REPORT PACIFIC FOCUS18 FUND ANNUAL. For The Financial Year Ended 30 September

Transcription

1 ANNUAL REPORT For The Financial Year Ended 30 September 2018 PACIFIC FOCUS18 FUND PACIFIC MUTUAL FUND BHD (336059U) A member of the OCBC Group

2 CONTENTS Fund Information Fund Performance Manager s Report Performance Review Investment Strategy Review Asset Allocation Analysis Of Net Asset Value Market Review Income Distribution Unit Split Significant Changes In The State Of Affairs Of The Fund Circumstances That Materially Affect Interest Of Unitholders Soft Commissions Report Of The Trustee Statement By The Manager Independent Auditors Report Statement Of Financial Position Statement Of Comprehensive Income Statement Of Changes In Net Asset Value Statement Of Cash Flows Notes To The Financial Statements This page has been left blank intentionally.

3 FUND INFOATION As at 30 September 2018 Name Of Fund : Manager Of Fund : Launch Date : Pacific Focus18 Fund Pacific Mutual Fund Bhd (336059U) 16 June 2005 The Fund will continue its operations until terminated as provided under Part 12 of the Deed. Category Of Fund : Type Of Fund : Investment Objective : Equity Growth Pacific Focus18 Fund aims to achieve high capital growth over the long term* by investing in a concentrated portfolio of equity and equityrelated securities. * Long term is defined as a period of more than three years. Performance Benchmark : Since inception to 5 July 2009 Kuala Lumpur Composite Index (KLCI) 6 July 2009 to 14 November 2010 FTSE Bursa Malaysia Top 100 Index (FBM 100) 15 November 2010 onwards Composite benchmark: 50% MSCI AC World Index (MXWD) 50% FTSE Bursa Malaysia Top 100 Index (FBM 100) Distribution Policy : Fund Size : Income, if any, will be distributed annually million units 2

4 Breakdown : Of Unitholdings Size Of Holdings 5,000 units & below 5,00110,000 units 10,00150,000 units 50,001500,000 units 500,001 units & above Total No. Of Unitholders % Of Unitholders No. Of Units (million)

5 FUND PERFOANCE Financial Highlights Category As At As At As At Quoted Equity Securities Banks Capital Goods Consumer Durables & Apparel Consumer Services Diversified Financials Energy Food, Beverage & Tobacco Health Care Equipment & Services Materials Real Estate Retailing Semiconductors & Semi. Equipment Software & Services Technology Hardware & Equipment Telecommunication Services Transportation Utilities Foreign Equity Securities: Australia Great Britain Hong Kong Indonesia Japan Singapore United States of America Collective Investment Scheme Cash And Liquid Assets Total % % % Net Asset Value ( 000) Number Of Units In Circulation (Units 000) Net Asset Value Per Unit () Management Expense Ratio ( MER ) 1 Portfolio Turnover Ratio (times) 4,002 10, % ,957 12, % ,456 15, %

6 The Management Expense Ratio for the current financial year is lower due to a higher percentage of decrease in expenses compared with average net asset value attributable to unitholders of the Fund. 1 The MER does not include brokerage and other transaction fees. The Portfolio Turnover Ratio for the current financial year is higher due to increase in investing activities. Notes: The net asset value per unit of the Fund is largely determined by market factors. Therefore past performance figures shown are only a guide and should not be taken as indicative of future performance. Net asset value per unit and investment returns may go up or down. 5

7 Performance Data 1 Yearʼs Period ( to ) 3 Yearsʼ Period ( to ) 5 Yearsʼ Period ( to ) Pacific Focus18 Fund Average Total Annual Return Return 2.13% 2.13% 4.00% 0.36% 1.33% 0.07% Composite Benchmark # Average Total Annual Return Return 3.56% 3.56% 21.56% 35.08% 7.19% 7.02% Pacific Focus18 Fund Capital Return Income Return Total Return to % 0.00% 2.13% to % 0.00% 4.46% to % 0.00% 1.61% to % 0.00% 3.62% to % 5.81% 8.48% Composite Benchmark # 3.56% 12.85% 4.01% 3.87% 6.98% Unit Prices Highest NAV () Lowest NAV () to to to Distributions Gross Distribution Per Unit (sen) Net Distribution Per Unit (sen) Unit Splits ( ) ( ) ( ) ( ) ( ) ( ) # The benchmark returns are adjusted by the movement of Ringgit Malaysia against foreign currencies. Notes: 1. All figures pertaining to the Fund s return were extracted from Lipper. 2. The net asset value per unit of the Fund is largely determined by market factors. Therefore past performance figures shown are only a guide and should not be taken as indicative of future performance. Net asset value per unit and investment returns may go up or down. 6

8 MANAGER S REPORT 30 September 2018 Performance Review From 7 July 2005 (date of launch: 16 June 2005) to 30 September 2018, the Pacific Focus18 Fund registered a total return of 56.62%, while its composite benchmark (50% MSCI AC World Index [MXWD] and 50% FTSE Bursa Malaysia Top 100 Index [FBM 100]), rose %. For the financial year under review (1 October 2017 to 30 September 2018), the Fund registered a total return of 2.13%. In comparison, its benchmark rose 3.56%. The Fund has not met its investment objective of achieving high capital growth over the long term as the Fund s positions in value stocks underperformed Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009 Jul 2010 Jul 2011 Jul 2012 Jul 2013 Jul 2014 Jul 2015 Jul 2016 Jul 2017 Sep 2018 Notes: The benchmark returns are adjusted by the movement of Ringgit Malaysia against foreign currencies. 7

9 Investment Strategy Review The Pacific Focus18 Fund started the financial year under review with a low equity weight of 76% at endoctober 2017, as the Fund took some profits during the global market rally. Locally, the Fund also trimmed stocks that lacked growth catalysts i.e. a plastic components manufacturer and a small cap oil and gas vessel provider. The Fund raised equity exposure on market weakness in November and early December, that was fuelled by political uncertainties in Europe, delays in the US tax reform and new liquidity rules in China. Locally, the Malaysian equity market also weakened on foreign selling. Equity exposure was raised to 90% at end2017. Following sharp gains, the Fund cut equity exposure to an average 81.6% during January to March 2018, and switched out of high beta stocks trading at demanding valuations into undervalued stocks and/or defensive stocks e.g. telecommunications, utilities and tobacco. Equity exposure was further cut to an average 79% in April to June 2018 as trade tensions heated up between US and its major trading partners especially China. In May, the Trump administration declared that US will impose a 25% tariff on USD50 billion worth of goods from China. In June, President Trump directed the US Trade Representative to identify USD200 billion worth of Chinese goods for potential additional tariffs of 10% if China retaliated. However, the Fund increased equity exposure to an average 85.3% over July to September as value emerged after the regional market selloff. The buying focused on global stocks trading at trough valuations with perceived limited downside. For the financial year under review, equity exposure averaged at 82%. In the near term, the internal view on equity markets has turned cautious due to global uncertainties and continued trade tensions. Even though Chinese markets are trading at attractive valuations, the USChina trade conflict remains a concern, with tariffs likely to cover all Chinese exports to the US should China refuse to accede to US demands. In the US, investors have yet to fully factor in rising bond yields and earnings impact from the USChina trade conflict into valuations; hence there is potential downside risk. Elsewhere, European markets also bear monitoring given concerns over Brexit negotiations. Locally, policy risks and a potentially restrictive Budget 2019 may cap upside for local stocks, especially since valuations are not cheap versus historical ranges and regional peers. The Fund will likely maintain equity exposure at 8288% levels pending greater visibility on political and trade developments. 8

10 % % Quoted Equity Securities 2.56% 0% Collective Investment Scheme 19.05% 11.98% Cash & Liquid Assets As at 30 September 2018 As at 30 September 2017 The quoted equity securities allocation of Pacific Focus18 Fund decreased to 78.39% as at 30 September 2018 from 88.02% recorded at the beginning of the financial year under review due to net equity sales. Analysis Of Net Asset Value The net asset value (NAV) per unit of Pacific Focus18 Fund increased from to during the financial year under review. Meanwhile, total NAV of the Fund decreased from 4,956,741 to 4,001,705 mainly due to fund redemptions. Market Review Review Of Global Markets The financial year under review began on a strong note and continued to be so until the final few months which were marred by global trade war tensions initiated by President Trump. In addition, emerging markets have been hit by a strengthening Dollar as investors reevaluate their emerging market exposure. Hong Kong +0.9%, Korea 2.2%, Singapore +1.2%, US +18%, Taiwan +6.6%, Shanghai 15.7%, Thailand +5%, UK +1.9%, Indonesia +1.3%, Australia +9.3%, Japan +18.5% and Eurozone 5.4%. 9

11 Fourth quarter 2017 ended on a high note as most equity markets rose higher, lifted by strong earnings season, continued healthy economic growth and US tax cuts. President Trump signed into law the most sweeping overhaul of US taxes in 31 years, with key provisions including cutting the corporate tax rate from 35% to 21%. In Japan, Prime Minister Shinzo Abe comfortably won the election, providing political stability and boosting confidence on the continuation of his policies. Most equity markets continued its surge through February 2018 driven by investor s optimism after the government s big tax cut and a strong start to the reporting season. Unfortunately, it stumbled in March as global equities were rocked by fears of a global trade war. The US administration initially announced tariffs on steel and aluminium imports. This was followed by a 25% tariff on USD60 billion worth of Chinese imports, a move that was seen as a punishment on China for what the US perceived as intellectual property theft from American businesses. Consequently, China imposed tariffs of up to 25% on USD3 billion worth of US imports. Trade concerns escalated in the second quarter affecting Chinese and emerging market equities. The US trade representatives released USD200 billion list of Chinese imports that will be targeted with 10 percent tariffs. In contrast, the US and EU agreed to work towards zero tariffs, zero nontariff barriers and zero subsidies on nonauto industrial goods, easing trade tensions between the two parties. In addition to trade concerns, countries with large current account deficits such as Turkey and Argentina have come under significant pressure with sharp currency and equity market falls. Rate hikes by the Federal Reserve in June and two further rate hikes this year could put additional pressure on these two countries. In the third quarter of 2018, US equities continued to march higher leaving it some way ahead of the pack over the year as a whole. Trade tensions continue to escalate after the Trump administration imposed new tariffs of 10% on additional USD200 million worth of Chinese goods, followed by an increase to 25% by January 2019 if a trade deal cannot be reached. China retaliated by imposing tariffs of their own on USD60 billion worth of US goods ranging between 510%. To minimize the impact from its ongoing trade conflict with the US, China plans to reduce tariff rates on imports from most of its trading partners as soon as October. However, the trade negotiations haven t been all bad news, with the new NAFTA deal. Separately, WTI crude oil price increase 41% to USD73 per barrel on the back of impending US sanctions on Iran and on demand growth on the back of strong global economic growth. 10

12 Moving on to macroeconomic data, the US economy expanded by 4.2% quarteronquarter in the second quarter, inline with expectations. ISM manufacturing and consumer sentiment data in August came in above expectation at 61.3 and 96.2, respectively. Jobs data also came in above expectation at 201k versus 190k with unemployment rate held steady at 3.9%, an 18year low. Consumer Price Index rose less than expected in August at 0.2% monthonmonth versus 0.3% monthonmonth as increases in gasoline and rents were offset by declines in healthcare and apparel costs. Retail sales cooled to 0.1% monthonmonth in August following a strong gain of 0.5% monthonmonth in July. In Europe, the economy grew slightly slower in 2Q18 at 0.3% compared to 0.4% in the prior quarter. August core headline inflation came in below estimates at 1% yearonyear, a setback for the European Central Bank s (ECB) need in tightening monetary policy. Markit manufacturing PMI in August was inline with expectation at 54.6, a sign that the economy is still in expansion mode. Producer Price Index (PPI) beat analyst expectation in July at 4% yearonyear, a 15month high. China s economy grew 6.7% yearonyear in the second quarter, which was inline with economist expectation. August CPI grew higher than expected at 2.3% yearonyear versus 2.1% yearonyear. PPI in August beat expectation marginally at 4.1% yearonyear versus 4% yearonyear and Industrial production in August was inline with consensus expectation at 6.1% yearonyear. However, Caixin manufacturing Purchasing Managers Index (PMI) fell from 50.6 to 50.8 in August, below expectation of Exports rose 9.8% yearonyear in August beating expectations, but at the slowest pace since March due to the ongoing USChina trade war. Imports climbed 20% yearonyear bringing trade balance to USD27.9 billion, lower than expectation of USD31 billion. Income Distribution Nil Unit Split Nil 11

13 Significant Changes In The State Of Affairs Of The Fund 1. Appended below are the changes to the Fund as per fourth supplementary master prospectus dated 28 September 2018: Designated Person Responsible For The Investment Management Of The Fund Previous Provision Tan Yee Cheng Head of Equities, Investment She has over 22 years of experience in investment research and fund management. Prior to joining Pacific Mutual in May 2007 as Senior Manager, Investment, she was an investment manager in an Americanbased insurance company. She had earlier worked as a senior analyst and a research manager at two local stockbroking firms and headed the investment research of a local unit trust company. Master of Science in Economics (University of Idaho, USA); CFA charterholder (CFA Institute). She is the designated person responsible for the investment management of the Pacific Focus18 Fund. New Provision Tan Yee Cheng Equity Specialist, Investment She has over 23 years of experience in investment research and fund management. Prior to joining Pacific Mutual in May 2007 as Senior Manager, Investment, she was an investment manager in an Americanbased insurance company. She had earlier worked as a senior analyst and a research manager at two local stockbroking firms and headed the investment research of a local unit trust company. Master of Science in Economics (University of Idaho, USA); CFA charterholder (CFA Institute). She is the designated person responsible for the investment management of the Pacific Focus18 Fund. 2. Any reference to the Goods and Services Tax ( GST ) and Goods and Services Act 2014 herein is hereby removed with effect from 1 September Circumstances That Materially Affect Interest Of Unitholders Nil Soft Commissions During the financial year under review, the Fund has received soft commissions from brokers. Soft commissions received from brokers are retained by the Manager for purchasing goods and services which are of demonstrable benefit to the unitholders and in the form of research and advisory services that assist in the decisionmaking process relating to the investment of the Fund such as research materials, data and quotation services, computer software, investment advisory services, and investment related publications. 12

14 REPORT OF THE TRUSTEE To the Unitholders of PACIFIC FOCUS18 FUND We, CIMB COMMERCE TRUSTEE BERHAD being the trustee of PACIFIC FOCUS18 FUND ( the Fund ), are of the opinion that PACIFIC MUTUAL FUND BHD ( the Manager ), acting in the capacity as Manager of the Fund, has fulfilled its duties in the following manner for the financial year ended 30 September (a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager under the Deeds, the Securities Commission Malaysia s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws; (b) Valuation and pricing for the Fund has been carried out in accordance with the Deeds and relevant regulatory requirements; and (c) Creation and cancellation of units have been carried out in accordance with the Deeds and relevant regulatory requirements. For and on behalf of CIMB COMMERCE TRUSTEE BERHAD LEE KOOI YOKE Chief Operating Officer Kuala Lumpur, Malaysia 1 November

15 STATEMENT BY THE MANAGER We, TEH CHICHEUN and ONG EU JIN, being two of the directors of PACIFIC MUTUAL FUND BHD, do hereby declare that, in the opinion of the Manager, the accompanying financial statements set out on pages 18 to 39 are prepared in accordance with the requirements of the Deeds, Malaysian Financial Reporting Standards, International Financial Reporting Standards and Securities Commission s Guidelines on Unit Trust Funds in Malaysia so as to give a true and fair view of the financial position of PACIFIC FOCUS18 FUND as at 30 September 2018 and of its results, changes in net asset value and cash flows for the financial year then ended. Signed on behalf of the Manager in accordance with a resolution of the directors TEH CHICHEUN ONG EU JIN Kuala Lumpur, Malaysia 1 November

16 INDEPENDENT AUDITORS REPORT To the Unitholders of PACIFIC FOCUS18 FUND Report On The Audit Of The Financial Statements Opinion We have audited the financial statements of PACIFIC FOCUS18 FUND ( the Fund ), which comprise the statement of financial position as at 30 September 2018, and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows of the Fund for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 18 to 39. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 30 September 2018, and of its financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Basis For Opinion We conducted our audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence And Other Ethical Responsibilities We are independent of the Fund in accordance with the ByLaws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( ByLaws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the ByLaws and the IESBA Code. Information Other Than The Financial Statements And Auditors Report Thereon The Manager of the Fund is responsible for the other information. The other information comprises the information included in the annual report of the Fund, but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. 15

17 If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibility Of The Manager And Trustee For The Financial Statements The Manager of the Fund is responsible for the preparation of financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. The Trustee is responsible for overseeing the Fund s financial reporting process. The Trustee is also responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements. Auditors Responsibilities For The Audit Of The Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 16

18 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements of the Fund represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Other Matters This report is made solely to the unitholders of the Fund, as a body, in accordance with the Guidelines on Unit Trust Funds issued by Securities Commission Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. ERNST & YOUNG AF: 0039 Chartered Accountants BRANDON BRUCE STA MARIA No /09/2019 J Chartered Accountant Kuala Lumpur, Malaysia 1 November

19 STATEMENT OF FINANCIAL POSITION As at 30 September 2018 Assets Investments Dividend receivable Interest receivable Amount due from brokers/dealers Cash and cash equivalents Total Assets Note ,239,372 11, , ,555 4,314, ,362,814 1, , ,124 5,358,824 Liabilities Amount due to Manager Amount due to brokers/dealers Other payables Total Liabilities 6 7 9, ,684 14, ,810 6, ,300 99, ,083 Net Asset Value Of The Fund 4,001,705 4,956,741 Equity Unitholders capital Retained earnings Net Asset Value Attributable To Unitholders 14 2,820,871 1,180,834 4,001,705 3,894,536 1,062,205 4,956,741 Total Equity And Liabilities 4,314,515 5,358,824 Number Of Units In Circulation (Units) 15 10,049,000 12,712,000 Net Asset Value Per Unit The accompanying notes form an integral part of the financial statements. 18

20 STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 30 September 2018 Investment Income Gross dividends from financial assets at fair value through profit or loss Interest income Net (loss)/gain on investments Financial assets at fair value through profit or loss Foreign exchange Net unrealised gain/(loss) on foreign exchange Net unrealised gain/(loss) on changes in fair value of financial assets at fair value through profit or loss Note ,482 9,970 (405,293) (128,009) 5, , , ,090 16, ,247 84,972 (1,423) (421,813) 58,528 Expenses Audit fee Tax agent s fee Manager s fee Trustee s fee Custodian s fee Brokerage and other transaction fees Administration expenses ,600 3,057 69,574 8,400 1, ,060 18, ,187 7,600 2,850 88,417 18,000 16, ,243 18, ,642 Net Income/(Loss) Before Taxation Taxation Net Income/(Loss) After Taxation , ,629 (252,114) 2,321 (249,793) Total Comprehensive Income/(Loss) 118,629 (249,793) Total Comprehensive Income/(Loss) Is Made Up As Follows: Realised (loss)/income Unrealised income/(loss) (706,037) 824, , ,443 (423,236) (249,793) The accompanying notes form an integral part of the financial statements. 19

21 STATEMENT OF CHANGES IN NET ASSET VALUE For the financial year ended 30 September 2018 At 1 October 2016 Net loss after taxation Creation of units Cancellation of units At 30 September 2017 Unitholders Capital 5,144,408 69,463 (1,319,335) 3,894,536 Retained Earnings 1,311,998 (249,793) 1,062,205 Net Asset Value Attributable To Unitholders 6,456,406 (249,793) 69,463 (1,319,335) 4,956,741 At 1 October 2017 Net income after taxation Creation of units Cancellation of units At 30 September ,894, ,250 (1,186,915) 2,820,871 1,062, ,629 1,180,834 4,956, , ,250 (1,186,915) 4,001,705 The accompanying notes form an integral part of the financial statements. 20

22 STATEMENT OF CASH FLOWS For the financial year ended 30 September 2018 Cash Flows From Operating And Investing Activities Proceeds from sale of investments Purchase of investments Dividends received Interest received Tax refunded Manager s fee paid Trustee s fee paid Custodian s fee paid Payment for other fees and expenses Net cash generated from operating and investing activities Cash Flows From Financing Activities Cash proceeds from units created Cash paid on units cancelled Net cash used in financing activities Net Increase/(Decrease) In Cash And Cash Equivalents Effect Of Exchange Rate Changes Cash And Cash Equivalents At Beginning Of Financial Year Cash And Cash Equivalents At End Of Financial Year Cash And Cash Equivalents Comprise: Cash at banks Deposits with financial institutions ,124,537 (17,625,811) 85,225 9,899 (71,261) (9,186) (2,398) (44,783) 1,466, ,250 (1,182,534) (1,069,284) 396,938 (21,507) 610, , , , , ,613,247 (16,337,637) 110,023 16,653 3,537 (90,250) (17,998) (16,523) (39,111) 241,941 69,875 (1,327,905) (1,258,030) (1,016,089) 37,540 1,588, , , ,124 The accompanying notes form an integral part of the financial statements. 21

23 NOTES TO THE FINANCIAL STATEMENTS 30 September The Fund, The Manager And Their Principal Activities Pacific Focus18 Fund (hereinafter referred to as the Fund ) was constituted pursuant to the execution of a Deed dated 6 June 2005 as amended by the First Supplemental Deed dated 8 February 2006, Second Supplemental Deed dated 28 June 2007, Supplemental Master Deed dated 22 May 2009, Second Supplemental Master Deed dated 25 June 2010 and its Third Supplemental Master Deed dated 12 July 2017 (hereinafter referred to as the Deeds ), made between the Manager, Pacific Mutual Fund Bhd, the Trustee, CIMB Commerce Trustee Berhad and the registered holders of the Fund. The principal activity of the Fund is to invest in Permitted Investments as defined in the Deeds, which include stocks and shares of companies quoted on Bursa Malaysia Securities Berhad, foreign securities, unlisted securities, futures contracts and any other investments approved by the Securities Commission Malaysia from time to time. The Fund was launched on 16 June 2005 and will continue its operations until terminated as provided in the Deeds. The Manager is a 70% owned subsidiary of Lion Global Investors Limited (formerly known as Lion Capital Management Limited), a company incorporated in Singapore. The remaining 30% of the share capital of the Manager is held by Koperasi Angkatan Tentera Malaysia Bhd. The ultimate holding company is OverseaChinese Banking Corporation Limited, a public listed company incorporated in Singapore. The principal activities of Pacific Mutual Fund Bhd are the establishment and management of unit trust funds as well as the management of private investment mandates. The financial statements were authorised for issue by the Board of Directors of the Manager in accordance with a resolution of the directors on 1 November Summary Of Significant Accounting Policies (a) Basis Of Preparation The financial statements of the Fund have been prepared on a historical cost basis, except as otherwise stated in the accounting policies and comply with Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards ( IFRS ), the Deeds and the Securities Commission Malaysia s Guidelines on Unit Trust Funds in Malaysia. The significant accounting policies adopted are consistent with those applied in the previous financial year end except for the adoption of Amendments to MFRSs which are effective for the financial year beginning on or after 1 January These Amendments to MFRSs did not give rise to any significant effect on the financial statements. 22

24 The Fund will adopt the following MFRSs, Amendments to MFRSs and IC Interpretations when they become effective in the respective financial periods and these MFRSs, Amendments to MFRSs and IC Interpretations are not expected to have any material impact to the financial statements of the Fund upon the initial application. Pronouncements issued but not yet effective: Effective dates for financial periods beginning on or after MFRS 9 Financial Instruments (IFRS 9 Financial Instruments as issued by International Accounting Standards Board in July 2014) MFRS 15 Revenue from Contracts with Customers* IC Interpretation 22 Foreign Currency Transactions and Advance Consideration Clarifications to MFRS 15 Revenue from Contracts with Customers* Classification and Measurement of Sharebased Payment Transactions (Amendments to MFRS 2)* Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts (Amendments to MFRS 4)* Annual Improvements to MFRS Standards Cycle (i) Amendments to MFRS 1 Firsttime Adoption of MFRSs (ii) Amendments to MFRS 128 Investments in Associates and Joint Ventures* Transfers of Investment Property (Amendments to MFRS 140)* MFRS 16 Leases* Prepayment Features with Negative Compensation (Amendments to MFRS 9)* Plan Amendment, Curtailment or Settlement (Amendments to MFRS 119 Employee Benefits)* Longterm Interests in Associates and Joint Ventures (Amendments to MFRS 128)* Annual Improvements to MFRS Standards Cycle (i) Previously Held Interest in a Joint Operation (Amendments to MFRS 3 Business Combinations)* (ii) Previously Held Interest in a Joint Operation (Amendments to MFRS 11 Joint Arrangements)* (iii) Income Tax Consequences of Payments on Financial Instruments Classified as Equity (Amendments to MFRS 112 Income Taxes)* (iv) Borrowing Costs Eligible for Capitalisation (Amendments to MFRS 123 Borrowing Costs)* 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan19 1Jan19 1Jan19 1Jan19 1Jan19 1Jan19 1Jan19 1Jan19 23

25 Effective dates for financial periods beginning on or after IC Interpretation 23 Uncertainty over Income Tax Treatments* Amendments to References to the Conceptual Framework in MFRS Standards (1) Amendments to MFRS 2 ShareBased Payment* (2) Amendment to MFRS 3 Business Combinations* (3) Amendments to MFRS 6 Exploration for and Evaluation of Mineral Resources* (4) Amendment to MFRS 14 Regulatory Deferral Accounts* (5) Amendments to MFRS 101 Presentation of Financial Statements (6) Amendments to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors (7) Amendments to MFRS 134 Interim Financial Reporting (8) Amendment to MFRS 137 Provisions, Contingent Liabilities and Contingent Assets (9) Amendment to MFRS 138 Intangible Assets* (10) Amendment to IC Interpretation 12 Service Concession Arrangements* (11) Amendment to IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments (12) Amendment to IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine* (13) Amendment to IC Interpretation 22 Foreign Currency Transactions and Advance Consideration (14) Amendments to IC Interpretation 132 Intangible Assets Web Site Costs* MFRS 17 Insurance Contracts* Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to MFRS 10 and MFRS 128)* 1Jan19 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan20 1Jan21 To be announced * These MFRSs, Amendments to MFRSs and IC Interpretations are not relevant to the Fund. 24

26 (b) Functional And Presentation Currency 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 also the Fund s functional currency. (c) Foreign Currency Translation Assets and liabilities denominated in foreign currencies are translated into at rates of exchange prevailing at the reporting date. Transactions in foreign currencies are translated into at the rates of exchange ruling on the dates of transactions. Exchange differences arising are included in profit or loss. (d) Financial Instruments The Fund recognises financial assets and financial liabilities in the Statement of Financial Position on the date it becomes a party to the contractual provisions of the instruments. Regular way purchase and sales of all categories of investments in financial instruments are recognised on trade dates i.e. dates on which the Fund commits to purchase or sell the financial instruments. The Fund determines the classification of its financial assets and financial liabilities at initial recognition, and the categories include financial assets at fair value through profit or loss, receivables and financial liabilities. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Financial Assets At Fair Value Through Profit Or Loss Financial assets classified as financial assets at fair value through profit or loss are all financial assets acquired for the purpose of generating a profit from shortterm fluctuations in price, or part of a portfolio with a pattern of shortterm profit taking (held for trading); or those financial assets designated in this category by the Manager. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value with gain and loss recognised in profit or loss. Transaction costs are recognised in profit or loss as incurred. Exchange differences on financial assets at fair value through profit or loss are not recognised separately in profit or loss but are included in net gains or net losses on changes in fair value of financial assets at fair value through profit or loss. 25

27 The fair values of quoted investments are determined by reference to last done prices at the close of the business at the reporting date. The fair value of collective investment scheme is determined from last published repurchase price at the reporting date as reported by the management company of such funds and as agreed by the Trustee and the Manager so as to reflect its fair value. Receivables Receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. These include cash and cash equivalents, amount due from brokers/dealers and other receivables. Receivables are recognised initially at fair value including transaction costs. These are subsequently measured at amortised cost using the effective interest method, less impairment. Financial Liabilities Financial liabilities are recognised initially at fair value i.e. the consideration for goods and services received and subsequently stated at amortised cost. These include amounts due to Manager, brokers/dealers, Trustee and other payables. The difference between the proceeds and the amount payable is recognised over the period of the payable using the effective interest method. (e) Derecognition Of Financial Assets And Liabilities Financial Assets A financial asset is derecognised when the asset is disposed and the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. Financial Liabilities A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liability is derecognised, and through the amortisation process. (f) Impairment Of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. Financial Assets Carried At Amortised Cost If a financial asset carried at amortised cost is impaired, an impairment loss is recognised in profit or loss as the difference between the asset s carrying amount and the present value of estimated future cash flow discounted at the financial asset s original effective interest rate. 26

28 If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the writedown, the writedown is reversed through profit or loss. (g) Income Recognition Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Dividend income is recognised when the Fund s right to receive payment is established. Interest income is recognised using the effective interest method on an accrual basis. (h) Unrealised Reserves/(Deficits) The unrealised reserves/(deficits) represent the net gain or loss arising from carrying quoted investments at their fair value and are recognised in the Statement of Comprehensive Income. (i) Cash And Cash Equivalents Cash and cash equivalents comprise cash at banks and deposits with financial institutions with original maturities of 3 months or less which have an insignificant risk of changes in value. (j) Taxation Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rate and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. (k) Fair Value Measurement 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. 27

29 (l) Unitholders Capital Unitholders Capital meets the conditions for the definition of puttable instruments classified as equity instruments. Distribution equalisation is accounted for on the date of creation and cancellation of units. It represents the average distributable amount included in the creation and cancellation prices of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are cancelled. (m) Significant Accounting Estimates And Judgments The preparation of financial statements in accordance with MFRS and IFRS requires the use of certain accounting estimates and exercise of judgments. Estimates and judgments are continually evaluated and are based on past experience, reasonable expectations of future events and other factors. No major estimates or judgments have been made by the Manager in applying the Fund s accounting policies. There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities at the reporting date. 3. Investments Financial Assets At Fair Value Through Profit Or Loss Quoted investments Equity securities Collective investment scheme Total investments ,136, ,566 3,239, ,362,814 4,362,814 28

30 The composition of quoted investments at the reporting date is as detailed below. The industry classifications are based on MSCI s Global Industry Classification Standard. EQUITY SECURITIES Quantity 124,000 Name Of Counter Malaysia Capital Goods MMC Corporation Berhad Cost 224,614 Fair Value 169,880 Fair Value As A % Of Net Asset Value ,500 27,000 Consumer Services Berjaya Sports Toto Berhad Genting Berhad 223, , , , , , ,000 Energy Bumi Armada Bhd 179, , ,000 15,500 Materials Lafarge Malaysia Berhad Petronas Chemicals Group Bhd 314, , , , , , ,300 Real Estate SP Setia Berhad 110, , ,000 Retailing Aeon Company (M) Berhad 161, , ,400 50,500 Telecommunication Services Axiata Group Berhad Telekom Malaysia Berhad 128, , , , , , Total Equity Securities Malaysia 1,886,543 1,620,

31 Quantity 413 Name Of Counter Australia Materials Rio Tinto Limited Cost 87,161 Fair Value 97,112 Fair Value As A % Of Net Asset Value ,140 Great Britain Food, Beverage & Tobacco Imperial Brands PLC 159, , ,000 Hong Kong Banks Industrial And Commercial Bank of China Limited 237, , ,400 Consumer Services Wynn Macau, Limited 202, , Total Equity Securities Hong Kong 440, , ,100 Japan Consumer Durables & Apparel Panasonic Corporation 170, , ,900 Singapore Capital Goods Keppel Corporation Limited 81,964 82, ,400 United States of America Capital Goods General Electric Company 179, , Exchange Traded Fund ishares MSCI South Korea ETF 176, ,

32 Quantity 1,100 Name Of Counter Insurance American International Group, Inc. Cost 229,004 Fair Value 242,279 Fair Value As A % Of Net Asset Value 6.05 Total Equity Securities United States of America 585, , Total Equity Securities 3,411,973 3,136, COLLECTIVE INVESTMENT SCHEME 99,889 Malaysia Pacific OCBC Cash Fund* 102, , TOTAL QUOTED INVESTMENTS 3,514,388 3,239, UNREALISED LOSS FROM QUOTED INVESTMENTS (275,016) * Managed by the Manager 31

33 4. Fair Value Hierarchy The Fund uses the following hierarchy for determining and disclosing the fair values of financial instruments by valuation techniques: Level 1: Quoted prices (unadjusted) in active markets 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 (i.e. prices) or indirectly (i.e. derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs) Financial Assets At Fair Value Through Profit Or Loss Quoted investments 2017 Financial Assets At Fair Value Through Profit Or Loss Quoted investments Level 1 3,239,372 4,362,814 Total 3,239,372 4,362,814 The carrying amounts of other financial assets and financial liabilities, approximate fair values due to the relatively short term maturities of these financial instruments. 32

34 5. Cash And Cash Equivalents Cash and cash equivalents include cash at banks and deposits with financial institutions. Cash at banks: Malaysia Outside Malaysia Deposits with licensed financial institutions: Commercial bank Cash and cash equivalents , , , , , ,037 80, , ,124 The weighted average rate of return and remaining maturity of deposits with financial institutions at the reporting date were as follows: Deposits with licensed financial institutions: Commercial bank Weighted Average Rate Of Return (% Per Annum) Weighted Average Remaining Maturity (Days) Amount Due To Manager The amount due to Manager represents amount payable for units cancelled and/or amount payable for management fee. Management fee is payable on a monthly basis and amount payable for units cancelled is paid within 10 days of the transaction dates. 7. Amount Due From/To Brokers/Dealers The amount due from/to brokers/dealers relates to disposal/purchase of investments which remain outstanding as at the reporting date. These are normally received/paid within 3 business days of the transaction dates. 33

35 8. Manager s Fee The Manager s fee provided in the financial statements is computed at 1.5% (2017: 1.5%) per annum of the net asset value attributable to unitholders of the Fund, calculated on a daily basis net of Manager s fee rebate on the collective investment scheme as agreed by the Trustee and the Manager as follows: Name of Fund Pacific OCBC Cash Fund Rate p.a. 0.20% (1 October 2017 to 31 December 2017) 0.30% (Effective 1 January 2018) 9. Trustee s Fee The Trustee s fee provided in the financial statements is computed at 0.06% (2017: 0.07%) per annum of the net asset value attributable to unitholders of the Fund, calculated on a daily basis, subject to a minimum fee of 8,400 (2017: 18,000) per annum. 10. Custodian s Fee The custodian s fee provided in the financial statements ranges from 0.01% to 0.3% (2017: 0.015% to 0.4%, subject to a minimum of USD50 per foreign market) per annum, computed based on the net asset value attributable to unitholders of the Fund of the respective foreign portfolio at the end of the month. 11. Portfolio Turnover Ratio Portfolio turnover ratio ( PTR ) times times The PTR of the Fund is the ratio of average acquisitions and disposals of the Fund for the financial year over the average net asset value attributable to unitholders of the Fund calculated on a daily basis. The PTR for the current financial year is higher due to increase in investing activities. 12. Management Expense Ratio Management expense ratio ( MER ) % % MER is the ratio of expenses of the Fund expressed as a percentage of the average net asset value attributable to unitholders of the Fund for the financial year calculated on a daily basis. The MER for the current financial year is lower due to a higher percentage of decrease in expenses compared with average net asset value attributable to unitholders of the Fund. 1 The MER does not include brokerage and other transaction fees. 34