SICOM General Fund. Annual Report

Transcription

1 SICOM General Fund Annual Report JUNE 2015

2 MANAGER S REPORT AND FINANCIAL STATEMENTS CONTENTS Pages Management and Administration 1 Manager s Investment Report 2-7 Independent Auditor s Report to the Unitholders 8 Statement of Financial Position 9 Statement of Profit or Loss and Other Comprehensive Income 10 Statement of Movements in Net Assets Statement of Cash Flows 13 Notes to the Financial Statements 14-35

3 1 MANAGEMENT AND ADMINISTRATION MANAGER SICOM Financial Services Ltd Directors of SICOM Financial Services A N Deerpalsingh (Appointed as director on 16 April 2015, and Chairman on 25 May 2015 and up to 22 June 2015) Gujadhur S K (Chairman up to 25 March 2015) Ahmine A R (Up to 17 March 2015) Bhoojedhur-Obeegadoo K G (Mrs) Dabee D K (Up to 02 April 2015) Gopy D K Lobine K (Up to 18 December 2014) Nemchand S (as from 16 March 2015) Nowbuth R P (as from 16 March 2015 and up to 15 July 2015) Yip Wang Wing Y S Registered Office SICOM Financial Services Ltd SICOM Building Sir Celicourt Antelme Street, Port Louis Telephone : (230) Fax : (230) Address: sfsl@sicom.intnet.mu Website : TRUSTEE The Mauritius Commercial Bank Limited 9-15 Sir William Newton Street Port Louis REGISTRAR SICOM Registry & Secretarial Services Ltd SICOM Building Sir Celicourt Antelme Street, Port Louis AUDITORS BDO & Co 10, Frère Félix de Valois Street Port Louis BANKER The Mauritius Commercial Bank Limited SBI (Mauritius) Limited

4 2 MANAGER S INVESTMENT REPORT We are pleased to present our report of the SICOM General Fund for the financial year ended 30 June Investor Profile The SICOM General Fund is an open-ended Fund, which invests primarily in equities (local and overseas), government stocks/ bonds and cash/ short-term instruments. Investment in the Fund should be regarded as a long-term investment. The Fund is exposed to a certain number of risks such as fluctuations in the value of investments and currency risks. Investment Objectives & Approach The overall objectives of the SICOM General Fund are as follows: To maximise returns whilst acting prudently at all times, and Diversify its portfolio with a long-term view. SICOM Financial Services Ltd, the Manager of the Fund, has set up an Investment Committee, a sub- Committee of its Board of Directors, to define investment objectives and strategies of the Fund. Investment strategy and key investment decisions are made with reference to the overall objectives of the portfolio of the Fund as a whole, available investment opportunities and instruments on financial markets, cash flow availability and the need for diversification of a well-balanced portfolio. Governance SICOM General Fund is a Collective Investment Scheme with SICOM Financial Services Ltd carrying out the investment function as per the terms and conditions of the Trust Deed. The assets of the Fund are registered in the name of and held by the Trustee whose responsibility is to safeguard unit-holders and ensure that the Manager carries out its duties. Therefore, through this governance structure, the best interests of unit-holders are maintained.

5 3 Economic and Market Review According to the International Monetary Fund, the world economy grew by 3.4% in 2014 with advanced and emerging and developing economies growing by 1.8% and 4.6% respectively, reflecting a pickup in growth in advanced economies relative to the previous year and a downturn in emerging market and developing economies. Despite a disappointing start in 2015, the U.S. economy now appears to be on a solid growth path boosted by consumer spending, job growth and recovery in the housing market, fuelling further speculation of the first rate hike in 2015 since the financial crisis. In the wake of Quantitative Easing by the European Central Bank, growth in the Eurozone is finally accelerating but it faces continuing uncertainty about financial stability emanating from troubles in Greece. In Japan, the economic recovery is being supported by the weaker yen, lower oil prices and absence of fiscal tightening in In contrast, China continued to decelerate with lacklustre economic indicators, albeit government measures to thwart the slowdown. During the financial year ended 30 June 2015, equity markets recorded mixed performances. The S&P500 recorded a gain of 5.25%, closing at new all-time highs regularly, while the MSCI World Index inched down by 0.5%. The MSCI Europe and FTSE 100 plummeted by 10.0% and 3.3% respectively during the financial year ended 30 June Meanwhile, the DAX and CAC 40 rose by 11.3% and 8.3% respectively during the period under review. Similarly, the Japanese Nikkei 225 posted a remarkable gain of 33.5%, amid market optimism driven by positive corporate results. The MSCI Emerging Markets fell by 7.5% and bucking the trend, the MSCI China picked up by 21.0%, outpacing the MSCI India which rose by 1.7%. According to Statistics Mauritius, after growing by 3.2% in 2013, the growth rate for the Mauritian economy in 2014 improved slightly to 3.5%, supported by positive contribution from all major sectors except the construction sector. The investment rate in 2014 was 19.2% while the saving rate reached 11.5%. The headline inflation rate was 1.7% for the twelve months ended June 2015 compared to 4.0% for the previous corresponding period. For the financial year ended June 2015, the average weighted yield on Treasury Bills decreased by 67 basis points to 1.81%, epitomising the excess liquidity in the financial market. During the same period, there was an appreciation in the USD and GBP, compared to MUR while the EUR and AUD depreciated versus the local currency. The SEMDEX declined by 5.0%, while the DEMEX improved by 11.8% for the financial year ended 30 June 2015.

6 4 Fund Review Total Value & Total Assets As at 30 June 2015, the total value of the SICOM General Fund stood at Rs million as compared to Rs million last year. The total assets of the Fund increased over the financial year to reach Rs million as at 30 June 2015 as compared to Rs million last year. The increase in total value and total assets were primarily due to the positive performance of local and overseas equities. The return of the Fund stood at 9.2% for the year under review, outperforming its benchmark 1 which posted a comparative return of 5.3%. Performance of the Fund against Benchmark Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 SGF Benchmark Asset Mix The asset mix of the investment portfolio of the Fund as at 30 June 2015 as compared to 30 June 2014 is illustrated below: 1 The Benchmark is represented by 40% Global Composite Index, 35% Average weighted yield on Tbills and 25% SEMDEX. The Global Composite Index is made up of 36% S&P 500 Index, 24% MSCI World(ex-US) Index, 24% S&P/BGCantor 3-5 Year US Treasury Bond Index and 16% Citigroup Non-US Dollar World Government Bond Index.

7 Asset Mix 2014/ Fixed deposits 15.5% Short term instruments & Cash 2.3% Local equities 33.9% Overseas equities 48.3% Asset Mix 2013/2014 Fixed deposits 12.4% Short term instruments & Cash 14.2% Local equities 33.1% Overseas equities 40.3% Investment Income During the financial year under review, the gross investment income of SICOM General Fund fell to Rs 7.6 million, as compared to Rs 8.1 million last year explained by lower interest rate domestically and a drop in dividend earnings. Consequently, the net income from operating activities was Rs 5.6 million for the financial year ended 30 June 2015 as compared to Rs 6.1 million last year. Dividend The income available for distribution for the financial year ended 30 June 2015 stood at Rs 5.4 million. The dividend per unit stood at Rs for the year under review as compared to Rs last year.

8 6 Prospects The IMF has projected World Output to grow at 3.3% in 2015, with advanced economies growth gradually picking up, while emerging and developing economies continue to slow down. In advanced economies, growth is expected to improve, as the underlying drivers for gradual acceleration in economic activity, namely, easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labour market conditions, remain intact. In emerging market and developing economies, growth is expected to decrease in 2015 as a result of the impact of lower commodity prices, tighter external financial conditions and the rebalancing in China. In its June 2015 National Account Estimates, Statistics Mauritius has revised down its 2015 GDP forecast to 3.8%. The investment rate in 2015 is expected to increase to 19.5% while the saving rate is projected to reach 12.2%. In addition, as a percentage of GDP, public sector investment is expected to increase in 2015 while private sector investment is anticipated to be marginally lower. The domestic economic growth rebounded in the first quarter of 2015 compared to the corresponding quarter last year. Economic activities are expected to pick up during 2015 in line with the budgetary measures announced to boost growth. Domestically, we shall maintain our prudent selective purchases on the local stock market, geared generally towards attractively priced stocks with reasonable underlying fundamentals. Internationally, markets are expected to remain volatile with mixed performances across regions. We shall continue to invest for the long term by researching compelling investment opportunities and identifying markets with attractive valuations.

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10 INDEPENDENT AUDITORS REPORT TO THE MEMBERS 8 This report is made solely to the unitholders of SICOM Unit Trust - SICOM General Fund (the Fund ), as a body. Our audit work has been undertaken so that we might state to the Fund's unitholders those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the Fund's unitholders as a body, for our audit work, for this report, or for the opinions we have formed. Report on the Financial Statements We have audited the financial statements of SICOM Unit Trust SICOM General Fund on pages 9 to 35 which comprise the statement of financial position at 30 June 2015 and the statement of profit or loss and other comprehensive income, statement of movements in net assets and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Responsibilities of Manager and Trustee The Manager and Trustee are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Trust deed, and for such internal control as the Manager and Trustee determine is necessary to enable the preparation of the financial statements that are free from material misstatements whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Fund s preparation and fair presentation of the financial statements 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager and Trustee, as well as evaluating the overall presentation of the financial statements.

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13 10 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Notes GROSS INVESTMENT INCOME 14 7,592,044 8,089,736 FUND EXPENSES Manager s fees 15 (1,580,983) (1,532,749) Trustee s fees 16 (232,227) (229,912) Auditors' remuneration (179,400) (158,700) Other operating expenses (38,665) (27,576) (2,031,275) (1,948,937) PROFIT FROM OPERATING ACTIVITIES 5,560,769 6,140,799 EQUALISATION 3(d) Add: Income received on units created 56,037 23,192 Less: Income paid on units liquidated (11,687) (14,621) 44,350 8,571 Profit before taxation 5,605,119 6,149,370 Taxation 13(ii) (173,009) (206,821) Profit after taxation 5,432,110 5,942,549 Income brought forward PROFIT FOR DISTRIBUTION 5,432,594 5,943,023 Dividend - distribution to unitholders 12 (5,431,772) (5,942,539) PROFIT BEFORE NET UNREALISED GAINS ON INVESTMENTS Net increase in fair value of held-for-trading investments 12,127,121 12,394,264 PROFIT AFTER NET GAINS ON INVESTMENTS 12,127,943 12,394,748 The notes on pages 14 to 35 form an integral part of these financial statements. Auditors report on pages 8 and 8(a).

14 STATEMENT OF MOVEMENTS IN NET ASSETS FOR THE YEAR ENDED 30 JUNE Income and Other Net Distribution Investments Assets Account Total NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT 1 JULY ,156,481 15,907, ,064,644 MOVEMENT IN UNITS Cash receivable for units created - 3,365,910-3,365,910 Cash payable for units liquidated - (1,078,267) - (1,078,267) Net cash movement from units - 2,287,643-2,287,643 MOVEMENT IN INVESTMENTS Cost of investments purchased 54,047,483 (54,047,483) - - Proceeds of investments sold/matured (36,826,245) 36,826, Net cash movement in investments 17,221,238 (17,221,238) - - GAINS ON DISPOSAL/MATURITY OF INVESTMENTS Gains on disposal of shares 3,508,625 (3,508,625) - - Transfer to gross investment income (3,419,526) - - (3,419,526) 89,099 (3,508,625) - (3,419,526) Profit after net gains on investments - 12,127, ,127,943 Transfer of net loss on investments 12,127,121 (12,127,121) ,127, ,127, ,593,939 (2,534,541) 1, ,060,704 Income and distribution account - - (484) (484) NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT 30 JUNE ,593,939 (2,534,541) ,060,220 The notes on pages 14 to 35 form an integral part of these financial statements. Auditors report on pages 8 and 8(a).

15 STATEMENT OF MOVEMENTS IN NET ASSETS FOR THE YEAR ENDED 30 JUNE Income and Other Net Distribution Investments Assets Account Total NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT 1 JULY ,209,278 (2,919,855) ,289,897 MOVEMENT IN UNITS Cash receivable for units created - 2,838,705-2,838,705 Cash payable for units liquidated - (1,782,512) - (1,782,512) Net cash movement from units - 1,056,193-1,056,193 MOVEMENT IN INVESTMENTS Cost of investments purchased 30,342,873 (30,342,873) - - Proceeds of investments sold/matured (51,735,080) 51,735, Net cash movement in investments (21,392,207) 21,392, GAINS ON DISPOSAL/MATURITY OF INVESTMENTS Gains on disposal of shares 3,620,866 (3,620,866) - - Transfer to gross investment income (3,675,720) - - (3,675,720) (54,854) (3,620,866) - (3,675,720) Profit after net gains on investments - 12,394, ,394,748 Transfer of net loss on investments 12,394,264 (12,394,264) ,394, ,394, ,156,481 15,907, ,065,118 Income and distribution account - - (474) (474) NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT 30 JUNE ,156,481 15,907, ,064,644 The notes on pages 14 to 35 form an integral part of these financial statements. Auditors report on pages 8 and 8(a).

16 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation (after dividend and net gains on investments) 12,300,468 12,601,095 Adjustments for: Gain on disposal of investments (3,508,625) (3,620,866) Net increase in fair value of HFT investments (12,127,121) (12,394,264) Distributions to unitholders 5,431,772 5,942,539 Operating profit before working capital changes 2,096,495 2,528,504 Decrease/(increase) in other receivables 4,898,568 (5,253,133) Increase/(decrease) in other payables 480,922 (1,024,777) CASH GENERATED FROM/(USED IN) OPERATING ACTIVITIES 7,475,985 (3,749,406) Dividend paid (5,942,539) (5,027,523) Tax paid (207,536) (160,816) Cost of investments purchased (54,047,483) (30,342,873) Proceeds of investments sold/matured 36,826,245 51,735,080 Net cash (used in)/generated from operating activities (15,895,328) 12,454,462 CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds on movement in units 2,287,643 1,056,193 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (13,607,685) 13,510,655 CASH AND CASH EQUIVALENTS AT 1 JULY 16,397,987 2,887,332 CASH AND CASH EQUIVALENTS AT 30 JUNE 2,790,302 16,397,987 The notes on pages 14 to 35 form an integral part of these financial statements. Auditors report on pages 8 and 8(a).

17 14 1. GENERAL INFORMATION SICOM General Fund is an open ended Collective Investment Scheme established as a Unit Trust with its registered office situated at SICOM Building, Sir Celicourt Antelme Street, Port Louis. It was authorised under Section 3(1)(a) of the Unit Trust Act 1989 and established by a Trust Deed dated 11 June 2001 between SICOM Financial Services Ltd (The Manager) and The Mauritius Commercial Bank Ltd (The Trustee). The SICOM General Fund is constituted under the SICOM Unit Trust. A Unit Trust is a Collective Investment Fund requiring two parties, a Manager to carry out the investment function, and a Trustee which performs a fiduciary role on behalf of the investors. The overall objective of the SICOM General Fund is to maximise returns whilst acting prudently at all times and diversifying its portfolio with a long term view. 2. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS EFFECTIVE IN THE REPORTING PERIOD Amendments to published Standards and Interpretations effective in the reporting period Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities, clarify the requirements relating to the offset of financial assets and financial liabilities. The amendment is not expected to have any impact on the Company s financial statements. Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities, define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities. The standard has no impact on the Company s financial statements. IFRIC 21, Levies, sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what obligating event that gives rise to pay a levy and when should a liability be recognised. The Company is not subject to levies so the interpretation has no impact on the Company s financial statements. Amendments to IAS 36, Recoverable Amount Disclosures for Non- financial Assets, remove the requirement to disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated. The amendment has no impact on the Company s financial statements. Amendments to IAS 39, Novation of Derivatives and Continuation of Hedge Accounting, provide relief from the requirement to discontinue hedge accounting when a derivative designated as a hedging instrument is novated under certain circumstances. The amendments also clarify that any change to the fair value of the derivative designated as a hedging instrument arising from the novation should be included in the assessment and measurement of hedge effectiveness. The amendment has no impact on the Company s financial statements.

18 15 2. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS EFFECTIVE IN THE REPORTING PERIOD (CONT'D) Amendments to published Standards and Interpretations effective in the reporting period (cont'd) Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) applies to contributions from employees or third parties to defined benefit plans and clarifies the treatment of such contributions. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period. The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service, for example employee contributions that are calculated according to a fixed percentage of salary. Entities with plans that require contributions that vary with service will be required to recognise the benefit of those contributions over employee s working lives. The amendment has no impact on the Company s financial statements. Annual Improvements Cycle IFRS 2, Share based payments amendment is amended to clarify the definition of a vesting condition and separately defines performance condition and service condition. The amendment has no impact on the Company s financial statements. IFRS 3, Business combinations is amended to clarify that an obligation to pay contingent consideration which meets the definition of a financial instrument is classified as a financial liability or equity, on the basis of the definitions in IAS 32, Financial instruments: Presentation. It also clarifies that all non-equity contingent consideration is measured at fair value at each reporting date, with changes in value recognised in profit and loss. The amendment has no impact on the Company s financial statements. IFRS 8, Operating segments is amended to require disclosure of the judgements made by management in aggregating operating segments. It is also amended to require a reconciliation of segment assets to the entity s assets when segment assets are reported. The amendment has no impact on the Company s financial statements. IFRS 13 (Amendment), Fair Value Measurement clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. The amendment has no impact on the Company s financial statements. IAS 16, Property, plant and equipment and IAS 38, Intangible are amended to clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. The amendment has no impact on the Company s financial statements. IAS 24, Related party disclosures is amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity (the management entity ). Disclosure of the amounts charged to the reporting entity is required. The amendment has no impact on the Company s financial statements.

19 16 2. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS EFFECTIVE IN THE REPORTING PERIOD (CONT'D) Amendments to published Standards and Interpretations effective in the reporting period (cont'd) Annual Improvements Cycle IFRS 1, First-time Adoption of International Financial Reporting Standards is amended to clarify in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity s first IFRS financial statements. The amendment has no impact on the Company s financial statements, since the Company is an existing IFRS preparer. IFRS 3, Business combinations is amended to clarify that IFRS 3 does not apply to the accounting for the formation of any joint venture under IFRS 11. The amendment has no impact on the Company s financial statements. IFRS 13, Fair value measurement is amended to clarify that the portfolio exception in IFRS 13 applies to all contracts (including non-financial contracts) within the scope of IAS 39 or IFRS 9. The amendment has no impact on the Company s financial statements. IAS 40, Investment property is amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive. IAS 40 assists users to distinguish between investment property and owner-occupied property. Preparers also need to consider the guidance in IFRS 3 to determine whether the acquisition of an investment property is a business combination. The amendment has no impact on the Company s financial statements. Standards, Amendments to published Standards and Interpretations issued but not yet effective Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periods beginning on or after January 1, 2015 or later periods, but which the Company has not early adopted. At the reporting date of these financial statements, the following were in issue but not yet effective: IFRS 9 Financial Instruments Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) IFRS 14 Regulatory Deferral Accounts Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) IFRS 15 Revenue from Contract with Customers Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) Equity Method in Separate Financial Statements (Amendments to IAS 27)

20 17 2. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS EFFECTIVE IN THE REPORTING PERIOD (CONT'D) Standards, Amendments to published Standards and Interpretations issued but not yet effective (cont'd) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) Annual Improvements to IFRSs Cycle Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) Disclosure Initiative (Amendments to IAS 1) Where relevant, the Fund is still evaluating the effect of these Standards, amendments to published Standards and Interpretations issued but not yet effective, on the presentation of its financial statements. 3. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. (a) Basis of preparation The financial statements of SICOM General Fund comply with the Trust Deed and have been prepared in accordance with International Financial Reporting Standards (IFRS). Where necessary, comparative figures have been amended to conform with change in presentation in the current year. The financial statements are prepared under the historical cost convention except that held-for-trading financial assets are stated at their fair value and held-for-maturity securities are carried out at amortised cost. (b) Financial instruments Financial assets and financial liabilities are recognised in the statement of financial position when the Fund has become party to the contractual provisions of the financial instruments. Financial assets Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL) and held-for-maturity. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. (i) Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or where appropriate, a shorter period.

21 18 3. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial instruments (cont'd) Financial assets (cont'd) (ii) Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial assets are either held for trading or are designated as at FVTPL. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; or on initial recognition it is a part of an identified portfolio of financial instruments that the Fund manages together and has any recent actual pattern of short-term profit-taking. A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Fund's documented risk management and investment strategy, and information about the grouping is provided internally on that basis. Financial assets at FVPTL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend on the financial asset. Fair value is determined in the manner described in note 3(g). (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Fund s management has positive intention and ability to hold to maturity. Held-to-maturity investments are recognised initially at fair value plus directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less impairment. (iv) Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the financial asset's original effective interest rate.

22 19 3. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial instruments (cont'd) Financial assets (cont'd) (iv) Impairment of financial assets (cont'd) The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets. 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 through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. (v) Derecognition of financial assets The Fund derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Fund neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Fund recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Fund retains substantially all the risks and rewards of ownership of a transferred financial asset, the Fund continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities Financial liabilities are classified other financial liabilities. Other financial liabilities Other financial liabilities, including borrowings and other payables, are initially measured at fair value, net of transaction costs. Subsequently they are measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. (i) Derecognition of financial liabilities The Fund derecognises financial liabilities when, and only when, the Fund s obligations are discharged, cancelled or they expire.

23 20 3. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial instruments (cont'd) (ii) Units Units issued by the Fund are recorded at the proceeds received net of direct issue costs. They are redeemable at any time at the option of the unitholder for cash and do not have a par value and an unlimited number of units may be issued. The units are financial liabilities and therefore the net assets attributable to unitholders are classified within liabilities in the statement of financial position and distributions to unitholders are included as dividend in profit or loss. (c) Dividend and interest income Interest receivable from bank, foreign deposits, loan and treasury bills are credited to profit or loss on an accrual basis. Dividends receivable from securities are accounted for in profit or loss when the right for payment is established. (d) Equalisation Accrued income included in the issue and repurchase prices of units are dealt with in profit or loss. (e) Taxation Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Fund s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. (f) Foreign currency translation Monetary assets and monetary liabilities denominated in foreign currencies at the end of the reporting period are translated into Mauritian rupees at the rate of exchange ruling at that date. Any exchange gains or losses arising are recognised in profit or loss. Foreign currency transactions are converted into Mauritian rupees at the exchange rate ruling at the dates of the transactions. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date of the transactions. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity.

24 21 3. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (g) Fair value Except where stated elsewhere, the carrying amounts of the Fund s financial assets and financial liabilities approximate their fair values due to the short-term nature of the balances involved. The fair value of the financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted market price used for financial assets and financial liabilities is the current market price. (h) Provisions A provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each financial reporting date and adjusted to reflect the current best estimate. (i) Cash and cash equivalents Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. They are measured at fair value, based on the relevant exchange rates at the reporting date. (j) Related parties Related parties are individuals and companies where the individual or company has the ability directly or indirectly, to control the other party or exercise significant influence over the other party in making operating and financial decisions. (k) Transactions costs Transaction costs are costs incurred to acquire financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents and brokers. Transaction costs, when incurred, are immediately recognised in profit or loss as an expense. (l) Distributions payable to unitholders Proposed distributions to unitholders are recognised in profit or loss when they are appropriately authorised and the decision is deemed irrevocable. The distribution on the units is recognised as dividend in profit or loss. (m) Increase/decrease in net assets attributable to unitholders Income not distributed is included in net assets attributable to unitholders. Movements in net assets attributable to unitholders are recognised in the statement of movements in net assets.

25 22 4. ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of financial statements in accordance with IFRS requires management to exercise judgement in the process of applying the accounting policies. It also requires the use of accounting estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Judgements and estimates are continuously evaluated and are based on historical experience and other factors, including expectations and assumptions concerning future events that are believed to be reasonable under the circumstances. The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Areas where management has applied a higher degree of judgement that have a significant effect on the amounts recognised in the financial statements, or estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: (a) Units in issue The Fund has classified the units in issue as financial liabilities on the basis that apart the contractual obligation to redeem the units, the Fund has a contractual obligation to distribute income to the unitholders either by way of dividend, bonus issue or in whatever form the Manager may think fit. (b) Held-to-maturity investments The Fund follows the guidance of International Accounting Standards (IAS) 39 Recognition and Measurement on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the Fund evaluates its intention and ability to hold such investments to maturity. If the Fund fails to keep these investments to maturity other than for specified circumstances explained in IAS 39, it will be required to reclassify the whole class as available-for-sale. The investments would therefore be measured at fair value not amortised cost.

26 23 5. MAURITIAN QUOTED EQUITIES (a) The movement in investments is as follows: Fair value through profit or loss - held for trading investments At 1 July 49,294,609 47,802,307 Additions 9,922,123 - Disposals (5,796,560) (2,879,153) Fair value gains 4,000,196 4,371,455 At 30 June 57,420,368 49,294,609 (b) The Fund investments are summarised as follows: % of Fund (i) Official market Sector Banking and Insurance 27,324,692 24,491, Leisure and Hotels 6,069,291 2,976, Investment 9,864,172 10,129, Industry 2,584,536 2,491, Commerce 3,502,100 2,863, Sugar 14, , ,359,391 43,284, (ii) Development Enterprise Market Sector Investment 1,712,132 2,351, Banking and Insurance 3,227,100 2,429, Leisure and Hotels 1,498, , Sugar 65,000 68, Industry 1,558, , ,060,977 6,009, ,420,368 49,294, The Mauritian quoted equities are stated at fair value, based on values of the Stock Exchange of Mauritius at 30 June MAURITIAN UNQUOTED EQUITIES (a) The movement in investments is as follows: Fair value through profit or loss - held for trading investments At 1 July 3,296,724 2,879,946 Additions 57,892 29,401 Disposals (3,354,616) - Fair value gains - 387,377 At 30 June - 3,296,724 The Mauritian unquoted equities are stated at fair values, based on bid prices of the units of the funds published at 30 June 2015.

27 24 7. OVERSEAS QUOTED EQUITIES (a) The movement in investments is as follows: Fair value through profit or loss - held for trading investments At 1 July 63,903,257 61,104,377 Additions 17,867,486 91,046 Disposals (7,924,080) (4,927,598) Fair value gains 8,126,925 7,635,432 At 30 June 81,973,588 63,903,257 The overseas equities are stated at fair values, based on bid prices of the units of the funds published at 30 June (b) The Fund investments are summarised as follows: % of Fund JP Morgan Fleming Fund 4,838,524 4,111, LIM Asia Arbitrage Fund Inc 11,223,018 9,303, St James's Place 36,314,019 40,387, Merrill Lynch 20,093,512 6,003, Morgan Stanley 3,543,355 2,246, IPRO Fund 1,964,877 1,851, IMARA African Fund 3,462, ACM India Focus Fund 533, ,973,588 63,903, The overseas equities are stated at fair value based on values of the overseas markets on 30 June LOCAL CURRENCY DENOMINATED DEPOSITS Held-to-maturity financial assets At 1 July 19,661,891 33,422,648 Additions 26,199,982 30,222,426 Maturity (19,661,891) (43,983,183) At 30 June 26,199,982 19,661,891 These consist of deposits with local banks and other financial institutions with interest rates in the range of 3.25 % to 5.00% (2014: 4.85 % to 5.50%) per annum maturing between July 2015 to April OTHER RECEIVABLES % of Fund Interest receivable on deposits 541, , Dividend receivable on equities 640, , Other receivables - 5,121, ,182,354 6,080, The carrying amount of other receivables approximates their fair value and are denominated in Mauritian rupee.

28 25 9. OTHER RECEIVABLES (CONT'D) The classes within other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Fund does not hold any collateral as security. 10. FOREIGN CURRENCY DENOMINATED DEPOSITS These comprise of the following: % of Fund Cash and cash equivalents Call deposits denominated in USD and GBP 1,189 1, OTHER PAYABLES % of Fund Management fees 420, , Trustee's fees 58,120 40, Auditors' remuneration 172, , Printing 39,000 39, Payable to unitholders 296, Other fees 19,552 19, ,006, , The carrying amount of other payables approximates their fair value. 12. DIVIDEND - DISTRIBUTION TO UNITHOLDERS Final distribution of Re (2014: Re ) per unit 5,431,772 5,942,539 Distribution is recognised as a liability because in terms of the Trust Deed, the Fund has to distribute its net income. 13. TAXATION Income tax is calculated at the rate of 15% (2014: 15%) on net profit before taxation as adjusted for income tax purposes. (i) Tax liability At 1 July 103,083 57,078 Tax paid during the year (103,084) (96,032) Under/(over) provision in previous years 1 (8,788) Provision for the year 173, ,609 Tax paid under APS (104,452) (64,784) At 30 June 68, ,083

29 TAXATION (CONT'D) (ii) Tax expense Provision for the year 173, ,609 Under/over provision in previous years 1 (8,788) Tax charge 173, ,821 (iii) The tax on the Fund s profit before tax differs from the theoretical amount that would arise from using basic tax rates of the Fund as follows: Profit before taxation 5,605,119 6,149,370 Tax calculated at 15% (2014: 15%) 840, ,406 Tax effects of: - Expenses not deductible for tax purposes 126, ,474 Under/(over) provision in previous years 1 (8,788) - Income not subject to tax (794,551) (831,271) Tax charge 173, , GROSS INVESTMENT INCOME Loans and receivables Interest on deposits 980,752 1,533,968 Cash and cash equivalents Interest and net exchange losses/gains on bank balances 443, ,984 Held for trading Gain on disposal of investments 3,508,625 3,620,866 Dividend on Mauritian equities 1,788,381 1,919,769 Dividend on overseas securities 870, ,149 6,167,632 6,349,784 7,592,044 8,089, MANAGER'S FEES Manager s fees are paid to SICOM Financial Services Ltd based on 1% p.a of the Net Asset Value of the Fund. The fees which are calculated on a daily basis are payable monthly in arrears. 16. TRUSTEE'S FEES Trustee's fees are paid to the Mauritius Commercial Bank Limited based on 0.15% p.a of the Net Asset Value of the Fund. The fees are calculated on a daily basis and are payable monthly in arrears.

30 UNITS (a) Movements in units during the year: 2015 No. of Units No. of Units Net assets of the Fund at 1 July 11,088, ,064,644 11,010, ,289,897 Units created 241, ,365, , ,838,705 Units liquidated (77,963.21) (1,078,267) (134,017.66) (1,782,512) Revaluation gain realised on disposal of investments - (3,419,526) - (3,675,720) Profit not distributed for the year - 12,127,943-12,394,748 Income and distribution account brought forward - (484) - (474) Net assets of the Fund at 30 June 11,252, ,060,220 11,088, ,064, (b) Net asset value per unit: NAV per unit (cum-div) NAV per unit (ex-div) (c) Prices per unit: Issue price (cum-div) Re-purchase price (cum-div) RELATED PARTY TRANSACTIONS The Fund is making the following disclosures in accordance with IAS 24 (Related Party Disclosures): (a) Investment Manager's Holding Company Units in Fund held at end of year (fair value) 54,299,751 50,020,720 At 1 July (ex-div) 48,140,454 44,062,120 Additions 1,096,479 1,556,845 Change in fair value 5,062,818 4,401,755 At 30 June (cum-div) 54,299,751 50,020,720 Dividend payable (1,750,232) (1,880,266) At 30 June (ex-div) 52,549,519 48,140,454

31 RELATED PARTY TRANSACTIONS (CONT'D) (b) Investment Manager's shareholders (excluding the Holding Company) (i) Units in Fund held at end of year (fair value) 2,994,643 2,850,246 At 1 July (ex-div) 2,743,106 2,584,556 Change in fair value 251, ,690 At 30 June (cum-div) 2,994,643 2,850,246 Dividend payable to the shareholders (96,540) (107,140) At 30 June (ex-div) 2,898,103 2,743,106 (ii) Interest income from the shareholders - 597,043 (iii) Outstanding balance receivable Interest receivable - 205,984 (c) Investment Manager (i) Units in Fund held at end of year (fair value) 17,702,125 16,285,160 (ii) Investment Manager's fees 1,580,983 1,532,749 (iii) Dividend payable to the manager 589, ,857 (iv) Outstanding balances payable: - Manager s fees 420, ,687 - Entry and exit fees 7,801 5, , ,085 (d) Trustee (i) Balances with local bank (Trustee) 2,539,181 16,396,962 (ii) Trustee's fees 232, ,912 (iii) Interest income from Trustee 444, ,983 (iv) Bank changes 7,616 3,500 (v) Outstanding balances payable: - Trustee s fees 58,120 40,153

32 FINANCIAL RISK MANAGEMENT 19.1 Financial risk factors The Fund s activities expose it to a variety of financial risks: market risk (including foreign currency risk, interest rate risk and market price risk), credit and counterparty risk and liquidity risk. The Fund s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Fund s financial performance. A description of the significant risk factors is given below: (a) Market price risk The Fund trades in securities quoted on the Stock Exchange of Mauritius and overseas securities. All securities investment presents a risk of loss of capital. The Fund s investment securities are susceptible to market price risk from uncertainties about future prices of the instruments. The Fund Manager moderates this risk through a careful selection of securities, investment diversification and by having investment limits. The maximum risk resulting from investment securities is determined by the fair value of the financial instruments. The Fund s overall market positions are monitored on a regular basis by the Fund Manager. The following table details the Fund s sensitivity to a 5% and 10% increase/decrease in prices of securities Increase/decrease of 5% in the prices of securities Increase/decrease in net assets attributable to Unitholders 6,969,698 5,824,730 Increase/decrease of 10% in the prices of securities Increase/decrease in net assets attributable to Unitholders 13,939,396 11,649,459 (b) Foreign currency risk The Fund has deposits and overseas investments denominated in GBP and USD. The Manager monitors the Fund s currency position on a regular basis. The carrying amount of the Fund s foreign currency denominated assets and liabilities at the reporting date are as follows: Assets Concentration of assets under: US Dollars 46,161,689 23,518,081 GBP 36,314,140 40,387,402 82,475,829 63,905,483 Liabilities The Fund has no foreign currency denominated liabilities. Consequently the fund is exposed to risks that the exchange rate of the Rupee relative to those other currencies may change in a manner which has an adverse effect on the reported value of that portion of the Fund s assets which is denominated in currencies other than the Rupee.