CIMB-PRINCIPAL PRS PLUS EQUITY UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2018

Transcription

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

2 CONTENTS PAGE(S) MEMBERS LETTER 1 PRS PROVIDER S REPORTS 2-11 Fund objective and policy Performance data Market review Fund performance Portfolio structure Market outlook Investment strategy Members statistic Soft commissions and rebate STATEMENT BY THE PRS PROVIDER 12 TRUSTEE'S REPORT 13 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 14 UNAUDITED STATEMENT OF FINANCIAL POSITION 15 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO MEMBERS 16 UNAUDITED STATEMENT OF CASH FLOWS 17 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 40

3 MEMBERS LETTER Dear Valued Members, 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 has achieved RM54.85 billion in Asset under Management ( AUM ) as at June 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 In addition, we received recognition from Fundsupermart.com for Fund House of the Year award and Recommended Unit Trust 2018/2019 awards for the following funds: CIMB-Principal Global Titans Fund CIMB-Principal Asia Pacific Dynamic Income Fund CIMB Islamic Asia Pacific Equity Fund CIMB-Principal Greater China Equity Fund CIMB-Principal PRS Plus Conservative CIMB-Principal PRS Plus Growth Our latest accomplishment is The Asset Triple A Private Banking, Wealth Management, Investment and Exchange-Traded Fund ( ETF ) Awards 2018 where we have been recognized for the Best Wealth Manager in Malaysia. 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. We look forward to serving you for many years to come and to the best of our ability. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer 1

4 PRS PROVIDER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund seeks to provide capital growth over the long-term by investing in the domestic market. Has the Fund achieved its objective? For the financial period under review, the Fund underperformed its absolute target return of 8% per annum as described under the Fund Performance section. Nevertheless, the Fund's objective of providing capital growth over the long-term is still in place. What are the Fund investment policy and principal investment strategy? The Fund is managed to achieve a defined target return over the long-term through investments in the domestic market. The Fund will invest between 70% to 99.80% (both inclusive) of the Fund s Net Asset Value ( NAV ) in equities. However, the Fund may take temporary defensive positions that may detract from the Fund s prescribed asset allocation when the fund manager believes that the equity market is experiencing excessive volatility, expected prolonged declines or when the outlook of the equity market is unfavourable. Under these circumstances, the Fund may reduce its equity exposure and increase its investment in money market instruments to protect the Fund s investment objective in bearish or non performing equity market. Fund category/type Equity When was the Fund launched? 12 November 2012 What was the size of the Fund as at 31 July 2018? RM9.10 million (15.16 million units) What is the Fund s benchmark? The Fund has a target return of 8% per annum. This is not a guaranteed return and is only a measurement of the Fund s performance. The Fund may not achieve the target return in any particular financial year but targets to achieve this growth over the long-term. Note: The risk profile of the Fund is not the same as the risk profile of the benchmark. What is the Fund distribution policy? The Fund is not expected to pay any distribution. 2

5 PERFORMANCE DATA Details of portfolio composition of the Fund for the last three unaudited financial periods are as follows: % % % Collective investment schemes Quoted securities - Construction Consumer products Finance Industrials Plantation Properties Technology Trading/Services Cash and other net assets Performance details of the Fund for the last three unaudited financial periods are as follows: NAV (RM Million) - Class A Class C Class X Units in circulation (Million) - Class A Class C Class X NAV per unit (RM) - Class A Class C Class X to to to Highest NAV per unit (RM) - Class A Class C Class X Lowest NAV per unit (RM) - Class A Class C Class X Total return (%) - Class A (3.80) Class C (3.78) Class X (3.78) Capital growth (%) - Class A (3.80) Class C (3.78) Class X (3.78)

6 PERFORMANCE DATA (CONTINUED) to to to Income distribution (%) - Class A Class C Class X Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ( PTR ) (times) # ^ The Fund s MER increased from 0.21% to 0.22% mainly due to increased in other expenses during the financial period under review. # The Fund s PTR decreased from 0.63 times to 0.56 times as there were less trading other activities during the financial period under review % % % % % Annual total return - Class A (8.11) Class C (8.11) Class X (8.09) 9.43 (Launch date: 12 November 2012) 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. MARKET REVIEW (1 FEBRUARY 2018 TO 31 JULY 2018) For the financial period under review, the Financial Times Stock Exchange ( FTSE ) Bursa Malaysia ( FBM ) Kuala Lumpur Composite Index ( KLCI ) decreased by 4.51% from 1, points to 1, points. 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 by 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 its losses by month end. In February 2018, foreign investors net sold RM1.1 billion bringing year-to-date ( YTD ) net inflows to RM2.2 billion. March 2018 was a positive month as the FBMKLCI added 7 points or 0.4% 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 by 3.7%, supported by net foreign inflows of RM2.2 billion. In April 2018, the FBMKLCI touched a new high of 1,895 points on 19 April 2018, before closing up only 0.4% at 1,870 points. YTD, the FBMKLCI has gained by 4.1%. Foreigners turned net buyers of RM1.5 billion in April 2018 after being net sellers of RM0.1 billion in March 2018, bringing YTD net foreign inflows to RM3.5 billion. In April 2018, the Malaysian Ringgit ( MYR ) depreciated by 1.5%, while the 10-year Malaysian Government Securities ( MGS ) rose by 19 basis points ( bps ) to 4.13%. Brent crude oil rose by 7% to USD75 per barrel. Construction and finance outperformed, while technology, consumer staples and telecommunications underperformed. 4

7 MARKET REVIEW (1 FEBRUARY 2018 TO 31 JULY 2018) (CONTINUED) In May 2018, the FBMKLCI succumbed to heavy foreign selling, falling by 6.9% or 129 points to a low of 1,719 points before closing at 1,740 points as investors repriced policy risk. The period after the 14 th General Elections ( GE14 ) accounted for 5.7% of that fall. YTD, the FBMKLCI has lost 3.1%. In May 2018, foreigners net sold RM5.6 billion, reversing YTD net foreign flows to RM1.9 billion. During the month, the MYR depreciated by 1.4%, the 10-year MGS rose by 5 bps to 4.18%, while Brent crude oil gained by 3% to USD77 per barrel. The market sold off in May 2018, rattled by headline news of a higher national debt burden, concerns about the fiscal position, cancellation of mega infrastructure projects and the sanctity of toll roads concession agreements. Sentiment was further dampened by the weak first quarter of 2018 corporate earnings season. Meanwhile, global trade tensions were back in focus, and there was fear of contagion from Italian politics. These were happening against a backdrop of Central Banks plans to normalise monetary policies, leading to worries of possible policy missteps. The market continue to be sold off in June 2018, rattled by continuous news flow on 1Malaysia Development Bhd ( 1MDB ) and policy overhang on some of the mega projects like East Cost Rail Link ( ECRL ), Mass Rapid Transit 3 ( MRT3 ) and High Speed Rail ( HSR ). Telecommunications and banks have underperformed due to fear of lower broadband charges and re-pricing of risk arising from expectation of a slower Gross Domestic Product ( GDP ) in 2018 and 2019 respectively. Sentiment was further dampened by the weak first quarter of 2018 corporate earnings season and downgrades of GDP forecast for 2018 and Meanwhile, on global front, it seems that trade tensions have intensified with US planning to impose tariffs on selected European Union ( EU ) products and EU has vowed for a retaliatory tariffs for US goods. Telecommunication companies led the increased after the Government provided clarity on the Broadband plans. Industrials companies also outperformed the benchmark after May 2018 Industrial Production Index ( IPI ) rose by 3.0% year-on-year ( y-o-y ), driven by a rise in manufacturing output. June 2018 Consumer Price Index ( CPI ) came in at 0.8% y-o-y, reflecting the zero-rating of the Goods and Services Tax ( GST ). Nevertheless, with the introduction of the Sales and Service Tax ( SST ) in September 2018, inflation is expected to be higher in the fourth quarter of Meanwhile, on the global front, trade tensions remained a real risk after President Trump announced that the US is ready to impose additional tariffs on all China made goods. 5

8 FUND PERFORMANCE 6 months to year to Class A Class C Class X Class A Class C Class X % % % % % % Income Capital (3.80) (3.78) (3.78) Total Return (3.80) (3.78) (3.78) Benchmark Average Total Return N/A N/A N/A years to years to Class A Class C Class X Class A Class C Class X % % % % % % Income Capital Total Return Benchmark Average Total Return Since inception to Class A Class C Class X % % % Income Capital Total Return Benchmark Average Total Return For the financial period under review, the Fund decreased by 3.80%, while the benchmark increased by 3.92%. As such, the Fund underperformed its benchmark by 7.72%. 6

9 FUND PERFORMANCE (CONTINUED) 6 months to % 4.00% 2.00% 0.00% Class A,C and X* Benchmark -2.00% -4.00% -6.00% -8.00% % % 1 year to % 8.00% 6.00% 4.00% Class A,C and X* Benchmark 2.00% 0.00% -2.00% -4.00% 7

10 FUND PERFORMANCE (CONTINUED) 3 years to % 25.00% 20.00% 15.00% 10.00% Class A,C and X* Benchmark 5.00% 0.00% -5.00% % % 5 years to % 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% % % Class A,C and X* Benchmark 8

11 FUND PERFORMANCE (CONTINUED) Since inception to % 50.00% 40.00% 30.00% 20.00% Class A,C and X Benchmark 10.00% 0.00% % * Performance of Class A, Class C and Class X are almost the same. Slight variant was due to different timing of units created for each of the class. Changes in NAV CLASS A Changes % NAV (RM Million) NAV/Unit (RM) CLASS C Changes % NAV (RM Million) NAV/Unit (RM) CLASS X Changes % NAV (RM Million) NAV/Unit (RM) The NAV per unit for Class A, Class C and Class X increased due to injection of funds. 9

12 PORTFOLIO STRUCTURE Asset allocation (% of NAV) Collective investment schemes Quoted securities Cash and other net assets Total Asset allocation decreased from 99.13% as at 31 July 2017 to 83.05% as at 31 July 2018 as we became defensive of the market during that period. MARKET OUTLOOK* The market sold off in May 2018 and June 2018, rattled by headline news of a higher RM1 trillion national debt burden, concerns about the fiscal position and sovereign credit rating following the zerorating of the GST, cancellation of mega infrastructure projects and the sanctity of toll roads concession agreements. Sentiment was further dampened by the weak first quarter of 2018 corporate earnings season. Meanwhile, global trade tensions were back in focus, and there was fear of contagion from Italian politics. These were happening against a backdrop of Central Banks plans to normalise monetary policies, leading to worries of possible policy missteps. We take a more defensive view for capital protection until we see more clarity in the government s austerity measures. * 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 We expect range-bound market in the short term as odds of an escalating trade conflict and the impact on confidence from events in Turkey and Argentina are assessed. Domestically, investors are awaiting fresh leads on pro-growth initiatives by the new Government and the 2019 budget. We continue to prefer companies with strong fundamentals in sectors such as Consumer, Technology and Industrials. We maintain our view that, despite the short term volatility, investors should position for the longer term, where risk premiums may potentially reduce as a result of better governance. 10

13 MEMBERS STATISTICS AS AT 31 JULY 2018 CLASS A Size of unit holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below 1, ,001-10, ,001-50, , , Above 500, Total 1, CLASS C Size of unit holdings (units) No. of unit holders No. of units held (million) % of units held 5,000 and below ,001-10, ,001-50, , , Above 500, Total CLASS X Size of unit holdings (units) No. of unit holders No. of units held (million) % of units held 5,000 and below ,001-10, ,001-50, , , Above 500, Total SOFT COMMISSIONS AND REBATES The PRS Provider 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 PRS Provider 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. 11

14 STATEMENT BY THE PRS PROVIDER TO THE MEMBERS OF We, being the Directors of CIMB-Principal Asset Management Berhad (the PRS Provider ), do hereby state that, in the opinion of the PRS Provider, the accompanying unaudited financial statements set out on pages 14 to 39 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 July 2018 and of its financial performance, changes in net assets attributable to members 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 PRS Provider CIMB-Principal Asset Management Berhad (Company No.: K) ALEJANDRO ECHEGORRI Executive Director PEDRO ESTEBAN BORDA Director Kuala Lumpur 24 September

15 TRUSTEE S REPORT TO THE MEMBERS OF We have acted as Trustee for CIMB-Principal PRS Plus Equity (the Fund ) for the six months financial period ended 31 July To the best of our knowledge, for the financial period under review, CIMB-Principal Asset Management Berhad (the PRS Provider ) has operated and managed the Fund in accordance with the following:- (a) (b) (c) limitations imposed on the investment powers of the PRS Provider under the Deed(s), the Securities Commission s Guidelines on Private Retirement Schemes, the Capital Markets and Services Act 2007 and other applicable laws; valuation and pricing for the Fund has been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements; and creation and cancellation of units for the Fund have been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirement. For Deutsche Trustees Malaysia Berhad SOON LAI CHING Senior Manager, Trustee Operations RICHARD LIM HOCK SENG Chief Executive Officer Kuala Lumpur 24 September

16 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to Note RM RM INVESTMENT (LOSS)/INCOME Dividend income 93, ,640 Interest income 13,053 - Net (loss)/profit on financial assets at fair value through profit or loss 7 (344,399) 564,108 (237,824) 751,748 EXPENSES Private Pension Administrator's fee 4 1,559 1,397 Trustee s fee and custodian fee 5 7,658 1,397 Audit fee 4,100 5,960 Tax agent s fee 2,600 2,000 Transaction costs 33,030 - Other expenses 1,969 4,191 50,916 14,945 (LOSS)/PROFIT BEFORE TAXATION (288,740) 736,803 Taxation (DECREASE)/INCREASE IN NET ASSETS ATTRIBUTABLE TO MEMBERS (288,740) 736,803 Decrease/Increase in net assets attribution to members is made up as follows: Realised amount (84,837) 141,660 Unrealised amount (203,903) 595,143 (288,740) 736,803 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 14

17 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 JULY Audited Note RM RM ASSETS Cash and cash equivalents 8 1,571,851 1,709,967 Financial assets at fair value through profit or loss 7 7,559,572 6,463,118 Amount due from the PRS Provider 9 23,926 22,598 Amount due from stockbrokers 55,088 - Dividends receivable 1,413 1,251 Tax recoverable TOTAL ASSETS 9,211,905 8,196,989 LIABILITIES Amount due to stockbrokers 98,240 45,985 Other payables and accruals 12,347 15,322 TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO MEMBERS) 110,587 61,307 NET ASSET VALUE OF THE FUND 9,101,318 8,135,682 NET ASSETS ATTRIBUTABLE TO MEMBERS 9,101,318 8,135,682 REPRESENTED BY: FAIR VALUE OF OUTSTANDING UNITS - CLASS A 6,265,678 5,430,762 - CLASS C 1,008, ,853 - CLASS X 1,826,708 1,725,067 9,101,318 8,135,682 NUMBER OF UNITS IN CIRCULATION (UNITS) - CLASS A 10,436,911 8,709,901 - CLASS C 1,680,474 1,571,397 - CLASS X 3,042,593 2,766, ,159,978 13,047,819 NET ASSET VALUE PER UNIT (RM) - CLASS A CLASS C CLASS X The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 15

18 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO MEMBERS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to RM RM NET ASSETS ATTRIBUTABLE TO MEMBERS AT THE BEGINNING OF THE FINANCIAL PERIOD 8,135,682 7,761,799 Movement due to units created and cancelled during the financial period: - Creation of units from applications 1,499,274 1,413,246 - Cancellation of units (244,898) (2,436,712) 9,390,058 6,738,333 (Decrease)/Increase in net assets attributable to members during the financial period: (Loss)/Profit after taxation and total comprehensive (loss)/income (288,740) 736,803 NET ASSETS ATTRIBUTABLE TO MEMBERS AT THE END OF THE FINANCIAL PERIOD 9,101,318 7,475,136 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 16

19 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of quoted securities 3,644,252 - Proceeds from disposal of collective investment schemes - 4,960,000 Purchase of collective investment schemes - (3,963,000) Purchase of quoted securities (5,121,907) - Interest received from deposits with licensed financial institutions 13,053 - Private Pension Administrator s fee paid (1,563) (1,408) Trustee s fee paid (7,662) (1,408) Dividend income received 93,360 - Payments for other fees and expenses (10,697) (5,897) Net cash (used in)/generated from operating activities (1,391,164) 988,287 CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 1,497,946 1,416,751 Payments for cancellation of units (244,898) (2,424,663) Net cash generated from/(used in) financing activities 1,253,048 (1,007,912) Net decrease in cash and cash equivalents (138,116) (19,625) Cash and cash equivalents at the beginning of the financial period 1,709,967 92,883 Cash and cash equivalents at the end of the financial period 1,571,851 73,258 Cash and cash equivalents comprised of: Deposits with licensed financial institutions 1,550,140 - Bank balance 21,711 73,258 Cash and cash equivalents at the end of financial period 1,571,851 73,258 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 17

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY THE FUND, THE PRS PROVIDER AND ITS PRINCIPAL ACTIVITY CIMB-Principal PRS Plus Equity (the Fund ) is governed by a Deed dated 8 November 2012, a First Supplemental Deed dated 2 January 2014 and a Second Supplemental Deed dated 25 November 2014 (collectively referred to as the Deeds ) made between CIMB-Principal Asset Management Berhad (the PRS Provider ) and Deutsche Trustees Malaysia Berhad (the Trustee ). The Fund offers three classes of units known respectively as Class A, Class C and Class X. In accordance with the Disclosure Document, Class A and Class C are for members who have attained 18 years of age as of the date of opening a private pension account. Class A and C have different management fee. Class X is for Members who participate via respective employers and is subject to a minimum of 200 participating employees per employer or 50 participating employees under payroll deduction per employer. The Fund is managed to achieve a defined target return over the long-term through investments in the domestic market. The Fund will invest between 70% to 99.80% (both inclusive) of the Fund s NAV in equities. However, the Fund may take temporary defensive positions that may detract from the Fund s prescribed asset allocation when the fund manager believes that the equity market is experiencing excessive volatility, expected prolonged declines or when the outlook of the equity market is unfavourable. Under these circumstances, the Fund may reduce its equity exposure and increase its investment in money market instruments to protect the Fund s investment objective in bearish or non performing equity market. All investments are subjected to the Securities Commission Malaysia ( SC ) Guidelines on PRS, 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 PRS Provider, a company incorporated in Malaysia, is jointly owned by CIMB Group Sdn Bhd and Principal International (Asia) Limited. The principal activities of the PRS Provider 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. 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) 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 PRS Provider to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the PRS Provider s best knowledge of current events and actions, actual results may differ. 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(l). 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 February 2018: MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. The adoption of these amendments did not have any impact on the current financial period or any prior financial period and is not likely to affect future financial periods. (b) Financial assets and financial liabilities Classification The Fund designates its investments 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 are evaluated on a fair value basis. 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, amount due from the PRS Provider, amount due from stockbrokers 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 stockbrokers, and other payables and accruals as other financial liabilities. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (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 Bhd ( 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. 20

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (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 and quoted securities are recognised on a time proportionate basis using the effective interest rate method on an accrual basis. Realised gain or loss on disposal of collective investment schemes and quoted securities are accounted for as the difference between the net disposal proceeds and the carrying amount of collective investment schemes and quoted securities, 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 ( RM ), which is the Fund s functional and presentation currency. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Creation and cancellation of units The members contributions to the Fund meet the definition of puttable instruments classified as financial liability under MFRS 132 Financial Instruments: Presentation. The Fund issues cancellable units, in three classes of units, known respectively as the Class A, Class C and Class X, which are cancelled at the member s option and do not have identical features subject to restrictions as stipulated in the Disclosure Document and SC Guidelines on PRS. The units are classified as financial liabilities. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s NAV of respective classes. The outstanding units are carried at the redemption amount that is payable at the date of the statement of financial position if the member exercises the right to put back the unit to the Fund. Units are created and cancelled at the member s option at prices based on the Fund s NAV per unit of respective classes at the close of business on the relevant dealing day. The Fund s NAV per unit of respective classes is calculated by dividing the net assets attributable to members of respective classes with the total number of outstanding units of respective classes. (f) Increase/Decrease in net assets attributable to members Income not distributed is included in net assets attributable to members. (g) Transactions 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) Amount due from/to stockbrokers Amounts due from/to stockbrokers represent receivables for investments sold and payables for investments purchased that have been contracted for but not yet delivered on the statement of financial position date. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment for amounts due from stockbrokers. A provision for impairment of amounts due from stockbrokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from relevant stockbrokers. Significant financial difficulties of the stockbrokers, probability that the stockbrokers will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from stockbrokers is impaired. Once a financial asset or a group of similar financial assets have been written down as a result of an impairment loss, interest income is recognised using the interest rate used to discount the future cash flows for the purpose of measuring the impairment loss. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) 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 subjected to an insignificant risk of changes in value. (j) 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. Tax on dividend income from foreign quoted securities is based on the tax regime of the respective countries that the Fund invests in. (k) 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. (l) 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 Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the PRS Provider 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 PRS Provider 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 PRS. However, the PRS Provider is of the opinion that there are no accounting policies which require significant judgement to be exercised. 23

26 3. RISK MANAGEMENT OBJECTIVES AND POLICIES The investment objective of the Fund is to provide capital growth over the long-term by investing in the domestic market. 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 PRS Provider and adherence to the investment restrictions as stipulated in the Deeds and SC Guidelines on PRS. (a) Market risk (i) Price risk This is the risk that the fair value of investment in quoted securities will fluctuate because of changes in market prices. The value of investments 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 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 instruments. 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. 24

27 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (b) Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in financial loss to the Fund. The credit risk arising from placements of deposits with licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. For amount due from the PRS Providers the settlement terms of the proceeds from the creation of units receivable from the PRS Provider are governed by the SC Guidelines on PRS. (c) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The PRS Provider manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of the units by members. Liquid assets comprise bank balances, deposits with licensed financial institutions and other instruments 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 potential. (d) Capital risk management The capital of the Fund is represented by net asset attributable to members of RM9,101,318 ( : RM8,135,682). The amount of net assets attributable to members can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of members. 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 members and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. (e) 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 values 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 PRS Provider 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. 25

28 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) 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 judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment 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 RM RM RM RM Financial assets at fair value through profit or loss: - Quoted securities 7,559, ,559, Audited Financial assets at fair value through profit or loss: - Quoted securities 6,463, ,463,118 26

29 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) Fair value estimation (continued) (i) Fair value hierarchy (continued) Investments which values are based on quoted market prices in active markets, and are therefore classified within Level 1, include quoted securities. 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, amount due from the PRS Provider, amount due from stockbrockers, dividends receivable and all current liabilities are a reasonable approximation of their fair values due to their short term nature. 4. MANAGEMENT FEE AND PRIVATE PENSION ADMINISTRATOR S FEE In accordance with the Deeds, the PRS Provider is entitled to a maximum management fee of 3.00% per annum for each unit class, calculated daily based on the NAV of the Fund. For the six months financial period ended 31 July 2018 and 31 July 2017, the management fee for the respective classes is recognised at the following rates: Class A Class C Class X 1.40% 1.50% 1.40% Nonetheless, no management fee is charged on the Fund for the financial period as the management fee has been waived by the PRS Provider. The Private Pension Administrator s fee is recognised at a rate of 0.04% per annum ( : 0.04% per annum) for each unit class, calculated daily based on the NAV of the Fund. There is no further liability in respect of management fee and Private Pension Administrator s fee other than the amount recognised above. 5. TRUSTEE S FEE In accordance with the Deeds, the Trustee is entitled to a maximum fee of 0.04% per annum for each unit class, calculated daily based on the NAV of the Fund. The Trustee s fee includes local custodian fees but excluding foreign custodian fee. For the six months financial period ended 31 July 2018, the Trustee s fee is recognised at a rate of 0.04% per annum ( : 0.04% per annum) for each unit class. There is no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 27

30 6. TAXATION to RM to RM Tax charged for the financial period: - Current taxation - - A numerical reconciliation between the (loss)/profit before taxation multiplied by the Malaysian statutory income tax rate and tax expense of the Fund is as follows: to RM to RM (Loss)/Profit before taxation (288,740) 736,803 Taxation at Malaysian statutory rate of 24% ( : 24%) (69,298) 176,833 Tax effects of: --Investment loss not deductible for tax purposes/ (Investment income not subject to tax) 57,077 (180,420) --Expenses not deductible for tax purposes 11,156 1,331 --Restriction on tax deductible expenses for PRS Funds 1,065 2,256 Taxation FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Audited RM RM Designated at fair value through profit or loss at inception: --Quoted securities 7,559,572 6,463, to to Net (loss)/gain on financial assets at fair value through profit or loss: - Realised loss on disposals (140,500) (31,035) - Unrealised fair value (loss)/gain (203,899) 595,143 (344,399) 564,108 28

31 7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Name of counter QUOTED SECURITIES Aggregate Market Percentage Quantity cost value of NAV Units RM RM % Construction Econpile Holdings Bhd 38,100 27,384 34, Gamuda Bhd 26,200 93, , IJM Corporation Bhd 19,300 37,488 37, Kerjaya Prospek Group Bhd 40,400 69,711 61, Sunway Construction Group Bhd 23,100 54,242 44, Vizione Holdings Bhd 591,500 97,598 79, , , , Consumer Products British American Tobacco (Malaysia) Bhd 10, , , CCM Duopharma Biotech Bhd 56,000 72,206 68, Magni-Tech Industries Bhd 16, ,586 77, Padini Holdings Bhd 13,100 76,103 78, Power Root Bhd 13,680 16,888 22, QL Resources Bhd 14,100 60,072 84, Sasbadi Holdings Bhd 103,500 42,859 36, UMW Holdings Bhd 14,800 91,585 88, , , , Finance Aeon Credit Service Bhd 5,000 72,676 74, Bursa Malaysia Bhd 11,850 79,000 92, CIMB Group Holdings Bhd 82, , , Malayan Banking Bhd 49, , , Public Bank Bhd 9, , , ,725 1,326,932 1,367,