CIMB-PRINCIPAL PRS PLUS CONSERVATIVE UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017

Transcription

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

2 CONTENTS PAGE(S) MEMBERS' LETTER 1 PRS PROVIDER S REPORT 2-10 Fund Objective and Policy Performance Data Market Review Fund Performance Portfolio Structure Market Outlook Investment Strategy Members Statistics Soft Commissions and Rebates STATEMENT BY THE PRS PROVIDER 11 TRUSTEE'S REPORT 12 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 13 UNAUDITED STATEMENT OF FINANCIAL POSITION 14 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO MEMBERS 15 UNAUDITED STATEMENT OF CASH FLOWS 16 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 34 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 35-39

3 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN MEMBERS LETTER Dear Valued Members, Thank you for your continued support and for the confidence that you have placed in us. We are pleased to share that CIMB-Principal Asset Management Berhad ( CIMB-Principal ) Malaysia 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 also awarded Fund House of the Year in Malaysia by AsianInvestor for its Asset Management Awards 2017, its second consecutive win and The Employees' Provident Fund ( EPF ) External Portfolio Managers Awards 2017 for the Best Global Bond Portfolio Manager. These industry recognitions reflect our success in scaling up our investment capabilities while building a solid track record and earning the trust of our clients over time. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer/Executive Director 1

4 PRS PROVIDER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund seeks to provide Members with capital preservation* through investment primarily in fixed income instruments. *The Fund is neither a capital guaranteed fund nor a capital protected fund. Has the Fund achieved its objective? For the six months financial period under review, the Fund has performed in line with its objective as stated under the Fund Performance section. What are the Fund investment policy and principal investment strategy? The Fund aims to invest in a diversified portfolio of primarily Fixed Income Instruments with some exposure in equities. The fixed income portion will provide capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The Fund may opt to invest in Fixed Income Instruments, money market instruments and equities either directly or via collective investment schemes. At least 80% of the Fund s Net Asset Value ( NAV ) will be invested in Fixed Income Instruments and money market instruments, of which a minimum 20% of the Fund s NAV will be invested in money market instruments, all of which have a minimum credit rating of BBB3 or P2 by RAM Ratings ( RAM ) or equivalent rating by Malaysian Rating Corporation Berhad ( MARC ). The investments in equities shall not exceed 20% of the Fund s NAV. Fund category/type Core (Conservative) When was the Fund launched? 12 November 2012 What was the size of the Fund as at 31 July 2017? RM19.48 million (33.31 million units) What is the Fund s benchmark? 60% Quant shop Malaysian Government Securities ( MGS ) Short Index + 20% CIMB Bank 1-Year Fixed Deposit Rate + 20% Financial Times Stock Exchange ( FTSE ) Bursa Malaysia ( FBM ) Top 100 ( FBM100 ) Index Note: The risk profile of the Fund is not the same as the risk profile of the benchmark. What is the Fund distribution policy? The Fund is not expected to pay any distribution. 2

5 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN PERFORMANCE DATA Details of portfolio composition of the Fund for the last three unaudited financial periods are as follows: % % % Collective investment schemes Cash and other net assets Performance details of the Fund for the last three unaudited financial periods are as follows: NAV (RM Million) - Class A Class C Class X Units in circulation (Million) - Class A Class C Class X NAV per unit (RM) - Class A Class C Class X to to to Highest NAV per unit (RM) - Class A Class C Class X Lowest NAV per unit (RM) - Class A Class C Class X Total return (%) - Class A Class C Class X Capital growth (%) - Class A Class C Class X Income distribution (%) - Class A Class C Class X

6 PERFORMANCE DATA (CONTINUED) to to to Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ( PTR ) (times) # ^ The Fund s MER decreased from 0.11% to 0.10% mainly due to the increase in average NAV of the Fund. # The Fund s PTR decreased from 0.36 times to 0.18 times as there were less trading activities carried out within the reporting period Since inception to % % % % % Annual total return - Class A Class C Class X (Launch date: 12 November 2012) Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures for the financial period have been extracted from Lipper. MARKET REVIEW (1 FEBRUARY 2017 TO 31 JULY 2017) Local Equity The FBM100 Index closed higher by 6.6% to 12, points over the 6-month financial period under review. Malaysian markets rebounded in the first quarter of 2017, led by inflows from foreign funds. Markets were also buoyed by the optimism on restructuring activities within the Government-Linked Companies ( GLCs ) such as Sime Darby Bhd and UMW Holdings Bhd, which led to the outperformance of the consumer discretionary and industrial sectors. Over the first quarter of 2017, the local market remained well bid with bullish undertones led by foreign flows that remained very underweight on Malaysia. Net foreign inflows amounted to RM5.7 billion for the first quarter of 2017 and RM4.4 billion in March 2017 itself. Malaysian markets trended marginally higher in the second quarter of 2017, on the back of recovering corporate earnings prospects and foreign funds inflow. Buoyant regional markets and corporate exercise (proposed merger of I&P Group Sdn Bhd and SP Setia Bhd) also helped boost interest in the market. Energy outperformed in April 2017 on continued optimism about Saudi Aramco s potential USD7 billion investment in Refinery and Petrochemical Integrated Development ( RAPID ) project. Market was taken by surprise by the aborted Bandar Malaysia deal and the cancellation of the planned merger between UMW Oil & Gas Corporation Bhd with Orkim and Icon Offshore Bhd in May The stock market drifted sideways in June 2017 and July 2017 as local investors turned slightly cautious as foreign net buying tapered off to RM0.4 million in June 2017, with cumulative half year of 2017 net inflows at RM10.7 billion. Fixed Income For the six months financial period under review, the MGS yield curve bull flattened with the 3-year and 10-year spreads narrowing from 66 basis points ( bps ) to 44 bps. 4

7 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN MARKET REVIEW (1 FEBRUARY 2017 TO 31 JULY 2017) (CONTINUED) Fixed Income (continued) In the first quarter of 2017, Malaysia's economy grew at its fastest pace in two years, bolstered by strong domestic demand, a rise in manufacturing activity, and higher exports. Gross Domestic Product ( GDP ) rose by 5.6% in the three months ended March 2017 from a year earlier, according to Bank Negara Malaysia ( BNM ). Headline inflation has been revised upwards from 3% to 4%, with expectations that inflation will moderate in second half of Unemployment will inch up to between 3.6% and 3.8% as new job creation cannot keep up with new entrants to the job market. A notable positive is that household debt against GDP is down for the first time since 2010 to 88.4%, with loans growth expected to moderate even further over Improved sentiment was seen in the domestic market after foreign flows returned to the MGS market in April 2017 after 5 consecutive months of outflows. This indicated a reversal in sentiment following recent BNM liberalisation of bond and foreign exchange measures and a more supportive external market conditions. However, foreign flows to domestic bond market lost momentum in June 2017 with RM0.9 billion outflow seen in MGS. Total foreign holdings in MGS have reduced from 47.1% in December 2016 to 41.2% in June In its recent July 2017 meeting, BNM kept Overnight Policy Rate ( OPR ) unchanged for the sixth consecutive time and showed little inclination to adjust its monetary policy despite the strong growth and higher inflation in first quarter of The policy statement also continued to strike a neutral tone. BNM reiterated that headline inflation is poised to moderate from here. FUND PERFORMANCE 6 months to year to Class A Class C Class X Class A Class C Class X % % % % % % Income Capital Total Return Benchmark Average Total Return N/A N/A N/A years to Since inception to Class A Class C Class X Class A Class C Class X % % % % % % Income Capital Total Return Benchmark Average Total Return For the 6-month financial period, Class C gained by 3.01% while both Class A and Class X gained by 3.03%. Meanwhile, the benchmark appreciated by 2.61% over the same reporting period. The outperformance of the Fund relative to its benchmark was driven mainly by the allocation into fixed income funds. The slight variation in the performance between Class A, Class C and Class X, if any, was due to different timing of units created for each of the class. 5

8 FUND PERFORMANCE (CONTINUED) 6 months to % 3.00% 2.50% 2.00% 1.50% 1.00% Class A, C and X* Benchmark 0.50% 0.00% 1 year to % 4.00% 3.00% 2.00% 1.00% 0.00% Class A, C and X* Benchmark -1.00% 6

9 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN FUND PERFORMANCE (CONTINUED) 3 years to % 10.00% 8.00% 6.00% 4.00% 2.00% Class A, C and X* Benchmark 0.00% -2.00% Since inception to % 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% Class A, C and X* Benchmark * Performance of Class A, Class C and Class X are almost the same. Slight variant was due to different timing of units created for each of the class. 7

10 FUND PERFORMANCE (CONTINUED) Changes in NAV CLASS A Changes % NAV (RM Million) NAV/Unit (RM) CLASS C Changes % NAV (RM Million) NAV/Unit (RM) CLASS X Changes % NAV (RM Million) NAV/Unit (RM) The Fund recorded positive net inflow from unit creations over the six months financial period under review for all the three classes - Class A, Class C and Class X. Class A remained the most preferred choice as seen in its total NAV which grew by 41.77% to RM16.63 million. Meanwhile, the total NAV of Class C and Class X rose by 33.33% and 71.81% respectively. For the 1-year period, the Fund ranked 14 th in Quartile 3 under the Mixed Asset MYR Conservative category in the Lipper rankings. 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) Collective investment schemes Cash and other net assets The Fund was fully invested during the six months financial period under review. A minimal level of liquid assets was maintained primarily for redemption purposes. 8

11 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN MARKET OUTLOOK* Local Equity The local market is in a consolidation stage with foreign inflows moderating as we enter seasonal holiday months in the western world. Investors are now awaiting fresh catalysts before market can resume its uptrend. Key catalysts include: 1) the East Coast Rail Link contracts being announced; 2) an upgrade in earnings estimates following second quarter earnings season; and 3) resumption of foreign flows into the equity market. We are cautious in the short term in chasing beta stocks given that there may potentially be headwinds from the reduction of the US Federal Reserve (the Fed ) balance sheet heading into September We continue to like construction, tourism and e-commerce/logistics names. GLCs restructuring and banks remain core holdings in our portfolios. Fixed Income Inflation growth in Malaysia slowed to 3.6% y-o-y in June 2017 after it peaked at 5.1% y-o-y in March 2017 and is expected to trend lower in the coming months. We expect the headline inflation to moderate for the rest of the year. We think GDP growth should be strong in 2017 (market projecting 4.5% to 5.0%) and the fiscal consolidation to be on track to meet the 3.0% fiscal deficit in Consequently, we expect the Central Bank to keep its policy rate unchanged in Meanwhile, the global economy is expected to expand in a synchronized manner, as major risks weighing on the growth outlook such as Chinese hard-landing and political crisis in Europe have receded. Against this backdrop of global growth, market is taking the view that major central banks could shift to less accommodative policies. Nevertheless, the combination of the Fed decision to reduce its USD4.5 trillion balance sheet and European Central Bank ( ECB ) tapering its quantitative easing ( QE ) program could limit flows into the Emerging Market ( EM ) and makes EM vulnerable to outflows. Lack of foreign flows will dampen sentiment in the domestic sovereign bond market as global central banks pull back liquidity. Due to growing concerns on low inflation, the market has priced in a lower probability of another rate hike this year. Despite that, we are still of the view that the US Federal Open Market Committee ( FOMC ) will hike the rate to another 25 bps by end of this year. * 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 As this is a core Fund for the PRS, the Fund will continue to remain fully invested with minimal cash kept for redemption purposes. Our asset allocation decisions will continue to be subject to market conditions. 9

12 MEMBERS STATISTICS AS AT 31 JULY 2017 CLASS A Size of unit holdings (units) No. of members No. of units held % of units held (million) 5,000 and below ,001-10, ,001-50, , , ,001 and above Total 2, CLASS C Size of unit holdings (units) No. of members No. of units held (million) % of units held 5,000 and below ,001-10, ,001-50, , , ,001 and above Total CLASS X Size of unit holdings (units) No. of members No. of units held (million) % of units held 5,000 and below ,001-10, ,001-50, , , ,001 and above Total SOFT COMMISSIONS AND REBATES The CIMB-Principal Asset Management Berhad (the PRS Providers ) and the Trustee (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the PRS Provider and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commissions in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 10

13 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN STATEMENT BY THE PRS PROVIDER TO THE MEMBERS OF CIMB-PRINCIPAL PRS PLUS CONSERVATIVE We, being the Directors of CIMB-Principal Asset Management Berhad (the PRS Provider ), do hereby state that, in the opinion of the PRS Provider, the accompanying unaudited financial statements set out on pages 13 to 33 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 July 2017 and of its financial performance, changes in net assets attributable to members and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards ("MFRS") Interim Financial Reporting and International Accounting Standards ("IAS") 34 - Interim Financial Reporting. For and on behalf of the PRS Provider CIMB-Principal Asset Management Berhad (Company No.: K) MUNIRAH KHAIRUDDIN Chief Executive Officer/Executive Director ALEJANDRO ECHEGORRI Executive Director Kuala Lumpur 29 September

14 TRUSTEE S REPORT TO THE MEMBERS OF CIMB-PRINCIPAL PRS PLUS CONSERVATIVE We have acted as Trustee for CIMB-Principal PRS Plus Conservative (the Fund ) for the financial period ended 31 July To the best of our knowledge, for the financial period under review, CIMB-Principal Asset Management Berhad (the PRS Provider ) has operated and managed the Fund in accordance with the following:- (a) (b) (c) limitations imposed on the investment powers of the PRS Provider under the Deed(s), the Securities Commission s Guidelines on Private Retirement Schemes, the Capital Markets and Services Act 2007 and other applicable laws; valuation and pricing for the Fund has been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirements; and creation and cancellation of units for the Fund have been carried out in accordance with the Deed(s) of the Fund and applicable regulatory requirement. For Deutsche Trustees Malaysia Berhad SOON LAI CHING Senior Manager, Trustee Operations RICHARD LIM HOCK SENG Chief Executive Officer Kuala Lumpur 29 September

15 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to Note RM RM INVESTMENT INCOME Dividend income 753, ,101 Net (loss)/gain on financial assets at fair value through profit or loss 7 (123,606) 84, , ,542 EXPENSES Private Pension Administrator's fee 4 4,076 2,563 Trustee s fee 5 4,076 2,563 Audit fee 5,960 5,510 Tax agent s fee 2,000 2,000 Other expenses 5,416 1,585 21,528 14,221 PROFIT BEFORE TAXATION 608, ,321 Taxation INCREASE IN NET ASSETS ATTRIBUTABLE TO MEMBERS 608, ,321 Profit after taxation and total comprehensive income comprise the following: Realised amount 597,091 37,385 Unrealised amount 11, , , ,321 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 JULY Audited Note RM RM ASSETS Cash and cash equivalents 8 41,788 22,776 Financial assets at fair value through profit or loss 7 19,450,083 22,218,853 Amount due from the PRS Provider 9 25, ,321 Tax recoverable TOTAL ASSETS 19,517,404 22,616,028 LIABILITIES Amount due to the PRS Provider 9 20, ,200 Other payables and accruals 21,063 15,220 TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO MEMBERS) 41, ,420 NET ASSET VALUE OF THE FUND 19,476,341 22,264,608 NET ASSETS ATTRIBUTABLE TO MEMBERS 19,476,341 22,264,608 REPRESENTED BY: FAIR VALUE OF OUTSTANDING UNITS - Class A 16,630,706 19,979,590 - Class C 283, ,336 - Class X 2,562,036 2,047,682 19,476,341 22,264,608 NUMBER OF UNITS IN CIRCULATION (UNITS) - Class A 28,442,279 35,180,432 - Class C 484, ,753 - Class X 4,381,299 3,605, ,308,441 39,203,343 NET ASSET VALUE PER UNIT (RM) - Class A Class C Class X The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 14

17 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO MEMBERS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to RM RM NET ASSETS ATTRIBUTABLE TO MEMBERS AT THE BEGINNING OF THE FINANCIAL PERIOD 22,264,608 12,777,573 Movement due to units created and cancelled during the financial period: - Creation of units from applications 1,575,811 2,320,274 - Cancellation of units (4,972,780) (1,982,509) 18,867,639 13,115,338 Increase in net assets attributable to members during the financial period: Profit after taxation and total comprehensive income 608, ,321 NET ASSETS ATTRIBUTABLE TO MEMBERS AT THE END OF THE FINANCIAL PERIOD 19,476,341 13,432, The accompanying notes to the financial statements form an integral part of the unaudited financial statements.

18 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of collective investment schemes 5,786,000 4,404,715 Purchase of collective investment schemes (2,367,000) (4,540,315) Private Pension Administrator s fee paid (4,159) (2,549) Trustee s fee paid (4,159) (2,549) Payments for other fees and expenses (7,367) (10,458) Net cash generated from/(used in) operating activities 3,403,315 (151,156) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from unit created 1,599,677 2,157,847 Payments for cancellation of units (4,983,980) (2,008,079) Net cash (used in)/generated from financing activities (3,384,303) 149,768 Net increase/(decrease) in cash and cash equivalents 19,012 (1,388) Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period 22,776 41,788 36,446 35,058 Cash and cash equivalents comprised of: Bank balances 41,788 35,058 Cash and cash equivalents at the end of the financial period 41,788 35,058 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 16

19 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY THE FUND, THE PRS PROVIDER AND ITS PRINCIPAL ACTIVITY CIMB-Principal PRS Plus Conservative (the Fund ) is governed by a Deed dated 8 November 2012, a First Supplemental Deed dated 2 January 2014 and a Second Supplemental Deed dated 25 November 2014 (collectively referred to as the Deeds ) between CIMB-Principal Asset Management Berhad (the PRS Provider ) and Deutsche Trustees Malaysia Berhad (the Trustee ). The Fund offers three classes of units known respectively as Class A, Class C and Class X. In accordance with the Disclosure Document, Class A and Class C are for Members who have attained the age 18 years of age as of the date of opening a private pension account. Class A and C have different management fee. Class X is for Members who participate via respective employers and is subject to a minimum of 200 participating employees per employer or 50 participating employees under payroll deduction per employer. The Fund aims to invest in a diversified portfolio of primarily Fixed Income Instruments with some exposure in equities. The fixed income portion will provide capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The Fund may opt to invest in Fixed Income Instruments, money market instruments and equities either directly or via collective investment schemes. At least 80% of the Fund s NAV will be invested in Fixed Income Instruments and money market instruments, of which a minimum 20% of the Fund s NAV will be invested in money market instruments, all of which have a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC. The investments in equities shall not exceed 20% of the Fund s NAV. All investments will be subjected to the Securities Commission Malaysia ( SC ) Guidelines on PRS, SC requirements, the Deeds, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The PRS Provider, a company incorporated in Malaysia, is a subsidiary of CIMB Group Sdn Bhd and regards CIMB Group Holdings Berhad as its ultimate holding company. The PRS Provider is also an associate of Principal International (Asia) Limited, which is a subsidiary of Principal Financial Group Inc. The principal activities of the PRS Provider are the establishment and management of unit trust funds and fund management activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the MFRS and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. 17

20 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 financial 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 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(j). 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 February 2017: Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiative introduce an additional disclosure on changes in liabilities arising from financing activities. The adoption of these amendments did not have any impact on the current financial period or any prior financial period and is not likely to affect future financial periods. 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 February 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. 18

21 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) (i) Financial year beginning on/after 1 January 2018 (continued) 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. MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments 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 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. 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. 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. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities Classification The Fund designates its investments in collective investment schemes 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. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s loans and receivables comprise cash and cash equivalents and amount due from the PRS Provider. 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 the PRS provder, 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. Investments are initially recognised at fair value. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial period which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payments is established. Collective investment schemes are valued based on the most recent published NAV per unit or share of such collective investment schemes or, if unavailable, on the last published price of such unit or share (excluding any sales charge included in such selling price). 20

23 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Recognition and measurement (continued) Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest 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 interest rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent financial period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. (c) Income recognition Dividend income is recognised on the ex-dividend date when the right to receive payment is established. Realised gain or loss on disposal of collective investment schemes is accounted for as the difference between the net disposal proceeds and the carrying amount of collective investment schemes, determined on a weighted average cost basis. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Income recognition (continued) Realised gain or loss on disposal of collective investment schemes is accounted for as the difference between the net disposal proceeds and the carrying amount of investment, determined on a weighted average cost basis. (d) Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( RM ), which is the Fund s functional and presentation currency. (e) Creation and cancellation of units The members contributions to the Fund meet the definition of puttable instruments classified as financial liability under MFRS 132 Financial Instruments: Presentation. The Fund issues cancellable units, in three classes of units, known respectively as the Class A, Class C and Class X, which are cancelled at the member s option and do not have identical features subject to restrictions as stipulated in the Disclosure Document and SC Guidelines on PRS. The units are classified as financial liabilities. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s NAV of respective classes. The outstanding units are carried at the redemption amount that is payable at the date of the statement of financial position if the member exercises the right to put back the unit to the Fund. Units are created and cancelled at the member s option at prices based on the Fund s NAV per unit of respective classes at the close of business on the relevant dealing day. The Fund s NAV per unit of respective classes is calculated by dividing the net assets attributable to members of respective classes with the total number of outstanding units of respective classes. (f) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances which are subject to an insignificant risk of changes in value. (g) 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. (h) Increase/Decrease in net assets attributable to members Income not distributed is included in net assets attributable to members. (i) 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. 22

25 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the PRS Provider and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the PRS Provider will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on PRS. However, the PRS Provider is of the opinion that there are no accounting policies which require significant judgement to be exercised. 3. RISK MANAGEMENT OBJECTIVES AND POLICIES The objective of the Fund is to provide Members with capital preservation through investment primarily in fixed income instruments. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk), credit risk and liquidity risk. Financial risk management is carried out through internal control process adopted by the PRS Provider and adherence to the investment restrictions as stipulated in the Deeds and SC Guidelines on PRS. (a) Market risk (i) Price risk This is the risk that the fair value of investments in collective investment schemes will fluctuate because of changes in market prices. The value of investments may fluctuate according to the activities of individual companies, sector and overall political and economic conditions. Such fluctuation may cause the Fund s NAV and prices of units to fall as well as rise, and income produced by the Fund may also fluctuate. The price risk is managed through diversification and selection of collective investment schemes other financial instruments within specified limits according to the Deeds. (b) Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in financial loss to the Fund. The credit risk arising from placements of deposits with licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. 23

26 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (b) Credit risk (continued) For amount due from the PRS Provider the creation of units receivable from the PRS Provider are governed by the SC Guidelines on PRS. (c) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The PRS Provider manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of the units by members. Liquid assets comprise bank balances, which are capable of being converted into cash within 7 business days. The Fund s investments in collective investment scheme are realisable which are capable of being converted into cash within 10 business days. This is expected to reduce the risk for the entire portfolio without limiting to the Fund's growth potential. (d) Capital risk management The capital of the Fund is represented by net assets attributable to members of RM19,596,530 ( : RM22,264,608). The amount of capital can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of members. The Fund s objective when managing capital is to safeguard the Fund s ability to continue as a going concern in order to provide returns to members and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. (e) Fair value estimation Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The fair values of financial assets traded in active markets (such as trading securities) are based on quoted market prices at the close of trading on the financial period end date. The Fund utilises the last traded market price for financial assets where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the PRS Provider will determine the point within the bid-ask spread that is most representative of the fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. 24

27 CIMB-PRINCIPAL CIMB-PRINCIPAL PRS PLUS PRS ASIA PLUS PACIFIC CONSERVATIVE EX JAPAN 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) Fair value estimation (continued) (i) Fair value hierarchy The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2) Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. 25

28 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) Fair value estimation (continued) (i) Fair value hierarchy (continued) Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss: - Collective investment schemes 19,450, ,450, Audited Financial assets at fair value through profit or loss: - Collective investment schemes 22,218, ,218,853 Investments which values are based on quoted market prices in active markets, and are therefore classified within Level 1, include collective investments schemes. The Fund does not adjust the quoted prices for these instruments. The Fund s policies on valuation of these financial assets are stated in Note 2(b). (ii) The carrying values of cash and cash equivalents, amount due from the PRS Provider, and all current liabilities are a reasonable approximation of their fair values due to their short term nature. 4. MANAGEMENT FEE AND PRIVATE PENSION ADMINISTRATOR S FEE In accordance with the Deeds, the PRS Provider is entitled to a maximum management fee of 3.00% per annum for each unit class, calculated daily based on the NAV of the Fund. For the six months financial period ended 31 July 2017 and 31 July 2016, the management fee for the respective classes is recognised at the following rates: Class A Class C Class X 1.40% 1.50% 1.40% Nonetheless, no management fee is charged on the Fund for the six months financial period as the management fee has been waived by the PRS Provider. 26