Hong Leong Consumer Products Sector Fund

Transcription

1 Reaching out to you Hong Leong Consumer Products Sector Fund Interim Report 2017/ March 2018 Unaudited

2 Hong Leong Consumer Products Sector Fund Contents Page Manager s Review and Report 1-10 Statement by the Manager 11 Trustee s Report 12 Condensed Statement of Comprehensive Income 13 Condensed Statement of Financial Position 14 Condensed Statement of Changes In Equity 15 Condensed Statement of Cash Flows 16 Notes To The Condensed Financial Statements Performance Data Corporate Information 44 Corporate Directory 45 HONG LEONG CONSUMER PRODUCTS SECTOR FUND 1

3 Manager s Review and Report I. FUND INFORMATION Fund Name Hong Leong Consumer Products Sector Fund Fund Category Equity Fund Type Growth Investment Objective To provide the Malaysian public with an affordable and flexible access into an investment portfolio that focuses solely on securities that are classified under the Bursa Malaysia Consumer Product sector. Benchmark Bursa Malaysia Consumer Product Index Distribution Policy The Fund intends to provide Unitholders with Long-Term^ capital growth. As such, cash distribution will be incidental to the overall capital growth objective and a substantial portion of the income returns from investments will be reinvested. The Fund may also declare distributions in the form of additional Units to its Unitholders. Breakdown of Unitholdings By Size Size of Holdings No. of Accounts No. of Units Held 5,000 and below , ,001 to 10, ,523, ,001 to 50, ,819, ,001 to 500, ,879, ,001 and above 26 98,182, Note: ^ Long-Term refers to a period of above 5 years. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 1

4 II. FUND PERFORMANCE Chart 1: Performance of the Fund versus the benchmark covering the last five-year financial period Percentage Growth Mar Mar Mar Mar Mar Mar-2018 From 31/03/2013 To 31/03/2018 Hong Leong Consumer Products Sector Fund (HLCPSF) Bursa Malaysia Consumer Product Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per Unit-to-NAV Per Unit basis with gross income (if any) from HLCPSF reinvested. Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. 2 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

5 Performance Review This Interim Report covers the six-month financial period from 1 October 2017 to 31 March The Fund posted a return of 9.29% in the past six months while its benchmark the Bursa Malaysia Consumer Products Index registered a return of 12.75%. During the financial period under review, the Fund had distributed an income distribution of 2.50 sen per unit to its Unitholders on 16 January Prior to the income distribution, the cum-distribution net asset value (NAV) per unit of the Fund was RM while the ex-distribution NAV per unit after the distribution was RM Unitholders should note that income distribution has the effect of reducing the NAV per unit of the Fund after distribution. For the five-year financial period ended 31 March 2018, the Fund registered a return of 54.09% compared to the benchmark s return of 27.62% while distributing a total gross income of sen per unit. Table 1: Performance of the Fund for the following periods as at 31 March 2018 (Source: Lipper For Investment Management) 31/12/17 30/09/17 31/03/17 31/03/16 31/03/15 31/03/13 31/03/08 29/08/00 HLCPSF (%) 31/03/18 3 Months /03/18 6 Months /03/18 1 Year /03/18 2 Years /03/18 3 Years /03/18 5 Years /03/18 10 Years /03/18 Since Launch Benchmark (%) HONG LEONG CONSUMER PRODUCTS SECTOR FUND 3

6 Table 2: Return of the Fund based on NAV Per Unit-to-NAV Per Unit basis for the period 30 September 2017 to 31 March 2018 (Source: Lipper For Investment Management) NAV Per Unit Benchmark vs Benchmark (%) 31-Mar-18 RM Sep-17 RM0.3794* Return (%) 9.29# * Based on NAV per unit on 29 September 2017 as 30 September 2017 was a weekend. # Return is calculated after adjusting for income distribution of 2.50 sen per unit on 16/01/2018. Table 3: Financial Highlights The Net Asset Value attributable to Unitholders is represented by: 31-Mar-18 (RM) 30-Sep-17 (RM) Change (%) Unitholders Capital Retained Earnings Net Asset Value 48,916,227 16,811,824 65,728,051 53,070,185 11,939,342 65,009, Units in Circulation 169,235, ,373, HONG LEONG CONSUMER PRODUCTS SECTOR FUND

7 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 Highest NAV Per Unit (RM) Lowest NAV Per Unit (RM) Capital Growth (%) Income Distribution (%) Total Return (%) Financial Period 30/09/17 31/03/ Financial Year 30/09/16 30/09/ Financial Year 30/09/15 30/09/ Financial Year 30/09/14 30/09/ Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per Unit-to-NAV Per Unit basis with gross income (if any) from HLCPSF reinvested. Table 5: Average Total Return of the Fund Average Total Return (%) 31/03/17 31/03/18 1 Year /03/15 31/03/18 3 Years /03/13 31/03/18 5 Years Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per Unit-to-NAV Per Unit basis with gross income (if any) from HLCPSF reinvested. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 5

8 Table 6: Annual Total Return of the Fund Financial Year Annual Total Return (%) 30/09/16 30/09/ /09/15 30/09/ /09/14 30/09/ /09/13 30/09/14 30/09/12 30/09/ Source: Lipper For Investment Management, In Malaysian Ringgit terms, exdistribution, NAV Per Unit-to-NAV Per Unit basis with gross income (if any) from HLCPSF reinvested III. INVESTMENT PORTFOLIO Chart 2: Asset Allocation - October 2017 to March 2018 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Equities 6 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

9 Chart 3: Sector Allocation as at 31 March 2018 Deposits & Cash Equivalents 19.56% Consumer Products 80.44% Strategies employed during the period under review During the period under review, the Fund built positions in consumer companies helmed by competent management. The Fund also bought consumer companies that have pricing power and employ business models that will prevail in an environment of rising costs. Within the consumer sector space, we maintain our preference for reputable consumer staples stocks with a good profitability track record. The Fund looks to invest in selected consumer stocks that are likely to benefit from a rebound in consumer spending. The Fund also seeks to maintain exposure to consumer staples that tend to stay in demand regardless of economic conditions. As of 31 March 2018, the Fund s top three holdings are Nestle (Malaysia) Berhad (11.26%), Carlsberg Brewery Malaysia Berhad (11.02%) and Heineken Malaysia Berhad (8.74%). 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. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 7

10 IV. MARKET REVIEW During the period under review, the MSCI AC Asia Pacific ex Japan Index rose 6.5%. The best performing markets were Hong Kong and Singapore while the laggards were China and Philippines. In the local market, the FTSE Bursa Malaysia KLCI rose 6.1%. Small caps underperformed as the FTSE Bursa Malaysia Small Cap Index declined 12.4%. The fourth quarter of 2017 saw markets ending the year on a high note. Market sentiment was predominantly supported by strong Euro economic growth data and approval of the US tax reform bill by the House of Representatives. Commodities also posted solid performance as due to strong global economic data, extension of the current Organization of the Petroleum Exporting Countries (OPEC) and non-opec deal to limit production and prolonged drawdown in the US crude inventories. After a very smooth year for equity markets in 2017, volatility reared its ugly head in the first quarter of The sell-off was initially sparked by investors worries about faster-than-expected inflation and faster-than-expected rise in interest rates. Just as markets appeared to have stabilised, another wave of sell-off was triggered by fears of a trade war between US and China. The Malaysia market was trading sideways in a tight range for most of the second half of 2017 due to lack of catalysts. The Budget 2018 failed to lift market sentiments despite the rise in crude oil prices and Ringgit. The lacklustre results season also capped upside to the market. The FTSE BM KLCI did rise to a new high in December on the back of window dressing activities. The return of foreign investors and rising commodity prices also helped boost market sentiment at the end of the year. The Malaysia market got off to what appeared to be a two-speed trend as the large-cap stocks continued to trend higher while small-cap stocks experienced intense selling pressure during the first quarter of Financials led the main index higher on the back of Bank Negara Malaysia s rate hike in January Foreign inflows into bigcap stocks carried the index higher as foreign investors confidence rose on the back of higher oil prices and strengthening Ringgit. 8 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

11 V. FUTURE PROSPECTS AND PROPOSED STRATEGIES The global macro outlook appears very encouraging. Economic data in the US shows that the economy is on solid footing and is expected to continue to grow at a healthy pace in We expect corporate earnings in the US to continue to grow on the back of strong economic growth and implementation of the new US tax law reforms. The pace of economic growth in Europe is also accelerating. Unemployment rate continues to fall to new multi-year lows while the Purchasing Managers Index (PMI) readings imply robust manufacturing activity in the region. For the local market, we expect the main index to trade sideways. We expect the strong economic numbers, improving global demand growth and rising commodity prices to attract more foreign investor inflows into the local market. However, we expect the uncertainties over the coming general election, rising cost pressures for businesses and tepid corporate earnings growth to contribute to more volatility in the local market. We would take the opportunity to accumulate stocks that we like in the event of a market correction. We are positive on well-managed companies that will benefit from possible government pump priming such as those in the consumer sector. We continue to be invested in selected large-cap stocks that are trading at attractive valuations and selected export stocks that will benefit from improving external demand outlook. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 9

12 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. 10 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

13 STATEMENT BY THE MANAGER I, Hoo See Kheng, as the Director of Hong Leong Asset Management Bhd, do hereby state that, in the opinion of the Manager, the accompanying unaudited condensed financial statements set out on pages 13 to 41 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 March 2018 and of its financial performance, changes in equity and cash flows for the financial period ended 31 March 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 21 May 2018 HONG LEONG CONSUMER PRODUCTS SECTOR FUND 11

14 TRUSTEE S STATEMENT REPORT BY THE MANAGER TO THE UNITHOLDERS OF HONG LEONG CONSUMER PRODUCTS SECTOR FUND We have I, Hoo acted See Kheng, as the Trustee as the Director for Hong of Leong Hong Leong Consumer Asset Products Management Sector Fund Bhd, ( the do Fund ) hereby for state the financial that, in period the opinion ended 31 of March the Manager, To the best accompanying of our knowledge, unaudited for the condensed financial period financial under statements review, Hong set out Leong Asset pages Management 12 to 43 are Bhd drawn ( the Manager ) up in accordance has operated with the and provision managed of the the Deeds and give a true and fair view of the financial position of the Fund in accordance with the following: Fund as at 28 February 2017 and of its financial performance, changes in equity and cash flows for the financial period ended 28 February (a) limitations imposed on the investment powers of the Manager under 2017 in accordance with the Malaysian Financial Reporting Standards the Deed(s), the Securities Commission s Guidelines on Unit Trust Funds, ( MFRS ) 134 Interim Financial Reporting and International Financial the Capital Markets and Services Act 2007 and other applicable laws; Reporting Standards ( IFRS ) 34 Interim Financial Reporting. (b) valuation and pricing for the Fund is carried out in accordance with For and on behalf of the Manager, the Deed(s) of the Fund and applicable regulatory requirements; and Hong Leong Asset Management Bhd (Company No.: M) (c) creation and cancellation of units for the Fund are carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements. We are of the view that the distribution made during the financial period HOO SEE KHENG ended Chief 31 March Executive 2018 Officer/Executive by the Manager is Director not inconsistent with the objectives of the Fund. Kuala Lumpur 17 April 2017 For Deutsche Trustees Malaysia Berhad Soon Lai Ching Senior Manager, Trustee Operations Richard Lim Hock Seng Chief Executive Officer Kuala Lumpur 21 May HONG LEONG CONSUMER PRODUCTS SECTOR FUND

15 CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2017 TO 31 MARCH Note RM RM INVESTMENT INCOME Interest income 4 118, ,740 Dividend income 470, ,217 Net gain on financial assets at fair value through profit or loss ( FVTPL ) 10 6,010, ,006 6,599, ,963 EXPENDITURE Management fee 5 (488,185) (456,595) Trustee s fee 6 (26,037) (24,352) Auditors remuneration (2,493) (2,493) Tax agent s fee (1,290) (1,650) Transaction costs (99,707) (48,911) Other expenses (50,098) (49,681) (667,810) (583,682) PROFIT BEFORE TAXATION 5,931, ,281 Taxation PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 5,931, ,281 Profit after taxation is made up as follows: Realised amount 2,137,751 88,084 Unrealised amount 3,793, ,197 5,931, ,281 Distributions for the financial period: Net distributions 8 4,047,198 9,267,085 Net distributions per unit (sen) Gross distributions per unit (sen) The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 13

16 CONDENSED STATEMENT OF FINANCIAL POSITION (Unaudited) AS AT 31 MARCH Note RM RM ASSETS Cash and cash equivalents 9 12,784,908 10,794,207 Financial assets at fair value through profit or loss ( FVTPL ) 10 52,870,281 53,094,867 Amount due from brokers/dealers 204, ,552 Amount due from the Manager-creation of units 1, ,335 Dividends receivable 32, ,870 Tax recoverable 7,591 7,591 TOTAL ASSETS 65,901,039 65,118,422 LIABILITIES Amount due to the Manager-cancellation of units 65,519 - Amount due to the Manager-management fee 84,176 80,379 Amount due to the Trustee 4,489 4,287 Amount due to the Manager-expenses 1,666 - Distribution payable 5,018 11,015 Other payables and accruals 12,120 13,214 TOTAL LIABILITIES 172, ,895 NET ASSET VALUE OF THE FUND 65,728,051 65,009,527 EQUITY Unitholders capital 48,916,227 53,070,185 Retained earnings 16,811,824 11,939,342 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 65,728,051 65,009,527 UNITS IN CIRCULATION (UNITS) ,235, ,373,222 NET ASSET VALUE PER UNIT (RM) The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 14 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

17 CONDENSED STATEMENT OF CHANGES IN EQUITY (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2017 TO 31 MARCH 2018 Unitholders Retained capital earnings Total Note RM RM RM Balance as at 1 October ,070,185 11,939,342 65,009,527 Movement in net asset value: Creation of units from applications 8,625,311-8,625,311 Creation of units from distributions 4,026,677-4,026,677 Cancellation of units (13,817,787) - (13,817,787) Total comprehensive income for the financial period - 5,931,521 5,931,521 Distributions for the financial period 8 (2,988,159) (1,059,039) (4,047,198) Balance as at 31 March ,916,227 16,811,824 65,728,051 Balance as at 1 October ,010,990 11,131,306 57,142,296 Movement in net asset value: Creation of units from applications 15,140,472-15,140,472 Creation of units from distributions 9,120,255-9,120,255 Cancellation of units (5,536,893) - (5,536,893) Total comprehensive income for the financial period - 335, ,281 Distributions for the financial period 8 (6,995,343) (2,271,742) (9,267,085) Balance as at 31 March ,739,481 9,194,845 66,934,326 The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 15

18 CONDENSED STATEMENT OF CASH FLOWS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2017 TO 31 MARCH RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sales of financial assets at FVTPL 18,778, ,522 Purchase of financial assets at FVTPL (12,387,969) (14,485,563) Interest received 118, ,740 Dividends received 611, ,024 Management fee paid (484,388) (443,172) Trustee s fee paid (25,835) (23,636) Payment for other fees and expenses (53,309) (53,312) Tax refund received - 11,806 Net cash generated from/(used in) operating activities 6,557,287 (13,824,591) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 9,212,200 15,014,279 Payments for cancellation of units (13,752,268) (5,477,874) Distributions paid (26,518) (136,583) Net cash (used in)/generated from financing activities (4,566,586) 9,399,822 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,990,701 (4,424,769) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD 10,794,207 16,250,857 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 12,784,908 11,826,088 The accompanying notes to the financial statements form an integral part of these unaudited condensed financial statements. 16 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

19 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2017 TO 31 MARCH THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Hong Leong Consumer Products Sector Fund ( the Fund ) was constituted pursuant to the execution of a Deed dated 25 July 2000 and Supplemental Deeds dated 18 December 2000, 8 March 2004 and 30 April 2010 between the Manager, Hong Leong Asset Management Bhd, Universal Trustee (Malaysia) Berhad and the registered unitholders of the Fund. Universal Trustee (Malaysia) Berhad has been replaced with Deutsche Trustees Malaysia Berhad ( the Trustee ) effective 1 August 2013 and Supplemental Master Deeds were entered into between the Manager, the Trustee and the registered unitholders of the Fund on 30 May 2013 and 25 March 2015 to effect the change ( the Deeds ). The Fund s primary objective is to provide the Malaysian public with an affordable and flexible access into an investment portfolio that focuses solely on securities that are classified under the Bursa Malaysia Consumer Product sector. The Fund will aim to outperform the said sector s benchmark index which is the Bursa Malaysia Consumer Product Index, while assuming a risk level that matches that of the said sector. The Fund s will invest into a diversified portfolio of equities involved in the consumer product sector. The consumer product sector comprises companies that produce, manufacture and distribute materials or components into new products for consumer use. These companies include but are not limitied to companies involved in the food, beverage, tobacco, household goods, fashion, apparel, footwear, textiles and automobiles industries. The Fund commenced operations on 29 August 2000 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 21 May HONG LEONG CONSUMER PRODUCTS SECTOR FUND 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The condensed financial statements are unaudited and have been prepared in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) 134 Interim Financial Reporting and International Financial Reporting Standards ( IFRS ) 34 Interim Financial Reporting. The condensed financial statements should be read in conjuction with the audited financial statements of the Fund for the financial year ended 30 September 2017 which have been prepared in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). (b) Financial assets and financial liabilities Classification Financial assets are designated at fair value through profit or loss when their performance are managed and evaluated on a fair value basis. The Fund designates its investments in quoted equity securities as financial assets at fair value through profit or loss at inception. Loans and receivables are non-derivative 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 comprise cash and cash equivalents, amount due from brokers/dealers, amount due from the Manager-creation of units and dividends receivable. 18 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

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

22 Quoted investments are valued at the last done market prices quoted on Bursa Malaysia Securities Berhad ( Bursa Securities ) at the date of the statement of financial position. If a valuation based on the market price does not represent the fair value of the quoted investments, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. Deposits with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the respective deposits, which is a close estimate of their fair value due to the short term nature of the deposits. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. 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. 20 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

23 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. (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 ( RM ), which is the Fund s functional and presentation currency. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 21

24 (d) Income recognition Dividend income is recognised on the ex-dividend date when the Fund s right to receive payment is established. Interest income from deposits with licensed financial institutions is recognised on the effective interest method on an accrual basis. Realised gain or loss on disposal of quoted investments is accounted for as the difference between the net disposal proceeds and the carrying amount of quoted investments, determined on a weighted average cost basis. (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise cash at banks and deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (f) Amount due from/to brokers/dealers Amount due from/to brokers/dealers represents receivables/ payables for investments sold/purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. 22 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

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

26 (j) Unitholders capital The unitholders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the unitholder to a proportionate share of the Fund s net asset value; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units; and the total expected cash flows from the units over its life are based substantially on the profit or loss and change in the net asset value of the Fund. The outstanding units are carried at the redemption amount that is payable at the date of the statement of financial position if unitholder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s net asset value per unit at the time of creation and cancellation. The Fund s net asset value per unit is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. (k) Segmental information Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, 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. 24 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

27 (l) Fair value of financial instruments Financial instruments comprise financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The information presented herein represents the estimates of fair values as at the date of the statement of financial position. The Fund s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on the respective classification. The following table analyses the financial assets and financial liabilities of the Fund in the statement of financial position as at the reporting date: Loans and receivables/ Financial other assets financial at FVTPL liabilities Total RM RM RM Financial assets Cash and cash equivalents (Note 9) - 12,784,908 12,784,908 Financial assets at FVTPL (Note 10) 52,870,281-52,870,281 Amount due from brokers/dealers - 204, ,745 Amount due from the Manager -creation of units - 1,446 1,446 Dividends receivable - 32,068 32,068 52,870,281 13,023,167 65,893,448 Financial liabilities Amount due to the Manager -cancellation of units - 65,519 65,519 Amount due to the Manager -management fee - 84,176 84,176 Amount due to the Trustee - 4,489 4,489 Amount due to the Manager -expenses - 1,666 1,666 Distribution payable - 5,018 5,018 Other payables and accruals - 12,120 12, , ,988 HONG LEONG CONSUMER PRODUCTS SECTOR FUND 25

28 Loans and receivables/ Financial other assets financial at FVTPL liabilities Total RM RM RM Financial assets Cash and cash equivalents (Note 9) - 10,794,207 10,794,207 Financial assets at FVTPL (Note 10) 53,094,867-53,094,867 Amount due from brokers/dealers - 460, ,552 Amount due from the Manager -creation of units - 588, ,335 Dividends receivable - 172, ,870 53,094,867 12,015,964 65,110,831 Financial liabilities Amount due to the Manager -management fee - 80,379 80,379 Amount due to the Trustee - 4,287 4,287 Distribution payable - 11,015 11,015 Other payables and accruals - 13,214 13, , ,895 (m) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Funds results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgments are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 26 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

29 In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the Securities Commission Malaysia s Guidelines on Unit Trust Funds. However, the Manager is of the opinion that there are no accounting policies which require significant judgment to be exercised. 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 bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine the point within the bid-ask spread that is 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 over-the-counter derivatives, include the use of comparable recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 27

30 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 on-going 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) 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 28 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

31 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 RM RM RM RM Financial assets at FVTPL: - Quoted equity securities 52,870, ,870, Financial assets at FVTPL: - Quoted equity securities 53,094, ,094,867 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Fund does not adjust the quoted prices for these instruments. The Fund s policies on valuation of these financial assets are stated in Note 2(b). (ii) The carrying values of financial assets (other than financial assets at FVTPL) and financial liabilities are a reasonable approximation of their fair values due to their short term nature. HONG LEONG CONSUMER PRODUCTS SECTOR FUND 29

32 4. INTEREST INCOME RM RM Interest income from: - Deposits with licensed financial institutions 118, , MANAGEMENT FEE In accordance with Division 13.1 of the Deed, the Manager is entitled to a management fee of up to 1.50% per annum calculated daily based on the net asset value of the Fund. For the financial period from 1 October 2017 to 31 March 2018, the management fee is recognised at a rate of 1.50% ( to : 1.50%) 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 0.08% per annum calculated daily based on the net asset value of the Fund. For the financial period from 1 October 2017 to 31 March 2018, the trustee s fee is recognised at a rate of 0.08% ( to : 0.08%) per annum. There will be no further liability to the Trustee in respect of trustee s fee other than the amount recognised above. 30 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

33 7. TAXATION RM RM Tax charge for the financial period: Current taxation - - The numerical reconciliation between profit before taxation multiplied by the Malaysian statutory income tax rate and tax expense of the Fund is as follows: RM RM Profit before taxation 5,931, ,281 Taxation at Malaysian statutory rate of 24% (2017: 24%) 1,423,565 80,467 Tax effects of: Investment income not subject to tax (1,583,839) (220,551) Expenses not deductible for tax purposes 32,350 19,239 Restriction on tax deductible expenses for unit trust fund 127, ,845 Taxation - - HONG LEONG CONSUMER PRODUCTS SECTOR FUND 31

34 8. DISTRIBUTIONS RM RM Prior financial years realised income 1,059,039 2,271,742 Distribution equalisation 2,988,159 6,995,343 Net distributions amount 4,047,198 9,267,085 Net distributions per unit (sen) Gross distributions per unit (sen) Date of Declaration Distribution on 18 October Net distribution per unit (sen) Gross distribution per unit (sen) Distribution on 16/18 January Net distribution per unit (sen) Gross distribution per unit (sen) Net distributions above are sourced from prior financial years 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. Distribution equalisation represents the average amount of distributable income included in the creation and cancellation prices of units. It is computed as at each date of creation and cancellation of units. For the purpose of determining amount available for distribution, distribution equalisation is included in the computation of distribution available for unitholders. 32 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

35 9. CASH AND CASH EQUIVALENTS RM RM Deposits with licensed financial institutions 12,749,253 10,714,996 Cash at banks 35,655 79,211 12,784,908 10,794,207 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 2 days ( : 2 days). 10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS ( FVTPL ) RM RM Financial assets at FVTPL: Quoted equity securities 52,870,281 53,094, RM RM Net gain on financial assets at FVTPL: Realised gain/(loss) on disposals 2,216,500 (123,191) Changes in unrealised fair values 3,793, ,197 6,010, ,006 HONG LEONG CONSUMER PRODUCTS SECTOR FUND 33

36 Financial assets at FVTPL as at 31 March 2018 are as detailed below: QUOTED EQUITY SECURITIES Percentage Aggregate Fair of net asset Quantity cost value value units RM RM % Consumer Products Apollo Food Holdings Berhad 237, , , Carlsberg Brewery Malaysia Berhad 383,500 5,209,492 7,240, Classic Scenic Berhad 543, , , Dutch Lady Milk Industries Berhad 56,600 2,642,271 3,877, Fraser & Neave Holdings Bhd 148,500 3,753,538 4,956, Heineken Malaysia Berhad 276,300 4,405,777 5,747, Hong Leong Industries Berhad 195, ,053 2,127, IGB Berhad (formerly known as Goldis Berhad) 530,000 1,540,206 1,584, Kawan Food Berhad 423,333 1,325, , Khind Holdings Berhad 531,600 1,165,644 1,015, Nestle (Malaysia) Berhad 47,900 3,084,379 7,400, New Hoong Fatt Holdings Berhad 125, , , Oriental Holdings Berhad 305,300 2,359,174 1,902, Panasonic Manufacturing Malaysia Berhad 147,500 3,315,093 5,103, Power Root Berhad 550,000 1,178, , PPB Group Berhad 210,000 3,402,033 4,019, QL Resources Berhad 500,000 1,945,260 2,545, Spritzer Bhd 602,500 1,062,735 1,458, TOTAL QUOTED EQUITY SECURITIES 5,814,233 39,383,472 52,870, UNREALISED GAIN ON FINANCIAL ASSETS AT FVTPL 13,486,809 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FVTPL 52,870, HONG LEONG CONSUMER PRODUCTS SECTOR FUND

37 Financial assets at FVTPL as at 30 September 2017 are as detailed below: QUOTED EQUITY SECURITIES Percentage Aggregate Fair of net asset Quantity cost value value units RM RM % Consumer Products Apollo Food Holdings Berhad 314,800 1,122,022 1,567, Bonia Corporation Berhad 1,600,000 1,099, , Carlsberg Brewery Malaysia Berhad 383,500 5,209,492 5,691, Classic Scenic Berhad 543, , , Dutch Lady Milk Industries Berhad 50,600 2,251,333 3,054, Fraser & Neave Holdings Bhd 68,500 1,322,220 1,689, Goldis Berhad 530,000 1,540,206 1,425, Heineken Malaysia Berhad (formerly Guinness Anchor Berhad) 276,300 4,405,777 5,139, Hong Leong Industries Berhad 195, ,053 1,837, Hup Seng Industries Berhad 800, , , Kawan Food Berhad 423,333 1,325,890 1,443, Khind Holdings Berhad 545,000 1,195,026 1,188, Nestle (Malaysia) Berhad 69,900 4,501,004 5,927, New Hoong Fatt Holdings Berhad 125, , , Oriental Holdings Berhad 425,300 3,286,462 2,798, Padini Holdings Berhad 1,250,000 3,481,935 5,687, Panasonic Manufacturing Malaysia Berhad 147,500 3,315,093 5,666, PPB Group Berhad 210,000 3,402,033 3,540, Spritzer Bhd 602,500 1,062,735 1,295, Yee Lee Corporation Bhd 460,000 1,030, , Yoong Onn Corporation Berhad 638, , , TOTAL QUOTED EQUITY SECURITIES 9,659,333 43,401,828 53,094, UNREALISED GAIN ON FINANCIAL ASSETS AT FVTPL 9,693,039 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FVTPL 53,094,867 HONG LEONG CONSUMER PRODUCTS SECTOR FUND 35

38 11. UNITS IN CIRCULATION to to No. of units No. of units At the beginning of the financial period/year 171,373, ,669,383 Add: Creation of units during the financial period/year - Arising from applications 22,673,709 58,401,801 - Arising from distributions 10,906,114 34,697,070 Less: Cancellation of units during the financial period/year (35,717,612) (48,395,032) At the end of the financial period/year 169,235, ,373, MANAGEMENT EXPENSE RATIO ( MER ) % % MER (annualised) Management expense ratio includes management fee, trustee s fee, auditors remuneration, tax agent s fee and other expenses for the financial period divided by the Fund s average net asset value calculated on a daily basis and is calculated as follows: MER = (A+B+C+D+E) X 100 F 36 HONG LEONG CONSUMER PRODUCTS SECTOR FUND

39 Where; A = Management fee B = Trustee s fee C = Auditors remuneration D = Tax agent s fee E = Other expenses excluding Goods and Services Tax ( GST ) on transaction costs F = Average net asset value of the Fund calculated on a daily basis The average net asset value of the Fund for the financial period calculated on a daily basis is RM65,351,675 (2017: RM61,043,758). 13. PORTFOLIO TURNOVER RATIO ( PTR ) Times Times PTR PTR is derived from the following calculation: (Total acquisitions for the financial period + total disposals for the financial period)/2 Average net asset value of the Fund for the financial period calculated on a daily basis Where: total acquisitions for the financial period = RM12,349,717 (2017: RM14,334,191) total disposals for the financial period = RM16,368,072 (2017: RM464,012) HONG LEONG CONSUMER PRODUCTS SECTOR FUND 37