ANNUAL REPORT EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND

Transcription

1 ANNUAL REPORT EASTSPRING INVESTMENTS INDONESIA EQUITY MY FUND FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013

2 Annual Report TABLE OF CONTENTS Fund Information 2 Key Performance Data 4 Manager s Report 6 Market Review 9 Rebates and Soft Commissions 9 Trustee s Report To The Unitholders of Eastspring Investments Indonesia Equity MY Fund 12 Independent Auditor s Report To The Unitholders of Eastspring Investments Indonesia Equity MY Fund 13 Statement of Comprehensive Income 15 Statement of Financial Position 16 Statement of Changes in Equity 17 Statement of Cash Flows 18 Summary of Significant Accounting Policies 19 Notes To The Financial Statements 28 Corporate Directory 50 1

3 Eastspring Investments Indonesia Equity MY Fund Fund Information Name of Fund Eastspring Investments Indonesia Equity MY Fund Fund Category/ Type Feeder Fund (Global Equity) / Growth Fund Objective The Fund seeks to maximise long-term total return via the Eastspring Investments Indonesia Equity Fund that invests primarily in equity and equity-related securities of companies, which are incorporated, listed in or have their area of primary activity, in Indonesia. Should the Manager decide to invest in another collective investment scheme other than the Eastspring Investments - Indonesia Equity Fund for any reason whatsoever, Unit Holder s approval is required. Fund Benchmark Jakarta Composite Index ( JCI ) Source: Note: The risk profile of the benchmark is different from the risk profile of the Fund. Fund Income Distribution Policy In line with the distribution policy of the Target Fund, the Fund does not intend to distribute any income. 2

4 Annual Report Fund Information (continued) Breakdown of Unitholdings by Size As at 31 March 2013, the size of Eastspring Investments Indonesia Equity MY Fund stood at million units. Fund Size Units (Million) Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Breakdown of unitholdings Unitholdings No. of No. of unit units* holders % ( 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 3

5 Eastspring Investments Indonesia Equity MY Fund KEY PERFORMANCE DATA For financial year ended Category (%) Since launch to (%) Collective Investment Scheme Cash And Other Assets Total Net Asset Value (NAV) (RM 000) Units In Circulation (Units 000) Net Asset Value Per Unit (RM) Highest Net Asset Value Per Unit (RM) # Lowest Net Asset Value Per Unit (RM) # Total Return (%) - Capital Growth - Income Distribution Total Return (%) Gross Distribution Per Unit (sen) Net Distribution Per Unit (sen) Management Expense Ratio (MER) (%)* Portfolio Turnover Ratio (PTR) (times)^ 21,975 39, ,115 94, (0.72) - (0.72) # Figures shown as ex-distribution. * There were no significant changes to the MER during the period under review. ^ There were no significant changes to the PTR during the period under review. 4

6 Annual Report KEY PERFORMANCE DATA For financial year ended (continued) Average total return (%) 1 Year to Since launch to Year ended Annual total return (%) Source: Lipper for Investment Management, as at 31 March to Since launch to 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 Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. 5

7 Eastspring Investments Indonesia Equity MY Fund Manager s Report Fund Performance Since inception, the Fund recorded a return of 11.23%, underperforming the benchmark return of 16.83% by 5.60%. During the period under review, the Fund registered a return of 12.03%, underperforming the benchmark return of 14.00% by 1.97%. While the Fund did achieve the objective of capital appreciation, the quantum achieved was not sufficient to meet the benchmark set. Eastspring Investments Indonesia Equity MY Fund - Since Inception Return Vs Benchmark 20% 20% 15% 15% 10% 10% % Change 5% 0% Jul- May- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- 5% 0% Mar % -5% -10% -10% Eastspring Investments Indonesia Equity MY Fund Benchmark Benchmark: JCI Source: Lipper for Investment Management, as at 31 March 2013 Note: Performance return is computed based on NAV to NAV basis Past performance of the Fund is not necessarily indicative of its future performance. 6

8 Annual Report Manager s Report (continued) Analysis of Fund Performance For the financial year ended 31 March 2013 Income Capital Total Total Return of Return return * Return Benchmark (%) (%) (%) (%) *Capital return components (NAV per unit to NAV per unit) 1) Collective Investment Scheme 2) Cash and other assets Distribution/ Unit Split No distribution or unit split were declared for the financial year ended 31 March Investment Strategy During Period Under Review The Fund Manager remained positive on the outlook for Indonesia in view of its healthy macro fundamentals and strong growth prospects underpinned by strong domestic demand and rapid growth in investment. The Fund was mindful of the risk of currency volatility during periods of risk aversion due to the country s current account deficit and reliance on external funding. However, any sharp market correction represents an opportunity to accumulate fundamentally strong companies at more attractive valuations, in line with longterm investment horizon and bottom-up, valuation-driven investment approach. Asset Allocation Asset Allocation 31-Mar 31-Mar Changes (%) (%) (%) Collective investment scheme (1.73) Cash and other assets There have been no significant changes to the asset allocation since the Fund s last report. 7

9 Eastspring Investments Indonesia Equity MY Fund Manager s Report (continued) Switching Fee A switching fee of up to 0.50% on the total switched amount at NAV or RM1,000, whichever is lower, on switches made within three (3) months from the date of investment or date of switching into the Fund, effective 15 July For avoidance of doubt, investor is required to pay a Sales Charge where applicable when switching into a Fund. Investor will be charged the difference between the Sales Charge of these two (2) funds. No Sales Charge will be charged 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 unitholders during the period under review. 8

10 Annual Report Market Review The Jakarta Composite Index (JCI) ended 2Q12 lower as mining stocks corrected following the Finance Ministry s decree to impose a 20% tax on exports of unprocessed metal ores. However, coal was not on the list of taxable ores. Indonesia s central bank held off from raising its key interest rates during the quarter. The S&P kept Indonesia s sovereign debt rating at ``BB+, saying Indonesia s push to lure investment is at risk from ``policy slippages such as the failure to cut fuel subsidies. The JCI rebounded in 3Q12 to close at a high of 4, News of foreign direct investment (FDI) rising by 30% to a high of IDR56.1 trillion in the previous quarter bolstered market sentiment. Inflation accelerated in July and August 2012 mainly due to higher food costs. Meanwhile, Indonesia s central bank has taken a more pessimistic view on the 2013 economic prospects amid the country s widening current account deficit and uncertainties in the global economy. Indonesian shares rose for a second consecutive quarter in 4Q12. The country reported a slower economic growth of 6.2% in the third quarter compared to a 6.4% gain in the second quarter. The central bank announced a slew of new regulations covering the banking sector aimed at ensuring the financial health of the country s fragmented banking sector. Inflation was benign over the quarter, prompting the central bank to keep its policy rate at a record low. The Rupiah depreciated against the US dollar, making it one of the worst performing currencies in the region in The Indonesian market remained as one of the best performers in 1Q13. The Indonesian economy expanded 6.1% year-on-year in the 4Q12, bringing full-year real GDP growth to 6.2%. However, inflationary pressures started to build on the back of higher food prices and power tariffs. Indonesia s current account deficit in 2012 was wider than the initial target, raising concerns among investors and pressuring the Rupiah. The government plans to introduce a new economic policy to curb the ballooning fuel subsidy as 2013 fiscal deficit will likely breach the initial target of 1.65% GDP due to the widening fuel subsidy. For the period under review, the JCI gained 19.88% in local currency terms. Rebates and Soft Commissions During the period under review, the Manager and its delegates (if any) did not receive any soft commissions from stockbrokers. 9

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12 Annual Report Eastspring Investments Indonesia Equity MY Fund Financial statements FOR THE FINANCIAL YEAR ENDED 31 MARCH

13 Eastspring Investments Indonesia Equity MY Fund TRUSTEE S REPORT TO THE UNITHOLDERS OF EASTSPRING INVESTMENTS Indonesia Equity MY Fund We have acted as Trustee for Eastspring Investments Indonesia Equity MY Fund (Fund) for the financial year ended 31 March To the best of our knowledge, for the year under review, Eastspring Investments Berhad (Manager) has operated and managed the Fund in accordance with the following:- (a) 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; (b) the valuation/pricing for the Fund has been carried out in accordance with the deed of the Fund and applicable regulatory requirements; and (c) 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 Chua Mee Ling Chief Executive Officer Mahesh Anchan Head, Trustee Operations Kuala Lumpur Date: 15 May

14 Annual Report INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF EASTSPRING INVESTMENTS Indonesia Equity MY Fund REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Eastspring Investments Indonesia Equity MY Fund, which comprise the statement of financial position as at 31 March 2013 of the Fund, and statements of comprehensive income, changes in equity and cash flows of the Fund for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 15 to 49. Manager s Responsibility for the Financial Statements The Manager of the Fund is responsible for the preparation of financial statements that gives 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 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 13

15 Eastspring Investments Indonesia Equity MY Fund Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Fund as of 31 March 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Other Matter 1. As stated in summary of significant accounting policies (A), Eastspring Investments Indonesia Equity MY Fund adopted Malaysian Financial Reporting standards on 1 April 2012 with a transition date of 27 April 2011 (date of commencement of operations). These standards were applied retrospectively by the Manager to the comparative information in these financial statements, including the statements of financial position as at 31 March 2012, statement of comprehensive income, statement changes in equity and statement of cash flows for the year ended 31 March 2012 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Fund for the year ended 31 March 2013 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 April 2012 do not contain misstatements that materially affect the financial position as of 31 March 2013 and financial performance and cash flows for the year then ended. 2. 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: 15 May

16 Annual Report STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013 INVESTMENT INCOME Financial period from (date of commencement of operations) Note 2013 to rm rm Interest income from deposits with licensed financial institutions 14, ,256 Net foreign currency exchange gain/(loss) 49,500 (67,063) Net gain on financial assets at fair value through profit or loss 6 3,894,485 1,397,655 3,958,384 1,434,848 EXPENSES Management fee 3 (666,017) (661,437) Trustee fee 4 (29,601) (29,397) Audit fee (5,800) (5,800) Tax agent fee (3,400) (5,500) Other expenses (12,509) (10,037) (717,327) (712,171) PROFIT BEFORE TAXATION 3,241, ,677 TAXATION PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME 3,241, ,677 Profit after taxation is made up of the followings: Realised amount 1,265,861 (401,535) Unrealised amount 1,975,196 1,124,212 3,241, ,677 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 15

17 Eastspring Investments Indonesia Equity MY Fund STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2013 Note rm RM ASSETS CURRENT ASSETS Financial assets at fair value through profit or loss 6 21,595,486 48,736,061 Cash and cash equivalents 7 74,910 1,494,007 Amount due from Manager 8,353 87,664 Amount due from a stockbroker 1,040,041 - TOTAL ASSETS 22,718,790 50,317,732 LIABILITIES CURRENT LIABILITIES Amount due to Manager 687,136 3,107,381 Accrued management fee 39,118 74,298 Amount due to Trustee 1,739 3,302 Other payables and accruals 15,639 17,299 TOTAL LIABILITIES 743,632 3,202,280 NET ASSETS VALUE OF THE FUND 8 21,975,158 47,115,452 EQUITY Unitholders capital 18,011,424 46,392,775 Retained earnings 3,963, ,677 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 8 21,975,158 47,115,452 NUMBER OF UNITS IN CIRCULATION 8 39,476,600 94,818,826 NET ASSET VALUE PER UNIT (RM) The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 16

18 Annual Report STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013 unitholders Retained Note capital earnings Total rm RM rm Balance as at 1 April ,392, ,677 47,115,452 Movement in unitholders contribution: Creation of units from applications 8 5,805,702-5,805,702 Cancellation of units 8 (34,187,053) - (34,187,053) Total comprehensive income for the financial year - 3,241,057 3,241,057 Balance as at 31 March ,011,424 3,963,734 21,975,158 Balance as at 27 April 2011 (date of commencement of operations) Movement in unitholders contribution: Creation of units from applications 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. 17

19 Eastspring Investments Indonesia Equity MY Fund STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013 CASH FLOWS FROM OPERATING ACTIVITIES Financial period from (date of commencement of operations) Note 2013 to rm rm Proceeds from sale of investments 31,196,092 7,271,929 Purchase of investments (1,201,073) (54,677,399) Interest income received 14, ,256 Management fee paid (701,197) (587,139) Trustee fee paid (31,164) (26,095) Payment for other fees and expenses (23,369) (4,037) Net cash generated from/(used in) operating activities 29,253,688 (47,918,485) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 5,885,013 64,845,768 Payments for cancellation of units (36,607,298) (15,433,276) Net cash (used in)/generated from financing activities (30,722,285) 49,412,492 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,468,597) 1,494,007 EFFECT OF CURRENCY TRANSLATION 49,500 - CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR/ DATE OF COMMENCEMENT OF OPERATIONS 1,494,007 - CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR/PERIOD 7 74,910 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

20 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013 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 Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ) and the requirements. The financial statements for the financial year ended 31 March 2013 are the first set of financial statements prepared in accordance with the MFRS, including MFRS 1 First-time adoption of MFRS. The Fund have consistently applied the same accounting policies in its opening MFRS statement of financial position at 27 April 2011 (transition date) and throughout all years presented, as if these policies had always been in effect. Note 14 discloses the impact of the transition to MFRS on the Fund s reported financial position, financial performance and cash flows. The preparation of financial statements in conformity with the MFRS 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 year. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. 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) The new standards and amendments to published standards which are relevant to the Fund but not yet effective and have not been early adopted are as follows: (a) Financial year beginning on/after 1 April 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. 19

21 Eastspring Investments Indonesia Equity MY Fund 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 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. (b) Financial year beginning on/after 1 April 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. (c) Financial year beginning on/after 1 April 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. The accounting and presentation for financial liabilities and for de-recognising 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 20

22 Annual Report 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 earned from short term deposits is recognised on the 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. C TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable income earned during the financial year. 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. 21

23 Eastspring Investments Indonesia Equity MY Fund 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, amount due from a stockbroker 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. The Fund s financial liabilities which include amount due to Manager, accrued management fee, amount due to Trustee and other payables and accruals 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 trade date, 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. 22

24 Annual Report 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 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. 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 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 financial instrument. 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 rate method. 23

25 Eastspring Investments Indonesia Equity MY Fund For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The asset s carrying amount 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. 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. F FOREIGN CURRENCY TRANSLATION Foreign currency transactions in the Fund are translated into the functional currency using the exchange rates prevailing at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges. 24

26 Annual Report 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. H CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unitholder 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 statement of financial position date 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 unitholders with the total number of outstanding units. I UNITHOLDERS CAPITAL The unitholders contributions to the Fund meet the definition of puttable instruments classified as equity instruments under the revised MFRS 132 Financial Instruments: Presentation. The units in the Fund are puttable instruments which entitle the unitholders to a pro-rata share of the net asset value of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units in the Fund over the life of the units are based on the change in the net asset value of 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. 25

27 Eastspring Investments Indonesia Equity MY Fund Operating segments are reported in a manner consistent with the internal reporting used by the 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. 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. Financial assets at fair loans and value through Note receivables profit or loss Total rm rm RM 31 March 2013 Collective investment scheme 6-21,595,486 21,595,486 Cash and cash equivalents 7 74,910-74,910 Amount due from Manager 8,353-8,353 Amount due from a stockbroker 1,040,041-1,040,041 1,123,304 21,595,486 22,718, March 2012 Collective investment scheme 6-48,736,061 48,736,061 Cash and cash equivalents 7 1,494,007-1,494,007 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. 26

28 Annual Report L CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 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 Funds results and financial position are tested for sensitivity to changes in the underlying parameters. 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. 27

29 Eastspring Investments Indonesia Equity MY Fund NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH INFORMATION ON THE FUND Eastspring Investments Indonesia Equity MY Fund ( the Fund ) was constituted pursuant to the execution of a Supplemental Master Deed dated 30 July 2010 as modified by Second Supplemental Master Deed dated 28 January 2011,Third Supplemental Master Deed dated 9 March 2011 followed by a Fourth Supplemental Master Deed dated 20 January 2012 between Deutsche Trustees Malaysia Berhad (the Trustee ) and Eastspring Investments Berhad ( the Manager ) (collectively referred to as the Deed ). 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 ( 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 seeks to maximise long-term total return via the Eastspring Investments-Indonesia Equity Fund (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. 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, noncompliance risk and capital risk. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated in the Deed. 28

30 Annual Report 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 would generally hold a welldiversified 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. The table below shows assets of the Fund as at 31 March which are exposed to price risk rm rm Collective investment scheme designated at fair value through profit or loss 21,595,486 48,736,061 The table below summarises the sensitivity of the Fund s net asset value and profit after taxation to movements in prices of collective investment scheme at the end of the reporting year. The analysis is based on the assumption that the price of the collective investment scheme increased by 5% 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. 29

31 Eastspring Investments Indonesia Equity MY Fund Increase/ Increase/ (decrease) in (decrease) in % Change in profit after profit after price of financial taxation and taxation and assets at fair value Market net asset Market net asset through profit or loss value value value value R rm RM RM RM +5% 22,675,260 1,079,774 51,172,864 2,436,803-5% 20,515,712 (1,079,774) 46,299,258 (2,436,803) (b) Currency Risk While the Underlying fund, Eastspring Investments-Indonesia Equity Fund 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. 30

32 Annual Report The following table sets out the foreign currency risk concentrations and counterparties of the Fund. Financial assets at Amount due fair value through from a profit or loss stockbroker Total R rm RM RM At 31 March 2013 USD 21,595,486 1,040,041 22,635,527 At 31 March 2012 USD 48,736,061-48,736,061 The table below summarises the sensitivity of the Fund s investments fair value to changes in foreign exchange movements at the end of the reporting year. The analysis is based on the assumption that the foreign exchange rate changes by 5%, with all other variables remain 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. An 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 Impact on in foreign profit Impact on net exchange rate after taxation assets value % RM RM 31 March 2013 USD 5 1,131,776 1,131, March 2012 USD 5 2,436,803 2,436,803 31

33 Eastspring Investments Indonesia Equity MY Fund 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 changes, 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. 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. 32

34 Annual Report Less than Between 1 month 1 month to 1 year Total R rm rm RM At 31 March 2013 Amount due to Manager: - cancellation of units 687, ,136 - management fee 39,118-39,118 Amount due to Trustee 1,739-1,739 Other payable and accruals - 15,639 15,639 Contractual cash out flows 727,993 15, ,632 At 31 March 2012 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 payable and accruals - 17,299 17,299 Contractual cash out flows 3,184,981 17,299 3,202,280 33

35 Eastspring Investments Indonesia Equity MY Fund Single security risk The Fund essentially invests in a single security, which is the Eastspring Investments-Indonesia Equity Fund. 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 has an oversight function over management of the Fund by the management company to safeguard the interests of unitholders. 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 with licensed financial institutions is managed by ensuring that the Fund will only place deposits with reputable licensed financial institutions. 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. 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: 34

36 Annual Report Cash and Amount Amount cash due from due from a equivalents manager stockbroker Total rm RM rm RM As at 31 March 2013 Finance - AA1 74, ,910 - Non rated - 8,353 1,040,041 1,048,394 74,910 8,353 1,040,041 1,123,304 As at 31 March 2012 Finance - AA1 1,494, ,494,007 - Non rated - 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-compliance risk arises when the Manager and others associated with the Fund are not compliant to the rules set out in the Fund s constitution or the law that governs the Fund or applicable internal control procedures, or act fraudulently or dishonestly. The non-compliance may expose the Fund to higher risks which may result in a fall in the value of the Fund which in turn may affect its investment goals. However, the risk can be mitigated by the internal controls and compliance monitoring undertaken by the Manager. For the Fund, foreign market risk is managed through portfolio diversification by the collective investment scheme which invests among markets/countries and in companies which are well researched. 35

37 Eastspring Investments Indonesia Equity MY Fund Capital risk 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 unitholders. 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 unitholders 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. For instruments for which there is no active market, the Fund may use internally developed models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Valuation models are used primarily to value unlisted equity, debt securities and other debt instruments for which market were or have been inactive during the financial year. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions. 36