AmCumulative Growth 30 June 2018

Transcription

1 Annual Report for AmCumulative Growth 30 June 2018

2 TRUST DIRECTORY Manager AmFunds Management Berhad 9 th &10 th Floor, Bangunan AmBank Group 55 Jalan Raja Chulan Kuala Lumpur Board of Directors Raja Maimunah Binti Raja Abdul Aziz Dato Mustafa Bin Mohd Nor Tai Terk Lin Sum Leng Kuang Goh Wee Peng Investment Committee Sum Leng Kuang Tai Terk Lin Dato Mustafa Bin Mohd Nor Zainal Abidin Mohd Kassim Goh Wee Peng Trustee HSBC (Malaysia) Trustee Berhad Auditors and Reporting Accountants Ernst & Young Taxation Adviser Deloitte Tax Services Sdn Bhd AmCumulative Growth

3 CONTENTS 1 Manager s Report 8 Independent Auditor s Report to the Unitholders 11 Statement of Financial Position 12 Statement of Comprehensive Income 13 Statement of Changes In Equity 14 Statement of Cash Flows 15 Notes to the Financial Statements 41 Statement by the Manager 42 Trustee s Report 43 Directory AmCumulative Growth

4 MANAGER S REPORT Dear Unitholders, We are pleased to present you the Manager s report and the audited accounts of AmCumulative Growth ( Fund ) for the financial year ended 30 June Salient Information of the Fund Name Category/ Type Objective AmCumulative Growth ( Fund ) Equity/Growth The Fund aims to provide long-term capital growth mainly through investments in securities with superior growth potential*. As such, income** will be incidental to the overall capital growth objective and a substantial portion of the income from investments will be reinvested, rather than distributed. Notes: Any material change to the investment objective of the Fund would require Unit Holders approval. *Superior growth potential in this context refers to earnings growth higher than the market average. **The income could be in the form of units or cash. Duration Performance Benchmark The Fund was established on 24 July 1996 and shall exist for as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. In some circumstances, the unitholders can resolve at a meeting to terminate the Fund. MSCI Far East Ex-Japan Composite Index. (obtainable via Notes: The benchmark does not imply that the risk profile of the Fund is the same as the risk profile of the benchmark. Investors of the Fund will assume a higher risk compared to the benchmark. Hence, the returns of the Fund may be potentially higher due to the higher risk faced by the investors. Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an as is basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the MSCI Parties ) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, 1

5 incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. ( Income Distribution Policy Breakdown of Unit Holdings by Size Income distribution (if any) is incidental. For the financial year under review, the size of the Fund stood at 25,990,441 units. Size of holding As at 30 June 2018 As at 30 June 2017 No of units held Number of unitholders No of units held Number of unitholders 5,000 and below 74, , ,001-10, , ,185, ,001-50,000 1,316, ,261, , ,000 2,483, ,110, ,001 and above 21,976, ,679,552 3 Fund Performance Data Portfolio Composition Details of portfolio composition of the Fund for the financial years as at 30 June are as follows: FY 2018 % FY 2017 % FY 2016 % Communications Construction Consumer discretionary Consumer staples Energy Financials Health care Industrial products Information technology Materials Real estate Trading/Services Utilities Foreign CIS Cash and others Total Note: The abovementioned percentages are calculated based on total net asset value. 2

6 Performance Details Performance details of the Fund for the for the financial years ended 30 June are as follows: FY 2018 FY 2017 FY 2016 Net asset value (RM)* 27,508,412 21,338,219 21,509,526 Units in circulation* 25,990,441 22,097,002 26,848,153 Net asset value per unit (RM)* Highest net asset value per unit (RM)* Lowest net asset value per unit (RM)* Benchmark performance (%) Total return (%) (1) Capital growth (%) Income distribution (%) Gross distribution (sen per unit) Net distribution (sen per unit) Management expense ratio (%) (2) Portfolio turnover ratio (times) (3) * Above prices and net asset value per unit are not shown as ex-distribution. Note: (1) Total return is the actual return of the Fund for the respective financial years computed based on the net asset value per unit and net of all fees. (2) Management expenses ratio ( MER ) is calculated based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. The MER decreased by 0.35% as compared to 2.28% per annum for the financial year ended 30 June 2017 mainly due to increase in average fund size. (3) Portfolio turnover ratio ( PTR ) is calculated based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. The PTR decreased by 2.31 times (76.5%) as compared to 3.02 times for the financial year ended 30 June 2017 mainly due to decrease in investing activities. Average Total Return (as at 30 June 2018) AmCumulative Growth (a) % MXFEJI** (b) % One year Three years Five years Ten years

7 Annual Total Return Financial Years Ended (30 June) AmCumulative Growth (a) % MXFEJI** (b) % (a) (b) Source: Novagni Analytics and Advisory Sdn Bhd. MSCI Far East Ex-Japan Composite Index (MXFEJI) (obtainable from: ** Benchmark from 1 July 2008 to 9 September 2008 FBM EMAS from 10 September 2008 to 9 September %FBM KLCI:50% MXFEJI from 10 September 2009 to 12 April % FBM100:50% MXFEJI from 13 April 2010 onwards MXFEJI The Fund performance is calculated based on the net asset value per unit of the Fund. Average total return of the Fund and its benchmark for a period is computed based on the absolute return for that period annualised over one year. Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may fluctuate. Fund Performance For the financial year under review, the Fund registered a return of 9.61% which was entirely capital growth in nature. Thus, the Fund s return of 9.61% has outperformed the benchmark s return of 1.15% by 8.46%. As compared with the financial year ended 30 June 2017, the net asset value ( NAV ) per unit of the Fund increased by 9.60% from RM to RM while units in circulation increased by 17.62% from 22,097,002 units to 25,990,441 units. The line chart below shows comparison between the annual performances of AmCumulative Growth and its benchmark, MXFEJI, for the financial years ended 30 June. (Forward) 4

8 Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may fluctuate. Has the Fund achieved its objective? Strategies and Policies Employed The Fund has achieved its objective through capital appreciation by investing in growth equities. For the financial year under review, the Fund invested primarily in the equities of Asia Pacific excluding Japan. Liquid assets are strategically used for defensive measures in the short-term, if the Investment Manager views market risk to be high. The Investment Manager adopted a top-down investment approach followed by quantitative and qualitative screens for stock selection. The Fund will actively balance between growth and defensive stocks depending on the Investment Manager s view of the market cycle. The asset allocation and stock selection will be reviewed periodically depending on each country s economic and stock market outlook. The Fund can invest up to 60% in cash and liquid assets in the event the Investment Manager feels that the market risk is high. Portfolio Structure This table below is the asset allocation of the Fund for the financial years under review. As at % As at % Changes % Construction Consumer discretionary Consumer staples Energy Financials Health care (Forward) 5

9 As at % As at % Changes % Industrial Information technology Materials Real estate Cash and others Total For the financial year under review, there were some changes to the sector weights, the most notable being the decrease Consumer Discretionary, Information Technology and Construction whereby the weightings decreased by 13.58%, 11.34% and 1.69% respectively. These were offset by Real Estate, Industrial as well as cash whereby the weightings were increased by 11.78%, 3.11% and 8.03% respectively. Cross Trades Distribution/ Unit splits State of Affairs There are no cross trades for the Fund during this financial year under review. There was no income distribution and unit split declared for the financial year under review. There has been neither significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the financial year under review. Note: The Manager has appointed Deutsche Trustees Malaysia Berhad ( DTMB ) to carry out the fund accounting and valuation services for all funds effective 20 th June Rebates and Soft Commission It is our policy to pay all rebates to the Fund. Soft commissions received from brokers/dealers are retained by the Manager only if the goods and services provided are of demonstrable benefit to unitholders of the Fund. During the financial year under review, the Manager had received on behalf of the Fund, soft commissions in the form of fundamental database, financial wire services, technical analysis software and stock quotation system incidental to investment management of the Fund. These soft commissions received by the Manager are deem to be beneficial to the unitholders of the Fund. Market Review Geopolitical events that took place in 3Q17 include escalated tensions in the Korean Peninsula; the unveiling of the US tax reform plans which included the reduction in corporate tax rate from 35% to 20%; Angela Merkel winning the German elections, cementing her position for the fourth term. In October, The 19th National Congress of the Communist Party of China was held in Beijing, with the new leadership team announced. The Indian government announced a plan to recapitalize state-owned banks. China and South Korea agree to mend ties after the Terminal High Altitude Area Defense ( THAAD ) feud. The European Central Bank ( ECB ) its extension of quantitative easing by nine months to Sept 18, at a reduced pace of 30bn/month. Positive macroeconomic data with solid 3Q17 corporate earnings were supportive of global equity market performance. 6

10 In Malaysia, the Federal Budget was announced on 27th Oct 2017 with a lower fiscal deficit target for 2018, marking the ninth year of fiscal consolidation since Malaysia started to post fiscal deficits. The pro-consumer budget and continued commitment to gradual fiscal consolidation were somewhat anticipated. ASEAN markets (except Malaysia) in November continued to look expensive with markets such as Vietnam and Thailand hitting new 10-year highs in November while Indonesia and the Philippines were close to their 10-year highs. GDP growth in the region has been predominantly sustained by exports. Meanwhile in Malaysia, investors focus was centred on the 3Q17 reporting season where corporate earnings came in weaker than expected. As such, the domestic market remained soft even with 3Q17 GDP growth at 6.2% closed with a number of surprises as global markets continued to trend higher despite concerns on headwinds from political uncertainty (Trump as US President), US Fed rate hikes, election risks in Eurozone in addition to geopolitical tensions in North Korea and the Middle East. The global market was well supported by 1) the robust economic growth across the globe; 2) stronger corporate earnings, especially from the technology sector; 3) recovery of the oil price; 4) low inflation and interest rate environment; and 5) strong job market that boosted the consumer confidence, hence the recovery of consumer spending. Despite robust economic data reported in the US (the U.S. economy +2.6% in 4Q17 driven by consumer spending, business capital expenditure and resilient employment growth), 1Q18 proved to be a challenging quarter as global markets were held ransom by trade wars between the US and China starting with the US imposing steel and aluminium tariffs on China in March; subsequently plans by the US to impose tariffs on USD60b worth of imports from China along with new restrictions on technology transfer. It did not help that investors were concerned about a potentially overheating US economy (risk of more than expected rate hikes by the Fed). Much of market volatility in 2Q18 can be attributed to the ongoing trade/tariff war between the US and China; in April, the US threatened to impose an additional USD100b tariffs on China products, to which China retaliated by imposing tariffs of up to 25% of USD3b in food imports from the US. The Federal Reserve left its rate unchanged in April while Brent crude prices traded higher as Trump decided to pull out of the US-Iran nuclear deal. ASEAN market performance was weighted by concerns on USD strengthening. Market Outlook In the short run, we believe that markets will remain volatile due to investor concerns no trade tensions which could potentially escalate to a full scale trade war. As such, the portfolio has been positioned in a neutral stance for now. However, the longer term outlook remains positive as 1) global markets growth remain intact; 2) the newly elected local government is putting in every effort to revitalize the country; and 3) Malaysia being one of the few countries with current account surplus and the market being low beta in this region, would remain the foreign investors choice. We continue to prefer sectors such as finance, oil & gas, consumer staples, exporters, technology and high dividend yielding stocks such as REITs. Kuala Lumpur, Malaysia AmFunds Management Berhad 7 August

11 Independent auditors report to the unitholders of AmCumulative Growth Report on the audit of the financial statements Opinion We have audited the financial statements of AmCumulative Growth ( the Fund ), which comprise the statement of financial position as at 30 June 2018, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended, and notes to the financial statements, including a summary of significant acounting policies, as set out on pages 11 to 40. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 30 June 2018, and of its financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the 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 is responsible for the other information. The other information comprises the Annual Report, but does not include the financial statements of the Fund and our auditors report thereon, which we obtained prior to the date of this auditors report. The Annual report, which is expected to be made available to us after the date of this auditors report. Our opinion on the financial statements of the Fund does not cover the other information and we do not and will 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 identified above 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. 8

12 Independent auditors report to the unitholders of AmCumulative Growth (cont d.) When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Manager and Trustee of the Fund and take appropriate action to seek to have the uncorrected material misstatement appropriately brought to the attention of users for whom the auditors report is prepared. Responsibilities of the Manager and the Trustees for the financial statements The Manager is responsible for the preparation of the 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 to do so. The Trustee is 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. Auditor s 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 approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the planning and performance of 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. 9

13 Independent auditors report to the unitholders of AmCumulative Growth (cont d.) 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 or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements of the Fund represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Other matters This report is made solely to the unitholders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Wan Daneena Liza Bt Wan Abdul Rahman No /03/2020 J Chartered Accountant Kuala Lumpur, Malaysia 7 August

14 AmCumulative Growth STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE Note RM RM ASSETS Investments 4 23,598,907 20,016,255 Dividends receivable 117,722 83,987 Deposits with financial institutions 5 899, ,960 Cash at banks 3,315, ,847 TOTAL ASSETS 27,931,595 21,391,049 LIABILITIES Amount due to Manager 6 388,241 27,673 Amount due to Trustee 7 1, Sundry payables and accrued expenses 8 33,790 24,292 TOTAL LIABILITIES 423,183 52,830 EQUITY Unitholders capital 11(a) (52,209,506) (56,776,088) Retained earnings 11(b)(c) 79,717,918 78,114,307 TOTAL EQUITY 11 27,508,412 21,338,219 TOTAL EQUITY AND LIABILITIES 27,931,595 21,391,049 UNITS IN CIRCULATION 11(a) 25,990,441 22,097,002 NET ASSET VALUE PER UNIT sen sen The accompanying notes form an integral part of the financial statements. 11

15 AmCumulative Growth STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE Note RM RM INVESTMENT INCOME Gross dividend income 565, ,087 Interest income 50,544 19,320 Net gain from investments: Financial assets at fair value through profit or loss ( FVTPL ) 9 1,716,375 4,196,023 Other unrealised foreign exchange gain Gross Income 2,332,492 4,613,653 EXPENDITURE Manager s fee 6 (410,473) (335,495) Trustee s fee 7 (13,682) (11,183) Auditors remuneration - current financial year (8,000) (7,000) Auditors remuneration - over provision in prior financial year (1,000) - Tax agent s fee - current financial year (5,200) (5,500) Tax agent s fee - over provision in prior financial year (200) - Brokerage and transactions fees (146,182) - Custodian s fee (55,696) (104,710) Other expenses 10 (34,457) (46,819) Total Expenditure (674,890) (510,707) NET INCOME BEFORE TAX 1,657,602 4,102,946 LESS: INCOME TAX 13 (53,991) (25,195) NET INCOME AFTER TAX 1,603,611 4,077,751 OTHER COMPREHENSIVE INCOME - - TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 1,603,611 4,077,751 Total comprehensive income comprises the following: Realised income 2,524,080 2,179,515 Unrealised (loss)/gain (920,469) 1,898,236 1,603,611 4,077,751 The accompanying notes form an integral part of the financial statements. 12

16 AmCumulative Growth STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 Unitholders Retained Total capital earnings equity Note RM RM RM At 1 July 2016 (52,527,030) 74,036,556 21,509,526 Total comprehensive income for the financial year - 4,077,751 4,077,751 Creation of units 11(a) 5,329,176-5,329,176 Cancellation of units 11(a) (9,578,234) - (9,578,234) Balance at 30 June 2017 (56,776,088) 78,114,307 21,338,219 At 1 July 2017 (56,776,088) 78,114,307 21,338,219 Total comprehensive income for the financial year - 1,603,611 1,603,611 Creation of units 11(a) 14,305,553-14,305,553 Cancellation of units 11(a) (9,738,971) - (9,738,971) Balance at 30 June 2018 (52,209,506) 79,717,918 27,508,412 The accompanying notes form an integral part of the financial statements. 13

17 AmCumulative Growth STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE Note RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 18,445,848 69,030,930 Dividends received 478, ,451 Interest received 50,544 19,320 Manager s fee paid (399,721) (334,587) Trustee s fee paid (13,395) (11,210) Tax agent s fee paid (5,200) (5,000) Custodian s fee paid (55,696) (104,710) Payments for other expenses (193,565) (60,187) Purchase of investments (20,299,463) (66,817,281) Net cash (used in)/generated from operating and investing activities (1,992,239) 2,078,726 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 14,300,313 5,329,176 Payments for cancellation of units (9,383,915) (9,959,346) Net cash generated from/(used in) financing activities 4,916,398 (4,630,170) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,924,159 (2,551,444) CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 1,290,807 3,842,251 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 4,214,966 1,290,807 Cash and cash equivalents comprise: Deposits with financial institutions 5 899, ,960 Cash at banks 3,315, ,847 4,214,966 1,290,807 The accompanying notes form an integral part of the financial statements. 14

18 AmCumulative Growth NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION AmCumulative Growth ( the Fund ) was established pursuant to Deed dated 19 January 1996 as amended by Deeds Supplemental thereto ( the Deed ), between AmFunds Management Berhad as the Manager, HSBC (Malaysia) Trustee Berhad as the Trustee and all unitholders. The Fund was set up with the objective of providing investors with long term capital growth, mainly through investment in securities with superior growth potential. As provided in the Deed, the accrual period or financial year shall end on 30 June and the units in the Fund were first offered for sale on 24 July BASIS OF PREPARATION OF FINANCIAL STATEMENTS The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) as issued by the Malaysian Accounting Standards Board ( MASB ) and are in compliance with International Financial Reporting Standards. The financial statements of the Fund have been prepared under the historical cost convention, unless otherwise stated in the accounting policies. Standards effective during the financial year The adoption of MFRS which have been effective during the financial year did not have any material financial impact to the financial statements. Standards issued but not yet effective As at the date of authorisation of these financial statements, the following Standards, which are relevant to the Fund, have been issued by MASB but are not yet effective and have not been adopted by the Fund. Effective for financial periods beginning on or after MFRS 9: Financial Instruments MFRS 15: Revenue From Contracts With Customers 1 January January

19 MFRS 9 Financial Instruments In November 2014, MASB issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. MFRS 9 is effective for annual periods beginning on or after 1 January Retrospective application is required, but comparative information is not compulsory. MFRS 9 will require all financial assets, other than equity instruments and derivatives, to be classified on the basis of two criteria, namely the entity s business model for managing the assets, as well as the instruments contractual cash flow characteristics. Financial assets will be measured at amortised cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest. If the financial assets are held within a business model whose objective is achieved by both selling financial assets and collecting contractual cash flows that are solely payments of principal and interest, the assets shall be measured at fair value through other comprehensive income ( FVOCI ). Any financial assets that are not measured at amortised cost or FVOCI will be measured at fair value through profit or loss ( FVTPL ). MFRS 9 will also allow entities to continue to irrevocably designate instruments that qualify for amortised cost or FVOCI as FVTPL, if doing so eliminates or significantly reduces a measurement or recognition inconsistency. Equity instruments are normally measured at FVTPL; nevertheless entities are allowed to irrevocably designate equity instruments that are not held for trading as FVOCI, with no subsequent reclassification of gains or losses to the profit or loss. MFRS 9 will fundamentally change the impairment methodology for financial assets. The standard will replace MFRS 139 s incurred loss approach with a forward-looking expected credit loss ( ECL ) approach. The impairment requirements based on ECL approach is applicable for all debt financial assets not held at FVTPL, as well as loan commitments and financial guarantee contracts. The allowance for expected losses shall be determined based on the expected credit losses associated with the probability of default in the next twelve months unless there has been a significant increase in credit risk since origination, in which case, the allowance is based on the probability of default over the lifetime of the asset. The Fund plans to adopt MFRS 9 on the required effective date and, as permitted by the new standard, will not restate comparative information. During the financial year, the Fund has performed a detailed impact assessment on all aspects of MFRS 9. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Fund in financial year ending 30 June 2019 when the Fund will adopt MFRS 9. Based on the detailed impact assessment, the adoption of MFRS 9 is not expected to result in any significant impact as the investment in equity securities which is held for trading, will continue to be measured at FVTPL and is not subjected to the impairment requirements of MFRS 9. In addition, deposits with financial institutions, which are held for collection of contractual cash flows that are solely payments of principal and interest over their tenure, will continue to be measured at amortised cost. 16

20 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 designated at FVTPL and the Fund does not have any such liabilities. 3. SIGNIFICANT ACCOUNTING POLICIES Income recognition Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Dividend income is recognised when the Fund s right to receive payment is established. Interest income on short-term deposits is recognised on an accrual basis using the effective interest method. Income tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Functional and presentation currency Functional currency is the currency of the primary economic environment in which the Fund operates that most faithfully represents the economic effects of the underlying transactions. The functional currency of the Fund is Ringgit Malaysia which reflects the currency in which the Fund competes for funds, issues and redeems units. The Fund has also adopted Ringgit Malaysia as its presentation currency. Foreign currency transactions Transactions in currencies other than the Fund s functional currency (foreign currencies) are recorded in the functional currency using exchange rates prevailing at the transaction dates. At each reporting date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at the reporting date. All exchange gains or losses are recognised in profit or loss. Statement of cash flows The Fund adopts the direct method in the preparation of the statement of cash flows. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with insignificant risk of changes in value. 17

21 Distribution Distributions are at the discretion of the Fund. A distribution to the Fund s unitholders is accounted for as a deduction from realised reserves. A proposed distribution is recognised as a liability in the period in which it is approved. Unitholders capital The unitholders capital of the Fund meets the definition of puttable instruments and is classified as equity instruments under MFRS 132 Financial Instruments: Presentation ( MFRS 132 ). Financial assets Financial assets 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. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition, and the categories applicable to the Fund include financial assets at fair value through profit or loss ( FVTPL ) and loans and receivables. (i) Financial assets at FVTPL Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading by the Fund include equity securities acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in Net gain or loss on financial assets at fair value through profit or loss. Dividend revenue and interest earned elements of such instruments are recorded separately in Gross dividend income and Interest income respectively. Exchange differences, if any, on financial assets at FVTPL are not recognised separately in profit or loss but are included in net gains or net losses on changes in fair value of financial assets at FVTPL. For investments in local quoted securities, market value is determined based on the closing price quoted on Bursa Malaysia Berhad. For investments in foreign listed securities and foreign collective investment scheme, which are quoted in the respective stock exchanges, market value will be determined based on the published market price quoted by the respective stock exchanges at the end of each business day. Unrealised gains or losses recognised in profit or loss are not distributable in nature. On disposal of investments, the net realised gain or loss on disposal is measured as the difference between the net disposal proceeds and the carrying amount of the investments. The net realised gain or loss is recognised in profit or loss. 18

22 (ii) Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Impairment of financial assets The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. (i) Loans and receivables carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced through the use of an allowance account. When loans and receivables become uncollectible, they are written off against the allowance account. 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, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. 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. The Fund s financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. 19

23 Classification of realised and unrealised gains and losses Unrealised gains and losses comprise changes in the fair value of financial instruments for the period and from reversal of prior period s unrealised gains and losses for financial instruments which were realised (i.e. sold, redeemed or matured) during the reporting period. Realised gains and losses on disposals of financial instruments classified at fair value through profit or loss are calculated using the weighted average method. They represent the difference between an instrument s initial carrying amount and disposal amount. Significant accounting estimates and judgments The preparation of the Fund s financial statements requires the Manager to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future. The Fund classifies its investments as financial assets at FVTPL as the Fund may sell its investments in the short-term for profit-taking or to meet unitholders cancellation of units. No major judgments have been made by the Manager in applying the Fund s accounting policies. There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 4. INVESTMENTS Financial assets at FVTPL RM RM Quoted equity securities in Hong Kong 9,235,277 10,206,048 Quoted equity securities in Indonesia 503, ,522 Quoted equity securities in Korea 2,533,753 3,460,590 Quoted equity securities in Malaysia 2,481, ,335 Quoted equity securities in Philippines 739, ,250 Quoted equity securities in Singapore 4,070, ,116 Quoted equity securities in Taiwan 4,034,726 3,327,394 23,598,907 20,016,255 20

24 Details of investments as at 30 June 2018 are as follows: Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities Hong Kong Consumer discretionary Xinyi Glass Holdings Limited 26, , , Galaxy Entertainment Group Limited 9, , , , , , Consumer Staples China Mengniu Dairy Company Limited 17, , , Financials China Construction Bank Corporation - H Shares 202, , , Industrial and Commercial Bank of China Limited - H Shares 241, , , Ping An Insurance (Group) Co. of China Limited - H Shares 32,600 1,212, , ,600 2,695,421 2,283, Industrials China Railway Construction Corporation Limited - H Shares 97, , , Shenzhen International Holdings Limited 44, , , TK Group (Holdings) Limited 274, , , (Forward) 415,732 1,714,872 1,375,

25 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities Hong Kong (cont d) Information technology Kingsoft Corporation Limited 27, , , SUNeVision Holdings Ltd. 221, , , Sunny Optical Technology (Group) Co., Ltd 6, , , Tencent Holdings Limited 7,000 1,419, , ,500 2,769,058 1,693, Materials Angang Steel Company Limited Limited - H Shares 96, , , Real estate CIFI Holdings (Group) Co., Ltd. 56, , , Henderson Land Development Company Limited 15, , , Link Real Estate Investment Trust 6, , , Sun Hung Kai Properties Limited 6, , , ,510 1,062,843 1,112, Total quoted equity securities in Hong Kong 1,384,342 9,235,277 7,306, Indonesia Consumer staples PT Indofood CBP Sukses Makmur Tbk 117, , , Financials PT Bank Danamon Indonesia Tbk 117, , , Total quoted equity securities in Indonesia 234, , , (Forward) 22

26 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities Korea Health care Celltrion, Inc , , Information technology Samsung Electronics Co., Ltd. 3, , , Samsung SDI Co., Ltd , , SK Hynix Inc , , Wonik IPS Co., Ltd. 3, , , ,908 1,686,310 1,401, Materials Lotte Chemical Corporation , , POSCO , , , , Total quoted equity securities in Korea 8,624 2,533,753 2,301, Malaysia Energy Dialog Group Berhad 199, , , Petron Malaysia Refining & Marketing Berhad 27, , , , , , Financials CIMB Group Holdings Berhad 137, , , Public Bank Berhad 12, , , (Forward) 150,505 1,045,918 1,187,

27 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities Malaysia (cont d) Health care CCM Duopharma Biotech Berhad 103, , , Industrials Gamuda Berhad 82, , , Real estate IGB Real Estate Investment Trust 125, , , Total quoted equity securities in Malaysia 688,605 2,481,022 2,753, Philippines Financials BDO Unibank, Inc. 33, , , Real estate Ayala Land, Inc. 148, , , Total quoted equity securities in Philippines 181, , , Singapore Financials DBS Group Holdings Ltd 10, , , United Overseas Bank Limited 3, , , ,800 1,089,012 1,127, Real estate CapitaLand Commercial Trust 197, , , City Developments Limited 24, , , Mapletree Industrial Trust 73, , , Oxley Holdings Limited 298, , , (Forward) 24

28 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities Singapore (cont d) Real estate UOL Group Limited 19, , , ,500 2,981,707 3,191, Total quoted equity securities in Singapore 627,300 4,070,719 4,318, Taiwan Consumer discretionary Gourmet Master Co., Ltd. 1,395 54,589 46, Information technology Catcher Technology Co., Ltd. 17, , , GlobalWafers Co., Ltd. 7, , , Nanya Technology Corporation 47, , , Taiwan Semiconductor Manufacturing Co., Ltd. 35,600 1,022, , WIN Semiconductors Corp. 13, , , ,600 3,159,365 2,838, Materials Formosa Plastics Corporation 55, , , Total quoted equity securities in Taiwan 175,995 4,034,726 3,596, Total financial assets at FVTPL 23,598,907 21,657, Excess of market value over cost 1,940,929 25

29 5. DEPOSITS WITH FINANCIAL INSTITUTIONS RM RM At nominal value: Short-term deposits with licensed banks 899, ,900 At carrying value: Short-term deposits with licensed banks 899, ,960 Details of deposit with financial institution as at 30 June 2018 are as follows: Carrying value as a percentage of Maturity Nominal Carrying Purchase net asset date Bank value value cost value RM RM RM % Short-term deposit with a licensed bank Public Bank Berhad 899, , , The weighted average effective interest rate and average remaining maturity of short-term deposits are as follows: Weighted average effective Remaining interest rate maturity % % Days Days Short-term deposits with licensed banks NET AMOUNT DUE TO MANAGER RM RM Net redemption of units* (349,816) - Manager s fee payable (38,425) (27,673) * The amount represents net amount payable to the Manager for units redeemed. (388,241) (27,673) 26

30 Manager s fee is at a rate of 1.50% (2017: 1.50%) per annum on the net asset value of the Fund, calculated on a daily basis. The normal credit period in the previous and current financial years for creation and redemption of units is three business days. The normal credit period in the previous and current financial years for Manager s fee payable is one month. 7. AMOUNT DUE TO TRUSTEE Trustee s fee is at a rate of 0.05% (2017: 0.05%) per annum on the net asset value of the Fund, calculated on a daily basis. The normal credit period in the previous and current financial years for Trustee s fee payable is one month. 8. SUNDRY PAYABLES AND ACCRUED EXPENSES Included in sundry payables and accrued expenses was amount owing to broker for outstanding contract where settlement was not due as follows: RM RM Amount owing to broker (13,624) - The normal trade credit period is three business days. 9. NET GAIN FROM INVESTMENTS RM RM Net gain on financial assets at FVTPL comprised: Net realised gain on sale of investments 3,355,786 1,529,040 Net realised (loss)/gain on foreign currency exchange (718,567) 768,970 Net unrealised (loss)/gain on changes in fair values of investments (450,844) 1,577,357 Net unrealised (loss)/gain on foreign currency fluctuation of investments denominated in foreign currency (470,000) 320,656 1,716,375 4,196,023 27