CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 2017

Transcription

1 UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 2017

2 CONTENTS PAGE(S) INVESTORS LETTER 1 MANAGER S REPORT 2-7 Fund Objective and Policy Performance Data Market Review Fund Performance Portfolio Structure Market Outlook Investment Strategy Unit Holdings Statistics Soft Commissions and Rebates STATEMENT BY MANAGER 8 TRUSTEE S REPORT 9 SHARIAH ADVISER S REPORT 10 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 11 UNAUDITED STATEMENT OF FINANCIAL POSITION 12 UNAUDITED STATEMENT OF CHANGES IN EQUITY 13 UNAUDITED STATEMENT OF CASH FLOWS 14 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 52 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 53-57

3 INVESTORS' LETTER Dear Valued Investors, Thank you for your continued support and for the confidence that you have placed in us. We are pleased to share that CIMB-Principal Asset Management Berhad ("CIMB-Principal") Malaysia concluded the year with RM48 billion in Asset Under Management ( AUM ) and the CIMB-Principal s Group AUM has increased by 7.6% to RM67.6 billion, for 1-year period ending 31 December Our AUM for Private Retirement Scheme ("PRS") business has increased by 27% year-on-year ("y-o-y") to RM343 million as at 31 December We continue to achieve prestigious recognitions from The Edge Thomson Reuters Lipper Fund Awards: The Edge Thomson Reuters Lipper Malaysia Fund Awards 2017 Best Equity Global, 3 years & 5 years : CIMB-Principal Global Titans Fund Best Equity Asia Pacific Ex-Japan, 5 years : CIMB-Principal Asian Equity Fund Best Equity Asia Pacific Ex-Japan - Malaysia Islamic, 5 years : CIMB Islamic Asia Pacific Equity Fund Thomson Reuters Lipper Fund Award Global Islamic 2016 Best Equity Asia Pacific Ex-Japan (Islamic), 3 years : CIMB Islamic Asia Pacific Equity Fund These awards reflect our consistent fund performance, in tandem with our commitment to provide the best customer experience to you. CIMB-Principal was recently awarded Fund House of the Year in Malaysia by AsianInvestor for its Asset Management Awards 2017, its second consecutive win. This industry recognition reflects our success in scaling up its investment capabilities while building up a solid track record and earning the trust of our clients over time. As part of our on-going effort to further expand the payment options offered, CIMB-Principal has introduced the Virtual Account facility effective 7 December Please contact your servicing CWA Consultant or our Customer Care Centre at to find out more. Thank you once again and we wish you a happy and prosperous new year ahead. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer/Executive Director 1

4 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to provide investors with long-term capital growth by investing principally in equities. The Fund also seeks to outperform the benchmark. Has the Fund achieved its objective? For the financial period under review, the Fund has achieved its stated long-term objective. What are the Fund investment policy and principal investment strategy? The Fund will invest a minimum of 70% and up to a maximum of 98% of its Net Asset Value ( NAV ) in Shariah-compliant equities in order to gain long-term capital growth. The Fund may opt to invest in Shariah-compliant foreign equities up to a maximum of 70% of its NAV. Such foreign equities must be equity securities of companies domiciled in, listed in, and/or have significant operations in countries in Asia Pacific ex Japan. Significant operations means major businesses of the company. For example, the Fund can invest in a company with significant business and/or operations in Thailand but listed on the New York Stock Exchange ( NYSE ). The threshold for significant operations would be if more than 30% of total group revenue derives from countries in Asia Pacific ex Japan. The calculation would be based on the most recent financial reports released by the companies (e.g. interim and annual reports). In addition, Shariah-compliant liquid assets may be strategically used if the fund manager feels that the market downside risk is high in the short-term. In line with its objective, the investment strategy and policy of the Fund is to have a diversified portfolio of Shariah-compliant stocks that aims to outperform the market at different cycles of the market. Between 70% to 98% (both inclusive) of the Fund s NAV will be invested in Shariah-compliant equities and at least 2% of the Fund s NAV in Shariah-compliant liquid assets. Fund category/type Equity (Shariah-compliant)/Growth How long should you invest for? Recommended five (5) years or more Indication of short-term risk (low, moderate, high) High When was the Fund launched? 8 October 2004 What was the size of the Fund as at 30 April 2017? RM million ( million units) What is the Fund s benchmark? 30% Financial Times Stock Exchange ( FTSE ) Bursa Malaysia ( FBM ) EMAS Shariah ( FBMS ) Index + 70% Morgan Stanley Capital International All Country ( MSCI AC ) Asia ex Japan Islamic Index Note: The benchmark is customised as such to align it closer to the structure of the portfolio and to reflect the composition of the portfolio in line with the markets they operate in and its objectives. What is the Fund distribution policy? The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 2

5 FUND OBJECTIVE AND POLICY (CONTINUED) CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND What was the net income distribution for the six months financial period ended 30 April 2017? There was no distribution made for the six months financial period ended 30 April PERFORMANCE DATA Details of portfolio composition of the Fund for the last three unaudited financial periods are as follows: % % % Shariah-compliant collective investment scheme Shariah-compliant quoted securities - Basic Materials Construction Consumer Products Energy Finance Health Care Industrials Infrastructure Project Companies ("IPC") Plantation Properties Real Estate Investment Trusts ("REITs") Technology Telecommunications Trading/Services Utilities Cash and other net assets Performance details of the Fund for the last three unaudited financial periods are as follows: NAV (RM Million) Units in circulation (Million) NAV per unit (RM) to to to Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) 6.45 (8.77) Capital growth (%) 6.45 (8.77) Income distribution (%) Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ("PTR") (times) # ^ The Fund's MER increased from 0.82% to 0.85% mainly due to the increase in expenses during the financial period under review. # The Fund s PTR increased slightly from 0.56 times to 0.62 times due to more trading activities to position the Fund. 3

6 PERFORMANCE DATA (CONTINUED) CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND to to to Date of distribution Gross distribution per unit (sen) Net distribution per unit (sen) % % % % % Annual total return (7.97) (Launch date: 8 October 2004) 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 NOVEMBER 2016 TO 30 APRIL 2017) Regional Equities During the six months financial period under review, the MSCI Asia ex-japan Islamic Index rose by 9.2% in US Dollar ( USD ) terms. In Malaysian Ringgit ( MYR ) terms, the Index rose by 13.1%. Asian markets rallied strongly since end of June 2016 as Brexit triggered strong fund flows into both equity and fixed income markets. The rally fizzled out and declined by October 2016 on the back of falling oil price, China s restrictions on residential property transactions, rising US bond yields and the strength of the USD. The surprise victory of Donald Trump in early November 2016 resulted in higher USD and US bond yields. The threat of trade conflict Emerging Market ( EM ) bonds, equities and foreign exchange, resulting in negative absolute returns for all Asian markets except Singapore. However, a surge of economic indicators around the world gave rise to investor optimism and risk taking. This broad based global economic recovery led to the USD slightly weakening from its highs. The market has also priced in at least 3 US Federal Reserve (the Fed ) rate hikes as guided by the US Central Bank. As a result, Asian markets continued to rally since the month of January Domestic Equities November 2016 saw the market taking a serious dip with Donald Trump s surprise election win caught many by surprise. The unnerving event saw market confidence waiver towards year-end in anticipation of policy concerns ahead of his inauguration come next year. For 2017, the market ended the financial year on a stronger note rallying by 5.77% for the quarter driven by net foreign inflows. The Government-Linked Companies ( GLCs ) restructuring story continued to unfold, led by UMW Holdings Bhd and Sime Darby Bhd in the consumer discretionary and industrial sectors. Concerns about the large 10-year Malaysian Government Securities ( MGS ) redemptions were unwarranted, as yield remained stable at 4.04%, while the MYR firmed at 0.3% month-on-month ( m-o-m ) to RM4.44 against the USD. 4

7 FUND PERFORMANCE 6 months to year to years to years to Since inception to % % % % % Income Capital Total Return Benchmark Average Total Return N/A For the six months financial period under review, the Fund rose by 6.45%, while the benchmark rose by 10.48%. The Fund underperformed its benchmark by 4.03%. On 3-year and 5-year, the Fund had grown by 22.63% and 49.59% respectively. 5

8 FUND PERFORMANCE (CONTINUED) Changes in NAV CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND Changes % NAV (RM Million) NAV/Unit (RM) As at 30 April 2017, the Fund s NAV grew by 62.95% mostly driven by fund inflows. Performance data represents the combined income and capital return as a result of holding units in the Fund for the specified length of time, based on NAV to NAV price. The performance data assumes that all earnings from the Fund are reinvested and are net of management and trustee fees. Past performance is not reflective of future performance and income distributions are not guaranteed. Unit prices and income distributions, if any, may fall and rise. All performance figures for the financial period have been extracted from Lipper. PORTFOLIO STRUCTURE Asset allocation (% of NAV) Shariah-compliant collective investment scheme Shariah-compliant quoted securities - local Shariah-compliant quoted securities - foreign Cash and other net assets TOTAL The Fund recorded an increase in both Shariah-compliant foreign quoted securities and Shariahcompliant local quoted equities, as well as a decrease in cash and other net assets given that market has performed strongly. MARKET OUTLOOK* Regional Equities We are positive on Asian equities as we continue to see inflows, upward earnings revisions, and benign global financial markets (US 10-year yields 2.30% to 2.70%, stable USD Index at around 100 +/- 3%, relatively stable commodity prices). With consensus expecting 18% and 9% earnings growth in financial year ended 2017 and 2018 respectively and 14 times and 13 times in financial year ended 2017 and 2018 respectively, Asia is reasonably priced. Sentiment-wise, animal spirits are slowly returning supported by strong global Purchasing Managers' Index s ( PMI ) and healthy equity markets. Recent setbacks faced by Trump s administration could encourage fund inflows to EM. Domestic Equities For local equities, we believe the market will continue its bullish trend led by huge foreign inflows that remain very underweight on Malaysia. Foreign inflows year-to-date ( YTD ) continue to trend higher with inflows amounting to RM4.5 billion YTD and RM3.2 billion month-to-date ( MTD ). Given that our 1,750 points target has been reached, we have raised our year-end target to 1,820 points to 1,850 points. The trend remains bullish with local selling remaining well absorbed by foreign buying. We anticipate upgrades will continue to drive the market higher. *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. 6

9 INVESTMENT STRATEGY Regional Equities For regional equities, we think cyclical in the technological space and selective materials will do well. Research efforts will be on financials, technology (artificial intelligence ( AI ), big data, smartphone components) and consumer discretionary. The portfolio is targeting to be fully invested, and expect to be buyers of the market on dips. The sectors we are increasing exposure to are industrials, materials and technology. Country-wise, we favor India, Malaysia, China and Singapore. Domestic Equities For local equities, we expect the market to continue to be supported by foreign inflows from funds that remain very underweight on Malaysia. The trend remains bullish with local selling remaining well absorbed by foreign buying. We anticipate corporate earnings upgrades to continue to drive the market higher. We continue to overweight cyclical sectors like oil and gas, consumer discretionary and tourism-related companies. GLCs restructuring and e-commerce companies remain core holdings in our portfolios. UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 30 April 2017 are as follows: Size of unit holding (units) No. of unit holders No. of units held % of units held (million) 5,000 and below 35, ,001 to 10,000 5, ,001 to 50,000 8, ,001 to 500,000 2, ,001 and above Total 52, SOFT COMMISSIONS AND REBATES CIMB-Principal Asset Management Berhad ("the Manager"), as well as the Trustees (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the Manager and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commission in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 7

10 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND We, being the Directors of CIMB-Principal Asset Management Berhad (the "Manager"), do hereby state that, in the opinion of the Manager, the accompanying unaudited financial statements set out on pages 11 to 51 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 30 April 2017 of its financial performance, changes in equity and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards ( MFRS ) Interim Financial Reporting and International Accounting Standards ("IAS") 34 - Interim Financial Reporting. For and on behalf of the Manager CIMB-Principal Asset Management Berhad (Company No.: K) MUNIRAH KHAIRUDDIN Chief Executive Officer/Executive Director ALEJANDRO ECHEGORRI Executive Director Kuala Lumpur 30 June

11 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND We, AMANAHRAYA TRUSTEES BERHAD, have acted as Trustee of CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND for the six months financial period ended 30 April In our opinion, CIMB-PRINCIPAL ASSET MANAGEMENT BERHAD, the Manager, has operated and managed CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND in accordance with the limitations imposed on the investment powers of the management under the Deeds, securities laws and the applicable laws and the applicable Guidelines on Unit Trust Funds for the six months financial period ended 30 April We are also of the opinion that: a) Valuation/pricing is carried out in accordance with the Deeds and relevant regulatory requirements; and b) Creation and cancellation of units are carried out in accordance with the Deeds and any relevant regulatory requirements. For and on behalf of the Trustee, AMANAHRAYA TRUSTEES BERHAD HABSAH BINTI BAKAR Chief Executive Officer Kuala Lumpur, Malaysia 30 June

12 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND We have acted as the Shariah Adviser of CIMB Islamic DALI Asia Pacific Equity Growth Fund (the Fund ) for the financial period ended 30 April Our responsibility is to ensure that the procedures and processes employed by CIMB-Principal Asset Management Berhad (the Manager ) are in accordance with Shariah and Shariah Investment Guidelines. In our opinion, the Manager has managed and administered the Fund in accordance with the Shariah Investment Guidelines of the Fund and complied with applicable guidelines, rulings or decisions issued by the Securities Commission Malaysia pertaining to Shariah matters for the financial period ended 30 April In addition, we also confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission Malaysia and where applicable the Shariah Advisory Council of Bank Negara Malaysia. For investment other than the abovementioned, we have reviewed the same and of the opinion that these investments were in accordance with the rulings of the Shariah Adviser and Shariah Investment Guidelines of the Fund. For investments other than the abovementioned, we have reviewed the same and are of the opinion that these investments were in accordance with the Shariah Investment Guidelines of the Fund. This report is made solely to the unit holders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report and we shall not be liable for any errors or non-disclosure on the part of the Manager. For and on behalf of Shariah Adviser CIMB Islamic Bank Berhad ASHRAF GOMMA ALI Regional Head, Shariah & Governance/Designated Person Responsible for Shariah Advisory Kuala Lumpur 30 June

13 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL to to Note RM RM INVESTMENT INCOME/(LOSS) Dividend income 2,945,993 2,025,550 Profit income from Shariah-compliant deposits with licensed Islamic financial institutions and Hibah 579, ,221 Net gain/(loss) on financial assets at fair value through profit or loss 8 33,699,371 (27,208,871) Net foreign exchange loss (681,309) (1,870,759) Other income 4 77,515 27,336 36,621,022 (26,694,523) EXPENSES Management fee 5 3,343,468 2,525,145 Trustee's and custodian fees 6 237, ,886 Audit fee 7,670 7,120 Tax agent's fee 41,916 36,159 Transaction costs 1,757,681 1,111,894 Other expenses 374, ,098 5,763,074 4,177,302 PROFIT/(LOSS) BEFORE TAXATION 30,857,948 (30,871,825) Taxation 7 (184,754) (71,988) PROFIT/(LOSS) AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE FINANCIAL PERIOD 30,673,194 (30,943,813) Profit/(Loss) after taxation is made up as follows: Realised amount (1,446,952) (11,757,944) Unrealised amount 32,120,146 (19,185,869) 30,673,194 (30,943,813) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 11

14 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2017 CIMB ISLAMIC DALI ASIA PACIFIC EQUITY GROWTH FUND Audited Note RM RM ASSETS Cash and cash equivalents (Shariah-compliant) 9 40,971,359 38,597,714 Financial assets at fair value through profit or loss (Shariah-compliant) 8 497,301, ,802,081 Amount due from stockbrokers 18,484,407 2,582,438 Amount due from Manager 10,957,621 6,988,835 Amount due from Manager of collective investment scheme 87,927 50,299 Dividends receivable 272,338 43,138 Tax recoverable 9,270 9,270 TOTAL ASSETS 568,084, ,073,775 LIABILITIES Amount due to stockbrokers 6,602,228 7,774,430 Amount due to Manager 2,372,388 2,047,717 Accrued management fee 656, ,094 Amount due to Trustee 26,480 18,951 Other payables and accruals 114,191 91,309 TOTAL LIABILITIES 9,771,385 10,399,501 NET ASSET VALUE OF THE FUND 558,313, ,674,274 EQUITY Unit holders capital 504,665, ,699,451 Retained earnings 53,648,017 22,974,823 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 558,313, ,674,274 NUMBER OF UNITS IN CIRCULATION (UNITS) ,697, ,550,767 NET ASSET VALUE PER UNIT (RM) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 12

15 UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 2017 Retained earnings/ Unit holders capital (Accumulated losses) Total RM RM RM Balance as at 1 November ,699,451 22,974, ,674,274 Movement in unit holders' contributions: - Creation of units from applications 240,494, ,494,122 - Cancellation of units (89,528,145) - (89,528,145) Total comprehensive income for the financial period - 30,673,194 30,673,194 Balance as at 30 April ,665,428 53,648, ,313,445 Balance as at 1 November ,378,433 25,551, ,929,486 Movement in unit holders' contributions: - Creation of units from applications 117,471, ,471,416 - Cancellation of units (59,831,047) - (59,831,047) Total comprehensive loss for the financial period - (30,943,813) (30,943,813) Balance as at 30 April ,018,802 (5,392,760) 342,626,042 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 13

16 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL to to RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of Shariah-compliant quoted securities 198,796, ,914,115 Proceeds from disposal of Shariah-compliant collective investment scheme - 4,502,657 Purchase of Shariah-compliant quoted securities (342,532,966) (223,405,487) Dividend income received 2,539,417 1,912,171 Profit income received from Shariah-compliant deposits with licensed Islamic financial institutions and Hibah earned 579, ,221 Management fee paid (3,154,464) (2,436,793) Management fee rebates received 39,887 22,271 Trustee's and custodian fees paid (229,841) (182,780) Payments for other fees and expenses (401,671) (354,820) Net realised foreign exchange loss (1,594,437) (772,538) Tax refund 13,705 22,874 Net cash used in operating activities (145,944,340) (75,446,109) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 236,525, ,563,138 Payments for cancellation of units (89,203,474) (25,988,291) Distribution paid - (646,946) Net cash generated from financing activities 147,321,862 91,927,901 Net increase in cash and cash equivalents 1,377,522 16,481,792 Effects of foreign exchange differences 996,123 (1,252,526) Cash and cash equivalents at the beginning of the financial period 38,597,714 26,647,579 Cash and cash equivalents at the end of the financial period 40,971,359 41,876,845 Cash and cash equivalents comprises of Shariah-compliant deposits with licensed financial institutions 33,223,096 26,986,847 Bank balances 7,748,263 14,889,998 Cash and cash equivalents at the end of the financial period 40,971,359 41,876,845 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 14

17 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB Islamic DALI Asia Pacific Equity Growth Fund (the Fund ) is governed by a Master Deed dated 15 May 2008, a Fourth Supplemental Master Deed dated 25 June 2008, a Fifth Supplemental Master Deed dated 25 June 2008, a Sixth Supplemental Master Deed dated 14 July 2008, a Seventh Supplemental Master Deed dated 19 November 2008, a Fourteenth Supplemental Master Deed dated 26 June 2012, a Seventeenth Supplemental Master Deed dated 25 March 2015 and an Eighteenth Supplemental Master Deed dated 29 April 2015 (collectively referred to as the Deeds ) made between CIMB-Principal Asset Management Berhad (the Manager ) and AmanahRaya Trustees Berhad (the Trustee ). The Fund will invest a minimum of 70% and up to a maximum of 98% of its NAV in Shariahcompliant equities in order to gain long-term capital growth. The Fund may opt to invest in Shariah-compliant foreign equities up to a maximum of 70% of its NAV. Such foreign equities must be equity securities of companies domiciled in, listed in, and/or have significant operations in countries in Asia Pacific ex Japan. Significant operations means major businesses of the company. For example, the Fund can invest in a company with significant business and/or operations in Thailand but listed on the NYSE. The threshold for significant operations would be if more than 30% of total group revenue derives from countries in Asia Pacific ex Japan. The calculation would be based on the most recent financial reports released by the companies (e.g. interim and annual reports). In addition, Shariah-compliant liquid assets may be strategically used if the fund manager feels that the market downside risk is high in the short-term. In line with its objective, the investment strategy and policy of the Fund is to have a diversified portfolio of Shariah-compliant stocks that aims to outperform the market at different cycles of the market. Between 70% to 98% (both inclusive) of the Fund s NAV will be invested in Shariah-compliant equities and at least 2% of the Fund s NAV in Shariah-compliant liquid assets. All investments are subjected to the Securities Commission Malaysia ( SC ) Guidelines on Unit Trust Funds, SC requirements, the Deeds, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The Manager, a company incorporated in Malaysia, is a subsidiary of CIMB Group Sdn Bhd and regards CIMB Group Holdings Berhad as its ultimate holding company. The Manager is also an associate of Principal International (Asia) Limited, which is a subsidiary of Principal Financial Group Inc. The principal activities of the Manager are the establishment and management of unit trust funds and fund management activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the MFRS and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. 15

18 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 Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and assumptions are based are 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 2(m). 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 November 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 period or any prior period and is not likely to affect future periods. 16

19 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (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 November 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 on/after 1 November 2018 MFRS 15 Revenue from Contracts with Customers (effective from 1 January 2018) replaces MFRS 118 Revenue and MFRS 111 Construction 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. 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. 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 new standard, there are also increased disclosures. 17

20 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) (ii) Financial year beginning on/after 1 November 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 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 OCI 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 these standards when effective. These standards are not expected to have a significant impact on the Fund s financial statements. ¹ For the purposes of the investments made by the Fund, equity instruments and derivatives refers to Shariah-compliant equity instruments and Shariah-compliant derivatives. ² For the purposes of the investments made by the Fund, debt instruments refers to Sukuk. ³ For the purposes of this Fund, interest refers to profits earned from Shariah-compliant investments. 18

21 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities Classification The Fund designates its investment in Shariah-compliant collective investment scheme and Shariah-compliant quoted securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Financing 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 financing and receivables comprise cash and cash equivalents, amount due from stockbrokers, amount due from Manager, amount due from Manager of collective investment scheme 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, amount due to Manager, accrued management fee, amount due to Trustee, and other payables and accruals as other financial liabilities. 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. Shariah-compliant 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 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 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. Shariah-compliant collective investment scheme is valued based on the most recent published NAV per unit or share of such collective investment scheme or, if unavailable, the last published price of such unit or share (excluding any sales charge included in such selling price). 19

22 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Recognition and measurement (continued) Shariah-compliant 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. Foreign Shariah-compliant quoted securities are valued at 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. If a valuation based on the market price does not represent the fair value of the Shariah-compliant 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 Shariah-compliant quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the Shariah-compliant quoted securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. Shariah-compliant deposits with licensed Islamic financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the period from the date of placement to the date of maturity of the respective deposits. Financing and receivables and other financial liabilities are subsequently carried at amortised cost using the effective profit method. 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 profit rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If financing and receivables 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. 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. 20

23 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Impairment for assets carried at amortised costs (continued) 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. Profit income from Shariah-compliant deposits with licensed Islamic financial institutions is recognised on a time proportionate basis using the effective profit rate method on an accrual basis. Realised gain or loss on disposal of Shariah-compliant collective investment scheme and Shariah-compliant quoted securities are accounted for as the difference between the net disposal proceeds and the carrying amount of Shariah-compliant collective investment scheme and Shariah-compliant quoted securities, determined on a weighted average cost basis. (d) Foreign currency 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. 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 period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income, except when deferred in OCI as qualifying cash flow hedges. (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances and Shariah-compliant deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 21

24 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Taxation Current tax expense is determined according to Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. Tax on dividend income from foreign Shariah-compliant quoted securities is based on the tax regime of the respective countries that the Fund invests in. (g) Distribution A distribution to the Fund s unit holders is accounted for as a deduction from realised reserve. A proposed distribution is recognised as a liability in the financial period in which it is approved by the Trustee. (h) 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. (i) Amount due from/to stockbrokers Amounts due from/to stockbrokers represent receivables for Shariah-compliant investments sold and payables for Shariah-compliant investments 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. 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 profit rate used to discount the future cash flows for the purpose of measuring the impairment loss. (j) Management Fee Rebate Management fee rebate is deemed from the Shariah-compliant collective investment scheme held by the Fund on an accrual basis to ensure no double charging of management fee. It is accrued daily based on the fair value of Shariah-compliant collective investment scheme held. 22

25 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (k) Unit holders capital The unit holders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial period if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. (l) 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. (m) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Funds results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s Shariah-compliant investments, 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. 23