Hong Leong Income Management Fund

Transcription

1 Reaching out to you Hong Leong Income Management Fund First Quarter Report May 2018 Unaudited

2 Hong Leong Income Management Fund Contents Page Manager s Review and Report Statement by the Manager 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 Income Management Fund Fund Category Money Market (Wholesale) Fund Type Income Investment Objective The Fund aims to provide investors with the opportunity to enjoy regular income distribution while maintaining capital stability. Benchmark Maybank Overnight Repo Rate Distribution Policy The Fund aims to provide weekly distribution on a best effort basis to the overall capital growth 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 its Unitholders. Breakdown of Unitholdings By Size Size of Holdings 5,000 and below 5,001 to 10,000 10,001 to 50,000 50,001 to 500, ,001 and above No. of Accounts No. of Units Held 9, ,876, ,721,135,

4 II. FUND PERFOANCE Chart 1: Performance of the Fund versus the benchmark covering the last fiveyear financial period Percentage Growth /5/ /5/ /5/ /5/ /5/ /5/2018 From 31/05/2013 to 31/05/2018 Hong Leong Income Management Fund (HLIMF) : Maybank Overnight Repo Rate : 9.81 Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per UnittoNAV Per Unit basis with gross income (if any) from HLIMF 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 First Quarter Report covers the threemonth financial period from 1 March 2018 to 31 May The Fund posted a return of 0.89 in the past three months while its benchmark the Maybank Overnight Repo Rate registered a return of During the financial period under review, the Fund has distributed 13 times of income distributions to its Unitholders. Unitholders should note that income distributions have the effect of reducing the Net Asset Value (NAV) per unit of the Fund after distributions. For a full description of the income distributions, cumdistributions and exdistributions NAV per unit of the Fund, kindly refer to section entitled Performance Data at page

5 For the fiveyear financial period ended 31 May 2018, the Fund posted a return of compared to the benchmark s return of 9.81 while distributing a total gross income of sen per unit. Change(s) in Investment Team Departure No 1 Name Designation New Arrival No Name 1 Designation Key Risk Factors The potential risks associated with investing in the Fund are including but not limited to the followings: Management risk; Inflation/Purchasing power risk; Loan financing risk; Noncompliance risk Interest rate risk; Liquidity risk; Market risk; Credit risk; Particular security risk; and Fund management risk. Table 1: Performance of the Fund for the following periods as at 31 May 2018 (Source: Lipper For Investment Management) 31/05/16 31/05/18 2 Years 31/05/15 31/05/18 3 Years 31/05/13 31/05/18 5 Years 28/02/18 30/11/17 31/05/17 31/05/18 31/05/18 31/05/18 3 Months 6 Months 1 Year 31/05/08 31/05/18 10 Years 28/03/08 31/05/18 Since Launch HLIMF () Benchmark ()

6 Table 2: Return of the Fund based on NAV Per UnittoNAV Per Unit basis for the period 28 February 2018 to 31 May 2018 (Source: Lipper For Investment Management) 31May18 28Feb18 Return () NAV Per Unit Maybank Overnight Repo Rate vs Maybank Overnight Repo Rate () # # Return is calculated after adjusting for income distributions during the period under review. Table 3: Financial Highlights The Net Asset Value attributable to Unitholders is represented by: 31May18 () 28Feb18 () Change () Unitholders Capital Retained Earnings Net Asset Value 1,360,510,774 2,908,342 1,363,419,116 1,562,420,475 2,730,519 1,565,150, Units in Circulation 2,726,021,205 3,129,657, 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 28/02/18 31/05/18 Financial Year 28/02/17 28/02/18 Financial Year 29/02/16 28/02/17 Financial Year 28/02/15 29/02/16 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 HLIMF reinvested. 4

7 Table 5: Average Total Return of the Fund 31/05/17 31/05/18 1 Year 31/05/15 31/05/18 3 Years 31/05/13 31/05/18 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 HLIMF reinvested. Table 6: Annual Total Return of the Fund 28/02/17 28/02/18 29/02/16 28/02/17 28/02/15 29/02/16 28/02/14 28/02/15 28/02/13 28/02/14 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 HLIMF reinvested. Table 7: Volatility of the Fund 31/05/17 31/05/18 1 Year 31/05/15 31/05/18 3 Years 31/05/13 31/05/18 5 Years Annualised Standard Deviation Source: Lipper For Investment Management 5

8 III. INVESTMENT PORTFOLIO Chart 2: Asset Allocation March 2018 to May Mar18 Apr18 May18 Deposits & Cash Equivalents Chart 3: Sector Allocation as at 31 May 2018 Deposits & Cash Equivalents 100 Chart 4: Portfolio Composition by Ratings as at 31 May 2018 Deposits & Cash Equivalents 100 6

9 Strategies employed during the period under review There have been no significant changes to the core asset allocation of the Fund. The Fund has consistently maintained its investments in deposits and money market instruments, with active duration management strategy remaining in place to optimize the portfolio returns. Currently, the Fund s duration is approximately 0.12 years. As of 31 May 2018, the topthree holdings of the Fund are Affin Bank Berhad (24.90), Public Bank Berhad (24.54) and AmBank (M) Berhad (17.99). In accordance with the low risk objective, the Fund adopts a strict selection process in its investments. This selection process is crucial to ensure that credit risk can be reduced significantly through a rigorous and disciplined credit analysis. On the other hand, the Fund does not expose to any borrowing risk as the Fund does not borrow or engage in any forms of lending activities. Meanwhile, the Fund does not hold any illiquid assets in the portfolio as all investment holdings of the Fund are highly liquid and can be liquidated in a timely manner at their market value. Please be informed that the Goods and Services Tax (GST) on all fees and charges incurred by our products and services will be zerorated effective 1 June 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. 7

10 IV. MARKET REVIEW During the review period, Beige Book revealed that the US economic outlook has strengthened and the economy is expanding at a modest pace while inflation will rise in the coming months. Policymakers also highlighted that the central bank gave no indication of any intention to change its plan and will stay on its gradual path of raising interest rates unless inflation moves up by an appreciable margin. Meanwhile, during the March Federal Open Market Committee (FOMC) meeting, the Federal Reserve (Fed) raised the range of its benchmark interest rate by a quarter of a percentage point to and subsequently left it unchanged at its May meeting, signaling the Fed's confidence in the improving US economy. Locally, inflation for February slowed to 1.40 and subsequently eased further to 1.30 in March before rising slightly back to 1.40 in April. March reading was a 20month low since July The sharply lower reading was a result of decline in transport prices and smaller gains in food and all other prices. Malaysia s real gross domestic product (GDP) growth eased to 5.40 in the first quarter of 2018 from 5.90 in the preceding quarter as both private investment and public spending receded. Meanwhile on the monetary front, Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) unchanged at 3.25 at the last March and May Monetary Policy Committee (MPC) meetings, matching market estimations. There was practically no change in its policy statement, maintaining a neutral stance. 8

11 V. FUTURE PROSPECTS AND PROPOSED STRATEGIES BNM has kept rate steady at 3.25 and continued to emphasize that the current policy rate is still accommodative and supportive of economic activity. At the same time, BNM also reinstated positive on growth but headline and core inflation are expected to remain moderate. Given the expectation of a steady GDP growth outlook and a moderate inflation, BNM is unlikely to shift the OPR higher for the time being. As such, we look for opportunity to boost returns while moderately lengthening duration of money market placements. 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 11 to 33 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 May 2018 and its financial performance, changes in equity and cash flows for the financial period from 1 March 2018 to 31 May 2018 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 17 July

13 CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 MARCH 2018 TO 31 MAY 2018 Note to to INVESTMENT INCOME Interest income 4 14,319,587 59,543,165 EXPENDITURE Management fee Trustee s fee Auditors remuneration Tax agent s fee Other expenses 5 6 (1,102,353) (73,490) (1,588) (743) (75,541) (1,253,715) (4,656,363) (177,243) (1,588) (650) (296,936) (5,132,780) PROFIT BEFORE TAXATION Taxation PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 7 13,065,872 13,065,872 54,410,385 54,410,385 Profit after taxation is made up as follows: Realised amount 13,065,872 54,410,385 Distributions for the financial period: Net distributions Net distributions per unit (sen) Gross distributions per unit (sen) ,888, ,138, The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 11

14 CONDENSED STATEMENT OF FINANCIAL POSITION (Unaudited) AS AT 31 MAY 2018 Note ASSETS Cash at bank Financial assets at fair value through profit or loss ("FVTPL") TOTAL ASSETS 9 341,061 1,371,037,153 1,371,378, ,481 1,573,043,426 1,573,429,907 LIABILITIES Distribution payable Amount due to the Manager cancellation of units Amount due to the Manager management fee Amount due to the Trustee Amount due to the Managerexpenses Other payables and accruals TOTAL LIABILITIES 316,452 7,233, ,096 23, ,376 7,959, ,268 7,501, ,899 23,660 32,147 8,278,913 NET ASSET VALUE OF THE FUND 1,363,419,116 1,565,150,994 EQUITY Unitholders capital Retained earnings NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 1,360,510,774 2,908,342 1,363,419,116 1,562,420,475 2,730,519 1,565,150,994 UNITS IN CIRCULATION (UNITS) 10 2,726,021,205 3,129,657,053 NET ASSET VALUE PER UNIT () The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 12

15 CONDENSED STATEMENT OF CHANGES IN EQUITY (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 MARCH 2018 TO 31 MAY 2018 Note Unitholders capital Retained earnings Total Balance as at 1 March 2018 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 May ,562,420, ,680,623 8,390,312 (442,980,636) 1,360,510,774 2,730,519 13,065,872 (12,888,049) 2,908,342 1,565,150, ,680,623 8,390,312 (442,980,636) 13,065,872 (12,888,049) 1,363,419,116 Balance as at 1 March 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 May ,091,309, ,629,293 14,628,319 (6,095,230,403) 3,426,336,322 1,256,225 54,410,385 (53,138,662) 2,527,948 9,092,565, ,629,293 14,628,319 (6,095,230,403) 54,410,385 (53,138,662) 3,428,864,270 The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 13

16 CONDENSED STATEMENT OF CASH FLOWS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 MARCH 2018 TO 31 MAY to to CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from maturity of deposits with licensed financial institutions Placement of deposits with licensed financial institutions Interest received Management fee paid Trustee s fee paid Payment for other fees and expenses Tax refund received Net cash generated from operating activities CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created Payments for cancellation of units Distributions paid Net cash used in financing activities 4,054,728,466 (3,853,729,000) 15,326,394 (1,106,156) (73,744) (75,638) 215,070, ,680,623 (443,248,812) (4,547,553) (215,115,742) 19,359,886,000 (13,723,345,000) 71,268,620 (5,849,105) (201,106) (369,810) 29,885 5,701,419, ,791,546 (6,076,832,375) (42,144,387) (5,700,185,216) NET (DECREASE)/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 (45,420) 386, ,061 1,234,268 19,922 1,254,190 The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 14

17 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 MARCH 2018 TO 31 MAY THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Hong Leong Income Management Fund ( the Fund ) was constituted pursuant to the execution of a Deed dated 14 March 2008 and Supplemental Deeds dated 21 July 2008, 20 May 2010, 21 March 2011, 8 July 2011 and 25 March 2015 ( the Deeds ) between the Manager, Hong Leong Asset Management Bhd, the Trustee, CIMB Commerce Trustee Berhad and the registered unitholders of the Fund. The Fund aims to provide investors with the opportunity to enjoy regular income distribution while maintaining capital stability. The Fund will invest primarily in money market instruments and deposits. The duration of the invested instruments vary in accordance with the interest rate trends and market conditions. In selecting financial institutions for investing in such money market instruments and placement of deposits, the Fund will adopt a prudent selection process to ensure only credit worthy financial institutions and appropriate securities are invested in accordance with the investment objective and to optimize yield and provide liquidity to the Fund. The Fund s selection of financial institutions with which to invest and as counterparties depends largely on the Manager s rigorous credit assessment to assure relative certainty in principal repayment and overall total return stability. The Fund commenced operations on 28 March 2008 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 17 July

18 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 28 February 2018 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 investments in deposits with licensed financial institutions as financial assets at fair value through profit or loss at inception. Loans and 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 loans and receivables comprises cash at bank. 16

19 Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies distribution payable, amount due to the Managercancellation of units, amount due to the Managermanagement fee, amount due to the Trustee, amount due to the Managerexpenses 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. Deposits with licensed financial institutions are initially recognised at fair value. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Deposits with licensed financial institutions are stated at fair value. Due to the short term nature of the deposits, the cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the respective deposits is a reasonable estimate of fair value. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. 17

20 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 interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent 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 the 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. 18

21 (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 Interest income from deposits with licensed financial institutions is recognised on the effective interest method on an accrual basis. (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprises cash at bank that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (f) 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. (g) 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. 19

22 (h) 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. (i) 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. 20

23 (j) 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: Loans and Financial receivables/ assets other financial at FVTPL liabilities Total Financial assets Cash at bank Financial assets at FVTPL (Note 9) 1,371,037,153 1,371,037, , , ,061 1,371,037,153 1,371,378,214 Financial liabilities Distribution payable Amount due to the Manager cancellation of units Amount due to the Manager management fee Amount due to the Trustee Amount due to the Manager expenses Other payables and accruals 316,452 7,233, ,096 23, ,376 7,959, ,452 7,233, ,096 23, ,376 7,959,098 21

24 Loans and Financial receivables/ assets other financial at FVTPL liabilities Total Financial assets Cash at bank Financial assets at FVTPL (Note 9) 1,573,043,426 1,573,043, , ,481 1,573,043, ,481 1,573,429,907 Financial liabilities Distribution payable Amount due to the Manager cancellation of units Amount due to the Manager management fee Amount due to the Trustee Other payables and accruals 366,268 7,501, ,899 23,660 32,147 8,278, ,268 7,501, ,899 23,660 32,147 8,278,913 All liabilities are financial liabilities which are carried at amortised cost. (k) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information 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. 22

25 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 Unlisted Capital Market Products under the Lodge and Launch Framework. However, the Manager is of the opinion that there are no accounting policies which require significant judgment to be exercised. 3. FAIR VALUE ESTIMATION The fair value of financial assets traded in active markets (such as trading securities) are based on quoted market prices at the close of trading on the 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 availabe from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occuring 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 options, currency swaps and other overthecounter 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 23

26 other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entityspecific inputs. 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 equity, debt securities and other debt 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). 24

27 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 of the Fund's financial assets (by class) measured at fair value: Level 1 Level 2 Level 3 Total Financial assets at FVTPL: Deposits with licensed financial institutions 1,371,037,153 1,371,037, Financial assets at FVTPL: Deposits with licensed financial institutions 1,573,043,426 1,573,043,426 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 deposits with licensed financial institutions. As Level 2 instruments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations 25

28 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 asset at FVTPL) and financial liabilities are a reasonable approximation of their fair values due to their short term nature. 4. INTEREST INCOME Interest income from: Deposits with licensed financial institutions to ,319, to ,543, MANAGEMENT FEE In accordance with Division 13.1 of the Deed, the Manager is entitled to a management fee of up to 1.00 per annum calculated daily based on the net asset value of the Fund. For the financial period from 1 March 2018 to 31 May 2018, the management fee is recognised at a rate of 0.30 ( to : 0.30) per annum. There will be no further liability to the Manager in respect of management fee other than the amount recognised above. 6. TRUSTEE S FEE In accordance with Division 13.2 of the Deed, the Trustee is entitled to a fee not exceeding 0.20 subject to a minimum of 18,000 per annum (excluding foreign custodian fees and charges) calculated daily based on the net asset value of the Fund. 26

29 For the financial period from 1 March 2018 to 31 May 2018, the trustee's fee is recognised at a rate of 0.02 ( to : 0.015) in accordance with the fee structure of the Fund as follows: Fund Size (NAV of the Fund) Above 5 billion Above 3 billion up to 5 billion Less then 3 billion per annum of the Fund's NAV There will be no further liability to the Trustee in respect of trustee's fee and custodian fees other than the amount recognised above. 7. TAXATION Tax charge for the financial period: Current taxation to to 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 (2017: 24) to ,065,872 3,135, to ,410,385 13,058,492 Tax effects of: Investment income not subject to tax Expenses not deductible for tax purposes Restriction on tax deductible expenses for wholesale fund Taxation (3,436,701) 19, ,819 (14,290,360) 45,466 1,186,402 27

30 8. DISTRIBUTIONS Prior financial year's realised income Current financial period's realised income Less: Expenses Net distributions amount Net distributions per unit (sen) Gross distributions per unit (sen) Date of Declaration Distribution on 5/6 March Gross/net distribution per unit (sen) Distribution on 12/13 March Gross/net distribution per unit (sen) Distribution on 19/20 March Gross/net distribution per unit (sen) Distribution on 26/27 March Gross/net distribution per unit (sen) Distribution on 2/3 April Gross/net distribution per unit (sen) Distribution on 9/10 April Gross/net distribution per unit (sen) Distribution on 16/17 April Gross/net distribution per unit (sen) Distribution on 23/25 April Gross/net distribution per unit (sen) Distribution on 30 April/2 May Gross/net distribution per unit (sen) Distribution on 7/8 May Gross/net distribution per unit (sen) Distribution on 14/15 May Gross/net distribution per unit (sen) Distribution on 21/22 May Gross/net distribution per unit (sen) Distribution on 28/29 May Gross/net distribution per unit (sen) to ,470,286 11,415,223 (997,460) 12,888, to ,992 57,055,654 (4,912,984) 53,138,

31 Net distributions above are sourced from prior financial year's and current financial period's realised income. Gross distributions are 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. 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS ("FVTPL") Financial assets at FVTPL: Deposit with licensed financial institutions ,371,037, ,573,043,426 Financial assets at FVTPL as at 31 May 2018 are as detailed below: Nominal value Aggregate cost Percentage of net Fair asset value value DEPOSITS WITH LICENSED FINANCIAL INSTITUTIONS* Affin Bank Berhad AmBank (M) Berhad Bank Islam Malaysia Berhad Hong Leong Bank Berhad Malayan Banking Berhad Public Bank Berhad RHB Bank Berhad United Overseas Bank (Malaysia) Bhd 337,916, ,035,000 77,558, ,377,000 30,000, ,193, ,815,000 35,000, ,400, ,289,426 78,029, ,785,403 30,289, ,561, ,496,741 35,185, ,400, ,289,426 78,029, ,785,403 30,289, ,561, ,496,741 35,185, TOTAL DEPOSITS WITH LICENSED FINANCIAL INSTITUTIONS 1,365,894,000 1,371,037,153 1,371,037,

32 Financial assets at FVTPL as at 28 February 2018 are as detailed below: Nominal value Aggregate cost Percentage of net Fair asset value value DEPOSITS WITH LICENSED FINANCIAL INSTITUTIONS* Affin Bank Berhad Bank Islam Malaysia Berhad AmBank (M) Berhad Hong Leong Bank Berhad Public Bank Berhad RHB Bank Berhad United Overseas Bank (Malaysia) Bhd 369,602,000 32,846, ,371, ,894, ,184, ,996,466 90,000, ,423,451 33,168, ,197, ,566, ,983, ,571,679 90,131, ,423,451 33,168, ,197, ,566, ,983, ,571,679 90,131, TOTAL DEPOSITS WITH LICENSED FINANCIAL INSTITUTIONS 1,566,893,466 1,573,043,426 1,573,043, * The weighted average effective interest rates per annum are as follows: Deposits with licensed financial institutions Deposits with licensed financial institutions have an average maturity of 42 days ( : 42 days). 10. UNITS IN CIRCULATION to No. of units to No. of units At the beginning of the financial period/year Add: Creation of units during the financial period/year Arising from applications Arising from distributions Less: Cancellation of units during the financial period/year At the end of the financial period/year 3,129,657, ,233,129 16,777,536 (885,646,513) 2,726,021,205 18,183,103,104 3,126,689,619 92,117,114 (18,272,252,784) 3,129,657,053 30

33 11. UNITS HELD BY THE MANAGER AND RELATED PARTIES TRANSACTIONS AND BALANCES The related parties and their relationships with the Fund are as follows: Related parties Hong Leong Asset Management Bhd Hong Leong Capital Berhad Hong Leong Financial Group Berhad ("HLFG") Subsidiaries and associates of HLFG as disclosed in its financial statements Relationships The Manager Holding company of the Manager Ultimate holding company of the Manager Subsidiaries and associate companies of the ultimate holding company of the Manager Units Units HLA Holdings Sdn Bhd Hong Leong Assurance Berhad Hong Leong Bank Berhad RC Holdings Sdn Bhd 36,068, ,863, ,802, , ,265,595 18,037, ,954, ,931, , ,188,825 36,210, ,867, ,802, , ,407,607 18,108,938 80,450, ,931, , ,753,345 The above units were transacted at the prevailing market price. No units were held by the Manager as at 31 May 2018 and 28 February In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other related party transactions and balances. The Manager is of the opinion that all transactions with the related companies have been entered into at agreed terms between the related parties. 31

34 Related party balances Cash at bank: Hong Leong Bank Berhad Deposits with licensed financial institution: Hong Leong Bank Berhad 341, ,785, ,126, , ,566, ,953, to to Related party transactions Interest income from deposits with licensed financial institutions: Hong Leong Bank Berhad Hong Leong Investment Bank Berhad 1,854, ,687 1,963,756 12,478,535 12,478,535 32

35 12. SEGMENT INFOATION The internal reporting provided to the chief operating decision maker for the Fund s assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of MFRS and IFRS. The chief operating decisionmaker is responsible for the performance of the Fund and considers the business to have a single operating segment. Asset allocation decisions are based on a single, integrated investment strategy and the Fund s performance is evaluated on an overall basis. The reportable operating segment derives its income by seeking investments to achieve targeted returns consummate with an acceptable level of risk within the portfolio. These returns consist of interest income and is derived in Malaysia. There were no changes in reportable segment during the financial period. 33

36 Performance Data Financial Period 28/02/18 31/05/18 A (i) (ii) Total Net Asset Value (iii) (iv) (v) Portfolio Compositions: Deposits & Cash Equivalents Net Asset Value Per Unit Units in Circulation Highest/Lowest NAV Per Unit (exdistribution) Total Return of the Fund* Capital Growth Income Distribution (vi) Distribution Per Unit (exdistribution) (exdistribution) (exdistribution) Highest NAV Per Unit Lowest NAV Per Unit CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV ,363,419, ,726,021, /03/ /03/ /03/ /03/ /04/

37 28/02/17 28/02/18 29/02/16 28/02/17 28/02/15 29/02/16 28/02/14 28/02/15 28/02/13 28/02/ ,565,150,994 9,092,565,338 7,569,181,928 4,813,459,015 3,870,847, ,129,657, ,183,103, ,131,677, ,621,718, ,738,624, /03/ sen/unit sen/unit 07/03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ /03/ sen/unit sen/unit 23/03/ /03/ /03/ /04/ /04/ /03/ /03/ /04/

38 Performance Data Financial Period 28/02/18 31/05/18 CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV 09/04/ /04/ /04/ /04/ /05/ /05/ /05/

39 28/02/17 28/02/18 29/02/16 28/02/17 28/02/15 29/02/16 28/02/14 28/02/15 28/02/13 28/02/14 10/04/ /04/ /04/ /04/ /04/ /04/ /04/ /04/ sen/unit sen/unit 14/04/ /04/ sen/unit sen/unit 25/04/ /04/ /04/ sen/unit sen/unit 21/04/ /04/ /05/ sen/unit sen/unit 03/05/ /04/ sen/unit sen/unit 28/04/ /04/ /05/ sen/unit sen/unit 09/05/ sen/unit sen/unit 05/05/ /05/ /05/ /05/ /05/ sen/unit sen/unit 11/05/ sen/unit sen/unit 12/05/ /05/ /05/ /05/ /05/ /05/ /05/

40 Performance Data Financial Period 28/02/18 31/05/18 CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV 28/05/

41 28/02/17 28/02/18 29/02/16 28/02/17 28/02/15 29/02/16 28/02/14 28/02/15 28/02/13 28/02/14 29/05/ /05/ /05/ sen/unit sen/unit 26/05/ /05/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ sen/unit sen/unit 16/06/ /06/ sen/unit sen/unit 28/06/ /06/ /06/ /06/ /06/ sen/unit sen/unit 03/07/ /07/ /06/ sen/unit sen/unit 30/06/ /07/ /07/ /07/ /07/ /07/ /07/

42 Performance Data Financial Period 28/02/18 31/05/18 CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV 40

43 28/02/17 28/02/18 29/02/16 28/02/17 28/02/15 29/02/16 28/02/14 28/02/15 28/02/13 28/02/14 17/07/ /07/ /07/ sen/unit sen/unit 14/07/ /07/ /07/ /07/ /07/ sen/unit sen/unit 21/07/ /07/ /07/ /08/ /07/ sen/unit sen/unit 30/07/ /07/ /08/ /08/ /08/ sen/unit sen/unit 04/08/ sen/unit sen/unit 05/08/ /08/ /08/ /08/ sen/unit sen/unit 11/08/ /08/ /08/ /08/ /08/ sen/unit sen/unit 18/08/ /08/ /08/ /08/ /08/ sen/unit sen/unit 25/08/ /08/

44 Performance Data Financial Period 28/02/18 31/05/18 CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV CumDistribution NAV EXDistribution NAV 42

45 28/02/17 28/02/18 29/02/16 28/02/17 28/02/15 29/02/16 28/02/14 28/02/15 28/02/13 28/02/ sen/unit sen/unit 05/09/ /09/ sen/unit sen/unit 01/09/ /09/ /09/ /09/ sen/unit sen/unit 13/09/ /09/ sen/unit sen/unit 08/09/ /09/ /09/ /09/ /09/ sen/unit sen/unit 15/09/ sen/unit sen/unit 17/09/ /09/ /09/ /09/ sen/unit sen/unit 22/09/ sen/unit sen/unit 23/09/ /10/ /10/ /09/ sen/unit sen/unit 29/09/ /09/ /10/ sen/unit sen/unit 10/10/ /10/ /10/ sen/unit sen/unit 07/10/ /10/ sen/unit sen/unit 17/10/ /10/ /10/ /10/