Eastspring Investment Small-cap Fund

EASTSPRING INVESTMENTS
BALANCED FUND

ANNUAL REPORT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019



Dear Valued Investor,

Greetings from Eastspring Investments Berhad!
First and foremost, we would like to take this opportunity to thank you for
choosing to invest with Eastspring Investments Berhad.
We are pleased to enclose a copy of the Annual/Interim/Quarterly Fund
Reports of Eastspring Investments Berhad’s fund(s) for the reporting
period ended 31 December 2019.
You may also download these reports from our website at
www.eastspring.com/my
Should you require any assistance, please do not hesitate to contact our
Client Services at 03-2778 1000.

Yours sincerely,

Raymond Tang Chee Kin
Non-Independent, Executive Director and Chief Executive Officer

TABLE OF CONTENTS 1
4
Fund Information 7
Key Performance Data 10
Manager’s Report 14
Market Review 16
Rebates and Soft Commissions
Statement by the Manager 17
Trustee’s Report to the Unit Holders of
18
Eastspring Investments Balanced Fund 22
Independent Auditors’ Report to the Unit Holders of 23
24
Eastspring Investments Balanced Fund 25
Statement of Comprehensive Income 26
Statement of Financial Position 35
Statement of Changes In Equity 70
Statement of Cash Flows
Summary of Significant Accounting Policies
Notes to the Financial Statements
Corporate Directory

Annual Report

FUND INFORMATION

Name of Fund Eastspring Investments Balanced Fund (the “Fund”)

Fund Category/ Balanced/growth and income
Type
The Fund seeks to provide investors with capital appreciation
Fund Objective and a reasonable level of current income* by investing in a
mixed portfolio of companies with good** dividend yield and
low*** price volatility and a portfolio of investment grade fixed
income securities.

Note: The Fund’s focus is on growth.

ANY MATERIAL CHANGES TO THE FUND’S OBJECTIVE
WOULD REQUIRE UNIT HOLDERS’ APPROVAL.

* Income distributed to a Unit Holder will be reinvested into
additional Units unless Unit Holder opts for the distribution to
be paid out.

** good generally refers to potentially higher dividend yield than
the market average.

*** low generally refers to potentially lower price volatility than
the market average.

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Eastspring Investments Balanced Fund

FUND INFORMATION (CONTINUED)

Performance The performance benchmark of the Fund is 50% FTSE Bursa
Benchmark Malaysia 100 Index (“FBM100”) + 50% Maybank 12-month
fixed deposit rate.

The composite benchmark index is a reflection of the Fund’s
average asset allocation over the long-term of 50% of the
Fund’s NAV in equities and equity-related securities, and 50% of
the Fund’s NAV in fixed income securities and Deposits or liquid
assets.

Source:
FBM100 (www.bursamalaysia.com)
Maybank 12-month fixed deposit rate (www.maybank2u.com.my)

The performance of the Fund against the benchmark is
published in the Manager’s monthly factsheet and is available
from the Manager’s website at www.eastspring.com/my.


Note: The risk profile of the Fund is different from the risk
profile of the performance benchmark.

Fund Income At least once a year, subject to the availability of income.

Distribution Policy

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FUND INFORMATION (CONTINUED)

Breakdown of Unit As at 31 December 2019, the size of Eastspring InvestmentsUnits (Million)
Holdings by Size Balanced Fund stood at 61.202 million units.

Fund Size

80

60

40

20

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019

Breakdown of Unit Holdings

Unit Holdings No. of No of %
Unit Units*
% (‘000)
Holders

5,000 units and below 781 29.66 2,124 3.47
5,001 to 10,000 units 579 21.99 4,147 6.78
10,001 to 50,000 units 1,088 41.32 23,017 37.61
50,001 to 500,000 units 177 6.73 16,722 27.32
500,001 units and above 15,191 24.82
Total 8 0.30 61,201 100.00
2,633 100.00

* excludes units held by the Manager.

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Eastspring Investments Balanced Fund

KEY PERFORMANCE DATA

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER

Category 2019 2018 2017
(%) (%) (%)

Quoted securities 1.32 0.39 5.20
Construction - - -
Consumer -
Consumer Products & Services 9.94 11.02 -
Energy 1.82 1.50 -
Financial Services 13.66
Health Care 6.46 13.48 12.80
Industrial Products & Services 3.15 7.13 3.51
Manufacturing 3.98 1.52
Plantation - - -
Property 3.99 3.67 8.69
REITS 1.90 0.61 1.32
Technology 2.24 1.37
Telecommunications & Media 2.68 4.70 17.71
Trading/Services 6.69 1.79 -
Transportation & Logistics -
Utilities - - 14.71
2.50 3.92 -
Unquoted fixed income securities 5.40 -
Cash and other assets 61.75 53.56
Total 36.58 35.90 65.46
1.67 10.54 31.28
100.00 100.00
3.26
100.00

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KEY PERFORMANCE DATA (CONTINUED)

Category 2019 2018 2017

Net Asset Value (NAV) (RM'000) 53,901 60,065 72,101
Units In Circulation (Units '000) 61,202 65,505 67,558
Net Asset Value Per Unit (RM) 0.8807 0.9169 1.0672
Highest Net Asset Value Per Unit (RM)# 0.8876 0.9170 1.0672
Lowest Net Asset Value Per Unit (RM)# 0.8770 0.9102 1.0626
Total Return (%)
- Capital Growth (3.95) (14.08) 12.17
- Income Distribution 4.72 4.86 4.67
Total Return (%) 0.59
Gross Distribution Per Unit (RM) (9.91) 17.41
Net Distribution Per Unit (RM) 0.0414 0.0442 0.0496
Management Expense Ratio (MER) (%)* 0.0414 0.0400 0.0493
Portfolio Turnover Ratio (PTR) (times)^
1.66 1.68 1.72
0.44 0.74 0.39

# Figures shown as ex-distribution.
* There were no significant changes to the MER during the period under review.
^ There were no significant changes to the PTR during the period under review.

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Eastspring Investments Balanced Fund

KEY PERFORMANCE DATA (CONTINUED)

1 year 3 years 5 years

1.1.2019 to 1.1.2017 to 1.1.2015 to

31.12.2019 31.12.2019 31.12.2019

(%) (%) (%)

Average total return 0.59 2.09 3.37

Year ended 1.1.2019 to 1.1.2018 to 1.1.2017 to 1.1.2016 to 1.1.2015 to
31.12.2019 31.12.2018 31.12.2017 31.12.2016 31.12.2015

(%) (%) (%) (%) (%)

Annual total return 0.59 (9.91) 17.41 (0.60) 11.64

Source: The above total return of the Fund was sourced from Lipper for Investment Management.

Bases of calculation and assumptions made in calculating returns:

Percentage growth = NAVt -1
NAV0

NAVt = NAV at the end of the period
NAV0 = NAV at the beginning of the period
Performance annualised = (1 + Percentage Growth)1/n - 1

Adjusted for unit split and distribution paid out
for the period

n = Number of years

Past performance is not necessarily indicative of future performance and unit
prices and investment returns may go down, as well as up.

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MANAGER’S REPORT

Fund Performance Over the 5-year period, the Fund recorded a return of 18.06%,
outperforming the benchmark return of 5.51% by 12.55%.

During the period under review, the Fund registered a return of
0.59%, outperforming the benchmark return of 0.15% by 0.44%.

The Fund outperformance was mainly due to stock and
sector selections. The Fund exposure to technology, consumer
discretionary and REITs delivered a better relative performance
return vis-à-vis broad market. The detractions came from exposure
to industrial, healthcare and energy stocks. The Fund performance
was also supported by strong positive return from investments in
corporate bonds.

The Fund achieved its objective which is to provide investors with
capital appreciation and a reasonable level of current income
during the period under review.

Eastspring Investments Balanced Fund 40%
- 5 Years Return Vs Benchmark

40%

5 years % Change 30% 30%

20% 20%

10% 10%

0% 0%

-10% May Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug -10%
2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019
Dec Dec
2014 2019

Eastspring Investments Balanced Fund Benchmark

The performance is calculated on NAV-to-NAV basis with
gross income or dividend reinvested.

Benchmark: 50% FBM100 + 50% Maybank 12-month fixed
deposit rate

Source: Lipper for Investment Management and
www.bursamalaysia.com, as at 31 December 2019.

Past performance of the Fund is not necessarily indicative
of its future performance.

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Eastspring Investments Balanced Fund

MANAGER’S REPORT (CONTINUED)

Analysis of Fund For the financial year ended 31 December 2019:
Performance
Income Capital Total Total Return of
Distribution/ Return Return* Return Benchmark
Unit Split
(%) (%) (%) (%)

4.72 (3.95) 0.59 0.15

* Capital return components (NAV per unit to NAV per unit).

Ex-date 17-Dec-19
Distribution Per Unit (RM)

Gross 0.0414
Net 0.0414

Impact on NAV arising from distribution for the financial year ended
31 December 2019.

Ex-date 17-Dec-19
(RM per Unit)

Net Asset Value before distribution 0.9184
Less: distribution (0.0414)
Net Asset Value after distribution
0.8770

No unit split were declared for the financial year ended 31 December 2019.

Investment Equity Strategy
Strategy During
the Period Under The Fund adopted defensive strategy with focus on bigger cap
Review stocks which can provide good capital appreciation potential and
some dividend yield with strong fundamental.

Bond Strategy

The Fund participated in selected quality issuances for yield pick-
up, and trade on market volatility, subject to liquidity constraints.

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MANAGER’S REPORT (CONTINUED)

Asset Allocation 31-Dec 31-Dec
2019 2018
Asset Allocation Changes
(%) (%) (%)

Quoted securities 61.75 53.56 8.19
Unquoted fixed income securities 36.58 35.90 0.68
Cash and other assets 10.54 (8.87)
1.67

Asset Allocation as at 31 December 2019

Cash and other assets Quoted securities
1.67% 61.75%

Unquoted fixed income
securities
36.58%

There were no significant changes in asset allocation of the Fund
for the period under review.

State of Affairs of There have been neither significant change to the state of affairs
the Fund of the Fund nor any circumstances that materially affect any
interests of the unit holders during the period under review.

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Eastspring Investments Balanced Fund

MARKET REVIEW

Equity

For the 1Q2019, the FBM KLCI bucked the regional up-trend and was one of the worst
performing indices in emerging market. The regional uplift in sentiment was due to the
dramatic shift in US Federal Reserve policy to a more dovish stance and improving rhetoric
from the US-China trade talks. In addition, China’s fresh stimulus measures helped sustain
the positive sentiment. On the local front, investors were disappointed with Malaysian
corporates as reported results were once again disappointing. 2018 was the fourth year of
sub-par earnings growth. Towards the end of the 1Q2019, big cap stocks corrected post
the Invest Malaysia event held on 19-20 March, amidst the risk to earnings for banks due
to a possible rate cut, slower corporate earnings growth prospects and policy uncertainty.

The start of 2Q2019 saw regional markets rally on the back of positive US-China trade
talks prospects and improved global outlook. However, this quickly turned sour by the
month of May following the abrupt end of negotiations to the US-China trade deal with
the US raising tariffs on imports from China to 25% on USD200bn of goods effective 10th
May 2019. This was followed by steps to stifle China’s technology sector with what was
effectively a ban on American firms from supplying parts to Chinese telecommunications
giant Huawei Technologies. China retaliated with higher tariffs of up to 25% on US60bn
of US goods effective 1 June 2019, with the Chinese leadership hinting at further
retaliatory measures against the US. Regional markets rebounded in the month of June,
with news of US and China restarting their trade talks post the G20 meeting held in
Japan at the end of the month. Contrary to regional markets, the Malaysian equity
market struggled to perform early 2Q2019, dampened by news of the potential exclusion
of Malaysia from the FTSE Russel’s World Government Bond Index (“WBGI”) after
their review come September, weaker Malaysian Ringgit, cut in the OPR of 25bps, and
corporate results reporting that was not very inspiring.

The first two months of 3Q2019 saw regional markets correct largely due to an escalation
in the trade war and fear of increasing recession risks sparked by the further collapse in
global bond yields. President Trump announced an additional 10% tariff on a further
USD300bn in Chinese imports starting 1 September 2019, followed by the US designating
China as a “currency manipulator”. By the end of 3Q2019, global and regional equity
markets reversed some of the losses amid renewed optimism as US and China return to
the negotiation tables again. However, markets lost some momentum later in the month
following a drone attack on Saudi’s oil facilities and an impeachment inquiry launched
against the US President Trump. The Malaysian equity market remained weak in light of

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the external headwinds faced. Domestically, the Malaysian ringgit depreciated by about
1.34% for the 3Q2019, given its correlation with the China’s CNY which depreciated
4.1% against the USD. Brent crude oil prices declined by 8.67% for the 3Q2019 on
concerns of slowing global growth and demand. The June 2019 results season reported
was uninspiring yet again with more downgrades in earnings by consensus. Investor
sentiment domestically weakened following the end to Axiata and Telenor Asia merger
talks due to “complexities”, which led to profit taking activities. FTSE Russell’s decision to
defer Malaysia’s exclusion from the World Global Bond Index (“WGBI”) and keeping it on
the watchlist, was a relief but could be a case of kicking the can down the road, with the
next review in March 2020.

Global equity markets ended the year with solid gains in general, as the US agreed to a
Phase 1 trade deal with China, and cancelled tariffs on US$160bn of Chinese goods due
to take effect on 15 December 2019. While details of the deal were hard to come by,
the agreement in principle lifted a cloud that had been hanging the global economy all
year. In addition, the decisive win by the ruling Conservative Party in the UK elections,
almost guarantees the UK will leave the EU on 31 January, albeit with a 23-month
transitory period, providing clarity on Brexit. Domestically, Malaysian equities continued
to be one of the worst performers in the region. During the 4Q2019, the Budget 2020
announced measures aimed at promoting jobs, FDIs and structural reforms, rather than
the traditional mega infrastructure pump-priming, and offered tax incentives that should
benefit the electronic and manufacturing sectors. Malaysian equities were also subject to
foreign outflows due to various index rebalancing activities. In November 2019, the MSCI
Emerging Market Index saw an estimated net outflow of USD300-400m. Results reporting
for 3Q2019 was uninspiring, which will likely see the KLCI earnings for 2019 report
another year of negative growth (2018: -2.8%).

The FBM KLCI closed the year under review at 1,588.76 points, down 6.02%. The broader
FBM Emas (“FBMEmas”) Index closed the period under review down by 1.77%. The MSCI
Asia Pacific ex-Japan Index declined by 15.85% in USD terms.1

1 Source: Bloomberg: World indices

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Eastspring Investments Balanced Fund

Bond

US Federal Reserve (“Fed”) maintained the Fed Fund Rate in the first half of the year at
2.25-2.50%. As economic threat loomed in the face of global weakness and heightened
geopolitical risks, the Fed delivered a total of 3 cuts of 25bps each in 3 consecutive
meetings – July, September and October - citing modest mid-cycle adjustments to its
monetary policy which brought the Fed Fund Rate to 1.50%-1.75%. In the December
meeting, policymakers unanimously voted to keep the policy rate unchanged as economic
data have been resilient and previous rate cuts have yet to fully filter through the
economy, which accorded the Fed some policy space in the event of economic weakness.
Similarly, the easing of monetary policies by global central banks to either combat an
already slowing growth or to protect against downside risk to growth, have resulted in
lower bond yields globally.

The trade tensions between the US and China have dominated news headlines during
the period under review with rounds of de-escalation and re-escalation, sending global
financial markets into cycles of risk-on and risk-off modes. However, market sentiment
improved towards the end of 2019 with progress on the US-China Phase one deal. In UK,
Prime Minister Johnson won the UK election by a wide margin, giving him more control
over the parliament and subsequently his plan for the UK to leave EU by 31 January 2020.
Both the positive US-China deal and better clarity on Brexit reduced two of the geopolitical
risks that had plagued markets for years, have turned market sentiment positive. While we
see a broadly improving geopolitical backdrop, investors will continue to follow the US-
China talks closely as a complete resolution of trade war is still far in sight, given the deep
differences in US and China’s demands.

BNM cut the Overnight Policy Rate (“OPR”) by 25bps to 3.00% on 7 May 2019, its first
rate cut since January 2018, as a pre-emptive move to insure against downside risks in the
Malaysian economy due to the uncertainties in the global environment. In the subsequent
meetings for the year, BNM maintained its policy rate, largely consistent with the market’s
expectation for BNM to keep its powder dry on the back of improving visibility from the
Budget. For 2020, the pro-growth fiscal measures announced by the government in the
Budget are expected to reduce the pressure on monetary policy to push growth. BNM’s
monetary policy direction for 2020 is broadly expected to be data-dependent and event-
driven given the uncertainties surrounding geopolitical developments and the drag that
they have on global growth.

In April 2019, FTSE Russell announced changes to its market accessibility methodology
which resulted in Malaysia being placed in its watchlist for potential exclusion from the
World Government Bond Index (“WGBI”). Since then, Bank Negara has announced several

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initiatives to deepen and broaden onshore foreign exchange and bond market liquidity. In
September 2019, FTSE Russell still maintained Malaysia in its watchlist for exclusion from
WGBI, citing expectation for continued discussion with BNM as well as the index users.
The next index review is slated to be in March 2020, where market volatility is expected
to resurface prior to the announcement as investors weigh in the different outcome
probabilities.

On the economic front, Malaysia’s Gross Domestic Product (“GDP”) growth for the third
quarter of 2019 moderated to 4.4% (2Q2019: 4.9%), mainly due to lower growth in the
nation’s key sectors and a decline in the mining and construction activities. On a quarter-
on-quarter (“q-o-q”) seasonally-adjusted basis, the economy grew by 0.9% (2Q2019:
1.0%). Private sector activity continued to drive growth – private consumption increased
+7.0% (2Q 2019: 7.8%), which was supported by firm household spending backed by
continued income growth and moderately low inflation. For the year 2019, official BNM
GDP growth forecast remained at 4.3 – 4.8%. Headline inflation in November 2019 was
recorded lower at +0.9% year on year (“y-o-y”) compare to October (+1.1% y-o-y).
Inflation rate for 2019 is expected to be anchored around the current levels with the delay
in the targeted fuel subsidy implementation and the lapse of tax holiday impact. For the
full year, BNM maintains its inflation forecast at 0.70% - 1.70% while the government
expects 2019 inflation to be subdued at 1.00%.

For the period under review, the 3-years, 5-years, 10-years and 15-years Malaysian
Government Securities (“MGS”) yields decreased by 64bps, 61bps, 77bps and 84bps to
close at 2.98%, 3.15%, 3.30%, and 3.60% respectively.1 Similarly, the 3-years, 5-years,
10-years and 15-years Government Investment Issue (“GII”) yields decreased by 62bps,
64bps, 82bps and 89bps to close at 3.06%, 3.19%, 3.42%, and 3.72% respectively1.
Both MGS & GII yield curve bull-flattened during the period mirroring the move in the
global bond market on the back of (1) escalation of trade tension between US and China,
(2) consecutive global growth outlook downgrades amidst materialisation of downside
risk, and (3) a series of policy rate cuts by global central banks with market’s expectation of
more cuts. Meanwhile, corporate bond yields generally moved in tandem with sovereign
bond yields, albeit at a lag. Activities in the corporate bond market continued to be
vibrant, supported by ample liquidity and a stable credit environment.

On the supply front, total corporate bond issuances during the period stood around RM82
billion. Major primary issuances during the period were mainly government guaranteed
bonds and highly-rated corporates bonds.

1 Source: Bloomberg

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Eastspring Investments Balanced Fund

REBATES AND SOFT COMMISSIONS

During the period under review, the Manager and its delegates (if any) received goods and
services which directly assist the investment management of the Fund, including research
and advisory services, market analyses, data and quotation services, and computer
hardware and software used for and/or in support of the investment process of fund
managers.
The Manager and its delegates (if any) have not received any rebates or shared any
commissions from any brokers during the same period under review.

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EASTSPRING INVESTMENTS
BALANCED FUND

FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

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Eastspring Investments Balanced Fund

STATEMENT BY THE MANAGER

We, Tang Chee Kin and Iskander Bin Ismail Mohamed Ali, being two of the Directors of
Eastspring Investments Berhad, do hereby state that, in the opinion of the Manager, the
accompanying financial statements set out on pages 22 to 69 are drawn up in accordance
with the provisions of the Deed and give a true and fair view of the financial position of the
Fund as at 31 December 2019 and of its financial performance, changes in equity and cash
flows for the financial year ended on that date in accordance with the Malaysian Financial
Reporting Standards and International Financial Reporting Standards.
For and on behalf of the Manager,
EASTSPRING INVESTMENTS BERHAD

TANG CHEE KIN
Executive Director/Chief Executive Officer

ISKANDER BIN ISMAIL MOHAMED ALI
Independent, Non-Executive Director
Kuala Lumpur
Date: 17 February 2020

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TRUSTEE’S REPORT TO THE UNIT HOLDERS OF
EASTSPRING INVESTMENTS BALANCED FUND

We have acted as Trustee for Eastspring Investments Balanced Fund (the “Fund”) for
financial year ended 31 December 2019. To the best of our knowledge, for the financial
year under review, Eastspring Investments Berhad (the “Manager”) has operated and
managed the Fund in accordance with the following:-

a. limitations imposed on the investment powers of the Manager under the Deed(s),
the Securities Commission’s Guidelines on Unit Trust Funds, the Capital Markets and
Services Act 2007 and other applicable laws;

b. valuation and pricing for the Fund is carried out in accordance with the Deed(s) of the
Fund and any regulatory requirements; and

c. creation and cancellation of units for the Fund are carried out in accordance with the
Deed(s) of the Fund and any regulatory requirements.

We are of the view that the distribution made during this financial year ended
31 December 2019 by the Manager is not inconsistent with the objectives of the Fund.

For Deutsche Trustees Malaysia Berhad

Ng Hon Leong Richard Lim Hock Seng
Head, Trustee Operations Chief Executive Officer

Kuala Lumpur
Date: 17 February 2020

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Eastspring Investments Balanced Fund

INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS
OF EASTSPRING INVESTMENTS BALANCED FUND

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Our opinion

In our opinion, the financial statements of Eastspring Investments Balanced Fund (“the
Fund”) give a true and fair view of the financial position of the Fund as at 31 December
2019, and of its financial performance and its cash flows for the financial 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 December 2019, and the statement of comprehensive
income, statement of changes in equity and statement of cash flows for the financial year
then ended, and notes to the financial statements, including a summary of significant
accounting policies, as set out on pages 22 to 69.

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.

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Information other than the financial statements and auditors’ report thereon

The Manager of the Fund is responsible for the other information. The other information
comprises Manager’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 Manager for the financial statements

The Manager 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 Manager is also
responsible for such internal control as the Manager determine 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 Manager 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 Manager
either intend to liquidate the Fund or have no realistic alternative but to do so.

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

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Eastspring Investments Balanced Fund

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. 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.

b. 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.

c. Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Manager.

d. Conclude on the appropriateness of the Manager’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.

e. 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.

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We communicate with the Manager 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 unit holders 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
LLP0014401-LCA & AF 1146
Chartered Accountants
Kuala Lumpur
Date: 17 February 2020

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Eastspring Investments Balanced Fund

STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

Note 2019 2018
RM RM

INVESTMENT INCOME/(LOSS) 7 1,126,911 945,700
Gross dividend income
Interest income from deposits with licensed 143,310 321,700

financial institutions 957,834 1,017,385
Interest income from unquoted fixed income - 1,000

securities (799,109) (7,920,948)
Other income 1,428,946 (5,635,163)
Net loss on financial assets

at fair value through profit or loss

EXPENSES 3 (852,293) (971,515)
Management fee
Trustee fee 4 (45,456) (51,814)
Audit fee
Tax agent fee (7,000) (7,000)
Other expenses
Transaction costs (3,400) (4,602)

(38,844) (55,697)

(130,103) (244,774)

(1,077,096) (1,335,402)

PROFIT/(LOSS) BEFORE TAXATION 351,850 (6,970,565)

TAXATION 5 - (7,285)

PROFIT/(LOSS) AFTER TAXATION AND 351,850 (6,977,850)
TOTAL COMPREHENSIVE INCOME/(LOSS)

Profit/(loss) after taxation is made up of the 1,736,094 6,403,198
following: (1,384,244) (13,381,048)
Realised amount
Unrealised amount 351,850 (6,977,850)

The accompanying summary of significant accounting policies and notes to the financial statements
form an integral part of these financial statements.

22 Client Services : 03-2778 1000

STATEMENT OF FINANCIAL POSITION 2019 Annual Report
RM
AS AT 31 DECEMBER 2019 2018
Note 903,677 RM
63,750
ASSETS 8 - 6,207,748
Cash and cash equivalents 7 2,327 38,523
Amount due from Manager 18,974
Amount due from broker 9 27,858 150,073
Dividends receivable 25,828
Other receivable 52,989,133 18,974
Tax recoverable 54,005,719 27,858
Financial assets at fair value through
11,426 53,752,706
profit or loss 68,408 60,221,710
TOTAL ASSETS
3,648 32,904
LIABILITIES - 76,598
Amount due to Manager
Accrued management fee 21,229 4,085
Amount due to Trustee 104,711 23,888
Distribution payable 19,418
Other payables and accruals 53,901,008 156,893
TOTAL LIABILITIES
23,756,629 60,064,817
NET ASSET VALUE OF THE FUND 30,144,379
27,868,794
EQUITY 53,901,008 32,196,023
Unit holders’ capital
Retained earnings 61,201,929 60,064,817

NET ASSET ATTRIBUTABLE 0.8807 65,505,371
TO UNIT HOLDERS
0.9169
NUMBER OF UNITS IN CIRCULATION

NET ASSET VALUE PER UNIT
(EX-DISTRIBUTION) (RM)

The accompanying summary of significant accounting policies and notes to the financial statements
form an integral part of these financial statements.

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Eastspring Investments Balanced Fund

STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

Note Unit Retained Total
holders’ earnings RM

capital RM 60,064,817

RM

Balance as at 1 January 2019 27,868,794 32,196,023

Movement in unit holders’ 2,201,556 - 2,201,556
contribution: 2,399,888 - 2,399,888
(8,694,655) - (8,694,655)
Creation of units from applications
Creation of units from distribution 6 (18,954) (2,403,494) (2,422,448)
Cancellation of units
Distribution - 351,850 351,850

(Gross/Net: 4.14 sen) 23,756,629 30,144,379 53,901,008
Total comprehensive income

for the financial year

Balance as at 31 December 2019

Balance as at 1 January 2018 30,537,599 41,563,261 72,100,860

Movement in unit holders’ 5,126,333 - 5,126,333
contribution: 2,491,305 - 2,491,305
(10,160,638) - (10,160,638)
Creation of units from applications
Creation of units from distribution 6 (125,805) (2,389,388) (2,515,193)
Cancellation of units
Distribution - (6,977,850) (6,977,850)

(Gross: 4.42 sen/Net: 4.00 sen) 27,868,794 32,196,023 60,064,817
Total comprehensive loss

for the financial year

Balance as at 31 December 2018

The accompanying summary of significant accounting policies and notes to the financial statements
form an integral part of these financial statements.

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STATEMENT OF CASH FLOWS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

Note 2019 2018
RM RM

CASH FLOWS FROM OPERATING 29,278,420 54,097,638
ACTIVITIES (29,328,755) (46,441,878)

Proceeds from sale of investments 1,150,412 1,043,338
Purchase of investments
Dividends received 992,602 1,050,889
Interest received from unquoted fixed income
143,310 321,700
securities (860,483) (990,905)
Interest received from deposits with licensed
(45,893) (52,848)
financial institutions (47,432) (75,488)
Management fee paid 1,282,181 8,952,446
Trustee fee paid
Payment for other fees and expenses 5,124,049
Net cash generated from operating activities (10,384,605)

CASH FLOWS FROM FINANCING ACTIVITIES 2,176,329 (25,998)
Cash proceeds from units created (8,716,133) (5,286,554)
Payments for cancellation of units
Distribution paid (46,448) 3,665,892
Net cash used in financing activities (6,586,252)
2,541,856
NET (DECREASE)/ INCREASE IN CASH AND (5,304,071)
CASH EQUIVALENTS 6,207,748

CASH AND CASH EQUIVALENTS AT THE 6,207,748
BEGINNING OF THE FINANCIAL YEAR

CASH AND CASH EQUIVALENTS AT THE 8 903,677
END OF THE FINANCIAL YEAR

The accompanying summary of significant accounting policies and notes to the financial statements
form an integral part of these financial statements.

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Eastspring Investments Balanced Fund

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

The following accounting policies have been used in dealing with items which are
considered material in relation to the financial statements.

A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements have been prepared under the historical cost convention
in accordance with the Malaysian Financial Reporting Standards (“MFRS”) and
International Financial Reporting Standards (“IFRS”), as modified by financial assets at
fair value through profit or loss.

The preparation of financial statements in conformity with the MFRS and IFRS
require 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 Manager
to exercise their judgment in the process of applying the Fund’s accounting policies.
Although these estimates and judgment are based on the Manager’s best knowledge
of current events and actions, actual results may differ.

The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed in
Note K.

a. Standards, amendments to published standards and interpretations that are
effective:

The Fund has applied the following amendments for the first time for the financial
year beginning on 1 January 2019:

• Amendments to MFRS 112 ‘Income Taxes’ (effective from 1 January 2019)
clarify that where income tax consequences of dividends on financial
instruments classified as equity is recognised (either in profit or loss, other
comprehensive income or equity) depends on where the past transactions
that generated distributable profits were recognised.

Accordingly, the tax consequences are recognised in profit or loss when an
entity determines payments on such instruments are distribution of profits
(that is, dividends). Tax on dividend should not be recognised in equity merely
on the basis that it is related to a distribution to owners.

This standard is not expected to have a significant impact on the Fund’s financial
statements.

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b. Standards, amendments that have been issued but not yet effective:

Amendments to the definition of material (Amendments to MFRS 101 and
MFRS 108) effective 1 January 2020

The amendments clarify the definition of materiality and use a consistent
definition throughout MFRSs and the Conceptual Framework for Financial
Reporting.

The definition of ‘material’ has been revised as “Information is material if
omitting, misstating or obscuring it could reasonably be expected to influence
decisions that the primary users of general purpose financial statements make on
the basis of those financial statements, which provide financial information about
a specific reporting entity.”

The amendments also:

• clarify that an entity assess materiality in the context of the financial
statements as a whole.

• explain the concept of obscuring information in the new definition.
Information is obscured if it have the effect similar as omitting or misstating
of that information. For example, material transaction is scattered throughout
the financial statements, dissimilar items are inappropriately aggregated, or
material information is hidden by immaterial information.

• clarify the meaning of ‘primary users of general purpose financial statements’
to whom those financial statements are directed, by defining them as ‘existing
and potential investors, lenders and other creditors’ that must rely on general
purpose financial statements for much of the financial information they need.

The amendments shall be applied prospectively.

B. INCOME RECOGNITION

Interest income from short-term deposits with licensed financial institutions is
recognised on an accrual basis using the effective interest rate method.

Interest income from unquoted fixed income securities including amortisation of
premium and accretion of discount are recognised using the effective interest rate
method.

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Eastspring Investments Balanced Fund

Dividend income is recognised on the ex-dividend date, when the right to receive the
dividend has been established.

Realised gain or loss on disposal of quoted securities are accounted for as the
difference between the net disposal proceeds and the carrying amount of
investments, which is determined on a weighted average cost basis.

Realised gain or loss on disposal of unquoted fixed income securities accounted for
as the difference between the net disposal proceeds and the carrying amount of
the unquoted fixed income securities determined on cost adjusted for accretion of
discount or amortisation of premium.


C. TAXATION

Current tax expense is determined according to the Malaysian tax laws at the current
rate based upon the taxable income during the financial year.

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
(“RM”), which is the Fund’s functional and presentation currency.

E. FINANCIAL ASSETS AND FINANCIAL LIABILITIES

i. Classification

The Fund classify its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other
comprehensive income (“OCI”) or through profit or loss), and

• those to be measured at amortised cost

The Fund classifies its investments based on both the Fund’s business model for
managing those financial assets and the contractual cash flow characteristics of

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the financial assets. The portfolio of financial assets is managed and performance
is evaluated on a fair value basis. The Fund is primarily focused on fair value
information and uses that information to assess the assets’ performance and to
make decisions. The Fund has not taken the option to irrevocably designate any
equity securities as fair value through other comprehensive income. Consequently,
all investments are measured at fair value through profit or loss.

The Fund classifies cash and cash equivalents, dividends receivable, other
receivable and amount due from Manager as financial assets at amortised cost as
these financial assets are held to collect contractual cash flows consisting of the
amount outstanding.

The Fund classifies accrued management fee, amount due to Manager, amount
due to Trustee and other payables and accruals as financial liabilities measured at
amortised cost.

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 and transaction costs are expensed in the
statement of comprehensive income.

Financial assets are derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the Fund has transferred
substantially all risks and rewards of ownership.

Financial liabilities, are 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 liabilities are derecognised when the obligation under the liabilities are
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 financial year in which they arise.

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Eastspring Investments Balanced Fund

Dividend income from financial assets at fair value through profit or loss is
recognised in the statement of comprehensive income as part of gross dividend
income when the Fund’s right to receive payments is established.

Quoted securities in Malaysia are valued at the last done market price quoted
on the Bursa Malaysia Securities Berhad (“Bursa Securities”) at the date of the
statement of financial position.

Unquoted fixed income securities are carried at cost and adjusted for any
amortisation of premium or accretion of discount from acquisition date to
maturity date. The carrying cost is revalued to reflect its fair value on a daily
basis using the net present value method based on fair value prices quoted by a
bond pricing agency (“BPA”) registered with the Securities Commission as per
the Securities Commission’s (“SC”) Guidelines on Unit Trust Funds. Where such
quotations are not available or where the Manager is of the view that the price
quoted by the BPA for a specific unquoted fixed income securities differs from
the market price by more than 20 basis points, the Manager may use the market
price, provided that the Manager:

i. Records its basis for using a non-BPA price;
ii. Obtains necessary internal approvals to use the non-BPA price; and
iii. Keeps an audit trail of all decisions and basis for adopting the market yield.

If a valuation based on the market price does not represent the fair value of the
securities, for example during abnormal market conditions or when no market
price is available, including in the event of a suspension in the quotation of
the securities for a period exceeding 14 days, or such shorter period as agreed
by the Trustee, then the securities are valued as determined in good faith by
the Manager, based on the methods or basis approved by the Trustee after
appropriate technical consultation.

Deposits 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 respective deposits.

Loans and receivables and other financial liabilities are subsequently carried at
amortised cost using the effective interest method.

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iii. Impairment for assets carried at amortised costs

The Fund measures credit risk and expected credit losses using probability of
default, exposure at default and loss given default. Management considers both
historical analysis and forward looking information in determining any expected
credit loss. Management consider the probability of default to be close to zero as
these instruments have a low risk of default and the counterparties have a strong
capacity to meet their contractual obligations in the near term. As a result, no loss
allowance has been recognised based on 12 months expected credit losses as any
such impairment would be wholly insignificant to the Fund.

Significant increase in credit risk

A significant increase in credit risk is defined by management as any contractual
payment which is more than 30 days past due.

Definition of default and credit-impaired financial assets

Any contractual payment which is more than 90 days past due is considered credit
impaired.

Write-off

The Fund writes off financial assets, in whole or in part, when it has exhausted all
practical recovery efforts and has concluded there is no reasonable expectation
of recovery. The assessment of no reasonable expectation of recovery is based on
unavailability of debtor’s sources of income or assets to generate sufficient future
cash flows to repay the amount. The Fund may write-off financial assets that are
still subject to enforcement activity. Subsequent recoveries of amounts previously
written off will result in impairment gains. There are no write-offs/recoveries
during the financial year.

F. CASH AND CASH EQUIVALENTS

For the purpose of the statement of cash flows, cash and cash equivalents comprise
bank balance and deposit with licensed financial institution that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of changes in
value.

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Eastspring Investments Balanced Fund

G. DISTRIBUTION
A distribution to the Fund’s unit holders is accounted for as a deduction from realised
reserves. A proposed distribution is recognised as a liability in the financial year in
which it is approved by the Trustee.

H. UNIT HOLDERS’ CAPITAL
The unit holders’ contributions to the Fund meet the criteria to be classified as equity
instruments under MFRS 132 “Financial Instruments: Presentation”. Those criteria
include:
• the units entitle the holder to a proportionate share of the Fund’s net assets value;
• the units are the most subordinated class and class features are identical;
• there is no contractual obligations to deliver cash or another financial asset other
than the obligation on the Fund to repurchase; and
• the total expected cash flows from the units over its life are based substantially on
the profit or loss of the Fund.
The outstanding units are carried at the redemption amount that is payable at each
financial year if unit holder 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 unit holders with the total number of
outstanding units.

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I. AMOUNT DUE FROM/(TO) BROKERS

Amounts due from and to brokers represent receivables for securities sold and
payables for securities purchased that have been contracted for but not yet settled
or delivered on the statement of financial position date respectively. The amount due
from brokers balance is held for collection.

These amounts are recognised initially at fair value and subsequently measured at
amortised cost. At each reporting date, the Fund shall measure the loss allowance
on amounts due from broker at an amount equal to the lifetime expected credit
losses if the credit risk has increased significantly since initial recognition. If, at the
reporting date, the credit risk has not increased significantly since initial recognition,
the Fund shall measure the loss allowance at an amount equal to 12 months expected
credit losses. Significant financial difficulties of the broker, probability that the broker
will enter bankruptcy or financial reorganisation, and default in payments are all
considered indicators that a loss allowance may be required.

If the credit risk increases to the point that it is considered to be credit impaired,
interest income will be calculated based on the gross carrying amount adjusted for the
loss allowance. A significant increase in credit risk is defined by management as any
contractual payment which is more than 30 days past due.

Any contractual payment which is more than 90 days past due is considered credit
impaired.

J. TRANSACTION COSTS

Transaction costs are costs incurred to acquire financial assets or liabilities at fair
value through profit or loss. They include the bid-ask spread, fees and commissions
paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are
immediately recognised in the statement of comprehensive income as expenses.

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Eastspring Investments Balanced Fund

K. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 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 impact to the Fund’s results and financial position are
tested for sensitivity to changes in the underlying parameters.

Estimates and judgments are continually evaluated by the Manager and the Trustee
and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.

a. Estimate of fair value of unquoted fixed income securities

The Fund uses significant judgment in determining whether an investment is
impaired. The Fund evaluates, among other factors, the duration and extent to
which the fair value of the investment is less than cost, and the financial health
and near-term business outlook for the investee, including factors such as industry
and sector performance, macroeconomic factors and speculation.

In undertaking any of the Fund’s investment, the Manager will ensure that all
assets of the Fund under management will be valued appropriately, that is at fair
value.

Unquoted fixed income securities are valued using fair value prices quoted by a
bond pricing agency (“BPA”). Where the Manager is of the view that the price
quoted by BPA for a specific bond differs from the market price by more than 20
basis points, the Manager may use the market price, provided that the Manager
records its basis for using a non-BPA price, obtains necessary internal approvals
to use the non-BPA price, and keeps an audit trail of all decisions and basis for
adopting the use of non-BPA price.

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NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

1. INFORMATION ON THE FUND

Eastspring Investments Balanced Fund (the “Fund”) was constituted pursuant to the
execution of Master Deed dated 4 May 2001, a Supplemental Master Deed dated
26 May 2003, a Supplemental Master Deed dated 15 February 2006, Master
Supplemental Deed dated 25 July 2007, and Second Supplemental Master Deed dated
30 November 2009 between BHLB Trustee Berhad (“BHLB Trustee”) and Eastspring
Investments Berhad (the “Manager”). The Fund replaced BHLB Trustee with Deutsche
Trustees Malaysia Berhad (the “Trustee”) effective 1 October 2010. A Supplemental
Master Deed was entered into between Eastspring Investments Berhad (the “Manager”)
and Deutsche Trustees Malaysia Berhad (the “Trustee”) on 30 July 2010 to effect the
change of trustee from BHLB Trustee to the Trustee, followed by Second Supplemental
Master Deed dated 28 January 2011, Third Supplemental Master Deed dated 9 March
2011, Fourth Supplemental Master Deed dated 20 January 2012, Fifth Supplemental
Master Deed dated 26 March 2014, Sixth Supplemental Master Deed dated 2 January
2015, Seventh Supplemental Master Deed dated 11 July 2016, Eighth Supplemental
Master Deed dated 25 January 2017, Ninth Supplemental Master Deed dated
11 December 2017 and Tenth Supplemental Master Deed dated 4 June 2018
(collectively referred to as the “Deed”).

The Fund was launched on 29 May 2001 and will continue its operations until
terminated by the Trustee or the Manager as provided under Part 12 of the Deed.

The main objective of the Fund is to seeks to provide investors with capital appreciation
and a reasonable level of current income by investing in a mixed portfolio of companies
with good dividend yield and low price volatility and a portfolio of investment-grade
fixed income securities.

The Fund will invest in a balanced portfolio consisting of equities, equity-related
securities and fixed income securities. All investments will be subjected to the SC
Guidelines on Unit Trust Funds, the Deed and the objective of the Fund.

The Manager is a company incorporated in Malaysia and is related to Prudential Plc., a
public listed company in the United Kingdom. The principal activity of the Manager is
the establishment and management of unit trust funds and fund management.

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Eastspring Investments Balanced Fund

2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks which include market risk (inclusive of price
risk and interest rate risk), stock/issuer risk, liquidity risk, non-compliance risk, fund
management risk, capital risk and credit/default risk.

Financial risk management is carried out through internal control processes adopted by
the Manager and adherence to the investment restrictions as stipulated in the Deed.

Financial instruments of the Fund are as follows:

Note Financial Financial Total
assets at assets at RM
7 amortised fair value
7 through
cost profit or loss
8
RM RM

2019 - 33,274,452 33,274,452

Quoted securities - 19,714,681 19,714,681
Unquoted fixed income
63,750 - 63,750
securities 2,327 - 2,327
Amount due from Manager -
Dividends receivable 18,974 - 18,974
Other receivable 903,677 52,989,133 903,677
Cash and cash equivalents 988,728 53,977,861

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Note Loans and Financial Total
receivables assets at RM
fair value
RM through
profit or loss

RM

2018

Quoted securities 7 - 32,182,672 32,182,672
Unquoted fixed income 7
- 21,570,034 21,570,034
securities 8 150,073 - 150,073
Amount due from broker - 38,523
Amount due from Manager 38,523 - 25,828
Dividends receivable 25,828 - 18,974
Other receivable 18,974 -
Cash and cash equivalents 6,207,748 6,207,748
6,441,146 53,752,706 60,193,852

All liabilities are financial liabilities which are carried at amortised cost.

Market risk

i. Price risk

This risk refers to changes and developments in regulations, politics and the
economy of the country. The very nature of a Unit Trust Fund, however, helps
mitigate this risk because a fund would generally hold a well-diversified portfolio
of securities from different market sectors that the collapse of any one security or
any one market sector would not impact too greatly on the value of the Fund.

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Eastspring Investments Balanced Fund

The table below shows assets of the Fund as at 31 December which are
exposed to price risk:

2019 2018
RM RM

Financial assets at fair value through 33,274,452 32,182,672
profit or loss: 19,714,681 21,570,034
Quoted securities 52,989,133 53,752,706
Unquoted fixed income securities*

* Includes interest receivables of RM252,620 (2018: RM233,657).

The following table summarises the sensitivity of the Fund’s net asset value and
profit/(loss) after tax to movements in prices of quoted securities and unquoted
fixed income securities at the end of the reporting year. The analysis is based on
the assumptions that the market price of the quoted securities and unquoted
fixed income securities increased by 5% and decreased by 5% with all other
variables held constant. This represents management’s best estimate of a
reasonable possible shift in the quoted securities and unquoted fixed income
securities, having regard to the historical volatility of the prices.

% Change in price Market Impact on profit/
value (loss) after tax/
2019 net asset value
+5% RM
-5% RM

2018 55,373,339 2,636,826
+5% 50,099,687 (2,636,826)
-5%
56,195,001 2,675,952
50,843,097 (2,675,952)

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ii. Interest rate risk
In general, when interest rates rise, unquoted fixed income securities prices will
tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to
fall when interest rates rise or are expected to rise. However, investors should
be aware that should the Fund holds an unquoted fixed income securities till
maturity, such price fluctuations would dissipate as it approaches maturity, and
thus the growth of the NAV shall not be affected at maturity. In order to mitigate
interest rates exposure of the Fund, the Manager will manage the duration of the
portfolio via shorter or longer tenured assets depending on the view of the future
interest rate trend of the Manager, which is based on its continuous fundamental
research and analysis.
Investors should note that the movement in prices of unquoted fixed income
securities and money market instruments are benchmarked against interest rates.
As such, the investments are exposed to the movement of the interest rates.
This risk is crucial since unquoted fixed income securities portfolio management
depends on forecasting interest rate movements. Prices of unquoted fixed income
securities move inversely to interest rate movements, therefore as interest rates
rise, the prices of unquoted fixed income securities decrease and vice versa.
Furthermore, unquoted fixed income securities with longer maturity and lower
yield coupon rates are more susceptible to interest rate movements.
Such investments may be subject to unanticipated rise in interest rates which
may impair the ability of the issuers to make payments of interest income and
principal, especially if the issuers are highly leveraged. An increase in interest rates
may therefore increase the potential for default by an issuer.

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Eastspring Investments Balanced Fund

The table below summarises the sensitivity of the Fund’s profit/(loss) after tax
and NAV to movements in prices of unquoted fixed income securities held
by the Fund as a result of movement in interest rate. The analysis is based on
the assumptions that the interest rate changed by 1% (2018: 1%) with all
other variables held constant. This represents management’s best estimate of
a reasonable possible shift in the interest rate, having regard to the historical
volatility of the interest rate.

% Change in interest 2019 2018
rate of unquoted fixed
income securities Impact on Impact on
profit after tax/ loss after tax/
+1% (2018: +1%) net asset value net asset value
- 1% (2018: - 1%)
RM RM

(20,050) (19,680)
20,080 19,711

The Fund’s investments in deposits with licensed financial institutions are short
term in nature. Therefore, exposure to interest rate fluctuations is minimal.

Stock/Issuer risk

This risk refers to the individual risk of the respective companies issuing the securities.
Specific risk includes but is not limited to changes in consumer tastes and demand,
legal suits, competitive operating environments, changing industry conditions and
management omissions and errors. However, this risk is minimised through investing in a
wide range of companies in different sectors and thus function independently from one
another.

Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial
obligations. Generally, all investments are subject to a certain degree of liquidity risk
depending on the nature of the investment instruments, market, sector and other
factors. For the purpose of the Fund, the Fund Manager will attempt to balance the
entire portfolio by investing in a mix of assets with satisfactory trading volume and those
that occasionally could encounter poor liquidity. This is expected to reduce the risks for
the entire portfolio without limiting the Fund’s growth potentials.

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The Fund maintains sufficient level of liquid assets, after consultation with the Trustee,
to meet anticipated payments and cancellations of units by unit holders. Liquid
assets comprise bank balance, deposits with licensed financial institutions and other
instruments which are capable of being converted into cash within 7 days.

The table below summarises the Fund’s financial liabilities into relevant maturity
groupings based on the remaining period as at the statement of financial position
date to the contractual maturity date. The amounts in the table are the contractual
undiscounted cash flows.

Less than Between Total
1 month 1 month to RM

RM 1 year 11,426
68,408
RM
3,648
2019 11,426 - 21,229
68,408 - 104,711
Amount due to Manager -
Accrued management fee 3,648 21,229 32,904
Amount due to Trustee - 21,229 76,598
Other payables and accruals
Contractual cash outflows 83,482 4,085
23,888
2018 32,904 - 19,418
76,598 - 156,893
Amount due to Manager -
Accrued management fee 4,085 -
Amount due to Trustee 23,888 19,418
Distribution payable 19,418
Other payables and accruals -
Contractual cash outflows 137,475

Non-compliance risk

Non-compliance risk arises when the Manager and others associated with the Fund are
not compliant to the rules set out in the Fund’s constitution or the law that governs the
Fund or applicable internal control procedures, or act fraudulently or dishonestly.

The non-compliance may expose the Fund to higher risks which may result in a fall in
the value of the Fund which in turn may affect its investment goals. However, the risk
can be mitigated by the internal controls and compliance monitoring undertaken by the
Manager.

Client Services : 03-2778 1000 41

Eastspring Investments Balanced Fund

Fund management risk

There is the risk that the management company may not adhere to the investment
mandate of the respective Fund. With close monitoring by the investment committee,
back office system being incorporated with limits and controls, and regular reporting
to the senior management team, the management company is able to manage such
risk. The Trustee have an oversight function over management of the Fund by the
management company to safeguard the interests of unit holders.

Capital risk

The capital of the Fund is represented by equity consisting of unit holders’ capital
of RM23,756,629 (2018: RM27,868,794) and retained earnings of RM30,144,379
(2018: RM32,196,023). 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 unit
holders. 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 unit holders and benefits for
other stakeholders and to maintain a strong capital base to support the development of
the investment activities of the Fund.

Credit/Default risk

Credit risk refers to the ability of an issuer or a counter party to make timely payments
of interest, principals and proceeds from realisation of investments. In the case of the
Fund, both the Manager and the External Fund Manager regularly review the ratings
assigned to the Issuer so that the necessary steps can be taken if the ratings fall below
those prescribed by the Securities Commission.

The credit risk arising from placements of deposits in licensed financial institutions
is managed by ensuring that the Fund will only place deposits in reputable licensed
financial institutions. For amount due from brokers, the settlement terms are governed
by the relevant rules and regulations as prescribed by Bursa Malaysia Securities Berhad
(“Bursa Malaysia”). The settlement terms of the proceeds from the creation of units
receivable from the Manager are governed by the SC Guidelines on Unit Trust Funds.

The credit/default risk is minimal as all transactions in quoted securities are settled/paid
upon delivery using approved brokers.

The Fund seeks to mitigate credit/default risk by investing in high quality fixed income
securities.

42 Client Services : 03-2778 1000

The following table sets out the credit risk concentrations and counterparties of the Fund.

Financial

assets at fair Cash and Amount
due from
value through cash Other Dividends Manager

profit or loss equivalents receivable receivable RM Total
RM
RM RM RM RM

2019

Finance - 860,072 - - - 860,072
- AAA - 43,605 - - - 43,605
- AA1
Unquoted fixed income 7,330,760 - - - - 7,330,760
3,671,336 - - - - 3,671,336
securities 3,467,944 - - - - 3,467,944
- A1 1,040,658 - - - - 1,040,658
- AAA IS 4,107,644 - - - - 4,107,644
- AA3 - - - - 96,339
- AA2 (S) 96,339
- AAA - - 2,327
- C-IS -
Technology - 18,974 -
- NR - 903,677 18,974 2,327
Other 19,714,681
- NR
Annual Report- 2,327
Client Services : 03-2778 1000 43
63,750 82,724

63,750 20,703,409

Eastspring Investments Balanced FundFinancial
44 Client Services : 03-2778 1000
assets at

fair value

through Cash and Amount Amount
Other due from Dividends due from
profit or cash receivable broker receivable Manager

loss equivalents RM Total
RM
RM RM RM RM RM

2018

Finance - 6,160,574 -- - - 6,160,574
- AAA - 47,174 -- - - 47,174
- AA1
Plantation - - - - 12,980 - 12,980
- NR
Unquoted fixed 7,184,139 - -- - - 7,184,139
6,428,220 - -- - - 6,428,220
income 3,752,350 - -- - - 3,752,350
securities 4,084,525 - -- - - 4,084,525
- A1 - -- - - 120,800
- AA1 120,800
- AA3 - -- 12,848 - 12,848
- AAA -
- C-IS - 18,974 150,073 - 38,523 207,570
Technology - 6,207,748 18,974 150,073 25,828 38,523 28,011,180
-NR 21,570,034
Other
- NR

None of these assets are past due or impaired.

Annual Report

Fair value estimation

Fair value is defined as 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 (i.e. an exit price).

The fair value of financial assets traded in active market (such as trading securities) are
based on quoted market prices at the close of trading on the year end date. The Fund
utilises the last traded market price for financial assets where the last traded price falls
within the bid-ask spread. In circumstances where the last traded price is not within
the bid-ask spread, the Manager will determine the point within the bid-ask spread
that is representative of the fair value.

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.

Fair value hierarchy

i. The table below analyses financial instruments carried at fair value by valuation
method. The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active market for identical assets or
liabilities.

• Level 2: 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 3: Inputs for the asset and liability that are not based on observable
market data (that is, unobservable inputs).

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.

Client Services : 03-2778 1000 45

Eastspring Investments Balanced Fund

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.

The following table analyses within the fair value hierarchy the Fund’s financial
assets (by class) measured at fair value:

Level 1 Level 2 Level 3 Total
RM RM RM RM

2019 33,274,452 - - 33,274,452
Financial assets at fair value
- 19,714,681 - 19,714,681
through profit or loss: 33,274,452 19,714,681 - 52,989,133
Quoted securities
Unquoted fixed income
securities

2018 32,182,672 - - 32,182,672
Financial assets at fair value
- 21,570,034 - 21,570,034
through profit or loss: 32,182,672 21,570,034 - 53,752,706
Quoted securities
Unquoted fixed income
securities

Investments whose values are based on quoted market prices in active markets,
and are therefore classified within Level 1, includes active quoted securities. The
Fund does not adjust the quoted prices for these instruments. The Fund’s policies on
valuation of these financial assets are stated in Note E to the financial statements.

46 Client Services : 03-2778 1000