Aberdeen Islamic Asia Pacific Ex Japan Equity Fund. Annual Report 30 June 2018

Transcription

1 Aberdeen Islamic Asia Pacific Ex Japan Equity Fund Annual Report 30 June 2018

2 TABLE OF CONTENTS FUND INFORMATION 2 FUND PERFORMANCE DATA 3-5 MANAGER S REPORT 6-8 STATEMENT OF COMPREHENSIVE INCOME 9 STATEMENT OF FINANCIAL POSITION 10 STATEMENT OF CHANGES IN NET ASSET ATTRIBUTABLE TO UNITHOLDERS 11 STATEMENT OF CASH FLOWS 12 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY THE MANAGER 40 TRUSTEE S REPORT 41 SHARIAH ADVISER S REPORT 42 AUDITORS REPORT DISTRIBUTORS 46 1

3 FUND INFORMATION Name of Fund Aberdeen Islamic Asia Pacific Ex Japan 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 MSCI AC Asia Pacific Ex Japan Islamic 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 30 June 2018, the size of the Fund stood at million units. BREAKDOWN OF UNITHOLDINGS BY SIZE CLASS A - MYR Size of Holdings (Units) No. of Unitholders No. of Units Held ( 000) 5,000 and below ,001 to 10, ,001 to 50, ,001 to 500, ,001 and above 5 16,253 Total 13 16,446 BREAKDOWN OF UNITHOLDINGS BY SIZE CLASS A - USD 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

4 FUND PERFORMANCE DATA FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Sector Allocation % % % Shariah-Compliant Equities Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Materials Telecommunication Services Utilities Islamic Real Estate Information Technology Cash Total Country Allocation % % % Australia China Hong Kong India Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand Cash Total

5 FUND PERFORMANCE DATA (CONTINUED) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Class A - MYR As at Class A - USD Total Net Asset Value (NAV) (RM million) NAV per Unit (RM) Units in Circulation (million) Highest NAV per Unit (RM) Lowest NAV per Unit (RM) Return of the Fund (%) Capital Return (%) Income Return (%) Nil Nil Gross Distribution per Unit (sen) Nil Nil Net Distribution per Unit (sen) Nil Nil Management Expense Ratio (MER) (%) Portfolio Turnover Ratio (PTR) (times) Source: Deutsche Bank (Malaysia) Berhad Class A - MYR As at Class A - USD Total Net Asset Value (NAV) (RM million) NAV per Unit (RM) Units in Circulation (million) Highest NAV per Unit (RM) Lowest NAV per Unit (RM) Return of the Fund (%) Capital Return (%) Income Return (%) Nil Nil Gross Distribution per Unit (sen) Nil Nil Net Distribution per Unit (sen) Nil Nil Management Expense Ratio (MER) (%) Portfolio Turnover Ratio (PTR) (times) Source: Deutsche Bank (Malaysia) Berhad Average Total Return 1 year to (%) Since inception (annualised) to (%) Since inception (cumulative) to (%) Class A MYR Class A USD Source: Lipper for Investment Management as at 30 June

6 FUND PERFORMANCE DATA (CONTINUED) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Annual Total Return 1 year to (%) 1 year to (%) Since inception (annualised) to (%) Class A MYR Class A USD Source: Lipper for Investment Management as at 30 June 2018 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 Beginning 1 Income Return = Income Distribution per Unit / NAV per Unit Ex-Distribution Total Return = Capital Return x Income Return 1 Class A MYR 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 A USD 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. 5

7 MANAGER S REPORT Fund Performance The Aberdeen Islamic Asia Pacific Ex Japan Equity Fund returned -3.84% in ringgit terms over the period, compared with the total return of its benchmark, the MSCI AC Asia Pacific Ex Japan Islamic Index, of 2.19%. 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 Shariahcompliant equities. Class A - MYR Income Return % Class A - USD Capital Return % Total Return of Fund % Total Return of Benchmark % Income Return % Capital Return % Total Return of Fund % Total Return of Benchmark % FUND RETURN (SINCE INCEPTION) VS BENCHMARK /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/2018 Aberdeen Islamic APAC ex Japan Equity A MYR MSCI AC Asia Pacific Ex Japan Islamic TR USD Benchmark: MSCI AC Asia Pacific Ex Japan Islamic Index Source: Lipper for Investment Management as at 30 June 2018 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. 6

8 MANAGER S REPORT (CONTINUED) Market Review Asian equities rose over the review period, though macroeconomic and monetary policy concerns have increasingly come to the fore, resulting in higher risk aversion. In the second-half of 2017, Asian equities climbed steadily, with sentiment boosted by a steady global economic growth, upbeat corporate earnings and optimism over the prospects for Chinese internet stocks. Market momentum continued unabated at the start of 2018, with mainland stocks leading gains and their Hong Kong counterparts rising to record highs on the back of continued mainland inflows. Subsequently, volatility returned as investors grew skittish over a potentially faster pace of interest-rate hikes by major central banks. Most Asian currencies weakened in the first half of 2018, with the Indian rupee, Philippine peso and Indonesian rupiah losing the most ground. The three countries also felt the impact of volatile oil prices, given that they are all net oil importers. In view of inflation concerns and currency weakness, Indonesia and the Philippines started to raise interest rates while India also tightened monetary policy. The global economic recovery also started to diverge, as the US economy started to gather pace whereas growth in the Eurozone and most of Asia began to moderate. Trade tensions between the US and its major trading partners, especially China, also escalated. Mainland equities and the renminbi also were hindered by mixed economic data, despite the highly-anticipated inclusion of A shares into MSCI s indices. This compelled the central bank to hold its short-term interest rate, and cut banks reserve requirement ratio to boost liquidity. Market Outlook Asian markets are expected to remain on tenterhooks, given geopolitical uncertainties and monetary policy shifts over the next few months. Trade tensions between the US and its major trading partners will continue to weigh on investors minds. They will also be keeping a close watch on how major central banks manage liquidity and currency fluctuations. Upcoming elections in India and Indonesia will also be watched closely, as their outcomes may decide the fortunes of these two vast economies. Nevertheless, the global economy is still expanding steadily. Increased economic activity will lift commodity prices and inflation, which could further boost growth if well managed. Amid this supportive macroeconomic backdrop, governments in Asia are engaging in reforms that will strengthen their economies in the longer term. This should put economic growth in the region on a more stable footing. Asian central banks are also vigilant in ensuring that monetary policy remains appropriate, which should help calm foreign-exchange volatility and keep inflation in check. Investment Strategy The robust long-run fundamentals in Asia should continue to support corporate earnings. Our portfolios remain resilient and well-positioned for future growth. As true active managers, our long-time focus on quality and value should serve us well, with our holdings having the wherewithal to withstand the short-term volatility. Analysis of fund Performance Share Class A - MYR % % Change % NAV (RM Million) NAV/Unit (RM) The fund s NAV drop by -7.5% to 17.4 million as at 30 Jun Likewise, the NAV per unit also drop by -4.0% during the period. 7

9 MANAGER S REPORT (CONTINUED) Analysis of fund Performance Share Class A - USD % % Change % NAV (RM Million) NAV/Unit (RM) The fund s NAV drop by % to 0.32million as at 30 Jun Likewise, the NAV per unit rose by 2.1% during the period. Asset Allocation As at % As at % Shariah-Compliant Equities Cash Total Distribution / Unit Split No distribution or unit split was declared for the financial period ended 30 June 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. 8

10 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDING 30 JUNE 2018 SHARIAH-COMPLIANT NET INVESTMENT INCOME Note RM RM Dividend income 496, ,339 Net gain on financial assets at fair value through profit or loss (Shariah-compliant) 6 (618,254) 1,177,057 Net foreign currency exchange gain (121,364) 1,553,707 EXPENSES Management fee 3 382, ,881 Trustee s fees and custodian fees 4 53,788 57,286 Audit fee 7,200 7,200 Tax agent s fee 19,790 19,299 Transaction costs 19,508 21,169 Payment to charitable bodies 8(b) 3,414 16,845 Other expenses 37,308 33, , ,096 NET (LOSS)/PROFIT BEFORE TAXATION (644,538) 1,138,611 Taxation 5 47,979 (23,563) (DECREASE)/INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (692,517) 1,115,048 Net (loss)/profit after taxation and total comprehensive income comprises the following: Realised amount 693, ,139 Unrealised amount (1,385,568) 908,909 (692,517) 1,115,048 9

11 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 CURRENT ASSETS Note RM RM Cash and cash equivalents 7 578, ,405 Financial assets at fair value through profit or loss (Shariah-compliant) 6 18,298,394 20,998,720 Amount due from Manager - Creation of units 10, ,603 Dividends receivable 70,163 89,046 TOTAL ASSETS 18,957,476 22,177,774 CURRENT LIABILITIES Amount due to stockbrokers - - Amount due to Manager - Management fee 58,480 31,602 - Cancellation of units - 63,901 Amount due to Trustee 1,796 1,445 Amount due to stockbroker 57,183 - Other payables and accruals 43,374 29,634 TOTAL LIABILITIES (EXCLUDING NET ASSETS 126, ,833 ATTRIBUTABLE TO UNITHOLDERS) NET ASSET VALUE OF THE FUND 18,796,643 22,051,192 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 18,796,643 22,051,192 REPRESENTED BY: FAIR VALUE OF OUTSTANDING UNITS CLASS A - MYR 17,394,768 18,731,786 CLASS A - USD 1,401,875 3,319,406 18,796,643 22,051,192 NUMBER OF UNITS IN CIRCULATION 9 CLASS A - MYR 16,445,999 17,029,573 CLASS A - USD 309, ,924 NAV PER UNIT (RM) CLASS A - MYR CLASS A - USD NAV PER UNIT (RESPECTIVE CURRENCIES) CLASS A - MYR CLASS A - USD The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 10

12 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS FOR THE FINANCIAL YEAR ENDING 30 JUNE RM RM NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE BEGINNING OF THE FINANCIAL YEAR/PERIOD 22,051,192 8,209,159 Movement due to units created and cancelled during the financial year/period: - Creation of units arising from applications 5,079,929 15,979,609 - Cancellation of units (7,641,961) (3,252,624) 19,489,160 20,936,144 Net increase in net assets attributable to unitholders during the financial year/period: Net profit after taxation and total comprehensive income (692,517) 1,115,048 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE END OF THE FINANCIAL YEAR/PERIOD 18,796,643 22,051,192 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

13 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDING 30 JUNE 2018 Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sale of quoted Shariah-compliant securities 9,469,555 3,331,235 Purchase of quoted Shariah-compliant securities (7,302,326) (15,175,183) Dividend income received 515, ,663 Management fee paid (355,288) (239,882) Trustee's fee paid (23,771) (16,924) Payment of other fees and expenses (151,125) (130,322) Net realised foreign exchange loss (28,176) (35,625) Net cash used in operating activities 2,124,844 (11,960,038) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 5,408,516 15,643,035 Payments for cancellation of units (7,705,862) (3,256,139) Net cash generated from financing activities (2,297,346) 12,386,896 NET INCREASE IN CASH AND CASH EQUIVALENTS (172,502) 426,858 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR/PERIOD 751, ,547 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR/PERIOD 7 578, ,405 Cash and cash equivalent comprised of: Bank balances 7 578, ,405 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

14 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL PERIOD ENDING 30 JUNE 2018 A. BASIS OF PREPARATION OF 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 revenues and expenses during the reported financial period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note M. (a) 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 2017: Amendments to MFRS 107 Statement of Cash Flows Disclosure Initiative The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. (b) 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: (ii) Financial year beginning on/after 1 July 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. ^ Equity instruments and derivatives refer to Shariah-compliant equity instruments and Islamic derivatives * Debt instrument refers to trade and other receivables, cash and cash equivalents, financing and sukuk. ** Interest refers to profits earned from Shariah-compliant investments. 13

15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (b) 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: (continued) (ii) Financial year beginning on/after 1 July 2018 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 impacts from the adoption of the new standard on 1 July 2018 as below: There will be no impact on the Fund's accounting for financial assets as the Fund's quoted securities currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9. 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. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. B. INCOME RECOGNITION 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 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. 14

16 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. 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 year/period. Tax on dividend income from foreign quoted investments is based on the tax regime of the respective countries that the Fund invests in. E. 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. 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 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 as qualifying cash flow hedges. F. FINANCIAL ASSETS AND FINANCIAL LIABILITES (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. 15

17 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. FINANCIAL ASSETS AND FINANCIAL LIABILITES (CONTINUED) (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 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. Prior to 1 July 2013, foreign quoted Shariah-compliant investments are valued at the bid prices quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges. The Fund adopted MFRS 13 Fair Value Measurement from 1 July 2013 and changed its fair valuation inputs to utilise 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 for foreign quoted investments. If a valuation based on the market price does not represent the fair value of the Quoted Shariahcompliant 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. 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. 16

18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. FINANCIAL ASSETS AND FINANCIAL LIABILITES (CONTINUED) (ii) Recognition and measurement (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 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. G. 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. H. 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. 17

19 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. 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 unitholder 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 unitholder 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, Australia Dollars and Singapore Dollars. The Euro, Australian Dollars and Singapore Dollars denominated classes are not offered for sale for the financial year ended 30 June Units are created and cancelled at the unitholder 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 unitholders of respective classes with the total number of outstanding units of respective classes. J. INCREASE/DECREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Profit not distributed is included in net assets attributable to unitholders. Movements in net assets attributable to unitholders are recognised in the statement of comprehensive income as finance costs. 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, 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. L. 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. M. 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 1. INFORMATION ON THE FUND The Fund was constituted under the name of Aberdeen Islamic Asia Pacific Ex Japan Equity Fund (the Fund ) pursuant to the execution of a Deed dated 4 June 2015 (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, Euro, Australian Dollars and Singapore Dollars. The Euro, Australia Dollars and Singapore Dollars denominated classes are not offered for sale for the financial year ended 30 June All investments will be subjected to the Securities Commission ( SC ) s Guidelines on Unit Trust Funds, SC s requirements, the Deeds approved and the objective of the Fund, except where exemptions or variations have been approved by SC, internal policies and procedures and the Fund s objective. The Manager is a company incorporated in Malaysia. 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 and currency risk), credit risk, liquidity risk, non-compliance risk, reclassification of Shariah status risk and capital risk. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to the investment restrictions as stipulated by the prospectus and the SC s Guidelines on Unit Trust Funds. Financial instruments of the Fund are as follows: Financial assets at fair value through profit Note Receivables or loss Total As at 30 June 2018 RM RM RM Cash and cash equivalents 7 578, ,903 Quoted Shariah-compliant securities 6-18,298,394 18,298,394 Amount due from Manager 10,016-10,016 Dividends receivable 70,163-70,163 Total 659,082 18,298,394 18,957,476 19

21 NOTES TO THE FINANCIAL STATEMENTS 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Financial instruments of the Fund are as follows (continued): Financial assets at fair value through profit Note Receivables or loss Total As at 30 June 2017 RM RM RM Cash and cash equivalents 7 751, ,405 Quoted Shariah-compliant securities 6-20,998,720 20,998,720 Amount due from Manager 338, ,603 Dividends receivable 89,046-89,046 Total 1,179,054 20,998,720 22,177,774 All current liabilities are financial liabilities which are carried at amortised cost. 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 RM RM Quoted Shariah-compliant securities designated at fair value through profit or loss 18,298,394 20,998,720 The following table summarises the sensitivity of the Fund s net asset value (NAV) and profit after taxation 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. 20

22 NOTES TO THE FINANCIAL STATEMENTS Market risk (continued) (i) Price risk (continued) % change in price of quoted Shariah- compliant securities Market value Impact on profit after taxation/nav As at 30 June 2018 RM RM -5% 17,383,474 (914,920) 0% 18,298, % 19,213, ,920 As at 30 June 2017 RM RM -5% 19,948,784 (1,049,936) 0% 20,998, % 22,048,656 1,049,936 (ii) Currency risk Currency risk is associated with investments denominated in foreign currencies. When the foreign currencies fluctuate in an unfavourable movement against Ringgit Malaysia, the investments will face currency losses in addition to the capital gain/loss. The Manager will evaluate the likely directions of a foreign currency versus Ringgit Malaysia based on considerations of economic fundamentals such as profit rate differentials, balance of payments position, debt levels, and technical chart considerations. Shariahcompliant Dividends securities Receivable Total As at 30 June 2018 RM RM RM AUD 1,240,922 3,529 1,244,451 HKD 3,507,093 33,824 3,540,917 IDR 1,511,967-1,511,967 INR 2,578,330 2,151 2,580,481 KRW 3,124,276-3,124,276 PHP 339, ,374 SGD 1,839,065-1,839,065 TWD 1,572,632 24,620 1,597,252 USD 1,392,686-1,392,686 17,106,345 64,124 17,170,469 21

23 NOTES TO THE FINANCIAL STATEMENTS Market risk (continued) (ii) Currency risk (continued) Shariahcompliant Dividends securities Receivable Total As at 30 June 2017 RM RM RM AUD 1,928,015 3,895 1,931,910 HKD 2,927,898 46,846 2,974,744 IDR 2,518,123 30,096 2,548,219 INR 3,661,813 1,225 3,663,038 KRW 1,334,169-1,334,169 PHP 747, ,058 SGD 2,404,346-2,404,346 THB 1,441,048-1,441,048 USD 1,783,421-1,783,421 18,745,891 82,062 18,827,953 The table below summarises the sensitivity of the Fund's investments fair value to changes in foreign exchange movements. The analysis is based on the assumption that the foreign exchange rate changes by 5%, with all other variables remain assumption that the foreign exchange rate changes by 5%, with all other variables remain constants. This represents management's best estimate of a reasonable possible shift in the foreign exchange rate, having regard to historical volatility of this rate. Any increase/decrease in foreign exchange rate will result in a corresponding decrease/increase in the net assets attributable to unitholders by approximately 5%. Disclosures below are shown in absolute terms, changes and impacts could be positive or negative. Impact on profit after Change in price taxation/nav As at 30 June 2018 % RM AUD 5 62,223 HKD 5 177,046 IDR 5 75,598 INR 5 129,024 KRW 5 156,214 PHP 5 16,969 SGD 5 91,953 TWD 5 79,863 USD 5 69,634 22

24 NOTES TO THE FINANCIAL STATEMENTS 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Market risk (continued) (ii) Currency risk (continued) Impact on profit after Change in price taxation/nav As at 30 June 2017 % RM AUD 5 96,596 HKD 5 148,737 IDR 5 127,411 INR 5 183,15 KRW 5 66,708 PHP 5 37,353 SGD 5 120,217 THB 5 72,052 USD 5 89,171 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 Shariahcompliant investments are settled/paid upon delivery using approved stockbrokers. 23

25 NOTES TO THE FINANCIAL STATEMENTS 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) The following table sets out the credit risk concentration of the Fund: Cash and cash Amount due Dividends equivalents from Managers receivable Total As at 30 June 2018 RM RM RM RM Finance - AA1 578, ,903 - NR ,222 23,222 Consumer Products - NR - - 2,151 2,151 Energy - NR ,601 10,601 Industrial Products - NR - - 3,529 3,529 Materials - NR ,620 24,620 Trading/Services - NR - - 6,040 6,040 Others - NR - 10,016-10, ,903 10,016 70, ,082 As at 30 June 2017 Finance - AA1 751, ,405 - NR - - 9,426 9,426 Consumer Products - NR - - 1,225 1,225 Energy - NR ,830 6,524 Industrial Products - NR ,590 31,402 Materials - NR - 33,991 33,991 Trading/Services - NR - - 6,984 6,984 Others - NR - 338, , , ,603 89,046 1,179,054 All financial assets of the Fund as at the end of each financial year/period are neither past due nor impaired. 24

26 NOTES TO THE FINANCIAL STATEMENTS 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 taxation 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. Between Less than 1 month to 1 month 1 year Total As at 30 June 2018 RM RM RM Amount due to the Manager 58,480-58,480 Amount due to Trustee 1,796-1,796 Amount due to stockbroker 57,183-57,183 Other payables and accruals - 43,374 43,374 Contractual undiscounted cash flows 96,948 43, ,833 As at 30 June 2017 Amount due to the Manager 95,503-95,503 Amount due to Trustee 1,445-1,445 Amount due to stockbroker Other payables and accruals - 29,634 29,634 Contractual undiscounted cash flows 96,948 29, ,582 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 or the law that governs the Fund, applicable internal control procedures, or act fraudulently or dishonestly. It also includes the risk of the Manager not complying with internal control procedures. 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 This risk refers to the risk that the currently held Shariah-compliant securities in the portfolio of Shariahcompliant funds may be reclassified to be Shariah non-compliant in the periodic review of the securities by the Shariah Advisory Council of the Securities Commission, the Shariah Adviser or the Shariah Boards of the relevant Islamic indices. 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 excess 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. 25

27 NOTES TO THE FINANCIAL STATEMENTS 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Capital risk management The capital of the Fund is represented by equity consisting of unitholders capital and retained earnings. The amount of equity can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unitholders. The Fund s objective when managing capital is to safeguard the Fund s ability to continue as a going concern in order to provide returns for unitholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. Fair value estimation 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) are based on quoted market prices at the close of trading on the financial 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 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 26