Affin Hwang Aiiman Growth Fund

Transcription

1 Affin Hwang Aiiman Growth Fund Annual Report 31 August 2015 MANAGER Affin Hwang Asset Management Berhad ( T) TRUSTEE HSBC (Malaysia) Trustee Berhad (1281-T)

2 AFFIN HWANG AIIMAN GROWTH FUND Annual Reports and Audited Financial Statements For the Financial Year Ended 31 August 2015 Content Page MANAGER S REPORT... 2 FUND PEFORMANCE DATA... 8 TRUSTEE S REPORT... 9 SHARIAH ADVISER S 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 AUDITORS REPORT DIRECTORY OF SALES OFFICE

3 MANAGER S REPORT (1) MANAGER S VIEW ON PROTFOLIO AND MARKET Fund Type, Category, Objective and Distribution Policy Affin Hwang Aiiman Growth Fund, (the Fund ) is a growth Islamic Equity Fund that seeks to achieve consistent capital appreciation over medium to long-term by investing mainly in listed equities and other approved investments which harmonize with Islamic philosophy and laws. The Fund endeavours to distribute income, if any, on an annual basis. However, the amount of income available for distribution may fluctuate from year to year. Benchmark The benchmark used by the Manager in measuring the performance of the Fund is the FTSE Bursa Malaysia Emas Shariah Index (FBMSHA). Performance of the Fund (1 September 2014 to 31 August 2015) For the period 1 September 2014 to 31 August 2015, the Fund registered a return of %. The Net Asset Value (NAV) per unit of the Fund as at 31 August 2015 was RM while the NAV at 31 August 2014 was RM The Benchmark for the period registered a return of %. The Fund outperformed the Benchmark by 2.17%. (See Table 1 for performance of the Fund and Figure 1 for the movement of the Fund versus the Benchmark respectively). Since its inception to 31 August 2015, the Fund has registered a return of %. Compared to the benchmark that rose % for the same period, the Fund outperformed the Benchmark by %. As such, the Fund will continue to be managed in a manner to fulfill its objective. Table 1: Performance of the Fund 1 Year (1/9/14-31/8/15) 3 Years (1/9/12-31/8/15) 5 Years (1/9/10-31/8/15) Since Commencement (29/10/02-31/8/15) Fund (11.27%) 19.19% 63.46% % Benchmark (13.44%) 0.58% 23.71% % Outperformance 2.17% 18.61% 39.75% % Source of Benchmark: Bursa Malaysia Table 2: Average Total Return 1 Year (1/9/14-31/8/15) 3 Years (1/9/12-31/8/15) 5 Years (1/9/10-31/8/15) Since Commencement (29/10/02-31/8/15) Fund (11.27%) 6.03% 10.32% 12.64% Benchmark (13.44%) 0.19% 4.34% 7.05% Outperformance 2.17% 5.84% 5.98% 5.59% Source of Benchmark: Bursa Malaysia 2

4 Table 3: Annual Total Return FYE 2015 (01/9/14-31/8/15) FYE 2014 (01/9/13-31/8/14) FYE 2013 (01/9/12-31/8/13) FYE 2012 (01/9/11-31/8/12) FYE 2011 (01/9/10-31/8/11) Fund (11.27%) 17.26% 14.56% 22.14% 12.28% Benchmark (13.44%) 9.74% 5.88% 18.47% 3.82% Outperformance 2.17% 7.52% 8.68% 3.66% 8.46% Source of Benchmark: Bursa Malaysia Figure 1: Movement of the Fund versus the Benchmark Affin Hwang Aiiman Growth Fund Benchmark Oct-02 Feb-04 May-05 Sep-06 Dec-07 Mar-09 Jul-10 Oct-11 Jan-13 May-14 Aug-15 This information is prepared by Affin Hwang Asset Management Berhad for information purposes only. Past earnings or the Fund s distribution record is not a guarantee or reflection of the Fund s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. Source of benchmark is from Bloomberg. Benchmark: FTSE Bursa Malaysia Emas Shariah Index Strategies Employed (1 September 2014 to 31 August 2015) The year under review had remained challenging for the domestic equity market. Global political uncertainties, a weak Ringgit, and the low oil price environment coupled with headwinds of a slowing global growth scenario had kept financial markets in a limbo. The Manager had kept a relatively higher cash level for the Fund towards the end of the period under review believing that the risk/reward environment was less than attractive. The Fund held on to relatively higher cash levels as the Manager took on a more cautious view on the market. The Fund continues to maintain its strategy of bottom-up approach, pursuing stocks with strong cash flows and attractive dividend yields, or potential to do so. As at the end of August 2015, the Fund was 71.55% invested into the market, with the rest held in cash. 3

5 Assets Allocation As at 31 August 2015, the Shariah-compliant equities weighting in the portfolio stood at 71.55% of the Fund s NAV, with the balance in cash. For a snapshot of the Fund s asset mix during the year under review and sector allocation as at 31 August 2015, see Figure 2 below. Figure 2: Summary of Shariah-compliant Equity Sector Allocation Shariah-compliant Equity Sector Allocation 31 Aug Aug Aug 2013 Construction 10.28% 8.02% 3.25% Consumer Products 2.95% 3.61% 1.13% Finance 7.00% 2.60% - Industrial Products 4.33% 4.14% 5.85% Infrastructure 3.48% 4.68% 4.76% Oil & Gas 7.53% - Properties 6.53% 10.14% 8.06% Plantation 6.82% 6.93% 10.21% Trading & Services 25.83% 28.01% 27.75% Warrants 0.04% 0.07% 0.05% Technology 4.29% 0.52% 1.78% Shariah-compliant Equity 71.55% 76.25% 62.84% Cash 28.45% 23.75% 37.16% Total % % % Over the year under review, the Fund had maintained a relatively cautious view on the market, leading to moderately higher cash flows. The fund turned even more cautious towards the end of the year under review. This was largely due to the volatile equity market lead by intense uncertainty within global financial markets coupled with a weaker Ringgit against the US Dollar. Review of Market (1 September 2014 to 31 August 2015) Global financial markets remained volatile over the course of the period under review. Investors remained concerned over the health of the global economy as deflationary risk and low commodity prices put pressure on global growth. The European Central Bank ( ECB ) maneuvered to meet market expectations with a fullscale Quantitative Easing (QE) program. Lower crude oil prices helped to lift economic activity within the region especially the net importers as the reduced inflationary pressure provided more room to provide accommodative monetary policies. Monetary easing measures were seen being taken by many central banks in a bid to address the slowing environment e.g. Australia, China, Singapore, India, and Thailand. The domestic equity market took lead from crude oil prices and rebounded in mid-january. To the dismay of local investors, the rebound was unsustainable, and the index continued to trade range-bound. Comments of a possible sovereign rating downgrade by rating agency, Fitch, dragged down market sentiment. Political tensions continued to heighten within Malaysia as senior political personalities started to bicker in the open. The announcement of the 11 th Malaysia Plan in May failed to excite the market due to limited initiatives being announced. This highlighted the funding constraint faced by the Government. The recent Federal Open Market Committee ( FOMC ) meeting in June refocused investors expectation that the US Federal Reserve may be back on track to raise its interest rates in the second half of Investors remained cautious, taking into consideration the possibility of Greece being forced out of the Eurozone. The domestic equity market gauged by the FBM KLCI slumped 2.9% in the first half of the year, making it the second worst-performing market in ASEAN behind Indonesia, which slid 5.2% over the same period. 4

6 The Ringgit had continued to depreciate against the USD on the back of the highly anticipated rate hike, which generally pressures most Asian currencies lower. The severe depreciation of the local currency was mainly attributed to the plunging oil prices, as well as the intensifying political struggle in the nation. The Malaysian market fared poorly, with the domestic Shariah equity index dipping 8.5% year-to-date till end- August. This was on the back of revived concerns over the reversal of fund flows caused by the impending rate hike, weakening growth environment, plunging commodity prices coupled with a very poor first quarter (1Q) corporate earnings season. Volatility heightened towards the end of the period under review after the People s Bank of China made a surprise move to devalue the Renminbi. The move intensified concerns surrounding the rate of China s economic growth. The devaluation of the RMB drove down most Asian currencies, and led regional equities to close the month in the red. Investment Outlook The domestic equity market is expected to remain volatile in the near term, given the challenging environment globally. The slow pace of global growth and the increasing concerns surrounding China s ailing economy will likely influence the performance of the domestic, as well as the global financial market. We also expect the Federal Reserve to make reference to the well-being of the global economies when deciding its rate hike so whether or not the hike takes place in 2015 remain to be seen. The markets in Asia will unlikely outperform as we head into the later part of the year which is when the US Federal Reserve is expected to hike policy rates for the first time post global financial crisis. The markets that could fare well are those where policy reforms are implemented - potential candidates being China, India and Indonesia. Key risks within the Malaysian economy are expected to continue to keep the domestic equity market under pressure. In summary, this is the new normal that we face. It is one where volatility across all major asset classes is high. It is one where growth is slow and where rates should stay low. It is one where pockets of fragility will lead to the occasional risk-off events. It is one where active asset allocation strategy and diligent stock picking are best suited for. (2) SOFT COMMISSIONS RECEIVED FROM BROKERS As per the requirements of the Securities Commission s Guidelines on Unit Trust Funds and Guidelines on Compliance Function for Fund Management Companies., soft commissions received from brokers/dealers may be are retained by the management company only if the (i) (ii) goods and services provided are of demonstrable benefit to Unit holders of the Fund; and goods and services are in the form of research and advisory services that assists in the decisionmaking process. During the financial year 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. 5

7 (3) BREAKDOWN OF UNITHOLDERS BY SIZE AS AT 31 AUGUST 2015 Size of holdings (Units) No. of Unitholders No. of Units held* ( 000) 5,000 and below 1,673 4,544 5,001 to 10,000 1,183 8,868 10,001 to 50,000 1,873 41,545 50,001 to 500, , ,001 and above ,526 Total 5, ,528 *Note: Excluding Manager s Stock 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 year under review. 6

8 INCOME DISTRIBUTION Affin Hwang Asset Management Berhad recently declared a net distribution of RM0.015 sen per unit for investors of Affin Hwang Aiiman Growth Fund. All unitholders registered as at 8 June 2015 were eligible to receive this distribution. The NAV per unit prior and subsequent to the distribution was as follows:- Cum Date Ex-Date Cum-distribution Distribution per Unit Ex-distribution (RM) 29 August August August August August August August August August August August August June June June June June June June June

9 FUND PEFORMANCE DATA Source: HSBC Trustee As at 31 August 2015 As at 31 August 2014 As at 31 August 2013 Total NAV (RM million) NAV per Unit (RM) Units in Circulation (million) Highest NAV Lowest NAV Return of the Fund (%) iii Capital Return (%) i Income Return(%) ii Gross Distribution per Unit (sen) Net Distribution per Unit (sen) Management Expenses Ratio (%) Portfolio Turnover Ratio (times) Basis of calculation and assumption made in calculating the returns:- The performance figures are a comparison of the growth/decline in NAV for the stipulated period taking into account all the distribution payable (if any) during the stipulated period. An illustration of the above would be as follow:- Capital return = NAV per Unit end / NAV per Unit begin 1 Income return = Income distribution per Unit / NAV per Unit ex-date Total return = (1+Capital return) x (1+Income return) - 1 Capital Return i = {NAV per 31/8/15 NAV per 31/8/14*-1} x 100 = { } x 100 = % Total Income Return ii = {Income distribution per Unit NAV per 08/06/15} x 100 = { } x 100 = 1.462% Return of the Fund iii = [{(1 + Capital Return) x (1 + Total Income Return)} 1] x 100 = [{(1 + (12.55%)) x ( %)} 1] x 100 = % *Source: HSBC Trustee Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. 1 The MER period under review versus 2014 has no significant changes. 2 The PTR was lower than the previous period due to the risk-off strategy amidst challenging market conditions, leading to lower portfolio trading activity. 8

10 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 year ended 31 August To the best of our knowledge, Affin Hwang Asset Management Berhad ( the Management Company ), has operated and managed the Fund in accordance with the following: a) limitations imposed on the investment powers of the Management Company and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and c) creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. During this financial year, a total distribution of 1.50 sen per unit (gross) has been distributed to the unitholders of the Fund. We are of the view that the distribution is not inconsistent with the objective of the Fund. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur 22 October

11 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 and Sixth Supplemental Deed dated 27 June 2014 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 year ended 31 August 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 22 October

12 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2015 INVESTMENT (LOSS)/INCOME Note RM RM Dividend income 9,146,023 6,888,079 Profit from short term Shariah-based deposits 3,716,040 1,817,563 Net (loss)/gain on financial assets at fair value through profit or loss 8 (54,053,641) 36,629,427 (41,191,578) 45,335,069 EXPENSES Management fee 4 (6,970,593) (4,656,181) Trustee fee 5 (325,294) (217,288) Auditors remuneration (6,600) (6,600) Tax agent s fee (3,950) (3,550) Transaction costs (1,769,744) (1,141,366) Other expenses (182,523) (14,770) (9,258,704) (6,039,755) NET (LOSS)/PROFIT BEFORE TAXATION (50,450,282) 39,295,314 TAXATION 6 (13,311) 39,924 NET (LOSS)/PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE FINANCIAL YEAR (50,463,593) 39,335,238 Net (loss)/profit after taxation is made up of the following: Realised amount 12,561,139 11,138,191 Unrealised amount (63,024,732) 28,197,047 (50,463,593) 39,335,238 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 FINANCIAL POSITION AS AT 31 AUGUST 2015 ASSETS Note RM RM Financial assets at fair value through profit or loss 8 249,418, ,916,670 Cash and cash equivalents 9 92,068, ,399,469 Dividend receivable 438, ,922 Amount due from Manager - creation of units - 6,602,292 Amount due from brokers 8,344,199 - Tax recoverable 116, ,171 TOTAL ASSETS 350,386, ,251,524 LIABILITIES Amount due to Manager - management fee 463, ,225 - cancellation of units 1,282,595 - Amount due to Trustee 21,632 29,457 Amount due to brokers - 2,732,715 Auditors remuneration 6,600 6,600 Tax agent s fee 3,550 7,050 Other payables and accruals 36,541 4,000 TOTAL LIABILITIES 1,814,463 3,411,047 NET ASSET VALUE OF THE FUND 348,572, ,840,477 EQUITY Unitholders capital 355,648, ,331,646 (Accumulated losses)/retained earnings (7,076,772) 49,508,831 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 348,572, ,840,477 NUMBER OF UNITS IN CIRCULATION ,189, ,587,000 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. 12

14 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2015 (Accumulated losses) Unitholders /retained capital earnings Total RM RM RM Balance as at 1 September ,331,646 49,508, ,840,477 Total comprehensive loss for the financial year - (50,463,593) (50,463,593) Distributions (Note 7) - (6,122,010) (6,122,010) Movement in unitholders capital: Creation of units arising from applications 68,871,786-68,871,786 Creation of units arising from distributions 6,019,035-6,019,035 Cancellation of units (174,573,502) - (174,573,502) Balance as at 31 August ,648,965 (7,076,772) 348,572,193 Balance as at 1 September ,404,001 28,436, ,840,844 Total comprehensive income for the financial year - 39,335,238 39,335,238 Distributions (Note 7) - (18,263,250) (18,263,250) Movement in unitholders capital: Creation of units arising from applications 365,406, ,406,481 Creation of units arising from distributions 17,922,956-17,922,956 Cancellation of units (60,401,792) - (60,401,792) Balance as at 31 August ,331,646 49,508, ,840,477 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

15 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2015 CASH FLOWS FROM OPERATING ACTIVITIES Note RM RM Proceeds from sale of Shariah-compliant investments 339,288, ,265,931 Purchase of Shariah-compliant investments (270,690,708) (358,218,668) Dividend received 8,910,508 6,680,243 Profit from short term Shariah-based deposits 3,716,040 1,817,563 Management fee paid (7,138,273) (4,223,977) Trustee fee paid (333,119) (197,119) Payment for other fees and expenses (164,032) (21,270) Tax refund - 104,791 Net cash generated from/(used in) operating activities 73,588,786 (235,792,506) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 75,474, ,152,674 Payments for cancellation of units (173,290,907) (60,450,650) Payment for distributions (102,975) (340,294) Net cash (used in)/generated from financing activities (97,919,804) 299,361,730 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (24,331,018) 63,569,224 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 116,399,469 52,830,245 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 9 92,068, ,399,469 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2015 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 in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ), as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported financial year. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note M. (a) The new standards and amendments to published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 September 2017 MFRS 15 Revenue from contracts with customers (effective from 1 January 2017) deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces MFRS 118 Revenue and MFRS 111 Construction contracts and related interpretations. This standard is not expected to have a significant impact on the Fund s financial statements. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (a) The new standards and amendments to published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (continued) (ii) 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". The complete version of MFRS 9 was issued in November 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 contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. This standard is not expected to have a significant impact on the Fund s financial statements. 16

18 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 investments, 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 year. 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. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G FINANCIAL ASSETS AND FINANCIAL LIABILITES (i) Classification The Fund designates its investment in Shariah-compliant quoted securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. 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 receivable 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, 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. Quoted investments in Malaysia are valued at the last done market price quoted on Bursa Malaysia at the date of the statement of financial position. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G FINANCIAL ASSETS AND FINANCIAL LIABILITES (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. 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. 19

21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. 20

22 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES J CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unitholder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s Net Asset Value or NAV. The outstanding units are carried at the redemption amount that is payable as at the date of the statement of financial position if the unitholder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unitholder s option at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. K UNITHOLDERS CAPITAL The unitholders capital to the Fund meets the definition of puttable instruments classified as equity instruments under MFRS 132 Financial Instruments: Presentation. The units in the Fund are puttable instruments which entitle the unitholders to a pro-rata share of the net asset of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units in the Fund over the life of the units are based on the change in the net asset of the Fund. L 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 M CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES The preparation of financial statements in conformity with the Malaysian Financial Reporting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on the Manager s best knowledge of current events and actions, actual results could differ from those estimates. The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information 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. 21

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 AUGUST 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 and Third Supplemental Deed dated 23 September 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 may invest in Shariah-compliant securities traded on the FTSE Bursa Malaysia Emas Syariah Index and/or other markets considered as eligible markets, Shariah-based collective investment schemes, unlisted Shariah-compliant securities, Islamic futures contracts and any other investments not otherwise prohibited by the SC s Shariah Advisory Council and/or the Shariah Adviser from time to time and provided they are designated as Shariah-compliant. As our Shariah Adviser, Amanie Advisors Sdn Bhd will also be advising on the selection of investment tools to ensure compliance with Shariah requirements. All investments will be subjected to the SC s Guidelines on Unit Trust Funds, the Deeds and the objective of the Fund. The main objective of the Fund is to 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 22 October

24 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments are as follows: Financial Financing assets at fair and value through Note receivables profit or loss Total 2015 RM RM RM Shariah-compliant quoted investments 8-249,418, ,418,709 Cash and cash equivalents 9 92,068,451-92,068,451 Dividend receivable 438, ,437 Amount due from brokers 8,344,199-8,344,199 Total 100,967, ,418, ,386, Shariah-compliant quoted investments 8-384,916, ,916,670 Cash and cash equivalents 9 116,399, ,399,469 Dividend receivable 202, ,922 Amount due from Manager 6,602,292-6,602,292 Total 123,204, ,916, ,121,353 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. 23

25 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 Shariah-compliant quoted investments Shariah-compliant quoted equities designated at fair value through profit or loss 249,418, ,916,670 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 % 236,947,774 (12,470,935) 0% 249,418, % 261,889,644 12,470, % 365,670,836 (19,245,834) 0% 384,916, % 404,162,504 19,245,834 (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 a short term basis. The Fund s exposure to interest rate risk associated with deposits with licensed financial institutions is not material as the carrying value of the deposit is a reasonable estimate of fair value as the deposits are held on a short term basis. As at 30 April 2014, the Fund did not hold any financial instruments that expose it to interest rate risk. 24

26 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 payment and cancellations of unit by unitholders. Shariah-based liquid assets comprise bank balances, short term Shariah-based deposits with licensed financial institutions and other Shariah-compliant 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 2015 RM RM RM Amount due to Manager - management fee 463, ,545 - cancellation of units 1,282,595-1,282,595 Amount due to Trustee 21,632-21,632 Auditors remuneration - 6,600 6,600 Tax agent s fee - 3,550 3,550 Other payables and accruals 29,541 7,000 36,541 1,797,313 17,150 1,814, Amount due to Manager - management fee 631, ,225 Amount due to Trustee 29,457-29,457 Amount due to broker 2,732,715-2,732,715 Auditors remuneration - 6,600 6,600 Tax agent s fee - 7,050 7,050 Other payables and accruals - 4,000 4,000 3,393,397 17,650 3,411,047 25

27 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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. 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 of the Fund: Cash Amount Amount and cash Dividend due from due from equivalents receivable Manager brokers Total 2015 RM RM RM RM RM AAA 27, ,004 AA1 26,954, ,954,587 AA2 10,012, ,012,329 A1 55,074, ,074,531 Others - 438,437-8,344,199 8,782,636 92,068, ,437-8,344, ,851, AAA 103, ,135 AA1 21,526, ,526,673 AA3 94,769, ,769,661 Others - 202,922 6,602,292-6,805, ,399, ,922 6,602, ,204,683 The financial assets of the Fund are neither past due nor impaired. 26

28 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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 year end date. An active market is a market in which transactions for the asset take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. (i) Fair value hierarchy The table below analyses financial instruments carried at fair value 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) 27