CIMB-PRINCIPAL KLCI-LINKED FUND UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2018

Transcription

1 UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2018

2 CONTENTS PAGE(S) INVESTORS' LETTER 1 MANAGER'S REPORT 2-7 Fund Objective and Policy Performance Data Market Review Fund Performance Portfolio Structure Market Outlook Investment Strategy Unit Holdings Statistics Soft Commissions and Rebates STATEMENT BY MANAGER 8 TRUSTEE S REPORT 9 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 10 UNAUDITED STATEMENT OF FINANCIAL POSITION 11 UNAUDITED STATEMENT OF CHANGES IN EQUITY 12 UNAUDITED STATEMENT OF CASH FLOWS 13 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 35

3 INVESTORS' LETTER Dear Valued Investor, Thank you for your continued support and for the confidence that you have placed in us. We are pleased to share that CIMB-Principal Asset Management Berhad ("CIMB-Principal") Malaysia concluded the 1 st Quarter of 2018 with billion in Asset under Management ( AUM ). Our AUM for Private Retirement Scheme ("PRS") business increased by 33% year-on-year ( y-o-y ) to 541 million as at 31 March We continue to achieve prestigious recognitions from The Edge Thomson Reuters Lipper Fund Awards as follows: The Edge Thomson Reuters Lipper Malaysia Fund Awards 2018 Best Fund Over 5 Years, Equity Global - Malaysia : CIMB-Principal Global Titans Fund Best Fund Over 5 Years, Equity Asia Pacific ex Japan - Malaysia : CIMB-Principal Asian Equity Fund Best Fund Over 5 Years, Equity Asia Pacific ex Japan - Malaysia : CIMB Islamic Asia Pacific Equity Fund Best Fund Over 5 Years, Equity Malaysia Diversified - Malaysia : CIMB-Principal Equity Growth & Income Fund Best Fund Over 5 Years, Mixed Asset MYR Bal - Malaysia : CIMB-Principal Income Plus Balance Fund Best Fund Over 3 Years, Equity Global - Malaysia : CIMB-Principal Global Titans Fund Thomson Reuters Lipper Fund Award Global Islamic 2017 Best Equity Asia Pacific Ex-Japan (Islamic), Best Fund over 5 years : CIMB Islamic Asia Pacific Equity Fund These prestigious awards are a celebration of the trust that you have placed in us and testament to our capability in bringing potential value to your financial goals and needs. CIMB-Principal was also awarded Fund House of the Year in Malaysia by AsianInvestor for the Asset Management Awards 2017, its second consecutive win and The Employees' Provident Fund ("EPF") External Portfolio Managers Awards 2017 for the Best Global Bond Portfolio Manager. These industry recognitions reflect our success in scaling up our investment capabilities while building a solid track record and earning the trust of our clients over time. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer 1

4 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to achieve medium to long-term capital appreciation by seeking to match the performance of the Financial Times Stock Exchange ( FTSE ) Bursa Malaysia ("FBM") Kuala Lumpur Composite Index ( FBMKLCI ). Has the Fund achieved its objective? For the financial period under review, the Fund has performed in line with its stated objective. What are the Fund investment policy and principal investment strategy? The Fund is an index fund which aims to track the movement of the FBMKLCI. The Fund s indexing strategy is to hold a representative sample of the securities that make up its underlying index. Thus, the Fund normally invests at least 90% of its Net Asset Value ( NAV ) in the index stocks representing the top 95%-98% of the index weights. As such, the Fund may invest up to 30 index stocks, being the representative index stocks of the FBMKLCI. The Fund may also utilise index futures to ensure it is fully invested at all times and to reduce transaction costs. Fund category/type Equity/Index-tracking How long should you invest for? Recommended three (3) years or more Indication of short-term risk (low, moderate, high) High When was the Fund launched? 8 June 2000 What was the size of the Fund as at 31 March 2018? million (14.54 million units) What is the Fund s benchmark? FBMKLCI What is the Fund distribution policy? No distribution is expected to be paid, however, distribution, if any, will be incidental and will vary from period to period depending on interest rates, market conditions and the performance of the Fund. 2

5 PERFOANCE DATA Details of portfolio composition of the Fund for the last three unaudited financial periods are as follows: % % % Quoted securities - Construction Consumer Products Finance Industrials Infrastructure Project Companies ("IPC") Plantation Real Estate Investment Trust ("REIT") Trading/Services KLCI Futures Contracts Cash and other net assets Performance details of the Fund for the last three unaudited financial periods are as follows: NAV ( Million) Units in circulation (Million) NAV per unit () to to to Highest NAV per unit () Lowest NAV per unit () Total return (%) Capital growth (%) Income distribution (%) Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ( PTR ) (times) # ^ During the financial period under review, the MER increased from 0.63% to 0.64% due to decrease in average NAV. # During the financial period under review, the PTR for the Fund was at 0.06 times as the trading activities remain low which reflect the index-tracking status of the Fund % % % % % Annual total return (4.19) (Launch date: 8 June 2000) Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures for the financial period have been extracted from Lipper. 3

6 PERFOANCE DATA (CONTINUED) Characteristics and general composition of the Index Percentage of Index Sector (Market Capitalisation) % Consumer Products 3.62 Finance Industrials 8.10 IPC 3.05 Plantation 8.50 REIT 0.57 Trading/Services TOTAL Source: Bursa Malaysia MARKET REVIEW (1 OCTOBER 2017 TO 31 MARCH 2018) For the financial period under review, the FBMKLCI Index rose by 6.15% from 1, points to 1, points. In October 2017, the FBMKLCI fell by 7.66 points or 0.44% to 1, points. Budget 2018, tabled on 27 October 2017, was both expansionary and people-centric as expected. Fiscal discipline was maintained as shown by a smaller deficit target of 2.80% for 2018 from 3.00% this year. The FBMKLCI fell 30 points or 1.72% to 1, points in November The third quarter of 2017 corporate result season failed to re-rate the market. In addition to this, the Sime Darby Bhd demerger exercise failed to lift sentiments in the market. Malaysia s economy expanded 6.20% y-o-y in third quarter of 2017, the fifth straight quarter of improvement, as domestic demand strengthened. Bank Negara Malaysia ( BNM ) kept the Overnight Policy Rate ( OPR ) at 3.00% during the Monetary Policy Committee ( MPC ) meeting, but indicated that the MPC would consider reviewing the degree of monetary accommodation given the strength of global and domestic macroeconomic conditions. December 2017 was a good month as the FBMKLCI jumped 79 points or 4.60% to 1, points on the back of window dressing activities, driven by banking and technology stocks. For the year, the FBMKLCI rose 155 points or 9.45%, but underperformed the broader market and the region. Foreign investors were net buyers of 10.3 billion in 2017 versus net sellers of 3.2 billion in Brent crude oil price rose 5.20% month-on-month ( m-o-m ) or 17.70% y-o-y to USD67 per barrel, while the Malaysian Ringgit ( MYR ) closed the year stronger at per US Dollar ( USD ), up 10.00% y-o-y. The FBMKLCI had a strong start in January 2018, jumping 72 points or 4.00% to 1,868 points, on the back of the stronger MYR, higher oil prices, net foreign inflows, hike in OPR and overall stronger global economies. In January 2018, foreign investors were net buyers of 3.4 billion versus 10.3 billion in the whole of Brent crude oil price closed at USD69.05 per barrel, while the MYR appreciated 3.80% to close at per USD. February 2018 was a volatile month as investors began re-pricing more interest rate hikes in the United States ( US ), earlier than expected, on the back of higher inflation expectations. In line with the global rout, the FBMKLCI corrected points or 0.66% to 1, points. The FBMKLCI had fallen sharply from a high of 1,870 points (2 February 2018) to a low of 1,812 points (6 February 2018), before recouping most of its losses by month end. Consumer price inflation eased in January 2018 to 2.70% (3.50% y-o-y in December 2018) due to currency gains and a higher base, as fuel prices and electricity tariffs were raised a year ago. 4

7 MARKET REVIEW (1 OCTOBER 2017 TO 31 MARCH 2018) (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND March 2018 was a positive month as the FBMKLCI added 7 points or 0.40% to 1,863 points despite rising concerns of escalating US-China trade disputes. Large caps continued to outperform the broader market and small caps. For the first quarter of 2018, the FBMKLCI rose 3.70%, supported by net foreign inflows of 2.2 billion. FUND PERFOANCE 6 months to year to years to years to Since inception to % % % % % Income Capital Total Return Benchmark Average Total Return N/A The Fund rose 7.59% in the financial period under review, while the benchmark was up by 6.14%. 225% 200% 175% FBMKLCI CIMB-Principal KLCI-Linked Fund 150% 125% 100% 75% 50% 25% 0% 5

8 FUND PERFOANCE (CONTINUED) Changes in NAV Changes % NAV ( Million) (1.27) NAV/Unit () FBMKLCI 1, , For the 1 year period, the total NAV decreased by 1.27%, while the NAV per unit gained 9.59%. The decrease in total NAV was due to Fund redemption, while the higher NAV per unit was due to positive market performance. Performance data represents the combined income and capital return as a result of holding units in the Fund for the specified length of time, based on NAV to NAV price. The performance data assumes that all earnings from the Fund are reinvested and are net of management and trustee fees. Past performance is not reflective of future performance and income distributions are not guaranteed. Unit prices and income distributions, if any, may fall and rise. All performance figures for the financial period have been extracted from Lipper. PORTFOLIO STRUCTURE Asset allocation (% of NAV) Quoted securities KLCI Futures Contracts Cash and other net assets TOTAL The Fund remained fully invested during the financial period under review. A minimal level of liquid assets was maintained primarily for liquidity purposes. MARKET OUTLOOK* Market was shaken by the regional selldown mounting to US-China trade tensions. In our opinion, a full-blown trade war will be avoided as it is detrimental to all. Instead, we expect resolution via bilateral negotiations and dialogue on strategic economic sectors. Locally, the 14 th General Elections ( GE14 ) will be held on 9 May Our base case is for no major political changes following GE14, and for market to re-focus on earnings delivery and policy continuity, amidst a mainly externallydriven volatile macro environment. However, until we get a firm resolution on the US-China trade war and the final outcome of the GE14, volatility in the equity markets is expected to remain high. Nevertheless, we remain constructive on Malaysian equities and will look to selectively add to our preferred stocks opportunistically in market corrections. *This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make a purchase of any investment. The information given in this article represents the views of CIMB-Principal or based on data obtained from sources believed to be reliable by CIMB-Principal. Whilst every care has been taken in preparing this, CIMB-Principal makes no guarantee, representation or warranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this market outlook. INVESTMENT STRATEGY As this is an Index Fund, the Fund will continue to remain fully invested in the benchmark index stocks with minimal cash kept for liquidity purposes in order to track the performance of the benchmark. 6

9 UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 31 March 2018 are as follows: Size of unit holdings (units) No. of unit holders No. of units held (million) % of units held 5,000 and below 10, ,001 10, ,001 50, , , ,001 and above Total 11, SOFT COMMISSIONS AND REBATES CIMB-Principal Asset Management Berhad (the Manager ) and the Trustee (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the Manager and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commissions in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 7

10 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB-PRINCIPAL KLCI-LINKED FUND We, being the Directors of CIMB-Principal Asset Management Berhad (the Manager ), do hereby state that, in the opinion of the Manager, the accompanying unaudited financial statements set out on pages 10 to 34 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 March 2018 and of its financial performance, changes in equity and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards ( MFRS ) Interim Financial Reporting and International Accounting Standards ("IAS") 34 - Interim Financial Reporting. For and on behalf of the Manager CIMB-Principal Asset Management Berhad (Company No.: K) MUNIRAH KHAIRUDDIN Chief Executive Officer/Executive Director ALEJANDRO ECHEGORRI Executive Director Kuala Lumpur 18 May

11 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL KLCI-LINKED FUND We have acted as Trustee of CIMB-Principal KLCI-Linked Fund (the Fund ) for the financial period ended 31 March To the best of our knowledge, CIMB-Principal Asset Management Berhad (the Manager ), has operated and managed the Fund in accordance with the following: a) limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and c) creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur 18 May

12 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2018 CIMB-PRINCIPAL KLCI-LINKED FUND to to Note INVESTMENT INCOME Dividend income 358, ,556 Interest income 4 5,597 1,555 Net gain on financial assets at fair value through profit or loss 8 1,221,239 1,063,565 Net gain/(loss) on derivative assets 11 46,375 (2,025) 1,631,649 1,376,651 EXPENSES Management fee 5 97,298 98,834 Trustee s fee 6 7,170 7,282 Audit fee 8,100 8,030 Tax agent s fee 2,800 2,750 Transaction costs 8,398 9,319 Other expenses 15,447 15, , ,200 PROFIT BEFORE TAXATION 1,492,436 1,234,451 Taxation 7 (147) (181) PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 1,492,289 1,234,270 Profit after taxation is made up as follows: Realised amount 206,971 (5,911) Unrealised amount 1,285,318 1,240,181 1,492,289 1,234,270 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 10

13 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH Audited Note ASSETS Cash and cash equivalents 9 420, ,762 Financial assets at fair value through profit or loss 8 20,603,238 20,153,613 Deposits held in margin account 10 80,508 43,365 Derivative asset at fair value through profit or loss 11 2,275 - Amount due from Manager Dividends receivable 15,769 35,948 Tax recoverable 7,304 7,304 TOTAL ASSETS 21,130,152 20,656,586 LIABILITIES Amount due to Manager 16,589 48,459 Accrued management fee 16,968 16,316 Amount due to Trustee 1,250 1,202 Derivatives liabilities at fair value through profit or loss 11-6,125 Other payables and accruals 32,099 19,958 TOTAL LIABILITIES 66,906 92,060 NET ASSET VALUE OF THE FUND 21,063,246 20,564,526 EQUITY Unit holders capital 1,971,245 2,964,814 Retained earnings 19,092,001 17,599,712 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 21,063,246 20,564,526 NUMBER OF UNITS IN CIRCULATION (UNITS) 12 14,540,915 15,271,153 NET ASSET VALUE PER UNIT () The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 11

14 UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2018 CIMB-PRINCIPAL KLCI-LINKED FUND Unit holders Retained capital earnings Total Balance as at 1 October ,964,814 17,599,712 20,564,526 Movement in unit holders contributions: - Creation of units from applications 828, ,894 - Cancellation of units (1,822,463) - (1,822,463) Total comprehensive income for the financial period - 1,492,289 1,492,289 Balance as at 31 March ,971,245 19,092,001 21,063,246 Balance as at 1 October ,862,545 15,961,585 20,824,130 Movement in unit holders contributions: - Creation of units from applications 304, ,815 - Cancellation of units (1,036,927) - (1,036,927) Total comprehensive income for the financial period - 1,234,270 1,234,270 Balance as at 31 March ,130,433 17,195,855 21,326,288 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 12

15 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2018 CIMB-PRINCIPAL KLCI-LINKED FUND to to CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of quoted securities 2,679,541 1,369,583 Purchase of quoted securities (1,916,325) (793,064) Increase/(decrease) in margin accounts 832 (29,905) Dividend income received 378, ,327 Interest income received from deposits with licensed financial institutions 5,597 1,555 Management fee paid (96,646) (98,041) Trustee s fee paid (7,122) (7,223) Payments for other fees and expenses (14,206) (24,482) Net cash generated from operating activities 1,030, ,750 CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 828, ,015 Payments for cancellation of units (1,854,333) (982,112) Net cash used in financing activities (1,025,455) (677,097) Net increase in cash and cash equivalents 4,686 81,653 Cash and cash equivalents at the beginning of the financial period 415, ,940 Cash and cash equivalents at the end of the financial period 420, ,593 Cash and cash equivalents comprised of: Deposits with licensed financial institutions 367, ,015 Bank balances 53,378 45,578 Cash and cash equivalents at the end of the financial period 420, ,593 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 13

16 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB-PRINCIPAL KLCI-LINKED FUND CIMB-Principal KLCI-Linked Fund (the Fund ) is governed by a Master Deed dated 30 November 2007, a First Supplemental Master Deed dated 25 June 2008, a Second Supplemental Master Deed dated 14 July 2008, a Third Supplemental Deed dated 16 July 2009, a Fourth Supplemental Deed dated 26 July 2013 and a Fifth Supplemental Deed dated 23 March 2015 (collectively referred to as the Deeds ), between CIMB-Principal Asset Management Berhad (the Manager ) and HSBC (Malaysia) Trustee Berhad (the Trustee ). The Fund is an index fund which aims to track the movement of the FBMKLCI. The Fund s indexing strategy is to hold a representative sample of the securities that make up its underlying index. Thus, the Fund normally invests at least 90% of its NAV in the index stocks representing the top 95%-98% of the index weights. As such, the Fund may invest up to 30 index stocks, being the representative index stocks of the FBMKLCI. The Fund may also utilise index futures to ensure it is fully invested at all times and to reduce transaction costs. All investments are subjected to the Securities Commission Malaysia ( SC ) Guidelines on Unit Trust Funds, SC requirements, the Deeds, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The Manager, a company incorporated in Malaysia, is a subsidiary of CIMB Group Sdn Bhd and regards CIMB Group Holdings Berhad as its ultimate holding company. The Manager is also an associate of Principal International (Asia) Limited, which is a subsidiary of Principal Financial Group Inc. The principal activities of the Manager are the establishment and management of unit trust funds and fund management activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the MFRS and 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 their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. 14

17 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (a) Basis of preparation (continued) The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(k). Standards, amendments to published standards and interpretations to existing standards that are effective: The Fund has applied the following amendments for the first time for the financial period beginning 1 October 2017: Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiative introduce an additional disclosure on changes in liabilities arising from financing activities. The adoption of this amendment did not have any impact on the current financial period or any prior period and is not likely to affect future periods. The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 October 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. 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. Investments in equity instruments are always measured at fair value through profit or loss with an 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 loss model ( ECL ) on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. 15

18 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (a) Basis of preparation (continued) (i) Financial year beginning on/after 1 October 2018 (continued) The Fund has reviewed its financial assets and liabilities and has assessed the following impacts from the adoption of the new standard on 1 January 2018: 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 MFRS 9. 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 fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provisions based on ECL rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assessments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. (b) Financial assets and financial liabilities Classification The Fund designates its investment in quoted securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Derivatives are financial assets or liabilities at fair value through profit or loss categorised as held for trading unless they are designated hedges. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s loans and receivables comprise cash and cash equivalents, deposits held in margin account, amount due from Manager and dividends receivable. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, accrued management fee, amount due to Trustee, and other payables and accruals as other financial liabilities. 16

19 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (b) Financial assets and financial liabilities (continued) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the asset. Investments are initially recognised at fair value. Transaction costs are expensed in the statement of comprehensive income. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial period which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payments is established. Quoted securities in Malaysia are valued at the last done market price quoted on Bursa Malaysia Securities Berhad ( Bursa Securities ) at the date of the statement of financial position. If a valuation based on the market price does not represent the fair value of the quoted securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted securities are valued as determined in good faith by the Manager, based on the methods or basis approved by the Trustee after appropriate technical consultation. Deposits with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the respective deposits. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (b) Financial assets and financial liabilities (continued) Impairment for assets carried at amortised costs For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. 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 asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent financial period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. (c) Income recognition Dividend income is recognised on the ex-dividend date when the right to receive payment is established. Interest income from deposits with licensed financial institutions is recognised on a time proportionate basis using effective interest rate method on an accrual basis. Realised gain or loss on disposal of quoted securities is accounted for as the difference between net disposal proceeds and the carrying amount of investments, determined on a weighted average cost basis. (d) Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( ), which is the Fund s functional and presentation currency. 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances and deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (f) Taxation Current tax expense is determined according to Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. (g) Transaction costs Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. (h) Derivatives financial instruments A derivative financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. The Fund s derivative financial instruments comprise futures contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and the nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held for trading and accounted for in accordance with the accounting policy set out in Note 2(b). 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (i) Unit holders capital The unit holders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial period if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. (j) Segment information Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. (k) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Funds results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unit Trust Funds. However, the Manager is of the opinion that in applying these accounting policies, no significant judgement was required. 20

23 3. RISK MANAGEMENT OBJECTIVES AND POLICIES CIMB-PRINCIPAL KLCI-LINKED FUND The investment objective of the Fund is to achieve medium to long-term capital appreciation by seeking to match the performance of the FBMKLCI. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk and interest rate risk), credit risk and liquidity risk. Financial risk management is carried out through internal control process adopted by the Manager and adherence to the investment restrictions as stipulated in the Deeds and SC Guidelines on Unit Trust Funds. (a) Market risk (i) Price risk This is the risk that the fair value of an investment in quoted securities will fluctuate because of changes in market prices (other than those arising from interest rate risk). The value of quoted securities may fluctuate according to the activities of individual companies, sector and overall political and economic conditions. Such fluctuation may cause the Fund s NAV and prices of units to fall as well as rise, and income produced by the Fund may also fluctuate. The price risk is managed through portfolio diversification and selection of quoted securities and other financial instruments within specified limits according to the Deeds. (ii) Interest rate risk Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Interest rate is a general economic indicator that will have an impact on the management of the Fund. The Fund s exposure to fair value interest rate risk arises from investment in money market instrument. The interest rate risk is expected to be minimal as the Fund s investments comprise mainly short term deposits with approved licensed financial institutions. As at the end of each financial period, the Fund is not exposed to a material level of interest rate risk. The Fund is not exposed to cash flow interest rate risk as the Fund does not hold any financial instruments at variable interest rate. (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Fund. The credit risk arising from placements of deposits in licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions.. For amount due from Manager, the settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the SC Guidelines on Unit Trust Funds. 21

24 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (c) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of the units by unit holders. Liquid assets comprise bank balances and deposits with licensed financial institutions, which are capable of being converted into cash within 7 business days. This is expected to reduce the risks for the entire portfolio without limiting the Fund s growth potentials. (d) Capital risk management The capital of the Fund is represented by equity consisting of unit holder s capital of 1,971,245 ( : 2,964,814) and retained earnings of 19,092,001 ( : 17,599,712). The amount of capital can change significantly on a daily basis as the Fund is subjected to daily subscriptions and redemptions at the discretion of unit holders. The Fund s objective when managing capital is to safeguard the Fund s ability to continue as a going concern in order to provide returns to unit holder and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. (d) Fair value estimation Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The fair value of financial assets traded in active markets (such as trading securities) are based on quoted market prices at the close of trading on the financial period end date. The Fund utilises the last traded market price for financial assets where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine the point within the bid-ask spread that is most representative of the fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. 22

25 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (d) Fair value estimation (continued) The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. (i) Fair value hierarchy The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2) Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgement by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss: - Quoted securities 20,603, ,603,238 - Derivative assets - Future contracts 2, ,275 20,605, ,605,513 23

26 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB-PRINCIPAL KLCI-LINKED FUND (d) Fair value estimation (continued) (i) Fair value hierarchy (continued) Level 1 Level 2 Level 3 Total Audited Financial assets at fair value through profit or loss: - Quoted securities 20,153, ,153,613 Financial liabilities at fair value through profit or loss: - Derivative liabilities - Future contracts (6,125) - - (6,125) Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Fund does not adjust the quoted prices for these instruments. The Fund s policies on valuation of these financial assets are stated in Note 2(b). (ii) The carrying values of cash and cash equivalents, deposits held in margin account, amount due from Manager, dividends receivable and all current liabilities are a reasonable approximation of their fair values due to their short term nature. 4. INTEREST INCOME to to Interest income from deposits with licensed financial institutions 5,533 1,543 Interest income from current account 6 12 Interest income from margin account 58-5,597 1, MANAGEMENT FEE In accordance with the Deeds, the Manager is entitled to a maximum management fee of 1.50% per annum, calculated daily based on the NAV of the Fund. For the six months financial period ended 31 March 2018, the management fee is recognised at a rate of 0.95% per annum ( : 0.95% per annum). There will be no further liability to the Manager in respect of management fee other than amounts recognised above. 24

27 6. TRUSTEE S FEE In accordance with the Deeds, the Trustee is entitled to a maximum fee of 0.20% per annum, calculated daily based on the NAV of the Fund. For the six months financial period ended 31 March 2018, the Trustee s fee is recognised at a rate of 0.07% per annum ( : 0.07% per annum). There will be no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 7. TAXATION to to Tax charged for the financial period: - Current taxation A numerical reconciliation between the profit before taxation multiplied by the Malaysian statutory income tax rate and tax expense of the Fund is as follows: to to Profit before taxation 1,492,436 1,234,451 Taxation at Malaysian statutory rate of 24% ( : 24%) 358, ,268 Tax effects of: Investment income not subject to tax (391,596) (330,396) Expenses not deductible for tax purposes 4,940 5,706 Restriction on tax deductible expenses for Unit Trust Funds 28,471 28,422 Investment income subject to different tax rate Taxation FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Audited Designated at fair value through profit or loss at inception: - Quoted securities 20,603,238 20,153, to to Net gain on financial assets at fair value through profit or loss: - Realised loss on disposals (55,679) (176,616) - Unrealised fair value gain 1,276,918 1,240,181 1,221,239 1,063,565

28 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Name of counter QUOTED SECURITIES Aggregate Market Percentage Quantity cost value of NAV Units % Consumer Products Nestle Malaysia Bhd 3, , , PPB Group Bhd 17, , , , , , Finance AMMB Holdings Bhd 71, , , CIMB Group Holdings Bhd 247,211 1,498,508 1,777, Hong Leong Bank Bhd 25, , , Hong Leong Financial Group Bhd 8, , , Malayan Banking Bhd 216,346 1,701,638 2,293, Public Bank Bhd 112,044 1,307,121 2,689, RHB Bank Bhd 41, , , RHB Capital Bhd # 37, ,943 5,494,313 7,898, Industrials Petronas Chemicals Group Bhd 105, , , Petronas Gas Bhd 29, , , Press Metal Aluminium Holdings Bhd 60, , , ,500 1,296,147 1,648, IPC Digi.Com Bhd 137, , , Plantation IOI Corporation Bhd 121, , , Kuala Lumpur Kepong Bhd 17, , , Sime Darby Plantation Bhd 133, , , ,875 1,580,461 1,764, REIT KLCC Property Holdings Bhd 15, , ,