CIMB ISLAMIC MONEY MARKET FUND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2017

Transcription

1 FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2017

2 CONTENTS PAGE(S) INVESTORS LETTER 1-2 MANAGER S REPORT 3-9 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 INDEPENDENT AUDITOR S REPORT STATEMENT OF COMPREHENSIVE INCOME 17 STATEMENT OF FINANCIAL POSITION 18 STATEMENT OF CHANGES IN EQUITY 19 STATEMENT OF CASH FLOWS 20 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 47 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 48-52

3 INVESTORS' LETTER Dear Valued Investors, Thank you for your continued support and for the confidence that you have placed in us. We are pleased to share that CIMB-Principal Asset Management Berhad ( CIMB-Principal ) Malaysia concluded the first half of 2017 with RM48 billion in Asset Under Management ( AUM ) and CIMB- Principal s Group AUM has increased by 14% to RM63 billion, for 1-year period ending 30 June Our AUM for Private Retirement Schemes ( PRS ) business has increased by 25% year-on-year ( y-o-y ) to RM388 million as at 30 June 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 2017 Best Equity Asia Pacific Ex-Japan (Islamic), Best Fund over 5 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 the 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. With effect from 30 June 2017, the fund manager may utilize Shariah-compliant derivative instruments, subject to the Securities Commission Malaysia ( SC ) Guidelines, for the purpose of hedging. As for the Fund s investment in Shariah-compliant fixed income instruments, the minimum credit rating (by Standard & Poor ( S&P ) or equivalent rating by Moody's or Fitch) has been changed from "BBB" to "BBB-". In addition, there are 2 additional risk (i.e. Country risk and Currency risk) disclosure under "Specific risks associated with the investment portfolio of the funds" section. Pursuant to the revised Guidelines on Unit Trust Funds dated 24 May 2017, we now have the right to withdraw all units held by you in the event we are of the opinion that such withdrawal is necessary to ensure that we comply with any relevant laws, regulations and guidelines. We will first notify you before making any such compulsory withdrawal of your units. 1

4 INVESTORS' LETTER (CONTINUED) Please refer to the Master Prospectus (Shariah-compliant Funds) dated 30 June 2017 for further details. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer/Executive Director 2

5 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to provide investors with liquidity and regular income, whilst maintaining capital stability by investing primarily in money market instruments that conform with Shariah principles. Has the Fund achieved its objective? For the financial year under review, the Fund is in line with its stated objective. What are the Fund investment policy and principal investment strategy? The Fund will place at least 90% of its Net Asset Value ( NAV ) in Shariah-compliant money market instruments such as Islamic Accepted Bills, Islamic Negotiable Instruments of Deposits and Islamic Repurchase Agreements ("Repo-i") as well as in any other Shariah-compliant fixed income instruments and placements of Deposits, all of which are highly liquid and have a remaining maturity period of less than 365 days. Up to 10% of the Fund s NAV may be invested in Shariah-compliant fixed income instruments, which have a remaining maturity period of more than 365 days but less than 732 days. The Fund will be actively managed. The strategy is to invest in liquid and low risk short-term investments for capital preservation*. The investment strategy adheres to the SC Guidelines pertaining to investments for a money market fund. Note: *The Fund is neither a capital guaranteed fund nor a capital protected fund. Fund category/type Money Market (Shariah-compliant)/Income How long should you invest for? Recommended one (1) year or more Indication of short-term risk (low, moderate, high) Low When was the Fund launched? 17 March 2008 What was the size of the Fund as at 30 November 2017? RM million ( million units) What is the Fund s benchmark? 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. The 1-Month FRIA-i Rate is reflective of the objective of the Fund. Thus, investors are cautioned that the risk profile of the Fund is higher than investing in Shariah-compliant deposits. What is the Fund distribution policy? Monthly, depending on the level of income (if any) the Fund generates. What was the net income distribution for the financial year ended 30 November 2017? The Fund distributed a total net income of RM7.30 million to unit holders for the financial year ended 30 November

6 FUND OBJECTIVE AND POLICY (CONTINUED) The Fund s NAV per unit are as follows: Date NAV per unit (before distribution) NAV per unit (after distribution) RM RM PERFORMANCE DATA Details of portfolio composition of the Fund for the last three financial years are as follows: % % % Unquoted Sukuk and Islamic commercial papers Cash and other net assets Performance details of the Fund for the last three financial years are as follows: NAV (RM Million)* Units in circulation (Million) NAV per unit (RM)* *Ex-distribution Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income distribution (%) Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ("PTR ) (times) # ^ The Fund s MER increased from 0.57% to 0.58% mainly due to the decrease of average NAV during the financial year under review. # The Fund s PTR for the financial year under review was higher at 0.93 times from 0.71 times compared to the previous financial year due to higher number of transactions. 4

7 PERFORMANCE DATA (CONTINUED) Date of distribution Gross/Net distribution per unit (sen) Distribution on 30 December Distribution on 31 January Distribution on 28 February Distribution on 31 March Distribution on 28 April Distribution on 31 May Distribution on 30 June Distribution on 31 July Distribution on 30 August Distribution on 29 September Distribution on 31 October Distribution on 30 November Distribution on 31 December Distribution on 29 January Distribution on 29 February Distribution on 31 March Distribution on 29 April Distribution on 31 May Distribution on 30 June Distribution on 29 July Distribution on 30 August Distribution on 30 September Distribution on 31 October Distribution on 30 November Distribution on 31 December Distribution on 31 January Distribution on 27 February Distribution on 31 March Distribution on 30 April Distribution on 29 May Distribution on 30 June Distribution on 31 July Distribution on 28 August Distribution on 30 September Distribution on 30 October Distribution on 30 November % % % % % Annual total return (Launch date: 17 March 2008) 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 year have been extracted from Lipper. 5

8 MARKET REVIEW (1 DECEMBER 2016 TO 30 NOVEMBER 2017) CIMB ISLAMIC MONEY MARKET FUND During the financial year under review, the Malaysia Ringgit ( MYR ) strengthened against the US Dollar ( USD ) while bonds rallied after the massive selloff post US election and intensified when Bank Negara Malaysia ( BNM ) signaled some normalization to its monetary policy. The first big rally came in April 2017 after 5 consecutive months of outflows. We saw rally in the short end of the curve driven by strong buying interest from local and some foreign investors following the announcement by BNM to allow flexibility on currency trading on the onshore market. During the month, BNM unveiled a four-prong measure to: 1) promote a fair and effective financial market, 2) improve liquidity in the bond market, 3) provide additional Foreign Exchange ( FX ) flexibility; and 4) strengthen the financial market infrastructure. Specifically, under the second prong to improve liquidity, the Central Bank allowed wider but regulated short-selling of Malaysian Government Bonds to all resident entities. The second rally came later in the financial year under review. BNM Governor Muhammad Ibrahim remarked that any adjustment to its monetary policy would be normalizing rather than tightening, as BNM prepares the market for possible higher interest rates next year. Amid data indicating a stronger economy and rising price pressures, BNM is considering to transition from the easy monetary policy that s helped the Malaysian economy in recent years. BNM gave clues of that move in a policy statement last week when it kept the Overnight Policy Rate ( OPR ) unchanged at 3%. The Governor said in Kuala Lumpur that once economic growth is entrenched, economic expectation is positive, inflation is within what they ve expected and financial imbalances have not increased significantly or becoming a problem, it gives them a bit of flexibility to adjust the degree of monetary policy accommodativeness. It s not a tightening, but rather, a normalization of interest rate. So that gives them a bit of flexibility if those factors are in place. The possible interest rate hike saw foreign flows coming into the Malaysian Government Securities ( MGS ) market to profit from the predicted appreciation of the MYR against other currencies. In Budget 2018, the Government s commitment to fiscal consolidation remains firm and aims to reduce the fiscal deficit to 2.8% of Gross Domestic Product ( GDP ) at RM39.79 billion in 2018 while maintaining 3.0% target for With an average Brent oil price forecast of USD52 per barrel, the Government projects its revenue to grow by 6.4% in 2018 to RM239.9 billion from a growth of 6.1% in 2017 with total expenditure easing slightly to 5.4% at RM279.7 billion in 2018 (versus 5.7% in 2017) on the back of a slowdown in development expenditure to 0.1% or RM46 billion in 2018 from 9.4% in The Government foresees the economy remains resilient in 2018, albeit at a moderate pace, with a real GDP growth of 5 to 5.5% in 2018 as compared with a 5.2 to 5.7% projected growth in Inflation is expected to moderate to 2.5 to 3.5% in 2018 from the 3.0 to 4.0% projected range for With a budget deficit of RM39.79 billion and sizeable maturity of government bonds totaling RM66.8 billion, the gross MGS/Government Investment Issue ( GII ) supply in 2018 is estimated to be relatively stable at RM106.6 billion (2017: RM107.1 billion). We think overall the budget is supportive of Malaysia s sovereign rating as the Government remains on course in its fiscal consolidation drive in 2017 and Malaysia s economy grew at the fastest pace in more than three years during the third quarter of 2017 as activity in the services and manufacturing sectors picked up and public spending contributed positive to the date. GDP for the third quarter increased by 6.2% y-o-y, according to Malaysia s Department of Statistics, accelerating from a 5.8% rate in the second quarter. This was the fastest growth rate since the second quarter of

9 FUND PERFORMANCE 1 year to years to years to Since inception to % % % % Income Capital Total Return Benchmark Average Total Return As at 30 November 2017, the total return for 1 year, 3 years, and 5 years stood at 3.85%, 10.85% and 17.69% respectively which outperformed the benchmark by 0.86 basis points ( bps ), 1.61 bps and 2.28 bps respectively. Since inception, the Fund achieved a total return of 33.59%. Changes in NAV Changes % NAV (RM Million)* NAV/Unit (RM)* *Ex-distribution The Fund s NAV increased by 46.59% from RM million as at 30 November 2016 to RM million as at 30 November Meanwhile, the NAV per unit increased by 0.09% from RM per unit to RM per unit. 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 year have been extracted from Lipper. 7

10 PORTFOLIO STRUCTURE Asset allocation (% of NAV) Unquoted Sukuk and Islamic commercial papers Cash and other net assets Total As at 30 November 2017, the Fund was 81.23% invested in unquoted Sukuk and Islamic commercial papers with the remaining 18.77% in cash and other net assets. MARKET OUTLOOK* In the November 2017 Monetay Policy Committee ( MPC ) meeting, BNM kept its OPR unchanged at 3.00% as expected but stated that it may consider reviewing the current degree of monetary accommodation, an indication that BNM could raise rates in Real GDP growth for the first three quarters of 2017 has exceeded market expectations and is expected to stay above 5% in Given that the economic growth prospect appears favourable with core inflation to be sustained by robust domestic demand, there is a case for the removal of monetary accommodation by BNM. The MPC also indicated that private consumption will remain the largest driver of growth in 2018, likely to be boosted from the individual tax cuts and cash handouts announced in Budget Consequently, we are of the view that BNM will normalise its monetary policy by raising its OPR only once to 3.25% in The net Government Bond issuance size for 2018 will be in the range of RM40 bio (similar in 2017). Gross issuance for 2018 will be around RM107 billion matching 2017 estimated gross issuances. We expect BNM to target longer duration issuances to keep the maturity profile at manageable level. Expect to see similar type of tenor as seen in We do not discount similar private placements arrangements being executed in 2018 Government Bonds auctions to support bond yields. We will continue to expect more primary issuances before year end that will keep corporate bond yields elevated. *This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make a purchase of any investment. The information given in this article represents the views of CIMB-Principal or based on data obtained from sources believed to be reliable by CIMB-Principal. Whilst every care has been taken in preparing this, CIMB-Principal makes no guarantee, representation or warranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this market outlook. INVESTMENT STRATEGY We continue to overweight Private Debt Securities ( PDS ) compared to MGS and GII. We will continue to remain selective as downgrades and defaults in the credit market may be increasing in UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 30 November 2017 are as follows: Size of unit holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below 14, ,001-10, ,001-50,000 1, , , ,001 and above Total 16,

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 year under review, the Manager and 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 MONEY MARKET FUND CIMB ISLAMIC MONEY MARKET 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 audited financial statements set out on pages 17 to 46 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 30 November 2017 and of its financial performance, changes in equity and cash flows for the financial year then ended in accordance with the provisions of the Malaysian Financial Reporting Standards ("MFRS") and International Financial Reporting Standards ("IFRS"). For and on behalf of the Manager CIMB-Principal Asset Management Berhad (Company No.: K) MUNIRAH KHAIRUDDIN Chief Executive Officer/Executive Director ALEJANDRO ECHEGORRI Executive Director Kuala Lumpur 30 January

13 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC MONEY MARKET FUND We, MTrustee Berhad, being the Trustee of CIMB Islamic Money Market Fund (the Fund ), are of the opinion that CIMB-Principal Asset Management Berhad (the Manager ), has managed the Fund for the financial year ended 30 November 2017 in accordance with the following: (a) (b) (c) (d) limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission Malaysia s Guidelines on the 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; creation and cancellation of units is carried out in accordance with the Deeds and relevant regulatory requirements; and during the financial year, a total distribution of 4.01 sen per unit (gross) has been distributed to the unit holders of the Fund. We are of the view that the distribution is consistent with the objective of the Fund. For and on behalf of the Trustee MTrustee Berhad NURIZAN JALIL Chief Executive Officer Selangor 30 January

14 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC MONEY MARKET FUND CIMB ISLAMIC MONEY MARKET FUND We have acted as the Shariah Adviser of CIMB Islamic Money Market Fund (the Fund ) for the financial year ended 30 November 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 year ended 30 November In addition, we confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission Malaysia ( SACSC ) and where applicable the 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 Director/Regional Head, Shariah & Governance/Designated Person Responsible for Shariah Advisory Kuala Lumpur 30 January

15 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC MONEY MARKET FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion CIMB ISLAMIC MONEY MARKET FUND In our opinion, the financial statements of CIMB Islamic Money Market Fund (the Fund ) give a true and fair view of the financial position of the Fund as at 30 November 2017, and of its financial performance and its cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. What we have audited We have audited the financial statements of the Fund, which comprise the statement of financial position as at 30 November 2017, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 17 to 46. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. 13

16 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC MONEY MARKET FUND (CONTINUED) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Information other than the financial statements and auditors report thereon CIMB ISLAMIC MONEY MARKET FUND The Manager of the Fund is responsible for the other information. The other information comprises Manager s report but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager for the financial statements The Manager of the Fund is responsible for the preparation of the financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards in Malaysia. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so. The Manager is also responsible for overseeing the Fund s financial reporting process. 14

17 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC MONEY MARKET FUND (CONTINUED) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Responsibilities of the Manager for the financial statements (continued) CIMB ISLAMIC MONEY MARKET FUND Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) (b) (c) (d) (e) Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 15

18 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC MONEY MARKET FUND (CONTINUED) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Responsibilities of the Manager for the financial statements (continued) CIMB ISLAMIC MONEY MARKET FUND We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. OTHER MATTERS This report is made solely to the unit holders of the Fund and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS PLT LLP LCA & AF 1146 Chartered Accountants Kuala Lumpur 30 January

19 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2017 CIMB ISLAMIC MONEY MARKET FUND Note RM RM INVESTMENT INCOME Profit income 4 7,796,837 8,183,900 Net gain/(loss) on financial assets at fair value through profit or loss 9 329,074 (357,955) 8,125,911 7,825,945 EXPENSES Management fee 5 945,604 1,022,966 Trustee s fee 6 56,736 61,378 Audit fee 10,050 7,990 Tax agent s fee 3,000 4,400 Other expenses 79,431 88,916 1,094,821 1,185,650 PROFIT BEFORE TAXATION 7,031,090 6,640,295 Taxation PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 7,031,090 6,640,295 Profit after taxation is made up as follows: Realised amount 6,624,267 6,980,337 Unrealised amount 406,823 (340,042) 7,031,090 6,640,295 The accompanying notes to the financial statements form an integral part of the audited financial statements. 17

20 STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER Note RM RM ASSETS Cash and cash equivalents (Shariah-compliant) 10 47,708,071 40,141,157 Financial assets at fair value through profit or loss (Shariah-compliant) 9 203,550, ,874,375 Amount due from Manager 241, ,878 TOTAL ASSETS 251,500, ,362,410 LIABILITIES Amount due to Manager 724,085 5,309,484 Accrued management fee 101,766 71,911 Amount due to Trustee 6,106 4,315 Distribution payable 47,042 - Other payables and accruals 25,843 22,288 TOTAL LIABILITIES 904,842 5,407,998 NET ASSET VALUE OF THE FUND 250,595, ,954,412 EQUITY Unit holders capital 224,826, ,919,794 Retained earnings 25,768,879 26,034,619 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 250,595, ,954,412 NUMBER OF UNITS IN CIRCULATION (UNITS) ,828, ,291,872 NET ASSET VALUE PER UNIT (RM) (EX-DISTRIBUTION) The accompanying notes to the financial statements form an integral part of the audited financial statements. 18

21 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2017 CIMB ISLAMIC MONEY MARKET FUND Unit holders Retained capital earnings Total Note RM RM RM Balance as at 1 December ,919,794 26,034, ,954,412 Movement in unit holders contributions: - Creation of units from applications 263,222, ,222,109 - Creation of units from distribution 7,013,102-7,013,102 - Cancellation of units (190,328,237) - (190,328,237) Total comprehensive income for the financial year - 7,031,090 7,031,090 Distribution 7 - (7,296,829) (7,296,829) Balance as at 30 November ,826,768 25,768, ,595,647 Balance as at 1 December ,627,880 25,091, ,719,381 Movement in unit holders contributions: - Creation of units from applications 95,214,227-95,214,227 - Creation of units from distribution 5,697,178-5,697,178 - Cancellation of units (154,619,491) - (154,619,491) Total comprehensive income for the financial year - 6,640,295 6,640,295 Distribution 7 - (5,697,178) (5,697,178) Balance as at 30 November ,919,794 26,034, ,954,412 The accompanying notes to the financial statements form an integral part of the audited financial statements. 19

22 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of unquoted Sukuk and Islamic commercial papers 56,490,200 65,971,160 Purchase of unquoted Sukuk and Islamic commercial papers (296,104,779) (226,132,177) Proceeds from redemption of unquoted Sukuk and Islamic commercial papers 173,500, ,000,000 Profit income received from Shariah-compliant deposits with licensed Islamic financial institutions and Hibah received 951, ,809 Profit income received from unquoted Sukuk and Islamic commercial papers 5,612,618 9,660,078 Management fee paid (915,749) (1,045,387) Trustee s fee paid (54,945) (62,723) Payments for other fees and expenses (88,927) (100,065) Net cash (used in)/generated from operating activities (60,609,982) 85,125,695 CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 263,327,217 94,982,849 Payments for cancellation of units (194,913,636) (150,818,695) Distributions paid (236,685) - Net cash generated from/(used in) financing activities 68,176,896 (55,835,846) Net increase in cash and cash equivalents 7,566,914 29,289,849 Cash and cash equivalents at the beginning of the financial year 40,141,157 10,851,308 Cash and cash equivalents at the end of the financial year 10 47,708,071 40,141,157 Cash and cash equivalents comprised of: Shariah-compliant deposits with licensed Islamic financial institutions 47,668,717 40,130,629 Bank balances 39,354 10,528 Cash and cash equivalents at the end of the financial year 10 47,708,071 40,141,157 The accompanying notes to the financial statements form an integral part of the audited financial statements. 20

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB Islamic Money Market Fund (the Fund ) is governed by a Master Deed dated 15 May 2008, a Third 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 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 MTrustee Berhad (the Trustee ). The Fund will place at least 90% of its NAV in Shariah-compliant money market instruments such as Islamic Accepted Bills, Islamic Negotiable Instruments of Deposits and Repo-i as well as in any other Shariah-compliant fixed income instruments and placements of Deposits, all of which are highly liquid and have a remaining maturity period of less than 365 days. Up to 10% of the Fund s NAV may be invested in Shariah-compliant fixed income instruments, which have a remaining maturity period of more than 365 days but less than 732 days. The Fund will be actively managed. The strategy is to invest in liquid and low risk short-term investments for capital preservation. The investment strategy adheres to the SC Guidelines pertaining to investments for a money market fund. All investments are subjected to the 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 IFRS. The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. 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 year. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC MONEY MARKET FUND (a) Basis of preparation (continued) 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 December 2016: Amendments to MFRS 101 Presentation of Financial Statements - Disclosure Initiative provide clarifications on a number of issues, including: Materiality - an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. Disaggregation and subtotals - line items specified in MFRS 101 may need to be disaggregated where this is relevant to an understanding of the entity s financial position or performance. There is also new guidance on the use of subtotals. Notes - confirmation that the notes do not need to be presented in a particular order. Other comprehensive income ( OCI ) arising from investments accounted for under the equity method - the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. According to the transitional provisions, the disclosures in MFRS 108 regarding the adoption of new standards/accounting policies are not required for these amendments. Annual Improvements to MFRSs Cycle The adoption of these amendments did not have any impact on the current financial year or any prior financial year and is not likely to affect future financial years. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC MONEY MARKET FUND (a) Basis of preparation (continued) The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 December 2017 Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiative (effective from 1 January 2017) introduce an additional disclosure on changes in liabilities arising from financing activities. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. (ii) Financial year beginning on/after 1 November 2018 MFRS 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. (b) Financial assets and financial liabilities Classification The Fund designates its Shariah-compliant investments in unquoted Sukuk and Islamic commercial papers as financial assets at fair value through profit or loss at inception. 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. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC MONEY MARKET FUND (b) Financial assets and financial liabilities (continued) Classification (continued) 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 and amount due from Manager. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, accrued management fee, amount due to Trustee, distribution payable 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. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the Shariah-compliant investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial year which they arise. 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(j) for further explanation. Islamic commercial papers are revalued at least weekly by reference to bid and offer prices quoted by three (3) independent and reputable financial institutions of similar standing at the close of trading. Shariah-compliant deposits with licensed Islamic financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the financial year 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. 24

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC MONEY MARKET FUND (b) Financial assets and financial liabilities (continued) Impairment on assets carried at amortised costs For assets carried at amortised cost, the Fund assesses at the end of the reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If financing and receivables has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent financial year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in 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 Profit income from Shariah-compliant deposits with licensed Islamic financial institutions, unquoted Sukuk and Islamic commercial papers are recognised on a time proportionate basis using the effective profit method on an accrual basis. Realised gain or loss on disposal of unquoted Sukuk and Islamic commercial papers are accounted for as the difference between the net disposal proceeds and the carrying amount of unquoted Sukuk and Islamic commercial papers, determined on cost adjusted for accretion of discount or amortisation of premium. (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 RM, which is the Fund s functional and presentation currency. 25

28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB ISLAMIC MONEY MARKET FUND (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances and Shariah-compliant deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (f) Taxation Current tax expense is determined according to Malaysian tax laws at the current rate based upon the taxable profit earned during the financial year. (g) Distribution A distribution to the Fund s unit holders is accounted for as a deduction from realised reserve. A proposed distribution is recognised as a liability in the financial year in which it is approved by the Trustee. (h) Unit holders capital The unit holders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial year if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. (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. 26