Eastspring Investments Asia Select Income Fund

EASTSPRING INVESTMENTS
ASIA SELECT INCOME FUND

INTERIM REPORT

FOR THE SIX MONTHS FINANCIAL PERIOD
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 6
Key Performance Data 10
Manager’s Report 13
Market Review 16
Rebates and Soft Commissions
Statement by the Manager 17
Trustee’s Report to the Unit Holders of 18
19
Eastspring Investments Asia Select Income Fund 20
Unaudited Statement of Comprehensive Income 21
Unaudited Statement of Financial Position 22
Unaudited Statement of Changes in Equity 31
Unaudited Statement of Cash Flows 63
Summary of Significant Accounting Policies
Notes to the Unaudited Financial Statements
Corporate Directory

Interim Report

FUND INFORMATION

Name of Fund Eastspring Investments Asia Select Income Fund (the “Fund”)

Fund Category/ Balanced/growth and income
Type
The Fund seeks to provide a stable income* stream and an
Fund Objective opportunity for capital appreciation by investing primarily
in a portfolio of Malaysian investment grade fixed income
securities and a collective investment scheme, primarily the
Eastspring Investments - Dragon Peacock Fund, which invests
in equities and equity-related securities of corporations which
are incorporated in, or listed in, or operating principally from, or
carrying on significant business in, or derive substantial revenue
from, or whose subsidiaries, related or associated corporations
derive substantial revenue from the People’s Republic of China
(PRC) and India.

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

Note: The Fund’s focus is on income.

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

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Eastspring Investments Asia Select Income Fund

FUND INFORMATION (CONTINUED)

Performance The performance benchmark of the Fund is 20% Morgan
Benchmark Stanley Capital International China Index (“MSCI China Index”)
+ 20% Morgan Stanley Capital International India Index (“MSCI
India Index”) +60% Quant Shop Malaysian Government
Securities Medium Index (“Quant Shop MGS Medium Index”).

The composite benchmark index is a reflection of the Fund’s
average asset allocation over the long-term of 40% of the
Fund’s NAV in collective investment schemes and the remaining
of the Fund’s NAV in fixed income securities and Deposits or
liquid assets.

Source:
MSCI China Index (www.msci.com)
MSCI India Index (www.msci.com)
Quant Shop MGS Medium Index (www.quantshop.com)

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 Asia Select Income Fund stood at 107.351 million units.

Fund Size

140
120
100

80
60
40
20

0
Jul Aug Sep Oct Nov Dec
2019 2019 2019 2019 2019 2019

Breakdown of Unit Holdings

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

5,000 units and below 386 17.81 1,103 1.03
5,001 to 10,000 units 361 16.66 2,591 2.41
10,001 to 50,000 units 1,149 53.02 25,343 23.61
50,001 to 500,000 units 257 11.86 26,004 24.22
500,001 units and above 52,309 48.73
Total 14 0.65 107,350 100.00
2,167 100.00

* excludes units held by the Manager.

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Eastspring Investments Asia Select Income Fund

KEY PERFORMANCE DATA

FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER

Category 2019 2018 2017
(%)
Collective investment scheme-Foreign (%) (%)
Unquoted fixed income securities 37.95
39.74 36.55 48.93
Cash and other assets 57.03 57.89 86.88
Total 96.77 94.44 13.12
100.00
3.23 5.56
100.00 100.00 89,790
116,832
Net Asset Value (NAV) (RM'000) 83,782 90,791
Units In Circulation (Units '000) 107,351 125,830 0.7685
Net Asset Value Per Unit (RM) 0.7752
Highest Net Asset Value Per Unit (RM) 0.7804 0.7215 0.7386
Lowest Net Asset Value Per Unit (RM) 0.7844 0.7412
Total Return (%) 0.7440 0.7015 3.98
-
- Capital Growth 1.42 (0.82)
- Income Distribution - - 3.98
Total Return (%) -
Gross Distribution Per Unit (RM) 1.42 (0.82) -
Net Distribution Per Unit (RM) - -
Management Expense Ratio (MER) (%)* - - 0.86
Portfolio Turnover Ratio (PTR) (times)^ 0.25
0.81 0.81
0.11 0.05

* 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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KEY PERFORMANCE DATA (CONTINUED)

Average total return 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

(%) (%) (%)

8.16 6.05 6.64

Year ended 1.7.2018 to 1.7.2017 to 1.7.2016 to 1.7.2015 to 1.7.2014 to
Annual total return 30.6.2019 30.6.2018 30.6.2017 30.6.2016 30.6.2015

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

5.77 3.08 16.15 (0.28) 14.92

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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Eastspring Investments Asia Select Income Fund

MANAGER’S REPORT

Fund Performance Over the 5-year period, the Fund recorded a return of 37.92%,
underperforming the benchmark return of 41.39% by 3.47%.

During the period under review, the Fund registered a return of
1.42%, underperforming the benchmark return of 3.25% by
1.83%.

The underperformance of the Fund for the period under review
was largely dragged by the equity.

For Equity, overweights to Vodafone Idea Ltd, Sterling and
Wilson Solar and Baozun Inc were key detractors to the fund’s
relative performance during the review period. Sector-wise, stock
selection within Communication Services, Consumer discretionary
and Consumer Staples weighed on relative performance during
the review period.

Eastspring Investments Asia Select Income Fund
- 5 Years Return Vs Benchmark

50% 50%

5 years % Change 40% 40%

30% 30%

20% 20%

10% 10%

0% 0%

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

Eastspring Investments Asia Select Income Fund Benchmark

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MANAGER’S REPORT (CONTINUED)

Fund Performance The performance is calculated on NAV-to-NAV basis with
(continued) gross income or dividend reinvested.

Benchmark: 20% MSCI China Index + 20% MSCI India Index +
60% Quant Shop MGS Medium Index

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

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

Analysis of Fund For the financial period ended 31 December 2019:
Performance

Income Capital Total Total Return of
Return Return* Return Benchmark

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

0.00 1.42 1.42 3.25
* Capital return components (NAV per unit to NAV per unit).

Distribution/ No distribution or unit split were declared for the financial period
Unit Split ended 31 December 2019.

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Eastspring Investments Asia Select Income Fund

MANAGER’S REPORT (CONTINUED)

Investment Bond Strategy
Strategy During The Fund participated in selected quality issuances for yield pick-
the Period Under up, and trade on market volatility, subject to liquidity constraints.
Review
Equity Strategy
We continue to monitor China’s balancing act of undertaking
reforms while trying to rein in credit expansion and sustain
economic growth. By continuing to have tighter controls and
stronger financial oversight, President Xi Jinping should continue
to help transform China’s economy as it strives for quality over
quantity.

Despite the recent tensions over trade disputes between the US
and China, the portfolio manager believes that consistency in
the implementation of reforms on state-owned enterprises will
help support market sentiment and conviction. Being long-term
bottom-up investors, we will continue to search for stocks that
are attractively valued versus their history and fundamentals,
regardless of short-term market noise. In fact, we would take the
opportunity to exploit those market inefficiencies to buy and sell
stocks when the opportunity presents itself.

India’s economic recovery appears to be on a strong footing to
achieve its potential real GDP growth aided by lower interest
rates, strong reforms momentum, and a thrust on investments.
A stimulus through investments and not subsidies should yield
a better quality and sustainable growth in the long term. India’s
corporate earnings are expected to recover gradually, aided by
higher demand, lower interest rates, and a favourable investment
cycle coupled with a reduction in corporate taxes. Valuations are
fair in light of an impending recovery in earnings.

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MANAGER’S REPORT (CONTINUED)

Asset Allocation 31-Dec 30-Jun
2019 2019 Changes
Asset Allocation
(%) (%) (%)

Collective investment 39.74 39.92 (0.18)
scheme-Foreign 57.03 54.53 2.50

Unquoted fixed income securities 3.23 5.55 (2.32)
Cash and other assets

Asset Allocation as at 31 December 2019

Cash and other Collective investment
assets scheme-Foreign
3.23% 39.74%

Unquoted fixed
income securities

57.03%

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 Asia Select Income Fund

MARKET REVIEW

Bond

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 maintained the Overnight Policy Rate (“OPR”) at 3.00% during the period under
review, 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.

Despite additional measures introduced by BNM to deepen and broaden the onshore
financial market, FTSE Russell still maintained Malaysia in its watchlist for exclusion
from World Government Bond Index (“WGBI”) in September 2019, 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.

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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 seasonally-adjusted basis, the economy grew by 0.9% (2Q2019: 1.0%).
Private sector activity continued to drive growth – private consumption increased +7.0%
(2Q2019: 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 31bps, 27bps, 33bps and 31bps to
close at 2.98%, 3.15%, 3.30%, and 3.60%, respectively. Similarly, the 3-, 5-, 10- and
15-year Government Investment Issue (“GII”) yields decreased by 28bps, 23bps, 23bps
and 19bps to close at 3.06%, 3.19%, 3.42%, and 3.72%. Both MGS & GII yield curve
shifted lower 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) 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, Corporate bond issuances continued to remain healthy in the
period at around RM41billion. Major primary issuances during the period were mainly
government guaranteed bonds and corporates bonds.

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Eastspring Investments Asia Select Income Fund

Equity

MSCI China returned 8.4% in USD terms for 6 months as at 31 December 2019. Markets
recovered during the period supported by accommodative monetary policy and thawing
in the US-Sino trade dispute. The period started off with threats from the US to impose
an additional 10% tariffs on Chinese exports and label China a “currency manipulator”.
However, in December, US and China reached a partial trade deal. China committed to
increasing its purchases of certain US products, while the US did not go ahead with the
December 15 tariffs. On the macro front, economic data was mixed, but several released
in December pointed to signs that the recent slowdown had at least bottomed. On the
monetary policy front, the People’s Bank of China cut three key benchmark rates by 5
bps each in November. Elsewhere in Hong Kong, sentiment continued to be weighed
by ongoing protests and MSCI Hong Kong returned -6.6% during the period. 3Q GDP
contracted sharply by 3.2% quarter-on-quarter.

MSCI India declined 0.9% in USD terms for 6 months as at 31 December 2019. Sentiment
was buoyed by global news flow, better than expected corporate results as well as positive
chatter on domestic reforms, including the proposal to lower personal income tax rates
to boost consumer demand and the approval to reduce the government’s stake for select
state owned companies to below 51%. The contentious surcharge on capital gains for
both domestic and foreign investors proposed during the FY2020 Union Budget in July
was also scrapped. These positive developments helped to partially offset concerns around
continued weak macroeconomic data and a ratings downgrade by agency Moody’s in
November, citing rising risks and debt burden. Macro data during the period remained
soft. Quarterly GDP growth dipped to a record low of 4.5% year-on-year (“y-o-y”) largely
in line with expectations on the back of a continued slowdown in investment. Composite
PMI and Industrial Production declined steadily during the period in review. On the policy
front, the Reserve Bank of India (“RBI”) cut policy rates by in August and October - in
line with consensus expectations. However, in its December meeting, the central bank
surprised with its decision to hold its repo rate steady.

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REBATES AND SOFT COMMISSIONS

During the period under review, the Manager and its delegates (if any) did not receive any
soft commissions from stockbrokers.

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Eastspring Investments Asia Select Income Fund
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EASTSPRING INVESTMENTS
ASIA SELECT INCOME FUND

UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2019

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Eastspring Investments Asia Select Income 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 unaudited financial statements set out on pages 18 to 62 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 six months financial period 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 ASIA SELECT INCOME FUND

We have acted as Trustee for Eastspring Investments Asia Select Income Fund (the “Fund”)
for the financial period ended 31 December 2019. To the best of our knowledge, for
the financial period 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.

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 Asia Select Income Fund

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2019

Note 6-months 6-months
financial financial
period ended period ended
31.12.2019 31.12.2018

RM RM

INVESTMENT INCOME/(LOSS) 58,773 161,368
Interest from deposits with licensed
1,184,399 1,221,634
financial institutions - 500
Interest from unquoted fixed income
6 682,042 (1,432,165)
securities
Other Income (61,767) (5,784)
Net gain/(loss) on financial assets at
1,863,447 (54,447)
fair value through profit or loss
Net foreign currency exchange loss 3 (676,482) (705,802)

EXPENSES 4 (31,569) (32,937)
Management fee
Trustee fee (3,570) (3,579)
Audit fee
Tax agent fee (1,709) (2,915)
Other expenses
(9,539) (14,116)
PROFIT/(LOSS) BEFORE TAXATION
(722,869) (759,349)
TAXATION
1,140,578 (813,796)
PROFIT/(LOSS) AFTER TAXATION
AND TOTAL COMPREHENSIVE 5 --
INCOME/(LOSS)
1,140,578 (813,796)
Profit/(loss) after taxation is made up
of the following: 2,308,051 626,289
Realised amount (1,167,473) (1,440,085)
Unrealised amount
1,140,578 (813,796)

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

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UNAUDITED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

Note 2019 2018
RM RM

ASSETS 7 4,016,904 5,312,208
Cash and cash equivalents
Amount due from Manager 81,253 55,419
Financial assets at fair value through
6 81,083,485 85,717,417
profit or loss
TOTAL ASSETS 85,181,642 91,085,044

LIABILITIES 1,261,964 153,057
Amount due to Manager 108,729 116,505
Accrued management fee 5,074
Amount due to Trustee 23,996 5,437
Other payables and accruals 18,604
TOTAL LIABILITIES 1,399,763 293,603

NET ASSET VALUE OF THE FUND 83,781,879 90,791,441

EQUITY 59,781,875 73,932,456
Unit holders’ capital 24,000,004 16,858,985
Retained earnings
83,781,879 90,791,441
NET ASSET ATTRIBUTABLE TO
UNIT HOLDERS 8 107,350,981 125,829,952

NUMBER OF UNITS IN CIRCULATION 0.7804 0.7215

NET ASSET VALUE PER UNIT (RM)

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

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Eastspring Investments Asia Select Income Fund

UNAUDITED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2019

Balance as at 1 July 2019 Unit holders’ Retained Total
capital earnings RM
Movement in unit holders’ RM
contribution: RM 94,367,230
71,507,804
Creation of units from applications 22,859,426
Cancellation of units
Total comprehensive income for 9,750,546 - 9,750,546
(21,476,475) - (21,476,475)
the financial period
Balance as at 31 December 2019 - 1,140,578 1,140,578
59,781,875 24,000,004 83,781,879
Balance as at 1 July 2018
77,014,115 17,672,781 94,686,896
Movement in unit holders’
contribution: 6,302,632 - 6,302,632
(9,384,291) - (9,384,291)
Creation of units from applications
Cancellation of units - (813,796) (813,796)
Total comprehensive loss for 73,932,456 16,858,985 90,791,441

the financial period
Balance as at 31 December 2018

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

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UNAUDITED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2019

Note 6-months 6-months
financial financial
period ended period ended
31.12.2019 31.12.2018

RM RM

CASH FLOWS FROM OPERATING ACTIVITIES 15,744,055 2,009,000
Proceeds from sale of investments (8,253,943) (7,996,926)
Purchase of investments
Other Income - 500
Interest received 1,409,665 1,381,518
Management fee paid (682,426) (707,461)
Trustee fee paid
Payment for other fees and expenses (31,846) (33,014)
Net foreign exchange loss (20,612) (22,887)
Net cash generated from/(used in) (61,767)
(5,784)
operating activities 8,103,126
(5,375,054)

CASH FLOWS FROM FINANCING ACTIVITIES 10,635,843 6,517,586
Cash proceeds from units created (20,995,345) (9,513,673)
Payments for cancellation of units
Distribution paid - (16,175)
Net cash used in financing activities (10,359,502) (3,012,262)

NET DECREASE IN CASH AND (2,256,376) (8,387,316)
CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT THE 6,273,280 13,699,524
BEGINNING OF THE FINANCIAL PERIOD

CASH AND CASH EQUIVALENTS AT THE 7 4,016,904 5,312,208
END OF THE FINANCIAL PERIOD

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

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Eastspring Investments Asia Select Income Fund

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FOR THE SIX MONTHS FINANCIAL PERIOD 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,

as modified by financial assets and financial liabilities at fair value through profit or
loss, except as disclosed in this summary of significant accounting policies, and in
accordance with Malaysian Financial Reporting Standards (“MFRS”) and International
Financial Reporting Standards (“IFRS”).

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 period. It also requires the
Manager to exercise their judgment in the process of applying the Fund’s accounting
policies. Although these estimates and judgment are based on the Manager’s best
knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement 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 July 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.

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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.

B. INCOME RECOGNITION
Interest income from short term deposits is recognised on the accrual basis using the

effective interest method.

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

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

Realised gain or loss on sale of investments are accounted for as the difference
between the net disposal proceeds and the carrying amount of investments,
determined on a weighted average cost basis for collective investment scheme.

Realised gain or loss on disposal of unquoted fixed income securities is accounted
for as the difference between the net disposal proceeds and the carrying amount
of the investments, determined on a cost adjusted basis 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 earned during the financial period.

Tax on dividend income from foreign collective investment scheme is based on the tax
regime of the respective country that the Fund invest in.

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Eastspring Investments Asia Select Income Fund

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. FOREIGN CURRENCY TRANSLATION
Foreign currency transactions in the Fund are translated into the functional currency

using the exchange rates prevailing at the transaction dates. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the statement of comprehensive income, except when
deferred in other comprehensive income as qualifying cash flow hedges.

F. 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
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 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.

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The Fund’s classifies amount due to Manager, accrued management fee, 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.

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 liability is derecognised when the obligation under the liability is
extinguished. Gains and losses are recognised in the statement of comprehensive
income when the liabilities are derecognised, and through the amortisation
process.

Unrealised gains or losses arising from changes in the fair value of the ‘financial
assets at fair value through profit or loss’, including the effect of currency
translation 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
period in which they arise. Any unrealised gains however are not distributable.

Collective investment scheme are valued based on the last published net asset
value per unit or share of such collective investment schemes or, if unavailable, on
the average of the last published buying price and the last published selling price
of such unit or share (excluding any sales charge included in selling in such selling
price).

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Eastspring Investments Asia Select Income Fund

Unquoted fixed income securities are revalued on a daily basis based on fair value
prices quoted by a bond pricing agency (“BPA”) registered with the Securities
Commission as per the Securities Commission Guidelines on Unit Trust Funds.
Refer to Note K for further explanation.

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 rate method.

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.

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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 period.
As a practical expedient, the Fund may measure impairment on the basis of an
instrument’s fair value using an observable market price

G. CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash and cash equivalents comprise

bank balance and deposits with licensed financial institutions 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 Asia Select Income Fund

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.

I. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial liabilities. 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 information presented herein represents the estimates of fair values
as on the statement of financial position date.

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J. AMOUNTS DUE FROM/(TO) BROKERS
Amounts due from and to brokers represent receivables for securities sold and

payables for securities purchased that have been contracted for but not yet settled
or delivered on the statement of financial position date respectively. 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.

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Eastspring Investments Asia Select Income 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 and in compliance with Securities Commission Guidelines on Unit
Trust Funds.

However, the Manager is of the opinion that in applying the accounting
policies, no significant judgment was required.

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 UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2019

1. INFORMATION ON THE FUND

Eastspring Investments Asia Select Income Fund (the “Fund”) was constituted pursuant
to the execution of a Deed dated 27 October 2005, Master Supplemental Deed dated
12 July 2007, Second Supplemental Master Deed dated 30 November 2009 between
HSBC (Malaysia) Trustee Berhad (“HSBC Trustee”) and Eastspring Investments Berhad
(the “Manager”). The Fund replaced HSBC Trustee with Deutsche Trustees Malaysia
Berhad (the “Trustee”) effective 1 October 2010. A Supplemental Master Deed
was entered into between the Manager and the Trustee on 30 July 2010 to effect
the change of trustee from HSBC Trustee to the Trustee, followed by the 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, an
Eighth Supplemental Master Deed dated 25 January 2017, a Ninth Supplemental Master
Deed dated 11 December 2017 and a Tenth Supplemental Master Deed dated
4 June 2018 (collectively referred to as the “Deed”).

The Fund commenced operations on 18 November 2005 and will continue its
operations until terminated by the Manager or the Trustee as provided under Part 12
of the Deed.

The Fund invests in a portfolio of Malaysian investment grade fixed income securities;
and a collective investment scheme namely the Eastspring Investments - Dragon
Peacock Fund (the “target fund”), incorporated in Luxembourg.

All investments will be subject to the Securities Commission’s (“SC”) Guidelines
on Unit Trust Funds, the SC requirements, the Deed, except where exemptions or
variations have been approved by the SC, internal policies and procedures and the
Fund’s objective.

The objective of the Fund is to provide a stable income stream and an opportunity
for capital appreciation by investing primarily in a portfolio of Malaysian investment
grade fixed income securities and a collective investment scheme primarily the
Eastspring Investments – Dragon Peacock Fund, which invests in equities and equity-
related securities of corporations which are incorporated in, or listed in, or operating
principally from, or carrying on significant business in, or derive substantial revenue
from, or whose subsidiaries, related or associated corporations, derive substantial
revenue from the People’s Republic of China (PRC) and India.

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Eastspring Investments Asia Select Income 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, management and distribution of unit trust funds.

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to market risk (inclusive of price risk, interest rate risk and
foreign exchange/currency risk), liquidity risk, credit/default risk, stock/issuer risk,
fund management risk, non-compliance risk and capital 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 fair RM
amortised value through
profit or loss 4,016,904
cost 81,253
RM
RM 33,298,378
47,785,107
2019 7 4,016,904 - 85,181,642

Cash and cash equivalents 6 81,253 -
Amount due from 6
- 33,298,378
Manager
Collective investment - 47,785,107
4,098,157 81,083,485
scheme
Unquoted fixed income

securities

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Note Loans and Financial Total
receivables assets at fair RM
value through
RM profit or loss 5,312,208
55,419
RM
33,184,072
2018 7 5,312,208 - 52,533,345
91,085,044
Cash and cash equivalents 55,419 -
Amount due from
6 - 33,184,072
Manager
Collective investment 6 - 52,533,345

scheme
Unquoted fixed income

securities

5,367,627 85,717,417

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

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Eastspring Investments Asia Select Income Fund

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 so that the collapse of any one security
or any one market sector would not impact too greatly on the value of the Fund.

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

Collective investment scheme designated 2019 2018
at fair value through profit or loss RM RM

Unquoted fixed income securities designated 33,298,378 33,184,072
at fair value through profit or loss*
47,785,107 52,533,345

* Includes interest receivable of RM678,538 (2018: RM753,357).

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

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

2018 RM
+5%
-5% 84,425,194 4,020,247
76,384,700 (4,020,247)

89,212,263 4,248,203
80,715,857 (4,248,203)

ii. Interest rate risk

Cash flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates.

Fair value interest rate risk is the risk that the value of a financial instrument will
fluctuate due to changes in market interest rates.

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Eastspring Investments Asia Select Income Fund

In general, when interest rates rise, unquoted fixed income securities prices will
tend to fall and vice versa. Therefore, the net asset value (“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.

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

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

RM RM

(97,773) (105,224)
98,151 105,636

iii. Foreign exchange/Currency risk

As the Fund may invest its assets in collective investment schemes denominated in
a wide range of currencies other than Ringgit Malaysia, the net asset value of the
Fund expressed in Ringgit Malaysia may be affected favourably or unfavourably by
exchange control regulations or changes in the exchange rates between Ringgit
Malaysia and such other currencies. The risk is minimised through investing in a
wide range of foreign currencies denominated assets and thus, diversifying the
risk of single currency exposure.

In the normal course of investment, the Manager will usually not hedge foreign
currency exposure. The Manager may however depending on prevailing market
circumstances at particular point in time, choose to use forward or option
contracts for hedging and risk reduction purposes.

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Eastspring Investments Asia Select Income Fund

The following table sets out the foreign exchange/currency risk concentrations
and counterparties of the Fund.

2019 Financial Total
USD assets at fair RM
value through
2018 profit or loss 33,298,378
USD
RM 33,184,072

33,298,378

33,184,072

The table below summarises the sensitivity of the Fund’s financial assets to
changes in foreign exchange movements at the end of the reporting period.
The analysis is based on the assumption that the foreign exchange rate changes
by 5% with all variables remain constant. This represents management’s best
estimate of a reasonable possible shift in the foreign exchange rate having regard
to historical volatility of this rate.

Disclosures below are shown in absolute terms, changes and impacts could be
positive or negative.

Impact on profit/ Impact on net
Change in price (loss) after tax asset value

% RM RM

2019 5 1,664,919 1,664,919
USD
5 1,659,204 1,659,204
2018
USD



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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 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.

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 cash, 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 RM
to 1 year
RM
RM

2019 1,261,964 - 1,261,964
108,729 - 108,729
Amount due to Manager 5,074 - 5,074
Accrued management fee - 23,996 23,996
Amount due to Trustee 23,996
Other payables and accruals 1,375,767 1,399,763
Contractual cash outflows

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Eastspring Investments Asia Select Income Fund

Less than Between Total
1 month 1 month RM
to 1 year
RM
RM

2018 153,057 - 153,057
116,505 - 116,505
Amount due to Manager -
Accrued management fee 5,437 18,604 5,437
Amount due to Trustee 18,604 18,604
Other payables and accruals 274,999 293,603
Contractual cash outflows

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 SC.

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. The settlement terms of the proceeds from the creation of units
receivable from the Manager are governed by the SC’s Guidelines on Unit Trust Funds.

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

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

Financial Cash Amount Total
assets at fair and cash due from RM
value through equivalents Manager
profit or loss
RM RM
RM

2019 33,298,378 - - 33,298,378

Collective - 636,622 - 636,622
investment - 3,380,282 - 3,380,282
scheme
2,056,960 - - 2,056,960
- NR 6,311,405 - - 6,311,405
Finance 5,297,584 - - 5,297,584
- AA1 5,622,750 - - 5,622,750
- AA2 2,135,530 - - 2,135,530
3,092,525 - - 3,092,525
Unquoted fixed 1,040,658 - - 1,040,658
income securities 7,269,884 - - 7,269,884
5,725,822 - - 5,725,822
- A+ IS 3,594,131 - - 3,594,131
- A1 5,637,858 - - 5,637,858
- AA
- AA- IS - - 81,253 81,253
- AA1 81,083,485 4,016,904
- AA2
- AA2 (S)
- AA3
- AAA
- AAA (S)
- NR

Other
- NR

81,253 85,181,642

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Eastspring Investments Asia Select Income Fund

Financial Cash Amount Total
assets at fair and cash due from RM
value through equivalents Manager
profit or loss
RM RM
RM
2018 - - 33,184,072
33,184,072
Collective 5,270,491 - 5,270,491
investment - 41,717 - 41,717
scheme -
- - 6,204,725
- NR 6,204,725 - - 5,111,234
Finance 5,111,234 - - 7,459,502
- AAA 7,459,502 - - 7,665,637
- AA1 7,665,637 - - 3,095,703
Unquoted fixed 3,095,703 - - 1,351,527
1,351,527 - - 3,259,655
income securities 3,259,655 - - 13,698,905
- A1 13,698,905 - - 1,538,267
- AA 1,538,267 - 55,419 3,203,609
- AA- IS 3,148,190 5,312,208 55,419 91,085,044
- AA1 85,717,417
- AA2
- AA2 (S)
- AAA
- AA3
- AAA (S)
- NR

None of these assets are past due or impaired.

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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 difference sectors and thus function independently
from one another.

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 has an oversight function over management of the Fund by the
management company to safeguard the interest of unit holders.

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.

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Eastspring Investments Asia Select Income Fund

Capital risk
The capital of the Fund is represented by equity consisting of unit holders’ capital

of RM59,781,875 (2018: RM73,932,456) and retained earnings of RM24,000,004
(2018: RM16,858,985). 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.

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 period 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 or liability 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.

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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.

Assessing the significance of a particular input to the fair value measurement in its
entirety requires judgement, 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.

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Eastspring Investments Asia Select Income Fund

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 33,298,378 - - 33,298,378
- 47,785,107 - 47,785,107
Financial assets at
fair value through
profit or loss:
Collective investment
scheme
Unquoted fixed
income securities

2018 33,184,072 - - 33,184,072
- 52,533,345 - 52,533,345
Financial assets at
fair value through
profit or loss:
Collective investment
scheme
Unquoted fixed
income securities

Investments whose values are based on quoted market prices in active markets,
and are therefore classified within Level 1, include active quoted securities.
Investment in collective investment scheme, i.e Unit Trust Funds who values
are based on published prices in active markets is also classified within Level 1.
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 F to the financial
statements.

Financial instruments that trade in markets that are considered to be active
but are valued based on quoted market prices, dealer quotations or alternative
pricing sources supported by observable inputs are classified within Level 2. This
include unquoted fixed income securities. As Level 2 instruments include positions
that are not traded in active markets and/or are subject to transfer restrictions,

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