compliant quoted securities are recognised on the ex-dividend date, when the right to receive the dividend has been established. For Shariah-compliant quoted 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 a weighted average cost basis. C DIVIDEND 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 TRANSACTION COSTS Transaction costs are costs incurred to acquire financial assets or liabilities at fair value through profit or loss. They include the bid-ask spread, fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. E TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable profits earning during the financial period. F 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. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in Shariah-compliant quoted investments 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. Financing 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 financing and receivables comprise cash and cash equivalents, dividend receivables, amount due from Manager and amount due from brokers. 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 brokers, 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. Shariah-compliant investments are initially recognised at fair value. Transaction costs are expensed in the statement of comprehensive income. 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 de-recognised 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. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payments is established. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) If a valuation based on the market price does not represent the fair value of the securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the securities are valued as determined in good faith by the Manager, based on the methods or basis approved by the Trustee after appropriate technical consultation. Shariah-based deposits with licensed financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the period from the date of placement to the date of maturity of the deposits. Financing and receivables and other financial liabilities are subsequently carried at amortised cost using the effective profit 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. 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 profit rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If financing and receivables or a held-to-maturity investment has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit 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. H CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash and bank balances and short term Shariah-based 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. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I AMOUNT DUE FROM/(TO) BROKERS Amounts due from and to brokers 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 profit method, less provision for impairment for amounts due from brokers. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant broker. Significant financial difficulties of the broker, 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, profit income is recognised using the rate of profit used to discount the future cash flows for the purpose of measuring the impairment loss. The effective profit method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the profit income or loans expense over the relevant period. The effective profit 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 period, to the net carrying amount of the financial asset or financial liability. When calculating the effective profit 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 profit rate, transaction costs and all other premiums or discounts. J UNITHOLDERS CAPITAL The unit holders 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 period if unit holder 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 unit holders with the total number of outstanding units. 19

21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES K 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. L CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES 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 content of the estimates, certain key variables that are anticipated to have material impact 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 Shariah-compliant 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 Unit Trust Funds. 20

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY INFORMATION ON THE FUND The Unit Trust Fund was constituted under the name HwangDBS Dana Izdihar (the Fund ) pursuant to the execution of a Deed dated 3 October 2002, First Supplemental Deed dated 29 December 2005, Second Supplemental Deed dated 18 June 2007, Third Supplemental Deed dated 23 September 2008 and Seventh Supplemental Deed dated 30 November The Fund has changed its name from HwangDBS Dana Izdihar to HwangDBS AIIMAN Growth Fund as amended by the Fourth Supplemental Deed dated 20 November 2008, from HwangDBS AIIMAN Growth Fund to Hwang AIIMAN Growth Fund as amended by the Fifth Supplemental Deed dated 18 January 2012 and from Hwang AIIMAN Growth Fund to Affin Hwang Aiiman Growth Fund as amended by the Sixth Supplemental Deed dated 27 June 2014 (the Deeds ) entered into between Affin Hwang Asset Management Berhad (the Manager ), HSBC (Malaysia) Trustee Berhad (the Trustee ) and the registered unitholders of the Fund. The Fund commenced operations on 8 October 2002 and will continue its operations until terminated by the Trustee as provided under Clause 4.2 of the Deed. The Fund will invest in the following assets, subject to the Deed, the objective of the Fund, the Guidelines and all relevant laws: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Shariah compliant securities of companies listed on the recognised Malaysian stock exchange or any other exchanges where the regulatory authority is a member of the International Organisation of Securities Commissions (IOSCO); Unlisted Shariah-compliant securities; Shariah-compliant warrants; Government Investment Issues (GII), Islamic accepted bills, Bank Negara Malaysia negotiable notes, negotiable Islamic debt certificate (NIDC), Islamic negotiable instrument of deposit (INID), Cagamas mudharabah bonds and any other government Islamic papers; Other Shariah-compliant obligations issued or guaranteed by the Malaysian government, Bank Negara Malaysia, state governments and government-related agencies; Sukuk; Shariah-based deposits with financial institutions, Bank Islam Malaysia Berhad and placements of money with investment banks; Islamic money market instruments; Shariah-compliant collective investment schemes; and Any other form of Shariah-compliant investments as may be permitted by SC and/or Shariah Adviser from time to time that is in line with the Fund s objectives. All investments will be subjected to the Securities Commission s ( SC ) Guidelines on Unit Trust Funds, the Deeds, and the objectives of the Fund. The main objective of the Fund is to achieve consistent capital appreciation over the medium to long term by investing mainly in listed equities and other approved investments which harmonise with Islamic philosophy and laws. 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 18 April

23 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments are as follows: 2018 Financial assets at fair Financing and value through Note receivables profit or loss Total RM RM RM Shariah-compliant collective investment schemes - 5,643,000 5,643,000 Shariah-compliant quoted equities 7-376,219, ,219,113 Cash and cash equivalents 8 104,055, ,055,168 Amount due from Manager - - creation of units 559, ,054 - rebate management fee receivable 5,639-5,639 Dividend receivables 79,350-79,350 Total 104,699, ,862, ,561, Shariah-compliant quoted equities 7-335,063, ,063,525 Cash and cash equivalents 8 31,861,315-31,861,315 Amount due from Manager 820, ,793 Dividend receivables 916, ,025 Amount due from brokers 954, ,829 Total 34,552, ,063, ,616,487 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), liquidity risk, credit risk, capital risk and reclassification of Shariah status 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: RM RM Collective investment schemes Shariah-compliant collective investment schemes designated at fair value through profit or loss 5,643,000 - Shariah compliant quoted investments Shariah compliant quoted equities designated at fair value through profit or loss 376,219, ,063,525 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 quoted securities, having regard to the historical volatility of the prices. Impact on profit after % change in price Market value tax/nav RM RM % 362,769,007 (19,093,106) 0% 381,862, % 400,955,219 19,093, % 318,310,349 (16,753,176) 0% 335,063, % 351,816,701 16,753,176 (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 Shariah-based deposit placements with licensed financial institutions. The Manager overcomes this exposure by way of maintaining Shariah-based deposits on short term basis. The Fund s exposure to interest rate risk associated with Shariah-based deposits with licensed financial institutions is not material as the deposits are held on a short term basis. 23

25 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 Shariah-based liquid assets to meet anticipated payments and cancellation of units by unitholders. Shariah-based liquid assets comprise cash, Shariah-based deposits with licensed financial institutions 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 2018 RM RM RM Amount due to Manager - management fee 557, ,390 - cancellation of units 358, ,274 Amount due to Trustee 26,012-26,012 Auditors remuneration - 3,719 3,719 Tax agent s fee - 5,535 5,535 Other payables and accruals 34,670 4,383 39, ,346 13, , Amount due to Manager - management fee 423, ,653 Amount due to Trustee 19,770-19,770 Amount due to brokers 2,403,802-2,403,802 Auditors remuneration - 3,273 3,273 Tax agent s fee - 5,385 5,385 Other payables and accruals 26,605 5,609 32,214 2,873,830 14,267 2,888,097 Credit risk Credit risk refers to the ability of any issuer or counterparty to make timely payments of profit, principals and proceeds from realisation of Shariah-compliant investments. The Manager manages the credit risk by undertaking credit evaluation to minimise risk. The settlement terms of amount due from brokers are governed by the relevant rules and regulations as prescribed by the respective stock exchanges. 24

26 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) Credit risk arising from placements of short term Shariah-based deposits in licensed financial institutions is managed by ensuring that the Fund will only place Shariah-based deposits in reputable licensed financial institutions. The settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the Securities Commission s Guidelines on Unit Trust Funds. The following table sets out the credit risk concentration and counterparties of the Fund: 2018 Cash and cash Other equivalents assets* Total RM RM RM Finance - AAA 89,037,627-89,037,627 - AA2 15,017,541-15,017,541 Industrial Products - NR - 79,350 79,350 Others - NR - 564, , ,055, , ,699, Finance - AAA 4,888,399-4,888,399 - AA1 21,909,731-21,909,731 - AA3 5,063,185-5,063,185 Constructions - NR - 754, ,325 Industrial Products - NR - 954, ,829 Plantation - NR - 161, ,700 Others - NR - 820, ,793 31,861,315 2,691,647 34,552,962 * Other assets consist of dividend receivables, amount due from manager and amount due from brokers. The financial assets of the Fund are neither past due nor impaired. 25

27 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. Reclassification of Shariah status risk The risk refers to the risk that the currently held Shariah-compliant securities in the portfolio of Shariahcompliant funds may be reclassified to be Shariah non-compliant upon review of the securities by the Shariah Advisory Council of the Securities Commission performed twice yearly. If this occurs, the value of the Fund may be adversely affected where the Manager will take the necessary steps to dispose of such securities in accordance with the Shariah Advisory Council s advice. 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. The Fund utilises the current bid price for financial assets which falls within the bid-ask spread. 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 by valuation method. 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) 26