Nomura Global High Conviction Fund Quarterly Report and Financial Statements For The Period Ended 31 May 2018 MANAGER: NOMURA ASSET MANAGEMENT MALAYSIA SDN. BHD. Business Registration No.: 748695-A TRUSTEE: CIMB COMMERCE TRUSTEE BERHAD Business Registration No.: 313031-A
Table of Contents MANAGER S REPORT... 3 SOFT COMMISSIONS RECEIVED FROM BROKERS... 5 BREAKDOWN OF UNITHOLDERS BY SIZE... 5 INCOME DISTRIBUTION... 6 FUND DATA... 6 STATEMENT OF COMPREHENSIVE INCOME... 8 STATEMENT OF FINANCIAL POSITION... 9 STATEMENT OF FINANCIAL POSITION (CONTINUED)... 10 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS... 11 STATEMENT OF CASH FLOWS... 12 2
MANAGER S REPORT Fund Type, Category, Objective and Distribution Policy The Nomura Global High Conviction Fund (the Fund ) is a wholesale feeder fund which seeks to achieve long term capital growth by investing in the Target Fund (Nomura Funds Ireland plc Global High Conviction) which invests primarily in global equity securities. Distribution of income, if any, is subject to the availability of income and shall be in line with the dividend policy of the Target Fund. Benchmark MSCI All Country World Index; the risk profile of this Fund is different from the risk profile of the benchmark. Performance as at 31 May 2018 1 Month (30/Apr/18-31/May/18) 3 Months (28/Feb/18 31/May/18) 6 Months (30/Nov/17 31/May/18) 1 Year (31/May/17 31/May/18) Since Inception (1/Feb/17 31/May/18) Fund Class USD 0.59% (2.68)% 1.86% 7.04% 15.98% Benchmark USD (0.18)% (1.80)% 0.66% 9.70% 19.01% Out/ (Under) Performance 0.77% (0.88)% 1.20% (2.66)% (3.03)% Fund Class MYR 2.04% (1.07)% (0.87)% (0.49)% 4.34% Benchmark MYR 1.30% (0.22)% (2.04)% 1.98% 6.77% Out/ (Under) Performance 0.74% (0.85)% 1.17% (2.47)% (2.43)% Source of Fund and Benchmark Returns: Novagni Analytics and Advisory Sdn. Bhd. Volatility as at 31 May 2018 3-Year Fund N/A This information is prepared by Nomura Asset Management Malaysia (NAMM) for information purposes only. Past earnings or the fund s distribution record is not a guarantee or reflection of the fund s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. 3
Strategies Employed (1 Mar to 31 May 2018) The Fund remained primarily invested in the Target Fund with 95% or more of the Fund s assets being invested in the Target Fund during the period under review. Strategies Employed by the Target Fund (1 Mar to 31 May 2018) During the period under review, the Target Fund remained closely aligned with its investment philosophies and process amidst geopolitical noise which resurged once again. Performance Review (1 Mar to 31 May 2018) The Target Fund underperformed the benchmark during March. Adidas was the top contributor to fund performance over this month, a position initiated in January. The company announced surprisingly strong quarterly earnings and upgraded 2020 operating margin targets. AstraZeneca was also a top contributor as the company delayed again the final survival data for a key lung cancer trial. Following the more pronounced portfolio changes in February the fund took advantage of the heightened volatility to add to holdings of Apple and Ross Stores. Apple, in particular, was hit by the trade war concerns as the Chinese market is important both from a demand and supply chain perspective. In April, the Target Fund s lack of direct exposure to the Energy sector adversely affected the Fund s performance over the month with approximately half of the underperformance due to this position. Our Information Technology positions, accounting for over one quarter of fund assets, also underperformed. These headwinds were only partially offset by outperformance from our holdings in the Consumer Discretionary sector. The Global High Conviction strategy rose in May and outperformed the benchmark. Performance was helped by a rebound in the Information Technology sector where the fund has over a quarter of its assets. So too did weakness in Financial shares where the Fund is materially underrepresented. The top contributor was PayPal, up 10% over the month and our largest holding, as the acquisition of izettle was well received as was the hike in the long-term outlook. MasterCard was also a main contributor following a full year guidance upgrade. In the face of continued strength we took profit in Humana and AstraZeneca as the shares approached our estimates of fair value. We added a new position in the leading life sciences company Waters. The company has strong positions in machines and reagents required for quality testing of pharmaceutical, food and water purity applications. Source: Nomura Asset Management U.K. Ltd Summary of Asset Allocation 31 May 2018 Target Fund 95.87% Cash and Others # 4.13% Total 100.00% # Included in Cash and Others are cash on hand and net current assets/ liabilities Review of Market (1 Mar to 31 May 2018) March began with weakness persisting across global equity indices and volatility remained elevated from last year s levels amidst heightened geopolitical concerns. In particular, the risk of a trade war between the US and China raised the prospect of a political policy error derailing an otherwise robust macroeconomic 4
environment. We see risk of further sabre rattling heading into the US mid-term elections later this year as President Trump s foreign policy wins may be more readily garnered than those on the home front. After the spike in volatility over the first calendar quarter of the year, April saw markets stabilise as fears of a full-blown trade war between the US and China abated. Meanwhile, President Trump s threats to exit the Iran nuclear deal drove further strength in Energy stocks. Finally in May, on aggregate, Q1 earnings season provided a supportive backdrop for equities despite the ongoing political uncertainties. According to Thomson Reuters, for instance, at month end 78% of the 494 S&P 500 companies to have reported beat analyst expectations versus the long term average of 64%. Despite reassuring bottom-up data, markets were hit late in the month as uncertainty over a new populist government in Italy hit the euro and drove up volatility. Source: Nomura Asset Management U.K. Ltd SOFT COMMISSIONS RECEIVED FROM BROKERS Soft commissions received from brokers/dealers are retained by the manager only if the goods and services provided are of demonstrable benefit to unit holders of the Fund. During the financial period under review, the Manager did not receive any soft commission. BREAKDOWN OF UNITHOLDERS BY SIZE Fund - Class USD Size of holdings (units) No. of unitholders Less than 10,000 - - 10,000 to 50,000 1 49,867 50,001 to 100,000 - - 101,000 to 200,000 - - 200,00 to 300,000 - - 300,001 and above - - Total 1 49,867 Fund - Class MYR Size of holdings (units) No. of unitholders Less than 10,000 - - 10,000 to 50,000 - - 50,001 to 100,000 - - 101,000 to 200,000 - - 200,00 to 300,000 - - 300,001 and above 1 740,801 Total 1 740,801 * Note: Excluding Manager s Stock. 5 No. of units held* No. of units held*
INCOME DISTRIBUTION The Fund did not declare any income over the period under review. FUND DATA As at 31 May 2018 Class USD Class MYR Total NAV 57,835.76 773,029.77 NAV per Unit 1.1598 1.0434 Unit in Circulation 49,867.36 740,801.08 Highest NAV 1.1928 1.0550 (for the period under review) Lowest NAV (for the period under review) 1.1339 0.9945 Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. 6
Nomura Global High Conviction Fund Financial Statements For the Financial Period ended 31 May 2018 7
NOMURA GLOBAL HIGH CONVICTION FUND STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 31 MAY 2018 INVESTMENT INCOME 01.03.2018 To 01.03.2017 To 31.05.2018 31.05.2017 USD USD Net (loss)/gain on financial assets at fair value through profit or loss ( FVTPL ) (6,502) 7,812 (6,502) 7,812 OTHER INCOME Net (loss)/gain on foreign currency exchange (257) 42 Rebate on management fee 966 434 709 476 EXPENSES Management fee (1,290) (559) Trustee fee (14) (6) Auditors remuneration (386) (597) Tax agent's fee (293) (507) Other expenses (89) (103) GST other expenses (124) (107) (2,196) (1,879) NET (LOSS)/INCOME BEFORE TAXATION (7,989) 6,409 TAXATION - - (DECREASE)/INCREASE IN NET ASSET ATTRIBUTABLE TO UNITHOLDERS (7,989) 6,409 (Decrease)/Increase of net asset attributable to unitholders is made up of the following: Realised amount 1,544 (1,454) Unrealised amount (9,533) 7,863 (7,989) 6,409 8
NOMURA GLOBAL HIGH CONVICTION FUND STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2018 31.05.2018 31.05.2017 USD USD ASSETS 11,051 1,970 Cash and cash equivalents Financial assets at fair value through profit or loss ( FVTPL ) 241,667 134,620 Amount due from Provider 33,584 - Amount due from Manager 638 305 TOTAL ASSETS 286,940 136,895 LIABILITIES Amount due to Manager 32,757 205 Amount due to Trustee 5 2 Auditors remuneration 1,114 770 Tax agent s fee 832 654 Other payables and accruals 143 98 TOTAL LIABILITIES 34,851 1,729 NET ASSET VALUE OF THE FUND 252,089 135,166 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 252,089 135,166 9
NOMURA GLOBAL HIGH CONVICTION FUND STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2018 (CONTINUED) 31.05.2018 31.05.2017 REPRESENTED BY FAIR VALUE OF OUTSTANDING UNITS (USD) MYR CLASS 194,253 56,478 USD CLASS 57,836 78,688 UNIT IN CIRCULATION MYR CLASS 740,801 230,518 USD CLASS 49,867 72,621 NET ASSET VALUE PER UNIT (USD) MYR CLASS 0.2622 0.2450 USD CLASS 1.1598 1.0835 NET ASSET VALUE PER UNIT IN CLASS CURRENCIES MYR CLASS 1.0434 1.0485 USD CLASS 1.1598 1.0835 10
NOMURA GLOBAL HIGH CONVICTION FUND STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS FOR THE FINANCIAL PERIOD ENDED 31 MAY 2018 Note Unitholders Retained Capital Earnings Total USD USD USD Balance as at 28 February 2018 258,180 32,928 291,108 Movement in unitholders contribution: Creation of units from applications 1,293-1,293 Cancellation of units (32,323) - (32,323) Total comprehensive income for the financial Period - (7,989) (7,989) Balance as at 31 May 2018 227,150 24,939 252,089 Balance as at 28 February 2017 78,105-78,105 Movement in unitholders contribution: Creation of units from applications 50.652-50.652 Cancellation of units - - - Total comprehensive income for the financial period - 6,409 6,409 Balance as at 31 May 2017 128,757 6,409 135,166 11
NOMURA GLOBAL HIGH CONVICTION FUND STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 31 MAY 2018 01.03.2018 To 01.03.2017 To 31.05.2018 31.05.2017 USD USD CASH FLOWS FROM OPERATING ACTIVITIES Proceed from sale of investments 2,603 - Purchase of investments (1,260) (49,612) Management fee paid (1,315) (456) Rebate on management fee 1,089 203 Trustee fee paid (15) (5) Payment for other fees and expenses (1,418) (132) Net realised foreign exchange loss (125) (9) Net cash used in operating activities (441) (50,011) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 1,293 50,652 Payments for cancellation of units (56,815) - Net cash (used in)/generated from financing activities (55,522) 50,652 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (55,963) 641 EFFECTS OF FOREIGN CURRENCY EXCHANGE (132) 51 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 67,146 1,278 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 11,051 1,970 12