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

Transcription

1 ANNUAL REPORT For The Financial Year Ended 30 September 2018 PACIFIC CASH 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 Cash Fund Pacific Mutual Fund Bhd (336059U) 7 October 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 : Money market Income Pacific Cash Fund aims to provide regular income potentially higher than prevailing money market and savings rates, stability of capital and a high level of liquidity. Income is in reference to the Fund s distribution, which could be in the form of cash or units. Performance Benchmark : Since inception to 30 June Month Kuala Lumpur Interbank Offer Rate (KLIBOR) 1 July 2007 onwards Maybank Overnight Repo Rate Distribution Policy : Fund Size : Income, if any, will be distributed quarterly 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 Fixed Income Securities Collective Investment Scheme Cash And Liquid Assets Total % % % Net Asset Value ( 000) exdistribution Number Of Units In Circulation (Units 000) Net Asset Value Per Unit ()* Management Expense Ratio ( MER ) Portfolio Turnover Ratio (times) 18,653 35, % ,906 43, % ,174 50, % 3.83 The Management Expense Ratio for the current financial year is higher due to a lower percentage of decrease in expenses compared with average net asset value attributable to unitholders of the Fund. The Portfolio Turnover Ratio for the current financial year is lower due to decrease 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. * Price quoted is exdistribution. 4

6 Performance Data 1 Year s Period ( to ) 3 Years Period ( to ) 5 Years Period ( to ) Pacific Cash Fund Total Return 3.40% 11.29% 18.52% Average Annual Return 3.40% 3.76% 3.70% Maybank Overnight Repo Rate Total Return 1.85% 5.65% 9.76% Average Annual Return 1.85% 1.88% 1.95% Pacific Cash Fund Capital Return Income Return Total Return to % 3.10% 3.40% to % 3.11% 3.45% to % 3.13% 4.05% to % 2.55% 3.26% to % 2.57% 3.13% Maybank Overnight Repo Rate 1.85% 1.75% 1.95% 2.00% 1.84% 5

7 to to to Unit Prices Highest NAV () Lowest NAV () * Distributions Gross Distribution Per Unit (sen) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Net Distribution Per Unit (sen) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Unit Splits * All prices quoted are exdistribution prices. 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 10 October 2005 (date of launch: 7 October 2005) to 30 September 2018, the Pacific Cash Fund registered a total return of 49.76%, while its benchmark, the Maybank Overnight Repo rate, rose 29.65%. For the financial year under review (1 October 2017 to 30 September 2018), the Fund registered a total return of 3.40%. In comparison, its benchmark rose 1.85%. The Fund has met its investment objective of providing regular income potentially higher than prevailing money market and savings rates, stability of capital and a high level of liquidity. Income is in reference to the Fund s distribution, which could be in the form of cash or units Oct 2005 Oct 2006 Oct 2007 Oct 2008 Oct 2009 Oct 2010 Oct 2011 Oct 2012 Oct 2013 Oct 2014 Oct 2015 Oct 2016 Sep

9 Investment Strategy Review Shortterm markets were relatively unchanged at the beginning of the financial year under review although an uptick in inflation combined with generally strong economic releases prompted talks of overnight policy rate hike towards endnovember Into 2018, the Pacific Cash Fund benefited from higher reinvestment rates as commercial banks revised their deposit rates following the increase in the overnight policy rate by 25 basis points. Besides higher deposit rates, the Fund benefited from higher tender yields on selected commercial papers from the primary market. Fixed income allocations were managed within 7088% before dipping below 30% towards enddecember as the Fund reinvested its commercial papers maturities into cash deposits in view of the potential overnight policy rate adjustments. Thereafter, the Fund reinvested its cash maturities in shortdated bonds and longertenured commercial paper holdings for yield enhancements % % % Fixed Income Securities 7.45% Cash & Liquid Assets As at 30 September 2018 As at 30 September 2017 The fixed income securities allocation of Pacific Cash Fund decreased to 58.92% as at 30 September 2018 from 92.55% recorded at the beginning of the financial year under review mainly due to shortterm maturities and active cash management strategies. Analysis Of Net Asset Value The net asset value (NAV) per unit of Pacific Cash Fund increased from to during the financial year under review. Meanwhile, total NAV of the Fund decreased from 22,906,113 to 18,653,217 due to fund redemptions. 8

10 Market Review Bond Market Review Yields were on a general uptrend as interest rates rose on higher growth expectations. Macroeconomic data continued to surprise positively which has led the Federal Reserve (Fed) to move ahead with four rate hikes during the financial year under review despite continued benign inflation. Into 2018, yields rose at a robust pace as strong jobs data gave further fuel to growth and inflation expectations on the back of the US tax reform bill passed in December. The 10year yield touched its psychological 3% threshold on several counts during the year following hawkish policy tones and a stream of positive data before the Turkish headlines and heightened US China trade tensions caused yields to oscillate within % before closing the period at 3.06%. The Federal Open Market Committee (FOMC) saw a change of helm as Jerome Powell took over as the new Fed chair in early February. Shortterm yields remained under pressure as the new Fed chair stayed on course with its monetary normalization. The Fed funds rate was raised three times under the new chairmanship to a target range of %. The latest summary of economic projections showed the Fed solidifying around a fourth rate increase this year and more supportive of further rate hikes through During the financial year, the 2year Treasury increased by 135 basis points to 2.82% while the 10year yield rose by 73 basis points to 3.06%. Higher Treasury yields during the financial year represented expectations of higher levels of inflation and stronger economic growth, a view shared by the bond market and the Federal Reserve. The local bond yields closed marginally higher during the financial year on the back of weaker Treasuries and the overnight policy rate hike in January. Yields started to move higher boosted by rate hike expectations following hawkish assessments by Bank Negara on its intention to review the current degree of monetary accommodation. Soon after, the Monetary Policy Committee (MPC) delivered a 25 basis points hike in the overnight policy rate to 3.25% in the January meeting, in light of the steady economic growth and in a bid to preempt the buildup of risks as a result of prolonged low interest rates. Thereafter, the local bond market saw a general upward trend across the curve with sentiment largely affected by rising Treasury yields coupled with the postelection selloff. Market players were cautious over the policy direction of the new government and more importantly its implications on the Ringgit and fiscal impact from the implementation of the new government s key election proposals such as abolishment of GST and reintroduction of fuel subsidies. Towards the end of 3Q2018, trade tensions and a strong Dollar continued to dominate headlines. Buying momentum were sustained by the weakerthanexpected second quarter GDP which came in at 4.50% as well as the continued soft headline inflation which rose by 1.30% for the first eight months of the year. Meanwhile, the overnight policy rate was maintained at 3.25% after the first hike in January. Over the financial year, the 3year MGS increased by 22 basis points to 3.61% while the 10year yields increased by a lesser quantum of 15 basis points to 4.07%. 9

11 Income Distribution Gross distribution per unit Net distribution per unit NAV per unit before declaration (as at 28 September 2018) NAV per unit after declaration (as at 28 September 2018) Pacific Cash Fund 1.60 sen ( : sen : sen : sen : sen) 1.60 sen ( : sen : sen : sen : sen) Unit Split Not applicable Significant Changes In The State Of Affairs Of The Fund Any reference to the Goods and Services Tax ( GST ) and Goods and Services Tax 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 did not receive any soft commissions. 10

12 REPORT OF THE TRUSTEE To the Unitholders of We, MTRUSTEE BERHAD, being the Trustee of ( the Fund ), are of the opinion that in its capacity as Manager of the Fund, PACIFIC MUTUAL FUND BHD ( the Manager ), has managed the Fund for the financial year ended 30 September 2018 in accordance with the following: (a) limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; (b) valuation/pricing of units of the Fund is carried out in accordance with the Deeds and relevant regulatory requirements; (c) creation and cancellation of units are carried out in accordance with the Deeds and relevant regulatory requirements; and (d) the distribution of income by the Fund is appropriate and reflects the investment objectives of the Fund. For and on behalf of the Trustee MTRUSTEE BERHAD NURIZAN JALIL Chief Executive Officer Selangor, Malaysia 1 November

13 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 16 to 36 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 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

14 INDEPENDENT AUDITORS REPORT To the Unitholders of Report On The Audit Of The Financial Statements Opinion We have audited the financial statements of ( 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 16 to 36. 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. 13

15 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. 14

16 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

17 STATEMENT OF FINANCIAL POSITION As at 30 September 2018 Assets Investments Interest receivable Amount due from Manager Cash and cash equivalents Total Assets Note ,991,311 39,734 55,820 7,723,873 18,810, ,199, ,485 9,979 1,698,535 23,100,535 Liabilities Amount due to Manager Other payables Distribution payable Total Liabilities ,703 10, , ,521 6,217 12, , ,422 Net Asset Value Of The Fund 18,653,217 22,906,113 Equity Unitholders capital Retained earnings Availableforsale reserves Net Asset Value Attributable To Unitholders 13 17,494,883 1,156,614 1,720 18,653,217 21,565,449 1,336,696 3,968 22,906,113 Total Equity And Liabilities 18,810,738 23,100,535 Number Of Units In Circulation (Units) 14 35,675,983 43,941,000 Net Asset Value Per Unit (exdistribution) The accompanying notes form an integral part of the financial statements. 16

18 STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 30 September 2018 Investment Income Interest income Net gain from sale of financial assets at fair value through profit or loss Net gains from sale of availableforsale financial assets Net unrealised loss on changes in fair value of financial assets at fair value through profit or loss Expenses Audit fee Tax agent s fee Manager s fee Trustee s fee Administration expenses Note ,503 1, ,237 6,800 3,350 67,736 4,516 17, , ,110, ,474 10,971 (180,075) 1,110,741 6,800 2,500 79,832 10,892 19, ,996 Net Income Before Taxation Taxation Net Income After Taxation , , , ,745 Other Comprehensive Losses Net changes in fair value of availableforsale financial assets (2,248) (14,323) Total Comprehensive Income 753, ,422 Total Comprehensive Income Is Made Up As Follows: Realised income Unrealised losses 756,198 (2,248) 753,950 1,170,820 (194,398) 976,422 The accompanying notes form an integral part of the financial statements. 17

19 STATEMENT OF CHANGES IN NET ASSET VALUE For the financial year ended 30 September 2018 At 1 October 2016 Net income after taxation Other comprehensive loss Creation of units Cancellation of units Distribution At 30 September 2017 Note 12 Unitholders Capital 24,822,719 47,811,281 (51,108,826) 40,275 21,565,449 Retained Earnings 1,332, ,745 (986,931) 1,336,696 Available ForSale Reserves 18,291 (14,323) 3,968 Net Asset Value Attributable To Unitholders 26,173, ,745 (14,323) 47,811,281 (51,108,826) (946,656) 22,906,113 At 1 October 2017 Net income after taxation Other comprehensive loss Creation of units Cancellation of units Distribution At 30 September ,565,449 29,617,111 (33,906,965) 219,288 17,494,883 1,336, ,198 (936,280) 1,156,614 3,968 (2,248) 1,720 22,906, ,198 (2,248) 29,617,111 (33,906,965) (716,992) 18,653,217 The accompanying notes form an integral part of the financial statements. 18

20 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 Interest received Manager s fee paid Trustee 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 Distributions paid Net cash used in financing activities Net Increase/(Decrease) In Cash And Cash Equivalents 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 ,257,500 (31,942,321) 899,786 (69,249) (4,593) (30,038) 11,111,085 29,571,270 (33,906,965) (750,052) (5,085,747) 6,025,338 1,698,535 7,723,873 13,873 7,710,000 7,723, ,292,634 (98,355,482) 854,485 (76,063) (11,595) (29,272) 3,674,707 47,803,919 (51,108,826) (972,412) (4,277,319) (602,612) 2,301,147 1,698,535 18,535 1,680,000 1,698,535 The accompanying notes form an integral part of the financial statements. 19

21 NOTES TO THE FINANCIAL STATEMENTS 30 September The Fund, The Manager And Their Principal Activities Pacific Cash Fund (hereinafter referred to as the Fund ) was constituted pursuant to the execution of a Deed dated 23 September 2005 as amended by the First Supplemental Deed dated 14 February 2006, Second Supplemental Deed dated 28 June 2007, Supplemental Master Deed dated 22 May 2009, Second Supplemental Master Deed dated 14 December 2009, Third Supplemental Master Deed dated 26 April 2010 and its Fourth Supplemental Master Deed dated 8 January 2014 (hereinafter referred to as the Deeds ) made between the Manager, Pacific Mutual Fund Bhd, the Trustee, MTrustee 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 deposits with financial institutions, money market instruments and shortterm debt securities with potentially higher interest or saving rates. The Fund was launched on 7 October 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. 20

22 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 initial application, except for MFRS 9 of which the key area impacted would be as follows: Classification and measurement of financial assets Fixed income securities which are currently classified as availableforsale financial assets and measured at fair value through other comprehensive income will be reclassified under MFRS 9 as at fair value through profit and loss. Accordingly, the availableforsale reserve of 1,720 on transition date of 1 October 2018 will be reclassified to retained earnings. 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)* 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan18 1Jan19 1Jan19 1Jan19 1Jan19 21

23 Effective dates for financial periods beginning on or after 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)* 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 1Jan19 1Jan19 1Jan19 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. 22

24 (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) 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 availableforsale financial assets, 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. AvailableForSale Financial Assets Availableforsale financial assets are those nonderivative financial assets intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices or not classified in any of the other preceding categories. After initial recognition, availableforsale financial assets are measured at fair value with gain or loss recognised in other comprehensive income until the financial asset is derecognised or until the financial asset is determined to be impaired at which time the cumulative gain or loss previously reported in other comprehensive income is transferred from availableforsale reserve to profit or loss. The fair values of fixed income securities are determined by reference to prices quoted by a bond pricing agency (BPA) registered with the Securities Commission Malaysia on a daily basis. 23

25 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, amounts due from Manager 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, 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. (d) 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. (e) 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. AvailableForSale Financial Assets If an availableforsale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from the availableforsale reserve to profit or loss. 24

26 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. 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. (f) 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. Interest income, accretion of discount and amortisation of premium are recognised using the effective interest method on an accrual basis. (g) Unrealised Reserves/(Deficits) The unrealised reserves/(deficits) represent the net gain or loss arising from fixed income securities at their fair value and are recognised in the Statement of Comprehensive Income. (h) Cash And Cash Equivalents Cash and cash equivalents comprise cash at banks and deposits with financial institutions which have an insignificant risk of changes in value. (i) 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. (j) Distribution Distributions made by the Fund are accounted for as a deduction from realised reserves except where distributions are sourced out of distribution equalisation which are accounted for as a deduction from Unitholders Capital. Distributions are recognised in the Statement of Changes in Net Asset Value when they are approved by the Manager and the Trustee. 25

27 (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. (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 AvailableForSale Financial Assets Fixed income securities ,991, ,199,536 26

28 FIXED INCOME SECURITIES The composition of fixed income securities at the reporting date is as detailed below: Name Of Counter Alpha Circle Sdn Bhd Golden Assets International Finance Limited Pac Lease Berhad Sabah Development Bank Berhad Sabah Development Bank Berhad Sabah Development Bank Berhad Sunway Treasury Sukuk Sdn Bhd Sunway Treasury Sukuk Sdn Bhd UNREALISED GAIN FROM FIXED INCOME SECURITIES Credit Rating AA A1 P1 P1 P1 P1 M1 M1 Nominal Value 1,000,000 2,000,000 2,000,000 1,000,000 1,000,000 1,000,000 1,000,000 2,000,000 Cost 1,000,696 2,006,114 1,999, , , , ,273 1,995,250 11,000,000 10,989,591 Fair Value 1,000,230 2,008,300 1,999, , , , ,273 1,995,250 10,991,311 1,720 Fair Value As A % Of Net Asset Value The weighted average rate of return and remaining maturity of fixed income securities at the reporting date were as follows: Fixed income securities Weighted Average Rate Of Return (% Per Annum) Weighted Average Remaining Maturity (Days)

29 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) AvailableForSale Financial Assets Fixed income securities Level 1 Level 2 10,991,311 Total 10,991, AvailableForSale Financial Assets Fixed income securities 21,199,536 21,199,536 The carrying amounts of other financial assets and financial liabilities, approximate fair values due to the relatively short term maturities of these financial instruments. 28

30 5. Cash And Cash Equivalents Cash and cash equivalents include cash at banks and deposits with financial institutions. Cash at bank with a financial institution related to the Manager, OCBC Bank (M) Berhad Deposits with licensed financial institutions: Commercial banks Investment banks Cash and cash equivalents ,873 1,490,000 6,220,000 7,710,000 7,723, ,535 1,680,000 1,680,000 1,698,535 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 banks Investment banks Weighted Average Rate Of Return (% Per Annum) Weighted Average Remaining Maturity (Days) Amount Due From/To Manager The amount due from Manager represents amount receivable for units created while 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 receivable/payable for units created/ cancelled is received/paid within 10 days of the transaction dates. 7. Manager s Fee The Manager s fee provided in the financial statements is computed at 0.3% (2017: 0.3%) per annum of the net asset value attributable to unitholders of the Fund, calculated on a daily basis as agreed by the Trustee and the Manager. 29

31 8. Trustee s Fee The Trustee s fee provided in the financial statements is computed at 0.02% (2017: 0.05%) per annum of the net asset value attributable to unitholders of the Fund, calculated on a daily basis. Effective from 1 March 2017, the Trustee s fee was lowered to 0.02% per annum. 9. 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 lower due to decrease in investing activities. 10. 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 higher due to a lower percentage of decrease in expenses compared with average net asset value attributable to unitholders of the Fund. 11. Taxation Malaysian income tax: Current year s provision Income tax is calculated at the Malaysian statutory rate of taxation of 24% (2017: 24%) of the estimated assessable income for the financial year. There was no taxation charge for the current financial year due to tax exempt income received. 30

32 A reconciliation of income tax expense applicable to net income before taxation at the statutory rate of taxation to income tax expense at the effective rate of taxation is as follows: Net income before taxation , ,745 Taxation at Malaysian statutory rate of 24% Tax effects of: Income not subject to tax Losses not subject to tax Expenses not deductible for tax purpose Restriction on tax deductible expenses for unit trust funds Tax expense for the financial year 181,488 (205,497) 4,461 19, ,779 (309,796) 43,218 6,362 22, Distribution Distributions paid/payable to unitholders during the financial year are as follows: Payment Dates January April July October 2018 Total Gross Distribution Per Unit (sen) 1.60 Net Distribution Per Unit (sen) 1.60 Distribution Amount 306, , , , , January April July October 2017 Total , , , , ,656 31

33 Distribution to unitholders is from the following sources: Interest income Realised gains on sale of investments Previous years realised income Distribution equalisation Less: Expenses Taxation Gross distribution per unit (sen) Net distribution per unit (sen) ,526 1, ,918 (219,288) 838,890 (121,898) 716, , ,267 63,607 (40,275) 1,046,129 (99,473) 946, The unrealised gains arising from investments at the reporting date was 1,720 (2017: 3,968). 13. Net Asset Value Attributable To Unitholders Unitholders capital Retained earnings Realised reserves Availableforsale reserves Net asset value attributable to unitholders ,494,883 1,156,614 1,720 18,653, ,565,449 1,336,696 3,968 22,906,113 The net asset value per unit is rounded up to four decimal places. 14. Number Of Units In Circulation At beginning of the financial year Creation Cancellation At end of the financial year 2018 No. Of Units 43,941,000 56,429,983 (64,695,000) 35,675, No. Of Units 50,380,000 91,656,000 (98,095,000) 43,941,000 32

34 15. Units Held By The Manager And Its Related Parties Manager No. Of Units^ 14, ,385 No. Of Units^ 3, ,803 There were no units held by other related parties. ^ All units are held legally by the Manager as per the unitholders register. 16. Transactions With Brokers/Dealers Details of transactions with the brokers/dealers for the financial year are as follows: Brokers/Dealers AmBank (M) Bhd Kenanga Investment Bank Berhad Malayan Banking Bhd RHB Investment Bank Bhd CIMB Bank Berhad Hong Leong Bank Bhd The transactions above are with non related parties. Value Of Trade 14,919,447 8,970,493 4,009,690 2,057,201 1,985,490 1,007,500 32,949,821 % Of Total Trades Financial Risk Management Objectives And Policies The Fund is exposed to a variety of risks which include market risk, credit risk, liquidity risk, specific risk and single issuer risk. Financial risk management is carried out through policy reviews, internal control systems and adherence to the investment restrictions as stipulated in the Securities Commission Malaysia s Guidelines on Unit Trust Funds in Malaysia. (i) Market Risk The Fund s principal exposure to market risk arises primarily due to changes in the market environment, global economic and geopolitical developments. The Fund seeks to diversify some of these risks by investing into different sectors to mitigate risk exposure to any single asset class. 33

35 The Fund s market risk is affected primarily by the following risks: (a) Interest Rate Risk This risk refers to the effect of interest rate changes on the market value of fixed income securities and returns on deposits with financial institutions. In the event of reduction in interest rates, the return on deposits with financial institutions will decrease while prices of fixed income securities will increase and vice versa, thus affecting the net asset value of the Fund. This risk will be minimised via the management of the duration structure of the portfolio of fixed income securities and deposits with financial institutions. The Fund s exposure to interest rate risk with respect to fixed income securities is not considered to be significant at the reporting date and consequently no sensitivity analysis on interest rate risk has been presented. (ii) Credit Risk The Fund s principal exposure to credit risk arises primarily due to changes in the financial conditions of an issuer or a counterparty to make payment of principals, interest and proceeds from realisation of investments. Such events can lead to loss of capital or delayed or reduced profit for the Fund resulting in a reduction in the Fund s net asset value and thus, unit price. This risk is mitigated by setting counterparty limits and vigorous credit analyses. Credit risk generally arises from investments, cash and cash equivalents and other receivables. The maximum exposure to credit risk is presented in the Statement of Financial Position. None of these balances are impaired. Cash and cash equivalents are placed in financial institutions with strong credit ratings. Fixed income securities are either governmentguaranteed or rated by RAM Rating Services Berhad ( RAM ) or Malaysian Rating Corporation Berhad ( MARC ). 34

36 The following table analyses the Fund s portfolio of fixed income securities by rating categories at the reporting date: 2018 RAM Credit Rating A1 MARC Credit AA MARCST* Credit Rating M1 RAMST* Credit Rating P1 As A % Of Net Asset Value RAM Credit Rating AA2 AA3 A1 MARC Credit Rating AAA * ST denotes shortterm ratings definitions. RAMST* Credit Rating M1 RAMST* Credit Rating P1 As A % Of Net Asset Value (iii) Liquidity Risk This risk occurs in thinly traded or illiquid securities. Should the Fund need to sell a relatively large amount of such securities, the act itself may significantly depress the selling price. The risk is minimised by maintaining a prudent level of liquid assets that allows the Fund to meet daily redemption of units without jeopardising potential returns. The maturity of the Fund s financial liabilities fall due within three months while the net asset value attributable to unitholders are repayable on demand. (iv) Specific Risk The Fund is exposed to the individual risks of the respective companies issuing securities which includes changes to the business performance of the company, consumer tastes and demands, lawsuits and management practices. This risk is minimised through the diversification of the portfolio of investments of the Fund. 35