Aberdeen Islamic Malaysia Equity Fund. Interim Report 31 December 2017

Transcription

1 Aberdeen Islamic Malaysia Equity Fund Interim Report 31 December 2017

2 TABLE OF CONTENTS FUND INFOATION 2 FUND PERFOANCE DATA 3-4 MANAGER S REPORT 5-7 UNAUDITED INTERIM STATEMENT OF COMPREHENSIVE INCOME 8 UNAUDITED INTERIM STATEMENT OF FINANCIAL POSITION 9 UNAUDITED INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 10 UNAUDITED INTERIM STATEMENT OF CASH FLOWS 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE MANAGER 33 TRUSTEE S REPORT 34 SHARIAH ADVISER S REPORT 35 DISTRIBUTORS 36 1

3 FUND INFOATION Name of Fund Aberdeen Islamic Malaysia Equity Fund Fund Category / Type Equity (Islamic) / Growth Fund Objective The Fund seeks to achieve capital appreciation in the long term through investments in Shariah-compliant equities and equity-related securities. Fund Benchmark FTSE Bursa Malaysia EMAS Shariah Index Fund Income Distribution Policy As the investment objective of the Fund is to provide capital appreciation, distribution of income, if any, is incidental. Breakdown of Unitholdings by Size As at 31 December 2017, the size of the Fund stood at million units. BREAKDOWN OF UNITHOLDINGS BY SIZE CLASS A Size of Holdings (Units) No. of Unitholders No. of Units Held ( 000) 5,000 and below 0 0 5,001 to 10, ,001 to 50, ,001 to 500, ,001 and above 0 0 Total BREAKDOWN OF UNITHOLDINGS BY SIZE CLASS I Size of Holdings (Units) No. of Unitholders No. of Units Held ( 000) 5,000 and below 0 0 5,001 to 10, ,001 to 50, ,001 to 500, ,001 and above 1 4,500 Total 1 4,500 2

4 FUND PERFOANCE DATA FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2017 Sector Allocation % % % Shariah-Compliant Equities Basic Materials Consumer Goods Consumer Services Financials Healthcare Industrials Oil & Gas Technology Telecommunications Utilities Cash Total *Negative cash due to high redemption on the last day of the month * As at As at As at Class A Class I Class A Class I Class A Class I Total Net Asset Value (NAV) ( million) NAV per Unit () Units in Circulation (million) Highest NAV per Unit () Lowest NAV per Unit () Total Return (%) (1.8140) (1.8140) - Capital Return (%) (1.8140) (1.8140) - Income Return (%) Gross Distribution per Unit (sen) Net Distribution per Unit (sen) Management Expense Ratio (MER) (%) Portfolio Turnover Ratio (PTR) (times) Source: Deutsche Bank (Malaysia) Berhad 2.1 Average Total Return 6 months to (%) 1 year to (%) 3 years (annualised) to (%) Since inception (annualised) to (%) Fund Source: Lipper for Investment Management as at 31 December 2017 Annual Total Return 1 year to (%) 1 year to (%) 1 year to (%) 1 year to (%) Fund Source: Lipper for Investment Management as at 31 December

5 FUND PERFOANCE DATA (CONTINUED) FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2017 Bases of calculation and assumptions made in calculating the returns: The performance figures are a comparison of the growth/decline in NAV for the stipulated period, taking into account all the distributions payable (if any) during the stipulated period. An illustration of the above would be as follows: Capital Return = NAV per Unit End / NAV per Unit Begin 1 Income Return = Income Distribution per Unit / NAV per Unit Ex-Distribution Total Return = Capital Return x Income Return 1 Class A Capital Return = {NAV per NAV per } x 100 = { } x 100 = % Income Return = {Income Distribution per Unit NAV per Unit Ex-Distribution} x 100 = Nil Total Return = [{(1+ Capital Return) x (1+ Income Return)} 1] x 100 = [{( %) x (1 + 0%)} 1] x 100 = % Class I Capital Return = {NAV per NAV per } x 100 = { } x 100 = % Income Return = {Income Distribution per Unit NAV per Unit Ex-Distribution} x 100 = Nil Total Return = [{(1+ Capital Return) x (1+ Income Return)} 1] x 100 = [{( %) x (1 + 0%)} 1] x 100 = % Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. 4

6 MANAGER S REPORT Fund Performance The Aberdeen Islamic Malaysia Equity Fund rose by 1.87% in ringgit terms over the period, compared with the benchmark s total return of 5.29%. Given the performance during the period under review, we believe the Fund s objective is being met to provide investors with capital appreciation through long term investments in Shariah-compliant equities Income Return % Capital Return % Total Return of Fund % Total Return of Benchmark % FUND RETURN (SINCE INCEPTION) VS BENCHMARK Percetage Growth (%) Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Aberdeen Islamic Malaysia Equity Fund FTSE Bursa Malaysia EMAS Shariah Index Feb 17 May 17 Aug 17 Nov 17 Benchmark: FTSE Bursa Malaysia EMAS Shariah Index Source: Lipper for Investment Management as at 31 December 2017 Note: This information is prepared by Aberdeen Islamic Asset Management Sdn Bhd for information purposes only. Past performance of the Fund is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. Analysis of Fund Performance At the stock level, Aeon as well as DKSH were hampered by consumer sentiment, which remained weak despite the strong headline macro numbers. Nonetheless, we have a positive long-term view about consumer companies, given their relatively conservative balance sheets, steady cash-flow generation and attractive yields. Not holding Press Metal proved costly as its shares surged because of potentially higher aluminium prices. Conversely, Nestle Malaysia buoyed the fund, because of improvements in operational efficiency and lower costs. The underweight to Sime Darby proved beneficial as the conglomerate suffered from profit-taking, after it spun off its plantation and property businesses. Not holding Sapura Energy, formerly known as Sapurakencana Petroleum helped the fund too. Its shares plunged after its reported lacklustre quarterly results. 5

7 MANAGER S REPORT (CONTINUED) Analysis of Fund Performance (continued) In addition, we also introduced Gamuda, given its management quality, growth prospects, and attractive valuation; MyNews Holdings, a well-managed and growing convenience retail chain; and CCM Duopharma, a domestic pharmaceutical company with good growth potential. We also participated in SP Setia s rights issue. On the flipside, we exited Ajinomoto Malaysia given its lofty valuations % % Changes % NAV ( Million) NAV/ Unit () The Fund s NAV fell by 2.9% to 6.8 million as at 31 December Likewise, the NAV per unit rose by 5.6% during the financial period. Market Review Malaysian equities extended their gains over the six months under review, with index heavyweights underpinned by solid buying demand. Bank Negara maintained its key rate, which bolstered sentiment. Optimism about the country s near-term prospects grew on upbeat economic data, with services and manufacturing sectors expanding significantly. Exports of electronics were also boosted by the worldwide demand for semiconductors. Trade flows grew and strengthened the ringgit. This helped consumption, as did an increase in wages and stabilising unemployment, which mitigated costlier food and non-alcoholic beverages. Sentiment was also lifted by stimulus ahead of general elections, such as the tabling of a populist budget focused on promoting major infrastructure projects and supporting domestic consumption, and the abolishment of tolls in states such as Selangor, Johor Bahru and Kedah. Elsewhere, the OPEC-led agreement to reduce global supply buoyed oil prices rose and underpinned growth in commodity and energy businesses. Market Outlook Malaysian equities are likely to maintain their upward trajectory, in line with global markets. Synchronised global economic growth should underpin exporters in sectors such as manufacturing and commodities. In particular, oil prices may find further support in a decrease in oil supply. Domestically, government spending on infrastructure as well as other programmes ahead of the elections could provide a further boost and lift consumption. However, recent inflows of foreign funds into equities, bonds and other direct investments have resulted in a stronger ringgit, which may pose a risk to exporters. Sentiment could also be dented by monetary policy tightening in major economies or an unexpected election outcome at home. All things considered, we continue to see good prospects for the companies that we hold, which are selected through our bottom-up analysis of company fundamentals. These businesses are led by capable management, have robust operations, and could see intrinsic earnings growing. To navigate the fast-changing markets, we will continue to monitor our investments diligently, while maintaining a long-term investment outlook. Investment Strategy The global economy is likely to face continued volatility ahead, given US President Donald Trump s policy unpredictability, volatile oil prices and further geopolitical uncertainty. At home, the economy also faces challenges with ringgit weakness causing inflationary pressures that could dampen consumption, and sap investor confidence. However, our strategy is to remain disciplined, sticking to our buy-and-hold approach where we cherry-pick companies with robust business models and defensible industry leadership positions, investing for the long haul. Our portfolio remains fundamentally solid with our companies well-positioned in their respective sectors, being prudent and taking care to avoid overstretching their balance sheets given the current economic environment. We remain focused on quality and value, trimming positions when we think valuations are high, and adding to positions when we think valuations are attractive. Also, we will exit a position when we think that a company s management has lost focus or when the long-term prospects have changed irreversibly, as we have done in the past. 6

8 MANAGER S REPORT (CONTINUED) Asset Allocation % % % Shariah-Compliant Equities Cash * 2.1 Total *Negative cash due to high redemption on the last day of the month. Distribution / Unit Split No distribution or unit split was declared for the financial period ended 31 December State of Affairs of the Fund There has been no significant change to the state of affairs of the Fund, nor any circumstances that materially affected any interests of the unitholders during the period under review. Soft Commissions Soft commissions received from brokers or dealers are retained by the management company only if the goods and services provided are of demonstrable benefit to unitholders of the Fund as per requirements of Clause and of the Guidelines on Unit Trust Funds. During the period under review, the Manager and its delegates (if any) did not receive any soft commissions from stockbrokers or dealers. 7

9 UNAUDITED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 NET SHARIAH-COMPLIANT INVESTMENT INCOME Note to to Dividend income 99,133 82,745 Net gain/(loss) from Shariah-compliant investments: Financial assets at fair value through profit or loss ( FVTPL ) 7 28,653 (45,118) 127,786 37,627 EXPENSES Management fee Trustee s fees Audit fee Tax agent s fee Transaction costs 2,947 1,836 Other expenses ,994 1,867 NET PROFIT BEFORE TAXATION 124,792 35,760 Taxation 6 (756) (633) INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 124,036 35,127 Net profit after taxation and total comprehensive income comprises the following: Realised amount 79,240 49,979 Unrealised amount 44,796 (14,852) 124,036 35,127 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 8

10 UNAUDITED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 CURRENT ASSETS Note Financial assets at fair value through profit or loss (Shariah-compliant) 7 6,407,216 6,830,748 Dividends receivable 57 29,287 Cash and cash equivalents 8 441, ,554 TOTAL ASSETS 6,848,332 7,000,589 CURRENT LIABILITIES Amount due to Manager - Management fee Cancellation of units 4,017 - Amount due to Trustee Other payables and accruals - - TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNITHOLDERS) 4,017 - NET ASSET VALUE OF THE FUND 6,844,315 7,000,589 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 6,844,315 7,000,589 REPRESENTED BY: FAIR VALUE OF OUTSTANDING UNITS CLASS A 1,080,068 1,342,111 CLASS I 5,764,247 5,658,478 6,844,315 7,000,589 NUMBER OF UNITS IN CIRCULATION 10 CLASS A 843,179 1,067,338 CLASS I 4,500,000 4,500,000 NAV PER UNIT () CLASS A CLASS I The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 9

11 UNAUDITED INTERIM STATEMENT OF CHANGES IN NET ASSETS ASTTRIBUTABLE TO UNITHOLDERS AS AT 31 DECEMBER to to NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE BEGINNING OF THE FINANCIAL PERIOD 7,000,589 6,981,225 Movement due to units created and cancelled during the financial period: - Creation of units arising from applications 1, ,890 - Cancellation of units (282,128) (436,284) (280,310) (334,394) Net increase in net assets attributable to unitholders during the financial period: Net profit after taxation and total comprehensive income 124,036 35,127 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE END OF THE FINANCIAL PERIOD 6,844,315 6,681,958 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 UNAUDITED INTERIM STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 Note to to CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sale of Shariah-compliant investments 790,339 1,111,431 Purchase of Shariah-compliant investments (338,154) (336,306) Dividends received 128, ,993 Payment for other fees and expenses (2,994) (1,867) Tax paid (756) (633) Net cash generated from operating activities 576, ,618 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 1, ,890 Payments for cancellation of units (278,111) (1,248,103) Net cash used in financing activities (276,293) (1,146,213) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 300,505 (236,595) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 140, , , ,007 CASH AND CASH EQUIVALENT COMPRISE OF: BANK BALANCES 8 441, ,007 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. The financial statements have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost conventions as modified by the financial assets and financial liabilities at fair value through profit or loss ( FVTPL ). 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 revenue and expenses during the reported financial period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. The Manager believes that the underlying assumptions are appropriate and the Fund s financial statements therefore present the financial position results fairly. 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 N. 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 July 2016: Amendments to MFRS 101 "Presentation of Financial Statements - Disclosure Initiative" provide clarifications on a number of issues, including: Materiality an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. Disaggregation and subtotals line items specified in MFRS 101 may need to be disaggregated where this is relevant to an understanding of the entity s financial position or performance. There is also new guidance on the use of subtotals. Notes confirmation that the notes do not need to be presented in a particular order. Other comprehensive income ( OCI ) arising from investments accounted for under the equity method the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. According to the transitional provisions, the disclosures in MFRS 108 regarding the adoption of new standards/accounting policies are not required for these amendments. Annual Improvements to MFRS Cycle The adoption of these amendments did not have any impact on the current financial year or any prior financial year and is not likely to affect future years. 12

14 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 July 2017 Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative (effective from 1 January 2017) introduce an additional disclosure on changes in liabilities arising from financing activities. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. (ii) Financial year beginning on/after 1 July 2018 MFRS 15 Revenue from Contracts with Customers (effective from 1 January 2018) replaces MFRS 118 Revenue and MFRS 111 Construction Contracts and related interpretations. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer has the ability to direct the use of and obtain the benefits from the goods or services. A new five-step process is applied before revenue can be recognised: Identify contracts with customers; Identify the separate performance obligations; Determine the transaction price of the contract; Allocate the transaction price to each of the separate performance obligations; and Recognise the revenue as each performance obligation is satisfied. Key provisions of the new standard are as follows: Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. If the consideration varies (such as for incentives, rebates, performance fees royalties, success of an outcome etc), minimum amounts of revenue must be recognised if they are not at significant risk of reversal. The point at which revenue is able to be recognised may shift: some revenue which is currently recognised at a point in time at the end of a contract may have to be recognised over the contract term and vice versa. There are new specific rules on licenses, warranties, non-refundable upfront fees, and consignment arrangements, to name a few. As with any news standard, there are also increased disclosures. The fund will apply this standard when effective. This standard is not expected to have significant impact on the Fund's financial statements. 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 1 are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument 2 is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest 3. 1 Equity instruments and derivatives refer to Shariah- compliant equity instruments and Shariah- compliant derivatives. 2 Debt instrument refers to trade and other receivables, cash and cash equivalents, financing and sukuk. 3 Interest refers to profits earned from Shariah- compliant investments. 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (i) Financial year beginning on/after 1 July 2018 For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. 1. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply the above standards when effective. The standards are not expected to have a significant impact on the Fund s financial statements. B. INCOME RECOGNITION Profit income from Islamic deposits with licensed financial institutions is recognised based on effective profit method on an accrual and time proportional basis. Dividend income is recognised on the ex-dividend date, when the right to receive the dividend has been established. Realised gains and losses on sale of Shariah-compliant investments are accounted for as the difference between the net disposal proceeds and the carrying amount of Shariah-compliant investments, determined on a weighted average cost basis. C. DISTRIBUTIONS A distribution to the Fund s unit holders is accounted for as a deduction from realised reserve. As a result of the reclassification of units from equity to financial liability, the Fund s distributions are no longer classified as dividend paid in the statement of changes in net assets attributable to unit holders, but rather as finance cost in the statement of comprehensive income. A proposed distribution is recognised as a financial liability in the year in which it is approved. D. 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. E. TAXATION Current tax expense is determined according to the Malaysian tax laws at the current rate based on the taxable profit earned during the financial period. F. 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 ( ), which is the Fund s functional and presentation currency. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) G. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (i) Classification The Fund designates its investments in quoted Shariah-compliant equity 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. 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 receivables comprise cash and cash equivalents, amount due from Manager and dividends receivable 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 classifies amount due to Manager, amount due to stockbrokers, amount due to Trustee, other payables and accruals as other financial liabilities. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-dates, the date on which the Fund commits to purchase or sell the asset. Shariah-compliant investments are initially recognised at fair value. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value with gain and loss are recognised in the statement of comprehensive income. 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 Shariah-compliant investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit and loss in the period 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. If a valuation based on the market price does not represent the fair value of the Quoted Shariah-compliant 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 Shariah-compliant securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the securities are valued as determined in good faith by the Manager, based on the methods or basis approved by the Trustee after appropriate technical consultation. Islamic deposits with licensed Islamic financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the year from the date of placement to the date of maturity of the respective Islamic deposits. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) G. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) (ii) Recognition and measurement Receivables and other liabilities are subsequently carried at amortised cost using the effective profit method. For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised instatement of comprehensive income. If receivables or a held-to-maturity investment has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent 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 the 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. H. AMOUNT DUE FROM/TO STOCKBROKERS Amount due from and amount due to stockbrokers represent receivables for Shariah-compliant securities sold and payables for Shariah-compliant 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 profit method, less provision for impairment for amounts due from stockbrokers. A provision for impairment of amounts 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 stockbroker 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, profit income is recognised using the rate of profit used to discount the future cash flows for the purpose of measuring the impairment loss. The effective profit method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the profit income or financing expense over the relevant period. The effective profit rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective profit rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective profit rate, transaction costs and all other premiums or discounts. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) I. CASH AND CASH EQUIVALENTS For the purpose of the statement of cash flows, cash and cash equivalents comprise cash and bank balances that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. J. CREATION AND CANCELLATION OF UNITS In the previous financial period, the Fund classified its puttable instruments as equity in accordance with MFRS 132 (Amendment) Financial Instruments: Presentation. The Fund issues cancellable units, in two classes of units, known respectively as Class A, targeted at retail investors and Class I, targeted at institutional investors,which are cancelled at the unit holder s option and do not have identical features. In accordance with MFRS 132 (Amendment) Financial Instruments: Presentation, such units, by virtue of not having identical features, are classified as financial liabilities. 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 ) of respective classes. The outstanding units are carried at the redemption amount that is payable at the statement of financial position if the unit holder exercises the right to put back the unit to the Fund. Each class of units is also offered in different currency denominations, i.e. Ringgit Malaysia, US Dollars, Euro and Sterlings. The US Dollars, Euro and Sterlings denominated classes are not offered for sale for the financial period from 2 December 2015 (date of launch) to 30 June Units are created and cancelled at the unit holder s option at prices based on the Fund s NAV per unit of respective classes at the close of business on the relevant dealing day. The Fund s NAV per unit of respective classes is calculated by dividing the net assets attributable to unit holders of respective classes with the total number of outstanding units of respective classes. K. INCREASE/DECREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Profit not distributed is included in net assets attributable to unit holders. Movements in net assets attributable to unit holders are recognised in the statement of comprehensive income as finance costs. L. SEGMENT INFOATION 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. M. 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 statement of financial position. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) N. 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 Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgments are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 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. 18

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 1. INFOATION ON THE FUND The Fund was constituted under the name of Aberdeen Islamic Malaysia Equity Fund (the Fund ) pursuant to the execution of a Deed dated 10 September 2012 as amended by the Supplemental Deed dated 11 March 2013 (collectively referred to as the Deeds ) between Aberdeen Islamic Asset Management Sdn Bhd (the Manager ) and Deutsche Trustees Malaysia Berhad (the Trustee ). The Fund seeks to achieve capital appreciation in the long term through investments in Shariah-compliant equities and equity related securities. The Fund is a multi-class Fund which offers two classes of units which are class A, targeted at retail investors and Class I, targeted at institutional investors. Each class of units are also offered in different currency denominations, i.e. Ringgit Malaysia, US Dollars, Singapore Dollars, Australian Dollars, Euro and Sterlings. The US Dollars, Singapore Dollars, Australian Dollars, Euro and Sterlings denominated classes are not offered for sale for the financial period ended 31 December All investments will be subjected to the Securities Commission ( SC ) s 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 is a company incorporated in Malaysia and regards Aberdeen Asset Management Sdn Bhd as its immediate holding company and Aberdeen Asset Management Plc as its ultimate holding company. The principal activities of the Manager are establishment and management of Unit Trust Funds. 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks which include market risk (including price risk), credit risk, liquidity risk, noncompliance risk, reclassification of Shariah status risk and capital risk. Financial instruments of the Fund are as follows: Note Receivables Financial assets at fair value through profit or loss Total As at 31 December 2017 Quoted Shariah-compliant securities 7-6,407,216 6,407,216 Dividends receivable Cash and cash equivalents 8 441, , ,116 6,407,216 6,848,332 19

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Note Receivables Financial assets at fair value through profit or loss Total As at 30 June 2017 Quoted Shariah-compliant securities 7-6,830,748 6,830,748 Dividends receivable 29,287-29,287 Amount due from stockbrokers Cash and cash equivalents 8 140, , ,841 6,830,748 7,000,589 All current liabilities are financial liabilities which are carried at amortised cost. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated by the prospectus and the SC s Guidelines on Unit Trust Funds. Market risk (i) Price risk Price risk arises mainly due to uncertainty on the future prices of Shariah-compliant investments. It represents the potential loss the Fund might suffer through holding market positions in the face of price movements. The Manager manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio. The table below shows the financial instruments of the Fund which are exposed to price risk Quoted Shariah- compliant securities designated at fair value through profit or loss 6,407,216 6,830,748 The following table summarises the sensitivity of the Fund s net asset value ( NAV ) and profit after tax to movements in prices of investments at the end of the reporting period. The analysis is based on the assumptions that the market price of investments fluctuates by 5% with all other variables held constant. This represents the Manager s best estimate of a reasonable possible shift in investments, having regard to the historical volatility of the prices. % change in price of quoted Shariah- compliant securities Market value Impact on profit after tax/nav As at 31 December % 6,086,855 (320,361) 0% 6,407, % 6,727, ,361 20

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (i) Price risk (continued) Impact on profit after tax/nav Market % change in price of quoted Shariah- compliant securities value As at 30 June % 6,489,211 (341,537) 0% 6,830, % 7,172, ,537 Credit risk Credit risk refers to the risk that an issuer or counterparty will default on its contractual obligation to make timely payments of profit, principals and proceeds resulting in financial loss to the Fund. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. Credit risk arising from cash and cash equivalents is managed by ensuring that the Fund will only place Islamic deposits in reputable licensed financial institutions. The settlement terms of the proceeds from the creation of units receivable from the Manager and redemption of units payable to the Manager are governed by the SC s Guidelines on Unit Trust Funds. For amount due from stockbrokers, the settlement terms are governed by the relevant rules and regulations as prescribed by respective stock exchange. The credit risk is minimal as all transactions in Shariah-compliant investments are settled/ paid upon delivery using approved stockbrokers. The following table sets out the credit risk concentration of the Fund: Amount due from stockbrokers Dividends receivable Cash and cash equivalents Total As at 31 December 2017 Finance - AA , ,059 Technology - NR , ,116 As at 30 June 2017 Consumer Products - NR - 2,504-2,504 Finance - AA , ,554 Property -NR - 10,074-10,074 Trading/ Services - NR - 16,709-16,709-29, , ,841 All financial assets of the Fund as at the end of the financial period are neither past due nor impaired. 21

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Liquidity risk Liquidity risk is the risk that investments cannot be readily sold at or near its actual value without taking a significant discount. This will result in lower NAV and profit after tax of the Fund. The Manager manages this risk by maintaining sufficient level of Islamic liquid assets to meet anticipated payment and cancellations of units by unitholders. Islamic liquid assets comprise cash, Islamic deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days. The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts in the table below are the contractual undiscounted cash flows. Less than 1 month Between 1 month to 1 year Total As at 31 December 2017 Amount due to the Manager - cancellation of units 4,017-4,017 Amount due to Trustee Amount due to stockbrokers Other payables and accruals Contractual cash outflows 4,017-4,017 As at 30 June 2017 Amount due to the Manager- creation of units cancellation of units Amount due to Trustee Amount due to stockbrokers Other payables and accruals Contractual cash outflows Non-compliance risk Non-compliance risk arises when the Manager and others associated with the Fund are not in compliance with the rules set out in the Fund s constitution, 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. Reclassification of Shariah status risk The risk that the currently held Shariah-compliant securities in the portfolio of Shariah-compliant funds may be reclassified to be Shariah non-compliant upon review of the securities by the Shariah Advisory Council of the Securities Commission performed twice yearly. If this occurs, the Manager will take the necessary steps to dispose of such securities. There may be opportunity loss to the Fund due to the Fund not being allowed to retain the excses capital gains derived from the disposal of the Shariah non- compliant equities. The value of the Fund may also be adversely affected in the event of a disposal of Shariah non- compliant equities at a price lower than the investment cost. Capital risk management The capital of the Fund is represented by equity consisting of unitholders capital and retained earnings. The amount of equity can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of 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. 22

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 (CONTINUED) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Fair value estimation Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The fair value of financial assets traded in active markets (such as trading Shariah- compliant securities) is based on quoted market prices at the close of trading on the year end date. The Fund utilises the last traded market price for financial assets where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine the point within the bid-ask spread that is most representative of the fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets and liabilities that are not traded in an active market is determined by using valuation techniques. Fair value hierarchy (i) The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. Level 1 Level 2 Level 3 Total As at 31 December 2017 Financial assets at fair value through profit or loss at inception - quoted Shairah- compliant securities 6,407, ,407,216 Level 1 Level 2 Level 3 Total As at 30 June 2017 Financial assets at fair value through profits or loss at inception - quoted Shariah- compliant securities 6,830, ,830,748 23