Growth Fund. Interim Report 31 August MANAGER Affin Hwang Asset Management Berhad ( T) TRUSTEE AmanahRaya Trustee Berhad ( T)

Transcription

1 Affin Hwang Growth Fund Interim Report 31 August 2017 MANAGER Affin Hwang Asset Management Berhad ( T) TRUSTEE AmanahRaya Trustee Berhad ( T)

2 AFFIN HWANG GROWTH FUND Interim Report and Unaudited Financial Statements For the 6 Months Financial Period Ended 31 August 2017 Content Page FUND INFORMATION... 2 FUND PERFORMANCE DATA... 3 MANAGER S REPORT... 5 TRUSTEE S REPORT... 9 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE MANAGER DIRECTORY OF SALES OFFICE

3 FUND INFORMATION Fund Name Affin Hwang Growth Fund Fund Type Capital Growth Fund Category Equity Investment Objective To generate capital growth over the medium to long term period through diversified investments of equities listed on Bursa Malaysia Benchmark FTSE Bursa Malaysia KLCI Distribution Policy Distribution (if any) is incidental and will be subject to the availability of income BREAKDOWN OF UNITHOLDERS BY SIZE AS AT 31 AUGUST 2017 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below 43,119 92,141 5,001 to 10,000 30, ,885 10,001 to 50,000 24, ,493 50,001 to 500, , ,001 and above 2 4,568 Total 97, ,573 * Note: Excluding Manager s stock 2

4 FUND PERFORMANCE DATA Category As at 31 Aug 2017 (%) As at 31 Aug 2016 (%) As at 31Aug 2015 (%) Portfolio composition Quoted equities local - Construction Consumer products Finance Industrial products Infrastructure project company Plantation Properties REITs Rights Technology Trading / Services Warrant Total quoted equities local Cash & cash equivalent Total Total NAV (RM million) NAV per Unit (RM) Unit in Circulation (million) , Highest NAV Lowest NAV Return of the Fund (%) iii Capital Growth (%) i Income Distribution (%) ii Nil Nil Nil Gross Distribution per Unit (sen) Nil Nil Nil Net Distribution per Unit (sen) Nil Nil Nil Management Expense Ratio (%) Portfolio Turnover Ratio (times) Basis of calculation and assumption made in calculating the returns:- The performance figures are a comparison of the growth/decline in NAV for the stipulated period taking into account all the distribution payable (if any) during the stipulated period. An illustration of the above would be as follow:- Capital return = NAV per Unit end / NAV per Unit begin 1 Income return = Income distribution per Unit / NAV per Unit ex-date Total return = (1+Capital return) x (1+Income return) 1 Capital Return i = (NAV per 31/8/17 NAV per 28/2/17* - 1) x 100 = ( ) x 100 = 10.06% Total Income Return ii = Nil Return of the Fund iii = [{(1 + Capital Return) x (1 + Income Return)} 1] x 100 = [{( %) x ( %)} 1] x 100 = 10.06% 1 The MER of the Fund remained unchanged during the period under review. 2 The PTR of the Fund remained relative unchanged during the period under review, albeit marginally lower. 3

5 * Source Amanahraya Trustees Berhad Table 1: Performance of the Fund 6 Months (1/3/17-31/8/17) 1 Year (1/9/16-31/8/17) 3 Years (1/9/14-31/8/17) 5 Years (1/9/12-31/8/17) Since Commencement (28/6/11-31/8/17) Fund 10.06% 15.63% 10.14% 22.78% 35.74% Benchmark 4.69% 5.67% (4.17%) 8.33% 13.55% Outperformance / (Underperformance) 5.37% 9.96% 14.31% 14.45% 22.19% Source of Benchmark: Bursa Malaysia Table 2: Average Total Return 1 Year (1/9/16-31/8/17) 3 Years (1/9/14-31/8/17) 5 Years (1/9/12-31/8/17) Since Commencement (28/6/11-31/8/17) Fund 15.63% 3.27% 4.19% 5.07% Benchmark 5.67% (1.41%) 1.61% 2.08% Outperformance / (Underperformance) 9.96% 4.68% 2.58% 2.99% Source of Benchmark: Bursa Malaysia Table 3: Annual Total Return FYE 2017 (01/3/16-28/2/17) FYE 2016 (01/1/15-29/2/16) FYE 2014 (01/1/14-31/12/14) FYE 2013 (01/1/13-31/12/13) FYE 2012 (28/6/11-31/12/12) Fund 9.51% (1.06%) (8.86%) 8.42% 14.76% Benchmark 2.36% (5.58%) (5.22%) 10.17% 7.96% Outperformance / (Underperformance) 7.15% 4.52% (3.64%) (1.75%) 6.80% Source of Benchmark: Bursa Malaysia Past performance is not necessarily indicative of future performance and that Unit prices and investment returns may go down, as well as up. 4

6 MANAGER S REPORT Performance Review For the period 1 March 2017 to 31 August 2017, the Fund registered a return of 10.06%. The Net Asset Value (NAV) per unit of the Fund as at 31 August 2017 was RM while the NAV at 28 February 2017 was RM The Benchmark for the period registered a return of 4.69%. The Fund outperformed the Benchmark by 5.37 percentage points (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 2017, the Fund has registered a return of 35.74%. Compared to the benchmark that rose 13.55% for the same period, the Fund outperformed the Benchmark by percentage points. As such, the Fund will continue to be managed in a manner to fulfil its objective. Figure 1: Movement of the Fund versus the Benchmark This information is prepared by Affin Hwang Asset Management Berhad (AFFINHWANGAM) for information purposes only. Past earnings or the fund s distribution record is not a guarantee or reflection of the fund s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. Source of the Benchmark is from Bloomberg. Benchmark: FTSE Bursa Malaysia KLCI Income Distribution / Unit Split No income distribution or unit split were declared for the financial year ended 31 August

7 Asset Allocation For a snapshot of the Fund s asset mix during the period under review, please refer to Figure 2. Figure 2: Asset allocation of the Fund 31 Aug Aug Aug 2015 (%) (%) (%) Quoted equities foreign Cash & Cash equivalent Total The equity exposure for the portfolio during the period under review remained relative unchanged above the 90% level. As at 31 August 2017, the Fund s equity exposure in the domestic market stood at 91.97%, marginally lower than 94.19% a year ago. Correspondingly, the cash level of the Fund remained at a moderate level of 8.03% over the same period. Strategies Employed We had maintained a bottom-up stock selection process for the Fund s investments - focusing on building a sustainable portfolio of quality investments for a medium to longer-term horizon. We looked towards capitalising on the stronger equity market run, and maintained the Fund s market exposure at comparatively higher levels at the end of the period under review. Market Review Politics and policies remained in focus over the period under review. The US Federal Reserve continued on its rate hike trail with a further 25 basis points hike in June, after tightening its monetary policy once in December 2016, and again in March Sentiment was, however, dampened with concerns over political instability in the US and the Trump administration s ability to push through its policies. After a stellar run in 2016, strength of the US Dollar stalled against Asian currencies, leaving regional markets to end stronger against the US, and European bourses. The S&P 500 index trended 13.9% higher in local currency terms in the period under review. Despite the more encouraging economic data flowing out of the Eurozone, a hawkish note by the European Central Banks had led to speculations that its stimulus measures may soon be tapered off. This had also resulted in a market pull-back leading to the end of the period under review. The reversal in Dollar strength, coupled with a more optimistic outlook and improved earnings led emerging markets to end the period as one of the stronger performers recording an impressive 16.2% in local currency terms over the period under review. This was largely supported by the strong gains seen within the Asian region, which rose 17.4% in local currency terms over the same period. The strong momentum and upward trend of global financial markets did, however, take a breather at the end of the period under review. Investors shifted into safer haven assets after the erratic actions of North Korea heightened the risk of uncertainty. While concerns escalated, markets were quick to dispel the actions are mere threats, and financial markets soon found itself continuing to climb higher The Ringgit benefitted from the stall in US Dollar strength ending the month at RM4.27 to the Dollar compared to the RM4.44 rate being traded at the end of February The Ringgit has however remained below the RM4.07 levels seen in August The FBM KLCI Index ended the period under review with a 4.7% gain in local currency terms, and underperformed most of its regional peers. Performance of stocks within the energy sector was weak towards the end of the period under review, dragged down by lower oil prices on speculation that OPEC s production cap was losing its effectiveness. Sentiment was also dampened over the quarter after a reported rescindment in the sale of the TRX land to IWH CREC Sdn Bhd, a Sino-Malaysian consortium. Nevertheless, China had remained committed towards its continued investments into Malaysia, cemented with the signing of 9 memorandums of understanding ( MoUs ) totalling USD 7.2 billion during a ceremony held in China in May. 6

8 Trade balance surplus had widened towards the end of the period under review, coming in at USD 2.8 billion after slowing exports and even slower imports. After slipping to an all-time low in June, Malaysia s Purchasing Manager s Index was seen rebounding to 48.3 in July. Bank Negara Malaysia (BNM) maintained its overnight policy rate at 3.0%, and expected to keep rates steady for the rest of 2017 on the back of expectations for a firmer inflation, and the recent cyclical stabilisation. Economic growth had kept within targets, recording a 4.2% growth for the full 2016, after seeing 4.5% growth in the final quarter of the year. Private consumptions and investments had helped offset the slower public spending in the final quarter of Investment Outlook Global financial markets are expected to remain robust, supported by the broader improvement in economic data with upward revisions in corporate earnings boosting investors sentiment. We believe that the stronger economic data will be supportive of markets. The healthy pipeline of projects lined up within the infrastructure sector is expected to provide an opportunistic window for the Fund to participate into beneficiaries from the spending. The improved economic conditions and reflation trade also makes financial stocks more compelling. As such, we will also be maintaining a healthy exposure of financial stocks within the portfolio. Nevertheless, we will remain cautious when participating into the market given the prevailing external uncertainties. We believe that the Fund is well positioned under the current economic landscape, and are optimistic that it will continue to meet its objective. State of Affairs of the Fund There is neither any significant change to the state affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the period under review. However, in the Affin Hwang Growth Fund Prospectus dated 22 September 2017, the information in relation to the Investment Strategy and Specific Risks Dividend Policy Risk had been amended as follows in order to provide better clarity to the Fund. Investment Strategy To achieve the investment objective, the Manager s investment approach is to invest in equities with a focus on companies that exhibit strong growth potential. These companies are gauged through their competitive advantage against their sector and/or industry peers. In determining the competitive position, the Manager will look at the company s market share cost leadership, product differentiation and product benefits. To this end, the Fund will actively seek out opportunities to provide investors with capital growth. As part of its strategy, the Fund may also invest into dividend yielding stocks. However, to mitigate adverse impact from companies revising their dividend payout policy, we will focus on companies that already hold a stable dividend policy such as, for example, a consistent historical dividend payout over the past three (3) years and have healthy cash flows which refers to companies that are able to meet their cash flow needs when carrying out their operational functions without duress. Dividend Policy Risk This risk is particular to a fund which has significant dividend yielding stocks in its portfolio. If at any time there is a change in management policy, significant deterioration in the business or fundamentals of the company invested, it may result in a reduction or removal of the said company s dividend policy. This risk however is mitigated by investing mainly in companies with consistent historical record of at least three (3) years paying dividend and companies with healthy cash flows which refers to companies that are able to meet their cash flow needs when carrying out their operational functions without duress. 7

9 Soft Commissions received from Brokers As per the requirements of the Securities Commission s Guidelines on Unit Trust Funds and Guidelines on Compliance Function for Fund Management Companies, soft commissions received from brokers/dealers may be retained by the management company only if the (i) (ii) goods and services provided are of demonstrable benefit to Unit holders of the Fund; and goods and services are in the form of research and advisory services that assists in the decision making process. During the financial period under review, the management company had received on behalf of the Fund, soft commissions in the form of research materials, data and quotation services, investment-related publications, market data feed and industry benchmarking agencies which are of demonstrable benefit to Unitholders of the Fund. 8

10 TRUSTEE S REPORT For the Six Months Financial Period Ended 31 August 2017 TO THE UNIT HOLDERS OF AFFIN HWANG GROWTH FUND We, AMANAHRAYA TRUSTEES BERHAD, have acted as Trustee of AFFIN HWANG GROWTH FUND for the six months financial period ended 31 August In our opinion, AFFIN HWANG ASSET MANAGEMENT BERHAD, the Manager, has operated and managed AFFIN HWANG GROWTH FUND in accordance with the limitations imposed on the investment powers of the management company under the Deed, securities laws and the applicable Guidelines on Unit Trust Funds for the six month financial period ended 31 August We are of the opinion that: (a) (b) Valuation and pricing is carried out in accordance with the Deed and any regulatory requirement; and Cancellation of units are carried out in accordance with the Deed and other regulatory requirement. Yours faithfully AMANAHRAYA TRUSTEES BERHAD HABSAH BINTI BAKAR Chief Executive Officer Kuala Lumpur, Malaysia 13 October

11 STATEMENT OF COMPREHENSIVE INCOME INVESTMENT INCOME 6 months 6 months financial financial period ended period ended Note RM RM Gross dividend income 4,005,645 4,307,758 Interest income from deposit with financial institutions 240, ,004 Net gain on financial assets at fair value through profit or loss 7 21,444,215 9,055,521 25,690,656 13,994,283 EXPENSES Management fee 4 (1,803,626) (1,999,351) Trustee fee 5 (96,909) (106,632) Auditors' remuneration (3,630) (3,630) Tax agent's fee (3,025) (3,025) Transaction cost (545,217) (615,648) Other expenses (156,429) (171,503) (2,608,836) (2,899,789) NET PROFIT BEFORE TAXATION 23,081,820 11,094,494 TAXATION 6 (21,206) (18,587) NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 23,060,614 11,075,907 Net profit after taxation is made up of the following: Realised amount 12,081,949 (1,091,011) Unrealised amount 10,978,665 12,166,918 23,060,614 11,075,907 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 STATEMENT OF FINANCIAL POSITION ASSETS Note RM RM Financial assets at fair value through profit or loss 7 215,784, ,028,544 Cash and cash equivalents 8 21,682,034 19,917,750 Dividend receivables 214, ,416 Amount due from brokers 53,786 - TOTAL ASSETS 237,734, ,277,710 LIABILITIES Amount due to Manager - management fee 300, ,332 - cancellation of units 162, ,987 Amount due to Trustee 16,027 17,511 Amount due to brokers 2,584,033 4,825,987 Auditors remuneration 3,630 3,630 Tax agent s fee 7,325 9,125 Other payable and accruals 27,814 19,846 TOTAL LIABILITIES 3,101,443 5,385,418 NET ASSET VALUE OF THE FUND 234,633, ,892,292 EQUITY Unitholders capital 203,705, ,522,786 Retained earnings/(accumulated losses) 30,927,977 (3,630,494) NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 234,633, ,892,292 NUMBER OF UNITS IN CIRCULATION 9 771,576, ,875,000 NET ASSET VALUE PER UNIT (RM) The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 STATEMENT OF CHANGES IN EQUITY (Accumulated losses)/ Unitholders Retained capital earnings Total RM RM RM Balance as at 1 March ,743,256 7,867, ,610,619 Total comprehensive income for the financial period - 23,060,614 23,060,614 Movement in unitholders capital: Creation of units arising from applications 136, ,504 Cancellation of units (23,174,506) - (23,174,506) Balance as at 31 August ,705,254 30,927, ,633,231 Balance as at 1 March ,195,114 (14,706,401) 269,488,713 Total comprehensive income for the financial period - 11,075,907 11,075,907 Movement in unitholders capital: Cancellation of units (24,672,328) - (24,672,328) Balance as at 31 August ,522,786 (3,630,494) 255,892,292 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 STATEMENT OF CASH FLOWS CASH FLOW FROM OPERATING ACTIVITIES 6 months 6 months financial period financial period ended ended Note RM RM Proceeds from sale of investments 103,154, ,538,100 Purchase of investments (69,087,933) (91,575,771) Interest received 240, ,004 Dividend received 4,016,222 4,198,166 Management fee paid (1,774,196) (1,992,186) Trustee s fee paid (95,340) (106,250) Payment for other fees and expenses (158,993) (181,163) Net cash generated from operating activities 36,294,824 26,511,900 CASH FLOW FROM FINANCING ACTIVITIES Proceeds from creation of units 136,504 - Payments for cancellation of units (23,170,348) (24,538,072) Net cash used in from financing activities (23,033,844) (24,538,072) NET INCREASE IN CASH AND CASH EQUIVALENTS 13,260,980 1,973,828 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 8,421,054 17,943,922 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 8 21,682,034 19,917,750 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used in dealing with items which are considered material in relation to the financial statements. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention, except as disclosed in the summary of significant accounting policies and comply Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note K. (a) Standards, amendments to published standards and interpretations that are effective The Fund has applied the following amendments for the first time for the financial year beginning on 1 March 2017: Amendments to MFRS 101 Presentation of financial statements - Disclosure initiative Annual Improvements to MFRSs Cycle The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. (b) The new standards and amendments to the published standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 March 2018 Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative (effective from 1 January 2017) introduce an additional disclosure on changes in liabilities arising from financing activities. (ii) Financial year beginning on/after 1 March 2019 MFRS 15 Revenue from contracts with customers (effective 1 from 1 January 2018) replaces MFRS 118 Revenue and MFRS 111 Construction contracts and related interpretations. The standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (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 March 2019 (continued) Revenue is recognised when a customer obtains control of goods or services, and thus has the ability to direct the use of and obtain the benefits from the goods or services. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ("OCI"). The basis of classification depends on the entity's business model and the cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply these standards when effective. These standards are not expected to have a significant impact on the Fund's financial statements. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B INCOME RECOGNITION Dividend income is recognised on the ex-dividend date, when the right to receive the dividend has been established. Interest income from short term deposits with licensed financial institutions are recognised based on effective interest rate method on an accruals basis. For quoted investment, 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 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 and brokers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. D TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. E FUNCTIONAL AND PRESENTATION CURRENCY Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia, which is the Fund s functional and presentation currency. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in quoted equities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s loans and receivables comprise cash and cash equivalents, 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, amount due to brokers, auditors remuneration, tax agent s fee, and other payables and accruals as other financial liabilities. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date the date on which the Fund commits to purchase or sell the asset. 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 derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Gain or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category is presented in the statement of comprehensive income within net gain/(loss) on financial assets at fair value through profit or loss in the financial period which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payments is established. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (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. Deposit with licensed financial institutions is stated at cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the deposit. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. (iii) Impairment For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. 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 yield rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash and bank balances and deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. H AMOUNTS 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 interest 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, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or loans expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. I UNITHOLDERS CAPITAL The unitholders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the holder to a proportionate share of the Fund s net assets value; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial year if unitholder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unitholder s option at prices based on the Fund s net asset value per unit at the time of creation or cancellation. The Fund s net asset value per unit is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. 19

21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES J SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the strategic asset allocation committee of the Manager that makes strategic decisions. K CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgements are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unit Trust Funds 20

22 NOTES TO THE FINANCIAL STATEMENTS 1 INFORMATION ON THE FUND The Fund was constituted under the name Affin Quantum Fund (the Fund ) pursuant to the execution of a Deed dated 25 March The Fund has changed its name from Affin Quantum Fund to Affin Hwang Growth Fund as amended by the First Supplemental Deed dated 22 July 2014 (the Deeds ) entered into between Affin Hwang Asset Management Berhad (the Manager ) and AmanahRaya Trustees Berhad (the Trustee ). The Fund commenced operations on 25 March 2011 and will continue its operations until terminated by the Trustee as provided by Division 12.3 of the Deed. The Fund may invest in securities traded on Bursa Malaysia and other markets considered as eligible markets, collective investment schemes, unlisted securities, futures contracts and any other investments approved by the SC from time to time. All investments will be subjected to the SC s Guidelines on Unit Trust Funds, the Deeds and the objective of the Fund : (i) (ii) (iii) (iv) (v) (vi) (vii) Securities of Malaysian companies listed on Bursa Malaysia; Unlisted securities offered directly by the company to the Fund; Listed Private Debt Securities, unlisted loan stocks and corporate bonds; Malaysian Government Securities, Treasury Bills, Bank Negara Certificates, Government Investment Certificates and Cagamas Bonds; Deposits and money market securities; Stock warrants, covered options and call options that are traded on an eligible market; and Any other form of investments as may be agreed upon the Manager and the Trustee or as permitted by the relevant authorities from time to time. The objective of the Fund is to seek a stable return and generate capital growth over the medium to long term period in diversified investment of equities listed on Bursa Malaysia. 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 13 October

23 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments are as follows: 2017 Financial assets Loans at fair and value through Note receivables profit or loss Total RM RM RM Quoted equities 7-215,784, ,784,158 Cash and cash equivalent 8 21,682,034-21,682,034 Dividend receivable 214, ,696 Amount due from broker 53,786-53,786 Total 21,950, ,784, ,734, Quoted equities 7-241,028, ,028,544 Cash and cash equivalent 8 19,917,750-19,917,750 Dividend receivable 331, ,416 Total 20,249, ,028, ,277,710 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. 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. 22

24 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES 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. The Fund s overall exposure to price risk was as follows: Quoted investment Quoted equities designated at fair value RM RM through profit or loss 215,784, ,028,544 The following table summarises the sensitivity of the Fund s profit after taxation and net asset value to price risk movement. 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 % 204,994,950 (10,789,208) 0% 215,784, % 226,573,366 10,789, % 228,977,117 (12,051,427) 0% 241,028, % 253,079,971 12,051,427 23

25 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Market risk (continued) (b) Interest rate risk Liquidity 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 deposit placements with licensed financial institutions. The Manager overcomes this exposure by way of maintaining deposits on short term basis. The Fund s exposure to interest rate risk associated with deposits with licensed financial institutions is not material as the deposits are held on a short term basis. Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellation of units by unitholders. Liquid assets comprise cash, deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days. The table below analyses the Fund s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table below are the contractual undiscounted cash flows: 2017 Between one Within month to one month one year Total RM RM RM Amount due to Manager - management fee 300, ,509 - cancellation of units 162, ,105 Amount due to Trustee 16,027-16,027 Amount due to brokers 2,584,033-2,584,033 Auditors remuneration - 3,630 3,630 Tax agent s fee - 7,325 7,325 Other payables and accruals 21,661 6,153 27,814 3,084,335 17,108 3,101,443 24

26 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Liquidity risk (continued) The amounts in the table below are the contractual undiscounted cash flows (continued) Between one Within month to one month one year Total RM RM RM Amount due to Manager - management fee 328, ,332 - cancellation of units 180, ,987 Amount due to Trustee 17,511-17,511 Amount due to brokers 4,825,987-4,825,987 Auditors remuneration - 3,630 3,630 Tax agent s fee - 9,125 9,125 Other payables and accruals 20,750 (904) 19,846 5,373,567 11,851 5,385,418 Credit risk Credit risk refers to the ability of an issuer or counterparty to make timely payments of interest, principals and proceeds from realisation of investment. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. Credit risk arising from placements on deposits in licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. The settlement terms of amount due from brokers are governed by the relevant rules and regulations as prescribed by the respective stock exchanges. The settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the SC s Guidelines on Unit Trust Funds. 25

27 NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Credit risk (continued) The following table sets out the credit risk concentration of the Fund: 2017 Cash and cash Other equivalents assets* Total RM RM RM Finance - AAA 21,542,051-21,542,051 - AA3 139, ,983 Consumer Products - NR - 76,962 76,962 Industrial Products - NR - 7,830 7,830 REITS - NR - 83,994 83,994 Technology - NR - 45,910 45,910 Trading/Services - NR - 53,786 53,786 21,682, ,482 21,950, Finance - AAA 16,124,848-16,124,848 - AA3 3,792,902-3,792,902 Consumer Products - NR - 3,520 3,520 Industrial Products - NR - 70,153 70,153 REITS - NR - 4,692 4,692 Technology - NR - 69,219 69,219 Trading/Services - NR - 183, ,832 19,917, ,416 20,249,166 * Other assets consists dividend receivables and amount due from broker. 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 Capital risk The capital of the Fund is represented by equity consisting of unitholders capital and retained earnings. The amount of equity can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unitholders. The Fund s objective when managing capital is to safeguard the Fund s ability to continue as a going concern in order to provide returns for unitholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. 3 FAIR VALUE ESTIMATION Financial instruments comprise financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets traded in active markets (such as trading securities) is based on quoted market prices at the close of trading on the period end date. The Fund utilizes the current bid price for financial assets which fall within the bid-ask spread. An active market is a market in which transactions for the asset take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. (i) Fair value hierarchy The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2) Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market. 27

29 NOTES TO THE FINANCIAL STATEMENTS 3 FAIR VALUE ESTIMATION (i) Fair value hierarchy (continued) The following table analyses within the fair value hierarchy the Fund s financial assets (by class) measured at fair value: 2017 Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss at inception - quoted equities 215,784, ,784, Financial assets at fair value through profit or loss at inception - quoted equities 241,028, ,028,544 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Fund does not adjust the quoted prices for these instruments. (ii) The carrying values of cash and cash equivalents, dividend receivable, amount due from broker, and all current liabilities are a reasonable approximation of the fair values due to their short term nature. 4 MANAGEMENT FEE In accordance with the Prospectus, the Manager is entitled to a management fee at a rate of up to 1.50% per annum on the NAV of the Fund, calculated on a daily basis. For the financial period ended 31 August 2017, the management fee is recognised at a rate of 1.50% (2016: 1.50%) per annum on the NAV of the Fund calculated on a daily basis. There will be no further liability to the Manager in respect of management fee other than amounts recognised above. 28

30 NOTES TO THE FINANCIAL STATEMENTS 5 TRUSTEE S FEE In accordance with the Prospectus, the Trustee is entitled to a fee of up to 0.08% per annum of the NAV of the Fund, calculated on a daily basis. For the financial period ended 31 August 2017, the Trustee fee is recognised at a rate of 0.08% (2016: 0.08%) per annum on the NAV of the Fund calculated on a daily basis. There will be no further liability to the Trustee in respect of Trustee fee other than amounts recognised above. 6 TAXATION 6 months 6 months financial financial period ended period ended RM RM Current taxation 21,206 18,587 The numerical reconciliation between net profit/ (loss) before taxation multiplied by the Malaysian statutory tax rate and tax expense of the Fund is as follows: 6 months 6 months financial financial period ended period ended RM RM Net profit before taxation 23,081,820 11,094,494 Tax at Malaysian statutory tax rate of 24% (2016: 24%) 5,539,637 2,662,679 Tax effect of: Investment income not subject to tax (6,165,758) (3,358,628) Expenses not deductible for tax purposes 192, ,266 Restriction on tax deductible expenses for unit trust fund 433, ,683 Income subject to different tax rate 21,206 18,587 Tax expense 21,206 18,587 29