CIMB-PRINCIPAL ASEAN EQUITY FUND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018

Transcription

1 FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018

2 CONTENTS PAGE(S) INVESTORS' LETTER 1 MANAGER'S REPORT 2-7 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 8 TRUSTEE'S REPORT 9 INDEPENDENT AUDITORS' REPORT STATEMENT OF COMPREHENSIVE INCOME 14 STATEMENT OF FINANCIAL POSITION 15 STATEMENT OF CHANGES IN EQUITY 16 STATEMENT OF CASH FLOWS 17 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 47

3 INVESTORS' LETTER Dear Valued Investor, 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 1 st Quarter of 2018 with RM52.06 billion in Asset under Management ( AUM ). Our AUM for Private Retirement Schemes ("PRS") business increased by 33% year-on-year ( y-o-y ) to RM541 million as at 31 March We continue to achieve prestigious recognitions from The Edge Thomson Reuters Lipper Fund Awards as follows: The Edge Thomson Reuters Lipper Malaysia Fund Awards 2018 Best Fund Over 5 Years, Equity Global - Malaysia : CIMB-Principal Global Titans Fund Best Fund Over 5 Years, Equity Asia Pacific ex Japan - Malaysia : CIMB-Principal Asian Equity Fund Best Fund Over 5 Years, Equity Asia Pacific ex Japan - Malaysia : CIMB Islamic Asia Pacific Equity Fund Best Fund Over 5 Years, Equity Malaysia Diversified - Malaysia : CIMB-Principal Equity Growth & Income Fund Best Fund Over 5 Years, Mixed Asset MYR Bal - Malaysia : CIMB-Principal Income Plus Balanced Fund Best Fund Over 3 Years, Equity Global - Malaysia : CIMB-Principal Global Titans 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 prestigious awards are a celebration of the trust that you have placed in us and testament to our capability in bringing potential value to your financial goals and needs. 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 investors with capital growth over the medium to long-term through investments into Association of Southeast Asian Nations ( ASEAN ) assets inclusive of equities, Exchange Traded Funds ( ETFs ) and derivatives. Has the Fund achieved its objective? The Fund has achieved its objective. Since inception, the Fund generated a total return of 43.30%. What are the Fund investment policy and principal investment strategy? The Fund will invest between 70% to 98% (both inclusive) of its Net Asset Value ( NAV ) in the ASEAN equity markets. The Fund may also invest up to 30% of its NAV in the CIMB Financial Times Stock Exchange ( FTSE ) ASEAN 40 or other ETFs that invest in the ASEAN countries. Fund category/type Equity/Growth How long should you invest for? Recommended three (3) years or more Indication of short-term risk (low, moderate, high) High When was the Fund launched? 12 September 2007 What was the size of the Fund as at 30 April 2018? RM4.87 million (6.78 million units) What is the Fund s benchmark? FTSE/ASEAN 40 Index What is the Fund distribution policy? No distribution is expected to be paid, however, distribution, if any, will be incidental and will vary from period to period depending on interest rates, market conditions and the performance of the Fund. What was the net income distribution for the financial year ended 30 April 2018? There was no distribution made for the financial year ended 30 April

5 PERFORMANCE DATA Details of portfolio composition of the Fund for the last three financial years are as follows: % % % Collective investment scheme Quoted securities - Construction Consumer Products Energy Finance Health Care Industrials Infrastructure Project Companies ("IPC") Oil & gas Plantation Properties Technology Telecommunications Trading/Services Utilities Cash and other net assets Performance details of the Fund for the last three financial years are as follows: NAV (RM Million) Units in circulation (Million) NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) (6.61) - Capital growth (%) (6.61) - Income distribution (%) Management Expense Ratio ("MER") (%) ^ Portfolio Turnover Ratio ("PTR") (times) # # The Fund s MER during the financial year under review was increased from 2.79 times to 3.14 times due to increased in expenses. # The Fund s PTR was at 2.37 times as we actively realising profit and re-investing into the market during the financial year under review % % % % % Annual total return (6.61) (4.56) (Launch date: 12 September 2007) 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. 3

6 MARKET REVIEW (1 MAY 2017 TO 30 APRIL 2018) For the financial year under review, ASEAN markets along with global markets extended its rally until the beginning of February 2018 before faltered through the financial year end whereby the FTSE ASEAN 40 Index and Morgan Stanley Capital International ( MSCI ) World Index registered gains of 21.94% and 11.09% (in US Dollar ( USD ) term), respectively. Global equities were led by Vietnam (46.11%), Thailand (24.53%), Hong Kong (24.04%), Korea (21.19%), Singapore (20.10%), Japan (18.50%) and Malaysia (17.10%). As a group, North Asian markets outperformed ASEAN markets because the former have larger exposure to technology sectors. In terms of sectors, the outperforming sectors in the region were information technology, financials, real estate and materials. However, within ASEAN, Philippines and Indonesia underperformed largely due to weak currencies. For the year under review, Philippines Peso ( PHP ) and Indonesian Rupiah ( IDR ) have depreciated by 3.48% and 4.20% against USD, respectively. Global equity markets commenced 2018 with a bang and subsequently hit by multiple fronts. In February 2018, bond market was spooked by higher than expected inflationary concerns in the United States ( US ) and the rising crude oil prices was adding pressure to this rising expectation. In addition, the ongoing trade protectionism rhetoric from the US government was not helping the sentiment either. Hence, most emerging market currencies were impacted. Countries with current account deficit and fiscal deficit, or twin deficits, faced significant selling pressures. In ASEAN, there are two countries with twin deficits namely Indonesia and Philippines. Indonesia market led the ASEAN markets after the conclusion of Jakarta election in April 2018 followed by sovereign rating upgrade by rating agency, Standard & Poor s ( S&P ), to investment grade along with Fitch and Moody. The better than expected earnings posted by financial and mining sectors added to the rally. In addition, Bank Indonesia cut interest rate twice or a total of 50 basis points ( bps ) to 4.25% since August It hit all time high on 28 February Subsequently, Indonesia equity market started to correct on the back of weakening IDR and rising bond yield. Due to weak consumer spending, Indonesia government continued to put a cap on the petrol pump price. Hence, there was a concern that its deficit will grow. Thus, bond yield rose and IDR depreciated. After underperforming the market since the start of financial year, Thailand made comeback and started to rally led by banks, consumers and healthcare stocks. The rallies were quite broad-based with consumer names gaining momentum after digesting weak second quarter financial results. The market is looking beyond the financial results and seeing potential same-store-sales growth recovery on a low base last year with potential government policy support before year-end as key catalysts. Optimism resumed after the current military government announced that Thailand will hold a general election soon. The military has repeatedly delayed a vote since seizing power in 2014, citing concerns such as changes to the constitution and security issues. Military-appointed Prime Minister Prayut Chan-ocha told reporters the exact date will be set next June Furthermore, the month of October marked the end of the mourning period for the passing of Thailand s King Bhumibol Adulyadej. In addition, due to its strong current account position, Thai Baht ( THB ) is one of the performing currencies along with Malaysian Ringgit ( MYR ). Malaysian market started to rally towards the end of 2017 aided by its strong MYR and the optimism was boosted as the nation getting closer to its 14 th general election. Meanwhile, Singapore continued to enjoy its rally. Singaporean consumer confidence rose ever since the government started to show sign of easing on its property policy measure that was tightened since Furthermore, Singaporean banks are beneficiaries of rising interest rate. Lastly, on Philippines, after 5 years of strong growth, the nation is showing signs of overheating. Furthermore, it started to register current account deficit since early 2017 and Philippines inflation is highly correlated to crude oil price movement because it is a net importer of fuel oil. Hence, Philippines have been underperforming for the financial year under review. 4

7 FUND PERFORMANCE 1 year to years to years to Since inception to % % % % Income Capital Total Return Benchmark Average Total Return For the financial year under review, the Fund generated a return of 6.96%, underperforming the benchmark by 3.25%. Since inception, the Fund generated a total return of 43.30%, underperforming the benchmark by 3.66%. Changes in NAV Changes % NAV (RM million) (8.97) NAV/Unit (RM) For the year under review, Fund s NAV/unit increased by 6.96%, higher than a year ago due to net creations. 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. 5

8 PORTFOLIO STRUCTURE Asset allocation (% of NAV) Quoted securities - local Quoted securities - foreign Cash and other net assets TOTAL The Fund remained invested in equities during the year under review. The weight has been moved from local securities to foreign securities as we turned slightly cautious ahead of Malaysia s 14th General Election on 9 May Meanwhile, cash was higher largely due to portfolio rebalancing activity. MARKET OUTLOOK* Since the beginning of 2018, countries with current account deficit have seen their currencies being sold down along with the equity and bond markets, namely, Indonesia and Philippines. Nevertheless, subsequently, the rest of the ASEAN also faced selling pressures due to foreign outflows during this interest rates normalisation period led by the Fed. Volatility will stay as markets adjust to interest rates normalisation. However, ASEAN countries are at much healthier position as compared to 2013 taper tantrum period. Our thesis on consumption recovery is slowly playing out as can be seen in Thailand and lately Indonesia. We expect consumption to recover in Malaysia after the conclusion of the general election. On tourism, it remains to be robust in the region whereby tourist arrivals surpassed expectations and hotel room rate on the rising trend especially in Thailand and Singapore. In the short-run, markets are facing multiples uncertainties, namely ongoing trade war between US and China, love-hate relationship between US and North Korea, volatility in bond markets and foreign exchange markets coupled with political crisis in Italy and Spain. * 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 Since early 2018, we have been actively locking in profits and buying into weakness on companies we deemed to be strong enough to withstand these volatilities. Companies with earnings growth and backed by strong balance sheet. Once regional currencies and bond yield stabilise, we expect the fund flows to reverse in the region as the valuations for certain markets have corrected to attractive valuations given the long-term positive outlook in ASEAN countries. We remain constructive and positive on ASEAN and will look to add into weakness for sectors that we are bullish on namely tourism, consumer, financial and infrastructure related stocks. 6

9 UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 30 April 2018 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 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 commission in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 7

10 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASEAN EQUITY 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 14 to 46 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 30 April 2018 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 21 June

11 TRUSTEE S REPORT FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018 TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASEAN EQUITY FUND We have acted as Trustee for CIMB-Principal ASEAN Equity Fund ("the Fund") for the financial year ended 30 April 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: a) Limitations imposed on the investment powers of the Manager under the deed, securities laws and Guidelines on Unit Trust Funds; b) Valuation and pricing of the Fund are carried out in accordance with the deed and any regulatory requirement; and c) Creation and cancellation of units are carried out in accordance with the deed and any regulatory requirement. For Maybank Trustees Berhad (Company No. : 5004-P) BERNICE K M LAU Head, Operations Kuala Lumpur, Malaysia 21 June

12 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASEAN EQUITY FUND REPORT ON THE AUDIT OF FINANCIAL STATEMENTS Our opinion CIMB-PRINCIPAL ASEAN EQUITY FUND In our opinion, the financial statements of CIMB-Principal ASEAN Equity Fund ( the Fund ) give a true and fair view of the financial position of the Fund as at 30 April 2018, and of its financial performance and its cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. What we have audited We have audited the financial statements of the Fund, which comprise the statement of financial position as at 30 April 2018, 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 14 to 46. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. 10

13 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASEAN EQUITY FUND (CONTINUED) REPORT ON THE AUDIT OF FINANCIAL STATEMENTS (CONTINUED) Information other than the financial statements and auditors report thereon CIMB-PRINCIPAL ASEAN EQUITY FUND The Manager of the Fund is responsible for the other information. The other information comprises Manager s report, but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager for the financial statements The Manager of the Fund is responsible for the preparation of the financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. 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 have no realistic alternative but to do so. 11

14 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASEAN EQUITY FUND (CONTINUED) REPORT ON THE AUDIT OF FINANCIAL STATEMENTS (CONTINUED) Auditors responsibilities for the audit of the financial statements CIMB-PRINCIPAL ASEAN EQUITY FUND Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) (b) (c) (d) (e) Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 12

15 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASEAN EQUITY FUND (CONTINUED) REPORT ON THE AUDIT OF FINANCIAL STATEMENTS (CONTINUED) Auditors responsibilities for the audit of the financial statements (continued) CIMB-PRINCIPAL ASEAN EQUITY FUND We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. OTHER MATTERS This report is made solely to the unit holders of the Fund and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS PLT LLP LCA & AF 1146 Chartered Accountants Kuala Lumpur 21 June

16 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 APRIL Note RM RM INVESTMENT INCOME/(LOSS) Dividend income 125, ,498 Interest income from deposits with licensed financial institutions 1,325 3,426 Net gain on financial assets at fair value through profit or loss 8 603,766 1,475,902 Net foreign exchange loss (100,188) (22,498) Other income 4-25, ,366 1,686,057 EXPENSES Management fee 5 94, ,118 Trustee s and custodian fees 6 29,849 58,516 Audit fee 13,902 12,220 Tax agent s fee 4,500 2,600 Transaction costs 89,158 89,820 Other expenses 30,910 26, , ,243 PROFIT/(LOSS) BEFORE TAXATION 367,944 1,372,814 Taxation 7 (8,740) (9,559) PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 359,204 1,363,255 Profit after taxation is made up as follows: Realised amount 569,997 2,099,041 Unrealised amount (210,793) (735,786) 359,204 1,363,255 The accompanying notes to the financial statements form an integral part of the audited financial statements. 14

17 STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL Note RM RM ASSETS Cash and cash equivalents 9 460,035 1,285,339 Financial assets at fair value through profit or loss 8 4,569,319 5,093,370 Amount due from stockbrokers 96, ,074 Amount due from Manager of collective investment scheme - Management fee rebate - 17,880 Dividends receivable 18,772 6,915 Tax recoverable 40,427 40,427 TOTAL ASSETS 5,185,327 7,221,005 LIABILITIES Amount due to stockbrokers 281, ,805 Amount due to Manager 2,816 1,603,545 Accrued management fee 7,127 9,907 Amount due to Trustee Other payables and accruals 22,070 14,242 TOTAL LIABILITIES 313,674 1,867,939 NET ASSET VALUE OF THE FUND 4,871,653 5,353,066 EQUITY Unit holders capital 4,429,411 5,270,028 Retained earnings 442,242 83,038 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 4,871,653 5,353,066 NUMBER OF UNITS IN CIRCULATION (UNITS) 10 6,775,297 7,963,326 NET ASSET VALUE PER UNIT (RM) The accompanying notes to the financial statements form an integral part of the audited financial statements. 15

18 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018 Retained earnings/ Unit holders capital (Accumulated losses) Total RM RM RM Balance as at 1 May ,270,028 83,038 5,353,066 Movement in unit holders contributions: - Creation of units from application 72,499-72,499 - Cancellation of units (913,116) - (913,116) Total comprehensive income for the financial year - 359, ,204 Balance as at 30 April ,429, ,242 4,871,653 Balance as at 1 May ,953,837 (1,280,217) 6,673,620 Movement in unit holders contributions: - Cancellation of units (2,683,809) - (2,683,809) Total comprehensive income for the financial year - 1,363,255 1,363,255 Balance as at 30 April ,270,028 83,038 5,353,066 The accompanying notes to the financial statements form an integral part of the audited financial statements. 16

19 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 APRIL Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of quoted securities 13,575,011 14,464,811 Purchase of quoted securities (11,815,559) (12,372,160) Dividend income received 104, ,946 Interest income received from deposits with licensed financial institutions 1,325 3,426 Management fee paid (96,883) (123,098) Trustee s and custodian fees paid (29,972) (58,515) Payments for other fees and expenses (41,484) (45,660) Net realised foreign exchange loss (79,783) (42,839) Other income received 17,880 13,686 Tax paid - (14,103) Net cash generated from operating activities 1,635,348 2,062,494 CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 72,499 - Payments for cancellation of units (2,513,845) (1,080,264) Net cash used in financing activities (2,441,346) (1,080,264) Net increase/(decrease) in cash and cash equivalents (805,998) 982,230 Effects of foreign exchange differences (19,306) 20,056 Cash and cash equivalents at the beginning of the financial year 1,285, ,053 Cash and cash equivalents at the end of the financial 9 year 460,035 1,285,339 Cash and cash equivalent comprised of: Bank balances 222,012 - Deposits in licensed financial institutions 238,023 1,285, ,035 1,285,339 The accompanying notes to the financial statements form an integral part of the audited financial statements. 17

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 APRIL THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB-Principal ASEAN Equity Fund (the Fund ) is governed by a Principal Master Deed dated 15 May 2008, a Thirteenth Supplemental Master Deed 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 principal activity of the Fund is to invest between 70% to 98% (both inclusive) of its Net Asset Value ( NAV ) in the ASEAN equity markets. The Fund may also invest up to 30% of its NAV in the CIMB FTSE ASEAN 40 or other Exchange-Traded Fund ( ETF ) that invest in the ASEAN countries. All investments are subjected to the Securities Commission Malaysia ( 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 jointly owned by CIMB Group and Principal International (Asia) Limited. The principal activities of the Manager are the establishment and management of unit trust funds and fund management activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. 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(l). 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL ASEAN EQUITY FUND (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 May 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 financial 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 May 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 ( ECL ) 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 has reviewed its financial assets and liabilities and has assessed the following impacts from the adoption of the new standard on 1 January 2018: There will be no impact on the Fund s accounting for financial assets as the Fund s equity investments currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL ASEAN EQUITY FUND (a) Basis of preparation (continued) (i) Financial year beginning on/after 1 May 2018 (continued) There will be no impact on the Fund s accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provisions based on ECL rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assessments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. (b) Financial assets and financial liabilities Classification The Fund designates its investments in collective investment scheme and quoted 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, amount due from stockbrokers, amount due from Manager of collective investment scheme, and dividends receivable. 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 stockbrokers, amount due to Manger, accrued management fee, amount due to Trustee, and other payables and accruals as other financial liabilities. Recognition and measurement Regular purchases and sales of financial assets are recognised on 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. 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. 20

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL ASEAN EQUITY FUND (b) Financial assets and financial liabilities (continued) Recognition and measurement (continued) Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial year which they arise. 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. Quoted securities in Malaysia are valued at the last done market price quoted on Bursa Malaysia Securities Bhd ( Bursa Securities ) at the date of the statement of financial position. Collective investment scheme is valued based on the most recent published NAV per unit or share of such collective investment scheme or, if unavailable, the last published price of such unit or share (excluding any sales charge included in such selling price). Foreign quoted securities are valued at the last traded market price quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges. If a valuation based on the market price does not represent the fair value of the quoted securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. Deposits with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the financial year 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. 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. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL ASEAN EQUITY FUND (b) Financial assets and financial liabilities (continued) Impairment for assets carried at amortised costs (continued) 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 Dividend income is recognised on the ex-dividend date when the right to receive payment is established. Interest income from deposits with licensed financial institutions is recognised on a time proportionate basis using effective interest rate method on an accrual basis. Realised gain or loss on disposal of quoted securities and collective investment scheme are accounted for as the difference between the net disposal proceeds and the carrying amount of investments, determined on a weighted average cost basis. (d) Foreign currency Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( RM ), which is the Fund s functional and presentation currency. Due to mixed factors in determining the functional currency of the Fund, the Manager has used its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and have determined the functional currency to be in RM primarily due to the following factors: i) Units of the Fund are denominated in RM. ii) Significant portion of the Fund s expenses are denominated in RM. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income, except when deferred in other comprehensive income ( OCI ) as qualifying cash flow hedges. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL ASEAN EQUITY FUND (e) Cash and cash equivalents For the purpose of statement of cash flows, 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. Tax on dividend income from foreign quoted securities is based on the tax regime of the respective countries that the Fund invests in. (g) Other income Management fee rebate is derived from the collective investment scheme held by the Fund on an accrual basis to ensure no double charging of management fee. It is accrued daily based on the fair value of collective investment scheme held. (h) Amount due from/to stockbrokers Amount due from and amount due to stockbrokers represent receivables for quoted securities sold and payables for quoted securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment for amount due from stockbrokers. A provision for impairment of amount due from stockbrokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant stockbroker. Significant financial difficulties of the stockbroker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from stockbrokers is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. (i) Transaction costs Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CIMB-PRINCIPAL ASEAN EQUITY FUND (j) 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 and 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. (k) 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. (l) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the 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. However, the Manager is of the opinion that there are no accounting policies which require significant judgement to be exercised. 24

27 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 RM RM RM 2018 Cash and cash equivalents (Note 9) - 460, ,035 Quoted securities (Note 8) 4,569,319-4,569,319 Amount due from stockbroker - 96,774 96,774 Dividends receivable - 18,687 18,772 4,569, ,581 5,144, Cash and cash equivalents (Note 9) - 1,285,339 1,285,339 Quoted securities (Note 8) 5,093,370-5,093,370 Amount due from stockbroker - 777, ,074 Amount due from Manager of collective investment scheme - Management fee rebate - 17,880 17,880 Dividends receivable - 6,915 6,915 5,093,370 2,087,208 7,180,578 All current liabilities are financial liabilities which are carried at amortised cost. The Fund aims to provide investors with capital growth over the medium to long-term through investments into ASEAN assets inclusive of equities, ETFs and derivatives. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk, interest rate risk and currency 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. (a) Market risk (i) Price risk This is the risk that the fair value of investment in collective investment scheme and quoted securities will fluctuate because of changes in market prices (other than those arising from interest rate risk and currency risk). The value of collective investment scheme and quoted 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 collective investment scheme, quoted securities and other financial instruments within specified limits according to the Deeds. 25