AFFIN HWANG PRS MODERATE FUND

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2 AFFIN HWANG PRS MODERATE FUND Annual Report and Audited Financial Statements For The Financial Year Ended 31 July 2018 Contents Page FUND INFORMATION... 2 FUND PERFORMANCE DATA... 3 PROVIDER S REPORT... 5 SCHEME 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 PROVIDER AUDITORS REPORT DIRECTORY OF SALES OFFICE

3 FUND INFORMATION Fund Name Affin Hwang PRS Moderate Fund Fund Type Moderate Fund Category Core (Moderate) Investment Objective Benchmark Distribution Policy The Fund seeks income and capital growth from its investments to facilitate the accumulation of retirement savings for Members retirement needs. 30% FTSE Bursa Malaysia Top 100 Index + 30% Dow Jones / Asia Pacific Select Dividend 30 Index + 40% Maybank 12-month Fixed Deposit 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 JULY 2018 Size of holdings (units) No. of unitholders No. of units held * ( 000) 5,000 and below 2,369 6,507 5,001 to 10,000 1,688 12,127 10,001 to 50,000 2,615 54,890 50,001 to 500, , ,001 and above 6 4,382 Total 6,781 88,315 * Note: Excluding Manager s stock 2

4 FUND PERFORMANCE DATA Category As at 31 Jul 2018 (%) As at 31 Jul 2017 (%) As at 31 Jul 2016 (%) Portfolio composition Collective investment schemes local - Affin Hwang Select Asia (ex Japan) Opportunity Fund Affin Hwang Bond Fund Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund Affin Hwang Select Asia Pacific (ex Japan) Dividend Fund Affin Hwang Select Bond Fund Affin Hwang Select Dividend Fund Affin Hwang Select Opportunity Fund Affin Hwang World Series Global Equity Fund Affin Hwang World Series Japan Growth Fund Affin Hwang Select Balanced Fund Total collective investment schemes 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 Gross Distribution per Unit (sen) Nil Net Distribution per Unit (sen) 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 31/7/18 NAV per 31/7/17*-1} x 100 = { } x 100 = 2.36% Total Income Return ii = Nil Return of the Fund iii = [{(1 + Capital Return) x (1 + Total Income Return)} 1] x 100 = [{( %) x ( %)} 1] x 100 = 2.36% *Source: CIMB Commerce Trustee Berhad 1 The Fund s MER remained relatively unchanged, albeit marginally lower than previous period under review. 2 The Fund s PTR was lower than previous year given the lower average sum of total acquisition and disposal, coupled with higher average net asset value of the Fund for the financial year. 3

5 Table 1: Performance of the Fund 1 Year (1/8/17-31/7/18) 3 Years (1/8/15-31/7/18) 5 Years (1/8/13-31/7/18) Since Commencement (23/11/12-31/7/18) Fund 2.36% 20.30% 34.05% 42.48% Benchmark (1.75%) 9.56% 11.42% 18.59% Outperformance / (Underperformance) 4.11% 10.74% 22.63% 23.89% Source of Benchmark: Bloomberg Table 2: Average Total Return 1 Year (1/8/17-31/7/18) 3 Years (1/8/15-31/7/18) 5 Years (1/8/13-31/7/18) Since Commencement (23/11/12-31/7/18) Fund 2.36% 6.35% 6.03% 6.42% Benchmark (1.75%) 3.09% 2.19% 3.04% Outperformance / (Underperformance) 4.11% 3.26% 3.84% 3.38% Source of Benchmark: Bloomberg Table 3: Annual Total Return FYE 2018 (01/8/17-31/7/18) FYE 2017 (01/8/16-31/7/17) FYE 2016 (01/8/15-31/7/16) FYE 2015 (01/8/14-31/7/15) FYE 2014 (01/8/13-31/7/14) Fund 2.36% 11.93% 5.00% 1.83% 9.44% Benchmark (1.75%) 7.62% 3.61% (3.50%) 5.39% Outperformance / (Underperformance) 4.11% 4.31% 1.39% 5.33% 4.05% Source of Benchmark: Bloomberg 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 July 2018, the Fund registered a return of 2.36%. The Benchmark for the period registered a return of -1.75%. The Fund thus outperformed the Benchmark by 4.11 percentage points. The Net Asset Value (NAV) per Unit of the Fund as at 31 July 2018 was RM while the NAV per Unit 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). Since commencement, the Fund has gained 42.28%. Compared to the benchmark that rose 18.59%, the Fund outperformed the Benchmark by percentage points. Nevertheless, the Fund has not distributed income over the same period. As such, we believe that the Fund has not met its objective. Figure 1: Movement of the Fund versus the Benchmark Affin Hwang PRS Moderate Fund Benchmark Nov-12 Jan-14 Feb-15 Apr-16 May-17 Jul-18 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 benchmark is from Bloomberg. Benchmark: 30% FTSE Bursa Malaysia Top 100 Index + 30% Dow Jones / Asia Pacific Select Dividend 30 Index + 40% Maybank 12- month Fixed Deposit Rate Income Distribution / Unit Split No income distribution or unit split were declared for the financial year ended 31 July

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 Jul Jul Jul 2016 (%) (%) (%) Collective investment schemes local Cash & Cash equivalent Total As at 31 July 2018, the Fund s exposure in collective investment schemes (CIS) stood at 99.86% of the Fund s NAV while the balance was held in cash and cash equivalent. During the period under review, no changes have been made to the Fund s portfolio i.e. the Fund remained invested in the same CIS as previous year. Strategies Employed The Fund had remained into a portfolio of Collective Investment Schemes (CIS) managed by the Provider. The Provider 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 Provider holds the flexibility to rebalance the portfolio, depending on prevailing market conditions. Market Review Global markets enjoyed a strong run up to the tail-end of 2017, where an economic upswing buoyed regional markets particularly in Asia in terms of asset returns and earnings recovery. Accelerated growth, but benign inflation kept policy tightening at bay, creating the right conditions for risk-assets to perform well under a Goldilocks environment. The strong market rally subsequently took a breather in early-february 18, as markets entered correction territory as strong inflation & labour data prompted concerns that the US Federal Reserve would accelerate the pace of interest rate hikes. Global equities were broadly down as a bond rout deepened which lifted US Treasury Yields to near 3%. Regionally, the MSCI Asia ex-japan Index was weighed down by external risk closing just 2.81% higher in the period under review. Emerging markets are seeing a tantrum-like sell-off, where investors appetite for risk-assets have tapered off significantly on the back of fractious developments within Turkey and Argentina that have sent both their currencies into free fall. Investors are ploughing back money into the US on signs of quicker growth, rising interest rates and a stronger greenback that has undermined the attraction of riskier EM assets. Rising trade tensions between the US and China which threatens to escalate further also sent jitters across markets. US President Donald Trump announced a slew of protectionist measures including steel and aluminium tariff imports before scoping its aim to target China directly by proposing tariff imports in key strategic sectors identified by Beijing in its Made in China 2025 plan. China sought to retaliate with its own tit-for-tat measure by imposing tariffs on US imports. A sharp depreciation of the Chinese yuan also dragged down the rest of EMs, as a high correlation between markets led to further pain within other Asian currencies. The yuan has shed over 5% of its value YTD, when trade tensions started to brew. Due to concerns over trade-frictions with the US and possible second-order impacts on the Chinese economy that could manifest into slower investment and softer consumption, Beijing has shifted slightly towards a more neutral tone that leaves more room for China to loosen its grip on deleveraging and policy easing. Crude oil was also in focus where prices have rallied by over 13.8% YTD, as rising geopolitical tensions in the Middle East following a missile attack in Syria by US-allied forces raised concerns over potential disruptions in oil supply which led to a surge in prices. Even without the potential disruption and geopolitical 6

8 noise from the Syria conflict, crude oil prices have been holding up well this year on the back of stronger demand outlook and a drawdown in crude stockpiles. On the local front, the 14th General Election (GE14) concluded with jaw-dropping results that stunned political pundits and pollsters. In a watershed election, the opposition won GE14 by wrestling traditionally held strongholds from the incumbent by taking over states such as Johor, Kedah, and Melaka. Tun Dr. Mahathir aged 93 returns to parliament with a second stint as Prime Minister pledging institutional and fiscal reforms for the country. The benchmark KLCI edged up 1.38% in the period under review, whilst the small-cap rout deepened with the small-cap index down by % YTD. Construction stocks and politically-linked counters bore the brunt of the sell-off, as major infrastructure projects were reviewed and big-ticket items such as the Kuala Lumpur- Singapore High-Speed Rail (HSR) and the Mass Rapid Transit Line 3 (MRT3) project were scrapped. Investment Outlook The recent market correction will likely presage a new era of higher volatility in markets. We expect volatility to 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, as markets adjust to 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 acceleration in rate hikes. We expect a ramping-up of trade protectionist rhetoric and politicking in the lead up to the US midterm elections in November, as President Trump attempts to rile up support for his presidency and protectionist agenda. Nonetheless, our base case is that the outcome will be more modest than the intended threats or rhetoric used, as both parties will have to bring all their bargaining chips onto the negotiation table before eventually arriving at a middle ground. Having said that, we are not dismissing the risk especially due to the severity of the sell-down. Domestically, markets will look to further clarity from the new government on policy direction of its fiscal and debt management. This includes covering a revenue shortfall from GST collections that is slated to be zerorated effective June Nonetheless, proactive measures taken so far to cut operating expenditure including salary deduction of ministers, plugging of leakages and revamps across ministries could stem the bleeding. We expect reform policies to generate a return of monetary and human capital that would drive back capital flows. Whilst, markets could be volatile in the short-term as a result of regulatory uncertainty and kitchensinking exercises undertaken by the new government, we expect such concerns to ease as the government clarifies its position and sets policy direction. Nonetheless, a robust governance framework will eventually lend to business stability that would attract more sustainable forms of FDIs. This, coupled with fresh progrowth policies would provide the uplift of growth for the economy and increase wealth distribution. 7

9 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. 8

10 SCHEME TRUSTEE S REPORT TO THE MEMBERS OF AFFIN HWANG PRS MODERATE FUND We, CIMB Commerce Trustee Berhad being the scheme trustee of Affin Hwang PRS 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 financial period ended 31 July a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the PRS Provider under the 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 of units of the Fund has been carried out in accordance with the Deeds and relevant regulatory requirements; and c) Creation and cancellation of units have been carried out in accordance with the Deeds and relevant regulatory requirements. For and on behalf of CIMB Commerce Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 13 September

11 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 INVESTMENT INCOME Note RM RM Dividend income 1,487,460 1,124,827 Interest income 5,812 4,888 Net (loss)/gain on financial assets at fair value through profit or loss 9 (381,457) 3,019,592 Rebate of management fee 4 736, ,610 1,848,656 4,650,917 EXPENSES Management fee 4 (767,882) (523,642) Trustee s fee 5 (20,477) (13,964) PPA administration fee 6 (20,477) (13,964) Auditors remuneration (8,500) (8,500) Tax agent s fee (3,700) (3,700) Other expenses (12,066) (11,261) (833,102) (575,031) NET PROFIT BEFORE TAXATION 1,015,554 4,075,886 TAXATION NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 1,015,554 4,075,886 Net profit after taxation is made up of the following: Realised amount 1,420,593 1,195,694 Unrealised amount (405,039) 2,880,192 1,015,554 4,075,886 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 FINANCIAL YEAR ENDED 31 JULY 2018 ASSETS Note RM RM Cash and cash equivalents 33,778 98,832 Financial assets at fair value through profit or loss 9 56,686,803 42,590,801 Amount due from Provider - creation of units 83,716 84,144 - rebate of management fee receivable 68,375 51,532 TOTAL ASSETS 56,872,672 42,825,309 LIABILITIES Amount due to Provider - management fee 71,670 53,711 Amount due to Trustee 1,911 1,432 Amount due to PPA 1,911 1,432 Auditors remuneration 8,500 8,500 Tax agent s fee 5,500 4,800 Other payables and accruals 14,756 10,627 TOTAL LIABILITIES 104,248 80,502 NET ASSET VALUE OF THE FUND 56,768,424 42,744,807 EQUITY Members capital 50,705,887 37,697,824 Retained earnings 6,062,537 5,046,983 NET ASSETS ATTRIBUTABLE TO MEMBERS 56,768,424 42,744,807 NUMBER OF UNITS IN CIRCULATION 10 88,318,000 68,067,000 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 FINANCIAL YEAR ENDED 31 JULY 2018 Members Retained capital earnings Total RM RM RM Balance as at 1 August ,697,824 5,046,983 42,744,807 Total comprehensive income for the financial year - 1,015,554 1,015,554 Movement in members capital: Creation of units arising from applications 13,536,422-13,536,422 Cancellation of units (528,359) - (528,359) Balance as at 31 July ,705,887 6,062,537 56,768,424 Balance as at 1 August ,196,829 1,639,697 25,836,526 Total comprehensive income for the financial year - 4,075,886 4,075,886 Distributions (Note 8) - (668,600) (668,600) Movement in members capital: Creation of units arising from applications 13,693,362-13,693,362 Creation of units arising from distributions 668, ,600 Cancellation of units (860,967) - (860,967) Balance as at 31 July ,697,824 5,046,983 42,744,807 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 FINANCIAL YEAR ENDED 31 JULY RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceed from sale of investments 100,000 8,950,012 Purchase of investments (14,577,459) (22,849,839) Dividends received 1,487,460 1,124,827 Interest received 5,812 4,888 Management fee rebate received 719, ,732 Management fee paid (749,923) (502,077) Trustee fee paid (19,998) (13,389) PPA fee paid (19,998) (13,389) Payment for other fees and expenses (19,437) (20,090) Net cash used in operating activities (13,073,545) (12,838,325) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 13,536,850 13,642,863 Payments for cancellation of units (528,359) (860,967) Net cash generated from financing activities 13,008,491 12,781,896 NET DECREASE IN CASH AND CASH EQUIVALENTS (65,054) (56,429) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 98, ,261 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 33,778 98,832 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 FINANCIAL YEAR ENDED 31 JULY 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 year. 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 J. (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 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 year and is not likely to affect future years. (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). 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. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (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: (continued) (i) Financial year beginning on/after 1 August 2018 (continued) 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 August There will be no impact on the Fund s accounting for financial assets as the Fund s equity investments currently measured at fair value through profit or loss will continue 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. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 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 is recognised based on effective interest rate method on an accrual basis. For collective investment schemes ( CIS ), realised gains and losses on sale of investments are accounted for as the difference between the net disposal proceeds and the carrying amount of the investments, determined on a weighted average cost basis. C DISTRIBUTION A distribution to the Fund s members is accounted for as a deduction from realised reserve. A proposed distribution is recognised as a liability in the period in which it is approved by the Trustee of the Fund. D 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 year. 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 ( RM ), which is the Fund s functional and presentation currency. F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in collective investment schemes ( 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. 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 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. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (i) Classification (continued) The Fund classifies amount due to Provider, amount due to Trustee, amount due to PPA, 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. 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 de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are de-recognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of comprehensive income within net gain/(loss) on financial assets at fair value through profit or loss in the period which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payment is established. Investment in CIS is valued at the last published net asset value ( NAV ) per unit at the date of the statement of financial position. Deposit with licensed financial institutions are 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 liabilities are subsequently carried at amortised cost using the effective interest method. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) F FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (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 interest 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. G CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash and bank balances which is subject to an insignificant risk of change in value. H 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. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) H MEMBERS CAPITAL (CONTINUED) The outstanding units are carried at the redemption amount that is payable at each financial year 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. I 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 Provider that makes strategic decisions. J 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 investment, the Provider 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 Schemes. 19

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY INFORMATION ON THE FUND The Private Retirement Scheme ( PRS ) was constituted under the name Hwang PRS Moderate Fund (the Fund ) pursuant to the execution of a Deed dated 25 October 2012 as modified by Supplement Deed dated 17 June 2013, a Third Supplemental Deed dated 17 October 2014, a Fourth Supplemental Deed dated 13 June 2016 and a Restated Deed dated 18 December The Fund has changed its name from Hwang PRS Moderate Fund to Affin Hwang PRS Moderate Fund as amended by the Second Supplemental Deed dated 24 July 2014 (the Deeds ) entered into between Affin Hwang Asset Management Berhad (the Provider ) and CIMB Commerce Trustees Berhad (the Trustee ). The Fund commenced operations on 2 November 2012 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 investment: (a) (b) (c) (d) (e) (f) (g) (h) (i) Listed securities, Fixed deposit with Financial Institutions; Money market instruments such as negotiable certificates of deposits and bankers acceptance; Government bonds, treasury bills and other government approved or guaranteed bonds; Debentures including private debt securities and bonds; Structured products and equity linked notes; Units/ shares in collective investment schemes, both local and foreign; Derivatives; and Any other form of investments permitted by Securities Commission from time to time. All investments will be subjected to the SC s Guidelines on Private Retirement Schemes, the Deeds and the objective of the Fund. The main objective of the Fund is to seek income and capital growth from its investment to facilitate the accumulation of retirement savings for members retirement needs. 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 13 September

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES Financial instruments are as follows: 2018 Financial assets at fair value Loans and through Note receivables profit or loss Total RM RM RM Cash and cash equivalents 33,778-33,778 Collective investment schemes 9-56,686,803 56,686,803 Amount due from Provider - creation of units 83,716-83,716 - rebate of management fee receivable 68,375-68,375 Total 185,869 56,686,803 56,872, Cash and cash equivalents 98,832-98,832 Collective investment schemes 9-42,590,801 42,590,801 Amount due from Provider - creation of units 84,144-84,144 - rebate of management fee receivable 51,532-51,532 Total 234,508 42,590,801 42,825,309 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 and collective investment scheme 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 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 FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Market risk (continued) (a) Price risk (continued) The Fund s overall exposure to price risk is as follow: RM RM Collective investment schemes Collective investment schemes designated at fair value through profit or loss 56,686,803 42,590,801 The following table summarises the sensitivity of the Fund s profit after taxation and net asset value to price risk movements. The analysis is based on the assumptions that the market price increased by 5% and decreased by 5% with all other variables held constant. This represents management s best estimate of a reasonable possible shift in CIS, having regard to the historical volatility of the prices. Impact on profit after % Change in price Market value tax/nav RM RM % 53,852,463 (2,834,340) % 56,686, % 59,521,143 2,834, % 40,461,261 (2,129,540) % 42,590, % 44,720,341 2,129,540 22

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) 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 investments. The Provider manages the credit risk by undertaking credit evaluation to minimise risk. The settlement terms of the proceeds from the creation of units receivable from the Provider are governed by the SC Guidelines on Private Retirement Schemes. The following table sets out the credit risk concentration of the Fund: 2018 Cash Amount and cash due from equivalents Provider Total RM RM RM Finance - AAA 33,778-33,778 Others - NR - 152, ,091 33, , , Finance - AAA 98,832-98,832 Others - NR - 135, ,676 98, , ,508 The financial assets of the Funds are neither past due nor impaired. Liquidity risk Liquidity risk is the risk that the Fund will encounter 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 other instruments, which are capable of being converted into cash within 7 days. 23

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Liquidity risk (continued) The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table below are the contractual undiscounted cash flows Between Within one month one month to one year Total RM RM RM Amount due to Provider - management fee 71,670-71,670 Amount due to Trustee 1,911-1,911 Amount due to PPA 1,911-1,911 Auditors remuneration - 8,500 8,500 Tax agent s fee - 5,500 5,500 Other payables and accruals - 14,756 14,756 75,492 28, , Amount due to Provider - management fee 53,711-53,711 Amount due to Trustee 1,432-1,432 Amount due to PPA 1,432-1,432 Auditors remuneration - 8,500 8,500 Tax agent s fee - 4,800 4,800 Other payables and accruals ,324 10,627 56,878 23,624 80,502 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. 24

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 2 FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED) Collective investment scheme risk This risk is associated with the Fund s investment in CIS exposing the Fund to the inherent investment risks faced by the CIS. The Fund may also be exposed to liquidity risk which may arise from the inability of the CIS to meet redemption amounts, as well as the risk of not being aligned with the Fund s mandate in the event the CIS that the Fund is invested into breaches it s asset allocation limits. Therefore, should any of the risks faced by the CIS materialised, the performance of the Fund will be affected. 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) are 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 FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 3 FAIR VALUE ESTIMATION (CONTINUED) (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: 2018 Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss - collective investment schemes 56,686, ,686, Financial assets at fair value through profit or loss - collective investment schemes 42,590, ,590,801 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include collective investment schemes. The Fund does not adjust the quoted prices for these instruments. (ii) The carrying values of cash and cash equivalents, 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 FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 4 MANAGEMENT FEE & MANAGEMENT FEE REBATE In accordance with the Deeds, 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 year ended 31 July 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 stated in Disclosure Document. As this Fund invests in units of the Affin Hwang Bond Fund, Affin Hwang Select Asia (ex Japan) Opportunity Fund, Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund, Affin Hwang Select Bond Fund, Affin Hwang Select Dividend Fund, Affin Hwang Select Opportunity Fund and Affin Hwang World Series - Global Equity Fund, any management fee charged to collective investment schemes 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 amounts recognised above. 5 TRUSTEE S FEE In accordance with the Deeds, 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 year ended 31 July 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 as stated in Disclosure Document. 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 year ended 31 July 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 FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 7 TAXATION RM RM Current taxation local - - The numerical reconciliation between net profit before taxation multiplied by the Malaysian statutory tax rate and tax expense of the Fund is as follows: RM RM Net profit before taxation 1,015,554 4,075,886 Tax at Malaysian statutory rate of 24% (2017: 24%) 243, ,213 Tax effects of: Investment income not subject to tax (443,678) (995,834) Expenses not deductible for tax purposes 12,173 8,853 Restriction on tax deductible expenses for PRS Funds 187,772 8,768 Tax expense DISTRIBUTION RM RM Distributions to members is from the following sources: Gross dividend income - 188,070 Previous year s realised income - 486, ,774 Less: Expenses - (6,174) - 668,600 Gross and net distribution per unit (sen) Ex-date Gross distribution per unit is derived from gross realised income less expense divided by the number of units in circulation, while net distribution per unit is derived from gross realised income less expenses and taxation divided by the number of units in circulation. Included in distribution for the financial year is an amount of RM Nil (2017: RM486,704) made from previous financial year s realised income. 28

30 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss - collective investment schemes local 56,686,803 42,590,801 Net (loss)/gain on assets at fair value through profit or loss - realised gain on sale of investments 23, ,400 - unrealised (loss)/gain on changes in fair value (405,039) 2,880,192 (381,457) 3,019,592 (a) Collective investment schemes local (i) Collective investment schemes local as at 31 July 2018 are as follows: Aggregate Fair Percentage Quantity cost value of NAV RM RM % Affin Hwang Bond Fund 9,848,081 5,693,424 5,686, Affin Hwang Select Asia (ex Japan) Opportunity Fund 8,579,819 4,933,763 6,167, Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund 33,704,677 18,798,422 19,777, Affin Hwang Select Bond Fund 15,576,636 10,204,678 10,149, Affin Hwang Select Dividend Fund 13,232,049 8,402,189 9,021, Affin Hwang Select Opportunity Fund 1,399,220 1,520,734 1,417, Affin Hwang World Series - Global Equity Fund 7,128,916 3,613,500 4,466, Total collective investment schemes local 89,469,398 53,166,710 56,686, Accumulated unrealised gain on collective investment schemes - local 3,520,093 Total collective investment schemes local 56,686,803 29

31 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (a) Collective investment schemes local (continued) (ii) Collective investment schemes local as at 31 July 2017 are as follows: Aggregate Fair Percentage Quantity cost value of NAV RM RM % Affin Hwang Bond Fund 7,141,678 4,135,697 4,160, Affin Hwang Select Asia (ex Japan) Opportunity Fund 6,930,049 3,701,181 4,809, Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund 25,354,079 13,775,460 14,969, Affin Hwang Select Bond Fund 11,058,617 7,197,148 7,492, Affin Hwang Select Dividend Fund 9,900,963 6,094,853 6,855, Affin Hwang Select Opportunity Fund 187, , , Affin Hwang World Series - Global Equity Fund 7,034,944 3,555,000 4,097, Total collective investment schemes local 67,608,010 38,665,669 42,590, Accumulated unrealised gain on collective investment schemes - local 3,925,132 Total collective investment schemes local 42,590,801 30

32 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 10 NUMBER OF UNITS IN CIRCULATION No. of units No. of units At the beginning of the financial year 68,067,000 45,325,000 Creation of units arising from applications 21,079,000 23,102,689 Creation of units arising from distributions - 1,064,311 Cancellation of units (828,000) (1,425,000) At the end of the financial year 88,318,000 68,067, TRANSACTIONS WITH PROVIDER (a) Details of transaction with the Provider for the financial year ended 31 July 2018 are as follows: Name of Provider Value Percentage of trade of total trade RM % Affin Hwang Asset Management Berhad #* 13,190, There is no brokerage fee paid to the Provider during the financial year. (b) Details of transaction with the Provider for the financial year ended 31 July 2017 are as follows: Name of Provider Value Percentage of trade of total trade RM % Affin Hwang Asset Management Berhad #* 30,675, There is no brokerage fee paid to the Provider during the financial year. 31

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 11 TRANSACTIONS WITH PROVIDER (CONTINUED) # Included in the transactions are trades conducted with Affin Hwang Asset Management Berhad, the Provider, amounting to RM13,190,000 (2017: RM30,675,025). The Provider is of the opinion that all transactions have been entered into in the normal course of business at agreed terms between the related parties. * Affin Hwang Asset Management Berhad, the Provider of the Fund, is the manager of Affin Hwang Bond Fund, Affin Hwang Select Asia (ex Japan) Opportunity Fund, Affin Hwang Select Asia Pacific (ex Japan) Balanced Fund, Affin Hwang Select Bond Fund, Affin Hwang Select Dividend Fund, Affin Hwang Select Opportunity Fund and Affin Hwang World Series - Global Equity Fund, the CIS that the Fund invests in during the financial year. 12 UNITS HELD BY THE PROVIDER AND PARTIES RELATED TO THE PROVIDER The related parties of and their relationship with the Fund are as follows: Related parties Affin Hwang Asset Management Berhad Affin Hwang Investment Bank Berhad Affin Bank Berhad ( ABB ) Subsidiaries and associates of ABB as disclosed in its financial statements Relationship The Provider Holding company of the Provider Ultimate holding company of the Provider Subsidiary and associated companies of the ultimate holding company of the Provider The units held by the Provider as at the end of the financial year are as follows: The Provider: No. of units RM No. of units RM Affin Hwang Asset Management Berhad (The units are held legally for booking purposes) 2,811 1,807 7,687 4,827 32

34 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 13 MANAGEMENT EXPENSE RATIO ( MER ) % % MER MER is derived from the following calculation: MER = (A + B + C + D + E + F) x 100 G A = Management fee B = Trustee fees C = PPA administration fee D = Auditors remuneration E = Tax agent s fee F = Other expenses G = Average NAV of the Fund calculated on a daily basis The average NAV of the Fund for the financial year calculated on a daily basis is RM51,164,195 (2017: RM34,916,661). 14 PORTFOLIO TURNOVER RATIO ( PTR ) PTR (times) PTR is derived from the following calculation: (Total acquisition for the financial year + total disposal for the financial year) 2 Average NAV of the Fund for the financial year calculated on a daily basis Where: total acquisition for the financial year = RM14,577,459 (2017: RM22,849,839) total disposal for the financial year = RM76,418 (2017: RM8,810,612) 33

35 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2018 (CONTINUED) 15 SEGMENT INFORMATION The strategic asset allocation committee of the Investment Manager makes the strategic resource allocations on behalf of the fund. The Fund has determined the operating segments based on the reports reviewed by the Provider that are used to make strategic decisions. The committee is responsible for the Fund s entire portfolio and considers the business to have a single operating segment. The committee s asset allocation decisions are based on a single, integrated investment strategy and the Fund s performance is evaluated on an overall basis. The reportable operating segments derive their income by seeking investments to achieve targeted returns consummate with an acceptable level of risk within each portfolio. These returns consist of dividend and gains on the appreciation in the value of investments and is derived from collective investment schemes in Malaysia. There were no changes in the reportable segments during the financial year. The internal reporting provided to the committee for the Fund s assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of MFRS and IFRS. 34

36 AFFIN HWANG PRS MODERATE FUND STATEMENT BY THE PROVIDER I, Teng Chee Wai, as the Director of Affin Hwang Asset Management Berhad, do hereby state that in my opinion as the Provider, the financial statements set out on pages 10 to 34 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 July 2018 and of its financial performance, changes in equity and cash flows for the financial year ended 31 July 2018 in accordance with the Malaysian Financial Reporting Standards and International Financial Reporting Standards. For and on behalf of the Provider, AFFIN HWANG ASSET MANAGEMENT BERHAD TENG CHEE WAI EXECUTIVE DIRECTOR/MANAGING DIRECTOR Kuala Lumpur 13 September

37 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF AFFIN HWANG PRS MODERATE FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion In our opinion, the financial statements of Affin Hwang PRS Moderate Fund ( the Fund ) give a true and fair view of the financial position of the Fund as at 31 July 2018, and of its financial performance and its cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. What we have audited We have audited the financial statements of the Fund, which comprise the statement of financial position as at 31 July 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 10 to 34. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. 36

38 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF AFFIN HWANG PRS MODERATE FUND (CONTINUED) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Information other than the financial statements and auditors report thereon The Provider of the Fund is responsible for the other information. The other information comprises Provider s report but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Provider for the financial statements The Provider of the Fund is responsible for the preparation of the financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Provider is also responsible for such internal control as the Provider determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, the Provider is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Provider either intends to liquidate the Fund or has no realistic alternative but to do so. 37

39 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF AFFIN HWANG PRS MODERATE FUND (CONTINUED) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) (b) (c) (d) (e) Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Provider. Conclude on the appropriateness of the Provider s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 38

40 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF AFFIN HWANG PRS MODERATE FUND (CONTINUED) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Auditors responsibilities for the audit of the financial statements (continued) We communicate with the Provider regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. OTHER MATTERS This report is made solely to the members of the Fund and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS PLT LLP LCA & AF 1146 Chartered Accountants Kuala Lumpur 13 September

41 DIRECTORY OF SALES OFFICE HEAD OFFICE Affin Hwang Asset Management Berhad Ground Floor Tel : Menara Boustead Fax : , Jalan Raja Chulan Toll free no : Kuala Lumpur customercare@affinhwangam.com PENANG Affin Hwang Asset Management Berhad No. 10-C-24 Precinct 10 Jalan Tanjung Tokong Tel : Penang Fax : PERAK Affin Hwang Asset Management Berhad 13A Persiaran Greentown 7 Greentown Business Centre Tel : Ipoh Perak Fax : MELAKA Affin Hwang Asset Management Berhad Ground Floor, No. 584, Jalan Merdeka Taman Melaka Raya Tel : / Melaka Fax : JOHOR Affin Hwang Asset Management Berhad 1 st Floor, Lot 93 Jalan Molek 1/29, Taman Molek Johor Bahru Tel : Johor Fax : SABAH Affin Hwang Asset Management Berhad Lot No. B-2-09, 2 nd Floor Block B, Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu Tel : Sabah Fax : SARAWAK Affin Hwang Asset Management Berhad Ground Floor, No. 69 Block 10, Jalan Laksamana Cheng Ho Kuching Tel : Sarawak Fax : Affin Hwang Asset Management Berhad 1 st Floor, Lot 1291 Jalan Melayu, MCLD Miri Tel : Sarawak Fax :

42 41