Nomura i-cash Fund ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 APRIL 2017 MANAGER: NOMURA ISLAMIC ASSET MANAGEMENT SDN. BHD. Business Registration No.: 838564-T TRUSTEE: DEUTSCHE TRUSTEES MALAYSIA SDN. BHD. Business Registration No.: 736590-H
Table of Contents MANAGER S REPORT... iii SOFT COMMISSIONS RECEIVED FROM BROKERS... v BREAKDOWN OF UNITHOLDERS BY SIZE... v INCOME DISTRIBUTION... v FUND PERFORMANCE DATA... vi ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS... 1 ii
MANAGER S REPORT Fund Type, Category, Objective and Distribution Policy The Nomura i-cash Fund (the Fund) is categorized as a wholesale Islamic money market fund which provides investors with regular income distributions through investments in Shariah-based deposits, placement of money at call, General Investment Accounts and Islamic Negotiable Instruments. The Fund will distribute income at least on a monthly basis, subject to availability of income. All income distributions will be made in the form of cash. Benchmark The benchmark used by the Manager in measuring the performance of the Fund is the Bank Negara Malaysia (BNM) Islamic Interbank Overnight Rate. Performance as at May 2016 April 2017 For the period under review from 3 May 2016 to 28 April 2017, the Fund has registered 3.79% return. Compared to the Benchmark return of 3.01%, the Fund has outperformed the Benchmark by 0.78%. The Net Asset Value (NAV) per unit of the Fund as at 28 April 2017 was RM1.0284 compared to the NAV per unit as at 30 April 2016 was RM1.0220. On the total NAV basis, the Fund s NAV stood at RM 482.68 million as at 28 April 2017. During the period under review, the Fund has declared a total income distribution of RM0.03162 per unit. Performance as at 28 April 2017 3 Months 6 Months 1 Year 3 Year Since Commencement Fund 0.90% 1.81% 3.79% 11.60% 16.29% Benchmark 0.73% 1.47% 3.01% 9.66% 14.39% Outperformance/ 0.17% 0.34% 0.78% 1.94% 1.90% (Underperformance) Source: Novagni Analytics and Advisory Sdn. Bhd. This information is prepared by Nomura Islamic Asset Management Sdn Bhd (NIAM) for information purposes only. Past earnings or the fund s distribution record is not a guarantee or reflection of the fund s future earnings/future distributions. Investors are advised that unit prices, distributions payable and investment returns may go down as well as up. Volatility as at April 2017 3-Year Standard Deviation 0.0844% iii
Strategies Employed (May 2016 April 2017) The Fund invested solely in Islamic deposits during the period. The tight liquidity situation seen in the previous financial period eased gradually throughout the second half of 2016 and first quarter of 2017, with Bank Negara Malaysia reducing the Overnight Policy Rate (OPR) in Jul-16 by 0.25% to 3.00%. This resulted in deposit rates gradually declining throughout the financial year. We lengthened the duration of the Fund s investments to lock-in higher rates to sustain the fund s running yield. Summary of Asset Allocation 28 April 2017 30 April 2016 Islamic deposits 99.992% 99.987% Cash and other net current assets/ liabilities 0.008% 0.013% Total 100.000% 100.000% Review of Market (May 2016 April 2017) Over the review period, global markets went through a period of elevated volatility in 2016 as unanticipated political events swayed market sentiments. Notably, the Yes vote of the so-called Brexit referendum in Jun-16 and the Trump victory in the US presidential election led to large swings of volatility in global markets. Notwithstanding these political events, US, EU and China economic growth appeared to gain traction in the fourth quarter of 2016, which appeared to spill over into the first half of 2017. This uptick in economic activity led to the Federal Reserve hiking interest rate twice, once in Dec-16 and subsequently in Mar-17. Improving risk appetite triggered a rally for Asian assets in the first quarter of 2017, with the MYR partially reversing the decline seen over the last year. The MYR touched a low of 4.4975 in early Jan-17 but ended the financial period at 4.3410. Crude oil prices stabilized in the USD 45-55 range as OPEC reached a deal in Dec-16 to curtail output, lending support to the MYR. Domestic loans growth declined in 2016, led by the household sector although offset by the business sector, which experienced a modest rebound in fourth quarter of 2016 and first quarter of 2017. Loans growth bottomed out at 4.2% YoY in Sep-16 and ended the financial year at 6.1% in Apr-17. The weaker loans growth naturally dampened deposit competition among banks, leading to deposit rates gradually declining throughout the period. Investment Outlook Malaysia s GDP growth for the first quarter of 2017 posted a solid 5.6% YoY, supported by stronger external demand for manufactured goods and a rebound in agricultural output as the impact of the 2016 El Nino fades. Bank Negara Malaysia forecasted GDP growth for 2017 to be within 4.3-4.8%, an improvement over the 4.2% growth reported for 2016. The central bank s tone in 2017 has been increasingly optimistic, citing an improving external environment and receding financial imbalances in the domestic economy. Also, the Central Bank expects domestic demand to remain resilient, supported by investment spending and major infrastructure projects taking place across the country. Inflation pressure is expected to be transitionary due to the low base effect of oil prices in early 2016. Core inflation pressure remains stable. As such, we do not expect the Central Bank to adjust its policy rate in 2017 given that economic growth is expected to pick up modestly without generating any inflation pressure or excessive credit expansion. As loans growth has stabilized in the 5-6% region in the first half of 2017, we do not expect deposit competition to ease any further. As such, we will remain opportunistic and lengthen duration in periods of higher deposit rates. We will continue to maintain short-term liquidity for redemption purposes. iv
SOFT COMMISSIONS RECEIVED FROM BROKERS Soft commissions received from brokers/dealers are retained by the manager only if the goods and services provided are of demonstrable benefit to unit holders of the Fund as per the requirements of Clauses 6.15 and 6.16 of the Guidelines on Compliance Function for Fund Managers. During the financial period under review, the Manager did not receive any soft commission. BREAKDOWN OF UNITHOLDERS BY SIZE Size of holdings (units) No. of unitholders 500,000 - to 1,000,000 - - 1,000,001 to 5,000,000 6 19,940 5,000,001 to 10,000,000 3 22,214 No. of units held* ( 000) 10,000,001 to 15,000,000 2 22,243.77 15,000,001 to 20,000,000 - - 20,000,001 and above 6 404,944 Total 17 469,341 * Note: Excluding Manager s Stock INCOME DISTRIBUTION Nomura Islamic Asset Management Sdn Bhd has distributed a total of gross distribution of RM0.03162 per unit for investors of the Nomura i-cash Fund over the period under review. The Net Asset Value per Unit prior and subsequent to the distributions were as follows: Cum- Distribution Date Cum- Distribution (RM) Ex- Distribution Date Ex- Distribution (RM) Distribution per Unit (RM) 16-May-16 1.0238 17-May-16 1.0231 0.00079 27-Jun-16 1.0276 28-Jun-16 1.0240 0.00376 15-Aug-16 1.0291 16-Aug-16 1.0269 0.00232 15-Sep-16 1.0300 19-Sep-16 1.0273 0.00314 17-Oct-16 1.0303 18-Oct-16 1.0271 0.00333 15-Nov-16 1.0300 16-Nov-16 1.0288 0.00137 27-Dec-16 1.0328 28-Dec-16 1.0219 0.01107 15-Feb-17 1.0269 16-Feb-17 1.0255 0.00157 15-Mar-17 1.0283 16-Mar-17 1.0263 0.00201 17-Apr-17 1.0296 18-Apr-17 1.0274 0.00226 v
FUND PERFORMANCE DATA As at 28 April 2017 As at 30 April 2016 Total NAV (RM million) 482,684,790.94 247,791,686.74 NAV per Unit (RM) 1.0284 1.0220 Unit in Circulation (million) 469,340,857.10 242,453,272.10 Highest NAV (RM) 1.0328 1.0286 Lowest NAV (RM) 1.0219 1.0155 Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. vi