CIMB-PRINCIPAL MONEY MARKET INCOME FUND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

Transcription

1 FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

2 CONTENTS PAGE(S) INVESTORS LETTER 1 MANAGER S REPORT 2-8 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 9 TRUSTEE S REPORT 10 INDEPENDENT AUDITORS REPORT STATEMENT OF COMPREHENSIVE INCOME 15 STATEMENT OF FINANCIAL POSITION 16 STATEMENT OF CHANGES IN EQUITY 17 STATEMENT OF CASH FLOWS 18 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 41 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 42-46

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 2 nd Half of 2017 with 51 billion in Asset under Management ( AUM ). CIMB-Principal s Group AUM increased by 11% to 68 billion, for 1-year period ending 31 December Our AUM for Private Retirement Scheme ( PRS ) business increased by 51% yearon-year ( y-o-y ) to 517 million as at 31 December We continue to achieve prestigious recognitions from The Edge Thomson Reuters Lipper Fund Awards: The Edge Thomson Reuters Lipper Malaysia Fund Awards 2017 Best Equity Global, 3 years & 5 years : CIMB-Principal Global Titans Fund Best Equity Asia Pacific Ex-Japan, 5 years : CIMB-Principal Asian Equity Fund Best Equity Asia Pacific Ex-Japan - Malaysia Islamic, 5 years : CIMB Islamic Asia Pacific Equity Fund Thomson Reuters Lipper Fund Award Global Islamic 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. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer 1

4 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to provide a low risk investment option that normally earns higher interest than traditional bank accounts. 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 may place at least 90% of its Net Asset Value ( NAV ) in Deposits as well as invest in money market instruments and short-term debentures with a minimum credit rating of "BBB3" or "P2" by RAM Ratings ( RAM ) or equivalent rating by Malaysian Rating Corporation Berhad ( MARC ) or by local rating agency(ies) of the country of issuance or BBB- by Standard & Poor s ( S&P ) or equivalent rating by Moody's or Fitch, all of which have a remaining maturity period of less than 365 days. Up to 10% of the Fund s NAV may be invested in short term debentures which have a remaining maturity period of more than 365 days but less than 732 days. The Fund will be actively managed. The investment policy and strategy is to invest in liquid and low risk short-term investments for capital preservation*. Note: * The Fund is neither a capital guaranteed fund nor a capital protected fund. Fund category/type Money Market/Income How long should you invest for? Recommended up to one (1) year or more Indication of short-term risk (low, moderate, high) Low When was the Fund launched? 18 February 2004 What was the size of the Fund as at 31 December 2017? million (74.09 million units) What is the Fund s benchmark? CIMB Bank Overnight Rate Note: Given that the Fund is an income fund, the Fund shall benchmark itself against the overnight rate for performance comparison purpose only. Therefore, investors are cautioned that the risk profile of the Fund is higher than the benchmark. What is the Fund distribution policy? Quarterly, if any, within 14 days after the last day of each quarter. What was the net income distribution for the financial year ended 31 December 2017? The Fund distributed a total net income of 3.32 million to unit holders for the financial year ended 31 December

5 FUND OBJECTIVE AND POLICY (CONTINUED) The Fund s NAV per unit are as follows: PERFOANCE DATA CIMB-PRINCIPAL MONEY MARKET INCOME FUND Income Distribution Date NAV per unit (before distribution) NAV per unit (after distribution) Details of portfolio composition of the Fund for the last three financial years are as follows: % % % Unquoted fixed income securities Cash and other net asset Performance details of the Fund for the last three financial years are as follows: NAV ( Million) * Units in circulation (Million) NAV per unit () * *Ex-distribution Highest NAV per unit () Lowest NAV per unit () Total return (%) Capital growth (%) (1.44) (0.98) (0.95) - Income distribution (%) Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ("PTR") (times) # ^ The Fund s MER increased slightly from 0.80% to 0.81% due to lower average NAV during the financial year under review. # The Fund s PTR increased from 0.67 times to 0.77 times due to a higher number of transactions during the financial year under review. 3

6 PERFOANCE DATA (CONTINUED) Date of distribution Distribution on 31 March 2017 Gross/Net distribution per unit (sen) Distribution on 30 June 2017 Gross/Net distribution per unit (sen) Distribution on 29 September 2017 Gross/Net distribution per unit (sen) Distribution on 29 December 2017 Gross/Net distribution per unit (sen) Distribution on 31 March 2016 Gross/Net distribution per unit (sen) Distribution on 30 June 2016 Gross/Net distribution per unit (sen) Distribution on 30 September 2016 Gross/Net distribution per unit (sen) Distribution on 31 December 2016 Gross/Net distribution per unit (sen) Distribution on 31 March 2015 Gross/Net distribution per unit (sen) Distribution on 30 June 2015 Gross/Net distribution per unit (sen) Distribution on 30 September 2015 Gross/Net distribution per unit (sen) Distribution on 31 December 2015 Gross/Net distribution per unit (sen) % % % % % Annual total return (Launch date: 18 February 2004) Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures for the financial year have been extracted from Lipper. MARKET REVIEW (1 JANUARY 2017 TO 31 DECEMBER 2017) During the financial year under review, Bank Negara Malaysia s ( BNM ) Monetary Policy Committee ( MPC ) met six times from the month of January 2017 to November The MPC decided to maintain the Overnight Policy Rate ( OPR ) at 3.00% throughout the year. At the last MPC meeting held on 9 November 2017, the MPC commented that the stance of monetary policy remains accommodative, but added that given the strength of the global and domestic macroeconomic conditions, the MPC may consider reviewing the current degree of monetary accommodation. This is to ensure the sustainability of the growth prospects of the Malaysian economy. This statement signaled BNM s readiness to review the OPR and follows their bullish assessment that growth prospects are expected to remain strong in On the Malaysian economy, BNM highlighted that growth has become more entrenched with continued strong performance from the domestic and external sectors. As for global growth, BNM maintained that the global economy continues to strengthen, with growth becoming more entrenched and synchronised across countries. 4

7 MARKET REVIEW (1 JANUARY 2017 TO 31 DECEMBER 2017) (CONTINUED) The hawkish shift in the MPC Statement provided a much needed boost for the Malaysian Ringgit ( MYR ) which has been lacklustre despite the sound fundamentals of the currency. We note that US Dollar ( USD ) was at 4.47 per USD at the beginning of 2017 and ended at 4.05 per USD as of 29 December According to BNM s Financial Markets Committee ( FMC ), the MYR strengthened by 10.1% in 2017 with the exchange rate remaining stable with USD/MYR 1-month implied volatility at an average of 4.5% this year. The tone MPC Statement in November 2017 boosted the MYR with renewed portfolio fund flows to local bonds. Additionally, there were trade flows from the mandatory conversion of export proceeds which helped the currency. Following the meeting in November 2017, the Malaysian Government Securities ( MGS ) yield curve moved marginally lower in December 2017 as the market responded to the strong MYR movement. This was a change from the beginning of the year where Malaysian sovereign bonds were dealt with caution ahead of Trump s inauguration on 20 January Foreign buyers first became net buyers of the MGS in April 2017 following five months of net selling since November 2016 following the US Presidential election. The international reserves of BNM amounted to USD102.2 billion (equivalent to billion) as at 15 December 2017 which was an improvement from the USD94.6 billion (equivalent to billion) as of end December We highlight that BNM s FMC also stated in December 2017 that the Malaysian bond market continues to attract investors with the last three primary auctions attracting a diverse range of investors. Real Gross Domestic Product ( GDP ) growth for the first 3 quarters of 2017 exceeded market expectations and the market is expecting it to stay above 5% in GDP growth for the third quarter of 2017 was 6.2% y-o-y (second quarter of 2017: 5.8%; first quarter of 2017: 5.6%) with the economy continuing to surprise us on the private consumption front. The World Bank expects Malaysia s GDP growth to moderate to 5.2% in 2018 from an estimated 5.8% in 2017 on the back of a gradual slowdown in China which offsets a pickup of activity in the entire region. The Malaysian Consumer Price Index ( CPI ) y-o-y was at 1.8% in January 2017 and rose sharply to 4.1% in March It continued rising further to 5.1% in April 2017 due to rising transport and food costs in the country. Following this spike, it started to decline from May 2017 and dropped to a low of 3.2% in July The Index rose again in the month of September 2017 to 4.3% but ended at 3.4% in December. In continuation of the BNM s effort to deepen onshore financial market, Governor Muhammad Ibrahim announced new measures in November 2017 that included the introduction of Bank Negara Interbank Bill ( BNIB ). Other measures which were mentioned included the extension of regulated short-selling to Government Investment Issues ( GII ) by both conventional and Islamic banks and to expand the eligible collateral for liquidity operations with BNM to include Bankers Acceptance ( BA ) and Negotiable Instruments of Deposits ( NID ). The BNIB is a new instrument intended for liquidity management and is expected to better reflect onshore liquidity curves and condition as opposed to BNM Notes which was heavily affected by significantly offshore participation. There were 32 government auctions in 2017 which comprised of 16 MGS and 16 GII issuances respectively. The total gross MGS/GII supply in 2017 was billion. The private debt issuance was billion up to November 2017 and is the largest over the last 5 years. Net issuances were at a record billion as of November In the US market, the US Federal Reserve (the Fed ) first hiked interest rates by 25 basis points ( bps ) in March 2017 to signal their view that the economy is doing well. They raised the interest rates again in June 2017 by 25 bps in a widely expected move to reflect the Central Bank s confidence in their economy. The market saw another rate hike of 25 bps in December 2017 bringing in the target range between 1.25% and 1.5%. At the last Federal Open Market Committee ( FOMC ) meeting in December 2017, the committee collectively raised their GDP estimate from 2.1% in September 2017 to 2.5%. The inflation forecast for 2018 also got a modest boost from 1.6% to 1.7%. 5

8 FUND PERFOANCE 1 year to years to years to Since inception to % % % % Income Capital (1.44) (3.34) (3.15) (1.62) Total Return Benchmark Average Total Return For the 1-year period leading up to 31 December 2017, the Fund registered 3.59% total return outperforming its benchmark by 1.98%. The Fund has delivered 50.50% total return since inception, which outperformed the benchmark by 23.11%. Changes in NAV Changes % NAV ( Million) * NAV/Unit () * (1.45) * Ex-distribution The Fund s NAV grew by 7.75% for the financial year ended 31 December 2017 from million to million. During the same financial year, the Fund s NAV per unit decreased by 1.45% from per unit to 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. 6

9 PORTFOLIO STRUCTURE Asset allocation (% of NAV) Unquoted fixed income securities Cash and other net assets TOTAL As at 31 December 2017, about 82.61% of the Fund s assets were in high quality debt papers with the remaining 17.39% in cash and other net assets. MARKET OUTLOOK* At the last MPC meeting held on 9 November 2017, the statement released by BNM signaled a slightly hawkish tone which potentially revealed their readiness to hike the OPR. According to the schedule released during the same meeting, the first upcoming MPC meeting is scheduled to be held on 24 and 25 January 2018 of which the market will be closely watching. We foresee one rate hike in 2018 but believe the timing of the upcoming General Elections will likely affect the timing of the rate hike. Investors will also be closely monitoring the impending General Elections which could provide the MYR with headwinds in the first half of the year, but good economic and financial fundamentals are expected to be supportive of the MYR. For 2018, there will be a total of 33 auctions comprising of 15 MGS and 18 GII issuances compared to 32 auctions seen in The gross issuances for 2018 is expected to be around 103 billion with sizeable maturities of about 62.8 billion after BNM conducted a bond switching exercise reducing the 2018 MGS/GII maturity amount. We expect BNM to target more issuances with longer durations to manage the maturities which are now mostly concentrated in the short end. The targeted amounts of private placements are smaller in 2018 versus 2017 with the bulk of it being in the first quarter of We expect similar primary issuances for government guaranteed debt but anticipate lower issuances on the lower rated corporate debt. *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 The Fund aims to fully invest its cash in high grade commercial papers and short dated bonds as well as investing maximum 10% of the Fund s NAV in papers with maturity of up to 2 years. UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 31 December 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 ,001-10, ,001-50, , , ,001 and above Total

10 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 the Trustee did not receive any rebates from the brokers or dealers but have retained soft commissions in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 8

11 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB-PRINCIPAL MONEY MARKET INCOME FUND CIMB-PRINCIPAL MONEY MARKET INCOME 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 15 to 40 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 December 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 28 February

12 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL MONEY MARKET INCOME FUND FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL MONEY MARKET INCOME FUND We have acted as Trustee for CIMB-Principal Money Market Income Fund ( the Fund ) for the financial year ended 31 December To the best of our knowledge, CIMB-Principal Asset Management Berhad ( the Manager ) has managed the Fund in the financial year under review in accordance with the following: 1. Limitations imposed on the investment powers of the Manager under the deeds, securities laws and the Securities Commission Malaysia s Guidelines on Unit Trust Funds; 2. Valuation and pricing of the Fund are carried out in accordance with the deeds and any regulatory requirement; and 3. Creation and cancellation of units are carried out in accordance with the deeds and any regulatory requirement. A total income distribution of sen per unit was declared to the unitholders of the Fund for the financial year under review. We are of the view that the distribution is consistent with objective and distribution policy of the Fund. For Maybank Trustees Berhad (Company No.: 5004-P) BERNICE K M LAU Head, Operations Kuala Lumpur, Malaysia 28 February

13 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL MONEY MARKET INCOME FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion CIMB-PRINCIPAL MONEY MARKET INCOME FUND In our opinion, the financial statements of CIMB-Principal Money Market Income Fund (the Fund ) give a true and fair view of the financial position of the Fund as at 31 December 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 31 December 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 15 to 40. 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. 11

14 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL MONEY MARKET INCOME FUND (CONTINUED) CIMB-PRINCIPAL MONEY MARKET INCOME FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Information other than the financial statements and auditors report thereon 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. 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. 12

15 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL MONEY MARKET INCOME FUND (CONTINUED) CIMB-PRINCIPAL MONEY MARKET INCOME FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Auditors responsibilities for the audit of the financial statements 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. 13

16 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL MONEY MARKET INCOME FUND (CONTINUED) CIMB-PRINCIPAL MONEY MARKET INCOME FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Auditors responsibilities for the audit of the financial statements (continued) 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 unitholder 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 28 February

17 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL MONEY MARKET INCOME FUND Note INVESTMENT INCOME Interest income 4 2,878,725 3,007,984 Net loss on financial assets at fair value through profit or loss 9 (15,191) (2,991) 2,863,534 3,004,993 EXPENSES Management fee 5 462, ,622 Trustee s fee 6 19,827 21,840 Audit fee 8,490 7,990 Tax agent s fee 5,600 5,100 Other expenses 38,445 39, , ,130 PROFIT BEFORE TAXATION 2,328,550 2,420,863 Taxation PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 2,328,550 2,420,863 Profit after taxation is made up as follows: Realised amount 2,451,741 2,368,399 Unrealised amount (123,191) 52,464 2,328,550 2,420,863 The accompanying notes to the financial statements form an integral part of the audited financial statements. 15

18 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 Note ASSETS Cash and cash equivalents 10 12,751,231 20,635,229 Financial assets at fair value through profit or loss 9 60,196,582 47,051,846 Amount due from Manager 1, TOTAL ASSETS 72,949,413 67,687,975 LIABILITIES Amount due to Manager 20,995 - Accrued management fee 41,640 40,130 Amount due to Trustee 1,785 1,720 Distribution payable Other payables and accruals 16,445 16,444 TOTAL LIABILITIES 80,932 58,363 NET ASSET VALUE OF THE FUND 72,868,481 67,629,612 EQUITY Unit holders capital 68,294,530 62,063,296 Retained earnings 4,573,951 5,566,316 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 72,868,481 67,629,612 NUMBER OF UNITS IN CIRCULATION (UNITS) 11 74,087,895 67,762,709 NET ASSET VALUE PER UNIT () (EX-DISTRIBUTION) The accompanying notes to the financial statements form an integral part of the audited financial statements. 16

19 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL MONEY MARKET INCOME FUND Note Unit holders' Retained capital earnings Total Balance as at 1 January ,063,296 5,566,316 67,629,612 Movement in unit holders' contributions: - Creation of units from applications 22,940,738-22,940,738 - Creation of units from distribution 3,320,614-3,320,614 - Cancellation of units (20,030,118) - (20,030,118) Total comprehensive income for the financial year - 2,328,550 2,328,550 Distribution 7 - (3,320,915) (3,320,915) Balance as at 31 December ,294,530 4,573,951 72,868,481 Balance as at 1 January ,524,596 6,102,606 84,627,202 Movement in unit holders' contributions: - Creation of units from applications 41,082,675-41,082,675 - Creation of units from distribution 2,956,890-2,956,890 - Cancellation of units (60,500,865) - (60,500,865) Total comprehensive income for the financial year - 2,420,863 2,420,863 Distribution 7 - (2,957,153) (2,957,153) Balance as at 31 December ,063,296 5,566,316 67,629,612 The accompanying notes to the financial statements form an integral part of the audited financial statements. 17

20 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL MONEY MARKET INCOME FUND Note CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of unquoted fixed income securities 3,046,963 15,590,095 Proceeds from redemption of unquoted fixed income securities 82,250,000 84,579,725 Purchase of unquoted fixed income securities (99,411,020) (81,681,325) Interest income received from deposits with licensed financial institutions 244, ,861 Interest income received from unquoted fixed income securities 3,588,221 2,362,730 Management fee paid (461,112) (521,140) Trustee s fee paid (19,762) (22,333) Payments for other fees and expenses (52,534) (53,128) Net cash (used in)/generated from operating activities (10,814,612) 20,760,485 CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 22,940,038 41,082,425 Payments for cancellation of units (20,009,123) (60,500,865) Distribution paid (301) (257) Net cash generated from/(used in) financing activities 2,930,614 (19,418,697) Net (decrease)/increase in cash and cash equivalents (7,883,998) 1,341,788 Cash and cash equivalents at the beginning of the financial year 20,635,229 19,293,441 Cash and cash equivalents at the end of the financial year 10 12,751,230 20,635,229 Cash and cash equivalents comprised of: Bank balances 82,846 20,480,700 Deposits in licensed financial institutions 12,668, ,529 Cash and cash equivalents at the end of financial year 10 12,751,230 20,635,229 The accompanying notes to the financial statements form an integral part of the audited financial statements. 18

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB-PRINCIPAL MONEY MARKET INCOME FUND CIMB-Principal Money Market Income Fund (the Fund ) is governed by a Principal Master Deed dated 15 May 2008, a Fifth Supplemental Master Deed dated 16 July 2009, a Thirteenth Supplemental Master Prospectus dated 26 June 2012 and an Eighteenth Supplemental Master Deed dated 25 March 2015 (collectively referred to as the Deeds ) made between CIMB- Principal Asset Management Berhad (the Manager ), and Maybank Trustees Berhad (the Trustee ). The Fund may place at least 90% of its NAV in Deposits as well as invest in money market instruments and short-term debentures with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or by local rating agency(ies) of the country of issuance or BBB- by S&P or equivalent rating by Moody's or Fitch, all of which have a remaining maturity period of less than 365 days. Up to 10% of the Fund s NAV may be invested in short-term debentures which have a remaining maturity period of more than 365 days but less than 732 days. The Fund will be actively managed. The investment policy and strategy is to invest in liquid and low risk short-term investments for capital preservation. 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 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 assumptions are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(j). 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) 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 January 2017: Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative introduce an additional disclosure on changes in liabilities arising from financing activities. The adoption of these amendments did not have any impact on the current financial year or any prior year and is not likely to affect future years. 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 January 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 other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. 20

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities Classification The Fund designates its investments in unquoted fixed income securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. 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. 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. Investments are initially recognised at fair value. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in 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 fixed income securities denominated in Ringgit Malaysia ( ) 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. Deposits with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the period from the date of placement to the date of maturity of the respective deposits. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Impairment for 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 interest rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent financial 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 Interest income from deposits with licensed financial institutions and unquoted fixed income securities are recognised on a time proportionate basis using the effective interest rate method on an accrual basis. Realised gain or loss on disposal of unquoted fixed income securities is accounted for as the difference between the net disposal proceeds and the carrying amount of investments, 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, which is the Fund s functional and presentation currency. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise bank balances and 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. (j) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund's results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgments are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) Critical accounting estimates and judgments in applying accounting policies (continued) Estimate of fair value of unquoted fixed income securities In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unit Trust Funds. Ringgit-denominated unquoted fixed income securities are valued using fair value prices quoted by a BPA. Where the Manager is of the view that the price quoted by BPA for a specific unquoted fixed income securities differs from the market price by more than 20 bps, the Manager may use market price, provided that the Manager records its basis for using a non-bpa price, obtains necessary internal approvals to use the non-bpa price, and keeps an audit trail of all decisions and basis for adopting the use of non-bpa price. 3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT OBJECTIVES AND POLICIES Financial instruments of the Fund are as follows: Financial assets at fair value through profit or loss Loans and receivables Total 2017 Cash and cash equivalents (Note 10) - 12,751,231 12,751,231 Unquoted fixed income securities (Note 9) 60,196,582-60,196,582 Amount due from Manager - 1,600 1,600 60,196,582 12,752,831 72,949, Cash and cash equivalents (Note 10) - 20,635,229 20,635,229 Unquoted fixed income securities (Note 9) 47,051,846-47,051,846 Amount due from Manager ,051,846 20,636,129 67,687,975 All current liabilities are financial liabilities which are carried at amortised cost. The Fund aims to provide a low risk investment option that normally earns higher interest than traditional bank accounts. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk and interest rate risk), credit risk and liquidity risk. Financial risk management is carried out through internal control process adopted by the Manager and adherence to the investment restrictions as stipulated in the Deeds and SC Guidelines on Unit Trust Funds. 24

27 3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (a) Market risk (i) Price risk This is the risk that the fair value of an investment in unquoted fixed income securities will fluctuate because of changes in market prices (other than those arising from interest rate risk). The value of investments in unquoted fixed income securities may fluctuate according to the activities of individual companies, sector and overall political and economic conditions. Such fluctuation may cause the Fund's NAV and prices of units to fall as well as rise, and income produced by the Fund may also fluctuate. The price risk is managed through diversification and selection of unquoted fixed income securities and other financial instruments within specified limits according to the Deeds. The Fund s overall exposure to price risk was as follows: Financial assets at fair value through profit or loss: - Unquoted fixed income securities* 60,196,582 47,051,846 * Includes interest receivables of 539,977 (2016: 499,665). The table below summarises the sensitivity of the Fund s profit or loss and NAV to movements in prices of unquoted fixed income securities excluding interest receivables at the end of each financial year. The analysis is based on the assumptions that the price of the unquoted fixed income securities excluding interest receivables fluctuates by 5% with all other variables held constant. This represents management s best estimate of a reasonable possible shift in the unquoted fixed income securities, having regard to the historical volatility of the prices. % Change in price of unquoted fixed income securities Market value Impact on profit or loss/nav % 56,673,775 (2,982,830) 0% 59,656,605-5% 62,639,435 2,982, % 44,224,572 (2,327,609) 0% 46,552,181-5% 48,879,790 2,327,609 25