INVESTORS' LETTER 1 MANAGER'S REPORT 2-8

Transcription

1 CONTENTS PAGE(S) INVESTORS' LETTER 1 MANAGER'S REPORT 2-8 Fund Objective and Policy Performance Data Market Review Fund Performance Portfolio Structure Market Outlook Investment Strategy Unit Holdings Statistics Soft Commissions and Rebates STATEMENT BY MANAGER 9 TRUSTEE'S REPORT 10 SHARIAH ADVISER S REPORT 11 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 12 UNAUDITED STATEMENT OF FINANCIAL POSITION 13 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 14 UNAUDITED STATEMENT OF CASH FLOWS 15 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 40 LIST OF CWA (an Agency force of CIMB-Principal) OFFICES 41-45

2 INVESTORS' LETTER Dear Valued Investors, Thank you for investing in CIMB-Principal Asset Management Berhad ( CIMB-Principal ) funds. At CIMB-Principal, we are dedicated to provide the best service and guidance to our valued customers. We believe this will ensure your relationship with us is a long and satisfying one. We will continuously strive for customer satisfaction in the products we deliver and service we provide. As we step into the second half of the year, we are pleased to share this wonderful news that CIMB- Principal has won more awards. These awards are important because it means that the consistent investment process we have in place, supported by strong portfolio risk management and oversight practices, has yielded top-performing investment results for our loyal investors. AsianInvestor Asset Management Awards 2016 Best Fund House in Malaysia The Asset Triple A Asset Servicing, Fund Management and Investors Awards 2016 Asset Management Company of the Year We thank you for your ongoing support that plays an integral part to drive us to where we are now. This industry achievement will further boost our Southeast Asia s aspirations to be the most valued investment manager offering total asset management solutions and further strengthen our investment capabilities with sound track record. In moving forward, we are committed to deliver a better customer experience to you. Hence, we are taking the next step to know you better. For your information, we have started a customer information update exercise through s, phone and registered mail so that we can interact better with you in the future. We would like to thank those who have updated their latest information with us. For those who have not updated their information, our friendly Customer Service Officers will be in touch with you soon. Alternatively, you are also strongly encouraged to contact our Customer Care Centre directly at or your Consultant to update your latest information. I wish all of you a blessed and rewarding year ahead. Happy investing! Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer/Executive Director 1

3 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to provide investors with medium to long-term capital appreciation through investments in securities of Malaysian companies that will benefit from prevailing investment themes and that conform with Shariah principles. Has the Fund achieved its objective? For the financial period under review, the Fund has met its stated objective. What are the Fund investment policy and principal investment strategy? The strategy of the Fund is to invest in sectors that are related to the prevailing domestic and/or global investment themes. At least 70% of the Fund s Net Asset Value ("NAV") will be invested in equities listed on Bursa Malaysia that conform with Shariah principles and up to 28% of the Fund's NAV may be invested in other permissible investments. At least 2% of the Fund's NAV will be invested in Shariah-compliant liquid assets for liquidity purposes. Fund category/type Equity (Shariah-compliant)/Growth How long should you invest for? Recommended three (3) years or more Indication of short-term risk (low, moderate, high) High When was the Fund launched? Class MYR 28 February 2008 Class SGD 18 February 2016 What was the size of the Fund as at 31 May 2016? RM1, million (4, million units) What is the Fund s benchmark? Financial Times Stock Exchange ("FTSE") Bursa Malaysia ("FBM") EMAS Shariah ("FBMS") Index Note: Investors should note that the risk profile of the Fund is not same as the risk profile of the benchmark. What is the Fund distribution policy? Given the Fund s investment objective, the Fund is not expected to pay any distribution. Distributions, if any, are at the discretion of the Manager and will vary from period to period depending on the availability of realised income for distribution and performance of the Fund. What was the net income distribution for the six months financial period ended 31 May 2016? There was no distribution made for the six months financial period ended 31 May

4 PERFORMANCE DATA Details of portfolio composition of the Fund for the last three unaudited financial periods are as follows: % % % Shariah-compliant quoted securities - Construction Consumer Products Finance Industrials Infrastructure Project Companies ("IPC") Plantation Properties Real Estate Investment Trusts ("REITs") Technology Trading/Services Cash and other net assets Performance details of the Fund for the last three unaudited financial periods are as follows: NAV (RM Million) - Class MYR 1, , , Class SGD Units in circulation (Million) - Class MYR 4, , , Class SGD NAV per unit (RM) - Class MYR Class SGD to to to Highest NAV per unit (RM) - Class MYR Class SGD Lowest NAV per unit (RM) - Class MYR Class SGD Total return (%) - Class MYR (4.86) Class SGD (7.23) - - Capital growth (%) - Class MYR (4.86) Class SGD (7.23) - - Income distribution (%) - Class MYR Class SGD Management Expense Ratio ("MER") (%) ^ Portfolio Turnover Ratio ("PTR") (times) #

5 PERFORMANCE DATA (CONTINUED) ^ The Fund's MER increased from 0.81% to 0.83% mainly due to an increase in other expenses pursuant to the implementation of Goods and Services ("GST") effective from 1 April # The Fund's PTR decreased from 0.29 times to 0.21 times in the financial period under review due to less trading activities. There has been no change to the style of management of the Fund % % % % % Annual total return - Class MYR (5.77) (0.86) (Launch date: 28 February 2008) Since inception to % Annual total return - Class SGD (7.23) (Launch date: 18 February 2016) Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures for the financial period have been extracted from Lipper. MARKET REVIEW (1 DECEMBER 2015 TO 31 MAY 2016) For the financial period under review, the FBMS Index ("the Index") declined from 12, points to 11, points, losing 4.67%. December 2015 was a volatile month as oil prices dipped after the Organisation of the Petroleum Exporting Countries ( OPEC ) refrained from setting an official output target. Meanwhile, the much debated the US Federal Reserve (the "Fed") lift off finally happened as interest rates were raised by 25 basis points ( bps ). The Index closed 2015 on a high at 12, points. Equities had a rocky start in The Index fell sharply earlier in the month before rebounding towards the end. The sharp selloff globally spooked traders and Malaysia was not spared. The late recovery was helped by the recalibrated Budget 2016, as well as the rebound in crude oil prices and a stronger Malaysian Ringgit ("MYR"). In February 2016, the Index continued its downtrend due to external and internal headwinds. Key global events in February 2016 were:1) US and Chinese growth worries; 2) Possibility of a Fed hike mistake; 3) Brexit risk; and 4) Widening credit spreads. On the domestic, market sentiment was dented by the weak fourth quarter of 2015 corporate earnings. MYR weakened slightly from RM4.148 to RM4.203 against US Dollar ("USD"). The latest fourth quarter of 2015 Consumer Sentiment Index touched a new low of In March 2016, the market was lifted by higher oil prices, stronger MYR and increasing investor optimism that the Fed may delay its future Fed Funds rate hike. The confluence of these positive macro factors led to a RM6.1 billion net foreign equity inflow into the Malaysian market. However, most of the gains in March 2016 were given up in the following month of April Investors were rattled by news of 1 Malaysia Development Berhad ("1MDB") s bond default, which triggered a cross default on two other notes. Bank Negara Malaysia ("BNM") new internally sourced governor failed to lift the market. 4

6 MARKET REVIEW (1 DECEMBER 2015 TO 31 MAY 2016)(CONTINUED) CIMB ISLAMIC DALI EQUITY THEME FUND In May 2016, the market was back on its downtrend, weighed down by a few events such as: 1) The 1MDB bond default saga; 2) Fears of liquidity stress in Malaysian banking system as money supply slowed; 3) Morgan Stanley Capital International ( MSCI ) rebalancing which subjected the Malaysian market to repositioning and short-selling activities; 4) Rising probability of US rate hike in the coming months; 5) Weaker than expected China Purchasing Managers' Index ( PMI ); and 6) Weaker MYR despite the stronger oil price. FUND PERFORMANCE Class MYR 6 months to year to years to years to Since inception to % % % % % Income Capital (4.86) (10.24) (12.72) Total Return (4.86) (5.77) Benchmark (4.67) (5.20) (3.88) Average Total Return N/A (5.77) For the financial period under review, the Fund's total return for Class MYR has underperformed the benchmark slightly by 0.19%. Class SGD Since inception to % Income - Capital (7.23) Total Return (7.23) Benchmark (8.22) Average Total Return N/A The Fund had a total return of negative 7.23% in SGD term. 5

7 FUND PERFORMANCE (CONTINUED) CLASS MYR 90% 80% 70% 60% Class MYR FBMS Index 50% 40% 30% 20% 10% 0% -10% CLASS SGD 2% 0% -2% -4% -6% Class SGD FBMS Index -8% -10% 6

8 FUND PERFORMANCE (CONTINUED) Changes in NAV Class MYR Changes % NAV (RM Million) 1, , (8.25) NAV/unit (RM) (10.21) Class SGD Changes % NAV (RM Million) NAV/unit (RM) Over the last one year, the Fund s NAV has declined by 8.25%, while the NAV per unit fell by a larger 10.21% from RM to RM per unit. Performance data represents the combined income and capital return as a result of holding units in the Fund for the specified length of time, based on NAV to NAV price. The performance data assumes that all earnings from the Fund are reinvested and are net of management and trustee fees. Past performance is not reflective of future performance and income distributions are not guaranteed. Unit prices and income distributions, if any, may fall and rise. All performance figures for the financial period have been extracted from Lipper. PORTFOLIO STRUCTURE Asset allocation (% of NAV) Shariah-compliant quoted securities Cash and other net assets TOTAL The Fund will look to increase its equity exposure as it seeks opportunities to deploy cash into a combination of defensive and growth companies. MARKET OUTLOOK* We continue to view 2016 as a year of slow global growth, low inflation and elevated volatility. The Fed will have to maintain an exceptionally easy monetary policy to accommodate the pace of global growth and to maintain global financial stability by preventing a sharp rise in the USD. Meanwhile, China s economy will remain weak as it restructures, but a hard landing would be averted as China still has various monetary and fiscal options it can draw upon. Post the UK referendum where 52% votes were for Brexit, the probability of another Fed hike in 2016 has plummeted to a mere 15% in December In fact, there are now market expectations for the Fed to cut interest rates to combat the potential deflationary forces unleashed by Brexit. On the local front, we are cautious on Malaysian equities as overall economic growth weakens. Given the brutal first quarter of 2016 earnings season where consensus earnings disappointed by an average of 25% and a more subdued growth expectations in Malaysia, we anticipate the domestic equity market will trade range-bound. *This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make a purchase of any investment. The information given in this article represents the views of CIMB-Principal or based on data obtained from sources believed to be reliable by CIMB-Principal. Whilst every care has been taken in preparing this, CIMB-Principal makes no guarantee, representation or warranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this market outlook. 7

9 INVESTMENT STRATEGY In anticipation of a range bound equity market, we will remain defensive in portfolio positioning. Stock picking remains the key to alpha generation, and we remain selective. We continue to like high dividend yielders such as REITs, conglomerates and utilities. We also continue to maintain our overweight in the construction sector as we expect more positive newsflow of project awards in the second half of UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 31 May 2016 are as follows: CLASS MYR Size of unit holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below 7, ,001-10,000 11, ,001-50,000 35, , ,000 17,046 2, ,001 and above 484 1, Total 72,522 4, CLASS SGD Size of unit holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below ,001-10, ,001-50, , , ,001 and above Total SOFT COMMISSIONS AND REBATES CIMB-Principal Asset Management Berhad (the Manager ) and the Trustee (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the Manager and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commissions in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 8

10 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF CIMB ISLAMIC DALI EQUITY THEME FUND CIMB ISLAMIC DALI EQUITY THEME FUND We, being the Directors of CIMB-Principal Asset Management Berhad (the Manager ), do hereby state that, in the opinion of the Manager, the accompanying unaudited financial statements set out on pages 12 to 39 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 May 2016 and of its financial performance, changes in equity and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards ( MFRS ) Interim Financial Reporting and International Accounting Standards ("IAS") 34 - Interim Financial Reporting. For and on behalf of the Manager CIMB-Principal Asset Management Berhad (Company No.: K) MUNIRAH KHAIRUDDIN Chief Executive Officer/Executive Director ALEJANDRO ECHEGORRI Executive Director Kuala Lumpur 29 July

11 TRUSTEE S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC DALI EQUITY THEME FUND We have acted as Trustee of CIMB Islamic DALI Equity Theme Fund (the "Fund ), for the six months financial period ended 31 May To the best of our knowledge, CIMB-Principal Asset Management Berhad (the Manager ), has operated and managed the Fund in accordance with the following:- (a) (b) (c) limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and creation and cancellation of units is carried out in accordance with the Deeds and relevant any regulatory requirements. For HSBC (Malaysia) Trustee Berhad TAN BEE NIE Head, Trustee Operations Kuala Lumpur 29 July

12 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC DALI EQUITY THEME FUND CIMB ISLAMIC DALI EQUITY THEME FUND We have acted as the Shariah Adviser of CIMB Islamic DALI Equity Theme Fund (the "Fund") for the six months financial period ended 31 May Our responsibility is to ensure that the procedures and processes employed by CIMB-Principal Asset Management Berhad (the "Manager") are in accordance with Shariah and Shariah Investment Guidelines. In our opinion, the Manager has managed and administered the Fund in accordance with the Shariah Investment Guidelines of the Fund and complied with applicable guidelines, rulings or decisions issued by the Securities Commission Malaysia pertaining to Shariah matters for the six months financial period ended 31 May In addition, we also confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission Malaysia with the exception of Hume Industries Bhd. The said security is to be disposed off in one (1) year time or when the security is in a break even position, whichever is earlier.. For investments other than the abovementioned, we have reviewed the same and are of the opinion that these investments were in accordance with the Shariah Investment Guidelines of the Fund. This report is made solely to the unit holders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report and we shall not be liable for any errors or non-disclosure on the part of the Manager. For and on-behalf of Shariah Adviser CIMB Islamic Bank Berhad ABDUL GHANI ENDUT Group Head, Shariah & Governance/Designated Person Responsible for Shariah Advisory Kuala Lumpur 29 July

13 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MAY 2016 CIMB ISLAMIC DALI EQUITY THEME FUND to to Note RM RM INVESTMENT (LOSS)/INCOME Dividend income 16,628,290 21,714,698 Profit income 4 3,134,458 3,157,348 Net loss on financial assets at fair value through profit or loss 8 (76,576,938) (7,771,360) Net or foreign loss exchange gain (56,814,050) 17,100,686 EXPENSES Management fee 5 10,733,348 11,136,957 Trustee s fee 6 357, ,725 Transaction costs 1,572,386 2,184,158 Audit fee 14,000 7,120 Tax agent s fee 4,000 4,000 Other expenses 899, ,737 13,580,602 14,287,697 (LOSS)/PROFIT BEFORE TAXATION (70,394,652) 2,812,989 Taxation 7 (38,959) 8,343 (LOSS)/PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE FINANCIAL PERIOD (70,433,611) 2,821,332 (Loss)/Profit after taxation is made up as follows: Realised amount 41,787,040 13,047,830 Unrealised amount (112,220,651) (10,226,498) (70,433,611) 2,821,332 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 12

14 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY Audited Note RM RM CURRENT ASSETS Financial assets at fair value through profit or loss (Shariah-compliant) 8 1,189,837,291 1,300,692,050 Cash and cash equivalent (Shariah-compliant) 9 206,384, ,423,899 Amount due from stockbrokers 1,224,364 9,713,449 Amount due from Manager 991,384 1,368,715 Dividends receivable 1,546,721 2,084,064 Tax recoverable 91,805 91,805 TOTAL ASSETS 1,400,075,948 1,466,373,982 LIABILITIES Amount due to stockbrokers 15,433, ,272 Amount due to Manager 545,867 1,755,673 Accrued management fee 1,747,664 1,817,061 Amount due to Trustee 58,255 60,569 Provision for donation to charitable bodies 28,668 28,668 Other payables and accruals 244, ,526 TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS) 18,058,809 4,588,769 NET ASSET VALUE OF THE FUND 1,382,017,139 1,461,785,213 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 1,382,017,139 1,461,785,213 REPRESENTED BY: FAIR VALUE OF OUTSTANDING UNITS - Class MYR 1,382,013,278 1,461,785,213 - Class SGD 3,861-1,382,017,139 1,461,785,213 NUMBER OF UNITS IN CIRCULATION (UNITS) - Class MYR 4,104,446,708 4,130,329,046 - Class SGD 1,391-4,104,448,099 4,130,329,046 NET ASSET VALUE PER UNIT - Class MYR Class SGD The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 13

15 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MAY to RM to RM NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS AT THE BEGINNING OF THE FINANCIAL PERIOD 1,461,785,213 1,446,544,572 Movement due to units created and cancelled during the financial period: - Creation of units from applications 69,760, ,468,048 - Cancellation of units (79,095,375) (139,469,006) 1,452,450,750 1,503,543,614 Increase in net assets attributable to unit holders during the financial period: (Loss)/Profit after taxation (70,433,611) 2,821,332 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS AT THE END OF THE FINANCIAL PERIOD 1,382,017,139 1,506,364,946 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 14

16 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MAY 2016 CIMB ISLAMIC DALI EQUITY THEME FUND to to RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from disposal of Shariah-compliant quoted securities 348,278, ,656,602 Purchase of Shariah-compliant quoted securities (292,337,568) (499,468,162) Dividend income received 17,165,633 19,494,320 Profit income received from Shariah-compliant deposits with licensed Islamic financial institutions 3,134,458 3,156,578 Hibah Management fee paid (10,802,745) (10,970,097) Trustee s fee paid (360,092) (511,938) Payments for other fees and expenses (911,728) (240,724) Tax paid (38,959) - Net cash generated from/(used in) operating activities 64,127,282 (106,882,651) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 70,138, ,608,185 Payment for cancellation of units (80,305,181) (138,924,583) Net cash (used in)/generated from financing activities (10,166,967) 53,683,602 Net increase/(decrease) in cash and cash equivalents 53,960,315 (53,199,049) Effect of foreign exchange differences Cash and cash equivalents at the beginning of the financial period 152,423, ,868,735 Cash and cash equivalents at the end of the financial period 206,384, ,669,686 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 15

17 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 MAY THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB ISLAMIC DALI EQUITY THEME FUND CIMB Islamic DALI Equity Theme Fund (the Fund ) is governed by a Principal Master Deed dated 15 May 2008, a Third Supplemental Master Deed dated 25 June 2008, a Sixth Supplemental Master Deed dated 14 July 2008, a Seventh Supplemental Master Deed dated 19 November 2008, a Fifteenth Supplemental Master Deed dated 21 September 2012, a Sixteenth Supplemental Master Deed dated 19 March 2015, and a Seventeenth Supplemental Master Deed dated 25 March 2015 all executed between the Management Company and the AmTrustee Berhad (hereinafter known as the "Previous Trustee"), and a Principal Master Deed dated 10 April 2015 (collectively referred to as the Deeds ), between CIMB-Principal Asset Management Berhad (the Manager ) and HSBC (Malaysia) Trustee Berhad (the Trustee ). The strategy of the Fund is to invest in sectors that are related to the prevailing domestic and/or global investment themes. At least 70% of the Fund s NAV will be invested in equities listed on Bursa Malaysia that conform with Shariah principles and up to 28% of the Fund s NAV may be invested in other permissible investments. At least 2% of the Fund s NAV will be invested in Shariah-compliant liquid assets for liquidity purposes. All investments will be subjected to the Securities Commission Malaysia ( SC ) Guidelines on Unit Trust Funds, SC requirements, the Deeds, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The Manager, a company incorporated in Malaysia, is a subsidiary of CIMB Group Sdn Bhd and regards CIMB Group Holdings Berhad as its ultimate holding company. The Manager is also an associate of Principal International (Asia) Limited, which is a subsidiary of Principal Financial Group Inc. The principal activities of the Manager are the establishment and management of unit trust funds and fund management activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the MFRS and International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. 16

18 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(l). Standards, amendments to published standards and interpretations to existing standards that are effective: The Fund has applied the following amendments for the first time for the financial year beginning 1 December 2015: Annual Improvements to MFRS Cycle Annual Improvements to MFRS Cycle The adoption of these amendments did not have any impact on the current financial period or any prior period and is not likely to affect future periods. The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 December 2016 Amendments to MFRS 101 Presentation of financial statements - Disclosure Initiative (effective from 1 January 2016) provide clarifications on a number of issues, including: Materiality an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. Disaggregation and subtotals line items specified in MFRS 101 may need to be disaggregated where this is relevant to an understanding of the entity s financial position or performance. There is also new guidance on the use of subtotals. Notes confirmation that the notes do not need to be presented in a particular order. Other comprehensive income ( OCI ) arising from investments accounted for under the equity method - the share of OCI arising from equityaccounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income. According to the transitional provisions, the disclosures in MFRS 108 regarding the adoption of new standards/accounting policies are not required for these amendments. Annual Improvements to MFRS Cycle (effective from 1 January 2016) As these amendments merely clarify the existing requirements, they do not affect the Fund s accounting policies or any of the disclosures. 17

19 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) (ii) Financial year beginning on/after 1 December 2017 MFRS 15 Revenue from Contracts with Customers (effective from 1 January 2017) replaces MFRS 118 Revenue and MFRS 111 Construction contracts and related interpretations. The standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. (iii) Financial year beginning on/after 1 December 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. The complete version of MFRS 9 was issued in November MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through OCI. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments¹ are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument² is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest³. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives¹. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. ¹ For the purposes of the investments made by the Fund, equity instruments and derivatives refers to Shariah-compliant equity instruments and Shariah-compliant derivatives. ² For the purposes of the investments made by the Fund, debt instruments refers to Sukuk. ³ For the purposes of this Fund, interest refers to profits earned from Shariah-compliant investments. 18

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities Classification The Fund designates its investments in Shariah-compliant quoted securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Financing and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s financing and receivables comprise cash and cash equivalents, amount due from stockbrokers, amount due from Manager and dividends receivable. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to stockbrokers, amount due to Manager, accrued management fee, amount due to Trustee, provision for donation to charitable bodies, and other payables and accruals as other financial liabilities. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the asset. Shariah-compliant investments are initially recognised at fair value. Transaction costs are expensed in the statement of comprehensive income. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the Shariah-compliant investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income with net gain or loss on financial assets at fair value through profit or loss in the financial period which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund s right to receive payments is established. Shariah-compliant quoted securities in Malaysia are valued at the last done market price quoted on Bursa Malaysia Securities Berhad ( Bursa Securities ) at the date of the statement of financial position. 19

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Recognition and measurement (continued) If a valuation based on the market price does not represent the fair value of the Shariah-compliant quoted securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the Shariah-compliant quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the Shariah-compliant quoted securities are valued as determined in good faith by the Manager, based on the methods or basis approved by the Trustee after appropriate technical consultation. Shariah-compliant deposits with licensed Islamic financial institutions are stated at cost plus accrued profit calculated on the effective profit method over the period from the date of placement to the date of maturity of the respective deposits. Financing and receivables and other financial liabilities are subsequently carried at amortised cost using the effective profit method. Impairment for assets carried at amortised costs For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If financing and receivables has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent financial period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. 20

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Income recognition Dividend income is recognised on the ex-dividend date when the right to receive payment is established. Profit income from Shariah-compliant deposits with licensed Islamic financial institutions is recognised on a time proportionate basis using the effective profit rate method on an accrual basis. Realised gain or loss on disposal of Shariah-compliant quoted securities is accounted for as the difference between the net disposal proceeds and the carrying amount of Shariah-compliant quoted securities, determined on a weighted average cost basis. (d) Foreign Currency Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ("RM"), which is the Fund s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in statement of comprehensive income, except when deferred in OCI as qualifying cash flow hedges. (e) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances and Shariah-compliant deposits held in highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. (f) Taxation Current tax expense is determined according to Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. (g) Transaction costs Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. 21

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Amount due from/to stockbrokers Amounts due from and amount due to stockbrokers represent receivables for Shariahcompliant investments sold and payables for Shariah-compliant investments purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective profit method, less provision for impairment for amounts due from stockbrokers. A provision for impairment of amounts due from stockbrokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant stockbroker. Significant financial difficulties of the stockbroker, probability that the stockbroker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from stockbrokers is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, profit income is recognised using the profit rate used to discount the future cash flows for the purpose of measuring the impairment loss. (i) Creation and cancellation of units Prior to 18 February 2016, the Fund classified its puttable instruments as equity in accordance with MFRS 132 (Amendment) Financial Instruments: Presentation. However, the amendment requires puttable financial instruments that meet the definition of equity to be classified as financial liability when certain strict criteria are not met. Those criteria include: the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. These conditions were not met when Class SGD was issued on 18 February 2016 as this class does not have identical features. The units are subsequently classified as financial liabilities. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s NAV of respective classes. The outstanding units are carried at the redemption amount that is payable at the date of the statement of financial position if the unit holder exercises the right to put back the unit to the Fund. Units are created and cancelled at the unit holder s option at prices based on the Fund s NAV per unit of respective classes at the close of business on the relevant dealing day. The Fund s NAV per unit of respective classes is calculated by dividing the net assets attributable to unit holders of respective classes with the total number of outstanding units of respective classes. (j) Segment information Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. 22

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (k) Increase/decrease in net assets attributable to unit holders Income not distributed is included in net assets attributable to unit holders. (l) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Funds results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unit Trust Funds. 3. RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund aims to provide investors with medium to long-term capital appreciation through investments in securities of Malaysian companies that will benefit from prevailing investment themes and that conform with Shariah principles. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk and interest rate risk), credit risk and liquidity risk. Financial risk management is carried out through internal control process adopted by the Manager and adherence to the investment restrictions as stipulated in the Deeds and SC Guidelines on Unit Trust Funds. (a) Market risk (i) Price risk This is the risk that the fair value of a Shariah-compliant in quoted securities will fluctuate because of changes in market prices (other than those arising from interest rate risk and currency risk). The value of Shariah-compliant quoted securities may fluctuate according to the activities of individual companies, sector and overall political and economic conditions. Such fluctuation may cause the Fund s NAV and prices of units to fall as well as rise, and income produced by the Fund may also fluctuate. The price risk is managed through diversification and selection of Shariahcompliant quoted securities and other financial instruments within specified limits according to the Deeds. 23

25 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB ISLAMIC DALI EQUITY THEME FUND (a) Market risk (continued) (ii) Interest rate risk Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Interest rate is a general economic indicator that will have an impact on the management of the Fund. It does not in any way suggest that this Fund will invest in conventional financial instruments. All investment carried out for the Fund including placements and deposits are in accordance with Shariah. The Fund s exposure to fair value interest rate risk arises from Shariahcompliant deposits with licensed financial institutions. The interest rate risk is expected to be minimal as the Fund s investments comprise mainly Shariahcompliant short term deposits with approved licensed Islamic financial institutions. As at the end of each financial period, the Fund is not exposed to a material level of interest rate risk. The Fund is not exposed to cash flow interest rate risk as the Fund does not hold any financial instruments at variable interest rate. (iii) Currency risk Currency risk is associated with Shariah-compliant investments that are quoted and/or priced in foreign currency denomination. Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Manager will evaluate the likely directions of a foreign currency versus RM based on considerations of economic fundamentals such as interest rate differentials, balance of payments position, debt levels, and technical chart considerations. (b) Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in financial loss to the Fund. The credit risk arising from placements of Shariah-compliant deposits in licensed Islamic financial institutions is managed by ensuring that the Fund will only place Shariah-compliant deposits in reputable licensed Islamic financial institutions. The settlement terms of the proceeds from the creation of unit receivable from the Manager are governed by the SC Guidelines on Unit Trust Funds. For amount due from stockbrokers, the settlement terms are governed by the relevant rules and regulations as prescribed by respective stock exchange. The credit risk is minimal as all transactions in Shariah-compliant quoted securities are settled/paid upon delivery using approved stockbrokers. 24

26 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) CIMB ISLAMIC DALI EQUITY THEME FUND (c) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of the units by unit holders. Liquid assets comprise bank balances, Shariah-compliant deposits with licensed Islamic financial institutions and other instruments, which are capable of being converted into cash within 7 business days. Generally, all investments are subject to a certain degree of liquidity risk depending on the nature of the investment instruments, market, sector and other factors. For the purpose of the Fund, the Manager will attempt to balance the entire portfolio by investing in a mix of assets with satisfactory trading volume and those that occasionally could encounter poor liquidity. This is expected to reduce the risks for the entire portfolio without limiting the Fund s growth potentials. (d) Fair value estimation Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The fair value of financial assets traded in active markets (such as trading securities) are based on quoted market prices at the close of trading on the financial period end date. The Fund utilises the last traded market price for financial assets where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine the point within the bid-ask spread that is most representative of the fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. Fair value hierarchy (i) The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2) Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. 25