CIMB ISLAMIC BALANCED FUND UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2017

Transcription

1 UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2017

2 CONTENTS PAGE(S) INVESTORS' LETTER 1 MANAGER'S REPORT 2-9 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 10 TRUSTEE S REPORT 11 SHARIAH ADVISER'S REPORT 12 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 13 UNAUDITED STATEMENT OF FINANCIAL POSITION 14 UNAUDITED STATEMENT OF CHANGES IN EQUITY 15 UNAUDITED STATEMENT OF CASH FLOWS 16 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 60 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 61-65

3 INVESTORS' LETTER Dear Valued Investors, Happy New Year! 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 Asset Under Management ( 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. 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 achieve medium to long-term growth in both capital and income by investing in permissible Shariah-compliant investments. Has the Fund achieved its objective? The Fund has achieved its objective of achieving medium to long-term growth in both capital and income. What are the Fund investment policy and principal investment strategy? The Fund aims to invest in a diversified portfolio of Shariah-compliant equities and Shariah-compliant fixed income investments. In line with its objective, the investment policy and strategy is to maintain a balanced portfolio between Shariah-compliant equities and Shariah-compliant fixed income investments in the ratio of 60:40. The fixed income portion of the Fund is to provide some capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The investments by the Fund in Shariah-compliant equities shall not exceed 60% of the NAV of the Fund and investments in Shariah-compliant fixed income securities and Shariah-compliant liquid assets shall not be less than 40% of the NAV of the Fund with a minimum credit rating of BBB3 or P2 by RAM Ratings ("RAM") or equivalent rating by Malaysian Rating Corporation Berhad ("MARC") or by local rating agency(ies) of the country; BBB by Standard & Poor's ("S&P") or equivalent rating by Moody's or Fitch. The Fund may invest up to 25% of its NAV in unrated Shariah-compliant fixed income securities. At least 2% of the Fund's NAV will be invested in Shariah-compliant liquid assets. The Fund may opt to invest in Shariah-compliant foreign equities up to a maximum of 30% of its NAV. Such foreign equities must be of 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). Fund category/type Balanced (Shariah-compliant)/Growth and Income How long should you invest for? Recommended three (3) years or more Indication of short-term risk (low, moderate, high) Moderate When was the Fund launched? 8 March 2001 What was the size of the Fund as at 31 March 2017? RM million ( million units) What is the Fund s benchmark? 30% Financial Times Stock Exchange ("FTSE") Bursa Malaysia ( FBM ) EMAS Shariah ("FBMS") Index + 30% Morgan Stanley Capital International All Country ("MSCI AC") Asia ex Japan Islamic Index + 40% CIMB Islamic 1-month Fixed Return Income Account-i ( FRIA-i ) Note: The benchmark is customised as such to align it closer to the structure of the portfolio and the objective of the Fund. Investors are cautioned that the risk profile of the Fund is higher than the risk profile of the benchmark. 2

5 FUND OBJECTIVE AND POLICY (CONTINUED) 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. What was the net income distribution for the six months financial period ended 31 March 2017? There was no distribution made for the six months financial period ended 31 March 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 Trust ("REIT") Technology Telecommunications Trading/Services Utilities Unquoted Sukuk 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 (%) 2.55 (2.45) Capital growth (%) 2.55 (2.45) Income distribution (%)

6 PERFORMANCE DATA (CONTINUED) to to to Management Expense Ratio ("MER") (%) ^ Portfolio Turnover Ratio ("PTR") (times) # ^ The Fund's MER increased from 0.89% to 0.91% mainly due to the increase in expenses during the financial period under review. # The Fund s PTR increased slightly from 0.48 times to 0.52 times due to more trading to position the Fund % % % % % Annual total return 2.55 (0.77) (Launch date: 8 March 2001) 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 OCTOBER 2016 TO 31 MARCH 2017) Foreign Equities During the six months financial period under review, the MSCI AC Asia ex-japan Islamic Index rose by 4.3% in US Dollar ( USD ) terms. In Malaysian Ringgit ( MYR ) terms, the Index rose by 11.8%. 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 The local bourse suffered a correction at the start of the year on the back of a massive sell-off in China on renewed fears of capital controls as well as expectations of disappointing market earning season. The market however ended the first quarter hitting the year high, shrugging off concerns of a weaker European market as well as fears of capital controls in China. Rallying regional market lifting local sentiments as most markets underwent a strong risk on rally, which also saw commodity prices rebound from their lows in January The second quarter of 2016 saw some foreign funds flowing back, while the MYR moved back above the RM4.00 mark and touched the RM3.90 level against the USD. This however was not sustainable as investors were rattled by news of 1Malaysia Development Berhad s ( 1MDB ) bond default during the financial period, driving concerns that one default on interest payment will triggered a cross default on two other notes. 4

7 MARKET REVIEW (1 OCTOBER 2016 TO 31 MARCH 2017) (CONTINUED) Domestic equities (continued) CIMB ISLAMIC BALANCED FUND Towards mid-year 2016, the local Index shrugged off the surprise for Brexit vote due to window dressing activities. The Index extended its gains again in August 2016 driven by optimism of early elections in 2017 as well as on the back of being a laggard performer in the region. September 2016 was a volatile month for Malaysia as the Index rose on the back of some stability returning to regional markets and Wall Street, before reversing all gains due to concerns over the health of Deutsche Bank, Germany s largest bank. A divided Fed left its policy interest rate unchanged at the September 2016 Federal Open Market Committee ( FOMC ) meeting to await more evidence of progress towards its goals. Meanwhile, the Bank of Japan ( BOJ ) shifted the focus of its monetary policy to controlling bond yields. By end of October 2016, the Index gave back all its gain ahead of the pre-budget 2017 run-up on the back of a weaker MYR and slightly lower Brent crude oil price. Financials outperformed, led by CIMB Group Holdings Bhd and Alliance Financial Group Bhd on company-specific drivers. Industrials outperformed, led by Sime Darby Bhd, on expectations of a Permodalan Nasional Bhd-led change. Meanwhile, the defensive telecommunications and utilities sectors continued to underperform. By November 2016, the local market gave back all its gains on Donald Trump s surprise election win and market performance continued to waiver towards year-end uncertain of impact on his inauguration come next year. For 2017, the market ended the financial year on a stronger note rallying 4.77% 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 0.3% month-on-month ( m-o-m ) to RM4.44 against the USD. Domestic Sukuk In October 2016, the Malaysian Government reiterated its commitment to fiscal prudence and its determination in achieving the goal of a balanced budget by 2020 by setting a fiscal deficit target of 3.0% of Gross Domestic Product ( GDP ) in 2017 (3.1% of GDP in 2016). In November 2016, a stunning US election result saw Donald Trump comfortably secured the presidency after a string of formerly Democratic states swung his way. His victory caught many by surprise, as did the rapid sell-off in global markets that followed. Expectations of higher inflation stemming from the President-elect s promised infrastructure spending and tax cuts ripped into bond markets with the 10-year US Treasury jumping some 50 basis points ( bps ) within the first week. During the financial period under review, we saw the Fed hiked the Fed Funds Rate in December 2016 and March 2017 by 25 bps each, bringing the benchmark rate between 0.75% to 1.00%. The FOMC maintained its view that the labour market has continued to strengthen and growth of economic activity has expanded at a moderate pace. Policy makers pencilled in two more quarterpoint rate increases this year and three in 2018, unchanged from their projections in December Meanwhile, Malaysia s fourth quarter of 2016 GDP growth rose at 4.5% y-o-y from 4.3% in third quarter of 2016 on the back of stronger investment activities, a recovery in exports and higher inventory. This resulted in a full year 2016 GDP growth of 4.2% moderated from the 5% growth in the 2015 amid a slowdown in domestic demand. 5

8 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 MARKET REVIEW (1 OCTOBER 2016 TO 31 MARCH 2017) (CONTINUED) Domestic Sukuk (continued) CIMB ISLAMIC BALANCED FUND On the local front, Bank Negara Malaysia ( BNM ) kept the Overnight Policy Rate ( OPR ) unchanged at 3.00% as expected during the six months financial period under review. In its monetary policy statement, BNM exhibited slight optimism on global growth and exports but continued to highlight potential downside risks from protectionism, geopolitical developments and commodity price movements. BNM expects domestic growth momentum will be sustained, for headline expectation to average higher in 2017 due to the pass-through of higher fuel prices, and that the MYR continues to stabilise along with other EM currencies. BNM regards its current policy stance as accommodative for steady growth and stable inflation, suggesting that risks of a rate cut are less likely. 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 2.55%, while the benchmark rose by 4.18% which underperformed its benchmark by 1.63%. On 3-years and 5-years, the Fund gained 16.94% and 35.22% respectively. 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% CIMB Islamic Balanced Fund 30% FBMS Index + 30% MSCI AC Asia ex Japan Islamic Index + 40% CIMB Islamic 1-month FRIA-i 0% 6

9 FUND PERFORMANCE (CONTINUED) Changes in NAV Changes % NAV (RM Million) NAV/Unit (RM) The Fund s NAV grew by 1.33% to RM million during the financial period under review. Meanwhile NAV per unit grew by 2.51% during the financial period under review mostly driven by unit redemptions. 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 Unquoted Sukuk Cash and other net assets TOTAL The Fund saw increase in Shariah-compliant foreign quoted securities and cash and other net assets, while a decline was recorded in Shariah-compliant local quoted securities and Unquoted Sukuk. MARKET OUTLOOK* Foreign 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 between 2.30% to 2.70%, stable USD Index at around 100 +/- 3%, relatively stable commodity prices). 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 Locally, the market continues to be on a 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 between 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. We continue to remain at 85% to 95% on our asset allocation strategy with a bias towards the upper band. We continue to overweight cyclical sectors like oil and gas, banks, consumer discretionary and tourism related companies. GLCs restructuring and e-commerce companies remain a core holding in our portfolios. 7

10 MARKET OUTLOOK* (CONTINUED) Domestic Sukuk We see continued risk and volatility to come from uncertainties with regards to the tightening by the Fed, future US policies/rhetoric under Donald Trump and political developments in the Eurozone. Donald Trump s health care bill failure has put doubts in the market on the reflation trade. Nonetheless, there is a risk that the Fed may hike by another 2 to 3 more times in 2017 due to the recent strong economic numbers. Malaysia s inflation surged to 4.5% y-o-y in February 2017, more than expected. Nevertheless, we expect BNM to maintain the OPR at current levels this year to support economic growth coupled with the prospect of an early general election. *This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make a purchase of any investment. The information given in this article represents the views of CIMB-Principal or based on data obtained from sources believed to be reliable by CIMB-Principal. Whilst every care has been taken in preparing this, CIMB-Principal makes no guarantee, representation or warranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this market outlook. INVESTMENT STRATEGY Foreign Equities We presume cyclical stocks will continue to do reasonably well given the global synchronised recovery and rising inflation (from low levels). 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 and Technology. Country-wise, we favor India and Singapore. Domestic Equities On the local front, 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. Domestic Sukuk For unquoted Sukuk, we continue to overweight on corporate Sukuk and hold a tactical position in government securities. For corporate Sukuk, we will focus on the primary issuances and repriced secondary offers which we see value. Nonetheless, we remain aware of rising risks of rating downgrades and defaults in the credit market and will overweight fundamentals in our portfolio activities. UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 31 March 2017 are as follows: Size of holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below 56, ,001-10,000 4, ,001-50,000 11, , ,000 3, ,001 and above Total 76,

11 SOFT COMMISSIONS AND REBATES CIMB-Principal Asset Management Berhad (the Manager ) and the Trustee (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the Manager and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commission in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 9

12 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB ISLAMIC BALANCED 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 13 to 59 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 March 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 19 May

13 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC BALANCED FUND We, Universal Trustee (Malaysia) Berhad, being the Trustee for CIMB Islamic Balanced Fund (the Fund ), are of the opinion that CIMB-Principal Asset Management Berhad (the Manager ), acting in the capacity of the Manager of the Fund, have fulfilled their duties in the following manner for the financial period ended 31 March 2017: (a) (b) (c) the Fund is being managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; valuation/pricing is carried out in accordance with the Deeds and relevant regulatory requirements; and creation and cancellation of units is carried out in accordance with the Deeds and relevant regulatory requirements. For and on behalf of the Trustee UNIVERSAL TRUSTEE (MALAYSIA) BERHAD ONG TEE VANN Chief Executive Officer Kuala Lumpur 19 May

14 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC BALANCED FUND We have acted as the Shariah Adviser of CIMB Islamic Balanced Fund (the Fund ) for the financial period ended 31 March 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 31 March 2017 with the exception of Hume Industries Bhd. However the said security was fully disposed on 24 October 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 ( SACSC ) Malaysia and/or Shariah Advisory Council of Bank Negara Malaysia. 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 19 May

15 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2017 CIMB ISLAMIC BALANCED FUND to to Note RM RM INVESTMENT INCOME Dividend income 1,739,493 1,721,475 Profit income 5 3,264,709 3,084,349 Net gain/(loss) on financial assets at fair value through profit or loss 10 7,554,738 (6,533,561) Net foreign exchange gain/(loss) 1,348,394 (3,650,242) Other income 4 39,155 8,121 13,946,489 (5,369,858) EXPENSES Management fee 6 2,879,027 2,805,704 Trustee's and custodian fees 7 297, ,189 Audit fee 9,095 11,635 Tax agent's fee 32,823 25,817 Transaction costs 898, ,427 Other expenses 289, ,489 4,406,988 3,873,261 PROFIT/(LOSS) BEFORE TAXATION 9,539,501 (9,243,119) Taxation 9 (17,956) (34,299) PROFIT/(LOSS) AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE FINANCIAL PERIOD 9,521,545 (9,277,418) Profit/(Loss) after taxation is made up as follows: Realised amount 7,154, ,997 Unrealised amount 2,367,228 (9,965,415) 9,521,545 (9,277,418) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 13

16 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH Audited Note RM RM ASSETS Cash and cash equivalents (Shariah-compliant) 11 38,436,994 49,213,680 Financial assets at fair value through profit or loss (Shariah-compliant) ,117, ,696,215 Amount due from stockbrokers 10,834,974 6,295,753 Amount due from Manager 1,276,485 2,824,144 Amount due from Manager of collective investment scheme 19,007 - Dividends receivable 61, ,496 Tax recoverable 37,812 61,077 TOTAL ASSETS 391,785, ,376,365 LIABILITIES Amount due to stockbrokers 6,224,466 21,298,136 Amount due to Manager 1,838,117 3,465,737 Accrued management fee 484, ,488 Amount due to Trustee 32,517 32,577 Distribution payable 8, ,210 Provision for donation to charitable bodies 8 16,753 26,529 Other payables and accruals 91, ,517 TOTAL LIABILITIES 8,696,844 25,549,194 NET ASSET VALUE OF THE FUND 383,088, ,827,171 EQUITY Unit holders capital 300,495, ,755,441 Retained earnings 82,593,275 73,071,730 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 383,088, ,827,171 NUMBER OF UNITS IN CIRCULATION (UNITS) ,197, ,156,681 NET ASSET VALUE PER UNIT (RM) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 14

17 UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2017 CIMB ISLAMIC BALANCED FUND Unit holders capital Retained earnings Total RM RM RM Balance as at 1 October ,755,441 73,071, ,827,171 Movement in unit holders' contributions: - Creation of units from applications 27,001,150-27,001,150 - Cancellation of units (54,261,538) - (54,261,538) Total comprehensive income for the financial period - 9,521,545 9,521,545 Balance as at 31 March ,495,053 82,593, ,088,328 Balance as at 1 October ,474,312 82,756, ,230,576 Movement in unit holders' contributions: - Creation of units from applications 62,334,788-62,334,788 - Cancellation of units (36,215,970) - (36,215,970) Total comprehensive loss for the financial period - (9,277,418) (9,277,418) Balance as at 31 March ,593,130 73,478, ,071,976 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 15

18 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH 2017 CIMB ISLAMIC BALANCED FUND to to RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of Shariah-compliant quoted securities 145,936,802 69,615,350 Proceeds from disposal of unquoted Sukuk 48,954,405 60,603,264 Proceeds from the redemption of unquoted Sukuk 4,480,089 15,040,724 Purchase of Shariah-compliant collective investment scheme - (2,251,776) Purchase of Shariah-compliant quoted securities (136,702,064) (112,942,055) Purchase of unquoted Sukuk (49,263,709) (104,454,683) Dividend income received 1,942,743 1,682,058 Profit income received from Shariah-compliant deposits with licensed Islamic financial institutions and Hibah earned 242, ,034 Profit income received from unquoted Sukuk 3,222,848 3,199,480 Management fee paid (2,876,754) (2,762,687) Rebate on management fee received 16,736 - Trustee's and custodian fees paid (297,851) (210,401) Payments for other fees and expenses (351,832) (281,485) Net realised foreign exchange loss (276,181) (184,326) Donation to charitable bodies (9,776) - Tax refunded 23,265 12,943 Net cash generated from/(used in) operating activities 15,040,983 (72,691,560) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 28,548,809 62,343,792 Payments for cancellation of units (55,889,158) (35,712,291) Distribution paid (119,687) (30,010) Net cash (used in)/generated from financing activities (27,460,036) 26,601,491 Net decrease in cash and cash equivalents (12,419,053) (46,090,069) Effects of foreign exchange differences 1,642,367 (3,535,191) Cash and cash equivalents at the beginning of the financial period 49,213,680 80,686,132 Cash and cash equivalents at the end of the financial period 38,436,994 31,060,872 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 16

19 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MARCH THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB ISLAMIC BALANCED FUND CIMB Islamic Balanced Fund (the Fund ) is governed by a Master Deed dated 15 May 2008, a Fourth 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 and a Seventeenth Supplemental Master Deed dated 25 March 2015 (collectively referred to as the Deeds"), between, CIMB- Principal Asset Management Berhad (the Manager ) and Universal Trustee (Malaysia) Berhad (the Trustee ). The Fund aims to invest in a diversified portfolio of Shariah-compliant equities and Shariahcompliant fixed income investments. In line with its objective, the investment policy and strategy is to maintain a balanced portfolio between Shariah-compliant equities and Shariahcompliant fixed income investments in the ratio of 60:40. The fixed income portion of the Fund is to provide some capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The investments by the Fund in Shariah-compliant equities shall not exceed 60% of the NAV of the Fund and investments in Shariah-compliant fixed income securities and Shariah-compliant liquid assets shall not be less than 40% of the NAV of the Fund with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or by local rating agency(ies) of the country; BBB by S&P or equivalent rating by Moody's or Fitch. The Fund may invest up to 25% of its NAV in unrated Shariah-compliant fixed income securities. At least 2% of the Fund's NAV will be invested in Shariah-compliant liquid assets. The Fund may opt to invest in Shariah-compliant foreign equities up to a maximum of 30% of its NAV. Such foreign equities must be of 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). 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. 17

20 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC BALANCED FUND (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(l). Standards, amendments to published standards and interpretations to existing standards that are effective: The Fund has applied the following amendments for the first time for the financial year beginning 1 October 2016: Annual Improvements 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 18

21 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC BALANCED FUND (a) Basis of preparation (continued) 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. The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 October 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 October 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. 19

22 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC BALANCED FUND (a) Basis of preparation (continued) (ii) Financial year beginning on/after 1 October 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 this standard when effective. This standard is 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. 20

23 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC BALANCED FUND (b) Financial assets and financial liabilities Classification The Fund designates its investments in Shariah-compliant collective investment scheme, Shariah-compliant quoted securities and unquoted Sukuk 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, distribution payable, provision for donation to charitable bodies, 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 with 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). 21

24 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC BALANCED FUND (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. Unquoted Sukuk denominated in Ringgit Malaysia ( RM ) are revalued on a daily basis based on fair value prices quoted by a Bond Pricing Agency ( BPA ) registered with the SC as per the SC Guidelines on Unit Trust Funds. Refer to Note 2(l) for further explanation. 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. 22

25 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC BALANCED FUND (b) Financial assets and financial liabilities (continued) Impairment for assets carried at amortised costs (continued) If, in a subsequent financial period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. (c) Income recognition Dividend income is recognised on the ex-dividend date when the right to receive payment is established. Profit income from Shariah-compliant deposits with licensed Islamic financial institutions and unquoted Sukuk are 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. Realised gain or loss on disposal of unquoted Sukuk is accounted for as the difference between the net disposal proceeds and the carrying amount of unquoted Sukuk, determined on cost adjusted for accretion of discount or amortisation of premium. (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 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. 23