AFFIN HWANG AIIMAN PRS SHARIAH MODERATE FUND

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2 AFFIN HWANG AIIMAN PRS SHARIAH MODERATE FUND Interim Report and Unaudited Financial Statements 6 Months Financial Period Ended 31 January 2018 Contents Page FUND INFORMATION... 2 FUND PERFORMANCE DATA... 3 PROVIDER S REPORT... 5 SCHEME TRUSTEE S REPORT... 8 SHARIAH ADVISER S REPORT... 9 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE PROVIDER DIRECTORY OF SALES OFFICE

3 FUND INFORMATION Fund Name Affin Hwang Aiiman PRS Shariah Moderate Fund Fund Type Income & Growth Fund Category Investment Objective Benchmark Distribution Policy Mixed Asset To facilitate the accumulation of Shariah-compliant retirement savings by Members for their retirement needs by generating income and capital growth through Shariahcompliant investments. 60% FTSE Bursa Malaysia EMAS Shariah Index + 40% Maybank 12-Month General Investment Account (GIA) Rate The Fund will endeavour to declare distribution on a semi-annual basis after the end of its first financial year, subject to the availability of income. BREAKDOWN OF UNITHOLDERS BY SIZE AS AT 31 JANUARY 2018 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below ,001 to 10, ,115 10,001 to 50, ,301 50,001 to 500, ,001 and above 0 0 Total 563 3,414 * Note: Excluding Manager s stock 2

4 FUND PERFORMANCE DATA Category As at 31 Jan 2018 (%) As at 31 Jan 2017 (%) As at 31 Jan 2016 (%) Portfolio composition Collective investment scheme local - Affin Hwang Aiiman Asia (ex Japan) Growth Fund Affin Hwang Aiiman Growth Fund Affin Hwang Aiiman Select Income Fund Total collective investment scheme local Cash & cash equivalent Total Total NAV (million) NAV per Unit (in respective currencies) 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 31/01/18 NAV per 31/07/17* - 1) x 100 = ( ) x 100 = 4.55% Total Income Return ii = Nil Return of the Fund iii = [{(1 + Capital Return) x (1 + Income Return)} 1] x 100 = [{( %) x ( %)} 1] x 100 = 4.55% *Source: CIMB Commerce Trustee Berhad 1 The MER of the Fund was slightly lower than previous year given the higher average net asset value of the Fund during the financial period. 2 The PTR of the Fund was lower than previous year due to the lower average sum of acquisition and disposal during the period under review. 3

5 Table 1: Performance of the Fund 6 Months (1/8/17-31/1/18) 1 Year (1/2/17-31/1/18) Since Commencement (22/7/15-31/1/18) Fund 4.55% 10.53% 7.92% Benchmark 5.07% 8.32% 10.14% Outperformance / (Underperformance) (0.52%) 2.21% (2.22%) Source of Benchmark: Bursa Malaysia Table 2: Average Total Return 1 Year (1/2/17-31/1/18) Since Commencement (22/7/15-31/1/18) Fund 10.53% 3.05% Benchmark 8.32% 3.88% Outperformance / (Underperformance) 2.21% (0.83%) Source of Benchmark: Bursa Malaysia Table 3: Annual Total Return FYE 2017 (01/8/16-31/7/17) FYE 2016 (21/7/15-31/7/16) Fund 6.70% (3.26%) Benchmark 4.00% 0.78% Outperformance / (Underperformance) 2.70% (4.04%) 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 PROVIDER S REPORT Performance Review For the period 1 August 2017 to 31 January 2018, the Fund registered a return of 4.55%. The Benchmark for the period registered a return of 5.07%. The Fund thus underperformed the Benchmark by 0.52 percentage points. The Net Asset Value (NAV) per unit of the Fund as at 31 January 2018 was RM while the NAV as at 31 July 2017 was RM (See Table 1 for performance of the Fund and Figure 1 for the movement of the Fund versus the Benchmark respectively). Figure 1: Movement of the Fund versus the Benchmark This information is prepared by Affin Hwang Asset Management Berhad (AffinHwangAM) for information purposes only. Past earnings or the fund s distribution record is not a guarantee or reflection of the fund s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. Benchmark: 60% FTSE Bursa Malaysia EMAS Shariah Index + 40% Maybank 12-Month General Investment Account (GIA) Rate Income Distribution / Unit Split No income distribution or unit split were declared for the financial year ended 31 January 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 Jan Jan Jan 2016 (%) (%) (%) Collective investment scheme local Cash & cash equivalent Total During the period under review, no significant changes have been made to the portfolio. As at 31 January 2018, the Fund s exposure to the Shariah-based collective investment schemes stood at 99.01% of the Fund s NAV, while the balance was held in cash and cash equivalent. 5

7 Strategies Employed The Fund had remained into a portfolio of Collective Investment Schemes (CIS) managed by the Provider. The Manager believes that the portfolio of CIS provides the PRS members with sufficient diversification across asset-classes and geographical reach that is necessary to mitigate concentration risk. The portfolio of investments is reviewed on a quarterly basis. Nevertheless, the Manager holds the flexibility to rebalance the portfolio, depending on prevailing market conditions. Market Review With the return of growth, the year 2017 has seen an economic upswing that has lifted both global and regional markets in terms of asset returns and earnings recovery. Accelerating growth, but benign inflation has kept policy tightening at bay, creating the right conditions for risk-assets to perform well under a Goldilocks environment. Global benchmarks including the S&P 500 and tech-heavy Nasdaq Composite Index vaulted by over 25% (local currency terms), repeatedly notching all-time highs in the period under review. Supportive macroeconomic data, improving fundamentals and a positive earnings revision cycle have whet investors appetite leading to a boost in sentiment. In Europe, growth has become more entrenched as its economy expanded at its fastest pace in a decade, growing by 2.5% in Tightening labour conditions, a strong cyclical momentum and broad improvement in business sentiment indicators point to healthy expansion, despite uncertainties surrounding ongoing Brexit negotiations and political risks arising from elections in France, Germany and Netherlands. Marked by global reflation, as well as a recovery in trade and manufacturing PMI Asia scored top marks and emerged as one the best performers last year. The MSCI Asia ex-japan Index advanced +38.7%, compared to the MSCI AC World Index which had gained +20.1% (as at 31 Dec 2017). The MSCI Asia ex- Japan performance being primarily driven by North Asia, with tech emerging as the key outperformer, across China, Korea and Taiwan. In China, an acceleration in public-private partnership (PPP) projects drove infrastructure spending demand, whilst supply-side and SOE capacity reforms helped reflate raw material and commodity prices which spurred restocking activities. Rising household consumption and increased urbanisation through strong wage increases will place the planks for a long growth runway for its new economy sectors. South Korea s Kospi rallied by 21.8% in 2017, as prospects of improved capital repayment following chaebol reforms in the country could potentially unlock value for shareholders. Possibility of a long-drawn-out conflict with its belligerent northern neighbour, including outward displays of military force and continued sabre-rattling did little to sour the market s rally, having little or any significant long-term impact. In Singapore, an uplift seen in external demand and trade provided a boost to growth in the state-island. A rebound in the property sector on the back of improvements in volumes, surge in en-block deals and falling inventory levels will aid price recovery. Property prices rose 1% compared to a -3.1% decline in 2016, reinforcing signs that its property sector is rebounding from a four-year slump. On the domestic-front, the benchmark FBMKLCI climbed 9.5% to close at 1, points in Fuelled by exports growth and the strengthening Ringgit, the local market staged a strong performance last year, though still lagged behind other Asian markets. Overall, the local market hit an inflection point with earnings growing by 7% in 2017 as opposed to negative growth recorded from , for 3 consecutive years. The local bond and sukuk market started on a difficult note in 2018 as foreign outflows persisted early on in the year. But this on hindsight, provided good buying opportunities for local players who benefited later from foreign inflows returning to the market as a result of Bank Negara's relaxation FX hedging measures and as reflationary trade post-trump victory losing momentum. By the later part of the year, the hint of possible Overnight Policy Rate (OPR) hike by Bank Negara led the Ringgit to strengthen and brought more foreign inflows. Despite some volatility to track the volatile US Treasuries market, the local market overall was well supported. In the sukuk space, with the exception of the widening of GII-MGS spread in the 4Q 17, the corporate sukuk space held up pretty well throughout the year. 6

8 Investment Outlook Against a backdrop of synchronised growth and benign inflation, we expect a continuation of developments for 2018 with growth now seen broadening-out across countries and sectors. Volatility could pick-up in the year, as markets adjust to a reversal of a rate-cut cycle, with global central banks expected to gradually lift interest rates and embark on their balance-sheet unwinding. The gradual withdrawal of monetary stimulus would be a key focal point in markets, where markets are seen underpricing the impact of rate hikes by the US Federal Reserve, and tighter liquidity conditions. Inflation data may be a key-data point to monitor in coming quarters, especially if inflation picks up more than market s expectation, which would lead to an acceleration in rate hikes. In the domestic market, we expect to growth to spread as positive spill over effects from exports are starting to trickle down into domestic demand, which would be supportive of growth. With also less selling pressure going into 2018 and with potentially better micro support for the GDP number, we think market prospects for the KLCI should be more vibrant. Markets will look to better earnings growth as catalyst next year, where we expect the positive momentum will carry through into 2018 as strong GDP data and Ringgit strength will support consensus forecast of 5-7% growth this year. Though markets could turn more volatile, in the lead up to the 14 th General Election (GE14) which is due by August 18. Malaysia 2018 GDP is expected to chart a more moderate growth of 5% - 5.5% from slower export growth and a slowdown in public spending, in line with the government s fiscal consolidation drive. The strong export performance is expected to continue for the rest of 2018, propped up by the return of growth globally and synchronised economic expansion. However, we do expect exports to moderate from the lofty levels of 2017 owing a high-base effect. We expect a healthy pipeline of sukuk issuances this year supported by robust economic activities and resilient growth in the domestic economy. We expect strong activities in the construction sector will continue to drive the bulk of supply of sukuk issuances. The power sector may see more issuances to fund solar power projects, whilst the property market still reeling from weakness could necessitate property players to continue to borrow and fund working capital. Within the financial sector, issuances will probably be dominated by conventional papers. State of Affairs of the Fund There is neither any significant change to the state affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the period under review. Soft Commissions received from Brokers As per the requirements of the Securities Commission s Guidelines on Unit Trust Funds and Guidelines on Compliance Function for Fund Management Companies, soft commissions received from brokers/dealers may be retained by the management company only if the (i) (ii) goods and services provided are of demonstrable benefit to Unit holders of the Fund; and goods and services are in the form of research and advisory services that assists in the decision making process. During the financial period under review, the management company had received on behalf of the Fund, soft commissions in the form of research materials, data and quotation services, investment-related publications, market data feed and industry benchmarking agencies which are of demonstrable benefit to Unitholders of the Fund. 7

9 SCHEME TRUSTEE S REPORT TO THE MEMBERS OF AFFIN HWANG AIIMAN PRS SHARIAH MODERATE FUND We, CIMB Commerce Trustee Berhad being the scheme trustee of Affin Hwang Aiiman PRS Shariah Moderate Fund ( the Fund ) are of the opinion that Affin Hwang Asset Management Berhad ( the PRS Provider ), acting in the capacity as PRS Provider of the Fund, has fulfilled its duties in the following manner for the 6 months financial period ended 31 January a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the PRS Provider under the Deed, Supplemental Deeds, the Securities Commission Malaysia s Guidelines on Private Retirement Scheme, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws; b) Valuation and pricing for the Fund has been carried out in accordance with the Deed. Supplemental Deeds, and relevant regulatory requirements; and c) Creation and cancellation of units have been carried out in accordance with the Deed, Supplemental Deeds, and relevant regulatory requirements. For and on behalf of CIMB Commerce Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 15 March

10 SHARIAH ADVISER S REPORT TO THE MEMBERS OF AFFIN HWANG AIIMAN PRS SHARIAH MODERATE FUND We have acted as the Shariah Adviser of Affin Hwang Aiiman PRS Shariah Moderate Fund. Our responsibility is to ensure that the procedures and processes employed by Affin Hwang Asset Management Berhad and the provisions of the Restated Deed dated 18 December 2017 are in accordance with Shariah principles. In our opinion, Affin Hwang Asset Management Berhad has managed and administered Affin Hwang Aiiman PRS Shariah Moderate Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the financial period ended 31 January 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, Malaysia Date: 15 March

11 STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 INVESTMENT INCOME 6 months 6 months financial financial period ended period ended Note RM RM Dividend income 26,709 10,053 Profit and hibah Net gain on financial assets at fair value through profit or loss 8 58,258 9,115 Rebate of management fee 4 11,639 4,554 96,683 23,802 EXPENSES Management fee 4 (12,240) (5,018) Trustee fee 5 (326) (134) PPA administration fee 6 (326) (134) Auditors' remuneration (4,285) (4,275) Tax agent's fee (1,865) (1,861) Other expenses (6,606) (3,876) (25,648) (15,298) NET PROFIT BEFORE TAXATION 71,035 8,504 TAXATION NET PROFIT AFTER TAX AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 71,035 8,504 Net profit after taxation is made up of the following: Realised amount 12,777 (679) Unrealised amount 58,258 9,183 71,035 8,504 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 STATEMENT OF FINANCIAL POSITION FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 Note RM RM ASSETS Financial assets at fair value through profit or loss 8 1,826, ,486 Cash and cash equivalents 26,399 31,775 Amount due from Provider - creation of units 14,032 10,250 - management fee rebate receivable 2, TOTAL ASSETS 1,868, ,495 LIABILITIES Amount due to Provider - management fee 2,320 1,083 Amount due to Trustee Amount due to PPA Auditors remuneration 5,785 5,775 Tax agent s fee 5,616 5,411 Other payables and accruals 10,624 2,585 TOTAL LIABILITIES 24,469 14,937 NET ASSET VALUE OF THE FUND 1,844, ,558 EQUITY Members capital 1,707, ,976 Retained earnings 136,914 3,582 NET ASSETS ATTRIBUTABLE TO MEMBERS 1,844, ,558 NUMBER OF UNITS IN CIRCULATION 9 3,418,000 1,779,000 NET ASSET VALUE PER UNIT (RM) The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 Retained earnings/ Members (accumulated capital loss) Total RM RM RM Balance as at 1 August ,320,822 65,879 1,386,701 Total comprehensive income for the financial period - 71,035 71,035 Movement in members capital: Creation of units arising from applications 426, ,832 Cancellation of units (40,062) - (40,062) Balance as at 31 January ,707, ,914 1,844,506 Balance as at 1 August ,425 (4,922) 474,503 Total comprehensive income for the financial period - 8,504 8,504 Movement in members capital: Creation of units arising from applications 399, ,016 Cancellation of units (13,465) - (13,465) Balance as at 31 January ,976 3, ,558 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 STATEMENT OF CASH FLOWS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 CASH FLOW FROM OPERATING ACTIVITIES 6 months 6 months financial financial period ended period ended RM RM Proceeds from sale of Shariah-compliant investments - 101,000 Purchase of Shariah-compliant investment (406,710) (459,053) Dividend received 26,709 10,053 Profit and hibah Management fee paid (11,612) (3,982) Trustee s fee paid (309) (120) PPA fee paid (309) (96) Payment for other fees and expenses (12,449) (13,259) Rebate of management fee received 10,947 3,569 Net cash used in operating activities (393,656) (361,808) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from creation of units 445, ,891 Payments for cancellation of units (40,062) (13,465) Net cash generated from financing activities 405, ,426 NET INCREASE IN CASH AND CASH EQUIVALENTS 12,141 24,618 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 14,258 7,157 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 26,399 31,775 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 The following accounting policies have been used in dealing with items which are considered material in relation to the financial statements. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention, except as disclosed in the summary of significant accounting policies and comply with Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial period. It also requires the Provider to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Provider 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 I. (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 period beginning on 1 August 2017: Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative The adoption of these amendments did not have any impact on the current period and is not likely to affect future periods. (b) The new standard and amendments to the published standard that is applicable to the Fund but not yet effective and has not been early adopted is as follows: (i) Financial year beginning on/after 1 August 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 "Financial Instruments: Recognition and Measurement". MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ("OCI"). The basis of classification depends on the entity's business model and the cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 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) (i) Financial year beginning on/after 1 August 2018 (continued) A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund has reviewed its financial assets and liabilities and does not expect any impact from the adoption of the new standard on 1 January There will be no impact on the Fund s accounting for financial assets at the Fund s equity investments currently measured at fair value through profit or loss will continues to be measured on the same basis under MFRS 9. There will be no impact on the Fund s accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assessments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. B INCOME RECOGNITION Profit from short-term Shariah-based deposits with licensed financial institutions is recognised based on effective profit rate method on an accruals basis. Dividend income from Shariah-compliant investments is recognised on the ex-dividend date, when the right to receive the dividend has been established. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) B. INCOME RECOGNITION (CONTINUED) For Shariah-compliant collective investment schemes ( CIS ), realised gains and losses on sale of Shariahcompliant investments are accounted for as the difference between the net disposal proceeds and the carrying amount of the Shariah-compliant investments, determined on a weighted average cost basis. C 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. D 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. E FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its Shariah-compliant investment in CIS 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 equivalent and amount due from Provider. Financial liabilities are classified according to the substance of the contractual arrangements entered into the definitions of a financial liability. The Fund classifies amount due to Provider, amount due to Trustee, amount due to PPA, auditors remuneration, tax agent 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. 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. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) E FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) Financial assets are derecognised when the rights to receive cash flows from the Shariah-compliant 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. Shariah-compliant investment in CIS is valued at the last published net asset value ( NAV ) per unit at the date of the statement of financial position. 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 deposit. Financing and receivables and other liabilities are subsequently carried at amortised cost using the effective profit method. (iii) Impairment For assets carried at amortised cost, the Fund assesses at the end of the reporting year 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 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. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) F CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows cash and cash equivalents comprise cash and bank balances which are subject to an insignificant risk of changes in value. G MEMBERS CAPITAL The members 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 member to a proportionate share of the Fund s net assets value; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial period if member exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s net asset value per unit at the time of creation or cancellation. The Fund s net asset value per unit is calculated by dividing the net assets attributable to members with the total number of outstanding units. In accordance with the SC Guidelines on Private Retirement Schemes, investment positions are valued based on the last traded market price for the purpose of determining the net asset value per unit for creations and cancellations. H 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. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) I 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 contents on the estimates, certain key variables that are anticipated to have material impacts 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 Provider and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s Shariah-compliant investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Private Retirement Scheme. 19

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY INFORMATION ON THE FUND The Private Retirement Scheme ( PRS ) was constituted under the name Affin Hwang Aiiman PRS Shariah Moderate Fund (the Fund ) pursuant to the execution of a Third Supplemental Deed dated 17 October 2014 as modified by a Fourth Supplemental Deed dated 13 June 2016, and a Restated Deed dated 18 December 2017 (the Deeds ) entered into between Affin Hwang Asset Management Bhd (the Provider ) and CIMB Commerce Trustees Berhad (the Trustee ). The Fund commenced operations on 5 October 2015 and will continue its operations until terminated by the Trustee as provided under Clause 14.4 of the Deed. The Fund may invest in any of the following: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Listed Shariah-compliant securities; Shariah-compliant unlisted securities of companies, including without limitation, securities that have been approved by the relevant regulatory authorities for the listing of and quotation of such securities; Islamic money market instrument and Sukuk that are traded in or under the rules of an eligible Islamic market; Government Investment Issues, Islamic Accepted Bills, Bank Negara Malaysia Negotiable Notes, Negotiable Islamic Debt Securities, Islamic Negotiable Instruments of Deposits; Sukuk which are issued or guaranteed by the Malaysian government, Bank Negara Malaysia, Malaysian state government or Malaysian government related agencies; Other Islamic money market instruments and Sukuk which are not guaranteed by the Malaysian government, Bank Negara Malaysia, Malaysian state government or Malaysian government-related agencies; Shariah-compliant fixed deposit with Financial; Units/shares in shariah-compliant collective investment schemes, both local and foreign; Shariah-compliant derivatives; and Any other Shariah-compliant investments permitted by the Shariah Advisory Council of the SC and/or the Shariah Adviser from time to time. All investments will be subjected to the SC s Guidelines on Private Retirement Schemes, the Deed and the objective of the Fund. The main objective of the Fund is to facilitate the accumulation of Shariah-compliant retirement savings by Members for their retirement needs by generating income and capital growth through Shariah-compliant investments. The Provider is a company incorporated in Malaysia. The principal activities of the Provider 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 Provider on 15 March

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments are as follows: Financial assets at fair value Financing and through Note receivables profit or loss Total 2018 RM RM RM Shariah-compliant collective investment schemes 8-1,826,334 1,826,334 Cash and cash equivalents 26,399-26,399 Amount due from Provider - creation of units 14,032-14,032 - management fee rebate receivable 2,210-2,210 Total 42,641 1,826,334 1,868, Shariah-compliant collective investment schemes 8-840, ,486 Cash and cash equivalents 31,775-31,775 Amount due from Provider - creation of units 10,250-10,250 - management fee rebate receivable Total 43, , ,495 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), credit risk, liquidity risk, capital risk, collective investment scheme risk and reclassification of Shariah status risk. Financial risk management is carried out through internal control processes adopted by the Provider and adherence to the investment restrictions as stipulated by the SC Guidelines on Private Retirement Schemes. Market risk (a) Price risk Price risk arises mainly from the uncertainty about future prices of Shariah-compliant investments. It represents the potential loss the Fund might suffer through holding market positions in the face of price movements. The Provider manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio. 21

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 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 follow: RM RM Collective investment schemes Shariah-compliant collective investment schemes designated at fair value through profit or loss 1,826, ,486 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 and that fair value of the Fund s investment moved according to the historical correlation of the index. Disclosures below are shown in absolute terms, changes and impacts could be positive or negative. Impact on profit after % Change in price Market value tax/nav RM RM % 1,735,017 (91,317) 0% 1,826, % 1,917,651 91, % 798,462 (42,024) 0% 840, % 882,510 42,024 22

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk Credit risk refers to the ability of an issuer or counterparty to make timely payments of profit, principals and proceeds from realisation of Shariah-compliant investments. The Provider manages the credit risk by undertaking credit evaluation to minimise risk. The following table sets out the credit risk concentration of the Fund: Cash Amount and cash due from equivalents Provider Total 2018 RM RM RM Finance - AAA 26,399-26,399 Other - NR - 16,242 16,242 26,399 16,242 42, Finance - AAA 31,775-31,775 Other - NR - 11,234 11,234 31,775 11,234 43,009 The financial assets of the Fund are neither past due nor impaired. Liquidity risk Liquidity risk is the risk that the Fund encounters difficulty in meeting its financial obligations. The Provider manages this risk by maintaining sufficient level of liquid assets to meet anticipated payment and cancellations of unit by members, liquid assets comprise cash and bank balances, short-term Shariah-based deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days. The table below analyses the Fund s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. 23

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Liquidity risk (continued) 2018 Between Within one month one month to one year Total RM RM RM Amount due to Provider - management fee 2,320-2,320 Amount due to Trustee Amount due to PPA Auditors remuneration - 5,785 5,785 Tax agent s fee - 5,616 5,616 Other payables and accruals 14 10,610 10,624 2,458 22,011 24, Amount due to Provider - management fee 1,083-1,083 Amount due to Trustee Amount due to PPA Auditors remuneration - 5,775 5,775 Tax agent s fee - 5,411 5,411 Other payables and accruals 11 2,574 2,585 1,177 13,760 14,937 Capital risk The capital of the Fund is represented by equity consisting of members 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 members. 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 members and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. Collective investment scheme risk This risk is associated with the Fund s Shariah-compliant investment in CIS exposing the Fund to the inherent investment risks faced by the Shariah-compliant CIS. The fund may also be exposed to liquidity risk which may arise from the inability of the Shariah-compliant CIS to meet redemption amounts, as well as the risk of not being aligned with the Fund s mandate in the event the Shariah-compliant CIS that the Fund is invested into breaches it s asset allocation limits. Therefore, should any of the risks faced by the Shariahcompliant CIS materialised, the performance of the Fund will be affected. 24

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) 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 non Shariah-compliant upon review of the securities by the Shariah Advisory Council of the SC performed twice yearly. If this occurs, the value of the fund may be adversely affected where the Provider will take the necessary steps to dispose of such securities in accordance with the Shariah Advisory Council s advice. 3 FAIR VALUE ESTIMATION Financial instruments comprise financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets traded in active markets (such as trading securities) is based on quoted market prices at the close of trading on the period end date. 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. 25

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 3 FAIR VALUE ESTIMATION (CONTINUED) (ii) Fair value hierarchy (continued) The following table analyses within the fair value hierarchy the Fund s financial assets (by class) measured at fair value: 2018 Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss at inception - Shariah-compliant collective investment schemes 1,826, ,826, Financial assets at fair value through profit or loss at inception - Shariah-compliant collective investment schemes 840, ,486 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include collective investment scheme. The Fund does not adjust the quoted prices for these instruments. (iii) The carrying value of cash and cash equivalent, amount due from Provider and all current liabilities are a reasonable approximation of the fair values due to their short term nature. 26

28 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 4 MANAGEMENT FEE AND REBATE OF MANAGEMENT FEE In accordance with the Deed, the Provider is entitled to a management fee at a rate not exceeding 3.00% per annum on the NAV of the Fund calculated on a daily basis. For the financial period ended 31 January 2018, the management fee is recognised at a rate of 1.50% (2017: 1.50%) per annum on the NAV of the Fund, calculated on a daily basis. As this Fund invests in units of the Affin Hwang Aiiman Asia (Ex Japan) Growth Fund, Affin Hwang Aiiman Growth Fund and Affin Hwang Aiiman Select Income Fund, any management fee charged to CIS are fully refunded to this Fund. Accordingly, there is no double charging of management fee. There will be no further liability to the Provider in respect of management fee other than the amount recognised above. 5 TRUSTEE FEE In accordance with the Deed, the Trustee is entitled to an annual fee at a rate not exceeding 1.00% per annum on the NAV of the Fund. For the financial period ended 31 January 2018, the Trustee s fee is recognised at a rate of 0.04% (2017: 0.04%) 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 s fee other than the amount recognised above. 6 PRIVATE PENSION ADMINISTRATOR ( PPA ) ADMINISTRATION FEE For the financial period ended 31 January 2018, the PPA administration fee is recognised at a rate of 0.04% (2017: 0.04%) per annum on the NAV of the Fund calculated on a daily basis. There will be no further liability to the PPA in respect of the PPA administration fee other than the amount recognised above. 27

29 NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS FINANCIAL PERIOD ENDED 31 JANUARY 2018 (CONTINUED) 7 TAXATION 6 months 6 months financial financial period ended period ended Current taxation - local - - The numerical reconciliation between profit 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 71,035 8,504 Tax at Malaysian statutory rate of 24% (2017:24%) 17,048 2,041 Tax effects of: Investment income exempt from tax (20,411) (4,620) Expenses not deductible for tax purposes 3,209 2,404 Restriction on tax deductible for expenses for PRS Funds Tax expense FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss at inception - Shariah-compliant collective investment scheme local 1,826, ,486 Net gain on assets at fair value through profit or loss - realised loss on sale of investments - (68) - unrealised gain on financial assets at fair value through profit or loss 58,258 9,183 58,258 9,115 28