Hong Leong Dana Makmur

Transcription

1 Reaching out to you Hong Leong Dana Makmur Interim Report December 2017 Unaudited

2 Hong Leong Dana Makmur Contents Page Manager s Review and Report Statement by the Manager Trustee s Report Shariah Adviser s Report Condensed Statement of Comprehensive Income Condensed Statement of Financial Position Condensed Statement of Changes in Equity Condensed Statement of Cash Flows Notes to the Condensed Financial Statements Performance Data Corporate Information Corporate Directory

3 Manager s Review and Report I. FUND INFOATION Fund Name Hong Leong Dana Makmur Fund Category Islamic Equity Fund Type Growth Investment Objective To achieve consistent capital growth over the Medium ToLong Term* by investing strictly in accordance with the Shariah requirements. Benchmark FTSE Bursa Malaysia Emas Shariah Index Distribution Policy The Fund intends to provide LongTerm** capital growth. As such, cash distribution will be incidental to the overall capital growth objective and a substantial portion of the income returns from investments will be reinvested. The Fund may also declare distributions in the form of additional Units to the relevant Unitholders. Breakdown of Unitholdings By Size Size of Holdings No. of Accounts 5,000 and below 98 5,001 to 10, ,001 to 50, ,001 to 500, ,001 and above 10 No. of Units Held 298, , ,004, ,968, ,398, Notes: * MediumToLong Term refers to a period of 3 to 5 years. ** LongTerm refers to a period of above 5 years. 1

4 II. FUND PERFOANCE Chart 1: Performance of the Fund versus the benchmark covering the last fiveyear financial period Percentage Growth /12/ /12/ /12/ /12/ /12/ /12/2017 From 31/12/2012 To 31/12/2017 Hong Leong Dana Makmur (HLDM) FTSE Bursa Malaysia Emas Shariah Index Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per UnittoNAV Per Unit basis with gross income (if any) from HLDM reinvested. Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up Performance Review This Interim Report covers the sixmonth financial period from 1 July 2017 to 31 December The Fund posted a return of 3.55% in the past six months while its benchmark the FTSE Bursa Malaysia Emas Shariah Index registered a return of 3.75%. During the financial period under review, the Fund had distributed an income distribution of 4.30 sen per unit to its Unitholders on 28 July Prior to the income distribution, the cumdistribution net asset value (NAV) per unit of the Fund was while the exdistribution NAV per unit was Unitholders should note that income distribution has the effect of reducing the NAV per unit of the Fund after distribution. 2

5 For the fiveyear financial period ended 31 December 2017, the Fund posted a return of 46.27% compared to the benchmark s return of 15.47% while distributing a total gross income of sen per unit. Table 1: Performance of the Fund for the following periods as at 31 December 2017 (Source: Lipper For Investment Management) 30/09/17 30/06/17 31/12/17 31/12/17 3 Months 6 Months 31/12/16 31/12/17 1 Year 31/12/15 31/12/17 2 Years 31/12/14 31/12/17 3 Years 31/12/12 31/12/17 5 Years 31/12/07 31/12/17 10 Years 12/11/01 31/12/17 Since Launch HLDM (%) Benchmark (%) Table 2: Return of the Fund based on NAV Per UnittoNAV Per Unit basis for the period 30 June 2017 to 31 December 2017 (Source: Lipper For Investment Management) NAV Per Unit Benchmark Vs Benchmark (%) 31Dec * 13, Jun , Return (%) 3.55# * Based on NAV per unit on 29 December 2017 as 30 December 2017 and 31 December 2017 was a weekend. # Return is calculated after adjusting for an income distribution of 4.3 sen per unit on 28/07/2017. Table 3: Financial Highlights The Net Asset Value attributable to Unitholders is represented by: 31Dec17 () 30Jun17 () Change (%) Unitholders Capital Retained Earnings Net Asset Value 11,352,363 8,084,580 19,436,943 5,490,478 8,464,281 13,954, Units in Circulation 35,196,345 24,225,

6 Table 4: The Highest and Lowest NAV Per Unit, Total Return of the Fund and the breakdown into Capital Growth and Income Distribution for the financial period/years Financial Period 30/06/17 31/12/17 Financial Year 30/06/16 30/06/17 Financial Year 30/06/15 30/06/16 Financial Year 30/06/14 30/06/15 Highest NAV Per Unit () Lowest NAV Per Unit () Capital Growth (%) Income Distribution (%) Total Return (%) Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per UnittoNAV Per Unit basis with gross income (if any) from HLDM reinvested. Table 5: Average Total Return of the Fund 31/12/16 31/12/17 1 Year 31/12/14 31/12/17 3 Years 31/12/12 31/12/17 5 Years Average Total Return (%) Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per UnittoNAV Per Unit basis with gross income (if any) from HLDM reinvested. Table 6: Annual Total Return of the Fund Financial Year 30/06/16 30/06/17 30/06/15 30/06/14 30/06/16 30/06/15 30/06/13 30/06/14 30/06/12 30/06/13 Annual Total Return (%) Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per UnittoNAV Per Unit basis with gross income (if any) from HLDM reinvested. 4

7 III. INVESTMENT PORTFOLIO Chart 2: Asset Allocation July 2017 to December % 80% 60% 40% 20% 0% Jul17 Aug17 Sep17 Oct17 Nov17 Shariahcompliant Equities Shariahcompliant Warrants Shariahcompliant Collective Investment Schemes Dec17 Chart 3: Sector Allocation as at 31 December 2017 Shariahcompliant Warrants Shariahcompliant 0.22% Collective Invesment Schemes 4.13% Financials 4.16% Consumer Products 4.68% Properties 4.79% Construction 7.47% Islamic Deposits & Cash Equivalents 15.11% Technology 8.75% Industrial Products 25.91% Trading/Services 24.78% 5

8 Strategies employed during the period under review During the financial period under review, the Fund accumulated some Shariahcompliant largecap stocks that were trading at attractive valuations and would benefit from expected foreign inflows. The Fund maintained its exposure in Shariahcompliant exportoriented stocks that may benefit from improving external demand outlook. The Fund also increased its exposure to selected Shariahcompliant consumer and construction stocks that may benefit from preelection pumppriming activities. We maintain our positive view on Malaysia equities outlook as earnings expectations appear to be improving and the market is a laggard compared to its regional and global peers. As of 31 December 2017, the Fund s topthree Shariahcompliant holdings are Tenaga Nasional Berhad (7.93%), Top Glove Corporation Berhad (5.88%) and SKP Resources Berhad (5.63%). For the financial period under review, there were no significant changes in the state of affairs of the Fund or circumstances that would materially affect the interest of Unitholders up to the date of this Manager s report. 6

9 IV. MARKET REVIEW During the financial period under review, the MSCI AC Asia Pacific ex Japan Index rose 12.8%. The best performing markets were Hong Kong and Thailand while the laggards were Malaysia and Taiwan. All regional markets posted positive returns during the period. In the local market, the FTSE Bursa Malaysia KLCI rose 1.9%. Small caps underperformed as the FTSE Bursa Malaysia Small Cap Index declined 2.3%. In the third quarter of 2017, China led the rally in regional equities as market sentiment was buoyed by strong economic data and announcement by the People s Bank of China (PBoC) with regards to targeted Reserve Requirement Ratio (RRR) cut for banks. Market sentiment was also lifted by President Trump s tax proposal which included cuts in corporate and small business income taxes. Geopolitical tensions in North Korea caused some drags to market performance. In response to North Korea s repeated weapon tests, China ordered North Korean companies in China to shut down while the United States (US) expanded sanction over North Korea, excluding it from international banking system. The strong upward momentum in markets extended to the fourth quarter of Market sentiment was predominantly supported by strong Euro economic growth data and approval of the US tax reform bill by the House of Representatives. Commodities also posted solid performance as due to strong global economic data, extension of the current Organization of the Petroleum Exporting Countries (OPEC) and nonopec deal to limit production and prolonged drawdown in the US crude inventories. 7

10 The Malaysia market was trading sideways in a tight range for most of the second half of 2017 due to lack of catalysts. The Budget 2018 failed to lift market sentiment despite the rise in crude oil prices and the Ringgit. The lacklustre results season also capped upside to the market. The FTSE BM KLCI did rise to a new high in December on the back of window dressing activities. The return of foreign investors and rising commodity prices also helped boost market sentiment at the end of the year. V. FUTURE PROSPECTS AND PROPOSED STRATEGIES The global macro outlook appears very encouraging. Economic data in the US shows that the economy is on solid footing and is expected to continue to grow at a healthy pace in We expect corporate earnings in the US to continue to grow on the back of strong economic growth and implementation of the new US tax law reforms. The pace of economic growth in Europe is also accelerating. Unemployment rate continues to fall to new multiyear lows while the Purchasing Managers Index (PMI) readings imply robust manufacturing activity in the region. For the local market, we expect the main index to trade sideways. We expect the strong economic numbers, improving global demand growth and rising commodity prices to attract more foreign investors inflows into the local market. However, we expect the uncertainties over the coming general election, rising cost pressures for businesses and tepid corporate earnings growth to contribute to more volatility in the local market. We would take the opportunity to accumulate Shariahcompliant stocks that we like in the event of a market correction. We are positive on wellmanaged Shariahcompliant stocks of companies that will benefit from possible government pump priming such as those in the construction and consumer sectors. We continue to be invested in selected Shariahcompliant largecap stocks that are trading at attractive valuations and selected Shariahcompliant export stocks that will benefit from improving external demand outlook. 8

11 VI. SOFT COMMISSIONS The Manager has received soft commissions from brokers/ dealers in the form of goods and services such as research materials, data and quotation services incidental to investment management of the Fund and investment related publications. Such soft commissions received are of demonstrable benefit to Unitholders. 9

12 STATEMENT BY THE MANAGER I, Hoo See Kheng, as the Director of Hong Leong Asset Management Bhd, do hereby state that, in the opinion of the Manager, the accompanying unaudited condensed financial statements set out on pages 13 to 45 are drawn up in accordance with the provision of the Deeds and give a true and fair view of the financial position of the Fund as at 31 December 2017 and of its financial performance, changes in equity and cash flows for the financial period ended 31 December 2017 in accordance with the Malaysian Financial Reporting Standards ( MFRS ) 134 Interim Financial Reporting and International Financial Reporting Standards ( IFRS ) 34 Interim Financial Reporting. For and on behalf of the Manager, Hong Leong Asset Management Bhd (Company No.: M) HOO SEE KHENG Chief Executive Officer/Executive Director Kuala Lumpur 12 February

13 TRUSTEE S REPORT TO THE UNITHOLDERS OF We have acted as the Trustee for Hong Leong Dana Makmur ( the Fund ) for the financial period ended 31 December To the best of our knowledge, for the financial period under review, Hong Leong Asset Management Bhd ( 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 has been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements; and (c) creation and cancellation of units for the Fund have been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements. We are of the view that the distribution made during the financial period ended 31 December 2017 by the Manager is not inconsistent with the objectives of the Fund. For Deutsche Trustees Malaysia Berhad Soon Lai Ching Senior Manager, Trustee Operations Richard Lim Hock Seng Chief Executive Officer Kuala Lumpur 12 February

14 SHARIAH ADVISER S REPORT TO THE UNITHOLDERS OF We have acted as the Shariah Adviser of Hong Leong Dana Makmur. Our responsibility is to ensure that the procedures and processes employed by Hong Leong Asset Management Bhd are in accordance with Shariah principles. In our opinion, Hong Leong Asset Management Bhd has managed and administered Hong Leong Dana Makmur in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the financial period ended 31 December In addition, we also confirm that the investment portfolio of Hong Leong Dana Makmur comprises securities which have been classified as Shariahcompliant by the Shariah Advisory Council of the Securities Commission ( SACSC ). As for the securities which are not certified by the SACSC, we have reviewed the said securities and opine that these securities are designated as Shariahcompliant. For and on behalf of the Shariah Adviser IBFIM MUHAMMAD KHAIRULNIZAM BIN ALIAS Consultant (Shariah)/Designated Person Responsible for Shariah Advisory Kuala Lumpur 12 February

15 CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 JULY 2017 TO 31 DECEMBER 2017 Note INVESTMENT INCOME Profit income Dividend income Net gain on financial assets at fair value through profit or loss ( FVTPL ) Management fee rebate Reimbursement from the Manager , , , ,188 22, , ,487 1, ,110 EXPENDITURE Management fee Trustee s fee Auditors remuneration Tax agent s fee Transaction costs Other expenses 5 6 (113,465) (5,295) (2,772) (1,300) (60,757) (14,900) (198,489) (79,547) (3,712) (2,772) (1,300) (51,821) (14,892) (154,044) PROFIT BEFORE TAXATION Taxation PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 7 582, , , ,066 Profit after taxation is made up as follows: Realised amount Unrealised amount 693,219 (110,520) 582, ,427 (153,361) 254,066 Distributions for the financial period: Net distribution Net distribution per unit (sen) Gross distribution per unit (sen) , , The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 13

16 CONDENSED STATEMENT OF FINANCIAL POSITION (Unaudited) AS AT 31 DECEMBER 2017 Note ASSETS Cash and cash equivalents Financial assets at fair value through profit or loss ( FVTPL ) Amount due from the brokers/dealers Amount due from the Manager creation of units Amount due from the Manager management fee rebate Dividends receivable Prepayment TOTAL ASSETS ,477,463 16,499, , , ,050 19,715,178 1,961,126 12,018, ,821 10,000 11,005 1,590 14,220,016 LIABILITIES Amount due to the brokers/dealers Amount due to the Manager cancellation of units Amount due to the Manager management fee Amount due to the Trustee Distribution payable Other payables and accruals TOTAL LIABILITIES 190,261 53,852 22,907 1,069 1,313 8, , ,226 15,537 16,929 10,946 1,288 10, ,257 NET ASSET VALUE OF THE FUND 19,436,943 13,954,759 EQUITY Unitholders capital Retained earnings NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 11,352,363 8,084,580 19,436,943 5,490,478 8,464,281 13,954,759 UNITS IN CIRCULATION (UNITS) 12 35,196,345 24,225,817 NET ASSET VALUE PER UNIT () The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 14

17 CONDENSED STATEMENT OF CHANGES IN EQUITY (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 JULY 2017 TO 31 DECEMBER 2017 Note Unitholders capital Retained earnings Total Balance as at 1 July 2017 Movement in net asset value: Creation of units from applications Creation of units from distributions Cancellation of units Total comprehensive income for the financial period Distributions for the financial period Balance as at 31 December ,490,478 6,810, ,774 (1,898,259) (11,579) 11,352,363 8,464, ,699 (962,400) 8,084,580 13,954,759 6,810, ,774 (1,898,259) 582,699 (973,979) 19,436,943 Balance as at 1 July 2016 Movement in net asset value: Creation of units from applications Creation of units from distributions Cancellation of units Total comprehensive income for the financial period Distributions for the financial period Balance as at 31 December ,195, , ,148 (500,647) 2,754,482 7,939, ,066 (624,802) 7,568,394 10,134, , ,148 (500,647) 254,066 (624,802) 10,322,876 The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 15

18 CONDENSED STATEMENT OF CASH FLOWS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 JULY 2017 TO 31 DECEMBER 2017 CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sales of financial assets at FVTPL Purchase of financial assets at FVTPL Profit received Dividends received Reimbursement received from the Manager Management fee rebate received Management fee paid Trustee s fee paid Payment for other fees and expenses Net cash (used in)/generated from operating activities CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created Payments for cancellation of units Distributions paid Net cash generated from/(used in) financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD ,044,169 (10,976,700) 30, , (107,487) (15,172) (18,880) (3,876,947) 6,266,408 (1,859,944) (13,180) 4,393, ,337 1,961,126 2,477, ,271,623 (7,096,238) 22, ,494 1,224 (79,090) (14,402) (19,856) 196, ,409 (500,647) (10,654) (46,892) 149,270 1,030,728 1,179,998 The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 16

19 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 JULY 2017 TO 31 DECEMBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Hong Leong Dana Makmur ( the Fund ) was constituted pursuant to the execution of a Deed dated 2 October 2001 and Supplemental Deed dated 30 April 2010 between the Manager, Hong Leong Asset Management Bhd, AmTrustee Berhad and the registered unitholders of the Fund. AmTrustee Berhad has been replaced with Deutsche Trustees Malaysia Berhad ( the Trustee ) effective 1 September 2012 and Supplemental Master Deeds were entered into between the Manager, the Trustee and the registered unitholders of the Fund on 27 July 2012 and 25 March 2015 to effect the change ( the Deeds ). The Fund aims to achieve consistent capital growth over the MediumToLong Term by investing strictly in accordance with the Shariah requirements. The Fund follows a strict selection process to ensure only appropriate Shariahcompliant securities are invested. Generally, the Fund selects undervalued companies that have the potential to offer good MediumToLong Term capital growth. Undervalued companies refer to companies with stock price selling at a price lower than what is believed to be its intrinsic value and can be measured by its price to earnings ratio (PER), price to book ratio (P/B), dividend yield or any other appropriate method as determined by the Manager. The Fund commenced operations on 12 November 2001 and will continue its operations until terminated as provided under Part 12 of the Deed. The Manager of the Fund is Hong Leong Asset Management Bhd, a company incorporated in Malaysia. The principal activity of the Manager is the management of unit trust funds and private investment mandates. Its holding company is Hong Leong Capital Berhad, a company incorporated in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The financial statements were authorised for issue by the Manager on 12 February

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The condensed financial statements are unaudited and have been prepared in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) 134 Interim Financial Reporting and International Financial Reporting Standards ( IFRS ) 34 Interim Financial Reporting. The condensed financial statements should be read in conjuction with the audited financial statements of the Fund for the financial year ended 30 June 2017 which have been prepared in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). (b) Financial assets and financial liabilities Classification Financial assets are designated at fair value through profit or loss when their performance are managed and evaluated on a fair value basis. The Fund designates its investment in quoted Shariahcompliant equity securities, quoted Shariahcompliant warrants and unquoted Shariahcompliant collective investment scheme as financial assets at fair value through profit or loss at inception. Receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in assets. The Fund s receivables comprise cash and cash equivalents, amount due from brokers/dealers, amount due from the Managercreation of units, amount due from the Managermanagement fee rebate and dividends receivable. 18

21 Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to brokers/dealers, amount due to the Managercancellation of units, amount due to the Managermanagement fee, amount due to the Trustee, distribution payable and other payables and accruals as other financial liabilities. Recognition and measurement Regular purchases and sales of financial assets are recognised on the tradedate the date on which the Fund commits to purchase or sell the asset. Shariahcompliant investments are initially recognised at fair value. Transaction costs are expensed in the statement of comprehensive income. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the Shariahcompliant investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the period which they arise. 19

22 Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of dividend income when the Fund s right to receive payments is established. Quoted Shariahcompliant investments are valued at the last done market prices quoted on Bursa Malaysia Securities Berhad ( Bursa Securities ) at the date of the statement of financial position. If a valuation based on the market price does not represent the fair value of the quoted Shariahcompliant investments, 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 quoted Shariahcompliant securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted Shariahcompliant securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. Unquoted Shariahcompliant collective invectment scheme is valued at the last published NAV per unit at the date of the statement of financial position. Islamic deposits with licensed financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the period from the date of placement to the date of maturity of the respective Islamic deposits, which is a close estimate of their fair value due to the short term nature of the Islamic deposits. Receivables and other financial liabilities are subsequently carried at amortised cost using the effective profit method. 20

23 Impairment For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If receivables has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. 21

24 (c) Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( ), which is the Fund s functional and presentation currency. (d) Income recognition Dividend income is recognised on the exdividend date when the Fund s right to receive payment is established. Profit income from cash at bank and Islamic deposits with licensed financial institutions are recognised on the effective profit method on an accrual basis. Realised gain or loss on disposal of quoted and unquoted Shariahcompliant investments is accounted for as the difference between the net disposal proceeds and the carrying amount of quoted and unquoted Shariahcompliant investments, determined on a weighted average cost basis. (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise cash at banks and Islamic deposits held in highly liquid Shariahcompliant investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (f) Amount due from/to brokers/dealers Amount due from/to brokers/dealers represent receivables/payables for Shariah compliant investments sold/purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. 22

25 These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective profit method, less provision for impairment for amount due from brokers/ dealers. A provision for impairment of amount due from a broker/dealer is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant broker/ dealer. Significant financial difficulties of the broker/ dealer, probability that the broker/dealer will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers/dealers is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, profit income is recognised using the rate of profit used to discount the future cash flows for the purpose of measuring the impairment loss. (g) Taxation Current tax expense is determined according to Malaysian tax laws at the prevailing tax rate based on the taxable profit earned during the financial period. (h) Distributions A distribution to the Fund s unitholders is accounted for as a deduction from realised reserve. A proposed distribution is recognised as a liability in the financial period in which it is approved by the Board of Directors of the Manager. (i) Transaction costs Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors and brokers/dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. 23

26 (j) Unitholders capital The unitholders 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 unitholder to a proportionate share of the Fund s net asset 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 the units; and the total expected cash flows from the units over its life are based substantially on the profit or loss and change in the net asset value of the Fund. The outstanding units are carried at the redemption amount that is payable at the date of the statement of financial position if unitholder 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 and cancellation. The Fund s net asset value per unit is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. 24

27 (k) Segmental information Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decisionmaker. The chief operating decisionmaker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Investment Committee of the Fund s manager that undertakes strategic decisions for the Fund. (l) Fair value of financial instruments Financial instruments comprise financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The information presented herein represents the estimates of fair values as at the date of the statement of financial position. The Fund s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on the respective classification. The following table analyses the financial assets and financial liabilities of the Fund in the statement of financial position as at the reporting date: 25

28 Financial assets at FVTPL Receivables/ other financial liabilities Total Financial assets Cash and cash equivalents (Note 9) Financial assets at FVTPL (Note 10) Amount due from brokers/dealers Amount due from the Manager creation of units Amount due from the Manager management fee rebate Dividends receivable 16,499,930 16,499,930 2,477, , , ,050 3,215,248 2,477,463 16,499, , , ,050 19,715,178 Financial liabilities Amount due from brokers/dealers Amount due to the Manager cancellation of units Amount due to the Manager management fee Amount due to the Trustee Distribution payable Other payables and accruals 190,261 53,852 22,907 1,069 1,313 8, , ,261 53,852 22,907 1,069 1,313 8, , Financial assets Cash and cash equivalents (Note 9) Financial assets at FVTPL (Note 10) Amount due from brokers/dealers Amount due to the Manager creation of units Dividends receivable 12,018,474 12,018,474 1,961, ,821 10,000 11,005 2,199,952 1,961,126 12,018, ,821 10,000 11,005 14,218,426 Financial liabilities Amount due to brokers/dealers Amount due to the Manager cancellation of units Amount due to the Manager management fee Amount due to the Trustee Distribution payable Other payables and accruals 210,226 15,537 16,929 10,946 1,288 10, , ,226 15,537 16,929 10,946 1,288 10, ,257 All liabilities are financial liabilities which are carried at amortised cost. 26

29 (m) 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 content of the estimates, certain key variables that are anticipated to have material impact to the Funds results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgments are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the Securities Commission Malaysia s Guidelines on Unit Trust Funds. However, the Manager is of the opinion that there are no accounting policies which require significant judgment to be exercised. 27

30 3. FAIR VALUE ESTIMATION The fair value of financial assets traded in active markets (such as trading Shariahcompliant securities) are based on quoted market prices at the close of trading on the reporting date. The Fund utilises the last traded market price for financial assets where the last traded price falls within the bidask spread. In circumstances where the last traded price is not within the bidask spread, the Manager will determine the point within the bidask spread that is most representative of the fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. The Fund uses a variety of methods and makes assumptions that are based on market conditions existing at each period end date. Valuation techniques used for nonstandardised financial instruments such as Islamic options, currency swaps and other overthecounter Shariahcompliant derivatives, include the use of comparable recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entityspecific inputs. 28

31 For instruments for which there is no active market, the Fund may use internally developed models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Valuation models are used primarily to value unlisted Shariahcompliant equity and sukuk instruments for which market were or have been inactive during the financial period. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Fund holds. Valuations are therefore adjusted, where appropriate, to allow for additional factors including model risk, liquidity risk and counter party risk. 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. (i) Fair value hierarchy The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1); Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) 29

32 The level in the fair value hierarchy within which the fair value measurement is categorised in its entirely is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirely. For this purpose, the significance of an input is assessed against the fair value measurement in its entirely. If a fair value measurement uses observable inputs that requires 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 entirely 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 Financial assets at FVTPL: Quoted Shariah compliant equity securities Quoted Shariah compliant warrants Unquoted Shariah compliant collective investment scheme 15,653,132 43,240 15,696, , ,558 15,653,132 43, ,558 16,499, Financial assets at FVTPL: Quoted Shariah compliant equity securities Quoted Shariah compliant warrants 12,012,594 5,880 12,018,474 12,012,594 5,880 12,018,474 30

33 Shariahcompliant investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed Shariahcompliant equities and listed Shariahcompliant warrants. 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 2(b). Financial instruments that trade in markets that are not 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. These include unquoted Shariahcompliant collective investment scheme. As Level 2 instruments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or nontransferability, which are generally based on available market information. The Fund s policies on valuation of these financial assets are stated in Note 2(b). (ii) The carrying values of financial assets (other than financial assets at FVTPL) and financial liabilities are a reasonable approximation of their fair values due to their short term nature. 31

34 4. PROFIT INCOME Profit income from: Islamic deposits with licensed financial institutions Cash at bank , , , , MANAGEMENT FEE AND MANAGEMENT FEE REBATE In accordance with Division 13.1 of the Deed, the Manager is entitled to a management fee of up to 1.50% per annum calculated daily based on the net asset value of the Fund. For the financial period from 1 July 2017 to 31 December 2017, the management fee is recognised at a rate of 1.50% ( to : 1.50%) per annum. Management fee rebate relates to the rebate received from the Manager for investing in Hong Leong Islamic Institutional Income Management Fund II. The rebate was 0.30% per annum calculated on the net asset value of Hong Leong Islamic Institutional Income Management Fund II on a daily basis. There will be no further liability to the Manager in respect of management fee other than the amount recognised above. 32

35 6. TRUSTEE S FEE In accordance with Division 13.2 of the Deed, the Trustee is entitled to a fee not exceeding 0.10% subject to a minimum of 35,000 per annum calculated daily based on the net asset value of the Fund. For the financial period from 1 July 2017 to 31 December 2017, the trustee s fee is recognised at a rate of 0.07% ( to : 0.07%) per annum. There will be no further liability to the Trustee in respect of trustee s fee other than the amount recognised above. 7. TAXATION Tax charge for the financial period: Current taxation The numerical reconciliation between profit before taxation multiplied by the Malaysian statutory income tax rate and tax expense of the Fund is as follows: Profit before taxation Taxation at Malaysian statutory rate of 24% (2016: 24%) Tax effects of: Shariahcompliant investment income not subject to tax Expenses not deductible for tax purposes Restriction on tax deductible expenses for unit trust fund Taxation 582, ,848 (187,400) 17,652 29, ,066 60,976 (97,946) 14,863 22,107 33

36 8. DISTRIBUTION Prior financial years realised income Distribution equalisation Net distribution amount Date of Declaration Distribution on 28/19 July Net distribution per unit (sen) Gross distribution per unit (sen) ,400 11, , , , Net distribution above is sourced from prior financial years realised income. Gross distribution is derived using total income less total expenses. Gross distribution per unit is derived from net realised income less expenses divided by units in circulation, while net distribution per unit is derived from net realised income less expenses and taxation divided by units in circulation. Distribution equalisation represents the average amount of distributable income included in the creation and cancellation prices of units. It is computed as at each date of creation and cancellation of units. For the purpose of determining amount available for distribution, distribution equalisation is included in the computation of distribution available for unitholders. The above distribution has been proposed before taking into account the unrealised loss of 110,520 ( to : unrealised loss of 153,361) which is carried forward to the next financial period. 34

37 9. CASH AND CASH EQUIVALENTS Islamic deposits with licensed financial institutions Cash at banks ,396,576 80,887 2,477, ,927,153 33,973 1,961,126 The weighted average effective rate of return per annum are as follows: % % Islamic deposits with licensed financial institutions Islamic deposits with licensed financial institutions have an average maturity of 2 days ( : 3 days). 10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS ( FVTPL ) Financial assets at FVTPL: Quoted Shariahcompliant equity securities Quoted Shariahcompliant warrants Unquoted Shariahcompliant collective investment scheme ,653,132 43, ,558 16,499, ,012,594 5,880 12,018,474 Net gain on financial assets at FVTPL: Realised gain on disposals Changes in unrealised fair values ,125 (110,520) 546, ,848 (153,361) 233,487 35

38 Financial assets at FVTPL as at 31 December 2017 are as detailed below: Quality units Aggregate cost Percentage of net Fair asset value value % QUOTED SHARIAHCOMPLIANT EQUITY SECURITIES Main Market Construction Ahmad Zaki Resources Berhad Gabungan AQRS Berhad Kimlun Corporation Berhad Vizione Holdings Berhad 328, , ,875 1,707,400 2,460, , , , ,010 1,120, , , , ,184 1,451, Consumer Products Kotra Industries Berhad Padini Holdings Berhad 88, , , , , , , , , Finance BIMB Holdings Berhad Syarikat Takaful Malaysia Berhad 123,800 70, , , , , , , , Industrial Products DRBHICOM Berhad Eonmetall Group Berhad HeveaBoard Berhad Mieco Chipboard Berhad PETRONAS Chemicals Group Berhad SKP Resources Bhd Tong Herr Resources Berhad Top Glove Corporation Bhd 160, , , ,000 81, , , ,000 2,064, , , , , , , , ,768 4,206, , , , , ,700 1,094, ,200 1,142,570 4,576, Properties LBS Bina Group Berhad Yong Tai Berhad 215, , , , , , , , , Technology Globetronics Technology Bhd Pentamaster Corporation Berhad Willowglen MSC Berhad 60, , , , , , ,506 1,303, , , ,000 1,401, Trading/Services Datasonic Group Berhad Frontken Corporation Berhad MMC Corporation Berhad MY E.G. Services Berhad Taliworks Corporation Berhad Telekom Malaysia Berhad Tenaga Nasional Berhad UMW Oil & Gas Corporation Berhad Uzma Berhad 375,000 1,685,000 95, , ,000 65, ,000 1,225, ,000 4,162, , , , , , ,468 1,445, , ,992 5,080, , , , , , ,500 1,541, , ,880 4,817,

39 Quality units Aggregate cost Percentage of net Fair asset value value % ACE Market Industrial Products Oceancash Pacific Berhad 660, , , Technology JHM Consolidation Berhad 100, , , TOTAL QUOTED SHARIAHCOMPLIANT EQUITY SECURITIES 10,945,475 14,455,252 15,653, QUOTED SHARIAHCOMPLIANT WARRANTS Main Market Trading/Services HarbourLink Group Berhad Warrants C 2016/2021 UMW Oil & Gas Corporation Berhad Warrants 2017/ , ,250 6,240 37, TOTAL QUOTED SHARIAH COMPLIANT WARRANTS 255,250 43, UNQUOTED SHARIAHCOMPLIANT COLLECTIVE INVESTMENT SCHEME Hong Leong Islamic Institutional Income Management Fund II 803, , , TOTAL UNQUOTED SHARIAH COMPLIANT COLLECTIVE INVESTMENT SCHEME 803, , , TOTAL SHARIAHCOMPLIANT INVESTMENTS UNREALISED GAIN ON FINANCIAL ASSETS AT FVTPL TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FVTPL 12,004,042 15,258,730 16,499,930 1,241,200 16,499,

40 Financial assets at FVTPL as at 30 June 2017 are as detailed below: Quality units Aggregate cost Percentage of net Fair asset value value % QUOTED SHARIAHCOMPLIANT EQUITY SECURITIES Main Market Construction Ahmad Zaki Resources Berhad Gabungan AQRS Berhad Gadang Holdings Berhad Gamuda Berhad Kimlun Corporation Berhad TRC Synergy Berhad WCT Holdings Berhad 328, , ,750 65, , , ,727 1,585, , , , , , , ,676 1,958, , , , , , , ,698 2,320, Consumer Products Kotra Industries Berhad Padini Holdings Berhad 15, , ,000 29, , ,560 31, , , Finance BIMB Holdings Berhad Syarikat Takaful Malaysia Berhad 123,800 70, , , , , , , , Industrial Products Comintel Corporation Bhd DRBHICOM Berhad Dufu Technology Corp. Berhad HeveaBoard Berhad Hiap Teck Venture Berhad PETRONAS Chemicals Group Berhad Press Metal Aluminium Holdings Berhad (formerly known as Press Metal Berhad)^ SKP Resources Bhd Superlon Holdings Berhad Tong Herr Resources Berhad 300, , , , ,000 81,000 68, , ,000 80,000 2,009, , , , , , , , , , ,889 2,782, , , , , , , , , , ,400 3,003, Properties Eastern & Oriental Berhad Malaysian Resources Corporation Berhad S P Setia Berhad 191, ,000 99, , , , , , , , , , Technology Notion VTec Berhad Unisem (M) Berhad Willowglen MSC Berhad 235, , , , , , ,235 1,036, , , ,600 1,363,