FLEXI GROWTH & INCOME FUND

Transcription

1

2 CONTENTS PAGE 1 General Information 1 2 Manager s Report 3 3 Policy On Stockbroking Rebates And Soft Commissions 9 4 Statement By The Manager 10 5 Trustee s Report 11 6 Independent Auditors Report 12 7 Statement Of Comprehensive Income 15 8 Statement Of Financial Position 16 9 Statement Of Changes In Equity Statement Of Cash Flows Summary Of Significant Accounting Policies Notes To The Financial Statements Corporate Information 50 i

3

4 MANULIFE 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 8 September 2016 and will continue its operations until terminated as provided under Clause 12 of the Deed. 1.2 FUND TYPE / CATEGORY Growth and income / Mixed Assets 1.3 OBJECTIVE OF THE FUND The Fund seeks to provide income* and capital appreciation over a long term period. *Income will be distributed by way of reinvestment as additional units or by payment in cash. Any material change to the Fund s investment objective would require the Unit Holder s approval. 1.4 DISTRIBUTION POLICY Subject to the availability of income, the Fund will distribute income on a semi-annual basis. 1.5 PERFORMANCE BENCHMARK The performance benchmark of the Fund is total return of 8% per annum. This is not a guaranteed return but a benchmark against which the Fund s performance may be measured. The Fund may or may not achieve the target return of 8% per annum in any particular financial year but targets to achieve this growth over the long term. 1.6 INVESTMENT STYLE AND STRATEGY The Fund invests in a diversified portfolio of equities and fixed income securities. The Manager aims to achieve the objective of the Fund by adopting a flexible asset allocation strategy depending on the Manager s tactical view. The Fund will concentrate on investing in asset classes which offer prospects of capital growth and income distribution. There are no fixed sectoral weightings in the allocation of assets for the Fund. The Fund may invest up to 98% of the Fund s NAV in a single asset class of equities or fixed income securities (including money market instruments), and a minimum of 2% of the Fund s NAV in liquid assets. The Fund may invest up to 30% of its NAV in the Asian region, including but not limited to Singapore, Indonesia, Thailand, the Philippines, India, Hong Kong, China, Japan, Korea, Taiwan and Vietnam, or any other countries in the Asian region where the regulatory authority is an ordinary or associate member of the International Organization of Securities Commissions (IOSCO), 1

5 The Manager s strategies on equity investment consist of the following: Adopting a bottom-up approach in identifying companies with potential growth and steady income distribution during the stock selection process. Value-based criteria which identify fundamentally sound companies. These would include those with low valuations relative to their industry peers and those trading at discounts relative to their intrinsic, book or replacement value, focusing on fundamentally sound companies, whose stock prices have experienced sharp declines. The Manager strongly believes in internal research. The Manager conducts in-depth fundamental research on financial health, industry prospects and management quality of the prospective companies before investing. The Manager also adopts an active strategy in meeting the objective of the Fund and focuses on the company s capital structure, intrinsic value, cash flow, replacement costs, revised net asset value (RNAV), management and potential growth trend. Although the Fund is actively managed, the frequency of trading will depend on market opportunities and valuations. The Manager s strategies on fixed income securities and money market investment consist of the following: Invest in highly liquid fixed income securities# and money market instruments. The liquidity of the fixed income securities and money market instruments will depend on market demand and supply for an issuer and/or tenure of the instruments and/or credit ratings of the instruments which in turn will depend on prevailing economic and market conditions. The liquid nature of fixed income securities and money market instruments allows the Manager to easily switch to equities when the Manager sees investment opportunities in the equity market. The Fund may employ derivatives such as foreign exchange forward contracts and/or cross currency swaps for hedging purposes. # Note: Highly liquid fixed income securities mean fixed income securities, which are actively traded. During the financial year under review, the Fund remained guided by its investment objective of investing in a diversified portfolio of companies listed on Bursa Malaysia and up to 30% in foreign equities and equity-related securities in Asia Pacific, whenever opportunities were identified. 2

6 2 MANAGER S REPORT 2.1 FUND PERFORMANCE For the financial year ended 31 May 2018, the Fund s return decreased by 6.93%. The Fund underperformed its benchmark return which increased by 8.00%. The underperformance was due to exposure in the construction sector and stock selection in the industrial products and trading and services sectors. Exposure to foreign stocks also dragged on performance. The gross distribution of 0.43 sen per unit on 28 November 2017 and 0.23 sen per unit on 28 May 2018 had the effect of reducing the NAV per unit of the Fund, and the ex-distribution NAV per unit was RM and RM respectively. The graph below compares the 12-month performance of the Fund against its benchmark return: Fund Performance vs. Benchmark Index Return 10% 8% 6% 4% -2% 0% 2% -4% -4% -8% May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Manulife Flexi Growth and Income Fund Return Jan 18 Feb 18 Mar 18 Apr 18 May 18 Benchmark Index Return Source: Lipper & MAMSB Fund Size The Fund s total NAV decreased to RM11.93mil from RM14.69mil during the financial year under review. Fund s Returns (a) The graph below compares the performance of the Fund since commencement against its benchmark return: 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% Sep 16 Nov 16 Fund Performance vs. Benchmark Index Return Jan 17 Mar 17 May 17 Jul 17 Sep 17 Manulife Flexi Growth and Income Fund Return Source: Lipper & MAMSB Nov 17 Jan 18 Mar 18 May 18 Benchmark Index Return 3

7 (b) Average Total Return of the Fund: For the financial year ended 31 May 2018 Fund (% p.a.) Benchmark (% p.a.) 1 year (6.93) 8.00 Since commencement Commencement date: 8 September 2016 Source: Lipper & MAMSB (c) Annual Total Return of the Fund: For the financial year ended: Fund (% p.a.) Benchmark (% p.a.) 31 May 2018 (6.93) 8.00 Since commencement to 31 May Commencement date: 8 September 2016 Source: Lipper & MAMSB The Fund has achieved its target of providing unit holder investors with capital appreciation based on the Fund s objective since its commencement, with average annual total return of 1.69% p.a; and a current income return of 6.34% in the financial year. BASES OF CALCULATION 1. Net Asset Value (NAV) Net Asset Value of the Fund is determined by deducting the value of all the Fund s liabilities from the value of all the Fund s assets, at the valuation point. 2. Net Asset Value per unit Net Asset Value per unit is the net asset value of the Fund divided by the total number of units in circulation, at the valuation point. 3. Fund s Return Fund s return can be calculated based on the computation methods as follows: Daily Total Fund s Return = {[End NAV (Ex-distribution) - Beginning NAV + Dividend Distribution] / Beginning NAV} x 100% Total Fund s Return Average Total Return = Total Fund s return for the period is derived from geometrically linking together the daily total fund s returns. The linking formula is = [(1+ R 1 ) x (1+ R 2 ) x (1+ R n )] -1 where: R 1 is the first daily return for the period, R 2 is the second daily return for the period, and R n is the last daily return for the period. = Annualised Total Return (Actual number of days in a year/ [(1+ Total fund s return for the period) number of days during the period) -1] x 100% 4

8 The following table shows other financial and performance data of the Fund for the financial period: Fund Data 31 May August 2016 (Launch date) to 31 May 2017 NAV (RM) 11,926,339 14,685,147 Units in Circulation ( 000) 123, ,820 NAV (RM per unit) Highest / Lowest NAV (RM per unit) Total Fund Return (%) NAV Return (%) Income Return (%) Interim Distribution Gross (RM) Net (RM) Ex-date Final Distribution Gross (RM) Net (RM) Ex-date / (6.93) (12.48) / Management Expense Ratio (%) Portfolio Turnover Ratio (times) NOTES (i) Management Expenses Ratio (MER) MER can be calculated based on the ratio of the sum of fees and the recovered expenses of the unit trust fund to the average value of the unit trust fund calculated on a daily basis. Fees of the unit trust fund + Recovered expenses of the unit trust fund Average value of the unit trust fund calculated on a daily basis x 100 Where: Fees Recovered expenses Average value of the unit trust fund = All ongoing fees deducted / deductible directly from the unit trust fund in respect of the period covered by the management expense ratio, expressed as a fixed amount, calculated on a daily basis. This would include the annual management fee, the annual trustee fee and any other fees deducted / deductible directly from the unit trust fund; = All expenses recovered from/ charged to the unit trust fund, as a result of the expenses incurred by the operation of the unit trust fund, expressed as a fixed amount. This should not include expenses that would otherwise be incurred by an individual investor (e.g. brokerage, taxes and levies); and = The NAV of the unit trust fund, including unit trust net income value of the fund, less expenses on an accrued basis, in respect of the period covered by the management expense ratio, calculated on a daily basis. The MER for the financial year is higher as compared to the previous financial year mainly due to the increase in expenses incurred. 5

9 (ii) Portfolio Turnover Ratio (PTR) PTR can be calculated based on the ratio of the average sum of acquisitions and disposals of the unit trust fund for the period to the average value of the unit trust fund for the year calculated on a daily basis. [Total acquisitions of the fund for the year + Total disposals of the fund for the year]/2 Average value of the unit trust fund calculated on a daily basis The PTR for the financial year is higher as compared to the previous financial year mainly due to increase in trading activities. Impact On NAV Arising From Distribution Distributed For The Financial Year Ended 31 May 2018 Cum date Details 25 May November 2017 NAV before distribution (RM per unit) Less: Distribution (RM per unit) (0.0023) (0.0043) NAV after distribution (RM per unit) The Manager wishes to highlight that past performance of the Fund is not an indication of future performance. The price of units and the investment returns may go down, as well as up. 2.2 ASSET ALLOCATION Asset allocation for the past two financial years: % of Net Asset Value Sector Allocation 31 May May 2017 Trading / Services Industrial Products Finance Properties Construction Infrastructure Project Companies Plantation Consumer Products Real Estate Investment Trusts (REITs) Technology Total Investments - Local Total Investments - Foreign Total Quoted Investments Deposits with Licensed Financial Institutions Other Assets & Liabilities

10 Country Allocation MANULIFE % of Net Asset Value 31 May May 2017 Hong Kong/China Singapore South Korea Indonesia Japan Taiwan Thailand Total Investments - Foreign As at 31 May 2018, the Fund was 61.95% invested in Malaysian equities, 18.81% in foreign equities and 19.24% in cash instruments and other assets & liabilities. The Fund s top three allocations, by sectors, were trading & services, industrial products and finance. Trading & services and industrial products sectors saw the largest increase in allocation over the period, while the construction and plantation sectors saw the largest reductions. 2.3 MARKET OUTLOOK AND INVESTMENT STRATEGY During the financial year under review (1st June 2017 to 31st May 2018), global markets continued its uptrend in the first half of the period, supported by several major tailwinds. Economic data from the largest economies pointed towards a synchronised global growth, led by the US, which continued to post strong economic data and corporate earnings. The US Federal Reserve (Fed) expanded on its tightening trajectory by announcing its intention to reduce its USD4.5trn balance sheet. The optimism spilled over to the Asia Pacific markets as sentiment was further supported by a rally in crude oil prices and accommodative statements from Central Banks. China s Communist Party Congress concluded with President Xi Jinping strengthening his position at the top as General Secretary of the Party for another term. In addition, Japan continued its economic revival, registering a sustained gross domestic product (GDP) growth and its central bank reassuring that it intends to maintain its dovish stance. However, this positive momentum snapped when the US reported a stronger-than-expected wage growth in February 2018, raising fears that the Fed could tighten rates faster than expected. This triggered a return of volatility to the markets. It was soon followed by the US and China threatening to enact protectionist measures on trade, which could escalate into a trade war. The 10-year US Treasury yield temporarily breached the psychological 3.0% level in April 2018 for the first time since January 2014, reflecting the potential acceleration in inflation and interest rate hikes. Malaysia however bucked the global trend, with its equity market subdued at the beginning of the period from a lack of fresh catalysts. The FBM KLCI only began to rally strongly in tandem with the region at the end of 2017, spurred by the Bank Negara interest rate hike in January 2018, to reach a record high of 1, on 19 April 2018, ahead of the 14th General Election. However, investors were surprised by the unprecedented defeat of the Barisan Nasional government in 14th General Election (GE 14) on 9 May The FBM KLCI remained steady in the first few days after GE 14 following a peaceful transition, but soon plunged by 6.9% over the month, led by a surge in foreign outflows. For the financial year, the FBM KLCI declined by 1.4% year-on-year (y-o-y). The broader market underperformed, with the FBM Mid 70, FBM Small Cap, and FBM EMAS Shariah index returning -4.0%, -20.0% and -4.9% respectively. Relative to the region, the FBM KLCI underperformed the MSCI Asia ex-japan Index, which recorded an increase of 14.7% y-o-y. 7

11 2.4 ECONOMIC REVIEW AND OUTLOOK We expect market volatility in the region and Malaysia to persist as geopolitical uncertainty remains elevated. However, the news flow has somewhat overshadowed key economic data released, which continue to indicate encouraging fundamentals. Hence, we believe the volatile environment can provide opportunities and any correction as healthy over the long term. For Asia, its corporate earnings remain strong as seen through earnings revisions, and valuations are undemanding relative to developed market equities. Economic growth in the region will be supported by a relatively benign interest rate environment as inflation is likely to remain at reasonable levels. For Malaysia, despite the optimism under the new government, near term uncertainties over the government s fiscal position and policies could affect sentiment and result in a pullback in private and public investment. Nevertheless, with the abolishment of the Goods and Services Tax (GST) and other measures to alleviate cost of living, it could stimulate private consumption growth in the short to medium term. We expect confidence to gradually return as clarity improves. Overall economic growth should remain robust, underpinned by strong exports and commodity prices, and private consumption, with a synchronised global economic growth acting as a tailwind. That said, we are cognisant of rising policy risks and the resulting volatility in currencies and fund flows. As such, we remain vigilant in our investments, focusing on valuations and earnings visibility with a more opportunistic approach. 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 31 MAY 2018 The following table presents the distribution of the Fund s unit holders according to size of unit holdings: Size of Holdings No. of Unit Holders % No. of Units Held ( 000) % 5,000 and below ,001 to 10, ,001 to 50, ,001 to 500, Above 500, , Manager s stock Total , STATE OF AFFAIRS Notification of Changes A Second Supplemental Master Prospectus to the Master Prospectus dated 29 December 2016 and Supplemental Master Prospectus dated 10 November 2017 was issued on 14 June 2018 to make the following general and administrative updates which have been effective since 14 June 2018: revision to definition and disclosure of launch date for clarity; amendments to nature of transaction between the Manager with related parties; inclusion of disclosure on cross trade policy; and updates to how you can keep abreast of fund developments and financial reports of the Fund. The Second Supplemental Master Prospectus dated 14 June 2018 is available in the company website 8

12 3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS The Management Company did not retain any rebates. For the financial year ended 31 May 2018, the Manager and its Fund Manager did not receive any rebates or soft commissions. 9

13 4 STATEMENT BY THE MANAGER We, Edmond Cheah Swee Leng and Chong Soon Min, being two of the Directors of Manulife Asset Management Services Berhad (the "Manager"), do hereby state that, in the opinion of the Manager, the accompanying financial statements comprising the statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, summary of significant accounting policies and notes to the financial statements, are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 May 2018 and of its financial performance, changes in equity and cash flows of the Fund for the financial year ended 31 May 2018 in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). For and on behalf of the Manager MANULIFE ASSET MANAGEMENT SERVICES BERHAD EDMOND CHEAH SWEE LENG Director CHONG SOON MIN Director Kuala Lumpur 23 July

14 5 TRUSTEE S REPORT TO THE UNIT HOLDERS OF MANULIFE We have acted as Trustee of Manulife Flexi Growth & Income Fund ( the Fund ) for the financial year ended 31 May To the best of our knowledge, Manulife Asset Management Services Berhad ( the Management Company ) has operated and managed the Fund in accordance with the following: a) limitations imposed on the investment powers of the Management Company and the Trustee under the Deed, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) valuation/pricing is carried out in accordance with the Deed and any regulatory requirements; and c) creation and cancellation of units are carried out in accordance with the Deed and any regulatory requirements. During this financial year, a total distribution of 0.66 sen (gross) has been distributed to the unit holders of the Fund. We are of the view that the distributions are not inconsistent with the objective of the Fund. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur 23 July

15 6 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF MANULIFE REPORT ON THE FINANCIAL STATEMENTS Opinion We have audited the financial statements of Manulife Flexi Growth & Income Fund (the "Fund"), which comprise the statement of financial position as at 31 May 2018 and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows of the Fund for the financial year ended 31 May 2018, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 15 to 49. In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 31 May 2018 and of its financial performance and cash flows for the financial 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 on 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 audit opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) 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 By-Laws and the IESBA Code. Information other than the financial statements and auditors report thereon The Manager of the Fund (the Manager ) 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. 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. Responsibilities of the Manager and Trustee for the financial statements The Manager 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. 12

16 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 has 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. 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. 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. Responsibilities of the Manager and Trustee for the financial statements The Manager 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 has 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. 13

17 As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism 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. 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. 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 the 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 Bruce Sta Maria No. AF: 0039 Chartered Accountants Ahmad Hammami Bin Muhyidin No /07/2019(J) Chartered Accountant Kuala Lumpur, Malaysia 23 July

18 7 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 Note Financial year from to RM Financial period from (launch date) to RM INVESTMENT (LOSS)/INCOME Interest income 35,983 46,478 Gross dividend income 439, ,518 Net (loss)/gain on financial assets at fair value through profit or loss 6 (611,465) 1,158,731 Net foreign currency exchange loss (15,231) (18,090) Redemption fee 1,599 12,250 (149,509) 1,308,887 EXPENSES Manager s fee 3 270,208 97,572 Trustee s fee 4 10,460 3,777 Auditors remuneration 5,500 5,500 Tax agent s fee 26,719 2,700 Other expenses 274, , , ,069 (LOSS)/PROFIT BEFORE TAXATION (736,756) 1,083,818 TAXATION 5 (7,574) (2,388) (LOSS)/PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/INCOME (744,330) 1,081,430 (Loss)/Profit after taxation is made up as follows: Realised 747, ,014 Unrealised (1,491,840) 926,416 (744,330) 1,081,430 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 15

19 8 STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2018 Note RM RM ASSETS Financial assets at fair value through profit or loss 6 9,631,047 12,862,394 Amount due from Manager 274, ,990 Amount due from stockbrokers 434,207 - Dividends receivable 9,141 22,907 Other receivables - 10,871 Cash and cash equivalents 7 2,250,029 1,535,959 TOTAL ASSETS 12,599,088 14,926,121 LIABILITIES Amount due to Manager - Manager s fee 16,166 18,723 Amount due to Trustee Amout due to stockbrokers 365, ,017 Other payables 8 13,302 12,095 Distribution payable 277,104 - Tax payable TOTAL LIABILITIES 672, ,974 NET ASSET VALUE ( NAV ) OF THE FUND 11,926,339 14,685,147 EQUITY Unit holders capital 12,573,349 13,603,717 (Accumulated losses)/retained earnings (647,010) 1,081,430 11,926,339 14,685,147 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 11,926,339 14,685,147 NUMBER OF UNITS IN CIRCULATION (UNITS) 9 123,260, ,820,000 NAV PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 16

20 9 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 Unit holders Accumulated capital losses Total RM RM RM BALANCE AS AT 01 JUNE ,603,717 1,081,430 14,685,147 Movement in unit holders contribution: Creation of units arising from applications 7,902,085-7,902,085 Creation of units arising from distribution 984, ,110 Cancellation of units (9,916,563) - (9,916,563) Total comprehensive income for the year - (744,330) (744,330) Distribution (Note 15) - (984,110) (984,110) BALANCE AS AT 31 MAY ,573,349 (647,010) 11,926,339 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 18 AUGUST 2016 (LAUNCH DATE) - - Movement in unit holders contribution: Creation of units 14,840,589-14,840,589 Cancellation of units (1,236,872) - (1,236,872) Total comprehensive income for the period - 1,081,430 1,081,430 BALANCE AS AT 31 MAY ,603,717 1,081,430 14,685,147 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 17

21 10 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 CASH FLOWS FROM OPERATING ACTIVITIES Note Financial year from to RM Financial period from (launch date) to Purchase of investments (26,657,525) (15,439,367) Sale of investments 29,274,787 3,919,959 Net realised foreign exchange (loss)/gain (312,896) 6,672 Dividends received 453,373 86,611 Interest income received 35,983 46,478 Other income 12,470 1,379 Manager s fee paid (272,765) (78,849) Trustee s fee paid (10,559) (3,052) Audit fee paid (5,500) - Tax agent s fee paid (26,719) - Tax paid (7,895) (1,974) Payment for other fees and expenses (273,474) (111,625) Net cash generated from/(used in) operating activities 2,232,118 (11,573,768) RM CASH FLOWS FROM FINANCING ACTIVITIES Distribution paid (707,006) - Proceeds from creation of units 9,105,521 14,346,599 Payments for cancellation of units (9,916,563) (1,236,872) Net cash (used in)/generated from financing activities (1,518,048) 13,109,727 Net increase in cash and cash equivalents 714,070 1,535,959 Cash and cash equivalents at beginning of the financial period/year 1,535,959 - Cash and cash equivalents at end of the financial period/year 7 2,250,029 1,535,959 Cash and cash equivalents comprise: Deposit with licensed financial institution 7 1,713,295 1,065,854 Bank balances in licensed banks 536, ,105 2,250,029 1,535,959 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 18

22 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. The policies have been consistently applied during the financial period from its launch date, unless otherwise stated. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The audited financial statements of the Fund have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the Manager to exercise judgement in the process of applying the Fund s accounting policies. Although these estimates and judgement are based on the Manager s best knowledge of current events and actions, actual results may differ. There are no significant areas of judgement or complexity that have significant effect on the amounts recognised in the financial statements. There are no critical accounting estimates and assumptions used in the preparation of the financial statements of the Fund for the financial year ended 31 May The Fund has applied the following amendments for the first time for the financial year beginning 1 January 2017: Amendments to MFRS 112 Recognition of Deffered Tax for the unrealised loss (effective from 1 January 2017). Amendments to MFRS 12 Disclosure of interest in other entities (effective from 1 January 2017). Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiatives (effective from 1 January 2017) introduce an additional disclosure of changes in liabilities arising from financing activities. The adoption of the Amendment to MFRS 107 has required additional disclosure of changes in liabilities arising from financing activities. Other than that, the adoption of the above amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. The new Standards that are applicable to the Fund but not yet effecive and have not been early adopted by the Fund are discussed below: Financial year beginning on/after 1 June 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. 19

23 MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investment in equity instruments is always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit losses (ECL) model on impairment that replaces the incurred loss impairment model used in MFRS 139. The ECL model is forwardlooking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund has reviewed its financial assets and liabilities and has assessed the following impacts from the adoption of the new standard as stated below: There will be no impact on the Fund's accounting for financial assets as the Fund's equity investments currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS9. There will be no impact on the Fund's accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designed at fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provosions based on ECL rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classfieds at amotised cost. Based on the assessment undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. The Fund will apply the standard when effective. This standards are not expected to have a significant impact on the Fund s financial statements. MFRS 15 Revenue from Contracts with Customers (effective from 1 January 2018) replaces MFRS 118 Revenue and MFRS 111 Construction contracts and related interpretations. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A new five-step process is applied before revenue can be recognised: Identify contracts with customers; Identify the separate performance obligations; Determine the transactions price of contract; Allocate the transaction price to each other separate performance obligations; and Recognise the revenue as each performance obligation is satisfied. 20

24 Key provisions of the new standards are as follows: Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. If the considerations varies (such as incentives, rebates, performance fees, royalties, success of an outcome etc), minimum amounts of revenue must be recognised if they are not at significant risk of reversal. The point at which revenue is able to be recognised may shift: some revenue which is currently recognised at a point in time at the end of a contract may have to be recognised over the contract term and vice versa. There are new specific rules in licenses, warranties, non-refundable up-front fees, and consignment arrangements, to name a few. As with any new standard, there are increased disclosures. The Manager is currently assessing the impact of MFRS 15 and the Fund will adopt the new standard when it becomes effective. This standard is not expected to have a significant impact on the Fund s financial assets. B (i) FINANCIAL ASSETS AND FINANCIAL LIABILITIES Classification The Fund classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial assets at fair value through profit or loss Financial assets are designated at fair value through profit or loss when they are managed principally for the purposes of selling or repurchasing in the near term and their performance are evaluated on a fair value basis. The Fund designates its investment in quoted investments as financial assets at fair value through profit or loss at inception. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Fund s loans and receivables comprise amount due from Manager,amount due from stockbrokers, dividends receivable, other receivable, cash and cash equivalents in the statement of financial position. Other financial liabilities The Fund classifies amount due to Manager, amount due to Trustee, amount due to stockbrokers, distribution payable and other payables as other financial liabilities. 21

25 (ii) Recognition and initial 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 assets. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. Loans and receivables are initially recognised at fair value plus transaction costs. 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. (iii) Subsequent measurement - Gains and losses Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are included in the profit or loss in the financial period which they arise. Loans and receivables are subsequently carried at amortised cost using the effective interest rate method. (iv) Subsequent measurement - Impairment of financial assets The Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Fund uses to determine that there is objective evidence of an impairment loss include indications that the obligor is experiencing significant financial difficulty, high probability that the obligor will enter bankruptcy or other distressed financial reorganisation and events that would adversely affect the financial capability of the obligor. 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 profit or loss. 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 by 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 is recognised (such as an improvement in the debtor s/issuer s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. 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. (v) De-recognition Financial assets are de-recognised 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 de-recognised when they are extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or has expired. 22

26 C CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unit holder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding unit is carried at the redemption amount that is payable at the date of the statement of financial position if the unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unit holder s option 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 is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. The net asset value per unit is computed for each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as equity in the statement of financial position and are stated at fair value representing the price at which unit holders can redeem the units from the Fund. D INCOME RECOGNITION Interest income from deposits placed with licensed financial instituitions is recognised on an accrual basis using the effective interest rate method. Dividend income on quoted investments is recognised on the ex-dividend date. Realised gains or losses on sale of quoted investments are accounted for as the difference between the net disposal proceeds and the carrying amount of the investments, determined on a weighted average cost basis. E EXPENSES Expenses are accounted for on an accrual basis and charged to the statement of comprehensive income. Expenses arising from the disposal and acguisition of investments are recognised as transaction costs (Note L to the financial statements) F AMOUNT DUE FROM/TO STOCKBROKERS Amounts due from and to stockbrokers represent receivables for securities sold and payables for securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment for amount due from stockbrokers. A provision for impairment of amount due from a stockbroker is established when there is objective evidence that the Fund will not be able to collect the amount due from the relevant stockbroker. Significant financial difficulties of the stockbroker, probability that the stockbroker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from the stockbroker 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 to discount the future cash flows for the purpose of measuring the impairment loss. The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. 23