cimb-principal strategic income bond fund 2 financial statements for ...

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2CONTENTSPAGE(S)INVESTORS’ LETTER 1MANAGER’S REPORT 2 - 9Fund objective and policyPerformance dataMarket reviewFund performancePortfolio structureMarket outlookInvestment strategyUnit holdings statisticsSoft commissions and rebatesSTATEMENT BY MANAGER 10TRUSTEE’S REPORT 11INDEPENDENT AUDITORS’ REPORT 12 - 13STATEMENT OF COMPREHENSIVE INCOME 14STATEMENT OF FINANCIAL POSITION 15STATEMENT OF CHANGES IN EQUITY 16STATEMENT OF CASH FLOWS 17NOTES TO THE FINANCIAL STATEMENTS 18 - 48DIRECTORY 49LIST OF CWA (agency force of CIMB-Principal) OFFICES 50 - 53

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2INVESTORS’ LETTERDear Valued Investors,Firstly, thank you for your support and trust by investing in CIMB-Principal Asset Management(“CIMB-Principal”) funds. Our commitment to you is to deliver consistent risk adjusted returns bycombining sound investment and strong corporate governance. By placing clients at the heart ofeverything we do, we will continue to strive in delivering quality products and services that meetour clients’ financial and investment needs.It is our great pleasure to announce that CIMB-Principal has won the Asset ManagementCompany of the Year (Malaysia) from The Asset Triple A Investor and Fund Management Awards2014. The award recognizes the outstanding asset management company that has built acomprehensive platform for investing across different asset classes and servicing the needs ofinstitutional, corporate and retail clients. It also looks at the asset company that consistentlyachieves above-benchmark performance and sets the tone for innovation and industry practice.Indeed this success is not possible without your trust in us and we thank you for your ongoingsupport.Saving for retirement is one of the most important things to do, more crucial as we plan for ourfuture. The sooner we start, the easier it will be. Realizing the importance of this and as means ofinculcating savings from an early age for a well-prepared retirement, the Prime Minister in his 2014Budget tabled on 25 October 2013 announced an incentive of RM500 to contributors whoparticipate in the Private Retirement Scheme (PRS) scheme. This incentive will be given to eligiblecontributors with a minimum cumulative contribution of RM1,000 within a year*. We at CIMB-Principal welcome this timely initiative by the Government.Thus, we highly encourage all eligible contributors to take advantage of this attractive opportunity.For parents with young adults, we urge you to encourage your children to enroll in CIMB-PrincipalPRS Plus / CIMB Islamic PRS Plus (“PRS Plus account”) or give them a head start by making aninitial contribution towards their PRS Plus account.Thank you once again for your continued support and I wish all of you a blessed and rewardingyear ahead.Happy Investing!Munirah KhairuddinChief Executive OfficerCIMB-Principal Asset Management Berhad* Within any calendar year between 2014 to 2018 in a single PRS fund of a single Provider.1

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2MANAGER’S REPORTFUND OBJECTIVE AND POLICYWhat is the investment objective of the Fund?The Fund aims to provide regular income through investments in predominantly bonds and otherfixed and floating rate securities.Has the fund achieved its objective?For the year under review, the Fund is in line with its stated objectives as stated under the Fundperformance review.What are the fund investment policy and its strategy?The Fund seeks to achieve its investment objective by investing between 70% to 98% (bothinclusive) of its NAV in a diversified portfolio of bonds and other fixed and floating rate securitiesissued by governments, government agencies, supranational organizations and corporateissuers.The Fund may also invest in structured products and/or derivatives such as forward contracts,options, futures contracts or swap agreements, of which the underlying are related/linked to theabove-mentioned securities. The Fund may also invest in High Yield Securities, subject to amaximum of 40% of its NAV. At least 2% of the Fund’s NAV are maintained in the form of liquidassets such as money market instruments and/or bank deposits for liquidity purposes.The Fund’s policies on investments were carried out in accordance with the Deed and it willcontinue its operations until terminated in accordance with the provisions of the Deed.Fund category/ typeBond (close-ended)/IncomeHow long should you invest for?Recommended for 3 yearsIndication of short-term risk (low, moderate, high)MediumWhen was the Fund launched?9 April 2012What was the size of the Fund as at 30 April 2014?RM 91.00 million (87.67 million units)What is the fund’s benchmark?3-year CIMB Bank fixed deposit rate at the Commencement Date.What is the fund distribution policy?The Fund will pay distribution on an annual basis, depending on the level of income (if any) theFund generates and at the discretion of the Manager.What was the net income distribution for the period ended 30 April 2014?The Fund declared a net income of 4.88 sen per unit for all unit holders on 26 March 2014.As a result of distribution, the net asset value per unit dropped from RM 1.0894 to RM 1.04062

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2PERFORMANCE DATADetails of portfolio composition of the Fund for the last two financial years are as follows:30.04.2014 30.04.2013% %Fixed income securities 92.66 96.21Cash and other net assets 7.34 3.79100.00 100.00Performance details of the Fund for the last two financial years are as follows:30.04.2014 30.04.2013Net asset value (RM Million)* 91.00 95.88Units in circulation (Million) 87.67 92.07Net asset value per unit (RM)* 1.0379 1.0413Highest NAV per unit (RM) 1.0905 1.0777Lowest NAV per unit (RM) 1.0336 1.0000Total return (%) 3.95 7.48- Capital growth (%) (0.72) 4.48- Income distribution (%) 4.69 2.93Management expense ratio (%) 0.10 0.11Portfolio turnover ratio (times) # 0.09 1.18Gross distribution per unit (sen) 4.88 3.08Net distribution per unit (sen) 4.88 3.06Date of distribution 26.03.2014 29.03.2013Total return AnnualisedPeriod % %- One year 3.95 3.95- Two years 7.48 5.70- Since inception 11.81 5.53*Above figures are ex-distribution(Launch date: 9 April 2012)# The Portfolio Turnover Ratio (“PTR”) for the financial year ended 30.04.2014 was 0.09 timesagainst 1.18 times as at 30.04.2013. The lower PTR was mainly due to the buy and hold tomaturity requirement for the fund.SinceInception to30.04.2014 30.04.2013Annual total return (%) 3.95 7.48Past performance is not necessarily indicative of future performance and that unit prices and investment returns may godown, as well as up. All performance figures for the financial year ended have been extracted from Lipper.3

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2MARKET REVIEW (1 MAY 2013 TO 30 APRIL 2014)At the start of 2013, Asian corporate bonds continued to perform with the inflows of liquidity intothe market. However, market was rocked in May when the then former US Federal Reserve(“Fed”) Chairman, Ben Bernanke first talked about Quantitative Easing (“QE”) tapering. Thefinancial markets did not take too well to this and there was a sell off in the United StatesTreasuries (“UST”). Additionally, market players fears of fund outflows back to equity anddeveloped market saw emerging market bond negatively impacted.Over at the Asean region, due to the foreign pullback on the Fed’s QE uncertainty and rising USTyields prompted broad sell off in the government securities. The currencies were also not spared.South Korean and Australian government bonds were the biggest losers followed closely bySingapore and Hong Kong.However, with no tapering in sight in September and the political risk of a potential partialgovernment shutdown in October as well as the breach in the debt ceiling saw inflows into theregional bond market. Further support also came with Janet Yellen being nominated as the nextFed Chairman by US president Barack Obama. The nomination is a positive development for thebond market as Janet Yellen is expected to provide continuity of the Fed’s monetary policydirection. However, in December, the Fed finally announced that it will start tapering the pace ofits quantitative easing exercise beginning in January 2014 by trimming USD10 billion off itsexisting monthly purchases of USD85 billion.UST curve bull flattened in February with the 2 over 10 spread narrowed to 220 basis points(“bps”) as a string of weak economic data dampened growth optimism and tapering outlook alongwith the jitters related to political tension in Ukraine. The release of the minutes from the firstFederal Open Market Committee (“FOMC”) meeting showed members continued to support thetapering pace of its monthly bond purchases over the course of the year as long as the economycontinues to perform as they expect. The members viewed the recent economic weakness astemporary that is due to unseasonably cold weather. FOMC minutes also revealed that it wouldsoon be appropriate for the Committee to change its forward guidance as unemployment ratenears 6.5% although there is no concrete direction at this juncture.Turning to the US dataflow, the cold weather blaming continued in the US as industrial productionexpectedly fell the most since 2009. Total payrolls rose just 113,000 in January as againstexpectations of 180,000 following a 75,000 increase in December. Both housing starts and permitsalso weakened in January with starts down an especially sharp 16% month on month (“m-o-m”)and permits were down 5.4% m-o-m. Existing home sales fell sharply by 5.1% m-o-m to anannualised rate of 4.62 million in January after growing by 0.8% in December 2013.US real Gross Domestic Product (“GDP”) growth was revised lower to an annualized 2.4% in thefourth quarter of 2013 as compared to the Government’s initial estimate of 3.2% quarter-on-quarter(“q-o-q”) issued last month. This was attributed to the downward revision of materially slower gainin private consumption. However, the University of Michigan is confidence index was revised up to81.6 which was a 6-month high. The Chicago Purchasing Managers' Indexes (“PMI”) alsounexpectedly improved from 59.6 to 59.8 as against forecast of 56.4 suggesting thatmanufacturing improvements will be sustained in 2014.Elsewhere in the Eurozone, the European Central bank (“ECB”) kept its key policy rate unchangedat 0.25% in February and also kept the deposit rate at zero but indicated that risks to the currencybloc’s economy remain skewed to the downside and inflation would be low for a protracted period.Inflation in the Eurozone has been declining to 0.7% in January which was below the ECB’s targetof 2.0%.4

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2MARKET REVIEW (1 MAY 2013 TO 30 APRIL 2014) (CONTINUED)Meanwhile, Moody’s upgraded the sovereign rating of Spain by one notch to Baa2 on the back ofimproving economic outlook. It is noted that the rating of three debt stricken peripheral Eurozonecountries including Greece, Ireland and Spain have been upgraded by the rating agency sinceNovember 2013. However, recovery hope for the Eurozone is still at the early stage as growth isexpected to be uneven in the region with unemployment rate still at a record high of 12% inJanuary 2014 led by Greece and Spain.Over in Asia, Japan’s GDP slowed to an annualised rate of 1.0% in the fourth quarter of 2013 froma revised 1.1% in the third quarter of 2013 marking the third consecutive quarter of slowdown dueto weak export growth and surging imports which resulted in a trade deficit and dragged on thecountry’s GDP growth. For the full year 2013, the economy grew by 1.6% as against 1.4% in 2012and a contraction of 0.5% in 2011. In line with expectation, Bank of Japan (“BOJ”) kept themonetary policy programme and maintained its monetary base expansion plans at JPY60 toJPY70 trillion per year. But BOJ unexpectedly decided to double and extend its loan supportprogramme by one year in its attempt to fight deflation. M-o-m, the 10 years JapaneseGovernment Bond (“JGB”) fell by 7.5bps to close at 0.586% on the back of BOJ’s continued easingstance.US Treasuries generally sold off in March after Fed forecasts indicated that the Fed funds ratemay be hiked sooner than market expectations. The benchmark UST 5-year and 10-yearincreased by 20 bps and 8 bps respectively while the 30-year UST yields decreased by 2 bps. The5-year, 10-year and 30-year benchmark UST yields ended at 1.70%, 2.69% and 3.55%.Janet Yellen presided over her first FOMC meeting as head of the Federal Reserve in March. TheUS FOMC which Yellen chairs decided to taper the size of its monthly asset purchases by USD10billion for the third time, reducing its monthly bond purchases to USD55 billion in assets eachmonth. The Committee announced that it will now cut mortgage bond purchases to USD25 (downfrom USD30 billion) and USD30 billion in Treasury debt (down from USD35 billion) beginning inApril. In addition, the Committee revamped its forward guidance on interest rates, moving towardsmore qualitative than quantitative language, dropping the 6.5% unemployment rate thresholdwhich previously served as an indicator for considering a rate hike. Yellen also made a surprisinghawkish statement during the FOMC meeting which revealed the possibility of a rate hike aroundsix month after the end of the stimulus programme.Elsewhere in the Eurozone, the ECB kept its key policy rate unchanged at 0.25% in March andalso kept the deposit rate at zero citing continued signs of recovery. Nonetheless, risks to theEurozone economy remain on the downside. Inflation in the Eurozone stood at 0.7% in Februarywhich was below the ECB’s target of 2.0%, raising the prospect that the ECB may have to takeradical action to combat the threat of deflation across the currency bloc.Rising geo-political tensions in Russia and Ukraine coupled with slowing growth prospects haveresulted in all 3 major rating agencies placing Russia under review for a credit downgrade.However, it is unlikely for Russia to fall into non-investment grade as any downgrade is expectedto be limited to 1 notch below its current rating of BBB/Baa1. Meanwhile, broadly improvingeconomic sentiments across Europe have resulted in a raft of rating upgrades for Europeannations in recent months. In line with this, countries like Cyprus, Netherlands and Belgium haveseen their rating outlooks revised to stable from negative by Moody’s.5

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2MARKET REVIEW (1 MAY 2013 TO 30 APRIL 2014) (CONTINUED)Economic data releases for the US during the month of April painted a more positive economicrecovery, further confirming market expectations for a rebound from the weather disruption inJanuary and February. US Institute for Supply Management non-manufacturing and manufacturingindex rose to 53.1 (+1.5pts) and 53.7 in March (+0.5pts), bolstered by growth in new ordersalongside bullish job creation shown in payrolls and higher factory orders in February. Positiveretail sales print, industrial production and housing starts also showed a more positive economicrecovery. GDP for the first quarter 2014, however, missed estimates mainly due to the negativeweather conditions in January and February.However, the optimism from the data released was in contrast to the Fed’s remarks, whichemphasized the considerable slack in the labour market as well as the negative trend of the labourforce participation rate. The mentioned shortfall in unemployment and inflation would warrant theFOMC to keep rates low for an extended period of time. The FOMC in April continued to reduce itsopen market operations by another USD10 billion.As at the end of the period under review, ECB left its benchmark refinancing rate and deposit rateunchanged at 0.25% and 0% respectively, in its meeting in April. This was despite the inflationindex for the Eurozone slowing to 0.5% in March, which is below the ECB’s inflation target of 2%.Mario Draghi gave a dovish statement, primarily aimed at addressing the continued low inflation inthe region. The governing council has unanimously agreed to use "unconventional” tools to tacklethe "risks of a prolonged period of low inflation". However, France had returned to expansionfollowing four months of contraction, while Ireland showed the sharpest increase on manufacturingand services output.Meanwhile, Japan’s inflation in March grew 1.6% year over year (February: 1.5%), in line withestimates while the trade deficit widened more than expected to JPY1.714 trillion versus JPY1.184trillion, as export growth missed expectations at a mere 1.8% year over year (prior: 9.8%).However, imports grew 18.1% year over year (prior: 9.0%). Although BOJ remained confident thatApril’s consumption tax hike is unlikely to materially impact Japan’s 2% inflation target, BOJGovernor, Haruhiko Kuroda added that additional stimulus would be implemented withouthesitation should economic developments suggest otherwise.FUND PERFORMANCE1-year to30.04.20142-years to30.04.2014SinceInceptionto 30.04.2014Income (%) 4.69 2.93 7.76Capital (%) (0.72) 4.48 3.76Total Return (%) 3.95 7.48 11.81Benchmark (%) 3.00 3.30 6.01Average Total Return (%) 3.95 5.70 5.536

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2FUND PERFORMANCE (CONTINUED)12%10%8%3-year CIMB Bank fixeddeposit rateCIMB-PRINCIPALSTRATEGIC INCOMEBOND FUND 26%4%2%0%Changes in Net Asset Value (“NAV”)30.04.2014 30.04.2013 Changes %NAV (RM Million) 91.00 95.88 (5.09)NAV per unit (RM Million) 1.0379 1.0413 (0.33)The Fund’s NAV dropped 5.09% from RM95.88 million as at 30 April 2014 to RM 91 million as atend April 2014.Performance data represents the combined income and capital return as a result of holding units in the fund for thespecified length of time, based on NAV to NAV price. The performance data assumes that all earnings from the fund arereinvested and are net of management and trustee fees. Past performance is not reflective of future performance andincome distributions are not guaranteed. Unit prices and income distributions, if any, may fall and rise. All performancefigures have been extracted from Lipper.7

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2PORTFOLIO STRUCTUREAsset allocation(% of NAV)Fixed income securitiesCash and other net assetsTOTAL30.04.2014 30.04.201392.66 96.217.34 3.79100.00 100.00The Fund is 92.66% invested fixed income securities and 7.34% in cash as at end April 2014 asliquidity to cater for dividend payout and redemption.Cash and othernet assets7.34%Fixed incomesecurities92.66%MARKET OUTLOOK*The developed economies such as the EURO and the U.S are currently showing signs ofrecovery, and coupled with the potential pull back of liquidity from the existing quantitative easingprogramme to the financial market has resulted in a highly volatile fixed income market.Consequently, talks of early QE tapering by the U.S Fed have resulted in global bond yields risingin anticipation of higher interest rates at the beginning of this year. However, rising geo-politicaltensions in Russia and Ukraine have seen some safe haven flows which supported the UST.Although market is expecting an upward trajectory of rates, the bond market will be supported inthe near term as the Fed has reiterated low interest rate environment for a while and coupled withEurozone potential quantitative easing as well as Japan’s current quantitative and qualitativeeasing, liquidity will remain and this should support current bond market.* This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make apurchase of any investment. The information given in this article represents the views of CIMB-Principal AssetManagement Berhad (“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 orwarranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice orstatement made in this market outlook8

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2INVESTMENT STRATEGYOverall, we will continue with our buy and hold strategy and to prioritise capital preservation.UNIT HOLDINGS STATISTICSBreakdown of unit holdings by size as at 30 April 2014 are as follows:Size of unit holdings (units)No. ofunit holdersNo. of unitsheld (million)% of unitsheld5,000 and below 13 0.03 0.035,001 to 10,000 15 0.14 0.1610,001 to 50,000 40 1.34 1.5350,001 to 500,000 20 1.94 2.21500,001 and above 2 84.22 96.07Total 90 87.67 100.00SOFT COMMISSIONS AND REBATESCIMB-Principal Asset Management Berhad ("the Manager"), as well as the Trustees will not retainany form of rebate or soft commission from, or otherwise share in any commission with, any brokerin consideration for directing dealings in the investments of the Funds unless the soft commissionreceived is retained in the form of goods and services such as financial wire services and stockquotations system incidental to investment management of the Funds. All dealings with brokersare executed on best available terms.During the financial period under review, the Manager and Trustee did not receive any rebates andsoft commissions from brokers or dealers.9

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2STATEMENT BY MANAGER TO THE UNIT HOLDERS OFCIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2I, being the Director of CIMB-Principal Asset Management Berhad (the “Manager”), do herebystate that, in the opinion of the Manager, the accompanying audited financial statements set outon pages 14 to 48 are drawn up in accordance with the provisions of the Deed and give a trueand fair view of the financial position of the Fund as at 30 April 2014 and of its financialperformance, changes in equity and cash flows for the financial year then ended, in accordancewith Malaysian Financial Reporting Standards and International Financial Reporting Standards.For and on behalf of the Manager,CIMB-Principal Asset Management Berhad(Company No.: 304078-K)MUNIRAH KHAIRUDDINChief Executive Officer / DirectorKuala Lumpur30 June 201410

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2TRUSTEE’S REPORT TO THE UNIT HOLDERS OFCIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2We have acted as Trustee of CIMB-Principal Strategic Income Bond Fund 2 (“the Fund”) for thefinancial year ended 30 April 2014. To the best of our knowledge, CIMB-Principal AssetManagement Berhad (“the Manager”), has operated and managed the Fund in accordance with thefollowing:-a) limitations imposed on the investment powers of the Manager and the Trustee under the Deed,the Securities Commission’s Guidelines on Unit Trust Funds, the Capital Markets and ServicesAct 2007 and other applicable laws;b) valuation/pricing is carried out in accordance with the Deed and any regulatory requirements;andc) creation and cancellation of units are carried out in accordance with the Deed and anyregulatory requirements.During this financial year, a total distribution of 4.88 sen per unit (gross) has been distributed to theunit holders of the Fund. We are of the view that the distribution is not inconsistent with the objectiveof the Fund.For HSBC (Malaysia) Trustee BerhadTan Bee NieHead, Trustee OperationsKuala Lumpur30 June 201411

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OFCIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2REPORT ON THE FINANCIAL STATEMENTSWe have audited the financial statements of CIMB-Principal Strategic Income Bond Fund 2 onpages 14 to 48, which comprise the statement of financial position as at 30 April 2014 of theFund, and the statements of comprehensive income, changes equity and cash flows for thefinancial year then ended, and a summary of significant accounting policies and otherexplanatory notes, as set out on Note 1 to 19.Manager’s Responsibility for the Financial StatementsThe Manager of the Fund is responsible for the preparation of financial statements so as to givea true and fair view in accordance with Malaysian Financial Reporting Standards andInternational Financial Reporting Standards. The Manager is also responsible for such internalcontrol as the Manager determines is necessary to enable the preparation of financialstatements that are free from material misstatement whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with approved standards on auditing in Malaysia. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on our judgment,including the assessment of risks of material misstatement of the financial statements, whetherdue to fraud or error. In making those risk assessments, we consider internal control relevant tothe Fund’s preparation of financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the Manager’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by the Manager, as well as evaluating the overall presentation of thefinancial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.12

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OFCIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2 (CONTINUED)REPORT ON THE FINANCIAL STATEMENTS (CONTINUED)OpinionIn our opinion, the financial statements give a true and fair view of the financial position of theFund as of 30 April 2014 and of its financial performance and cash flows for the financial yearthen ended, in accordance with Malaysian Financial Reporting Standards and InternationalFinancial Reporting Standards.OTHER MATTERSThis report is made solely to the unit holders of the Fund and for no other purpose. We do notassume responsibility to any other person for the content of this report.PRICEWATERHOUSECOOPERS(No. AF: 1146)Chartered AccountantsKuala Lumpur30 June 201413

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 30 APRIL 2014Note 2014RM09.04.2012(date oflaunch) to30.04.2013RMNET INVESTMENT INCOMEInterest income 4 5,545,669 5,226,172Net gain/(loss) on financial assets at fair valuethrough profit or loss 10 203,883 (905,177)Net foreign currency exchange gain 28,989 172,495Net (loss)/gain on forward foreign currencycontracts (1,678,950) 2,583,516Other income 5 95,331 75,2544,194,922 7,152,260EXPENSESTrustee’s and custodian fees 7 73,368 75,205Audit fee 9,500 8,000Tax agent’s fee 5,000 7,600Other expenses 10,550 6,14398,418 96,948PROFIT BEFORE TAXATION 4,096,504 7,055,312Taxation 8 (37,656) (301,186)PROFIT AFTER TAXATION AND TOTALCOMPREHENSIVE INCOME FOR THEFINANCIAL YEAR/PERIOD 4,058,848 6,754,126Profit after taxation is made up as follows:Realised amount 5,557,695 6,592,131Unrealised amount (1,498,847) 161,9954,058,848 6,754,126The accompanying notes to the financial statements form an integral part of the audited financialstatements.14

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2STATEMENT OF FINANCIAL POSITIONAS AT 30 APRIL 2014Note 2014 2013RMRMCURRENT ASSETSFinancial assets at fair value through profit orloss 10 84,321,205 92,253,439Forward foreign currency contracts 11 300,762 709,879Cash and cash equivalents 12 6,470,462 2,945,392Other receivable 9,302 -TOTAL ASSETS 91,101,731 95,908,710CURRENT LIABILITIESAmount due to Manager 45,724 -Amount due to Trustee 3,664 4,217Other payables and accruals 18,528 13,283Tax payable 31,060 13,261TOTAL LIABILITIES 98,976 30,761NET ASSET VALUE OF THE FUND 91,002,755 95,877,949EQUITYUnit holders’ capital 87,309,082 91,943,501Retained earnings 3,693,673 3,934,448NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 13 91,002,755 95,877,949Number of units in circulation (units) 13 87,673,799 92,066,722Net asset value per unit (RM) (Ex-distribution) 1.0379 1.0413The accompanying notes to the financial statements form an integral part of the audited financialstatements.15

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 APRIL 2014NoteUnit holders’ Retainedcapital earningsTotalRM RM RMBalance as at 1 May 2013 91,943,501 3,934,448 95,877,949Movement in unit holders’ contributions:Cancellation of units 13 (4,634,419) - (4,634,419)Total comprehensive income for thefinancial year - 4,058,848 4,058,848Distribution 9 - (4,299,623) (4,299,623)Balance as at 30 April 2014 87,309,082 3,693,673 91,002,755Balance as at 9 April 2012 (date oflaunch) - - -Movements in unit holders’contributions:Creation of units from applications 13 95,077,705 - 95,077,705Cancellation of units 13 (3,134,204) - (3,134,204)Total comprehensive income for thefinancial period - 6,754,126 6,754,126Distribution 9 (2,819,678) (2,819,678)Balance as at 30 April 2013 91,943,501 3,934,448 95,877,949The accompanying notes to the financial statements form an integral part of the audited financialstatements.16

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2STATEMENT OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 APRIL 2014Note 2014RM09.04.2012(date oflaunch) to30.04.2013RMCASH FLOWS FROM OPERATING ACTIVITIESPurchase of fixed income securities (11,525,320) (152,371,287)Proceeds from disposal of fixed income securities 6,422,709 60,027,109Proceeds from redemption of fixed income securities 12,660,116 -Interest income received from deposits with licensedfinancial institutions 72,680 368,801Interest income received from fixed income securities 6,051,601 3,758,407Other income received 86,029 75,254Trustee’s and custodian fees paid (73,921) (70,988)Payments for other fees and expenses (19,803) (8,460)Net realised foreign exchange (loss)/gain (6,222) 138,713Net realised (loss)/gain on forward foreign currencycontracts (1,269,833) 1,873,637Tax paid (19,858) (3,399)Net cash generated from/(used in) operating activities 12,378,178 (86,212,213)CASH FLOWS FROM FINANCING ACTIVITIESCash proceeds from units created - 95,077,705Payments for cancellation of units (4,588,695) (3,134,204)Distribution paid (4,299,623) (2,819,678)Net cash (used in)/generated from financing activities (8,888,318) 89,123,823Net increase in cash and cash equivalents 3,489,860 2,911,610Cash and cash equivalents at the beginning of thefinancial year/period 2,945,392 -Effects of foreign exchange 35,210 33,782Cash and cash equivalents at the end of the financialyear/period 12 6,470,462 2,945,392The accompanying notes to the financial statements form an integral part of the audited financialstatements.17

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 APRIL 20141. THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITYCIMB-Principal Strategic Income Bond Fund 2 (the “Fund”) is governed by a Deed dated25 November 2011 (the “Deed”), made between CIMB-Principal Asset Management Bhd(the “Manager”) and HSBC (Malaysia) Trustee Bhd (the “Trustee”).The principal activity of the Fund is to invest between 70% to 98% (both inclusive) of itsnet asset value (“NAV”) in a diversified portfolio of bonds and other fixed and floating ratesecurities issued by governments, government agencies, supranational organisations andcorporate issuers. The Fund may also invest in structured products and/or derivativessuch as forward contracts, options, futures contracts or swap agreements, of which theunderlyings are related/linked to the above-mentioned securities. The Fund may alsoinvest in high yield securities, subject to a maximum of 40% of its NAV. At least 2% of theFund’s NAV are maintained in the form of liquid assets such as money market instrumentsand/or bank deposits for liquidity purposes.All investments will be subject to the Securities Commission’s (“SC”) Guidelines on UnitTrust Funds, SC requirements, the Deed, except where exemptions or variations havebeen 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 SdnBhd and regards CIMB Group Holdings Bhd as its ultimate holding company. TheManager is also an associate of Principal International (Asia) Limited, which is asubsidiary of Principal Financial Group Inc. The principal activities of the Manager are theestablishment and management of unit trust funds and fund management activities.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been used consistently in dealing with items whichare considered material in relation to the financial statements:(a)Basis of preparationThe financial statements have been prepared in accordance with the provisions ofthe Malaysian Financial Reporting Standards (“MFRS”) and International FinancialReporting Standards (“IFRS”).The financial statements have been prepared under the historical cost convention,as modified by financial assets and financial liabilities (including derivativesinstruments) at fair value through profit or loss.The preparation of financial statements in conformity with MFRS and IFRSrequires the use of certain critical accounting estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements, and the reportedamounts of revenues and expenses during the reported financial period. It alsorequires the Manager to exercise their judgment in the process of applying theFund’s accounting policies. The Manager believes that the underlying assumptionsare appropriate and the Fund’s financial statements therefore present the financialposition results fairly. Although these estimates and judgment are based on theManager’s best knowledge of current events and actions, actual results may differ.18

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(a)Basis of preparation (continued)The areas involving a higher degree of judgment or complexity, or areas whereassumptions and estimates are significant to the financial statements are disclosedin Note 2(m).The standards, amendments to published standards and interpretations to existingstandards that are applicable to the Fund but not yet effective and have not beenearly adopted are as follows:(i) Financial year beginning on/after 1 May 2014Amendment to MFRS 132 “Financial Instruments: Presentation” (effectivefrom 1 January 2014) does not change the current offsetting model inMFRS 132. It clarifies the meaning of ‘currently has a legally enforceableright of set-off’ that the right of set-off must be available today (notcontingent on a future event) and legally enforceable for all counterpartiesin the normal course of business. It clarifies that some gross settlementmechanisms with features that are effectively equivalent to net settlementwill satisfy the MFRS 132 offsetting criteria. The Fund will apply thisamendment when effective.The adoption of the amendment is not expected to have a significantimpact on the results of the Fund.(ii) Financial year beginning on/after 1 May 2017MFRS 9 “Financial Instruments – Classification and Measurement ofFinancial Assets and Financial Liabilities” (effective no earlier than annualperiods beginning on or after 1 January 2017) replaces the parts of MFRS139 that relate to the classification and measurement of financialinstruments. MFRS 9 requires financial assets to be classified into twomeasurement categories: those measured as at fair value and thosemeasured at amortised cost. The determination is made at initialrecognition. The classification depends on the entity’s business model formanaging its financial instruments and the contractual cash flowcharacteristics of the instrument. For financial liabilities, the standardretains most of the MFRS 139 requirements. The main change is that, incases where the fair value option is taken for financial liabilities, the part ofa fair value change due to an entity’s own credit risk is recorded in othercomprehensive income rather than the income statement, unless thiscreates an accounting mismatch. The Fund will apply this standard wheneffective.The adoption of the standard is not expected to have a significant impacton the results of the Fund.19

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(b)Financial assets and financial liabilitiesClassificationThe Fund designates its investment in unquoted fixed income securities asfinancial assets at fair value through profit or loss at inception.Financial assets are designated at fair value through profit or loss when they aremanaged and their performance evaluated on a fair value basis.Derivatives are financial assets/liabilities at fair value through profit or losscategorised as held for trading unless they are designated hedges.Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market and have beenincluded in current assets. The Fund’s loans and receivables comprise cash andcash equivalents, and other receivables.Financial liabilities are classified according to the substance of the contractualarrangements entered into and the definitions of a financial liability.The Fund classifies amount due to Manager, amount due to Trustee, otherpayables and accruals as other financial liabilities.Recognition and measurementRegular 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. Investmentsare initially recognised at fair value.Financial liabilities, within the scope of MFRS 139, are recognised in the statementof financial position when, and only when, the Fund becomes a party to thecontractual provisions of the financial instrument.Financial assets are derecognised when the rights to receive cash flows from theinvestments have expired or have been transferred and the Fund has transferredsubstantially all risks and rewards of ownership.Financial liabilities are derecognised when it is extinguished, i.e. when theobligation specified in the contract is discharged or cancelled or expired.Unrealised gains or losses arising from changes in the fair value of the financialassets at fair value through profit or loss are presented in the statement ofcomprehensive income within net gain or loss on financial assets at fair valuethrough profit or loss in the period which they arise.Unquoted fixed income securities denominated in Ringgit Malaysia are revalued ona daily basis based on fair value prices quoted by a bond pricing agency (“BPA”)registered with the SC as per the SC Guidelines on Unit Trust Funds. Refer to Note2(m) for further explanation.20

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(b)Financial assets and financial liabilities (continued)Prior to 13 September 2013, unquoted fixed income securities denominated inforeign currencies are revalued on a daily basis by reference to the price obtainedfrom at least three financial institutions. Effective from 13 September 2013, theunquoted fixed income securities denominated in foreign currencies are revaluedon a daily basis based on fair value prices quoted by Interactive Data Corporation("IDC"), a provider of financial market data. However, if such quotations are notavailable or should the gaps of the quotations provided by the financial institutionsor IDC differ by more than 20 basis points, the valuation shall be determined byreference to the value of such debt securities quoted by Bloomberg.Deposits with licensed financial institutions are stated at cost plus accrued interestcalculated on the effective interest method over the period from the date ofplacement to the date of maturity of the respective deposits.Loans and receivables and other financial liabilities are subsequently carried atamortised cost using the effective interest method.For assets carried at amortised cost, the Fund assesses at the end of the reportingperiod whether there is objective evidence that a financial asset or group offinancial assets is impaired. A financial asset or a group of financial assets isimpaired and impairment losses are incurred only if there is objective evidence ofimpairment as a result of one or more events that occurred after the initialrecognition of the asset (a ‘loss event’) and that loss event (or events) has animpact on the estimated future cash flows of the financial asset or group offinancial assets that can be reliably estimated.The amount of the loss is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows (excluding futurecredit losses that have not been incurred) discounted at the financial asset’soriginal effective interest rate. The asset’s carrying amount of the asset is reducedand the amount of the loss is recognised in profit or loss. If ‘loans and receivables’has a variable interest rate, the discount rate for measuring any impairment loss isthe current effective interest rate determined under the contract.As a practical expedient, the Fund may measure impairment on the basis of aninstrument’s fair value using an observable market price.If, in a subsequent period, the amount of the impairment loss decreases and thedecrease can be related objectively to an event occurring after the impairment wasrecognised (such as an improvement in the debtor’s credit rating), the reversal ofthe previously recognised impairment loss is recognised in statement ofcomprehensive income.When an asset is uncollectible, it is written off against the related allowanceaccount. Such assets are written off after all the necessary procedures have beencompleted and the amount of the loss has been determined.21

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c)Income recognitionInterest income from deposits with licensed financial institutions and unquotedfixed income securities are recognised on a time proportionate basis using theeffective interest rate method on an accrual basis.Realised gain or loss on disposal of unquoted fixed income securities is accountedfor as the difference between the net disposal proceeds and the carrying amountof investments, determined on cost adjusted for accretion of discount oramortisation of premium.(d)Foreign currencyFunctional and presentation currencyItems included in the financial statements of the Fund are measured using thecurrency of the primary economic environment in which the Fund operates (the“functional currency”). The financial statements are presented in Ringgit Malaysia(“RM”), which is the Fund’s functional and presentation currency.Transactions and balancesForeign currency transactions are translated into the functional currency using theexchange rates prevailing at the dates of the transactions or valuation where itemsare remeasured. Foreign exchange gains and losses resulting from the settlementof such transactions and from the translation at period end exchange rates ofmonetary assets and liabilities denominated in foreign currencies are recognised instatement of comprehensive income, except when deferred in othercomprehensive income as qualifying cash flow hedges.(e)Creation and cancellation of unitsThe Fund issues cancellable units, which are cancelled at the unit holder’s optionand are classified as equity. Cancellable units can be put back to the Fund at anytime for cash equal to a proportionate share of the Fund’s NAV. The outstandingunits are carried at the redemption amount that is payable at the date of thestatement of financial position if the unit holder exercises the right to put back theunit to the Fund.Units are created and cancelled at the unit holder’s option at prices based on theFund’s NAV per unit at the time of creation or cancellation. The Fund’s NAV perunit is calculated by dividing the net assets attributable to unit holders with the totalnumber of outstanding units.(f)Cash and cash equivalentsFor the purpose of statement of cash flows, cash and cash equivalents comprisebank balances and deposits held in highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to an insignificant riskof changes in value.22

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(g)TaxationCurrent tax expense is determined according to Malaysian tax laws at the currentrate based upon the taxable profit earned during the financial period. Tax oninterest income from foreign unquoted fixed income securities is based on the taxregime of the respective countries that the Fund invests in.(h)DistributionsA distribution to the Fund’s unit holders is accounted for as a deduction fromrealised reserve. A proposed distribution is recognised as a liability in the period inwhich it is approved by the Board of Directors of the Manager.(i)Unit holders’ capitalThe unit holders’ contributions to the Fund meet the definition of puttableinstruments classified as equity instruments under MFRS 132 “FinancialInstruments: Presentation”.The units in the Fund are puttable instruments which entitle the unit holders to apro-rata share of the net asset of the Fund. The units are subordinated and haveidentical features. There is no contractual obligation to deliver cash or anotherfinancial asset other than the obligation on the Fund to repurchase the units. Thetotal expected cash flows from the units in the Fund over the life of the units arebased on the change in the net asset of the Fund.(j)Segmental informationA business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are different fromthose of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that aresubject to risks and return that are different from those of segments operating inother economic environments.Operating segments are reported in a manner consistent with the internal reportingused by the chief operating decision-maker. The chief operating decision-maker isresponsible for allocating resources and assessing performance of the operatingsegments.(k)Derivative financial instrumentsA derivative financial instrument is any contract that gives rise to both a financialasset of one enterprise and a financial liability or equity instrument of anotherenterprise.A financial asset is any asset that is cash, a contractual right to receive cash oranother financial asset from another enterprise, a contractual right to exchangefinancial instruments with another enterprise under conditions that are potentiallyfavourable, or an equity instrument of another enterprise.A financial liability is any liability that is a contractual obligation to deliver cash oranother financial asset to another enterprise, or to exchange financial instrumentswith another enterprise under conditions that are potentially unfavourable.23

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(k)Derivative financial instruments (continued)The Fund’s derivative financial instruments comprise forward currency contracts.Derivatives are initially recognised at fair value on the date a derivative contract isentered into and are subsequently re-measured at their fair value.The method of recognising the resulting gain or loss depends on whether thederivative is designated as a hedging instrument, and the nature of the item beinghedged. Derivatives that do not qualify for hedge accounting are classified as heldfor trading and accounted for in accordance with the accounting policy set out inNote 2(b).(l)Fair value of financial instrumentsFinancial instruments comprise financial assets and financial liabilities. Fair valueis defined as the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurementdate (i.e. an exit price). The information presented herein represents the estimatesof fair values as at the date of the statement of financial position.(m)Critical accounting estimates and judgements in applying accountingpoliciesThe Fund makes estimates and assumptions concerning the future. The resultingaccounting estimates will, by definition, rarely equal the related actual results. Toenhance the information content of the estimates, certain key variables that areanticipated to have material impact to the Fund’s results and financial position aretested for sensitivity to changes in the underlying parameters.Estimates and judgments are continually evaluated by the Manager and are basedon historical experience and other factors, including expectations of future eventsthat are believed to be reasonable under the circumstances.Estimate of fair value of unquoted fixed income securitiesIn undertaking any of the Fund’s investment, the Manager will ensure that allassets of the Fund under management will be valued appropriately, that is at fairvalue and in compliance with the SC Guidelines on Unit Trust Funds.Ringgit-denominated unquoted fixed income securities are valued using fair valueprices quoted by a bond pricing agency (“BPA”). Where the Manager is of theview that the price quoted by BPA for a specific unquoted fixed income securitiesdiffers from the market price by more than 20 basis points, the Manager may usemarket price, provided that the Manager records its basis for using a non-BPAprice, obtains necessary internal approvals to use the non-BPA price, and keepsan audit trail of all decisions and basis for adopting the use of non-BPA price.Prior to 13 September 2013, unquoted fixed income securities denominated inforeign currencies are revalued on a daily basis by reference to the price obtainedfrom at least three financial institutions. Effective from 13 September 2013, theunquoted fixed income securities denominated in foreign currencies are revaluedon a daily basis based on fair value prices quoted by Interactive Data Corporation("IDC"), a provider of financial market data. However, if such quotations are notavailable or should the gaps of the quotations provided by the financial institutionsor IDC differ by more than 20 basis points, the valuation shall be determined byreference to the value of such debt securities quoted by Bloomberg.24

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIESThe investment objective of the Fund is to provide regular income through investments inpredominantly bonds and other fixed and floating rate securities.The Fund is exposed to a variety of risks which include market risk (inclusive of price risk,interest rate risk and currency risk), credit risk, liquidity risk, non-compliance risk andcapital risk.Financial risk management is carried out through internal control process adopted by theManager and adherence to the investment restrictions as stipulated in the Deed and SCGuidelines on Unit Trust Funds.Financial instruments of the Fund are as follows:Financial assetsat fair value through Loans andprofit or loss receivables TotalRM RM RM2014Unquoted fixed income securities(Note 10) 84,321,205 - 84,321,205Forward foreign currency contracts(Note 11) 300,762 - 300,762Cash and cash equivalents (Note 12) - 6,470,462 6,470,462Other receivable -───────────9,302───────────9,302──────────84,621,967 6,479,764 91,101,731═══════════ ═══════════ ══════════2013Unquoted fixed income securities(Note 10) 92,253,439 - 92,253,439Forward foreign currency contracts(Note 11) 709,879 - 709,879Cash and cash equivalents (Note 12) -───────────2,945,392───────────2,945,392──────────92,963,318 2,945,392 95,908,710═══════════ ═══════════ ══════════All current liabilities except for tax payable are financial liabilities which are carried atamortised cost.25

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(a)Market risk(i)Price riskThis is the risk that the fair value of an investment in unquoted fixed incomesecurities will fluctuate because of changes in market prices (other thanthose arising from interest rate risk and currency risk). The value ofinvestments may fluctuate according to the activities of individualcompanies, sector and overall political and economic conditions. Suchfluctuation may cause the Fund’s NAV and prices of units to fall as well asrise, and income produced by the Fund may also fluctuate.The price risk is managed through diversification and selection of securitiesand other financial instruments within specified limits according to theDeed.The Fund’s overall exposure to price risk was as follows:2014 2013RMRMFinancial assets at fair value throughprofit or loss:- unquoted fixed income securities * 84,321,205 92,253,439* Includes interest receivable of RM1,703,740 (2013: RM1,565,221)The table below summarises the sensitivity of the Fund’s profit after tax andNAV to movements in prices of unquoted fixed income securities at the endof each reporting year. The analysis is based on the assumptions that theprice of the unquoted fixed income securities increased and decreased by5% with all other variables held constant. This represents management’sbest estimate of a reasonable possible shift in the unquoted fixed incomesecurities, having regard to the historical volatility of the prices.% Change in price ofunquotedfixedsecuritiesMarketvalueRMImpact on profitafter tax / net assetvalueRM2014-5% 78,486,592 (4,130,873)0% 82,617,465 -5% 86,748,338 4,130,873═════════ ═════════ ═════════2013-5% 86,153,807 (4,534,411)0% 90,688,218 -5% 95,222,629 4,534,411═════════ ═════════ ═════════26

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(a)Market risk (continued)(ii)Interest rate riskIn general, when interest rates rise, unquoted fixed income securities priceswill tend to fall and vice versa. Therefore, the NAV of the Fund may alsotend to fall when interest rates rise or are expected to rise. However,investors should be aware that should the Fund holds an unquoted fixedincome securities till maturity, such price fluctuations would dissipate as itapproaches maturity, and thus the growth of the NAV shall not be affectedat maturity. In order to mitigate interest rates exposure of the Fund, theManager will manage the duration of the portfolio via shorter or longertenured assets depending on the view of the future interest rate trend of theManager, which is based on its continuous fundamental research andanalysis.Investors should note that the movement in prices of unquoted fixedincome securities and money market instruments are benchmarked againstinterest rates. As such, the investments are exposed to the movement ofthe interest rates.This risk is crucial since unquoted fixed income securities portfoliomanagement depends on forecasting interest rate movements. Prices ofunquoted fixed income securities move inversely to interest ratemovements, therefore as interest rates rise, the prices of unquoted fixedincome securities decrease and vice versa. Furthermore, unquoted fixedincome securities with longer maturity and lower yield coupon rates aremore susceptible to interest rate movements.Such investments may be subject to unanticipated rise in interest rateswhich may impair the ability of the issuers to make payments of interestincome and principal, especially if the issuers are highly leveraged. Anincrease in interest rates may therefore increase the potential for default byan issuer.The table below summarises the sensitivity of the Fund’s profit after tax andNAV to movements in prices of unquoted fixed income securities held bythe Fund as a result of movement in interest rate. The analysis is based onthe assumptions that the interest rate changed by 1% with all othervariables held constant. This represents management’s best estimate of areasonable possible shift in the interest rate, having regard to the historicalvolatility of the interest rate.% Change in interest rate Impact on profit after tax / net asset value2014 2013RMRM+1% (61,974) (114,152)-1% 62,072 114,366═════ ════════ ════════27

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(a)Market risk (continued)(ii)Interest rate risk (continued)The Fund’s exposure to interest rates associated with deposits withlicensed financial institutions is not material as the deposits are held onshort-term basis.(iii)Currency riskCurrency risk is associated with financial instruments that are quotedand/or priced in foreign currency denomination. Malaysian based investorshould be aware that if the Ringgit Malaysia appreciates against thecurrencies in which the portfolio of the investment is denominated, this willhave an adverse effect on the NAV of the fund and vice versa. Investorsshould note any gains or losses arising from the movement of foreigncurrencies against its home currency may therefore increase/decrease thecapital gains of the financial instruments. Nevertheless, investors shouldrealise that currency risk is considered as one of the major risks to financialinstruments in foreign assets due to the volatile nature of the foreignexchange market. The Manager or its fund management delegate couldutilise two pronged approaches in order to mitigate the currency risk; firstlyby spreading the investments across different currencies (i.e.diversification) and secondly, by hedging the currencies when it deemednecessary.The following table sets out the foreign currency risk concentrations of theFund at the end of each reporting year/period:Financialassets atfair valuethroughprofit orlossForwardforeigncurrencycontractsCash andcashequivalentsTotalRM RM RM RM2014USD 36,829,428 300,762 - 37,130,190IDR 20,735,204 - 15 20,735,21957,564,632 300,762 15 57,865,4092013USD 36,073,784 709,879 34,032 36,817,695IDR 16,111,100 - 338,848 16,449,94852,184,884 709,879 372,880 53,267,64328

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(a)Market risk (continued)(iii)Currency risk (continued)The table below summarises the sensitivity of the Fund's profit after tax andNAV to changes in foreign exchange movements at the end of eachreporting year/period. The analysis is based on the assumption that theforeign exchange rate fluctuates by 5%, with all other variables remainconstants. This represents management's best estimate of a reasonablepossible shift in the foreign exchange rate, having regard to historicalvolatility of this rate. Disclosures below are shown in absolute terms,changes and impacts could be positive or negative.Change inforeign exchangeImpact on profit after tax / netasset valuerate2014 2013% RM RMUSD 5 1,856,510 1,840,885IDR 5 1,036,761 822,4972,893,271 2,663,382(b)Credit riskCredit risk refers to the risk that a counterparty will default on its contractualobligation resulting in financial loss to the Fund.Investment in unquoted fixed income securities may involve a certain degree ofcredit/default risk with regards to the issuers. Generally, credit risk or default risk isthe risk of loss due to the issuer’s non-payment or untimely payment of theinvestment amount as well as the returns on investment. This will cause a declinein value of the defaulted unquoted fixed income securities and subsequentlydepress the NAV of the Fund. Usually credit risk is more apparent for aninvestment with a longer tenure, i.e. the longer the duration, the higher the creditrisk. Credit risk can be managed by performing continuous fundamental creditresearch and analysis to ascertain the creditworthiness of its issuer. In addition,the Manager imposes a minimum rating requirement as rated by either local and/orforeign rating agencies and manages the duration of the investment in accordancewith the objective of the Fund.The credit risk arising from placements of deposits in licensed financial institutionsis managed by ensuring that the Fund will only place deposits in reputable licensedfinancial institutions. The settlement terms of the proceeds from the creation ofunits receivable from the Manager are governed by the SC Guidelines on UnitTrust Funds.29

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(b)Credit risk (continued)Financialassets atfair valuethroughprofit orlossForwardforeigncurrencycontractsCash andcashequivalentsOtherreceivable TotalRM RM RM RM RM2014Construction& materials- AA2 9,944,466 - - - 9,944,466- AA3 1,028,514 - - - 1,028,514ConsumerProducts- Baa3 699,149 699,149Finance- AAA - 270,704 21,825 - 292,529- AA1 - 30,058 2,001,085 - 2,031,143- AA2 - - 4,447,552 - 4,447,552- AA3 517,233 - - - 517,233- A3 22,782,555 - - - 22,782,555- Baa1 8,169,819 8,169,819- Ba1 10,359,114 10,359,114- NR 20,735,204 - - - 20,735,204Plantations- AA2 5,000,630 - - - 5,000,630Utilities- AA3 5,084,521 - - - 5,084,521Others- NR - - - 9,302 9,30284,321,205 300,762 6,470,462 9,302 91,101,73130

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(b)Credit risk (continued)Financialassets atfair valuethroughprofit orlossCash andcashequivalentsForwardforeigncurrencycontractsTotalRM RM RM RM2013Construction &materials- AA 10,023,466 - - 10,023,466- AA3 1,057,009 - - 1,057,009Food &beverages- AA2 3,069,818 - - 3,069,818Finance- AAA - 2,572,512 375,923 2,948,435- AA1 - - 333,956 333,956- AA2 - 372,880 - 372,880- AA3 532,984 - - 532,984- A3 22,563,160 - - 22,563,160- Baa1 7,625,254 - - 7,625,254- Ba2 9,796,327 - - 9,796,327- NR 16,111,100 - - 16,111,100Industrials- Baa2 3,813,116 - - 3,813,116Plantations- AA2 5,111,130 - - 5,111,130Properties- Ba2 7,348,255 - - 7,348,255Utilities- AA3 5,201,820 - - 5,201,82092,253,439 2,945,392 709,879 95,908,710All financial assets of the Fund are neither past due nor impaired.(c)Liquidity riskLiquidity risk can be defined as the ease with which a security can be sold at ornear its fair value depending on the volume traded in the market. If a securityencounters a liquidity crunch, the security may need to be sold at a discount tothe market fair value of the security. This in turn would depress the NAV and/orgrowth of the Fund. Generally, all investments are subject to a certain degree ofliquidity risk depending on the nature of the investment instruments, market,sector and other factors. For the purpose of the Fund, the fund Manager willattempt to balance the entire portfolio by investing in a mix of assets withsatisfactory trading volume and those that occasionally could encounter poorliquidity. This is expected to reduce the risks for the entire portfolio withoutlimiting the Fund’s growth potentials.31

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(b) Liquidity risk (continued)The Manager manages this risk by maintaining sufficient level of liquid assets tomeet anticipated payments and cancellations of the units by unit holders. Liquidassets comprise bank balance, deposits with licensed financial institutions and otherinstruments, which are capable of being converted into cash within 7 business days.The table below summarises the Fund’s financial liabilities into relevant maturitygroupings based on the remaining year as at the statement of financial position dateto the contractual maturity date. The amounts in the table are the contractualundiscounted cash flows.BetweenLess than 1 month1 month to 1 year TotalRM RM RM2014Amount due to Manager 45,724 - 45,724Amount due to Trustee 3,664 - 3,664Other payables and accruals - 18,528 18,528─────────── ─────────── ───────────Contractual cash out flows 49,388 18,528 67,916═══════════ ═══════════ ═══════════2013Amount due to Trustee 4,217 - 4,217Other payables and accruals - 13,283 13,283─────────── ─────────── ───────────Contractual cash out flows 4,217 13,283 17,500═══════════ ═══════════ ═══════════(d)Non-compliance riskNon-compliance risk arises when the Manager and others associated with the Funddo not follow the rules set out in the Fund’s constitution, or the law that govern theFund, or act fraudulently or dishonestly. It also includes the risk of the Manager notcomplying with internal control procedures.The non-compliance may expose the Fund to higher risks which may result in a fallin the value of the Fund which in turn may affect its investment goals. However, therisk can be mitigated by the internal controls and compliance monitoring undertakenby the Manager.(e)Capital risk managementThe capital of the Fund is represented by equity consisting of unit holders’ capitaland retained earnings. The amount of equity can change significantly on a dailybasis as the Fund is subject to daily subscriptions and redemptions at the discretionof unit holders. The Fund’s objective when managing capital is to safeguard theFund’s ability to continue as a going concern in order to provide returns for unitholders and benefits for other stakeholders and to maintain a strong capital base tosupport the development of the investment activities of the Fund.32

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(f)Fair value estimationThe fair value of financial assets and liabilities traded in active markets (such aspublicly traded derivatives and trading securities) are based on quoted marketprices at the close of trading on the year end date. Prior to 1 May 2013, thequoted market price used for financial assets held by the Fund was the currentbid price; the quoted market price for financial liabilities was the current askingprice. The Fund adopted MFRS 13, ‘Fair Value Measurement’, from 1 May 2013and changed its fair valuation inputs to utilise the last traded market price forboth financial assets and financial liabilities.An active market is a market in which transactions for the asset or liability takeplace with sufficient frequency and volume to provide pricing information on anongoing basis.The fair value of financial assets and liabilities that are not traded in an activemarket is determined by using valuation techniques. The Fund uses a variety ofmethods and makes assumptions that are based on market conditions existingat each period end date. Valuation techniques used for non-standardisedfinancial instruments such as options, currency swaps and other over-thecounterderivatives, include the use of comparable recent arm’s lengthtransactions, reference to other instruments that are substantially the same,discounted cash flow analysis, option pricing models and other valuationtechniques commonly used by market participants making the maximum use ofmarket inputs and relying as little as possible on entity-specific inputs.For instruments for which there is no active market, the Fund may use internallydeveloped models, which are usually based on valuation methods andtechniques generally recognised as standard within the industry. Valuationmodels are used primarily to value unlisted equity, debt securities and otherdebt instruments for which market were or have been inactive during thefinancial period. Some of the inputs to these models may not be marketobservable and are therefore estimated based on assumptions.The output of a model is always an estimate or approximation of a value thatcannot be determined with certainty, and valuation techniques employed maynot fully reflect all factors relevant to the positions the Fund holds. Valuationsare therefore adjusted where appropriate, to allow for additional factorsincluding model risk, liquidity risk and counterparty risk.The fair value is based on the following methodology and assumptions:(i)(ii)Bank balance and deposits and placements with financial institutionswith maturities less than 1 year, the carrying value is a reasonableestimate of fair value.The carrying value less impairment provision of receivables andpayables are assumed to approximate their fair values. The carryingvalue of the financial assets and financial liabilities approximate their fairvalue due to their short-term nature.33

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(f)Fair value estimation (continued)Fair value hierarchyThe table below analyses financial instruments carried at fair value, by valuationmethod. The different levels have been defined as follows:• Quoted prices (unadjusted) in active market for identical assets orliabilities (Level 1)• Inputs other than quoted prices included within Level 1 that areobservable for the asset or liability, either directly (that is, as prices) orindirectly (that is, derived from prices) (Level 2)• Inputs for the asset and liability that are not based on observable marketdata (that is, unobservable inputs) (Level 3)The level in the fair value hierarchy within which the fair value measurement iscategorised in its entirety is determined on the basis of the lowest level input thatis significant to the fair value measurement in its entirety. For this purpose, thesignificance of an input is assessed against the fair value measurement in itsentirety. If a fair value measurement uses observable inputs that requiresignificant adjustment based on unobservable inputs, that measurement is aLevel 3 measurement.Assessing the significance of a particular input to the fair value measurement inits entirety requires judgment, considering factors specific to the asset or liability.The determination of what constitutes ‘observable’ requires significant judgmentby the Fund. The Fund considers observable data to be that market data that isreadily available, regularly distributed or updated, reliable and verifiable, notproprietary, and provided by independent sources that are actively involved inthe relevant market.Level 1 Level 2 Level 3 TotalRM RM RM RM2014Financial assets at fair valuethrough profit or loss:- unquoted fixed incomesecurities - 84,321,205 - 84,321,205Derivative assets:- forward foreign currencycontracts - 300,762 - 300,762- 84,621,967 - 84,621,9672013Financial assets at fair valuethrough profit or loss:- unquoted fixed incomesecurities - 92,253,439 - 92,253,439Derivative assets- forward foreign currencycontracts - 709,879 - 709,879- 92,963,318 - 92,963,31834

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 23. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)(f)Fair value estimation (continued)Fair value hierarchy (continued)Financial instruments that trade in markets that are considered to be active butare valued based on quoted market prices, dealer quotations or alternativepricing sources supported by observable inputs are classified within Level 2. Thisincludes unquoted fixed income securities and forward foreign currencycontracts. As Level 2 instruments include positions that are not traded in activemarkets and/or are subject to transfer restrictions, valuations may be adjusted toreflect illiquidity and/or non-transferability, which are generally based on availablemarket information. The Fund’s policies on valuation of these financial assets arestated in Note 2(b).4. INTEREST INCOME2014RM09.04.2012(date oflaunch) to30.04.2013RMInterest income from unquoted fixed income securities 5,472,989 4,857,371Interest income from deposits with licensed financialinstitutions 72,680 368,8015,545,669 5,226,1725. OTHER INCOMEOther income consists of exit fees charged to unit holders for withdrawals made prior tothe maturity date of the Fund. The penalty will be fixed at three percent (3%) of the NAVper unit for the first year and will decline by one percent (1%) every year thereafter. Forthe financial year ended 30 April 2014, the penalty is fixed at two percent (2%)(09.04.2012 to 30.04.2013: 3%).6. MANAGEMENT FEEIn accordance with Clause 24(1) of the Deed, the Manager is entitled to a fee of up to3.00% per annum calculated and accrued daily based on the NAV of the Fund.As at each financial year/period, no management fee is charged on the Fund as themanagement fee has been waived by the Manager.There will be no further liability to the Manager in respect of management fee other thanthe amount recognised above.35

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 27. TRUSTEE’S AND CUSTODIAN FEESIn accordance with Clause 24(2) of the Deed, the Trustee is entitled to a fee notexceeding 0.10% per annum calculated and accrued daily based on the NAV of theFund. The Trustee’s fee includes the local custodian fee but excludes the foreign subcustodianfee, if any.For the financial year ended 30 April 2014, the Trustee’s fee is recognised at a rate of0.05% per annum (2013: 0.05% per annum).There will be no further liability to the Trustee and custodian in respect of Trustee’s andcustodian fees other than the amount recognised above.8. TAXATION2014RM09.04.2012(date oflaunch) to30.04.2013RMTax charged for the financial year/period:- current taxation – local 25,372 16,660- current taxation – foreign 8,132 284,526- under provision in prior financial year 4,152 -37,656 301,186A numerical reconciliation between the profit before taxation multiplied by the Malaysianstatutory income tax rate and tax expense of the Fund is as follows:2014RM09.04.2012(date oflaunch) to30.04.2013RMProfit before taxation 4,096,504 7,055,312Taxation at Malaysian statutory rate of 25%(2013: 25%) 1,024,126 1,763,828Tax effects of:Investment income not subject to tax (1,024,898) (1,771,127)Expenses not deductible for tax purposes 24,006 21,452Restriction on tax deductible expenses for unittrust funds 2,138 2,507Effect of foreign tax on foreign taxable income 8,132 284,526Under provision in prior financial year 4,152 -Taxation 37,656 301,18636

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 29. DISTRIBUTIONDistribution to unit holders derived from the following sources:2014RM09.04.2012(date oflaunch) to30.04.2013RMInterest income 4,185,715 1,816,935Net realised foreign exchange gains 160,551 73,518Net realised gain on forward foreign currencycontracts (18,494) 993,028Other income 52,869 31,9914,380,641 2,915,472Less:Expenses (81,018) (79,854)Taxation - (15,940)Net distribution amount 4,299,623 2,819,678Final distribution on 26 March 2014Gross distribution per unit (sen) 4.88 -Net distribution per unit (sen) 4.88 -Final distribution on 29 March 2013Gross distribution per unit (sen) - 3.08Net distribution per unit (sen) - 3.06Net distribution above is sourced from current year’s realised income. Gross distributionis derived using total income less total expenses.Gross distribution per unit is derived from gross realised income less expense divided bythe number of units in circulation, while net distribution for unit is derived from netrealised income less expenses and taxation divided by the number of units in circulation.37

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 210. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS2014 2013RMRMDesignated at fair value through profit or loss at inception:- unquoted fixed income securities 84,321,205 92,253,4392014RM09.04.2012(date oflaunch) to30.04.2013RMNet gain/(loss) on financial assets at fair value throughprofit or loss:- realised gain/(loss) on disposals 611,693 (191,750)- change in unrealised fair value loss (407,810) (713,427)203,883 (905,177)Name of counterNominalvalueAggregatecostMarketvaluePercentageof net assetvalueRM RM RM %2014UNQUOTED FIXEDINCOME SECURITIES– LOCALBank MuamalatMalaysia Bhd 5.15%15/06/2021 (A3) 5,000,000 5,188,491 5,181,209 5.69Golden AssetsInternational FinanceLtd 4.35% 17/11/2017(AA2) 5,000,000 5,108,407 5,000,630 5.50Malakoff Power Bhd4.30% 17/12/2015(AA3) 5,000,000 5,082,999 5,084,521 5.59Bahrain MumtalakatHolding CompanyB.S.C 5.35%30/04/2018 (AA2) 10,000,000 10,019,482 9,944,466 10.93New PantaiExpressway Sdn Bhd7.45% 27/4/2015(AA3) 1,000,000 1,031,693 1,028,514 1.13RHB Investment BankBhd 7.25%06/04/2020 (AA3) 500,000 515,694 517,233 0.56TOTAL UNQUOTEDFIXED INCOMESECURITIES –LOCAL 26,500,000 26,946,766 26,756,573 29.4038

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 210. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)Name of counterNominalvalueAggregatecostMarketvaluePercentageof net assetvalueRM RM RM %2014 (CONTINUED)UNQUOTED FIXEDINCOME SECURITIES– FOREIGNINDONESIAAdira Dinamika MultiFinance 9.60%27/05/2014 (NR) 6,208,400 6,518,176 6,356,158 6.98Adira Dinamika MultiFinance 7.75%04/05/2015 (NR) 8,466,000 10,176,102 8,534,119 9.38Bank Pan Indonesia9.00% 09/11/2015(NR) 5,644,000 6,978,914 5,844,927 6.42TOTAL INDONESIA 20,318,400 23,673,192 20,735,204 22.78UNITED STATESCIMB Bank Bhd6.62% 02/11/15 (Ba1) 9,792,000 9,697,814 10,359,114 11.38Li & Fung Ltd6.00% 25/05/2018(Baa3) 652,800 627,073 699,149 0.77National Capital Trust II5.486% 29/12/2049(Baa1) 7,833,600 7,607,089 8,169,819 8.98Standard CharteredBank London 9.50%Perpetual (A3) 16,320,000 16,890,508 17,601,346 19.35TOTAL UNITEDSTATES 34,598,400 34,822,484 36,829,428 40.4839

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 210. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)Name of counterNominalvalueAggregatecostMarketvaluePercentageof net assetvalueRM RM RM %2014 (CONTINUED)UNQUOTED FIXEDINCOME SECURITIES– FOREIGNTOTAL FIXED INCOMESECURITIES –FOREIGN 54,916,800 58,495,676 57,564,632 63.26TOTAL UNQUOTEDFIXED INCOMESECURITIES 81,416,800 85,442,442 84,321,205 92.66UNREALISED LOSSON FINANCIALASSETS AT FAIRVALUE THROUGHPROFIT OR LOSS (1,121,237)TOTAL FAIR VALUEOF FINANCIALASSETS AT FAIRVLAUE THROUGHPROFIT OR LOSS 84,321,20540

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 210. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)Name of counterNominalvalueAggregatecostMarketvaluePercentageof net assetvalueRM RM RM %2013UNQUOTED FIXEDINCOMESECURITIES –LOCALBank Muamalat5.15% 15/06/2021 5,000,000 5,228,641 5,276,001 5.50First (A3) Resources Limited4.45% 31/07/2017 3,000,000 3,032,918 3,069,818 3.20Golden (AA2) Assets Intl Fin4.35% Ltd 17/11/2017Malakoff (AA2) Power Bhd5,000,000 5,111,316 5,111,130 5.335.983% 30/04/2015 5,000,000 5,171,457 5,201,820 5.43Bahrain MumtalakatHolding CompanyB.S.C. 5.35%30/04/2018 (AA2) 10,000,000 10,022,718 10,023,466 10.45New PantaiBhd Expressway 7.45% 4/27/2015 SdnRHB (AA3) Investment Bank1,000,000 1,061,638 1,057,009 1.107.25% Bhd 06/04/2020CIMB (AA3) Bank Bhd500,000 529,545 532,984 0.566.62% 02/11/159,122,401 9,674,887 9,796,327 10.22(Baa3)TOTAL UNQUOTEDFIXED INCOMESECURITIES –LOCAL 38,622,401 39,833,120 40,068,555 41.7941

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 210. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)Name of counterNominalvalueAggregatecostMarketvaluePercentageof net assetvalueRM RM RM %2013 (CONTINUED)UNQUOTED FIXEDINCOMESECURITIES –INDONESIAAdira Dinamika MultiFinance7.75% 04/05/2015(NR) 9,369,000 10,201,835 9,544,474 9.95Bank Pan Indonesia9.00% 09/11/2015(NR) 6,246,000 7,068,446 6,566,626 6.85TOTAL INDONESIA 15,615,000 17,270,281 16,111,100 16.80UNITED STATESLi & Fung Ltd6.00% 25/05/2018(Baa2) 608,160 625,810 636,430 0.66Longfor Properties9.50% 07/04/2016 6,689,761 7,187,675 7,348,255 7.66National (BB) Capital Trust II5.486% 29/12/2049(Baa1) 7,297,921 7,448,925 7,625,254 7.95SSE PLC5.625% 01/10/2017(Baa2) 3,040,799 3,104,033 3,176,686 3.31Standard CharteredLondon Bank ondon 9.50%Perpetual (A3) 15,204,001 17,497,022 17,287,159 18.04TOTAL UNITEDSTATES 32,840,642 35,863,465 36,073,784 37.6242

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 210. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)Name of counterNominalvalueAggregatecostMarketvaluePercentageof net assetvalueRM RM RM %2013 (CONTINUED)TOTAL UNQUOTEDFIXED INCOMESECURITIES –FOREIGN 48,455,642 53,133,746 52,184,884 54.42TOTAL UNQUOTEDFIXED INCOME SECURITIES 87,078,043 92,966,866 92,253,439 96.21UNREALISED LOSSON FINANCIALASSETS AT FAIRVALUE THROUGHPROFIT OR LOSS (713,427)TOTAL FAIR VALUEOF FINANCIALASSETS AT FAIRVALUE THROUGHPROFIT OR LOSS 92,253,43911. FORWARD FOREIGN CURRENCY CONTRACTSAs at 30 April 2014, there are 4 (2013: 10) outstanding US Dollar/Malaysian Ringgit forwardforeign currency contracts. The notional principal amount of the outstanding forward foreigncurrency contracts amounted to RM300,762 (2013: RM709,879).The US Dollar/Malaysian Ringgit forward foreign currency contracts are entered into duringthe financial year/period to minimise the risk of foreign currency exposure between the USDollar and the Malaysian Ringgit for the Fund.As the Fund has not adopted hedge accounting during the financial year/period, any changesin the fair value of the forward foreign currency contracts are recognised immediately in thestatement of comprehensive income during the year/period in which it was incurred.43

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 212. CASH AND CASH EQUIVALENTS2014 2013RMRMDeposits with licensed financial institutions 6,448,637 -Bank balances in a licensed bank 21,825 2,945,3926,470,462 2,945,392The effective weighted average interest rate per annum is as follows:2014 2013% %Deposits with licensed financial institutions 3.17 -As at 30 April 2014, deposits with licensed financial institutions of the Fund have andaverage maturity of 3 days.13. NUMBER OF UNITS IN CIRCULATION AND NET ASSETS ATTRIBUTABLE TO UNITHOLDERS09.04.2012 (date of launch) to201430.04.2013No. of units RM No. of units RMAt the beginning of thefinancial year/period 92,066,722 95,877,949 - -Add: Creation of unitsfrom applicationsduring the financialyear/period - - 95,077,705 95,077,705Less: Cancellation of unitsduring the financialyear/period (4,392,923) (4,634,419) (3,010,983) (3,134,204)Total comprehensiveincome for the financialyear/period - 4,058,848 - 6,754,126Distribution for thefinancial year/period - (4,299,623) - (2,819,678)At the end of the financialyear/period 87,673,799 91,002,755 92,066,722 95,877,94944

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 214. MANAGEMENT EXPENSE RATIO (“MER”)09.04.2012(date oflaunch) to2014 30.04.2013% %MER 0.10 0.11MER is derived from the following calculation:MER = ( A + B + C + D ) x 100EA =B =C =D =E =Trustee’s and custodian feesAudit feeTax agent’s feeOther expensesAverage NAV of the Fund calculation on a daily basisThe average NAV of the Fund for the financial year/period calculated on daily basis isRM94,822,111 (2013: RM89,931,044).15. PORTFOLIO TURNOVER RATIO (“PTR”)201409.04.2012(date oflaunch) to30.04.2013PTR (times) 0.09 1.18PTR is derived based on the following calculation:(Total acquisition for the financial year/period + total disposal for the financial year/period) ÷ 2Average NAV of the Fund for the financial year/period calculated on a daily basiswhere:total acquisition for the financial year/period = RM11,525,320 (2013: RM152,371,287)total disposal for the financial year/period = RM 6,090,007 (2013: RM60,344,103)45

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 216. UNITS HELD BY THE MANAGER AND RELATED PARTIES TRANSACTIONS ANDBALANCESThe related parties and their relationship with the Fund are as follows:Related partiesCIMB-Principal Asset Management BhdCIMB Group Sdn BhdCIMB Group Holdings Bhd (“CIMB”)CIMB Bank BhdCIMB Investment Bank BhdSubsidiaries and associates of CIMB asdisclosed in its financial statementsRelationshipThe ManagerHolding company of the ManagerUltimate holding company of theManagerFellow subsidiary of the ManagerFellow subsidiary of the ManagerSubsidiary and associated companiesof the ultimate holding company ofthe ManagerUnit held by the Manager and parties related to the ManagerThere was no unit held by the Manager and parties related to the Manager as at the endof each financial year/period.In addition to related party disclosures mentioned elsewhere in the financial statements,set out below are other significant related party transactions and balances. The Manageris of the opinion that all transactions with the related companies have been entered intoin the normal course of business at agreed terms between the related parties.2014RM09.04.2012(date oflaunch) to30.04.2013RMSignificant related party transactionInterest income from deposits with licensedfinancial institution:- CIMB Bank Bhd 10,109 46,996There are no significant related party balances as at the end of each financialyear/period.46

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 217. TRANSACTIONS WITH BROKERS/DEALERSDetails of transactions with the top 10 brokers/dealers for the financial year ended 30 April2014 is as follows:Brokers/dealersPercentageValues oftradesPercentageof totaltradesBrokeragefeesof totalbrokeragefeesRM % RM %Hong Leong Bank Bhd 72,499,000 24.61 - -RHB Bank Bhd 61,399,000 20.85 - -Malayan Banking Bhd 42,001,900 14.26 - -CIMB Bank Bhd # 44,834,500 15.22 - -United Overseas Bank(Malaysia) Bhd 17,901,000 6.08 - -Alliance Bank Malaysia Bhd 16,786,000 5.70 - -RHB Investment Bank Bhd 13,590,653 4.61 - -Public Bank Bhd 7,593,000 2.58 - -AmBank Bhd 4,388,000 1.49 - -Hong Leong Islamic BankBhd 628,000 0.21 - -Others 12,913,125 4.39 - -294,534,178 100.00 - -Details of transactions with the top 10 brokers/dealers for the financial period from 9 April2012 (date of launch) to 30 April 2013 is as follows:Brokers/dealersPercentageValues oftradesPercentageof totaltradesBrokeragefeesof totalbrokeragefeesRM % RM %RHB Bank Bhd 364,827,000 24.55 - -Hong Leong Bank Bhd 311,909,000 20.99 - -United Overseas Bank(Malaysia) Bhd 221,358,000 14.90 - -CIMB Bank Bhd # 157,083,942 10.57 - -Alliance Investment Bank Bhd 96,630,000 6.50 - -RHB Investment Bank Bhd 75,143,823 5.06 - -Hong Leong Islamic Bank 67,751,000 4.56 - -Bhd Morgan Stanley & CoInternational Plc 40,799,028 2.75 - -Affin Bank Bhd 24,962,000 1.68 - -Alliance Bank Malaysia Bhd 23,765,000 1.60 - -Others # 101,843,603 6.84 - -1,486,072,3966100.00 - -47

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 217. TRANSACTIONS WITH BROKERS/DEALERS (CONTINUED)# Included in transactions by the Fund are trades conducted with CIMB Bank Bhd andCIMB Investment Bank Bhd, fellow subsidiaries of the Manager amounting toRM44,834,500 (2013:RM157,083,942) and RM Nil (2013: RM4,381,517) respectively.The Manager is of the opinion that all transactions with the related companies havebeen entered into in the normal course of business at agreed terms between the relatedparties.18. SEGMENT INFORMATIONThe internal reporting provided to the chief operating decision-maker for the fund’sassets, liabilities and performance is prepared on a consistent basis with themeasurement and recognition principles of MFRS and IFRS. The chief operatingdecision-maker is responsible for the performance of the Fund and considers thebusiness to have a single operating segment located in Malaysia. Asset allocationdecisions are based on a single, integrated investment strategy and the Fund’sperformance is evaluated on an overall basis.The investment objective of the Fund is to provide regular income through investmentsin predominantly bonds and other fixed and floating rate securities. The reportableoperating segment derives its income by seeking investments to achieve targetedreturns consummate with an acceptable level of risk within the portfolio. These returnsconsist of interest and dividend income earned from investments and gains on theappreciation in the value of investments.There were no changes in reportable operating segment during the financialyear/period.19. APPROVAL OF FINANCIAL STATEMENTSThe financial statements have been approved for issue by the Manager on 30 June2014.48

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2DIRECTORYHead office of the ManagerCIMB-Principal Asset Management Berhad (Company No.: 304078-K)Level 5, Menara Milenium,8, Jalan Damanlela,Bukit Damansara.50490 Kuala Lumpur, MALAYSIA.Postal addressCIMB-Principal Asset Management Berhad (Company No.: 304078-K)P.O.Box 10571,50718 Kuala Lumpur, MALAYSIA.Internet sitewww.cimb-principal.com.myE-mail addressservice@cimb-principal.com.myGeneral investment enquiries(03) 7718 3100Trustee for the CIMB-Principal Strategic Income Bond Fund 2HSBC (Malaysia) Trustee Berhad (Co. No. 001281 -T)13 th Floor, HSBC South Tower No. 2, Leboh Ampang,50100 Kuala Lumpur, MALAYSIA.Auditors of the Trusts and of the ManagerPricewaterhouseCoopers(Company No. AF: 1146)Level 10, 1 Sentral,Jalan Travers, Kuala Lumpur Sentral,PO Box 10192, 50706 Kuala Lumpur, MALAYSIA.49

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2CIMB-Principal Strategic Income Bond Fund 2 is also available from CWA (an agency forceof CIMB-Principal) OfficesADDRESSTELEPHONECWA BRANCHESCentral Region• 46, 2 nd Floor, Jalan SS 21/39 Damansara Utama47400, Petaling Jaya, Selangor. 03-77122888• No 13B, 2nd Floor, Jalan Mamanda 7/1,Off Jalan Ampang, 68000 Ampang, Selangor. 03-42702970• 169-2, Jalan Radin Bagus, Bandar Baru Sri Petaling,57000 Kuala Lumpur. 03-90592333Northern Region• No 5, Jalan Todak 4, Bandar Sunway, 04-3702155Seberang Jaya, 13700 Perai, Penang. 04-3702156• 30A, First Floor, Persiaran Greentown 1, 05-2439001Greentown Business Centre, 30450 Ipoh, Perak. 05-2439002East Coast Region• Ground Floor, No 298-BJalan Tok Hakim, 09-747117215000 Kota Bharu, Kelantan. 09-7471190Southern Region• 23 & 23A Jalan Harimau TarumTaman Century, 80250 Johor Bahru, Johor. 07-3341748• 21, Jalan Melaka Raya 24,Taman Melaka Raya, 75000 Melaka. 06-2811111East Malaysia Region• No 1 Jalan Pasar Baru, Kampung Air, 088-23995188000 Kota Kinabalu, Sabah. 088-239952• 5B, Lot 414, Section 10, KTLD Jalan Rubber,93400 Kuching, Sarawak. 082-259777• 1 st and 2 nd Floor, Lot 1092, Jalan Merpati,98000 Miri, Sarawak. 085-43252550

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2CIMB-Principal Strategic Income Bond Fund 2 is also available from CWA (an agency forceof CIMB-Principal) Offices (continued)ADDRESSTELEPHONECWA SALES OFFICESCentral Region• 32-3, 3rd Floor Jalan 1/27F, KL Satellite Centre (KLSC),Wangsa Maju, Section 5, 53300 Kuala Lumpur. 03-41422911• Unit B-3A-1, Setiawangsa Business Suites, Jalan Setiawangsa 11Taman Setiawangsa, 54200, Kuala Lumpur. 03-42566277• J-06-01, Level 6, Block J, Solaris Mont Kiara,Jalan Solaris, 50480 Kuala Lumpur. 03-62040113• Suite B-12-11, Plaza Mont Kiara,2 Jalan 1/70C,Mont Kiara, 50480 Kuala Lumpur. 03-62039036• No 41B, 43B, Jalan Wan Kadir 2, Taman Tun Dr Ismail,60000, Kuala Lumpur. 03-77241789• A-2-1, Block A, 8 Jalan PJU 1A/20A,Dataran Ara Damansara, 47301 Petaling Jaya, Selangor. 03-78430506• Lot C-615 & Lot C-616, Level 6, Block C, Kelana Square,17, Jalan SS7/26, Kelana Jaya, 47301 Petaling Jaya, Selangor. 03-78806893• A-2-3, Block A, 8 Jalan PJU 1A/20A,Dataran Ara Damansara, 47301 Petaling Jaya, Selangor. 03-78430503• No 3A, Jalan Hentian 3, Pusat Hentian Kajang,43000, Kajang, Selangor 03-87345695• 2-6A Jalan PJU 8/3A, Bandar Damansara Perdana,47820 Petaling Jaya, Selangor. 03-77256320• The Strand, 32A-3, Jalan PJU5/20D, Kota Damansara47810, Petaling Jaya, Selangor. 03-61428382• Lot No 35-2, 2 nd Floor, Jalan Sepah Puteri 5/1B, Pusat Dagangan Seri UtamaPJU5, Kota Damansara, 47410, Selangor 03-61403046• 1-91-2, Block I, Jalan Teknologi 3/9, Kota Damansara47810, Petaling Jaya, Selangor. 03-61407275• 47A, Tingkat 1, Jalan Badminton 13/29, Seksyen 13,Shah Alam, 40100, Selangor. 03-55232693• 98A, Jalan SS21/39, Damansara Utama,47400, Petaling Jaya, Selangor. 03-77250825• D10-08-G & D10-08-1, Pusat Perdagangan Dana 1, Jalan PJU1A/46,47301, Petaling Jaya, Selangor. 03-7831126751

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2CIMB-Principal Strategic Income Bond Fund 2 is also available from CWA (an agency forceof CIMB-Principal) Offices (continued)ADDRESSTELEPHONECWA SALES OFFICES (CONTINUED)Central Region (Continued)• 37-2, Jalan Cecawi 6/33, PJU5, Kota Damansara,47810, Petaling Jaya, Selangor. 03-61422970• B-1-22 & B-2-22 & B-2-21 Block B 10 Boulevard, Jalan Cempaka,Sungai Kayu Ara, 47400 Petaling Jaya, Selangor. 03-77223895• No. 6-2, Jalan Dagang 1/1A, Taman Dagang,68000 Ampang, Selangor. 03-42511129• No 35B-2 (2 nd Floor), Jalan Keluli Am7/Am, Pusat Perniagaan Bukit Raja,40000 Seksyen 7, Shah Alam, Selangor. 03-33414978• No 65-2, Jalan Nelayan A, 19/A, Pusat Daerah Seksyen 19,40300 Shah Alam, Selangor. 03-54800296• No B-3A-23, Merchant Square, Jalan Tropicana Selatan 1,Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor. 03-78874408• Block E-1-03A & E-2-03A, Jalan SS6/20A, Dataran Glomac,47301 Kelana Jaya, Selangor.. 03-78807082East Coast Region• A-7, Tingkat 1, Lorong Tun Ismail 12, Sri Dagangan 2,25000, Kuantan, Pahang 09-5161430• Lot 252, No 73, Tingkat 1, Jalan Besar Pusat Niaga Paka,23100, Paka, Terengganu 09-8278001• PT 10725, Ground Floor, Jalan Kubang Kurus, Taman Cukai Utama Fasa 4,24000 Kemaman,Terengganu. 09-8589911Southern Region• No 38-01, Jalan Serangkai 18, Taman Bukit Dahlia,81700 Pasir Gudang, Johor. 07-2326976• 24-1 Jalan Padi Emas 4/1 Pusat Bandar Tampoi, Johor Bahru,81200 Johor 03-2326976• No 55-2, 57-2, 59-2, Jalan TU 49A, Taman Tasik Utama,Ayer Keroh, 75450 Melaka. 06-2533289• No 18-1 S2 B18, Biz Avenue Seremban 2, 70300 Seremban,Negeri Sembilan. 06-601574952

CIMB-PRINCIPAL STRATEGIC INCOME BOND FUND 2CIMB-Principal Strategic Income Bond Fund 2 is also available from CWA (an agency forceof CIMB-Principal) Offices (continued)ADDRESSTELEPHONECWA SALES OFFICES (CONTINUED)East Malaysia Region• 15A, Jalan Ruby, 96000 Sibu, Sarawak. 084-325515• Shop Lot No.2, Block 49, of Parent Lot 2646, Park City Commerce Square,Jalan Kambar, Off Jalan Tun Ahmad Zaidi, 97000 Bintulu, Sarawak. -53