The renewed Prospectus for the Affin Hwang Aiiman Select Income Fund (the Fund ) would be made available to you effective 1 March 2017.

Transcription

1 RE: Affin Hwang Aiiman Select Income Fund - Renewed Prospectus dated 1 March 2017 The renewed Prospectus for the Affin Hwang Aiiman Select Income Fund (the Fund ) would be made available to you effective 1 March As part of our exercise, we have made adjustments to the disclosures within the Fund s Prospectus to provide better clarity to our investors. Do note that the disclosures of the investment strategy have been changed to the following: Previous Disclosure The Fund will invest in a diversified portfolio of Sukuk,Shariah-compliant equities and Islamic money market instruments. The Fund s investments in Sukuk would consist of Malaysian and foreign-issued Sukuk whether issued by government or companies. These Sukuks are expected to provide profit at intervals which are predetermined. These profits will then be distributed to Unit Holders in the form of income. Investments in dividend yielding Shariahcompliant equities are expected to enhance income and returns to the Fund. The asset alloc The Fund will have the flexibililty to seek investment opportunities in foreign markets where the regulatory authorities are the ordinary or associate members of the International Organization of Securities Commissions ( IOSCO ). The selection of Sukuk will depend largely on its credit quality where the respective Sukuk s issuers will have strong ability to meet their financial obligations and offer highest safety for timely payment of interest and principal. Current Disclosure The Fund will focus on achieving its objective by investing in a diversified portfolio consisting a minimum 60% of its NAV in Sukuk and Islamic money market instruments, a maximum 40% of its NAV in Shariahcompliant equities, and the remaining of its NAV in cash and Islamic deposits with financial institutions. The Fund s investments in Sukuk would consist of Malaysian and foreign-issued Sukuk whether issued by governments or companies. These Sukuk are expected to provide profit at intervals which are predetermined which will be distributed to you in the form of income. We will combine a top-down and bottom-up investment approach to identify investment opportunities. Macroeconomic trends and market analysis are the important considerations in deriving the top-down perspective on interest rate outlook, credit market and currency movement. For its bottom-up approach, we would conduct analysis on the issuers to assess its ability to service its debt obligations. When choosing individual Sukuk, the following are the more important considerations: issuer s and/or guarantor s industry and business medium- to long-term outlook; issuer s and/or guarantor s financial strength and gearing levels; issuer s and/or guarantor s cash-flow quality and volatility; issuer s and/or guarantor s expected future cash-flow and ability to pay interest and principal; The selection of Sukuk will depend largely on its credit quality where the respective Sukuk s issuers will have strong ability to meet their financial obligations, healthy cash-flow, collateral type, value, claims priority as well as offer highest safety for timely payment of interest and principal. The Fund intends to invest in dividend yielding Shariah-compliant equities that are expected to enhance income and return to the Fund. The investment selection process will include

2 issuer s and/or guarantor s ratings by RAM or MARC or a recognized global credit rating agency; duration and interest rate sensitivity; collateral type and value, and claims priority; and price and yield-to-maturity. In addition, the Fund will invest in equities with the anticipation to gain income from dividends. When choosing individual equity, the following are the more important considerations: historical and expected future dividend yield; industry and business medium to long term outlook; management track record/quality; treatment towards minority shareholders by management and controlling shareholders; financial strength and gearing levels; earnings and cash flow volatility; expected future earnings growth; and share price valuation. Based on the above, the Manager s investment philosophy is to mainly invest in companies which have medium to long-term investment horizon bias. These companies are expected to generate sufficient cash flows to meet their debt obligations for fixed income instruments and/or distribute dividends for equity investments. However, when opportunity arises, the Manager may take a shorter period view (buying and selling in Short-term) to benefit from strong potential upside in markets. The use of money market instruments for this Fund is primarily bridging in nature. The Fund intends to remain fully invested rather than merely holding cash while waiting for investment opportunities to arise in the Sukuk or shariah-compliant equities markets. As such, while waiting for that opportunity to arise, the Fund will place cash in Shariahbased deposits which will be relatively Shortterm in nature. Notwithstanding the aforesaid, the Fund may also selectively purchase instruments such as Islamic commercial companies that are able to provide a steady income stream through regular income distribution. As such, we would adopt a bottom-up strategy where individual stock analysis forms the primary building blocks for portfolio construction and stock selection. The Fund focuses on higher dividend paying sectors where cash flows are more resilient, and selected lower dividend yielding stocks with prospects of growing its dividends to achieve an element of capital growth in addition to dividend yield on a total return basis. Key factors which are useful to the identification of such companies would include sales and profit growth, financial strength and gearing levels, capital expenditure levels as well as management commitment to rewarding shareholders via dividends or capital repayments. The dividends provided by these companies would be the primary source of income from which the Fund would then declare income distributions to you. While we typically take an active trading policy, we look to maintain some core holdings that are held over the medium-term to long term which is similar to a buy and hold strategy. We will also maintain a trading portion for the portfolio, which we use to take advantage of beneficiaries during prevailing market conditions with the aim of boosting the Fund s performance. Derivative Investments for Hedging Purposes Only The Fund may employ Shariah-compliant derivative investments for hedging purposes by participating in instruments such as forward exchange contracts, and cross currency swaps. Forward exchange contracts enable the Fund to trade currency at a specific exchange rate, specific time and specific amount as indicated in the contract. Cross currency swaps allows the Fund to convert foreign exchange rates and/or interest rate exposures between two currencies.

3 papers as part of its general investment. The Manager may also selectively invest in Shariah-compliant warrants and Shariahbased collective investment schemes, such as Shariah-compliant exchange traded funds, to gain broad exposure to certain market sectors. The Manager may take temporary defensive positions that may be inconsistent with the Fund s principal strategy in attempting to respond to adverse market conditions that may impact financial markets. In this regard, the Fund may allocate all of its holding into cash, Shariah-compliant deposits with financial institutions or money market instruments. The defensive positions may be adopted up to such time as the Manager considers appropriate in consultation with the Trustee. Derivative Investments for Hedging Purposes Only These derivatives may be used to hedge the principal and/or the returns of the foreign currency denominated investments back to MYR. The employment of derivatives under these circumstances, is expected to reduce the impact of foreign currency movements on the Fund s NAV. While the hedging strategy will assist with mitigating the potential foreign exchange losses by the Fund, any potential gains from the hedging strategy will be capped as well. Temporary Defensive Positions We have the option to take temporary defensive measures that may be inconsistent with the Fund s principal strategy and asset allocation to protect the Fund against adverse market conditions. TO manage the risk of the Fund, we may shift the Fund s focus into lower risk investments such as Islamic deposits with financial institutions or Islamic money market instruments. The Fund may employ Shariah-compliant derivatives in order to hedge the investments back to RM. The decision to employ hedging would depend on the Manager s outlook and views on the relevant currencies in relation to the Ringgit Malaysia. Prior to hedging the investments of the Fund, the Manager would also consider the cost of initiating such hedges against the potential benefit to the Fund. We reiterate that the underlying investment strategy for the Fund remains unchanged. We remain optimistic that the strategy will continue to lead the Fund to meet its investment objective over the medium to long-term investment horizon. However, any changes in the disclosure will only take effect fourteen (14) days from the date of the Prospectus. You are advised to contact your Relationship Manager or our Customer Care Consultant should you require any further clarifications on the above. Thank you.

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5 Responsibility Statements This Prospectus has been reviewed and approved by the directors of Affin Hwang Asset Management Berhad and they collectively and individually accept full responsibility for the accuracy of the information. Having made all reasonable enquiries, they confirm to the best of their knowledge and belief, that there are no false or misleading statements, or omission of other facts which would make any statement in the Prospectus false or misleading. Statements of Disclaimer The Securities Commission Malaysia has authorised the Fund and a copy of this Prospectus has been registered with the Securities Commission Malaysia. The authorisation of the Fund, and registration of this Prospectus, should not be taken to indicate that Securities Commission Malaysia recommends the said Fund or assumes responsibility for the correctness of any statement made, opinion expressed or report contained in this Prospectus. The Securities Commission Malaysia is not liable for any non-disclosure on the part of Affin Hwang Asset Management Berhad, the management company responsible for the said Fund and takes no responsibility for the contents in this Prospectus. The Securities Commission Malaysia makes no representation on the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever arising from, or in reliance upon, the whole or any part of its contents. Additional Statements Investors should note that they may seek recourse under the Capital Markets and Services Act 2007 for breaches of securities laws including any statement in the Prospectus that is false, misleading, or from which there is a material omission; or for any misleading or deceptive act in relation to the Prospectus or the conduct of any other person in relation to the Fund. The Affin Hwang Aiiman Select Income Fund has been certified as Shariah-compliant by the Shariah Adviser appointed for the Fund. This Prospectus is not intended to and will not be issued and distributed in any country or jurisdiction other than in Malaysia ( Foreign Jurisdiction ). Consequently, no representation has been and will be made as to its compliance with the laws of any Foreign Jurisdiction. Accordingly, no issue or sale of Units to which this Prospectus relates may be made in any Foreign Jurisdiction or under any circumstances where such action is unauthorised. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. IF INVESTORS ARE UNABLE TO MAKE THEIR OWN EVALUATION, THEY ARE ADVISED TO CONSULT PROFESSIONAL ADVISERS. 2

6 TABLE OF CONTENTS CORPORATE DIRECTORY... 4 ABBREVIATION... 5 GLOSSARY... 5 RISK FACTORS... 8 ABOUT AFFIN HWANG AIIMAN SELECT INCOME FUND DEALING INFORMATION FEES, CHARGES AND EXPENSES PRICING SALIENT TERMS OF THE DEED THE MANAGER THE EXTERNAL FUND MANAGER THE TRUSTEE THE SHARIAH ADVISER RELATED PARTIES TRANSACTION AND CONFLICT OF INTEREST TAX ADVISERS LETTER RELEVANT INFORMATION DOCUMENTS AVAILABLE FOR INSPECTION DIRECTORY OF SALES OFFICE

7 CORPORATE DIRECTORY The Manager Affin Hwang Asset Management Berhad ( T) Registered Office 27 th Floor, Menara Boustead 69 Jalan Raja Chulan Kuala Lumpur Business address Ground Floor, Menara Boustead 69 Jalan Raja Chulan Kuala Lumpur Tel No. : (603) Fax No. : (603) Toll free line : customercare@affinhwangam.com Website : Board of Directors of AHAM Tan Sri Dato Seri Che Lodin Bin Wok Kamaruddin (Non-independent Director) Datuk Maimoonah Binti Mohamed Hussain (Non-independent Director) YBhg Mej Jen Dato Hj Latip Bin Ismail (Independent Director) Mr Teng Chee Wai (Non-independent Director) Mr David Jonathan Semaya (Non-independent Director) Encik Abd Malik Bin A Rahman (Independent Director) External Fund Manager AIIMAN Asset Management Sdn. Bhd. (formerly known as Asian Islamic Investment Management Sdn. Bhd.) Registered Address 27 th Floor, Menara Boustead 69 Jalan Raja Chulan Kuala Lumpur Tel No. : (604) Fax No. : (604) Business Address 14 th Floor, Menara Boustead 69 Jalan Raja Chulan Kuala Lumpur Tel No. : (603) Fax No. : (603) The Trustee HSBC (Malaysia) Trustee Berhad (1281-T) Registered & Business Address 13 th Floor, Bangunan HSBC, South Tower No 2, Leboh Ampang Kuala Lumpur Tel No. : (603) Fax No. : (603) Trustee s Delegate The Hongkong and Shanghai Banking Corporation Limited (as Custodian) and assets held through:- HSBC Nominees (Tempatan) Sdn. Bhd. ( D) Registered Address Bangunan HSBC No.2, Leboh Ampang Kuala Lumpur Tel No. : (603) Fax No. : (603) Trustee s Delegate (Foreign Custodian) HSBC Institutional Trust Services (Asia) Limited 6th Floor, Tower One HSBC Centre No 1 Sham Mong Road Kowloon, Hong Kong Tel No. : (852) Fax No: (852) The Shariah Adviser Amanie Advisors Sdn. Bhd. No. 2, Jalan Binjai Off Jalan Ampang Kuala Lumpur Tel No. : (603) Fax No. : (603) Website : 4

8 ABBREVIATION EMIS FiMM GST IUTA MARC MYR PHS RAM SC SAC EPF Members Investment Scheme Federation of Investment Managers Malaysia. Goods and Services Tax. Institutional Unit Trust Advisers Malaysian Rating Corporation Berhad. Ringgit Malaysia. Product Highlights Sheet. RAM Rating Services Berhad. Securities Commission Malaysia. Shariah Advisory Council. GLOSSARY assets of the Fund the Act or CMSA the Board Bursa Malaysia Business Day the Deed(s) Islamic deposit(s) External Fund Manager/AIIMAN financial institution Forward Pricing Fund Means the holdings of the Fund which include, Shariah-compliant securities, Sukuk, cash and Shariah-based deposits, other Islamic money market instruments and all amounts due to the Fund. Means the Capital Markets and Services Act 2007 as originally enacted and amended or modified from time to time. Means the Board of Directors of the Manager. Means the Malaysian stock exchange managed and operated by the Bursa Malaysia Securities Berhad. A day on which the Bursa Malaysia is open for trading. Information on when Bursa Malaysia is close for trading can be obtained from Refers to the deed dated 24 April 2012, supplemental deed dated 27 June 2014 and second supplemental deed dated 19 December 2016 entered into between the Manager and the Trustee and includes any subsequent amendments and variations thereto. Has the same meaning as per the definition of "Islamic deposit" in the Islamic Financial Services Act For the avoidance of doubt, it shall exclude structured deposit. AIIMAN Asset Management Sdn. Bhd. (formerly known as Asian Islamic Investment Management Sdn. Bhd.). Means (a) if the institution is in Malaysia: (i) a licensed bank; (ii) a licensed investment bank; or (iii) a licensed Islamic bank; (b) if the institution is outside Malaysia, any institution that is licensed, registered, approved or authorised by the relevant banking regulator to provide financial services. Means the price of a Unit that is the Net Asset Value per Unit calculated at the next valuation point after a purchase request or a repurchase request, as the case may be, is received by the Manager. Refers to the Affin Hwang Aiiman Select Income Fund. 5

9 Guidelines Latest Practicable Date (LPD) long-term the Manager/AHAM medium-term Net Asset Value or NAV NAV per Unit Prospectus Repurchase Charge Repurchase Price Sales Charge Selling Price Shariah Shariah Adviser/Amanie Shariah requirements Short-term Special Resolution Sukuk the Trustee Unit or Units Means the Guidelines on Unit Trust Funds issued by the SC and as may be amended from time to time. Means 31 December 2016 and is the latest practicable date for the purposes of ascertaining certain information in this Prospectus. Means a period of more than five (5) years. Refers to Affin Hwang Asset Management Berhad. Means a period between three (3) to five (5) years. Means the value of all the Fund s assets less the value of all the Fund s liabilities at the valuation point. For the purpose of computing the annual management fee and annual trustee fee, the NAV of the Fund should be inclusive of the management fee and the trustee fee for the relevant day. Means the Net Asset Value of the Fund at a particular valuation point divided by the total number of Units in Circulation at that point. Refers to this prospectus including any supplementary thereof or replacement prospectus, as the case may be. Means a charge imposed pursuant to the Unit Holder s request for repurchase of Units of the Fund. Means the price payable to a Unit Holder by the Manager for a Unit pursuant to a repurchase request and it shall be exclusive of any Repurchase Charge. Means a charge imposed pursuant to the Unit Holder s purchase request. Means the price payable by a Unit Holder for a Unit pursuant to a purchase request and it shall be exclusive of any Sales Charge. Islamic law, originating from the Qur`an (the holy book of Islam), and its practices and explanations rendered by the prophet Muhammad (pbuh) and ijtihad of ulamak (personal effort by qualified Shariah scholars to determine the true ruling of the divine law on matters whose revelations are not explicit). Refers to Amanie Advisors Sdn. Bhd. Means a phrase or expression which generally means making sure that any human conduct must not involve any prohibition and that in performing that conduct all the essential elements that make up the conduct must be present and each essential element must meet all the necessary conditions as required by the Shariah for that element. Means a period of less than 3 years. Means a resolution passed at a meeting of Unit Holders duly convened in accordance with the Deed and passed by a majority of not less than three forth (¾) of Unit Holders voting at a meeting of Unit Holders. For the purpose of terminating or winding up the Fund, a Special Resolution is passed by a majority in number representing at least three quarter (¾) of the value of Units held by the Unit Holders voting at the meeting. Means a certificate of equal value which evidence undivided ownership or investment in assets using Shariah principles and concepts endorsed by the Shariah Advisory Council of the SC. Refers to HSBC (Malaysia) Trustee Berhad. Means a measurement of the right or interest of a Unit Holder in the Fund 6

10 Units in Circulation Unit Holders and includes any subunit thereof. Means Units created and fully paid for and which has not been cancelled. Means the person for the time being who, in full compliance to the relevant laws and under the Deed, is registered pursuant to the Deed as a holder of Units, including a jointholder. Note: Reference to day(s) in this Prospectus will be taken to mean calendar day(s) unless otherwise stated. Reference to first person pronouns such as we, us or our in this Prospectus means the Manager/AHAM. 7

11 RISK FACTORS This section provides you with information on the risks associated with investing in the Fund. GENERAL RISKS Manager s Risk This risk refers to the day-to-day management of the Fund by the Manager which will impact the performance of the Fund. For example, investment decisions undertaken by the Manager as a result of an incorrect view of the market or any non-compliance with internal policies, investment mandate, the Deed, relevant law or guidelines due to factors such as human error, fraudulent, dishonesty or weaknesses in operational process and systems, may adversely affect the performance of the Fund. Inflation Risk This is the risk that your investment in the Fund may not grow or generate income at a rate that keeps pace with inflation. This would reduce your purchasing power even though the value of the investment in monetary terms has increased. Financing Risk This risk occurs when you take a financing to finance your investment. The inherent risk of investing with financed money includes you being unable to service the financing repayments. In the event Units are used as collateral, you may be required to top-up your existing instalment if the prices of Units fall below a certain level due to market conditions. Failing which, the Units may be sold at a lower net asset value per unit as compared to the net asset value per unit at the point of purchase towards settling the financing. Operational Risk This risk refers to the possibility of a breakdown in the Manager s internal controls and policies. The breakdown may be a result of human error, system failure or may be fraud where employees of the Manager collude with one another. This risk may cause monetary loss and/or inconvenience to you. The Manager will regularly review its internal policies and system capability to mitigate instances of this risk. Additionally, the Manager maintains a strict segregation of duties to mitigate instances of fraudulent practices amongst employees of the Manager. SPECIFIC RISKS The specific risks associated with the securities/instruments in which the Fund will invest include: Credit and Default Risk Credit risk relates to the creditworthiness of the issuers of the investment (Sukuk and Islamic money markets instruments) and their expected ability to make timely payment of interest and/or principal. Any adverse situations faced by the issuer may impact the value as well as liquidity of the investment. In the case of rated investments, this may lead to a credit downgrade. Default risk relates to the risk of an issuer of the investment either defaulting on payments or failing to make payments in a timely manner which will in turn adversely affect the value of the investment. This could adversely affect the value of the Fund. Counterparty Risk This risk concerns with the Fund s investment in Shariah-compliant derivatives where the other party in an agreement may default on the terms of the agreement. Generally, counterparty risk can be reduced by emphasis on credit analysis of the counterparty to determine its creditworthiness. Interest Rate Risk Interest rate risk refers to the impact of interest rate changes on the valuation of Sukuk. When interest rates rise, Sukuk prices generally decline and this may lower the market value of the Fund s investment in Sukuk. The reverse may apply when interest rates fall. In order to mitigate interest rate risk, we will need to manage the debt portfolio taking into account the coupon rate and time to maturity of the Sukuk. 8

12 (Note: Interest rate is a general indicator that will have an impact on the management of the Fund regardless of whether it is a Shariah-based fund or otherwise. It does not in any way suggest that this Fund will invest in conventional financial instruments). Equity Investment Risk The buying and selling of Shariah-compliant equities which includes Shariah-compliant warrants carry a number of risks. The most important being the volatility of the capital markets on which those equities are traded and the general insolvency risk associated with the issuers of equities. The value of equities investment also depends on its growth and earnings potential, sound management, treatment of minority shareholders, as well as a myriad of other factors. Failure to achieve the expected earnings would result in declining investment value which in turn affects the performance of the Fund. This risk could be mitigated by diversifying the Fund s portfolio. The Manager will employ stringent stock selection criteria which would effectively filter its stock components to equities which can provide returns to the Fund in the form of capital gains and income. Liquidity Risk Liquidity risk arises in two scenarios. The first is where an investment cannot be sold due to unavailability of a buyer for that investment. The second scenario exists where the investment, by its nature, is thinly traded. This will have the effect of causing the investment to be sold below its fair value which would adversely affect the NAV of the Fund. Currency Risk As the investments of the Fund may be denominated in currencies other than the base currency, any fluctuation in the exchange rate between the base currency and the currencies in which the investments are denominated may have an impact on the value of these investments. You should note that any gains or losses arising from the fluctuation in the exchange rate may further increase or decrease the returns of the investment. Country Risk Investments of the Fund in any countries may be affected by changes in the economic and political climate, restriction on currency repatriation or other developments in the law or regulations of the countries in which the Fund invests in. For example, the deteriorating economic condition of such countries may adversely affect the value of the investments undertaken by the Fund in those affected countries. This in turn may cause the NAV of the Fund or prices of Units to fall. Regulatory Risk The investments of the Fund will be exposed to changes in the laws and regulations in the countries the Fund has invested in. These regulatory changes pose a risk to the Fund as it may materially impact the investments of the Fund. In an effort to manage and mitigate such risk, the Manager seeks to continuously keep abreast of regulatory developments (for example, by closely monitoring announcements on regulators website and mainstream medias) in that country. The Manager may dispose of its investments in that particular country should the regulatory changes adversely impact the Unit Holders interest or diminish returns to the Fund. Re-classification of Shariah Status Risk This risk refers to the risk that the currently held Shariah-compliant equities in the Fund may be reclassified to be Shariah non compliant in the periodic review of the equities by the SAC of the SC, the Shariah Adviser or the Shariah boards of the relevant Islamic indices. If this occurs, we will take the necessary steps to dispose of such equities. There may be opportunity loss to the Fund due to the Fund not being allowed to retain the excess capital gains derived from the disposal of the Shariah non-compliant equities. We will be required to dispose-off these equities immediately if the prices are above the purchase price. Should the prices be below the purchase price, we may choose to hold on to these holdings until the prices meet the purchase price. Nevertheless, should we decide to dispose-off these equities below the purchase price, the Fund will be faced with the risk of realising its losses, thus negatively impacting the NAV of the Fund. Please refer to section - Shariah Investment Guidelines of this Prospectus on the Fund s Shariah methodology on the treatment of gains and losses as a result of the reclassification of Shariah non-compliant equties. 9

13 RISK MANAGEMENT In our day-to-day running of the business, we employ a proactive risk management approach to manage portfolio risks and operational risks. The Board has established a board compliance & risk management committee to oversee AHAM s risk management activities both at operational level and at portfolio management level to ensure that the risk management process is in place and functioning. The board compliance & risk management committee comprises of at least three board members and is chaired by an independent director. At the operational level, we have established a compliance & risk oversight committee with the primary function of identifying, evaluating and monitoring risks as well as to formulate internal control measures to manage and mitigate the exposure to risks that may affect the performance of the Fund, returns to the investors or Unit Holders interest within a clearly defined framework and is primarily responsible for ensuring that the policies and procedures that have been implemented are reviewed on an ongoing basis with periodic assessments. The compliance & risk oversight committee reports to the board compliance & risk management committee on a quarterly basis. We have in place a system that is able to monitor the transactions to ensure compliance with the Fund s limits and restrictions. These limits are system-controlled and not manually tracked, thus reducing the probability of human error occurring in ensuring the Fund s limits and restrictions are adhered to. We also undertake stringent evaluation of movements in market prices and regularly monitor, review and report to the investment committee to ensure that the Fund s investment objective is met. Regular portfolio reviews by senior members of the investment team further reduce the risk of implementation inconsistencies and Guidelines violations. We also have in place a credit risk management process to reduce credit risk of derivatives counterparty. Prior to entering into a contract with the counterparty, we will conduct an evaluation on the credit of the counterparty to ensure they are able to meet their contractual obligations. It is important to note that an event of downgrade does not contribute a default. If we view that the counterparty may have high credit risk, we will not hesitate to take preemptive measures to unwind these positions. We also employ a performance attribution system that enables us to review the performance of the Fund to determine the key factors that have contributed and detracted from the Fund s performance. This system complements our overall risk management process as the system also provides standard risk analytics on the portfolio such as the Fund s standard deviation, tracking error and measures of excess return. The data produced by the performance attribution system is reviewed regularly and at least on a monthly basis in meetings chaired by the managing director and participated by the portfolio managers and the performance evaluation team. We engage a stringent screening process by conducting fundamental analysis of economic, political and social factors to evaluate their likely effects on the performance of the markets and sectors. Regular meetings are held to discuss investment themes and portfolio decisions taken at the meetings are then implemented according to the investment guidelines which also take into account requirements for minimum portfolio diversification across individual investment holdings, sectors, geographies and asset classes (based on the respective portfolio s objective and strategy). We also practise prudent liquidity management with the objective to ensure that the Fund is able to meet its Short-term expenses. It is important to note that events affecting the investments cannot always be foreseen. Therefore, it is not possible to protect investments against all risks. You are recommended to read the whole Prospectus to assess the risks associated to the Fund. If necessary, you should consult your professional adviser(s) for a better understanding of the risks. 10

14 ABOUT AFFIN HWANG AIIMAN SELECT INCOME FUND Fund Category : Mixed Asset (Conservative) Base Currency : MYR Launch Date : 12 December 2012 Fund Type : Income Financial Year End : 31 March Distribution Policy : The Fund will distribute income on a semi-annual basis (subject to income availability. Deed(s) : Deed dated 24 April 2012, supplemental deed dated 27 June 2014 and second supplemental deed dated 19 December INVESTMENT OBJECTIVE The Fund seeks to provide investors with regular income stream through Shariah-compliant investments. Note : Any material change to the Fund s investment objective would require Unit Holders approval. Income distribution will either be made in the form of Units or in cash. INVESTORS PROFILE This Fund is suitable for investors who:- expect to receive regular income* distribution; have a moderate risk appetite; expect incidental growth in capital; and want an investment that complies with Shariah requirements. *Income distribution will either be made in the form of Units or in cash. BENCHMARK The benchmark will be a combination of the current Maybank 12-month Maybank General Investment Account (GIA) weighing at 70% and FTSE Bursa Malaysia EMAS Shariah Index performance (FBMSHA) weighing at 30%.* *As the Fund is a mixed asset fund, the Manager has used a weighted benchmark to enable Unit Holders to evaluate the performance of the Fund against what Unit Holders would have earned if they placed 70% of moneys in Islamic fixed deposit (equivalent to the 12-month Maybank GIA) and 30% in Shariah-compliant local equities (as reflected by the FTSE Bursa Malaysia EMAS Shariah Index). Under normal market conditions, the ratio of the Fund s asset allocation between fixed income instruments and equities is expected to be 70 to 30. Regardless, the risk profile of the Fund is higher than the benchmark. Please note that the capital and returns of the Fund are not guaranteed. The latest information on the Maybank 12-month Maybank General Investment Account (GIA) is obtainable on Maybank s website at or from any Maybank branch nationwide. As for the latest information on the FTSE Bursa Malaysia EMAS Shariah Index performance (FBMSHA), investors can refer to (Please note that investors may also obtain the benchmark from the Manager upon request.) 11

15 ASSET ALLOCATION The Fund s asset allocation is as follows: Sukuk and Islamic money market instruments 60% to 100% Shariah-compliant equities 0% to 40% Cash and Islamic deposits The remaining balance of the Fund s NAV INVESTMENT STRATEGY The Fund will focus on achieving its objectives by investing in a diversified portfolio consisting a minimum 60% of its NAV in Sukuk and Islamic money market instruments, a maximum 40% of its NAV in Shariah-compliant equities and the remaining of its NAV in cash and Islamic deposits with financial institutions. The Fund s investments in Sukuk would consist of Malaysian and foreign-issued Sukuk whether issued by government or companies. These Sukuk are expected to provide profit at intervals which are predetermined which will be distributed to you in the form of income. We will combine a top-down and bottom-up investment approach to identify investment opportunities. Macroeconomic trends and market analysis are the important considerations in deriving the top-down perspective on interest rate outlook, credit market and currency movement. For its bottom-up approach, we would conduct analysis on the issuers to assess its ability to service its debt obligations. The selection of Sukuk will depend largely on its credit quality where the respective Sukuk s issuers will have strong ability to meet their financial obligations, healthy cash-flow, collateral type, value, claims priority as well as offer highest safety for timely payment of interest and principal. The Fund intends to invest in dividend yielding Shariah-compliant equities that are expected to enhance income and return to the Fund. The investment selection process will include companies that are able to provide a steady income stream through regular income distribution. As such, we would adopt a bottom-up strategy where individual stock analysis forms the primary building blocks for portfolio construction and stock selection. The Fund focuses on higher dividend paying sectors where cash flows are more resilient, and selected lower dividend yielding stocks with prospects of growing its dividends to achieve an element of capital growth in addition to dividend yield on a total return basis. Key factors which are useful to the identification of such companies would include sales and profit growth, financial strength and gearing levels, capital expenditure levels as well as management commitment to rewarding shareholders via dividends or capital repayments. The dividends provided by these companies would be the primary source of income from which the Fund would then declare income distributions to you. While we typically take an active trading policy, we look to maintain some core holdings that are held over the medium-term to long term which is similar to a buy and hold strategy. We will also maintain a trading portion for the portfolio, which we use to take advantage of beneficiaries during prevailing market conditions with the aim of boosting the Fund's performance. Derivative Investments for Hedging Purposes Only The Fund may employ Shariah-compliant derivative investments for hedging purposes by participating in instruments such as forward exchange contracts, and cross currency swaps. Forward exchange contracts enable the Fund to trade currency at a specific exchange rate, specific time and specific amount as indicated in the contract. Cross currency swaps allows the Fund to convert foreign exchange rates and/or interest rate exposures between two currencies. 12

16 These derivatives may be used to hedge the principal and/or the returns of the foreign currency denominated investments back to MYR. The employment of derivatives under these circumstances, is expected to reduce the impact of foreign currency movements on the Fund s NAV. While the hedging strategy will assist with mitigating the potential foreign exchange losses by the Fund, any potential gains from the hedging strategy will be capped as well. Temporary Defensive Positions We have the option to take temporary defensive measures that may be inconsistent with the Fund's principal strategy and asset allocation to protect the Fund against adverse market conditions. To manage the risk of the Fund, we may shift the Fund's focus into lower risk investments such as Islamic deposits with financial institutions or Islamic money market instruments. SHARIAH INVESTMENT GUIDELINES The Manager will provide to the Shariah Adviser on a quarterly basis the monthly report on the holding of the Fund and transactions entered into for the Fund. Investment in Malaysia The Fund will only invest in securities that are classified as Shariah-compliant based on the List of Shariah- Compliant Securities by the SAC of the SC. Investments in securities which are not listed in Bursa Malaysia and thus has no endorsement by the SAC of the SC will be determined in accordance with the Shariah ruling by the Shariah Adviser. Such investments will be duly screened by the Shariah Adviser based on screening methodology as set out below. The Fund will also invest in sukuk, cash, Islamic deposits and other Islamic money market instruments that are Shariah-compliant. Investment in foreign market The Manager will streamline the Fund s investment universe for foreign listed Shariah-compliant securities by making reference to companies that have been included into the list of Shariah-compliant securities as indicated by index providers. The securities which are not in the list will be determined in accordance to the ruling by the Shariah Adviser. Securities will be duly screened by the Shariah Adviser based on the screening methodology as set out below. These securities would need to be approved by the Shariah Adviser before the Manager can proceed with investments. A list of such securities shall be maintained and the Shariah Adviser shall review the list on a quarterly basis. The Fund will also invest in sukuk, cash, Islamic deposits and other Islamic money market instruments that are Shariah-compliant. Level 1: Business Activity Screening Shariah Investment Guidelines do not allow investment in companies which are directly active in the following activities ( prohibited activities ): Alcohol; Tobacco; Pork related products; Conventional financial services; Defense/Weapons; Entertainment (gambling/casino/music/hotels/cinema/adult entertainment and etc.). 13

17 Level 2: Financial Screening After removing companies with unacceptable primary business activities, the remaining stocks are evaluated according to several financial filters. The filters are based on the criteria set up by the Shariah Adviser to remove companies with unacceptable levels of debts or impure interest income. Exclude companies if total debt divided by trailing 24-month average market capitalization is greater than or equal to 33%. (Note: total debt = short-term debt + current portion of long-term debt + long-term debt) Exclude companies if the sum of cash and interest bearing securities divided by trailing 24-month average market capitalization is greater than or equal to 33%. Exclude companies if account receivables divided by total assets is greater than or equal to 45%. (Note: accounts receivables + current receivables + long-term receivables) Reclassification of Shariah-compliant securities The Fund will invest in Shariah-compliant securities. However, the SAC of the SC and/ or the Shariah Adviser may reclassify the Shariah-compliant securities to be Shariah non-compliant in the periodic review of the securities. For the securities that their market value exceeds the original investment cost on the announcement day, those securities will be required to be disposed off immediately on the announcement day itself. On the other hand, the Fund is allowed to hold the investment in the Shariah non-compliant securities if the market price of the said securities is below the original investment costs. Shariah Adviser Amanie Advisors Sdn Bhd ( Amanie ) has been appointed as the Shariah Adviser for the Fund. Amanie s responsibility is to ensure that the Fund is managed and administered in accordance with Shariah principles. Amanie is also responsible for scrutinizing the Fund s compliance report and investment transaction reports provided by, or duly approved by, the Trustee to ensure that the Fund s investment are in line with Shariah principles. Amanie has viewed the Prospectus of the Fund and other documents in which relates to the structure of the Fund. Amanie confirms that the Fund s structure and its investment process, and other operational and administrative matters are Shariah-compliant in accordance with Shariah principles and complied with applicable guidelines, rulings or decisions issued by the SC pertaining to Shariah matter. Amanie is of the view that, given the prevailing circumstances, the Fund and the respective investments as disclosed and presented are acceptable and within the Shariah principles, subject to proper execution of the legal documents and other transactions related to the Fund. PERMITTED INVESTMENTS Sukuk Shariah-compliant equities of companies listed on the recognized Malaysian stock exchange or any other market where the regulatory authority is a member of the International Organisation of Securities Commission (IOSCO) Unlisted Shariah-compliant securities, including without limitation, Shariah-compliant securities that have been approved by the relevant regulatory authorities for the listing of and quotation of such Shariahcompliant securities Islamic money market instruments Islamic deposits 14

18 Units or shares in Shariah-compliant collective investment schemes Shariah-compliant warrants Shariah-compliant derivatives Any other form of Shariah-compliant investments as may be permitted by the Shariah Advisory Council of the SC and/or the Shariah Adviser and as may be agreed between the Manager and the Trustee from time to time that is in line with the Fund s objective INVESTMENT RESTRICTIONS AND LIMITS Unless otherwise prohibited by the relevant authorities or any relevant law and provided always that there are no inconsistencies with the objective of the Fund, the investment restrictions and limits of the Fund shall be as follows:- The value of the Fund s Shariah-compliant investment in unlisted securities shall not exceed 10% of the Fund s NAV unless the investments are in:- Shariah-compliant equities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing and quotation, and are offered directly to the Fund by the issuer; Sukuk traded on an organised over-the-counter (OTC) market; and structured products. The value of the Fund s Shariah-compliant investment in Shariah-compliant structured products issued by a single counter-party shall not exceed 15% of the Fund s NAV; The value of the Fund s investments in Shariah-compliant ordinary share issued by any single issuer shall not exceed 10% of the Fund s NAV; The value of the Fund s placements in Islamic deposits with any single financial institution shall not exceed 20% of the Fund s NAV; The value of the Fund s investments in transferable Shariah-compliant securities (equity, Sukuk, warrant) and Islamic money market instruments issued by any single issuer shall not exceed 15% of the Fund s NAV; The aggregate value of the Fund s investments in transferable Shariah-compliant securities, Islamic money market instruments, OTC Islamic derivatives, Islamic structured products and Islamic deposits issued or placed with (as the case may be) any single issuer/institution shall not exceed 25% of the Fund s NAV; The value of the Fund s investments in transferable Shariah-compliant securities and Islamic money market instruments issued by any group of companies shall not exceed 20% of the Fund s NAV; The value of the Fund s investments in units/shares of any Shariah-compliant collective investment scheme shall not exceed 20% of the Fund s NAV; The Fund s investments in Shariah-compliant equities and warrants shall not exceed 10% of the securities issued by any single issuer; The Fund s investment in Sukuk shall not exceed 20% of the Sukuk issued by any single issuer; The Fund s investment in Islamic money market instruments shall not exceed 10% of the instruments issued by any single issuer. This limit does not apply to Islamic money market instruments that do not have a pre-determined issue size; The Fund s investments in Shariah-compliant collective investment schemes shall not exceed 25% of the units/ shares in any one Shariah-compliant collective investment scheme; and Any other investments or restrictions imposed by the relevant regulatory authorities or pursuant to the Guidelines, any laws and/ or regulations applicable to the Fund. The abovementioned limits and restrictions will be complied with at all times based on the up-to-date value of the Fund, and the value of its investments and instruments, unless the SC grants the exemption or variation. However, a 5% allowance in excess of any limits or restrictions may be permitted where the limit or restriction is breached through the appreciation or depreciation of the NAV of the Fund (whether as a 15

19 result of an appreciation or depreciation in value of the investments, or as a result of repurchase of Units or payment made from the Fund). We will not make any further acquisitions to which the relevant limit is breached and within a reasonable period of not more than three (3) months from the date of the breach we will take all necessary steps and actions to rectify the breach. VALUATION OF THE FUND We will ensure that the valuation of the Fund is to be carried out in a fair manner in accordance to the relevant laws and Guidelines. We will obtain the daily price or value of the assets for the purpose of valuing the Fund in accordance to the Financial Reporting Standard 139 issued by the Malaysian Accounting Standards Board. In the absence of daily price or value of the assets, we will use the latest available price or value of the assets respectively. The valuation bases for the permitted investments of the Fund are as below: Listed Shariah-compliant securities For listed Shariah-compliant securities, the valuation shall be based on the market price. Where no market value is publicly available or where the use of the quoted market value is inappropriate, or where no market price is available, including in the event of suspension in the quotation of the securities for a period exceeding fourteen (14) days, or such shorter period as agreed by the Trustee; such investments will be valued at fair value determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. Islamic money market instruments Valuation of tradable and non-tradable Islamic money market instruments will be done by reference to the fair value as determined in good faith by the Manager on methods or bases which have been verified by the auditor of the Fund and approved by the Trustee. Islamic deposit Islamic deposits placed with financial institutions are valued by reference to the principal value of such investments and profit accrued thereon for the relevant period. Unlisted Shariah-compliant collective investment schemes Shariah-compliant investments in unlisted Shariah-based collective investment schemes shall be valued based on the last published repurchase price. Sukuk For unlisted Sukuk denominated in Ringgit Malaysia, the valuation will be done using the fair value as quoted by a bond pricing agency ( BPA ) registered with the SC. If we are of the view that the price quoted by BPA differs from the market price by more than 20 basis points and we determine that the methodology used by the independent dealers to obtain market price is more appropriate, we may elect to use the price quoted by the independent dealers as the market price, provided that we record its basis for using a non-bpa price, obtains the necessary internal approvals to use the non-bpa price and keeps an audit trail of all decisions and basis for adopting the market yields. Investments in other unlisted Sukuk will be valued using the average indicative price quoted by at least 3 independent dealers. In the case of listed Sukuk, the last traded prices quoted on an exchange will be used. Other Islamic securities Investments such as Islamic accepted bills, government investment issues (GII), Bank Negara Malaysia negotiable notes, Cagamas mudharabah bonds, negotiable islamic debt certificate (NIDC), Islamic negotiable instrument of deposits (INID) and any other government Islamic papers are valued by reference to the value of such investments and the profits accrued thereon for the relevant period. Investors are advised that certain types of Shariah-compliant securities are required to be held until such Shariah-compliant securities mature for the actual value to be realised. Any sale of such Shariah-compliant securities prior to its maturity may attract costs and penalties that would result in a value which is less than 16