Structured Income Fund VIII

Transcription

1 Affin Hwang Structured Income Fund VIII Quarterly Report 31 July 2016 MANAGER Affin Hwang Asset Management Berhad ( T) TRUSTEE Maybank Trustees Berhad (5004-P)

2 AFFIN HWANG STRUCTURED INCOME FUND VIII Quarterly Report and Financial Statements As at 31 July 2016 Contents Page QUARTERLY REPORT... 2 STATEMENT OF COMPREHENSIVE INCOME... 5 STATEMENT OF FINANCIAL POSITION... 6 STATEMENT OF CHANGES IN EQUITY

3 QUARTERLY REPORT MANAGER S VIEW ON PORTFOLIO AND MARKET Fund Type, Category, Objective and Distribution Policy Affin Hwang Structured Income Fund VIII ( the Fund ) is an income fund, categorized as Structured Product (wholesale fund/close-ended) which aims to provide regular income distribution over a maximum investment horizon of three years. The Fund endeavours to distribute income on a quarterly basis and, in the absence of a Maturity Event, until the Maturity date. All income shall be paid in cash. There will be no option for unitholders to reinvest the income in the form of additional Units for this Fund. Benchmark The benchmark used by the Manager in measuring the performance of the Fund is the 12-month Malayan Banking Berhad fixed deposit rate ( the Benchmark ). (source: Malayan Banking Berhad; obtainable at At each anniversary of the Fund, the benchmark shall be reset based on the then prevailing 12-Month Malayan Banking Berhad fixed deposit rate. Performance of the Fund as at 1 May 2016 to 31 July 2016 For the period under review from 1 May 2016 to 31 July 2016, the Fund registered a return of 3.34%. Compared to the Benchmark return of 0.81%, the Fund outperformed the Benchmark by 2.53%. The Net Asset Value (NAV) per Unit of the Fund as at 31 July 2016 was RM On total NAV basis, the Fund s NAV stood at RM million as at 31 July (See Table 1 for performance of the Fund and Figure 1 for movement of the Fund versus the Benchmark respectively). As at 31 July 2016, the Fund has continued to meet its quarterly income distribution payouts. Table 1: Performance as at 31 July Months (1/5/16-31/7/16) 6 Months (1/2/16-31/7/16) 1 Year (1/8/15-31/7/16) Since Commencement (16/8/13-31/7/16) Fund 3.34% 11.24% 9.06% 20.82% Benchmark 0.81% 1.62% 3.30% 9.94% Outperformance 2.53% 9.62% 5.76% 10.88% Source of Benchmark: Bloomberg Table 2: Volatility as at 31 July Year Fund N/A Volatility is a number calculated based on methodology endorsed and relating to the sensitivity of the portfolio return of a fund to changes in the market conditions and the general economy. It is also based on an evaluation of a specific set of quantitative factors involving the performance of the fund. 2

4 Figure 1: Movement of the Fund versus the Benchmark 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: 12-month Malayan Banking Berhad fixed deposit rate Strategies Employed (1 May July 2016) During the period under review, the Manager maintained a high investment level into the Structured Product. The structured report is referenced to 10 underlying entities, namely Petroleo Brasileiro SA, HSBC Bank Plc, Temasek Holdings Pte Ltd, Crown Ltd, Volkswagen Aktiengesellschaft, PCCW-HKT Telephone Ltd, Reliance Industries Ltd, Bank of America Corporation, Republic of Indonesia, and Allianz SE. Cash levels were maintained at an appropriate level in order to meet redemption requests and any incidental expenses of the Fund. Asset Allocation (1 May July 2016) From 1 May 2016 to 31 July 2016, the Fund s asset allocation exposure to the Structured Product stood at 99.90% of the Fund s NAV while the balance was held in cash. For a snapshot of the Fund s asset mix as at 31 July 2016, please refer to Figure 2. Figure 2: Summary of Asset Allocation Asset Allocation 31 July April January 2016 Structured Product 99.90% 99.88% 99.88% Cash & Money Market 0.10% 0.12% 0.12% Total % % % 3

5 Review of Market (1 May July 2016) The key event for the second quarter of 2016 had not changed much, revolving around similar topics namely the slow pace of global growth, timing of the US Federal Reserve ( Fed ) s second rate hike, volatility in commodity prices as well as further monetary policy stimulus by global central banks. While markets were expecting a June rate hike on the back of the Fed s hawkish statement, the weaker than expected US jobs data had turned the tables on this, pushing back Fed s plan. The non-farm payrolls increased by only 38,000 in May, its slowest since September The weaker numbers had led the US Federal Reserves (Fed) to slow the pace of interest rate hikes. During the period under review, the Brexit event had stolen the limelight and caused turmoil in global markets with its surprising outcome when the UK s referendum resulted in a vote to leave the EU, 52% to 48%. Markets had reacted swiftly to the UK s shocking vote on 23 June. In the immediate aftermath of the defying outcome, the FTSE 100 plunged by more than 8%, the biggest falls since the collapse of the US investment bank Lehman Brothers in October Probability of the Fed policy makers hiking interest rates in 2016 also collapsed to 0% post-brexit vote while the likelihood of the Fed slashing interest rates soared. In the face of these global events, risk sentiment was heavily beaten. Investors fled risk assets for safe havens, which resulted in the rally of US dollar and Japanese yen, and a sharp sell-off in Asia-Pacific equities. Nevertheless, the stock markets shrugged off Brexit fears and recovered rapidly as most markets substantially recouped their losses in the following week. Global central banks had continued with their monetary policy easing with further rate cuts. The Reserve Bank of Australia slashed its cash rate by 25 basis points ( bps ) in early May given the persistent downside risk to its price outlook. Similarly, Bank of Indonesia cut its benchmark interest rate by another 25 bps in June, the fourth rate cut in The Central Bank s overnight deposit facility ( Fasbi ) and lending facility rate were likewise cut by 25 bps to 4.50% and 7.00% respectively over the same period. On the domestic front, Bank Negara Malaysia ( BNM ) had acted against consensus, and surprised the market by cutting its key interest rate for the first time since The Overnight Policy Rate ( OPR ) was reduced by 25 bps to 3.00% from its previous record of 3.25%. Though unexpected, the reduction had served its purpose of helping the country to remain on a steady growth path as the ringgit rallied against the US dollar to RM right after BNM announced its decision. Global monetary easing together with the high demand for safe haven assets spurred the rally in US treasuries ( UST ). The yields for UST declined noticeably across the yield curve as the Feds turned dovish. The UST yields softened by -55 bps, -70 bps, -78 bps, and -80 bps respectively for 3, 5, 10, and 30-year tenures since the start of the year. Each of them ended the period lower at 0.76%, 1.03%, 1.46%, and 2.18% as at 29 July As both growth and price outlook turned softer, the longer dated bond yields weaken quite a far bit compared to the short-end of the curve, resulting in the flattening in benchmark UST yield curve. Investment Outlook With global central banks expected to continue with their accommodative monetary policies, we believe that the low yield scenario is likely to be the base case going forward. While the credit spread has subsided somewhat, all of the ten underlying reference entities have continued to meet their financial obligations in a timely manner. The structurer of the Fund s structured product investment (i.e. CIMB Bank (Malaysia) Berhad) (the Structurer ) maintained its AAA credit rating by domestic rating agency, RAM Ratings Services Berhad. The Manager believes that credit quality is vital to safeguard investors capital amid market volatility. More importantly from a structured credit perspective, credit quality is key to ensuring that financial obligations are met, to safeguard investors capital and expected coupons. In respect to the Fund s investments, the Manager expects the underlying reference entity to safely go through the current environment and continue to meet future debt obligations. As such, the Manager is also confident that the Structurer will continue to honour its obligations in respects of the Fund s structured product investment. 4

6 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 31 JULY 2016 INVESTMENT INCOME Financial Financial period ended period ended RM RM Interest income from deposits with licensed financial institutions 8,482 34,462 Net gain on financial asset at fair value through profit or loss 39,500,189 12,399,489 Exit fee income 12,755 77,083 39,521,426 12,511,034 EXPENSES Trustee fee (99,583) (97,786) Auditors remuneration (8,431) (7,480) Tax agent s fee (2,992) (2,656) Other expenses (20,122) (14,923) (131,128) (122,845) NET PROFIT BEFORE TAXATION 39,390,298 12,388,189 TAXATION (2,790) (19,055) NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 39,387,508 12,369,134 Net income after taxation is made up of the following: Realised amount 14,299,408 14,381,734 Unrealised amount 25,088,100 (2,012,600) 39,387,508 12,369,134 5

7 STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2016 ASSETS RM RM Financial assets at fair value through profit or loss 345,299, ,271,400 Cash and cash equivalents 359, ,351 Tax recoverable 24,241 4,197 TOTAL ASSETS 345,683, ,235,948 LIABILITIES Amount due to Trustee 11,695 11,407 Auditors remuneration 8,934 7,480 Tax agent s fee 6,772 9,756 Other payable and accruals 13,307 4,488 TOTAL LIABILITIES 40,708 33,131 NET ASSET VALUE OF THE FUND 345,642, ,202,817 EQUITY Unitholders capital 334,206, ,224,588 Retained earnings 11,436, ,229 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 345,642, ,202,817 NUMBER OF UNITS IN CIRCULATION 334,086, ,115,000 NET ASSET VALUE PER UNIT (RM)

8 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 JULY 2016 (Accumulated Unitholders losses)/retained capital earnings Total RM RM RM Balance as at 1 November ,462,401 (13,952,025) 320,510,376 Total comprehensive income for the financial period - 39,387,508 39,387,508 Distributions - (13,999,237) (13,999,237) Movement in unitholders capital: Cancellation of units (256,291) - (256,291) Balance as at 31 July ,206,110 11,436, ,642,356 Balance as at 1 November ,766,714 2,674, ,441,052 Total comprehensive income for the financial period - 12,369,134 12,369,134 Distribution - (14,065,243) (14,065,243) Movement in unitholders capital: Cancellation of units (1,542,126) - (1,542,126) Balance as at 31 July ,224, , ,202,817 7

9 Affin Hwang Asset Management Berhad ( T)