Aberdeen Islamic Asia Pacific Ex Japan Equity Fund. Interim Report 31 December 2017

Transcription

1 Aberdeen Islamic Asia Pacific Ex Japan Equity Fund Interim Report 31 December 2017

2 TABLE OF CONTENTS FUND INFOATION 2 FUND PERFOANCE DATA 3 5 MANAGER S REPORT 6 98 UNAUDITED INTERIM STATEMENT OF COMPREHENSIVE INCOME 10 9 UNAUDITED INTERIM STATEMENT OF FINANCIAL POSITION UNAUDITED INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS UNAUDITED INTERIM STATEMENT OF CASH FLOWS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE MANAGER TRUSTEE S REPORT SHARIAH ADVISER S REPORT DISTRIBUTORS

3 FUND INFOATION Name of Fund Aberdeen Islamic Asia Pacific Ex Japan Equity Fund Fund Category / Type Equity (Islamic) / Growth Fund Objective The Fund seeks to achieve capital appreciation in the long term through investments in Shariah-compliant equities and equity-related securities. Fund Benchmark MSCI AC Asia Pacific Ex Japan Islamic Index Fund Income Distribution Policy As the investment objective of the Fund is to provide capital appreciation, distribution of income, if any, is incidental. Breakdown of Unitholdings by Size As at 31 December 2017, the size of the Fund stood at million units. BREAKDOWN OF UNITHOLDERS BY SIZE A (MYR) CLASS Size of Holdings (Units) No. of Unitholders No. of Units held ( 000) 5,000 and below ,001 to 10, ,001 to 50, ,001 to 500, ,001 and above 5 17,184 Total 15 17,504 BREAKDOWN OF UNITHOLDERS BY SIZE A (USD) CLASS Size of Holdings (Units) No. of Unitholders No. of Units held ( 000) 5,000 and below 0 0 5,001 to 10, ,001 to 50, ,001 to 500, ,001 and above Total

4 FUND PERFOANCE DATA FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2017 Sector Allocation % % Shariah-Compliant Equities Consumer Staples Consumer Discretionary Energy Healthcare Information Technology Industrials Materials Islamic Real Estate Telecommunication Services Utilities Cash Total Country Allocation % % Australia China Hong Kong Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand India Cash Total

5 FUND PERFOANCE DATA (CONTINUED) FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2017 As at As at Class A - MYR Class A - USD Class A - MYR Class A - USD Total Net Asset Value (NAV) (million) NAV per Unit Units in Circulation (million) Highest NAV per Unit Lowest NAV per Unit Return of the Fund (%) Capital Return (%) Income Return (%) Nil Nil Nil Nil Gross Distribution per Unit (sen) Nil Nil Nil Nil Net Distribution per Unit (sen) Nil Nil Nil Nil Management Expense Ratio (MER) (%) Portfolio Turnover Ratio (PTR) (times) Source: Deutsche Bank (Malaysia) Berhad Performance of the Fund 6 months to (%) 1 year to (%) Since inception (annualised) to (%) Class A MYR Class A USD Source: Lipper for Investment Management as at 31 st December 2017 Average Total Return 1 year to (%) 1 year to (%) Since Inception (cumulative) to (%) Class A MYR Class A USD Source: Lipper for Investment Management as at 31 st December

6 FUND PERFOANCE DATA (CONTINUED) FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2017 Basis of calculation and assumptions made in calculating the returns: The performance figures are a comparison of the growth/decline in NAV for the stipulated period taking into account all the distributions payable (if any) during the stipulated period. An illustration of the above would be as follows: Capital return = NAV per Unit end / NAV per Unit begin 1 Income return = Income distribution per Unit / NAV per Unit ex-date Total return = Capital return x Income return 1 Class A MYR Capital Return = {NAV per NAV per } x 100 = { } x 100 = % Total Income Return = {Income Distribution per Unit NAV per Unit Ex-Distribution} x 100 = Nil Return of the Fund = [{(1+Capital Return) x (1+Total Income Return)} 1] x 100 = [{( %) x (1+ 0%)}-1] x 100 = % Class A USD Capital Return = {NAV per NAV per } x 100 = { } x 100 = % Total Income Return = {Income distribution per Unit NAV per Unit ex-date} x 100 = Nil Return of the Fund = [{(1+Capital Return) x (1+Total Income Return)} 1] x 100 = [{( %) x (1+ 0%)}-1] x 100 = % Past performance is not necessarily indicative of future performance and that Unit prices and investment returns may go down, as well as up. 5

7 INTERIM REPORT MANAGER S REPORT The Aberdeen Islamic Asia Pacific Ex Japan Equity Fund returned 2.08% in ringgit terms over the period, compared with the total return of its benchmark, the MSCI AC Asia Pacific Ex Japan Islamic Index, of 10.40%. Given the performance during the period under review, we believe the Fund s objective is being met to provide investors with capital appreciation through long term investments in Shariah-compliant equities. Class A - MYR Income Return % Capital Return % Total Return of Fund % Total Return of Benchmark % Income Return % Capital Return % Total Return of Fund % Total Return of Benchmark % Class A - USD FUND RETURN (SINCE INCEPTION) VS BENCHMARK Percentage Growth (%) Fund Performance Dec 15 Mar 16 Jun 16 Sep 16 Mar 17 Dec 16 Jun 17 Sep 17 Dec Aberdeen Islamic APAC ex Japan Equity A MSCI AC Asia Pacific Ex Japan Islamic Index Benchmark: MSCI AC Asia Pacific Ex Japan Islamic Index Source: Lipper for Investment Management as at 31 December 2017 Note: This information is prepared by Aberdeen Islamic Asset Management Sdn Bhd for information purposes only. Past performance of the Fund is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. 6 6

8 MANAGER S REPORT (CONTINUED) Analysis of Fund Performance Against this backdrop, the fund rose by 2.08% in ringgit terms, lagging the benchmark s return of 10.40%. Over heavy exposure to both Indonesia and Malaysia detracted from performance, although this was mitigated by positive stock selection in both markets. Korea was another detractor. We have an underweight exposure to the market, which outperformed the region. At the stock level, intense competition in Korea s botox market weighed on our holding Medy-tox. In Hong Kong, both our holdings in Jardine Matheson and Swire Pacific underperformed. Jardine s share price fell owing to pressures faced by its subsidiaries in Hong Kong and Indonesia. Swire remained weak amid the restructuring of its airline business and cyclical challenges for its marine segment. Stock selection in India also proved costly, with our holdings in Lupin and Bosch weighing on performance. Declining prices and greater scrutiny from US regulators hurt Lupin, and Bosch lagged its peers in the recovering consumer discretionary sector. Conversely, the fund s positioning in Taiwan contributed significantly to performance. We benefited from our underweight exposure to the market, which posted lower returns as compared to most regional peers. From a stock perspective, we gained from our holding in GlobalWafers, which we introduced to the portfolio towards the period-end. The company is one of the top suppliers of silicon wafers globally and is benefiting from structurally improving wafer demand as well as industry consolidation. Management has also demonstrated execution ability by improving the product portfolio and transforming the company successfully through various acquisitions. We also initiated a position in the preference shares of Korea s Samsung Electronics (SEC) after the stock was added to the benchmark index. SEC has strong competitive positions across its three key segments semiconductors, mobile phones and TFT-LCDs, supported by its net-cash balance sheet, cash flow generation and profitability. The introduction of both GlobalWafers and SEC are part of ongoing efforts to refine our positioning in the tech sector by shifting our exposure towards faster growing names and themes, such as the fundamental increase in semiconductor content and upgrade of hardware specifications across various applications. Beyond the tech sector, we initiated a position in LG Chem, given its unique business mix and attractive valuations relative to its growth prospects. At its core, LG Chem s resilience stems from a robust and cash-generative chemicals business, which serves as a strong base for the company to build on its current leading position in the electric vehicle battery market, where it has already garnered a broad automotive customer base and growing backlog of orders. Against these, we divested Global Logistic Properties (GLP) at a price close to the privatisation offer of S$3.38 per share. The high-profile buyout of GLP concluded, after the Singapore-listed logistics company accepted a Chinese consortium s offer at 25% premium to its last closing price. Valued at around US$12 billion, GLP s strength lies in China, where a boom in ecommerce is driving demand for modern logistics facilities. The transaction is a positive outcome for GLP, as it puts an end to the long-running uncertainty around the transaction. We also exited Nestle India, Digi.Com, Bangkok Dusit Medical Services and Home Product Center after they were dropped from the benchmark index. 7

9 MANAGER S REPORT (CONTINUED) Analysis of Fund Performance (Continued) % % Changes % NAV ( Million) NAV/ Unit () The Fund s NAV rose by 5.9% to 23.4 million as at 31 December Likewise, the NAV per unit rose by 2.9% during the financial period. Market Review Asian equities posted solid gains over the review period despite the occasional wobbles caused by geopolitical uncertainty. A synchronised worldwide economic recovery, resurgent earnings and subdued inflation buoyed markets. Global financial conditions also proved supportive, with the US Federal Reserve raising rates gradually and continued quantitative easing in Europe and Japan. Market Outlook After a bumper year there is a sense that equity markets may be due for a pullback. Yet the current backdrop appears sustainable. The world economy is at its healthiest in years, with Asia expected to continue boosting global growth. Inflation is subdued. Global monetary policy remains loose even though some central banks are withdrawing stimulus. Policymakers are vigilant to the risks of tightening too quickly and are likely to take a gradual approach to minimise market disruption. Meanwhile, corporate earnings are on the rise, driven by improving sales and margins. Yet the current backdrop appears sustainable. The world economy is at its healthiest in years, with Asia expected to continue boosting global growth. Inflation remains subdued. Meanwhile, corporate fundamentals look sound and valuations appear reasonable, with improving sales and margins are providing support to earnings growth. In terms of strategy, we remain focused on quality and value paring our holdings on strength, adding to them on weakness or initiating new names with compelling valuations and intact long-term growth drivers. Investment Strategy Valuations appear reasonable in view of projected earnings growth. In terms of strategy, we remain focused on quality and value paring our holdings on strength, adding to them on weakness or initiating new names with compelling valuations and intact longterm growth drivers. Asset Allocation % % Shariah-Compliant Equities Cash Total

10 MANAGER S REPORT (CONTINUED) Distribution / Unit Split No distribution or unit split was declared for the financial period ended 31 December State of Affairs of the Fund There has been no significant change to the state of affairs of the Fund, nor any circumstances that materially affected any interests of the unitholders during the period under review. Soft Commissions Soft commissions received from brokers or dealers are retained by the management company only if the goods and services provided are of demonstrable benefit to unitholders of the Fund as per requirements of Clause and of the Guidelines on Unit Trust Funds. During the period under review, the Manager and its delegates (if any) did not receive any soft commissions from stockbrokers or dealers. 9

11 UNAUDITED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 SHARIAH-COMPLIANT NET INVESTMENT INCOME Note to to Dividend income 208, ,354 Net gain on financial assets at fair value through profit or loss (Shariah-compliant) 6 597, ,531 Net foreign currency exchange loss (26) (403) EXPENSES 805, ,482 Management fee 3 209,668 94,941 Trustee s fee 4 15,707 10,299 Audit fee 3,630 3,630 Tax agent s fee 7,562 6,848 Transaction costs 10,345 8,785 Payment to charitable bodies - 16,578 Other expenses 33,088 29, , ,532 NET PROFIT BEFORE TAXATION 525, ,950 Taxation 5 (18,009) (5,719) INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 507, ,231 Net profit after taxation and total comprehensive income comprises the following: Realised amount 577,760 65,230 Unrealised amount (70,271) 377, , ,231 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 UNAUDITED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 CURRENT ASSETS Note Financial assets at fair value through profit or loss (Shariah- compliant) 6 22,759,198 20,998,720 Amount due from Manager - Creation of units 91, ,603 Dividends receivable 1,305 89,046 Cash and cash equivalents 7 599, ,405 TOTAL ASSETS 23,451,283 22,177,774 CURRENT LIABILITIES Amount due to Manager - Management fee 34,207 31,602 - Cancellation of units - 63,901 Amount due to Trustee 3,121 1,445 Other payables and accruals 36,194 29,634 TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 73, ,582 NET ASSET VALUE OF THE FUND 23,377,761 22,051,192 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 23,377,761 22,051,192 REPRESENTED BY: FAIR VALUE OF OUTSTANDING UNITS CLASS A MYR 19,652,327 18,731,786 CLASS A USD 3,725,434 3,319,406 23,377,761 22,051,192 NUMBER OF UNITS IN CIRCULATION 9 CLASS A MYR 17,504,099 17,029,573 CLASS A USD 774, ,924 NAV PER UNIT () CLASS A MYR CLASS A USD NAV PER UNIT (RESPECTIVE CURRENCIES) CLASS A MYR MYR MYR CLASS A USD USD USD The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 UNAUDITED INTERIM STATEMENT OF CHANGES IN NET ASSETS ASTTRIBUTABLE ATTRIBUTABLE TO UNITHOLDERS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER to to NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE BEGINNING OF THE FINANCIAL PERIOD 22,051,192 8,209,159 Movement due to units created and cancelled during the financial period: - Creation of units arising from applications 3,640,127 6,308,863 - Cancellation of units (2,821,047) (915,767) Net increase in net assets attributable to unitholders during the financial period: 22,870,272 13,602,255 Net profit after taxation and total comprehensive income 507, ,231 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT END OF THE FINANCIAL PERIOD 23,377,761 14,044,486 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 UNAUDITED INTERIM STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 CASH FLOWS FROM OPERATING ACTIVITIES Note to to Proceeds from sale of quoted Shariah-compliant securities 4,324,232 1,254,423 Purchase of quoted Shariah-compliant securities (5,487,710) (5,900,553) Dividend income received 296, ,459 Management fee paid (207,064) (86,237) Trustee s fee paid (14,031) (9,901) Payment for other fees and expenses (66,074) (43,830) Net cash used in operating activities (1,154,408) (4,660,639) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 3,887,372 6,131,125 Payments for cancellation of units (2,884,947) (983,183) Net cash generated from financing activities 1,002,425 5,147,942 NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS (151,983) 487,303 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 751, ,547 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 7 599, ,850 Cash and cash equivalent comprised of: Bank balances 7 599, ,850 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

15 INTERIM REPORT SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. The financial statements have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost conventions as modified by the financial assets and financial liabilities at fair value through profit or loss ( FVTPL ). 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 revenue and expenses during the reported financial period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. The Manager believes that the underlying assumptions are appropriate and the Fund s financial statements therefore present the financial position results fairly. Although these estimates and judgment are based on the Manager 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 N. 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 year beginning 1 July 2016: Amendments to MFRS 101 "Presentation of Financial Statements - Disclosure Initiative" provide clarifications on a number of issues, including: Materiality an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. Disaggregation and subtotals line items specified in MFRS 101 may need to be disaggregated where this is relevant to an understanding of the entity s financial position or performance. There is also new guidance on the use of subtotals. Notes confirmation that the notes do not need to be presented in a particular order. Other comprehensive income ( OCI ) arising from investments accounted for under the equity method the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. According to the transitional provisions, the disclosures in MFRS 108 regarding the adoption of new standards/accounting policies are not required for these amendments. Annual Improvements to MFRS Cycle The adoption of these amendments did not have any impact on the current financial year or any prior financial year and is not likely to affect future years. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 July 2017 Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative (effective from 1 January 2017) introduce an additional disclosure on changes in liabilities arising from financing activities. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. (ii) Financial year beginning 1 on/after 1 July 2018 MFRS 152 Revenue from Contracts with Customers (effective from 1 January 2018) replaces MFRS 118 Revenue and MFRS 111 Construction 3 Contracts and related interpretations. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 1 Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer has the ability to direct the use of and obtain the benefits from the goods or services. The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (continued) A new five-step process is applied before revenue can be recognised: Identify contracts with customers; Identify the separate performance obligations; Determine the transaction price of the contract; Allocate the transaction price to each of the separate performance obligations; and Recognise the revenue as each performance obligation is satisfied. Key provisions of the new standard are as follows: Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. If the consideration varies (such as for incentives, rebates, performance fees royalties, success of an outcome etc), minimum amounts of revenue must be recognised if they are not at significant risk of reversal. The point at which revenue is able to be recognised may shift: some revenue which is currently recognised at a point in time at the end of a contract may have to be recognised over the contract term and vice versa. There are new specific rules on licenses, warranties, non-refundable upfront fees, and consignment arrangements, to name a few. As with any news standard, there are also increased disclosures. The fund will apply this standard when effective. This standard is not expected to have significant impact on the Fund's financial statements. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (ii) Financial year beginning on/after 1 July 2018 (continued) MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through Other Comprehensive Income ("OCI"). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments 1 are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument 2 is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest 3. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives 1. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply the above standards when effective. The standards are not expected to have a significant impact on the Fund s financial statements. B. INCOME RECOGNITION Profit income from Islamic deposits with licensed financial institutions is recognised based on effective profit method on an accrual and time proportional basis. Dividend income is recognised on the ex-dividend date, when the right to receive the dividend has been established. Realised gains and losses on sale of Shariah-compliant investments are accounted for as the difference between the net disposal proceeds and the carrying amount of Shariah-compliant investments, determined on a weighted average cost basis. C. DISTRIBUTIONS A distribution to the Fund s unit holders is accounted for as a deduction from realised reserve. As a result of the reclassification of units from equity to financial liability, the Fund s distributions are no longer classified as dividend paid in the statement of changes in net assets attributable to unit holders, but rather as finance cost in the statement of comprehensive income. A proposed distribution is recognised as a financial liability in the year in which it is approved. 1 Equity instruments and derivatives refer to Shariah-compliant equity instruments and Shariah-compliant derivatives. 2 Debt instrument refers to trade and other receivables, cash and cash equivalents, financing and sukuk. 3 Interest refers to profits earned from Shariah-compliant investments. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) D. TRANSACTION COSTS Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. E. TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based on the taxable profit earned during the financial period. Tax on dividend income from foreign quoted investments is based on the tax regime of the respective countries that the Fund invests in. F. FOREIGN CURRENCY Function and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( ), which is the Fund s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges.. G. FINANCIAL ASSETS AND FINANCIAL LIABILITES (i) Classification The Fund designates its investments in quoted Shariah-compliant equity securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. 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 receivables comprise cash and cash equivalents, amount due from Manager and dividends receivable which are all due within 12 months. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, amount due to stockbrokers, amount due to Trustee, other payables and accruals as other financial liabilities. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-dates, the date on which the Fund commits to purchase or sell the asset. Shariah-compliant investments are initially recognised at fair value. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value with gain and loss are recognised in the statement of comprehensive income. Transaction costs are expensed in the statement of comprehensive income. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) G. FINANCIAL ASSETS AND FINANCIAL LIABILITES ( CONTINUED) (ii) Recognition and measurement (continued) Financial assets are derecognised when the rights to receive cash flows from the Shariah-compliant 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 category are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit and loss in the 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. Prior to 1 July 2013, foreign quoted Shariah-compliant investments are valued at the bid prices quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges. The Fund adopted MFRS 13 Fair Value Measurement from 1 July 2013 and changed its fair valuation inputs to utilise the last traded market price quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges for foreign quoted investments. If a valuation based on the market price does not represent the fair value of the Quoted Shariahcompliant 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 Shariah-compliant securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the 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. Islamic deposits with licensed Islamic financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the year from the date of placement to the date of maturity of the respective Islamic deposits. Receivables and other liabilities are subsequently carried at amortised cost using the effective profit method. 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 profit rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised instatement of comprehensive income. If receivables or a held-to-maturity investment has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit 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. 18

20 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) G. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) If, in a subsequent year, 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 the 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. H. AMOUNT DUE FROM/TO STOCKBROKERS Amount due from and amount due to stockbrokers represent receivables for Shariah-compliant securities sold and payables for Shariah-compliant securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective profit 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 the relevant stockbroker. Significant financial difficulties of the stockbroker, probability that the stockbroker 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 has been written down as a result of an impairment loss, profit income is recognised using the rate of profit used to discount the future cash flows for the purpose of measuring the impairment loss. The effective profit method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the profit income or financing expense over the relevant period. The effective profit rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective profit rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective profit rate, transaction costs and all other premiums or discounts. I. CASH AND CASH EQUIVALENTS For the purpose of the statement of cash flows, cash and cash equivalents comprise cash and bank balances that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. J. CREATION AND CANCELLATION OF UNITS In the previous financial period, the Fund classified its puttable instruments as equity in accordance with MFRS 132 (Amendment) Financial Instruments: Presentation. The Fund issues cancellable units, in two classes of units, known respectively as Class A, targeted at retail investors and Class I, targeted at institutional investors, which are cancelled at the unit holder s option and do not have identical features. In accordance with MFRS 132 (Amendment) Financial Instruments: Presentation, such units, by virtue of not having identical features, 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 net asset value ( NAV ) of respective classes. The outstanding units are carried at the redemption amount that is payable at the statement of financial position if the unit holder exercises the right to put back the unit to the Fund. 19

21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) J. CREATION AND CANCELLATION OF UNITS (CONTINUED) Each class of units is also offered in different currency denominations, i.e. Ringgit Malaysia, US Dollars, Euro, Australia Dollars and Singapore Dollars. The Euro, Australian Dollars and Singapore Dollars denominated classes are not offered for sale for the financial period ended 31 December Units are created and cancelled at the unit holder 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 unit holders of respective classes with the total number of outstanding units of respective classes. K. INCREASE/DECREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Profit not distributed is included in net assets attributable to unit holders. Movements in net assets attributable to unit holders are recognised in the statement of comprehensive income as finance costs. L. SEGMENT INFOATION Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Investment Committee of the Fund s Manager that undertakes strategic decisions for the Fund. M. FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments comprise financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm s length transaction. The information presented herein represents the estimates of fair values as at the statement of financial position. N. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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 judgments are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unit Trust Funds. However, the Manager is of the opinion that there are no accounting policies which require significant judgement to be exercised. 20

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER INFOATION ON THE FUND The Fund was constituted under the name of Aberdeen Islamic Asia Pasific Ex Japan Equity Fund (the Fund ) pursuant to the execution of a Deed dated 4 June 2015 (collectively referred to as the Deeds ) between Aberdeen Islamic Asset Management Sdn Bhd (the Manager ) and Deutsche Trustees Malaysia Berhad (the Trustee ). The Fund seeks to achieve capital appreciation in the long term through investments in Shariah-compliant equities and equity related securities. The Fund is a multi-class Fund which offers two classes of units which are class A, targeted at retail investors and Class I, targeted at institutional investors. Each class of units are also offered in different currency denominations, i.e. Ringgit Malaysia, US Dollars, Euro, Australian Dollars and Singapore Dollars. The Euro, Australia Dollars and Singapore Dollars denominated classes are not offered for sale for the financial period ended 31 December All investments will be subjected to the Securities Commission ( SC ) s Guidelines on Unit Trust Funds, SC s requirements, the Deeds approved and the objective of the Fund, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The Manager is a company incorporated in Malaysia. The principal activities of the Manager are establishment and management of Unit Trust Funds. 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks which include market risk (including price risk and currency risk), credit risk, liquidity risk, non-compliance risk, reclassification of Shariah status risk and capital risk. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated by the prospectus and the SC s Guidelines on Unit Trust Funds. Financial instruments of the Fund are as follows: Note Receivables Financial assets at fair value through profit or loss Total As at 31 December 2017 Quoted Shariah-compliant securities 6-22,759,198 22,759,198 Amount due from Manager 91,358-91,358 Dividends receivable 1,305-1,305 Cash and cash equivalents 7 599, , ,085 22,759,198 23,451,283 As at 30 June 2017 Quoted Shariah-compliant securities 6-20,998,720 20,998,720 Amount due from Manager 89,046-89,046 Dividends receivable 751, ,405 Cash and cash equivalents 7 338, ,603 1,179,054 20,998,720 22,177,774 All current liabilities are financial liabilities which are carried at amortised cost. 21

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (i) Price risk Price risk arises mainly due to uncertainty on the future prices of Shariah-compliant investments. It represents the potential loss the Fund might suffer through holding market positions in the face of price movements. The Manager manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio. The table below shows the financial instruments of the Fund which are exposed to price risk Quoted Shariah-compliant securities designated at fair value through profit or loss 22,759,198 20,998,720 The following table summarises the sensitivity of the Fund s net asset value (NAV) and profit after tax to movements in prices of investments at the end of the reporting period. The analysis is based on the assumptions that the market price of investments fluctuates by 5% with all other variables held constant. This represents the Manager s best estimate of a reasonable possible shift in investments, having regard to the historical volatility of the prices. % change in price of quoted Shariah-compliant securities Market value Impact on profit after tax/nav As at 31 December % 21,621,238 (1,137,960) 0% 22,759, % 23,897,158 1,137,960 As at 30 June % 19,948,784 (1,049,936) 0% 20,998, % 22,048,656 1,049,936 (ii) Currency risk Currency risk is associated with investments denominated in foreign currencies. When the foreign currencies fluctuate in an unfavourable movement against Ringgit Malaysia, the investments will face currency losses in addition to the capital gain/loss. The Manager will evaluate the likely directions of a foreign currency versus Ringgit Malaysia based on considerations of economic fundamentals such as profit rate differentials, balance of payments position, debt levels, and technical chart considerations. Shariah- compliant securities Dividends receivable Amount due from stockbrokers Total As at 31 December 2017 AUD 2,061, ,061,864 USD 1,997, ,997,176 HKD 4,166, ,166,662 INR 3,333, ,333,817 IDR 2,172, ,172,879 KRW 3,393,248 1,305-3,394,553 PHP 881, ,832 SGD 2,314, ,314,645 TWD 704, ,206 21,026,328 1,305-21,027,633 22

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (ii) Currency risk (continued) Shariah- compliant securities Dividends receivable Amount due from stockbrokers Total As at 30 June 2017 AUD 1,928,015 3,895-1,931,910 USD 1,783, ,783,421 HKD 2,927,898 46,846-2,974,744 INR 3,661,813 1,225-3,663,038 IDR 2,518,123 30,096-2,548,219 KRW 1,334, ,334,169 PHP 747, ,058 SGD 2,404, ,404,346 THB 1,441, ,441,048 18,745,891 82,062-18,827,953 The table below summarises the sensitivity of the Fund's investments fair value to changes in foreign exchange movements. The analysis is based on the assumption that the foreign exchange rate changes by 5%, with all other variables remain assumption that the foreign exchange rate changes by 5%, with all other variables remain constants. This represents management's best estimate of a reasonable possible shift in the foreign exchange rate, having regard to historical volatility of this rate. Any increase/decrease in foreign exchange rate will result in a corresponding decrease/increase in the net assets attributable to unitholders by approximately 5%. Disclosures below are shown in absolute terms, changes and impacts could be positive or negative. 23 Impact on profit after tax/nav Change in price As at 31 December 2017 % AUD 5 103,093 USD 5 99,859 HKD 5 208,333 INR 5 166,691 IDR 5 108,644 KRW 5 169,728 PHP 5 44,092 SGD 5 115,732 THB 5 35,210 As at 30 June 2017 AUD 5 96,596 USD 5 89,171 HKD 5 148,737 INR 5 183,152 IDR 5 127,411 KRW 5 66,708 PHP 5 37,353 SGD 5 120,217 THB 5 72,052 Credit risk Credit risk refers to the risk that an issuer or counterparty will default on its contractual obligation to make timely payments of profit, principals and proceeds resulting in financial loss to the Fund. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. Credit risk arising from cash and cash equivalents is managed by ensuring that the Fund will only place Islamic deposits in reputable licensed financial institutions.

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (Continued) The settlement terms of the proceeds from the creation of units receivable from the Manager and redemption of units payable to the Manager are governed by the SC s Guidelines on Unit Trust Funds. For amount due from stockbrokers, the settlement terms are governed by the relevant rules and regulations as prescribed by respective stock exchange. The credit risk is minimal as all transactions in Shariah-compliant investments are settled/paid upon delivery using approved stockbrokers. The following table sets out the credit risk concentration of the Fund: Amount due from Managers Dividends receivable Cash and cash equivalents As at 31 December 2017 Finance - AA , ,422 Health Care - NR - 1,305-1,305 Others - NR 91, ,358 91,358 1, , ,085 As at 30 June 2017 Finance - AA , ,405 - NR - 9,426-9,426 Consumer Products - NR - 1,225-1,225 Others - NR 338, ,603 Energy - NR - 11,830-11,830 Industrial Products - NR - 25,590-25,590 Materials - NR - 33,991-33,991 Trading/Services - NR - 6,984-6, ,603 89, ,405 1,179,054 Liquidity risk Liquidity risk is the risk that investments cannot be readily sold at or near its actual value without taking a significant discount. This will result in lower NAV and profit after tax of the Fund. The Manager manages this risk by maintaining sufficient level of Islamic liquid assets to meet anticipated payment and cancellations of units by unitholders. Islamic liquid assets comprise cash, Islamic deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table below are the contractual undiscounted cash flows. Total 24