CIMB-PRINCIPAL ASIAN EQUITY FUND UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017

Transcription

1 UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017

2 CONTENTS PAGE(S) INVESTORS' LETTER 1 MANAGER'S REPORT 2-7 Fund Objective and Policy Performance Data Market Review Fund Performance Portfolio Structure Market Outlook Investment Strategy Unit Holdings Statistics Soft Commissions and Rebates STATEMENT BY MANAGER 8 TRUSTEE'S REPORT 9 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 10 UNAUDITED STATEMENT OF FINANCIAL POSITION 11 UNAUDITED STATEMENT OF CHANGES IN EQUITY 12 UNAUDITED STATEMENT OF CASH FLOWS 13 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 41 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 42-46

3 INVESTORS' LETTER Dear Valued Investors, Thank you for your continued support and for the confidence that you have placed in us. We are pleased to share that CIMB-Principal Asset Management Berhad ("CIMB-Principal") Malaysia concluded the 2 nd Half of 2017 with RM51 billion in Asset under Management ( AUM ). CIMB-Principal s Group AUM increased by 11% to RM68 billion, for 1-year period ending 31 December Our AUM for Private Retirement Scheme ("PRS") business increased by 51% year-on-year ("y-o-y") to RM517 million as at 31 December We continue to achieve prestigious recognitions from The Edge Thomson Reuters Lipper Fund Awards: The Edge Thomson Reuters Lipper Malaysia Fund Awards 2017 Best Equity Global, 3 years & 5 years : CIMB-Principal Global Titans Fund Best Equity Asia Pacific Ex-Japan, 5 years : CIMB-Principal Asian Equity Fund Best Equity Asia Pacific Ex-Japan - Malaysia Islamic, 5 years : CIMB Islamic Asia Pacific Equity Fund Thomson Reuters Lipper Fund Award Global Islamic 2017 Best Equity Asia Pacific Ex-Japan (Islamic), Best Fund over 5 years : CIMB Islamic Asia Pacific Equity Fund These awards reflect our consistent fund performance, in tandem with our commitment to provide the best customer experience to you. CIMB-Principal was also awarded Fund House of the Year in Malaysia by AsianInvestor for the Asset Management Awards 2017, its second consecutive win and The Employees' Provident Fund ("EPF") External Portfolio Managers Awards 2017 for the Best Global Bond Portfolio Manager. These industry recognitions reflect our success in scaling up our investment capabilities while building a solid track record and earning the trust of our clients over time. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer 1

4 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to seek capital growth by investing primarily in equities and equity related instruments in the Asia ex Japan. Has the Fund achieved its objective? Yes. It has met its objective of capital appreciation over the medium to long term. What are the Fund investment policy and principal investment strategy? The Fund aims to achieve capital growth by investing primarily in equity securities of companies domiciled in, listed in, and/or have significant operations in Asia ex Japan. Significant operations means major businesses of the company. For example, the Fund can invest in a company with significant business/operations in Thailand but listed on the New York Stock Exchange ("NYSE"). The threshold for significant operations would be if more than 30% of total group revenue derives from countries in Asia ex Japan. The calculation would be based on the most recent financial reports released by the companies (e.g. interim and annual reports). The Fund may also invest in instruments issued by companies incorporated in the Asia ex Japan but listed or traded on exchanges outside Asia ex Japan. Under normal market conditions, the Fund will invest primarily in common stocks. The Fund may seek investment opportunities in other types of transferable securities, including fixed income securities as well as collective investment schemes that is in line with the objective of the Fund subject to the requirement of the Securities Commission Malaysia ("SC") Guidelines. The Asia ex Japan includes but is not limited to the following countries: Hong Kong Special Administrative Region ("SAR"), India, Indonesia, Korea, the People s Republic of China, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan, Malaysia and Thailand. The investments of the Fund in the foreign markets are in accordance to the SC Guidelines. The Fund will invest between 70% to 99.5% (both inclusive) of the Fund's Net Asset Value ("NAV") in equity securities in Asia ex Japan, up to 28% of the Fund's NAV in other permissible investments and at least 0.5% of the Fund's NAV in liquid assets. CIMB-Principal has appointed CIMB-Principal Asset Management (S) Pte Ltd ("CIMB-Principal (S)"), a company incorporated in Singapore, as the Sub-Manager of the Fund. CIMB-Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. Fund category/type Equity/Growth How long should you invest for? Recommended five (5) years or more Indication of short-term risk (low, moderate, high) High When was the Fund launched? 1 March 2006 What was the size of the Fund as at 31 December 2017? RM70.66 million (80.03 million units) What is the Fund s benchmark? Morgan Stanley Capital International ("MSCI") All Country ("MSCI AC") Asia ex Japan Index 2

5 FUND OBJECTIVE AND POLICY (CONTINUED) What is the Fund distribution policy? The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. What was the net income distribution for the six months financial period ended 31 December 2017? There was no distribution made for the six months financial period ended 31 December PERFORMANCE DATA Details of portfolio composition of the Fund for the last three financial periods are as follows: % % % Collective investment schemes Quoted securities - Basic Materials Consumer Products Energy Finance Health Care Industrials Real Estate Investment Trust ("REIT") Technology Telecommunications Utilities Cash and other net assets Performance details of the Fund for the last three financial periods are as follows: NAV (RM Million) Units in circulation (Million) NAV per unit (RM) to to to Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) (4.11) - Capital growth (%) (4.11) - Income distribution (%) Management Expense Ratio ( MER ) (%) ^ Portfolio Turnover Ratio ( PTR ) (times) # ^ The Fund's MER decreased from 1.21% to 1.10% due to the increase in average NAV. # The PTR was decreased from 0.43 times to 0.34 times due to the lower volatility in the stock markets. 3

6 PERFORMANCE DATA (CONTINUED) % % % % % Annual total return (Launch date: 1 March 2006) Performance data is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures for the financial period have been extracted from Lipper. MARKET REVIEW (1 JULY 2017 TO 31 DECEMBER 2017) For the financial period under review, the Asian Pacific ex Japan equities rallied strongly on the back of a recovering synchronised global economy and the still highly accommodative policies of the global Central Banks. Earnings estimates were revised up gradually over the period which has supported a stock market rally during the period. The rally in the stock markets in Asia was led by the technology, consumer discretionary and other cyclical sectors. These were the sectors which has seen a strong upwards revision in earnings estimates. On a country basis, China and other North Asian countries led the rally. China s stronger than expected economic growth supported the positive sentiment while Taiwan and Korea saw strong growth in their technology sectors. FUND PERFORMANCE 6 months to year to years to years to Since inception to % % % % % Income Capital Total Return Benchmark Average Total Return N/A The Fund has outperformed the benchmark both in the short-term and in the long-term. 4

7 FUND PERFORMANCE (CONTINUED) 100% 80% CIMB-Pincipal Asian Equity Fund MSCI AC Asia ex Japan Index 60% 40% 20% 0% -20% Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17-40% Changes in NAV Changes % NAV (RM Million) NAV/Unit (RM) The NAV of the Fund has risen as a result of the stronger stock market return and an inflow of fresh funds. Performance data represents the combined income and capital return as a result of holding units in the Fund for the specified length of time, based on NAV to NAV price. The performance data assumes that all earnings from the Fund are reinvested and are net of management and trustee fees. Past performance is not reflective of future performance and income distributions are not guaranteed. Unit prices and income distributions, if any, may fall and rise. All performance figures for the financial period have been extracted from Lipper. PORTFOLIO STRUCTURE Asset allocation (% of NAV) Collective investment schemes Quoted securities Cash and other net assets TOTAL As at 31 December 2017, the Fund had 10.82% in cash and other net assets and held the rest in quoted securities. 5

8 MARKET OUTLOOK* The outlook for Asia is positive in the near term. There is a global synchronised economic recovery with a modest inflationary outlook. We expect the global Central Banks to gradually raise interest rates which should not derail the rally. China is also executing well on its reforms which will help support its economy to grow more sustainably. These factors should continue to support an upgrade cycle in earnings estimates in Asia. As a result, we expect the stock markets to remain buoyant. *This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make a purchase of any investment. The information given in this article represents the views of CIMB-Principal or based on data obtained from sources believed to be reliable by CIMB-Principal. Whilst every care has been taken in preparing this, CIMB-Principal makes no guarantee, representation or warranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this market outlook. INVESTMENT STRATEGY We are positive on Asian equities. The investment strategy is to remain fully invested in the near term. Our favoured sectors will include the technology, financial, resources and consumer discretionary sectors. On a country basis, we prefer China, Hong Kong, Singapore and Malaysia where earnings estimates revision upwards appears to be gaining momentum. The Association of Southeast Asian Nations ("ASEAN") countries are seeing a more modest recovery as they are grappling with slower domestic growth and an uncertain political climate. UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 31 December 2017 are as follows: Size of unit holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below 15, ,001-10, ,001-50,000 1, , , ,001 and above Total 18,

9 SOFT COMMISSION AND REBATES CIMB-Principal Asset Management Berhad (the Manager ) and the Trustee (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the Manager and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commission in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 7

10 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASIAN EQUITY FUND CIMB-PRINCIPAL ASIAN EQUITY FUND We, being the Directors of CIMB-Principal Asset Management Berhad (the Manager ), do hereby state that, in the opinion of the Manager, the accompanying audited financial statements set out on pages 10 to 40 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 December 2016 and of its financial performance, changes in equity and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards ( MFRS ) Interim Financial Reporting and International Accounting Standards ("IAS") 34 - Interim Financial Reporting. For and on behalf of the Manager CIMB-Principal Asset Management Berhad (Company No.: K) MUNIRAH KHAIRUDDIN Chief Executive Officer/Executive Director ALEJANDRO ECHEGORRI Executive Director Kuala Lumpur 28 February

11 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB-PRINCIPAL ASIAN EQUITY FUND We, Universal Trustee (Malaysia) Berhad, being the Trustee for CIMB-Principal Asian Equity Fund (the Fund ), are of the opinion that CIMB-Principal Asset Management Berhad (the Manager ), acting in the capacity of Manager of the Fund, have fulfilled their duties in the following manner for the financial period ended 31 December 2017: (a) (b) (c) the Fund is being managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission s Guidelines on the Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. For and on behalf of the Trustee UNIVERSAL TRUSTEE (MALAYSIA) BERHAD ONG TEE VANN Chief Executive Officer Kuala Lumpur 28 February

12 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL ASIAN EQUITY FUND to to Note RM RM INVESTMENT INCOME Dividend income 1,308, ,749 Interest income from current accounts 11,157 8,127 Net gain on financial assets at fair value through profit or loss 8 6,418,020 3,659,279 Net foreign exchange (loss)/gain (524,960) 111,372 Other income 4 27,853 18,424 7,240,884 3,987,951 EXPENSES Management fee 5 551, ,200 Trustee s and custodian fees 6 35,309 60,349 Audit fee 7,920 7,420 Tax agent s fee 3,100 13,672 Transaction costs 124, ,048 Other expenses 67,161 38, , ,579 PROFIT BEFORE TAXATION 6,450,669 3,375,372 Taxation 7 (99,217) (16,914) PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 6,351,452 3,358,458 Profit after taxation is made up as follows: Realised amount 1,292,996 1,027,682 Unrealised amount 5,058,456 2,330,776 6,351,452 3,358,458 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 10

13 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER Audited Note RM RM ASSETS Cash and cash equivalents 9 5,822,569 2,192,536 Financial assets at fair value through profit or loss 8 63,747,020 45,444,031 Amount due from Manager 1,526, ,690 Amount due from Manager of collective investment scheme -Management fee rebate 36,686 23,165 Dividends receivable 1,609 87,080 TOTAL ASSETS 71,134,548 48,076,502 LIABILITIES Amount due to Manager 343, ,310 Accrued management fee 100,196 67,953 Amount due to Trustee 2,017 1,345 Other payables and accruals 24,173 24,204 TOTAL LIABILITIES 470, ,812 NET ASSET VALUE OF THE FUND 70,664,214 47,847,690 EQUITY Unit holders capital 24,835,914 8,370,842 Retained earnings 45,828,300 39,476,848 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 70,664,214 47,847,690 NUMBER OF UNITS IN CIRCULATION (UNITS) 10 80,032,855 60,904,560 NET ASSET VALUE PER UNIT (RM) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 11

14 UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL ASIAN EQUITY FUND Unit holders Retained capital earnings Total RM RM RM Balance as at 1 July ,370,842 39,476,848 47,847,690 Movement in unit holders contributions: - Creation of units from applications 20,525,719-20,525,719 - Cancellation of units (4,060,647) - (4,060,647) Total comprehensive income for the financial period - 6,351,452 6,351,452 Balance as at 31 December ,835,914 45,828,300 70,664,214 Balance as at 1 July ,765,392 29,193,504 34,958,896 Movement in unit holders contributions: - Creation of units from applications 10,516,965-10,516,965 - Cancellation of units (3,073,037) - (3,073,037) Total comprehensive income for the financial period - 3,358,458 3,358,458 Balance as at 31 December ,209,320 32,551,962 45,761,282 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 12

15 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 CIMB-PRINCIPAL ASIAN EQUITY FUND to RM to RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of quoted securities 13,992,361 16,862,148 Purchase of quoted securities (26,498,611) (18,451,563) Dividend income received 1,295, ,750 Interest income received from current accounts 11,157 8,127 Management fee paid (517,954) (359,267) Management fee rebate received 12,694 8,849 Trustee s and custodian fees paid (34,637) (60,090) Payments for other fees and expenses (78,212) (52,197) Net realised foreign exchange loss (153,155) (64,038) Net cash used in operating activities (11,971,291) (1,770,164) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 19,328,745 10,358,564 Payments for cancellation of units (3,852,009) (6,268,672) Net cash generated from financing activities 15,476,736 4,089,892 Net increase in cash and cash equivalents 3,505,445 2,319,728 Effects of foreign exchange differences 124, ,305 Cash and cash equivalents at the beginning of the financial period 2,192,536 3,319,929 Cash and cash equivalents at the end of the financial period 5,822,569 5,854,962 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 13

16 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB-PRINCIPAL ASIAN EQUITY FUND CIMB-Principal Asian Equity Fund (the Fund ) is governed by a Principal Master Deed dated 15 May 2008, a First Supplemental Master Deed dated 25 June 2008, a Third Supplemental Master Deed dated 14 July 2008, a Fourth Supplemental Master Deed dated 18 March 2009, a Thirteenth Supplemental Master Deed dated 26 June 2012 and an Eighteenth Supplemental Master Deed dated 25 March 2015 (collectively referred to as the Deeds ), made between CIMB-Principal Asset Management Berhad (the Manager ) and Universal Trustee (Malaysia) Berhad (the Trustee ). The Fund aims to achieve capital growth by investing primarily in equity securities of companies domiciled in, listed in, and/or have significant operations in Asia ex Japan. Significant operations means major businesses of the company. For example, the Fund can invest in a company with significant business/operations in Thailand but listed on the New York Stock Exchange ("NYSE"). The threshold for significant operations would be if more than 30% of total group revenue derives from countries in Asia ex Japan. The calculation would be based on the most recent financial reports released by the companies (e.g. interim and annual reports). The Fund may also invest in instruments issued by companies incorporated in the Asia ex Japan but listed or traded on exchanges outside Asia ex Japan. Under normal market conditions, the Fund will invest primarily in common stocks. The Fund may seek investment opportunities in other types of transferable securities, including fixed income securities as well as collective investment schemes that is in line with the objective of the Fund subject to the requirement of the Securities Commission Malaysia ("SC") Guidelines. Asia ex Japan includes but is not limited to the following countries: Hong Kong SAR, India, Indonesia, Korea, the People s Republic of China, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan, Malaysia and Thailand. The investments of the Fund in the foreign markets are in accordance with the SC Guidelines. The Fund will invest between 70% to 99.5% (both inclusive) of the Fund s NAV in equity securities in Asia ex Japan up to 28% of the Fund's NAV in other permissible investments and at least 0.5% of the Fund s NAV in liquid assets. CIMB-Principal has appointed CIMB-Principal Asset Management (S) Pte Ltd ("CIMB- Principal (S)"), a company incorporated in Singapore, as the Sub-Manager of the Fund. CIMB- Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. All investments are subjected to the SC Guidelines on Unit Trust Funds, SC requirements, the Deeds, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The Manager, a company incorporated in Malaysia, is a subsidiary of CIMB Group Sdn Bhd and regards CIMB Group Holdings Berhad as its ultimate holding company. The Manager is also an associate of Principal International (Asia) Limited, which is a subsidiary of Principal Financial Group Inc. The principal activities of the Manager are the establishment and management of unit trust funds and fund management activities. 14

17 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CIMB-PRINCIPAL ASIAN EQUITY FUND The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the MFRS and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and assumptions are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where estimates and assumptions are significant to the financial statements are disclosed in Note 2(k). 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 introduce an additional disclosure on changes in liabilities arising from financing activities. The adoption of these amendments did not have any impact on the current financial period or any prior period and is not likely to affect future periods. The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1July 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. 15

18 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) (i) Financial year beginning on/after 1 July 2018 (continued) MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply is standards when effective. These standards is not expected to have a significant impact on the Fund s financial statements. (b) Financial assets and financial liabilities Classification The Fund designates its investments in collective investment scheme and quoted securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s loans and receivables comprise cash and cash equivalents, amount due from Manager, amount due from Manager of collective investment scheme and dividends receivable. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, accrued management fee, amount due to Trustee, and other payables and accruals as other financial liabilities. 16

19 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date the date on which the Fund commits to purchase or sell the asset. Investments are initially recognised at fair value. Transaction costs are expensed in the statement of comprehensive income. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial 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. Collective investment scheme is valued based on the most recent published NAV per unit or share of such collective investment scheme or, if unavailable, the last published price of such unit or share (excluding any sales charge included in such selling price). Foreign quoted securities are valued at the last traded market price quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges. If a valuation based on the market price does not represent the fair value of the quoted securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. Loans and receivables and other financial liabilities are subsequently carried at amortised cost using the effective interest method. 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Impairment for assets carried at amortised costs For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. 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 period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. (c) Income recognition Dividend income is recognised on the ex-dividend date when the right to receive payment is established. Realised gain or loss on disposal of collective investment scheme and quoted securities are accounted for as the difference between the net disposal proceeds and the carrying amount of investments, determined on a weighted average cost basis. (d) Foreign currency Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( RM ), which is the Fund s functional and presentation currency. 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Foreign currency Functional and presentation currency (continued) Due to mixed factors in determining the functional currency of the Fund, the Manager has used its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and have determined the functional currency to be in RM primarily due to the following factors: i) The Fund s units are denominated in RM. ii) All of the Fund s expenses are denominated in RM. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income. (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances which are subject to an insignificant risk of changes in value. (f) Taxation Current tax expense is determined according to Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. Tax on dividend income from foreign quoted securities is based on the tax regime of the respective countries that the Fund invests in. (g) Transaction costs Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. (h) Management fee rebate Management fee rebate is derived from the collective investment scheme held by the Fund on an accruals basis to ensure no double charging of management fee. It is accrued daily based on the fair value of the collective investment scheme held. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) Unit holders capital The unit holders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial period if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. (j) Segment information Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. (k) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unit Trust Funds. However, the Manager is of the opinion that there are no accounting policies which require significant judgment to be exercised. 20

23 3. RISK MANAGEMENT OBJECTIVES AND POLICIES CIMB-PRINCIPAL ASIAN EQUITY FUND The Fund aims to seek capital growth by investing primarily in equities and equity related instruments in the Asia ex Japan. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk and currency risk), credit risk and liquidity risk. Financial risk management is carried out through internal control process adopted by the Manager and adherence to the investment restrictions as stipulated in the Deeds and SC Guidelines on Unit Trust Funds. (a) Market risk (i) Price risk This is the risk that the fair value of investments in collective investment scheme and quoted securities will fluctuate because of changes in market prices (other than those arising from interest rate risk and currency risk). The value of collective investment scheme and quoted securities may fluctuate according to the activities of individual companies, sector and overall political and economic conditions. Such fluctuation may cause the Fund s NAV and prices of units to fall as well as rise, and income produced by the Fund may also fluctuate. The price risk is managed through diversification and selection of collective investment scheme, quoted securities and other financial instruments within specified limits according to the Deeds. (ii) Currency risk Currency risk is associated with investments that are quoted and/or priced in foreign currency denomination. Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Manager will evaluate the likely directions of a foreign currency versus RM based on considerations of economic fundamentals such as interest rate differentials, balance of payments position, debt levels, and technical chart considerations. (b) Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligation resulting in financial loss to the Fund. For amount due from manager, the settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the SC Guidelines on Unit Trust Funds. 21

24 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB-PRINCIPAL ASIAN EQUITY FUND (c) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of the units by unit holders. Liquid assets comprise bank balances, and deposits with licensed financial institutions which are capable of being converted into cash within 7 business days. Generally all investments are subject to a degree of liquidity risk depending on the nature of the investments instruments, market, sector and other factors. For the purpose of the Fund, the Manager will attempt to balance the entire portfolio by investing in a mix of assets with satisfactory trading volume and those that occasionally could encounter poor liquidity. This is expected to reduce the risks for the entire portfolio without limiting the Fund's growth potentials. (d) Capital risk management The capital of the fund is represented by equity consisting of unit holders capital of RM24,835,914 (2016: RM13,209,320) and retained earnings of RM45,828,300(2016: RM32,551,962). The amount of capital can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unit holders. 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 to unit holders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. (e) 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 securities) are based on quoted market prices at the close of trading on the financial period 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. 22

25 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB-PRINCIPAL ASIAN EQUITY FUND (e) Fair value estimation (continued) (i) Fair value hierarchy The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1) 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 2) Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) 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. 23

26 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB-PRINCIPAL ASIAN EQUITY FUND (e) Fair value estimation (continued) (i) Fair value hierarchy (continued) Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss: - Collective investment scheme 2,241, ,241,866 - Quoted securities 61,505, ,505,154 63,747, ,747, Audited Financial assets at fair value through profit or loss: - Collective investment scheme 901, ,516 - Quoted securities 44,542, ,542,515 45,444, ,444,031 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities and collective investment scheme. The Fund does not adjust the quoted prices for these instruments. The Fund s policies on valuation of these financial assets are stated in Note 2(b). (ii) The carrying values of cash and cash equivalents, amount due from Manager, amount due from Manager of collective investment scheme, dividends receivable and all current liabilities are a reasonable approximation of their fair values due to their short term nature. 4. OTHER INCOME Other income represents the Fund s entitlement to management fee rebate from the MAnager and the Manager of collective investment scheme the Fund invests in. For the six months financial period ended 31 December 2017, the rebate is recognised at a rate of 2.00% per annum ( : 2.00%) for CIMB-Principal Indo Domestic Equity, and 1.75% per annum ( : Nil) for CIMB-Principal SMART Equity Fund calculated and accrued daily based on the NAV of the collective investment scheme. 24

27 5. MANAGEMENT FEE In accordance with the Deeds, the Manager is entitled to a maximum management fee of 3.00% per annum, calculated daily based on the NAV of the Fund. For the six months financial period ended 31 December 2017, the management fee is recognised at a rate of 1.85% per annum ( : 1.85% per annum). There will be no further liability to the Manager in respect of management fee other than amounts recognised above. 6. TRUSTEE S AND CUSTODIAN FEES In accordance with the Deeds, the Trustee is entitled to a maximum fee of 0.035% per annum, calculated daily based on the NAV of the Fund, excluding foreign sub-custodian fees and charges. The foreign custodian fee (safekeeping fee and transaction fee, including out of pocket charges) is subject to a minimum of USD500 per month and is charged monthly in arrears. The safekeeping fee ranges from a minimum of 0.04% per annum to a maximum of 0.38% per annum of the market value of the respective foreign portfolios, depending on the country invested. The transaction fee is charged for every transaction and the amounts are dependent on the country invested. For the six months financial period ended 31 December 2017, the Trustee s fee is recognised at a rate of 0.035% per annum ( : 0.035% per annum) while the foreign subcustodian fee is recognised at RM24,838 ( : RM53,270). There will be no further liability to the Trustee and custodian in respect of Trustee s and custodian fees other than the amount recognised above. 7. TAXATION RM RM Tax charged for the financial period: - Current taxation 99,217 16,914 A numerical reconciliation between the profit/(loss) before taxation multiplied by the Malaysian statutory income tax rate and tax expense of the Fund is as follows: to RM to RM Profit before taxation 6,450,669 3,375,372 Taxation at Malaysian statutory rate of 24% ( : 24%) 1,548, ,089 Tax effects of: Investment income not subject to tax (1,737,812) (956,988) Expenses not deductible for tax purposes 45,069 48,501 Restriction on tax deductible expenses for Unit Trust Funds 144,583 98,398 Effects of foreign tax on foreign taxable income 99,217 16,914 Taxation 99,217 16,914 25

28 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS CIMB-PRINCIPAL ASIAN EQUITY FUND Audited RM RM Designated at fair value through profit or loss at inception: - Collective investment scheme 2,241, ,516 - Quoted securities 61,505,154 44,542,515 63,747,020 45,444, to to RM RM Net gain on financial assets at fair value through profit or loss: - Realised gain on disposals 1,484,793 1,328,503 - Unrealised fair value gain 4,933,227 2,330,776 6,418,020 3,659,279 Name of counter COLLECTIVE INVESTMENT SCHEMES Aggregate Market Percentage Quantity cost value of NAV Units RM RM % INDONESIA CIMB-Principal SMART Equity Fund 4,073,844 1,389,384 1,386, CIMB-Principal Indo Domestic Equity Fund 2,840, , , TOTAL COLLECTIVE INVESTMENT SCHEMES 6,914,344 2,140,316 2,241, ACCUMULATED UNREALISED GAIN ON COLLECTIVE INVESTMENT SCHEME AT FAIR VALUE THROUGH PROFIT OR LOSS 101,550 TOTAL COLLECTIVE INVESTMENT SCHEME AT FAIR VALUE THROUGH PROFIT OR LOSS 2,241,866 26

29 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Name of counter QUOTED SECURITIES MALAYSIA Aggregate Market Percentage Quantity cost value of NAV Units RM RM % Aggregate Market Percentage Quantity cost value of NAV Units RM RM % Consumer Products Bermaz Auto Bhd 311, , , Finance CIMB Group Holdings Bhd 195,800 1,170,378 1,280, Industrials Malaysia Airports Holdings Bhd 153,200 1,140,398 1,346, V.S. Industry Bhd 329, , , ,100 1,845,911 2,339, TOTAL MALAYSIA 990,600 3,654,815 4,305, CAYMAN ISLANDS Consumer Products Alibaba Group Holding Ltd 4,439 2,412,280 3,095, TOTAL CAYMAN ISLANDS 4,439 2,412,280 3,095, CHINA Consumer Products Midea Group Co Ltd -A* 50,732 1,192,653 1,748, Weichai Power Co Ltd -A* 129, , , ,732 1,964,457 2,417, Finance China Vanke Co Ltd - H 78, ,388 1,259, Industrial and Commercial Bank of China Ltd 726,000 1,964,326 2,363, Ping An Insurance Group Co of China Ltd - H** 47,000 1,152,178 1,979, ,000 4,108,892 5,602, Industrials Anhui Conch Cement Co Ltd 46, , , Hangzhou Hikvision Digital Technology Co Ltd 79,510 1,507,768 1,927, ,010 2,214,092 2,812, TOTAL CHINA 1,156,742 8,287,441 10,831,