ANNUAL REPORT. EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND (formerly known as Prudential Indonesia Equity Fund)

Transcription

1 ANNUAL REPORT EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND (formerly known as Prudential Indonesia Equity Fund) FOR THE FINANCIAL YEAR ENDED 31 MARCH 2012

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3 TABLE OF CONTENTS Fund Information... 2 Fund Performance... 4 Manager s Report... 6 Market Review... 9 Rebates and Soft Commissions Trustee s Report To The Unitholders of Eastspring Investments Indonesia Equity MY Fund Independent Auditor s Report To The Unitholders of Eastspring Investments Indonesia Equity MY Fund Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Summary of Significant Accounting Policies Notes To The Financial Statements Corporate Directory... 55

4 Eastspring Investments Indonesia Equity MY Fund FUND INFORMATION Name of Fund Eastspring Investments Indonesia Equity MY Fund (formerly known as Prudential Indonesia Equity Fund) Fund Category/ Type Equity / Growth Fund Objective Fund Benchmark Seeks to provide medium to long-term capital growth. Jakarta Composite Index ( JCI ) Source: Fund Income Distribution Policy In line with the distribution policy of the Target Fund, the Fund does not intend to distribute any income. Breakdown of Unit Holding by Size As at 31 March 2012, the size of Eastspring Investments Indonesia Equity MY Fund stood at million units. 2 Customer Service:

5 Annual Report FUND INFORMATION (CONTINUED) Breakdown of Unit Holding by Size Unitholdings BREAKDOWN OF UNITHOLDINGS No. of Unit Holders % No. of Units* ('000) % 5,000 units and below ,001 to 10,000 units ,001 to 50,000 units , ,001 to 500,000 units , ,001 units and above , Total , * exclude units held by the Manager. Customer Service:

6 Eastspring Investments Indonesia Equity MY Fund FUND PERFORMANCE For the financial period ended Category Since launch date to (%) Collective Investment Scheme Cash And Liquid Assets - Total Net Asset Value (RM'000) 47,115 Units In Circulation (Units '000) 94,819 Net Asset Value Per Unit (RM) Highest Net Asset Value (RM)# Lowest Net Asset Value (RM)# Total Return (%) - Capital Growth (0.72) - Income Distributions 0.00 Total Return (%) (0.72) Gross Distribution Per Unit (RM) - Net Distribution Per Unit (RM) - Management Expense Ratio (%)* 1.69 Portfolio Turnover Ratio (times)^ 0.73 * There is no comparative figure as this is the first annual report for the Fund. ^ There is no comparative figure as this is the first annual report for the Fund. # Figures shown as ex-distribution. 4 Customer Service:

7 Annual Report FUND PERFORMANCE For the financial period ended (continued) Since launch date to (%) Annualised average total return (0.72) Year ended Since launch date to (%) Annual total return (0.72) Source: Lipper Hindsight 5 as at 31 March 2012 Bases of calculation and assumptions made in calculating returns: Percentage growth = NAV t -1 NAV 0 NAV t = NAV at the end of the period NAV 0 = NAV at the beginning of the period Performance annualized = (1+Percentage Growth) 1/n - 1 n = Number of years The unit price of the Fund may go down as well as up and the past performance figures shown are not indicative of future performance. Customer Service:

8 Eastspring Investments Indonesia Equity MY Fund MANAGER S REPORT Fund Performance Since inception, the Fund recorded a return of -0.72%, underperforming the benchmark return of 2.48% by 3.20%. The Fund has not met the investment objective of seeking to maximise long-term total return via a Target Fund that invests primarily in the International Opportunity Fund Indonesia Equity Fund and equity related securities of companies, which are incorporated, listed in or have their area of primary activity, in Indonesia. Benchmark : JCI Source: Lipper Hindsight 5, 31 March 2012 Past performance of the Fund is not an indication of its future performance. 6 Customer Service:

9 Annual Report MANAGER S REPORT (CONTINUED) Analysis of Fund Performance For the financial year ended 31 March 2012 Income Return Capital Return* Total Return Total return of benchmark (%) (%) (%) (%) 0.00 (0.72) (0.72) 2.48 *Capital return components (NAV per unit to NAV per unit) 1) Collective investment scheme 2) Cash and cash equivalents Distribution/ Unit Splits Investment Strategy During Period Under Review No distribution or unit splits were declared for the financial period ended 31 March The Fund overweight the energy sector as it traded at attractive valuation despite positive earnings outlook underpinned by rising thermal coal demand. The Fund were also constructive on banks and property stocks, but underweight consumer staples due to expensive valuation. The fund manager will continue to monitor the macro situation while maintaining our bottom-up, valuation-driven investment approach. Asset Allocation Asset Allocation 31 march 2012 Changes (%) (%) Collective investment scheme-foreign There is no comparative figure as this is the first annual report for the Fund. Customer Service:

10 Eastspring Investments Indonesia Equity MY Fund MANAGER S REPORT (CONTINUED) Switching Fee A switching fee of up to 0.5% on the amount switched within 6 months from the date of investment or date of switching of the Fund has been imposed effective 15 July For avoidance of doubt, Investor is required to pay Sales Charge where applicable when switching into a Fund. That investor will be charged the difference between the Sales Charge of these two (2) funds. No Sales Charge will be charge if the Fund to be switched into has a lower Sales Charge. State of Affairs of the Fund There have been neither significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unit holders during the period under review. 8 Customer Service:

11 Annual Report MARKET REVIEW Commencing the period under review, the Jakarta Composite Index (JCI) advanced in June. Inflation moderated for a fifth consecutive month, Bank Indonesia kept the policy rate unchanged at 6.75% for a fourth consecutive month, citing decelerating inflationary pressures. The JCI hit 4,000 points for the first time in history early in 3Q2011. Macroeconomic news was largely positive, and first-half results were mostly in-line or above consensus, lending support to the Indonesian equity market in July. The central bank kept its policy rate unchanged at 6.75% for the quarter, citing easing inflation. Fitch commented that there is more than 50% probability that Indonesia s sovereign rating will be upgraded to investment grade within the next months. The JCI retreated towards the end of the quarter in tandem with global markets. In 4Q12, Bank Indonesia cut its benchmark reference rate twice to 6.00% to spur growth as the global recovery weakens and inflation slows. On corporate earnings, Indonesian banks reported another quarter of solid earnings, largely in tandem with expectations. Bank Indonesia intervened on some occasion to prevent excessive weakening of the Rupiah in November Fitch Ratings move to upgrade the country s sovereign debt to investment grade, citing Indonesia s resilient economy, lifted the stock market. The passage by the country s parliament of the long-awaited land reform bill was welcomed as it helps to accelerate infrastructure projects. For the whole of 2011, Indonesian GDP expanded 6.46%, the highest growth rate since In 1Q2012, Indonesia attained its investment grade rank when Moody s raised its credit rating to Baa3 from Ba1 with a stable outlook, thereby shedding its junk status. Indonesia s monthly inflation continued to slow. Bank Indonesia unexpectedly lowered its reference rate to 5.75% in February from 6%, its first rate cut in 3 months, taking advantage of easing inflation to support growth. The government has indicated that subsidized fuel prices must be raised in tandem with rising global crude prices. President Susilo Bambang Yudhoyono also signed a new mining law requiring foreign investors to gradually trim their stakes in local mining companies gradually. The move was to encourage domestic investment in mining projects. For the period under review, the JCI gained 8.86% in local currency terms. Customer Service:

12 Eastspring Investments Indonesia Equity MY Fund REBATES AND SOFT COMMISSIONS The Manager and its delegates (if any) are not entitled to any rebates or to share in any commission from any broker in consideration for direct dealings in the investments of the Funds. Accordingly, any rebates and shared commissions are directed to the account of the relevant Funds. Notwithstanding the aforesaid, the Manager may receive goods or services by way of soft commissions provided always that the goods or services are of demonstrable benefit to the Funds and that the execution of a transaction is consistent with the best execution standards. During the period under review (27 April March 2012), the Manager and its delegates (if any) did not receive any soft commissions from stockbrokers. 10 Customer Service:

13 Annual Report EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND (formerly known as Prudential Indonesia Equity Fund) FINANCIAL STATEMENTS for the year ended 31 March 2012 Customer Service:

14 Eastspring Investments Indonesia Equity MY Fund TRUSTEE S REPORT TO THE UNITHOLDERS OF EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND (formerly known as Prudential Indonesia Equity Fund) We have acted as Trustee for Eastspring Investments Indonesia Equity MY Fund (Formerly known as Prudential Indonesia Equity Fund) (Fund) for the financial period ended 31 March To the best of our knowledge, for the period under review, Eastspring Investments Berhad (Formerly known as Prudential Fund Management Berhad) (Manager) has operated and managed the Fund in accordance with the following:- (a) (b) (c) limitations imposed on the investment powers of the Manager and Trustee under the Deed, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; the valuation/pricing for the Fund has been carried out in accordance with the deed 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 of the Fund and applicable regulatory requirements. For Deutsche Trustees Malaysia Berhad JACQUELINE WILLIAM Chief Executive Officer KONG SEAH YEN Senior Trust Officer Kuala Lumpur Date: 18 May Customer Service:

15 Annual Report INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND (formerly known as Prudential Indonesia Equity Fund) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Eastspring Investments Indonesia Equity MY Fund (formerly known as Prudential Indonesia Equity Fund), in pages 15 to 54 which comprise the statement of financial position as at 31 March 2012 of the Fund, and the statements of comprehensive income, changes in equity and cash flows of the fund for the financial period then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 13. Manager s Responsibility for the Financial Statements The Manager is responsible for the preparation of financial statements that gives true and fair view in accordance with Financial Reporting Standards in Malaysia, and for such internal control as the Manager determines are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund's preparation of financial statements that give a true and fair view 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 Manager's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. Customer Service:

16 Eastspring Investments Indonesia Equity MY Fund REPORT ON THE FINANCIAL STATEMENTS (CONTINUED) Auditors Responsibility (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Fund as of 31 March 2012 and of its financial performance and cash flows for the financial period then ended. OTHER MATTERS This report is made solely to the unitholders of the Fund and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants Kuala Lumpur Date: 18 May Customer Service:

17 Annual Report STATEMENT OF COMPREHENSIVE INCOME (date of commencement of operations) to 31 March 2012 Note Financial period from (date of commencement of operations) to INVESTMENT INCOME (RM) Interest from deposits with licensed financial institutions 104,256 Net gain on financial assets at fair value through profit or loss 6 1,330,592 1,434,848 EXPENSES Management fee 3 (661,437) Trustee s fee 4 (29,397) Audit fee (5,800) Tax agent's fee (5,500) Other expenses (10,037) (712,171) NET PROFIT BEFORE TAXATION 722,677 TAXATION 5 - NET PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 722,677 Net profit after taxation is made up of the followings: Realised amount (401,535) Unrealised amount 1,124, ,677 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. Customer Service:

18 Eastspring Investments Indonesia Equity MY Fund STATEMENT OF FINANCIAL POSITION as at 31 March 2012 ASSETS Note 2012 (RM) CURRENT ASSETS Financial assets at fair value through profit or loss 6 48,736,061 Deposit with a licensed financial institution 7 1,480,244 Bank balance with a licensed bank 7 13,763 Amount due from Manager 87,664 TOTAL ASSETS 50,317,732 LIABILITIES CURRENT LIABILITIES Amount due to Manager 3,107,381 Accrued Management fee 74,298 Amount due to Trustee 3,302 Other payables and accrued expenses 17,299 TOTAL LIABILITIES 3,202,280 NET ASSETS VALUE OF THE FUND 8 47,115,452 EQUITY Unitholders capital 46,392,775 Retained earnings 722,677 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 8 47,115,452 NUMBER OF UNITS IN CIRCULATION 8 94,818,826 NET ASSET VALUE PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 16 Customer Service:

19 Annual Report STATEMENT OF CHANGES IN EQUITY (date of commencement of operations) to 31 March 2012 Note Unitholders capital Retained earnings Total (RM) (RM) (RM) Balance as at 27 April 2011 (date of commencement of operations) Movement in unitholders contribution: Creation of units arising from application 8 64,933,432-64,933,432 Cancellation of units 8 (18,540,657) - (18,540,657) Total comprehensive income for the financial period - 722, ,677 Balance as at 31 March ,392, ,677 47,115,452 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. Customer Service:

20 Eastspring Investments Indonesia Equity MY Fund STATEMENT OF CASH FLOWS (date of commencement of operations) to 31 March 2012 Financial period from (date of commencement of operations) to Note (RM) CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sale of investments 7,271,929 Purchase of investments (54,677,399) Interest received 104,256 Management fee paid (587,139) Trustee s fee paid (26,095) Payment for other fees and expenses (4,037) Net cash flows used in operating activities (47,918,485) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 64,845,768 Payments for cancellation of units (15,433,276) Net cash flows generated from financing activities 49,412,492 NET INCREASE IN CASH AND CASH EQUIVALENTS 1,494,007 CASH AND CASH EQUIVALENTS AT THE DATE OF COMMENCEMENT OF OPERATIONS - CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 7 1,494,007 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 18 Customer Service:

21 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (date of commencement of operations) to 31 March 2012 The following accounting policies have been used in dealing with items which are considered material in relation to the financial statements. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention in accordance with Financial Reporting Standards ( FRS ) in Malaysia. The preparation of financial statements in conformity with the FRS 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 judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note L. (i) Standards, amendments and interpretations to published standards that are applicable and effective: Amendments to FRS 7 Financial instruments: Disclosures and FRS 1 "First-time adoption of financial reporting standards" (effective 1 January 2011) requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. This amendment does not have any impact on the classification and valuation of the Fund s financial statements. Customer Service:

22 Eastspring Investments Indonesia Equity MY Fund SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (ii) The new standards, amendments and interpretations to published standards which are relevant to the Fund but not yet effective and have not been early adopted are: (a) Financial year beginning on 1 January 2012 In the financial year beginning on 1 January 2012, the Fund will be adopting the new IFRS-compliant framework, Malaysian Financial Reporting Standards ( MFRS ). MFRS 1 First-time adoption of MFRS provides for certain optional exemptions and certain mandatory exceptions for first-time MFRS adopters. There is no significant impact to the Fund s financial statements arising from the transition of existing FRSs to MFRSs. (b) Financial year beginning on 1 January 2013 Amendment to MFRS 7 Financial instruments: Disclosures (effective from 1 January 2013) requires more extensive disclosures focusing on quantitative information about recognised financial instruments that are offset in the statement of financial position and those that are subject to master netting or similar arrangements irrespective of whether they are offset. This amendment does not have any impact on the classification and valuation of the Fund s financial statements. MFRS 13 Fair value measurement (effective from 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across MFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in MFRS 7 Financial instruments: Disclosures, but apply to all assets and liabilities 20 Customer Service:

23 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (ii) The new standards, amendments and interpretations to published standards which are relevant to the Fund but not yet effective and have not been early adopted are: (continued) (b) Financial year beginning on 1 January 2013 (continued) measured at fair value, not just financial ones. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. (c) Financial year beginning on 1 January 2014 Amendment to MFRS 132 Financial instruments: Presentation (effective from 1 January 2014) does not change the current offsetting model in MFRS 132. It clarifies the meaning of currently has a legally enforceable right of set-off that the right of set-off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business. It clarifies that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the MFRS 132 offsetting criteria. This amendment does not have any impact on the classification and valuation of the Fund s financial statements. (d) Financial year beginning on 1 January 2015 MFRS 9 Financial instruments - classification and measurement of financial assets and financial liabilities (effective from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Customer Service:

24 Eastspring Investments Indonesia Equity MY Fund SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (ii) The new standards, amendments and interpretations to published standards which are relevant to the Fund but not yet effective and have not been early adopted are: (continued) (d) Financial year beginning on 1 January 2015 (continued) The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss( FVTPL ). Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in the liability s credit risk directly in other comprehensive income (OCI). There is no subsequent recycling of the amounts in OCI to profit or loss, but accumulated gains or losses may be transferred within equity. The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply. MFRS 7 requires disclosures on transition from MFRS 139 to MFRS 9. 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 INCOME RECOGNITION Interest income from short-term deposits is recognised on an accrual basis using the effective interest method. Realised gain or loss on sale of investments is accounted for as the difference between the net disposal proceeds and the carrying amount of investments, determined on a weighted average cost basis. Dividend income from the underlying fund is recognised on the ex-dividend date. 22 Customer Service:

25 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C TAXATION Current tax expense is determined according to the Malaysian tax laws in which the Fund is invested in and includes all taxes based upon taxable profits. Tax on dividend income from foreign collective investment scheme is based on the tax regime of the respective country that the Fund invests in. D PRESENTATION AND FUNCTIONAL CURRENCY Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia, which is the Fund s presentation and functional currency. E FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investment in collective investment scheme as financial assets at fair value through profit or loss at inception. Financial assets are designated as 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 Manager which are all due within 12 months. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Customer Service:

26 Eastspring Investments Indonesia Equity MY Fund SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES E FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (i) Classification (continued) The Fund s financial liabilities which include amount due to Manager, accrued management fee, amount due to Trustee and other payables and accrued expenses are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognised on the tradedate-the date on which the Fund commits to purchase or sell the asset. Investments are initially recognised at fair value. Transaction costs are expensed in the statement of comprehensive income. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. 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, within the scope of FRS 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 liabilities are derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised, and through the amortisation process. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of comprehensive income within net gain/(loss) on financial assets at fair value through profit and loss in the period in which they arise. 24 Customer Service:

27 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES E FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) 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 scheme are valued based on the last published net asset value per unit or share of such collective investment schemes or, if unavailable, on the average of the last published buying price and the last published selling price of such unit or share (excluding any sales charge included in selling in such selling price). Unrealised gains or losses on change in fair value of financial assets at fair value through profit or loss are accounted for in the statement of comprehensive income, any unrealised gains however are not distributable. Foreign exchange gains and losses on the derivative financial instrument are recognised in statement of comprehensive income when settled or at date of the Statement of financial position at which time they are included in the measurement of the derivative financial instrument. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Customer Service:

28 Eastspring Investments Indonesia Equity MY Fund SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES E FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement (continued) 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 of the asset is reduced and the amount of the loss is recognised in statement of comprehensive income. If loans and receivables or a held-to-maturity investment 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 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. 26 Customer Service:

29 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F FOREIGN CURRENCY TRANSLATION Foreign currency transactions in the Fund are accounted for at exchange rates prevailing at the transaction dates. Foreign currency monetary assets and liabilities are translated at exchange rates prevailing as at the date of the statement of financial position. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in the statement of comprehensive income. Translation differences on non monetary financial assets such as foreign collective investment schemes classified as financial assets at fair value through profit and loss are included in the statement of comprehensive income as part of the fair value gain or loss. The principal closing rate used in the translation of foreign currency is as follows: Foreign currency 2012 (RM) 1 US Dollar G CASH AND CASH EQUIVALENTS For the purpose of the statement of cash flows, cash and cash equivalents comprise bank balance and deposits with licensed financial institutions that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Customer Service:

30 Eastspring Investments Indonesia Equity MY Fund SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unit holder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value ( NAV ). The outstanding units is carried at the redemption amount that is payable at the net asset value if the holder exercises the right to put the unit back to the Fund. Units are created and cancelled at the holder s option at prices based on the Fund s net asset value per unit at the time of creation or cancellation. The Fund s net asset value per unit is calculated by dividing the net assets attributable to unitholder with the total number of outstanding units. I PROCEEDS AND PAYMENTS ON CREATION AND CANCELLATION OF UNITS The net asset value per unit is computed for each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as equity in the statement of financial position and are stated at fair value representing the price at which unit holders can redeem the units from the Fund. J SEGMENTAL INFORMATION A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments. Operating segments are reported in a manner consistent with the internal reporting used by chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Investment Committee of the Fund s manager that undertakes strategic decisions for the Fund. 28 Customer Service:

31 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES K FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments comprise financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm s length transaction. The information presented herein represents the estimates of fair values as at the date of the statement of financial position. Note Loans and receivables Financial assets at fair value through profit or loss Total (RM) (RM) (RM) 31 March 2012 Financial assets at fair value through profit or loss 6-48,736,061 48,736,061 Deposit with a licensed financial institution 7 1,480,244-1,480,244 Bank balance with a Licensed bank 7 13,763-13,763 Amount due from Manager 87,664-87,664 1,581,671 48,736,061 50,317,732 All current liabilities are financial liabilities which are carried at amortised cost. Customer Service:

32 Eastspring Investments Indonesia Equity MY Fund SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES L CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENT IN APPLYING ACCOUNTING POLICIES The preparation of financial statements in conformity with the Financial Reporting Standards on Unit Trust Funds requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the financial period. Although these estimates are based on the Manager s best knowledge of current events and actions, actual results could differ from those estimates. Estimates and judgments are continually evaluated by the Manager and the Trustee and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 30 Customer Service:

33 Annual Report NOTES TO THE FINANCIAL STATEMENTS (date of commencement of operations) to 31 March INFORMATION ON THE FUND Eastspring Investments Indonesia Equity MY Fund (Formerly known as Prudential Indonesia Equity Fund) ( the Fund ) was constituted pursuant to the execution of a deed dated 9 March 2011 between Deutsche Trustees Malaysia Berhad (the Trustee ) and Eastspring Investments Berhad (Formerly known as Prudential Fund Management Berhad) ( the Manager ). The Manager had changed its name from Prudential Fund Management Berhad to Eastspring Investments Berhad on 16 January A Fourth Supplemental Master Deed was entered into between the Manager and the Trustee on 20 January 2012 to effect the change of name of the Fund from Prudential Indonesia Equity Fund to Eastspring Investments Indonesia Equity MY Fund. The Fund was launched on 27 April 2011 and will continue its operations until terminated by the Trustee or the Manager as provided under Part 12 of the Deed. The Fund invests in the Eastspring Investments-Indonesia Equity Fund (Formerly known as International Opportunities Funds-Indonesia Equity) ( Target Fund ) which is a collective investment scheme registered in Luxembourg. All investments will be subject to the Securities Commisions ( SC ) Guidelines on Unit Trust Funds, the Deed and the objective of the Fund. The main objective of the Fund is to seek to maximise long-term total return via Eastspring Investments-Indonesia Equity Fund (Formerly known as International Opportunities Funds-Indonesia Equity) (Target Fund) that invests primarily in equity and equity-related securities of companies, which are incorporated, listed in or have their area primary activity in Indonesia. The Manager is a company incorporated in Malaysia and is related to Prudential Plc., a public listed company in the United Kingdom. The principal activity of the Manager is the establishment and management of unit trust funds and fund management services. Customer Service:

34 Eastspring Investments Indonesia Equity MY Fund NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks which include market risk inclusive of price risk, currency risk and interest rate risk, liquidity risk, single security risk, fund management risk, credit risk, non-compliance risk and capital risk management. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated in the SC Guidelines on Unit Trust Funds. Market risk (a) Price risk This risk refers to changes and developments in regulations, politics and the economy of the country. The very nature of a unit trust fund, however, helps mitigate this risk. The Underlying Fund that is the Eastspring Investments- Indonesia Equity Fund (Formerly known as International Opportunities Funds- Indonesia Equity) would generally hold a well-diversified portfolio of securities from different market sectors that the collapse of any one security or any one market sector would not impact too greatly on the value of the Eastspring Investments-Indonesia Equity Fund (formerly known as International Opportunities Funds-Indonesia Equity). The Fund s overall exposure to price risk was at follows: 2012 (RM) Collective investment scheme designated at fair value through profit or loss 48,736, Customer Service:

35 Annual Report NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (a) Price risk (continued) The table below summarises the sensitivity of the Fund s net asset value to movements in prices of collective investment scheme at the end of the reporting period. The analysis is based on the assumption that the price of the collective investment scheme increased and decreased by 5% with all other variables held constant. This represents management s best estimate of a reasonable possible shift in the collective investment scheme, having regard to the historical volatility of the prices. % Change in price of collective investment scheme Market value (RM) Increase/ (decrease) in profit before tax and net asset value (RM) +5% 51,172,864 2,436,803-5% 46,299,258 (2,436,803) Customer Service:

36 Eastspring Investments Indonesia Equity MY Fund NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (b) Currency Risk While the Underlying fund, Eastspring Investments-Indonesia Equity Fund (formerly known as International Opportunities Funds-Indonesia Equity) is denominated in United States Dollar ( USD ), it may be invested in whole or in part in securities quoted in other currencies. The performance of the underlying fund will therefore be affected by movements in the exchange rate between the currencies in which its assets are held and its base currency (if foreign currency positions have not been hedged). In addition, as the Fund is denominated in Ringgit Malaysia, whereas the underlying fund is denominated in USD, the performance the Fund will be affected by movements in the exchange rate between Ringgit Malaysia and USD. Changes in the exchange rate between currencies may cause the value of the Fund s investment in the underlying fund to decrease or increase which in turn will affect the value of the unitholders investments. The following table sets out the foreign currency risk concentrations and counterparties of the Fund. As at 31 March 2012 Financial assets at fair value through profit or loss (RM) US Dollar 48,736,061 48,736, Customer Service:

37 Annual Report NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (b) Currency Risk (continued) The table below summarises the sensitivity of the Fund s investments fair value to changes in foreign exchange movements as at 31 March The analysis is based on the assumption that the foreign exchange rate changes by 5%, with all other variables remaining constant. This represents management s best estimate of a reasonable possible shift in the foreign exchange rate, having regard to historical volatility of this rate. Any increase/decrease in foreign exchange rate will result in a corresponding decrease/increase in the net assets attributable to unit holders by approximately 5%. Disclosures below are shown in absolute terms, changes and impact could be positive or negative. Change in foreign exchange rate Impact on income before tax Impact on net asset value 2012 (%) (RM) (RM) US Dollar 5 2,436,803 2,436,803 (c) Interest rate risk The Fund is exposed to interest rate risk. To the extent the Fund invests in the Underlying Fund, it is exposed to the risk of interest rate changes. If the markets interest change, the price of these securities may be deeply affected and this applies to a greater degree if the Underlying Fund holds securities with high correlation to the interest rates. Changes in interest rates will affect the value of the investments and its returns. To manage the risk, investments will be concentrated in investment grade issues by financial institutions and companies determined by the Manager. Customer Service:

38 Eastspring Investments Indonesia Equity MY Fund NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (c) Interest rate risk (continued) Interest rate risk is a general economic indicator that will have an impact on the management of the fund. The reason for this is because a high level of interest rates will inevitably affect corporate profits and this will have an impact on the value of investments. The Fund s investments in deposits with licensed financial institutions are short term in nature. Therefore, exposure to interest rate fluctuations is minimal. Liquidity risk The Fund maintains sufficient level of liquid assets, after consultation with the Trustee, to meet anticipated payments and cancellations of units by unitholders. Liquid assets comprise cash, deposits with licensed financial institutions and other instruments which are capable of being converted into cash within 7 days. The table below summarises the Fund s financial liabilities into relevant maturity groupings based on the remaining period as at the statement of financial position date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. At 31 March 2012 Less than 1 month Between 1 month to 1 year Total (RM) (RM) (RM) Amount due to Manager: - cancellation of units 3,107,381-3,107,381 - management fee 74,298-74,298 Amount due to Trustee 3,302-3,302 Other payables and accrued expenses - 17,299 17,299 Contractual cash out flows 3,184,981 17,299 3,202, Customer Service:

39 Annual Report NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Single security risk The Fund essentially invests in a single security, which is the Eastspring Investments- Indonesia Equity Fund (Formerly known as International Opportunities Funds- Indonesia Equity). The feeder fund mitigates single security risk by investing in a diversified portfolio of equities. Fund management risk There is the risk that the management company may not adhere to the investment mandate of the respective fund. With close monitoring by the investment committee, back office system being incorporated with limits and controls, and regular reporting to the senior management team, the management company is able to manage such risk. The Trustee have an oversight function over management of the Fund by the management company to safeguard the interests of unitholder. Credit risk Credit risk refers to the ability of an issuer or a counter party to make timely payments of interest, principals and proceeds from realisation of investments. The credit risk arising from placements of deposits in licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. For amount due from stockbrokers, the settlement terms are governed by the relevant rules and regulations as prescribed by Bursa Securities. The settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the Securities Commission s Guidelines on Unit Trust Funds. Customer Service:

40 Eastspring Investments Indonesia Equity MY Fund NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) The credit risk is minimal as all transactions in collective investment scheme are settled/paid upon delivery using approved brokers. The following table sets out the credit risk concentrations and counterparties of the Fund: Cash and cash equivalents Amount due from manager Total (RM) (RM) (RM) As at 31 March 2012 Finance 1,494,007-1,494,007 Others - 87,664 87,664 1,494,007 87,664 1,581,671 None of these assets are past due or impaired. Non-compliance risk Non-adherence with laws, rules, regulations, prescribed practices, internal policies and procedures may result in tarnished reputation, limited business opportunities and reduced expansion potential for the management company. Unitholders investment goals may also be affected should the fund manager not adhere to the investment mandate. Such risk is mitigated by the compliance unit of the management company which oversees the entire compliance matters of the management company. 38 Customer Service:

41 Annual Report NOTES TO THE FINANCIAL STATEMENTS 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Capital risk management The capital of the Fund is represented by equity consisting of unitholders capital and retained earnings. The amount of equity can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of shareholders. 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 for shareholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. Fair value estimation The fair value of financial assets and liabilities traded in active market (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the year end date. The quoted market price used for financial assets by the Fund is the current bid price; the appropriate quoted market price for financial liabilities is the current asking price. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The fair value of financial assets and liabilities that are not traded in an active market is determined by using valuation techniques. The Fund uses a variety of methods and makes assumptions that are based on market conditions existing at each period end date. Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives, include the use of comparable recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs. Customer Service: