BIMB INVEST MONEY MARKET FUND ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

Transcription

1 BIMB INVEST MONEY MARKET FUND ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

2 TABLE OF CONTENTS 1.0 MANAGER S REPORT TRUSTEE S REPORT SHARIAH COMMITTEE S REPORT DIRECTORS DECLARATION INDEPENDENT AUDITORS REPORT FINANCIAL STATEMENTS (AUDITED) CORPORATE DIRECTORY 42 2

3 1.0 MANAGER S REPORT Dear Unitholders, We are pleased to present the Manager s report of BIMB Invest Money Market Fund ( BIMMF) for the financial year ended 30 June Fund Name BIMB Invest Money Market Fund ( BIMMF ) 1.2 Fund Type Income 1.3 Fund Category Wholesale Islamic Money Market Fund 1.4 Fund Investment Objective The Fund seeks to provide liquidity* and current income**, while maintaining capital stability*** by investing in instruments that comply with Shariah requirements. Note: *liquidity refers to redemption payment made on T or T+1 whereby T is the Business Day where a request/application to redeem is received by the Manager before the cut-off time. **Income will be in the form of Units ***The Fund is not a capital guaranteed fund or a capital protected fund. Any material changes to the investment objective would require Unitholders approval. 1.5 Fund Performance Benchmark The benchmark for the Fund is based on the 1-month General Investment Account of Bank Islam Malaysia Berhad (which is published at their branches and website: ) after Corporate tax of 25%. 1.6 Distribution Policy and Mode of Distribution The Fund will distribute income at least once a month, subject to availability of income. The Fund endeavors to distribute income on monthly basis by way of reinvestment in the form of additional units. If income is distributed, it will be automatically reinvested via issuance of additional units, based on NAV per unit at the valuation point immediately following the distribution date. There is no incidental cost associated with the reinvestment. 3

4 1.7 Performance for the Financial Year Ended 30 June Performance Review For the year under review, the Fund registered a return of 3.49%, outperformed its benchmark by 1.09%. The Fund s return of 3.49% was entirely based on income distribution which is in line with the Fund s objective in providing the investors a regular stream of income. During the financial year, the Fund paid out its income distribution totaling RM13,599,614. As at 30 June 2016, the NAV of the Fund was at RM424,594,837 and the total units in circulation of the Fund stood at 424,513,448 units. There were no unit splits declared for the year under review. There were no significant changes in the state of affairs of the Fund and no circumstances that materially affected the interest of the Unitholders for the financial year ended 30 June As at 30 June 2016 Net Asset Value (RM) Before Distribution 425,840,611 Net Asset Value (RM) After Distribution 424,594,837 Units In Circulation 424,513,448 Net Asset Value Per Unit (RM) (a) Highest Net Asset Value Per Unit (RM) (b) Lowest Net Asset Value Per Unit (RM) (b) Return On Portfolio (%) (c) 3.49 Benchmark Return (%) (d) 2.40 (a) Net Asset Value (NAV) per unit after income distribution. (b) Highest and lowest NAV per unit for the year under review. (c) Return for the financial year from 1 July 2015 to 30 June (d) Benchmark Return for the financial year from 1 July 2015 to 30 June 2016 is after corporate tax of 25%. Note: Benchmark 1 month Bank Islam General Investment Account (Source: Bank Islam Malaysia Berhad s website). 4

5 1.7.2 Total Return for the last 5 Financial Years Financial Year Total Return (1) BIMMF (%) Benchmark (%) (2) 30 June June June June June Notes: 1. Total Return of the Fund has been verified by Novagni Analytics & Advisory Sdn. Bhd. ( W). 2. The Benchmark return is after corporate tax of 25%. Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. 1.8 Economic and Market Review Economy Global The United States ( US ) Gross Domestic Product (GDP) grew at a rate of 1.1% in the first quarter of 2016 as compared to 1.4% growth in the fourth quarter of 2015 and 2.0% in the third quarter of Economic growth in the first quarter was constrained by a strong dollar and sluggish global demand that had dampened exports. Productivity was also weakened by businesses' inventory overhang while lower oil prices induced higher spending cuts on inventory demand and equipments. US headline inflation rate gained 1.0% in June 2016 from 0.2% in July 2015 as higher cost of services for rent, transportation and medical care offsets declines in energy prices. Concurrently, US core inflation rate increased to 2.3% in June 2016 from 1.8% in July US unemployment rate fell to 4.9% in June 2016, from 5.3% in July 2015, as the US economic recovery facilitated robust hiring for the labor market. The Euro zone economy grew by 0.6% in the first quarter of 2016 as compared to 0.4% growth in the fourth quarter of 2015 and 0.3% in the third quarter of Growth in the Euro zone was driven by better-than-expected recovery in France and Spain that helped boost Euro zone s economic growth which was previously been heavily reliant on Germany. 5

6 Euro zone s annual inflation declined to 0.1% in June 2016 from 0.2% in July 2015 due to lower cost of energy, food and services. The Euro zone unemployment rate fell to 10.1% in May 2016 from 10.8% in July 2015 due to continued improvement in the unemployment rate in Malta (4.1%), Germany (4.2%) and Austria (6.1%) The Chinese economic growth of 6.7% in the second quarter of 2016 was largely driven by stimulus as the government and the central bank facilitate to shore up domestic consumption and external demand. The GDP results are the lowest in 25 years as world s second-largest economy moves towards a more sustainable economic model based on domestic consumption instead of trade and investment. (Source: Reuters, Bloomberg and RHB Research Institute Sdn Bhd) Local The Malaysian economy grew by 4.2% in the first quarter of 2016 as compared to 4.5% in the fourth quarter of 2015 and 4.7% in the third quarter of Underpinned by strong private consumption and investments, the Malaysian economy was resilient given the backdrop of global economic slowdown and moderating global trade. Malaysia s headline inflation in June 2016 declined to 1.6% from 3.1% in July 2015 due to lower energy prices and waning GST effects. Bank Negara s international reserve stood at USD 97.2 billion as at 31 May 2016 from USD 96.7 billion in July 2015 as capital outflows stabilise. At these levels, the foreign exchange reserves are sufficient to finance 8.0 months of retained imports and cover 1.2 times the short term external debt of the nation. Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.25% at the Monetary Policy Committee (MPC) meeting 19 May (Source: Bank Negara Malaysia, Bloomberg and RHB Research Institute Sdn. Bhd.) 6

7 1.8.2 Bond Market and Money Market Review Global US Treasury ( UST ) yields declined in the 5-year to 30-year tenure during the year under review with 10-year and 30-year bonds yields falling by 86bps and 81bps respectively reflecting concerns over sluggish global economic growth. Figure 1: US Treasury Yields Local Source: US Treasury Department, 30 June 2016 The sovereign bonds dominated the local bond market activities when Malaysian Government Securities (MGS) and Government Investment Issues (GII) recorded secondary market traded volume of RM847.1 billion for the year under review. Both the government bond yields and corporate bonds yields declined across the yield curve with the market expectation that the OPR will be reduced on the second half of Tenure/ Date Table 1: Sukuk/ Islamic Bond Yields 30 June June 2015 (%) (%) Change* (bps) 3-Year Bond GII (29.2) AAA Corporate Year Bond GII (14.3) AAA Corporate (4.0) 7-Year Bond GII (21.5) AAA Corporate (5.0) 10-Year Bond GII (13.1) AAA Corporate (3.0) Source: Bond Pricing Agency Malaysia (BPAM), 30 June

8 Figure 2: Overnight Policy Rate (OPR) Source: Bank Negara Malaysia, 30 June 2016 Figure 3: KLIBOR Source: Bank Negara Malaysia, 30 June

9 Figure 4: Interest Rate Swap (IRS) Source: Bank Negara Malaysia, 30 June Market Outlook and Strategy The Fund s strategy is to invest in money market instruments and short term Sukuk papers with good credit standing and attractive yield level that would maximize the profit rate while providing liquidity for investors. 9

10 1.10 Asset Allocation ASSET ALLOCATION 30 June 2016 (%) Money Market (Commodity Murabahah) 77.2 Money Market (Term Deposit-i) 8.9 Short Term Sukuk 13.9 Total

11 1.11 Other Performance Data for the financial year ended 30 June BIMB Invest Money Market Fund Unit Prices (RM) Highest NAV per Unit for the year Lowest NAV per Unit for the year Net Asset Value (NAV) and Units in Circulation (UIC) as at Year End Total NAV (RM) * 424,594, ,573, ,428,461 Units in Circulation (UIC) 424,513, ,585, ,442,391 NAV per unit (RM) * Total Return of Fund (%) Capital Growth (%) N/A N/A N/A Income Return (%) Return on Portfolio (%) Gross Distribution per unit (sen) Management Expense Ratio (MER) (%) Portfolio Turnover Ratio (PTR) (Times) * Ex Distribution Note: Management Expense Ratio It is the total management expenses expressed as an annual percentage of the Fund s average Net Asset Value. Portfolio Turnover Ratio It represents the average of the total acquisitions and disposals of the investment in the Fund for the financial year over the average Net Asset Value of the Fund calculated on a daily basis. 11

12 1.12 Distribution Monthly Distribution for the Financial Year Ended 30 June 2016 Distribution per Unit Gross Net Total Amount Month (sen) (sen) (RM) July ,898 August ,299 September ,062,619 October ,001,833 November ,188,102 December ,230,259 January ,173,635 February ,217,126 March ,234,895 April ,161,669 May ,355,505 June ,245,774 Total 13,599, Impact on NAV Arising from Distribution As at 30 June 2016 Before (RM) After (RM) Net Asset Value Per Unit Net Asset Value 425,840, ,594,837 Units In Circulation 424,513, ,513, Breakdown of Unit Holding by Size Size of Holding Number of Unitholders Number of Units Held As at 30 June 2016 (%) Below 5, ,001 to 10, ,001 to 50, , ,001 to 500, , ,001 and above* ,027, Total ,513, * Included under this category is nominee account. 12

13 1.15 Policy on Rebate and Soft Commission The Manager or any delegate thereof shall not retain any rebate from, or otherwise share in any commission with, any broker in consideration for direct dealings in the investments of the Fund. Accordingly, any rebate or shared commission shall be directed to the account of the Fund concerned. However, the Manager or any delegate thereof may retain goods and services ( Soft Commissions ) from any broker/dealer, only if the goods and services are of demonstrable benefit to the Unitholders such as research materials and advisory services which are incidental to the investment management activities of the Fund. For and on behalf of the Manager BIMB Investment Management Berhad Date: 29 August

14 2.0 TRUSTEE S REPORT To the Unit Holders of BIMB INVEST MONEY MARKET FUND FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 We, AMANAHRAYA TRUSTEES BERHAD, have acted as Trustee of BIMB INVEST MONEY MARKET FUND for the financial year ended 30 June In our opinion, BIMB INVESTMENT MANAGEMENT BERHAD, the Manager, has operated and managed BIMB INVEST MONEY MARKET FUND in accordance with the limitations imposed on the investment powers of the management company under the Deed, securities laws and the applicable Guidelines on Unlisted Capital Market Products Under the Lodge and Launch Framework during the financial year then ended. We are of the opinion that: (a) (b) (c) Valuation and pricing is carried out in accordance with the Deed and any regulatory requirement; Creation and cancellation of units are carried out in accordance with the Deed and any regulatory requirement; and The distribution of income made by BIMB INVEST MONEY MARKET FUND as declared by the Manager is appropriate and reflects the investment objective of BIMB INVEST MONEY MARKET FUND. Yours faithfully AMANAHRAYA TRUSTEES BERHAD HABSAH BINTI BAKAR Chief Executive Officer Kuala Lumpur, Malaysia Date: 29 August

15 3.0 SHARIAH COMMITTEE S REPORT ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 ب س م ٱ ٱلر ح م ن ٱلر ح یم To the Unitholders of BIMB INVEST MONEY MARKET FUND We have acted as the Shariah Committee of BIMB Invest Money Market Fund. Our responsibilities are to ensure that the procedures and processes employed by BIMB Investment Management Berhad and that the provisions of the Deed dated 16 March 2009 are in accordance with Shariah principles. In our opinion, BIMB Investment Management Berhad has managed and administrated BIMB Invest Money Market Fund in accordance with Shariah principles and complied with applicable guidelines, ruling or decision issued by the Securities Commission pertaining to Shariah matters for the financial year ended 30 June In addition, we also confirm that the investment portfolio of BIMB Invest Money Market Fund comprises deposits and money market instruments which are Shariah-compliant. أعلم واالله For and on behalf of the Shariah Committee USTAZ DR. AHMAD SHAHBARI@SOBRI SALAMON (Chairman) USTAZ DR. YUSOF RAMLI (Committee Member). USTAZAH DR. ASMAK AB. RAHMAN (Committee Member) Date: 29 August

16 4.0 DIRECTORS DECLARATION ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 To the Unitholders of BIMB INVEST MONEY MARKET FUND We, Dato Ghazali bin Awang and Najmuddin bin Mohd Lutfi, being two of the directors of the Manager, BIMB Investment Management Berhad, for BIMB Invest Money Market Fund do hereby state that in our opinion, the accompanying Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Net Asset Value and Statement of Cash Flows are drawn up so as to give a true and fair view of the Statement of Financial Position of the Fund as at 30 June 2016 and Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Net Asset Value and Statement of Cash Flows for the year ended on that date. For and on behalf of the Board of Directors, BIMB Investment Management Berhad.. DATO GHAZALI BIN AWANG (Non Executive Independent Director).. NAJMUDDIN BIN MOHD LUTFI (Chief Executive Officer) Date: 29 August

17 5.0 INDEPENDENT AUDITORS REPORT Independent auditors report to the unitholders of BIMB Invest Money Market Fund (Established in Malaysia) Report on the Financial Statements We have audited the financial statements of BIMB Invest Money Market Fund ( the Fund ), which comprise the statement of financial position as at 30 June 2016, and the statements of profit or loss and other comprehensive income, changes in net asset value and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 19 to 41. Manager s and Trustee s Responsibility for the Financial Statements The Manager of the Fund is responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and Securities Commission s Guidelines on Wholesale Funds in Malaysia. The Manager is also responsible and for such internal control as the Manager determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 17

18 Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Fund as of 30 June 2016 and of its financial performance, changes in net asset attributable to unitholders and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Other Matters This report is made solely to the unitholders of the Fund as a body in accordance with Securities Commission s Guidelines on Wholesale Funds in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. KPMG Desa Megat & Co. Firm Number: AF 0759 Chartered Accountants Ow Peng Li Approval Number: 2666/09/17(J) Chartered Accountant Petaling Jaya, Selangor Date: 29 August

19 6.0 FINANCIAL STATEMENTS (AUDITED) BIMB Invest Money Market Fund 6.1 Statement of Financial Position as at 30 June RM 2015 RM Note Investments Islamic debt securities 4 58,665,250 26,288,240 Short term investments 5 332,111, ,086,076 Total investments 390,776, ,374,316 Current assets Other receivables 2,944,331 1,714,476 Cash and cash equivalents 6 32,369,692 3,626,798 Total assets 426,091, ,715,590 Current liabilities Other payables 250, ,847 Total liabilities 250, , ,840, ,524,743 Unitholders fund Unitholders capital 7 424,260, ,304,237 Retained profits 1,579, , ,840, ,573,910 Distribution reserve - 950, ,840, ,524,743 Number of units in circulation 7 424,513, ,585,214 Net asset value attributable to unitholders 425,840, ,573,910 Net asset value per unit (sen) The notes on pages 23 to 41 are an integral part of these financial statements. 19

20 6.2 Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June 2016 Note Income Income from Islamic debt securities 2,392, ,776 Income from short term investments 13,761,895 11,629,676 Hibah from Al-Wadiah account 2,377 1,124 Net unrealised gain from financial instruments at fair value through profit or loss 54,250 46,439 RM RM 16,211,198 12,415,015 Less: Amortisation of premium (342,280) (38,052) Expenses 15,868,918 12,376,963 Manager s fee 8 1,979,052 1,706,182 Trustee s fee 9 79,162 68,248 Audit fee 11,000 11,000 Tax agent s fee 2,000 2,000 Administrative expenses 133,840 36,002 2,205,054 1,823,432 Net income before taxation 13,663,864 10,553,531 Tax expense Net income after taxation 13,663,864 10,553,531 Other comprehensive income for the year - - Total comprehensive income for the year 13,663,864 10,553,531 Total comprehensive income for the year consist of: Realised amount 13,609,614 10,507,092 Unrealised amount 54,250 46,439 13,663,864 10,553,531 The notes on pages 23 to 41 are an integral part of these financial statements. 20

21 6.3 Statement of Changes in Net Asset Value for the financial year ended 30 June 2016 Note Unitholders capital Distribution reserve Retained profits Total net asset value RM RM RM RM As at 30 June 2014/1 July ,218, , , ,187,097 Movement in unitholders contribution or distribution Creation of units via cash 108,417, ,417,919 Reinvestment of distributions 10,301,355 (10,301,355) - - Cancellation of units (89,633,804) - - (89,633,804) Distributions 11-10,493,552 (10,493,552) - Total attributable to unitholders 29,085, ,197 (10,493,552) 18,784,115 Net income for the year ,553,531 10,553,531 As at 30 June 2015/1 July ,304, , , ,524,743 Movement in unitholders contribution or distribution Creation of units via cash 184,671, ,671,986 Reinvestment of distributions 13,304,673 (950,833) - 12,353,840 Cancellation of units (113,019,982) - - (113,019,982) Distributions (12,353,840) (12,353,840) Total attributable to unitholders 84,956,677 (950,833) (12,353,840) 71,652,004 Net income for the year ,663,864 13,663,864 As at 30 June ,260,914-1,579, ,840,611 The notes on pages 23 to 41 are an integral part of these financial statements. 21

22 6.4 Statement of Cash Flows for the financial year ended 30 June RM RM Cash flows from operating activities Purchase of short term investments (23,025,654) (157,099,439) Purchase of Islamic debt securities (64,065,040) (17,300,400) Maturity of Islamic debt securities 31,400,000 23,500,000 Income from Islamic debt securities and short term investments 14,924,716 11,594,515 Hibah from Al-Wadiah account 2,377 1,124 Management fee paid (1,943,961) (1,685,315) Trustee fee paid (77,758) (67,413) Audit fee paid - (10,000) Tax agent fee paid - (5,000) Payment for other administrative (123,790) (33,145) Net cash used in operating activities (42,909,110) (141,105,073) Cash flows from financing activities Cash receipt for creation of units 184,671, ,417,919 Cash payment for cancellation of units (113,019,982) (89,933,804) Net cash generated from financing activities 71,652,004 18,484,115 Net increase/(decrease) in cash and cash equivalents 28,742,894 (122,620,958) Cash and cash equivalents at beginning of the financial year 3,626, ,247,756 Cash and cash equivalents at end of the financial year 32,369,692 3,626,798 Cash and cash equivalents comprise: Cash at bank 367,190 38,973 Short term placements 32,002,502 3,587,825 32,369,692 3,626,798 The notes on pages 23 to 41 are an integral part of these financial statements. 22

23 BIMB Invest Money Market Fund (Established in Malaysia) 6.5 Notes to the Financial Statements 1. Information on the Fund BIMB Invest Money Market Fund (hereinafter referred to as the Fund ) was constituted pursuant to the execution of a Deed dated 16 March 2009 between the Manager - BIMB Investment Management Berhad, the Trustee - AmanahRaya Trustees Berhad and the registered unitholders of the Fund. The address of the registered office and principal place of business of the Fund is as follows: Registered office Level 32, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Principal place of business Level 19, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur The principal activity of the Fund is to invest in authorised investments as defined in the Deed, which include short term placements and Islamic debt securities. The Manager, BIMB Investment Management Berhad, a company incorporated in Malaysia, is a subsidiary of Bank Islam Malaysia Berhad. The financial statements were approved by the Board of Directors of the Manager on 29 August Basis of preparation (a) Statement of compliance The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards ( IFRS ), the Deed and Securities Commission s Guidelines on Wholesale Funds ( Guidelines ) in Malaysia. The following are accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board ( MASB ) but have not been adopted by the Fund: 23

24 2. Basis of preparation (continued) (a) Statement of compliance (continued) MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2016 MFRS 14, Regulatory Deferral Accounts Amendments to MFRS 5, Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements Cycle) Amendments to MFRS 7, Financial Instruments: Disclosures (Annual Improvements Cycle) Amendments to MFRS 10, Consolidated Financial Statements, MFRS 12, Disclosure of Interests in Other Entities and MFRS 128, Investments in Associates and Joint Ventures Investment Entities: Applying the Consolidation Exception Amendments to MFRS 11, Joint Arrangements Accounting for Acquisitions of Interests in Joint Operations Amendments to MFRS 101, Presentation of Financial Statements Disclosure Initiative Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138, Intangible Assets Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to MFRS 116, Property, Plant and Equipment and MFRS 141, Agriculture Agriculture: Bearer Plants Amendments to MFRS 119, Employee Benefits (Annual Improvements Cycle) Amendments to MFRS 127, Separate Financial Statements Equity Method in Separate Financial Statements Amendments to MFRS 134, Interim Financial Reporting (Annual Improvements Cycle) MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2017 Amendments to MFRS 107, Statement of Cash Flows Disclosure Initiative Amendments to MFRS 112, Income Taxes Recognition of Deferred Tax Assets for Unrealised Losses MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 MFRS 9, Financial Instruments (2014) MFRS 15, Revenue from Contracts with Customers MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019 MFRS 16, Leases MFRSs, Interpretations and amendments effective for a date yet to be confirmed Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 24

25 2. Basis of preparation (continued) (a) Statement of compliance (continued) The Fund plans to apply the abovementioned accounting standards, amendments and interpretations, where applicable: from the annual period beginning on 1 July 2016 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January 2016, except for MFRS 14, and Amendments to MFRS 10, MFRS 11, MFRS 116, MFRS 119, MFRS 127, MFRS 128 and MFRS 134 which are not applicable to the Fund. from the annual period beginning on 1 July 2017 for those amendments that are effective for annual periods beginning on or after 1 January from the annual period beginning on 1 July 2018 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January from the annual period beginning on 1 July 2019 for the accounting standard that is effective for annual periods beginning on or after 1 January The Fund is currently assessing the financial impact of adopting the abovementioned standards, amendments and interpretations. (b) Basis of measurement The financial statements are prepared on the historical cost basis except as disclosed in Note 3(a)(ii). (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia ( RM ), which is the Fund s functional currency. (d) Use of estimates and judgements The preparation of financial statements inconformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future years affected. 25

26 There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements. 3. Significant accounting policies The accounting policies set out below have been applied consistently to the periods presented in these financial statements, unless otherwise stated. (a) Financial instruments (i) Initial recognition and measurement A financial instrument is recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the instrument. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. (ii) Financial instrument categories and subsequent measurement The Fund categorises financial instruments as follows: Financial assets (a) Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading, or financial assets that are specifically designated into this category upon initial recognition. These include Islamic debt securities. Financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in the statement of profit or loss. (b) Financing and receivables Financing and receivables category are debt instruments that are not quoted in an active market and these comprises other receivables, cash and cash equivalents and short term investments. Financial assets categorised as financing and receivables are subsequently measured at amortised cost using the effective profit method. 26

27 3. Significant accounting policies (continued) All financial assets except for those measured at fair value through profit or loss, are subject to review for impairment, see note 3 (f). (a) Financial instruments (continued) (ii) Financial instrument categories and subsequent measurement (continued) Financial liabilities Financial liabilities measured at amortised cost comprise of other payables. (iii) Derecognition A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. (b) Income recognition Income from short term investments and Islamic debt securities are recognised as it accrues, using the effective profit method in profit or loss. (c) Islamic debt securities Islamic debt securities are investments in sukuk which are held for trading. It is categorised as fair value through profit or loss and subsequently measured at their fair value with the gain or loss recognised in profit or loss. (d) Short term investments 27 Short term investments are mainly Commodity Murabahah, Short Term Money Market Deposit i and Term Deposit i Tawarruq with maturity more than 30 days and less than 1 year. Short term investments are categorised and measured as financing and receivables in accordance with Note 3(a)(ii).

28 3. Significant accounting policies (continued) (e) Cash and cash equivalents Cash and cash equivalents consist of cash at bank and short term placement with licensed financial institutions which have insignificant risk of changes in fair value with original maturities of less than 30 days, and are used by the Fund in the management of its short term commitments. Cash and cash equivalents are categorised and measured as financing and receivables in accordance with Note 3(a)(ii)(b). (f) Impairment Financial assets All financial assets (except for financial assets categorised as fair value through profit or loss) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. An impairment loss in respect of financing and receivables is recognised in profit or loss and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the asset s original effective profit rate. The carrying amount of the asset is reduced through the use of an allowance account. (g) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the statement of financial position date,, and any adjustment to tax payable in respect of previous years. (h) Unitholders capital The Fund issues cancellable units, which are cancelled at the unitholders option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding units is carried at the redemption amount that is payable at the financial position date if the holder exercises the right to put the unit back to the Fund. 28

29 3. Significant accounting policies (continued) (h) Unitholders capital (continued) Units are created and cancelled at the unitholders option at prices based on the Fund s net asset value per unit at the time of creation or cancellation. The Fund s net asset value per unit is calculated by dividing the net asset attributable to unitholders with the total number of outstanding units. In accordance with the Securities Commission s Guidelines on Wholesale Funds in Malaysia, investment positions are valued based on the last traded market price for the purpose of determining the net asset value per unit for creations and cancellations. The units in the Fund are puttable instruments, classified as equity, which entitle the unitholders to a pro-rata share of the net asset of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units are based on the change in the net asset of the Fund. (i) Distribution Distribution is at the discretion of the Fund. A distribution to the Fund s unitholders is accounted for as a deduction from realised reserves. A proposed distribution is recognised as a liability in the year in which they are declared. (j) Net Asset Value The Net Asset Value is calculated after deducting the retained profits allocated for distribution. (k) Fair value measurement The Fund adopted MFRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, except for share-based payment and lease transactions, is determined 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. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. 29

30 3. Significant accounting policies (continued) (k) Fair value measurement (continued) When measuring the fair value of an asset or a liability, the Fund uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund can access at the measurement date. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability. The Fund recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers. 30

31 4. Islamic Debt Securities Percentage of value As at 30 June 2016 Maturity Cost Fair value of funds at 2016 Issuer date Rating* RM RM % Besraya (M) Sdn Bhd AA3 5,000,711 5,002, Lafarge Malaysia Berhad AA2 10,001,437 10,009, Kapar Energy Ventures Sdn Bhd AA+IS 13,500,070 13,500, Malakof Power Berhad AA-IS 4,507,198 4,508, BGSM Management Berhad AA3 15,624,751 15,640, Imtiaz Sukuk Berhad AA2 (S) 9,980,863 10,003, ,615,030 58,665, As at 30 June 2015 Percentage of value Maturity Cost Fair value of funds at 2015 Issuer date Rating* RM RM % Tanjung Bin O&M Berhad AA-IS 9,000,059 9,000, BGSM Management Berhad AAA3 8,067,042 8,067, BGSM Management Berhad AAA3 9,225,170 9,221, ,292,271 26,288, * Rating by Malaysian Rating Corporation Berhad. 5. Short term investments 2016 RM 2015 RM Short term investments with maturity more than 30 days: Commodity Murabahah 314,140, ,826,564 Special Investment Account - 51,095,386 General Investment Account - 100,352,655 Term Deposit i Tawarruq* - 14,511,471 Wadiah - 4,300,000 Short term money market deposit - Islamic 17,971, ,111, ,086,076 * Term Deposit i Tawarruq is placed with Bank Islam Malaysia Berhad, the holding company of the Manager. 31

32 6. Cash and cash equivalents RM RM Short term investments with maturity less than 30 days Commodity Murabahah 12,432,780 - Short Term Money Market Deposit - Islamic 9,339,297 - Term Deposit i Tawarruq* 10,230,425 1,124,053 Wadiah - 2,463,772 32,002,502 3,587,825 Cash at bank* 367,190 38,973 32,369,692 3,626,798 * Term Deposits i Tawarruq and cash at bank are placed with Bank Islam Malaysia Berhad, the holding company of the Manager. 7. Unitholders capital No. of units RM At 30 June 2014/1 July ,442, ,218,767 Creation of units 118,642, ,719,274 Cancellation of units (89,499,495) (89,633,804) At 30 June 2015/ 1 July ,585, ,304,237 Creation of units 197,784, ,976,659 Cancellation of units (112,855,919) (113,019,982) At 30 June ,513, ,260,914 In accordance with the Deed, the maximum number of units that can be issued for circulation is 1,125,000,000 units. As at 30 June 2016, the number of units yet to be issued was 700,486,552 units (2015: 785,414,786 units). Based on historical information over the last 12 months, redemption levels are expected to approximate RM113,000,000 (2015: RM90,000,000) and the average monthly level of creation net of redemption are expected to approximate RM7,080,000 (2015: RM2,424,000). However, the actual level of redemptions may differ significantly from the historical experience. 32

33 8. Manager s fee The manager s fee payable to Manager is based on 0.50% (2015: 0.50%) per annum of the net asset value of the Fund calculated on a daily basis. 9. Trustee s fee Trustee fee was charge at a rate of 0.02% (2015: 0.02%) per annum of the net asset value of the Fund, calculated on a daily basis subject to a minimum fee of RM12,000 (2015: RM12,000) per annum. 10. Tax expense RM RM Tax expense - Current year - - Reconciliation of effective tax expense Net income before taxation 13,663,864 10,553,531 Income tax using Malaysian tax rate 3,279,327 24% (2015: 25%) Non-deductible expenses 529, ,371 Income not subject to tax (3,808,540) (3,103,754) Distribution RM RM Distribution to unitholders is from the following sources: Income from short term investments 13,761,895 11,629,676 Income from Islamic debt securities 2,392, ,776 Hibah from Al-Wadiah account 2,377 1,124 16,156,948 12,368,576 Less: Expenses (2,205,054) (1,823,432) Amortisation of premium (342,280) (38,052) Undistributed income (1,255,774) (13,540) Net distribution 12,353,840 10,493,552 33

34 12. Units held by related party The total number and value of units held legally or beneficially by a related party of the Manager is as follows: As at As at Units RM Units RM Syarikat Takaful Malaysia Berhad The Manager does not hold any units in the Fund (2015: Nil). 13. Transactions with related parties Other than as disclosed in Note 5, 6 and 12 of the financial statements, other transactions with related parties are as follows: Transactions as at Balance as at RM RM RM RM The Manager BIMB Investment Management - Management fee 1,979,052 1,706,182 (188,351) (153,260) Holding company of the Manager Bank Islam Malaysia Berhad - Income from short term investments (1,144,132) (1,439,248) 10,230,425 15,635,524 The Trustee AmanahRaya Trustees Berhad - Trustee fee 79,162 68,247 (7,534) (6,130) 34

35 14. Transactions with Financial Institutions Islamic debt securities and short term investments Value of Trade RM % of Total trade 1 July 2015 to 30 June 2016 Alliance Islamic Bank Berhad 751,040, MIDF Amanah Investment Bank Berhad 535,695, Bank Islam Malaysia Berhad* 425,529, Bank Kerjasama Rakyat Malaysia Berhad 335,130, KAF Investment Bank Berhad 332,008, Hong Leong Islamic Bank Berhad 295,138, Al Rajhi Banking & Investment Corporation (M) Berhad 291,668, Bank Muamalat Malaysia Berhad 242,581, AmIslamic Bank Berhad 206,167, Other broker and financial institutions 688,564, ,103,526, July 2014 to 30 June 2015 Bank Muamalat Malaysia Berhad 980,860, AmIslamic Bank Berhad 946,656, Bank Islam Malaysia Berhad* 911,919, Public Islamic Bank 700,174, Hong Leong Islamic Bank Berhad 648,966, Alliance Islamic Bank Berhad 305,293, RHB Islamic Bank Berhad 253,171, KAF Investment Bank Berhad 245,025, Standard Chartered Saadiq Berhad 240,901, ,232,969, * Transactions with the related parties have been entered into in the normal course of business and have been transacted at arm s lengths basis. 35

36 15. Management Expense Ratio ( MER ) The management expense ratio for the financial year is 0.56% (2015: 0.53%). Management expense ratio is the ratio of total fees and recovered expenses of the Fund expressed as a percentage of the Fund s average net asset value. It is a total management expenses expressed as an annual percentage of the Fund s average net asset value. 16. Portfolio Turnover Ratio ( PTR ) The portfolio turnover ratio for the financial year is 5.15 times (2015: 7.63 times). It represents the average of total acquisitions and disposals of the investments in the Fund for the financial year over the average net asset value of the Fund calculated on a daily basis. 17. Financial instruments 17.1 Categories of financial instruments The table below provides an analysis of financial instruments categorised as follows: (a) Financing and receivables ( F&R ); (b) Fair value through profit or loss ( FVTPL ); (c) Other financial liabilities measured at amortised cost ( FL ). Carrying amount F&R/ (FL) FVTPL RM RM RM 2016 Financial assets Islamic debt securities 58,665,250-58,665,250 Short term investments 332,111, ,111,730 - Cash and cash equivalents 32,369,692 32,369,692 - Receivables 2,944,331 2,944, ,091, ,425,753 58,665,250 Financial liabilities Payables (250,392) (250,392) - 36

37 17. Financial instruments (continued) 17.1 Categories of financial instruments (continued) Carrying amount F&R/ (FL) FVTPL RM RM RM 2015 Financial assets Islamic debt securities 26,288,240-26,288,240 Short term investments 309,086, ,086,076 - Cash and cash equivalents 3,626,798 3,626,798 - Receivables 1,714,476 1,714, ,715, ,427,350 26,288,240 Financial liabilities Payables (190,847) (190,847) Net gains and losses arising from financial instruments RM RM Net gains on: Fair value through profit or loss: - Designated upon initial recognition 2,104, ,163 Financing and receivables 13,764,272 11,630,800 15,868,918 12,376, Financial risk management The Fund has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk Investment risk 37

38 17. Financial instruments (continued) 17.4 Credit risk Credit risk is the risk of a financial loss to the Fund if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Fund s exposure to credit risk arises principally from its short term investments and Islamic debt securities. Risk management objectives, policies and processes for managing the risk The Manager manages the credit risk by setting counterparty limits and undertaking credit evaluation to minimise the risk. The exposure to credit risk is monitored on an ongoing basis. Exposure to credit risk At balance sheet date, 100% (2015: 100%) of the Fund s short term investments are with 9 (2015: 5) licensed financial institutions. The Fund s maximum credit risk exposure at the reporting date is represented by the respective carrying amounts of the relevant financial assets in the statement of financial position. The financial assets of the Fund are neither past due or impaired as at date of statement of financial position 17.5 Liquidity risk Liquidity risk is the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund s exposure to liquidity risk arises principally from its various payables. The Fund maintains sufficient level of liquid assets, after consultation with the Trustee, to meet anticipated payments and cancellation of units by unitholders. Liquid assets comprise cash at bank and short term investments, which are capable of being converted into cash within 7 days Market risk Market risk is the risk that changes in market prices, such as profit rates and market prices will affect the Fund s financial position or cash flows. 38

39 17. Financial instruments (continued) 17.6 Market risk (continued) Profit rate risk The profit rate profile of the Fund s significant profit-bearing financial instruments, based on carrying amounts as at the end of reporting period was: RM RM Fixed rate instruments Islamic debt securities 58,665,250 26,288,240 Short term investments 332,111, ,086,076 Cash and cash equivalents - Short term placements with maturity less than 30 days 32,002,502 3,587,825 Fair value sensitivity analysis for fixed rate instruments The Fund accounts for the Islamic debt securities and short term investments with licensed financial institutions at fair value through profit and loss, and financing and receivables, respectively. An increase of 100 basis point (bp) in profit rates of Islamic debt securities at the end of the reporting period would have decreased equity and profit or loss by RM270,799 (2015: RM168,792 ). A decrease of 100 basis point (bp) in profit rates would have equal but opposite effect on the equity and profit or loss respectively. The Fund s fixed rate of short term investments and placements are not significantly exposed to profit rate risk Investment risk Investments are bound by regulatory guidelines that govern the maximum securities holdings and maximum liquid assets holdings. Investment risks for fixed income funds are in the form of profit rate and credit risks. To manage these risks, investments will be in investment grade sukuks. Risk management objectives, policies and processes for managing the risk The Manager has written policies and guidelines on risk management, which set out the overall investment risks strategies and general risk management philosophies. These processes monitor, measure and control risks associated with the business. Matters relating to investment risks in respect of funds portfolio are discussed during the Investment Committee meetings of the Manager held at least 6 (2015: 6) times a year. 39