MAYBANK GLOBAL BOND FUND

Transcription

1 Maybank Asset Management Sdn Bhd ( M) Level 12 Tower C Dataran Maybank No.1 Jalan Maarof Kuala Lumpur Telephone Facsimile MAYBANK GLOBAL BOND FUND Interim report For the financial period ended 31 December 2017

2 CONTENT PAGE Manager's report 1-9 Trustee's report 10 Statement by Manager 11 Unaudited statement of comprehensive income Unaudited statement of financial position 14 Unaudited statement of changes in equity 15 Unaudited statement of cash flows 16 Notes to the financial statements 17-44

3 Manager s report for the 6 months financial period ended 31 December 2017 A. Fund Information 1. Name of the Fund Maybank Global Bond Fund (the Fund ) 2. Type of Fund Income 3. Category of Fund Feeder fund 4. Duration of the Fund The Fund is an open-ended fund 5. Fund launch date 4 November Fund s investment objective The objective of the Fund is to maximise investment returns by investing in the Templeton Global Bond Fund ("Target Fund"). 7. Fund distribution policy Distribution, if any, will be made from the realised income of the Fund. Distribution will be on a quarterly basis (subject to availability of income). 8. The Fund s performance benchmark JP Morgan Global Government Bond Index 9. Has the Fund achieved its objective? For the period under review ended 31 December 2017, the Fund delivered a total return of -4.23% vis-àvis the Target Fund's total return of -3.70% (in Ringgit Malaysia ("RM") terms), and the benchmark JP Morgan Global Government Bond Index's total return of -1.60% (in RM terms). 10. The Fund's investment policy and principal investment strategy The Fund invests at least 95% of the Fund s Net Asset Value ("NAV") in the Class A (Mdis) Singapore Dollar ( SGD ) H1 shares of the Target Fund, a sub-fund of the Franklin Templeton Investment Funds, managed by Franklin Advisers, Inc. (the "Target Fund Manager"). The remaining 2% to 5% of the Fund s NAV are invested in liquid assets. The base currency of the Target Fund is in United States Dollar ( USD ), whereas the shares of the Target Fund in which the Fund invests in are denominated in SGD. Note : (Mdis) is a share class which distributes income (whenever available) on a monthly basis and SGD-H1 refers to SGD hedged share class which means the currency of the share class is hedged against the USD. 1

4 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) A. Fund Information (cont'd) 11. Net income distribution for the 6 months financial period ended 31 December 2017 The Fund did not make a distribution for the 6 months financial period ended 31 December Breakdown of unitholdings by size Fund size As at 31 December 2017, the size of the Fund stood at 3,605,740 units. Breakdown of unitholdings as at 31 December 2017 Unitholdings No. of No. of unitholders % units ('000) % 5,000 units and below * ,001 to 10,000 units ,001 to 50,000 units ,001 to 500,000 units ** ,001 units and above ** Total , * Represents 1,129 units held by Maybank Asset Management Sdn Bhd (the "Manager") ** Represent units held under an Institutional Unit Trust Agent ( IUTA ) B. Performance Review 1. Key performance data of the Fund Category to to to to % % % % Collective investment scheme - foreign Cash and other net assets (%) Total (%) NAV (RM 000) 3,633 4,608 6,417 8,547 Units in circulation ( 000) 3,606 4,375 6,569 8,210 NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Annual return (%) (1) - Capital growth (%) (6.02) 7.84 (6.17) Income distribution (%) Total return (%) (4.23) (2.02)

5 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) B. Performance Review (cont'd) 1. Key performance data of the Fund (cont'd) Category to to to to % % % % Target fund (3.70) (0.73) 6.15 Benchmark (1.60) Distribution date Quarter Quarter Quarter Quarter Gross/net distribution per unit (sen) Quarter Quarter Quarter Quarter Total Management Expense Ratio (2) ("MER") (%) Portfolio Turnover Ratio (3) ("PTR") (times) % % % % % Annual total return (4.23) (2.02) Investors are reminded that past performance of the Fund is not necessarily an indicative of its future performance and that unit prices and investment returns may fluctuate. Note: (1) Actual return of the Fund for the financial period is computed based on the daily average NAV per unit, net of Manager's and Trustee's fee. (2) The Fund s MER decrease from 1.43% to 0.55% in the current financial period ended 31 December 2017 due to lower average expenses as compared to previous financial year. (3) The Fund s PTR decreased from 0.31 times to 0.13 times in the current financial period which was mainly due to lower investing activities during the financial period ended 31 December

6 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) 2. Performance of the Fund since inception to 31 December 2017 Category 6 months 1 year 2 years 3 years Since to to to to inception to % % % % % Capital growth (6.02) (6.36) (3.05) (0.36) 0.77 Income distribution Total return of the Fund (4.23) (2.15) Benchmark (1.60) (0.11) Average total return (4.23) (2.15) Source: Novagni Analytics and Advisory Sdn Bhd, as at 31 December 2017 For the period under review ended 31 December 2017, the Fund delivered a total return of -4.23% vis-àvis the Target Fund's total return of -3.70% (in RM terms), and the benchmark JP Morgan Global Government Bond Index's total return of -1.60% (in RM terms). For the financial period under review, the Fund underperformed the benchmark and also the Target Fund for the following reasons: i. ii. The Fund is a feeder fund, which incurs higher fees as compared to the Target Fund for trustee fees, audit fees as well as management fees; and The Fund is required to maintain a minimum liquidity, which results in a lower proportion of invested amount when compared to the Target Fund. Consequently, the fund does not fully mimic the performance of the Target Fund. 4

7 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) B. Performance Review (cont'd) 3. Basis of calculation made in calculating the returns: The performance figures are a comparison of the growth/decline in NAV after taking into account all the distributions payable (if any) during the stipulated period. An illustration of the above would be as follows: C. Market Review Capital return = NAV per unit end / NAV per unit begin - 1 Income return = Income distribution per unit / NAV per unit ex-date Total return = (1+Capital return) x (1+Income return) - 1 The US Federal Reserve ("Fed") kept rates unchanged during the third quarter 2017, while remaining on track for a rate hike in December and announcing its intentions to begin unwinding its balance sheet in October. Fed Chair Janet Yellen commented on the strength of the US economy and household spending, while indicating that the committee expects inflation to stabilize around its 2% target over the medium term. The comments appeared a bit more hawkish than markets had been expecting. Overall, we expect US Treasury yields to continue rising as the Fed unwinds its balance sheet and tightens policy, while inflation pressures build on exceptional strength in the US labor market. A number of currencies strengthened against the US dollar during the third quarter, notably the Brazilian real, Colombian peso, euro and Australian dollar. However, the US dollar broadly strengthened against a number of global currencies during September, reversing the weakening trend that had persisted throughout much of Europe largely remained in a state of optimism during the quarter, driven by the cyclical upswing in eurozone growth as well as recent political refortifying since French President Emmanuel Macron s victory in May. However, Angela Merkel s win in the German election in September came with new uncertainties around forming a coalition. The Bank of Japan ("BOJ") and European Central Bank ("ECB") continued with their quantitative easing ("QE") programs during the quarter as short-term yields in Japan and the eurozone remained negative. We expect the euro and Japanese yen to weaken on widening rate differentials with the US. Rising US Treasury yields should produce a more effective environment for the BOJ to actively deploy additional monetary accommodation that weakens the yen. In Europe, we expect the ECB to continue with monetary accommodation through 2017, as it has indicated. ECB President Mario Draghi has indicated the ECB will announce a new schedule for additional QE tapering in October. Nonetheless, Draghi continued to indicate that overall monetary accommodation is still needed for the near term, with eventual policy normalizing still several quarters away. The BOJ and ECB continued with their QE programs during the quarter as short-term yields in Japan and the eurozone remained negative. We expect the euro and Japanese yen to weaken on widening rate differentials with the US. Rising US Treasury yields should produce a more effective environment for the BOJ to actively deploy additional monetary accommodation that weakens the yen. In Europe, we expect the ECB to continue with monetary accommodation through 2017, as it has indicated. ECB President Mario Draghi has indicated the ECB will announce a new schedule for additional QE tapering in October. Nonetheless, Draghi continued to indicate that overall monetary accommodation is still needed for the near term, with eventual policy normalizing still several quarters away. 5

8 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) C. Market Review (cont'd) The BOJ and ECB continued with their QE programs during the quarter as short-term yields in Japan and the eurozone remained negative. We expect the euro and Japanese yen to weaken on widening rate differentials with the US. Rising US Treasury yields should produce a more effective environment for the BOJ to actively deploy additional monetary accommodation that weakens the yen. In Europe, we expect the ECB to continue with monetary accommodation through 2017, as it has indicated. ECB President Mario Draghi has indicated the ECB will announce a new schedule for additional QE tapering in October. Nonetheless, Draghi continued to indicate that overall monetary accommodation is still needed for the near term, with eventual policy normalizing still several quarters away. Across emerging markets, rate environments were generally idiosyncratic, as Indonesia and Brazil saw declining yields in the 10-year range of their yield curves, while India, Colombia and Mexico saw a modest rise. Overall, we continue to see a number of local-currency markets that we believe are undervalued, particularly in places like India, Indonesia, Mexico and Colombia. We also see attractive risk-adjusted yields in places like Brazil and Argentina. On the whole, we continue to expect select currencies to appreciate over the medium term, particularly in countries with economic resilience and relatively higher, maintainable rate differentials. The Fed kept rates unchanged at its November meeting, but market expectations for a rate hike in December notably strengthened. Jerome Powell was nominated by US President Donald Trump to be the next Fed chair, scheduled to replace Janet Yellen in February Markets have appeared to view Powell as a mainstream continuation of the Yellen/Bernanke Fed, though Powell brings more private sector experience and more support for deregulation. Market expectations for additional rate hikes in 2018 strengthened after the Powell nomination, with federal funds futures indicating expectations for another rate hike in March The Fed continued with its balance sheet unwinding, targeting around US$6 billion in USTs and US$4 billion in mortgage-backed securities ( MBS ) to roll off each month as they mature. Markets appear to be underappreciating the potential impacts of Fed unwinding, which we expect to put upward pressure on yields. Overall, we expect UST yields to continue rising as the Fed unwinds its balance sheet and tightens policy, while inflation pressures build on exceptional strength in the US labour market. In Europe, yields generally declined but the euro strengthened against the US dollar. We expect widening rate differentials between rising yields in the US and the low to negative yields in the eurozone to depreciate the euro against the US dollar. Although the ECB is scheduled to reduce the pace of its bond-buying programme in January 2018 to 30 billion per month, down from the current pace of 60 billion per month, the overall monetary effect is still highly accommodative. ECB President Mario Draghi has continued to indicate that rates are not likely to be hiked until QE ends, implying that rates would likely remain unchanged in In Japan, Prime Minister Shinzo Abe s political mandate remains strong after his political coalition maintained its supermajority in October elections. We expect Abenomics programmes to continue as planned with Abe s ongoing political strength. Japan s economy continues to need weakness in the yen. The BOJ continued with its QE programme as short-term yields in Japan remained negative. Rising UST yields should produce a more effective environment for the BOJ to actively deploy additional monetary accommodation that weakens the yen, as it continues to target a 0.0% yield on the 10-year Japanese government bond. Overall, we expect the yen to weaken on widening rate differentials with the US. 6

9 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) C. Market Review (cont'd) Across emerging markets, yields rose in specific areas of Latin America and Asia, with some exceptions. Emerging-market currencies broadly appreciated against a weakened US dollar in November, with notable appreciations in the Mexican peso and Argentine peso. A number of countries continued to see positive yield carry, benefitting from elevated yields. We continue to have positive medium-term outlooks for both Argentina and Brazil as their governments trend away from prior failed policies and move towards important structural reforms. Risk-adjusted yields in Brazil and Argentina remain attractive, in our view. Additionally, we continue to see a number of local-currency markets that we believe are undervalued, particularly in India, Indonesia, Mexico and Colombia. (Source: Franklin Templeton Investments) D. Market Outlook For nearly a decade, financial markets have surfed a wave of low-cost money in the US, courtesy of the US Federal Reserve s massive QE programs that were launched after the global financial crisis ( GFC ) of The expansion of the Fed s balance sheet from around US$900 billion in 2008 to nearly US$4.5 trillion today has arguably been the most dominant force shaping global financial markets. QE has driven down yields and pushed up asset prices, steering many investors toward riskier assets while keeping the costs of capital artificially suppressed. This has distorted valuations in bonds and in equities. In short, the era of QE has created a seemingly complacent market that views persistently low yields as a permanent condition. However, these conditions are neither normal nor permanent, in our assessment, and we expect the reversal of QE by the Fed to meaningfully impact financial markets in 2018 and beyond. A number of factors are poised to pressure UST yields higher, including the aforementioned reversal of QE, but also the exceptional strength in US labor markets, rising wage and inflation pressures, ongoing resiliency in the US economy, and a structural shift toward deregulation by both the Trump administration and potentially a Jerome Powell Fed. At the same time, major foreign buyers of USTs from prior years have notably stopped acquiring USTs over the last few years. China has reduced its foreign reserves by around US$1 trillion, while oil exporting nations like Saudi Arabia have similarly become net borrowers instead of lenders, no longer buying massive levels of USTs. Now the Fed will also be departing that market, further driving down the supply of UST buyers. Markets could see sharp corrections to UST yields in upcoming quarters. The challenge for investors in 2018 will be that the traditional diversifying relationship between bonds and risk assets may not hold true in this new cycle of UST declines. It s quite possible to see risk assets also decline as the risk-free rate ratchets higher. The impact of Fed policy tightening on emerging markets should vary from country to country in the upcoming year. It s important to identify countries with idiosyncratic value that may be less correlated to broad-based beta (market) risks. Countries that are more domestically driven and less reliant on global trade often have those idiosyncratic qualities along with inherent resiliencies to global shocks. A select few have already demonstrated that resilience in recent years, notably Indonesia. For others, economic risks are related to the reforms underway within their country, rather than what happens externally, such as in Brazil or Argentina. Higher rate differentials are also crucial in a rising-rate environment. By contrast, emerging markets with macro imbalances or low rate environments should be impacted harder by rising rates. Another group of potentially vulnerable countries are those with lower rates, such as South Korea or Singapore, which despite strong macro fundamentals could also be vulnerable to currency depreciation as the yield differential with the US flips. Thus we think the key to emerging-market allocations in 2018 will be to avoid the broad beta risks and find those idiosyncratic sources of alpha that can withstand rising rates. In the major developed economies, we continue to see unattractive bond markets, particularly the low to negative yields in the eurozone and Japan 7

10 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) D. Market Outlook (cont'd) As we look ahead in 2018, we expect the reversal of QE, rate hikes and rising inflation pressures in the US to be among the most impactful factors for global financial markets in the upcoming year. When the first rounds of QE were initially deployed by the Fed nearly a decade ago, many skeptics argued that pumping money into the financial system would cause high inflation. But inflation never accelerated, in part because banks and financial companies stockpiled cash while credit activity remained constrained by post-gfc regulations, such as the Dodd-Frank Act. However, the factors that previously limited inflation and money creation over the last decade are also now approaching their end. Deregulation efforts through executive action are already underway, while credit activity has been accelerating. This potential acceleration in money velocity combined with existing inflation pressures in the US economy and labor markets leads us to expect higher inflation and higher UST yields in the upcoming year. (Source: Franklin Templeton Investments) E. Investment Strategy The core strategy for the Target Fund is to position the portfolio to navigate a rising-rate environment as the Target Fund Manager believes that rate hikes from the Fed are needed given prevailing conditions and that a return to appropriate monetary policy in the US can catalyst markets towards a broad fundamental recovery. Consequently, it has continued to position defensively with regard to duration and actively seek opportunities that can potentially offer positive real yields without taking undue interest-rate risk. Countries that have solid underlying fundamentals and policymakers who have stayed ahead of the curve regarding fiscal, monetary and financial policy remain the preferred sovereign investments. 8

11 Manager s report for the 6 months financial period ended 31 December 2017 (cont'd) F. Asset Allocation The comparison of the Fund s asset allocation as at 31 December 2017 to the previous financial year is as below: Asset allocation RM % RM % Class A (Mdis) SGD - H1 shares of the Target Fund 3,497, ,513, Cash, deposit with a licensed financial institution and other net assets 136, , Total NAV 3,633, ,608, During the 6-month period, the Fund s allocation in the investment in Class A (Mdis) SGD - H1 shares of the Target Fund has decreased from 97.94% to 96.12% in terms of RM value. G. NAV as at 31 December Changes (%) NAV (RM) 3,633,229 4,608,331 (21.16) Units in circulation (units) 3,605,740 4,374,732 (17.58) NAV per unit (RM) (4.35) Overall, the NAV of the Fund has reduced by 21.05% from RM4.61 million to RM3.64 million. In tandem, the units in circulation has also reduced by 17.58% to RM3.61 million as at 31 December 2017 from RM4.37 million as at 30 June NAV per unit decreased by 4.21% from RM to RM H. Soft Commissions and Rebates The Manager and its delegates (if any) will not retain any form of soft commissions and rebates from or otherwise share in any commission with any broker in consideration for directing dealings in the investments of the Fund unless the 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 Fund. All dealings with brokers are executed on best available terms. During the financial period ended 31 December 2017, the Manager and its delegates (if any) did not receive any soft commissions and rebates from brokers or dealers. 9

12 TRUSTEE S REPORT TO THE UNITHOLDERS OF MAYBANK GLOBAL BOND FUND FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 We have acted as Trustee of Maybank Global Bond Fund (the "Fund") for the six months financial period ended 31 December In our opinion and to the best of our knowledge, Maybank Asset Management Sdn Bhd, 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 Deed, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 ("CMSA") and other applicable laws; Valuation/pricing was carried out in accordance with the Deed and any regulatory requirements; and Creation and cancellation of units were carried out in accordance with the Deed and relevant regulatory requirements; For and on behalf of RHB TRUSTEES BERHAD TONY CHIENG SIONG UNG Director Kuala Lumpur, Malaysia 28 February

13 STATEMENT BY MANAGER I, Badrul Hisyam Abu Bakar, being a Director of Maybank Asset Management Sdn Bhd (the "Manager") do hereby state that, in the opinion of the Manager, the accompanying financial statements set out on pages 12 to 44 are drawn up in accordance with Malaysian Financial Reporting Standards 134 Interim Financial Reporting and International Financial Reporting Standards 34 Interim Financial Reporting so as to give a true and fair view of the financial position of Maybank Global Bond Fund as at 31 December 2017 and of its results, changes in equity and cash flows for the financial period then ended and comply with the requirements of the Deed. For and on behalf of the Manager Badrul Hisyam Abu Bakar Kuala Lumpur, Malaysia 28 February

14 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 INVESTMENT INCOME to to Note RM RM Interest income 2,654 2,826 Dividend income 133, ,454 Net loss from available-for-sale ("AFS") financial assets (80,710) (200,497) Net realised foreign exchange gain 132, ,404 Net unrealised foreign exchange loss (263,633) (36,324) Rebate income 6,091 8,084 Redemption fee income (68,537) 168,381 EXPENSES Manager's fee 3 21,335 28,150 Trustee's fee 4 1,067 1,407 Auditor's remuneration 3,025 3,025 Tax agent's fee 1,765 1,765 Administrative expenses 3,520 2,991 30,712 37,338 Net (loss)/income before taxation (99,249) 131,043 Income tax credit/(expense) 5 7,384 (4,019) Net (loss)/income after taxation (91,865) 127,024 Other comprehensive income Items that may be reclassified to income statement in subsequent years Effects of changes in fair value (144,739) 172,108 Realised gain transferred to income statement upon disposal 68, ,376 Net changes in fair value of AFS financial assets (75,943) 378,484 Total comprehensive (loss)/income for the financial period (167,808) 505,508 12

15 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME to to Note RM RM Net (loss)/income after taxation is made up of the following: Net realised (loss)/income 12(b) (355,498) 90,700 Net unrealised income 12(c) 263,633 36,324 (91,865) 127,024 Distribution for the financial period: Net distribution 13-70,897 Gross distribution per unit (sen) Net distribution per unit (sen) The accompanying notes form an integral part of the unaudited financial statements. 13

16 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER Audited Note RM RM ASSETS AFS financial assets 6 3,497,124 4,513,586 Tax recoverable 6,349 5,393 Other assets 8 2,948 3,398 Interest receivable Due from Manager Deposits with a licensed financial institution 7 134, ,000 Cash at bank 1,267 2,884 TOTAL ASSETS 3,641,823 4,733,378 LIABILITIES Due to Manager 9 3,338 27,278 Due to Trustee Distribution payable - 87,495 Other payables and accruals 11 5,088 10,070 TOTAL LIABILITIES 8, ,047 NET ASSET VALUE ("NAV") OF THE FUND 3,633,229 4,608,331 EQUITY Unitholders' capital 12(a) 3,487,139 4,289,204 Retained earnings 12(b) & 12(c) 510, ,138 AFS reserve 12(a) (364,183) (283,011) NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 3,633,229 4,608,331 NUMBER OF UNITS IN CIRCULATION (UNIT) 3,605,740 4,374,732 NAV PER UNIT (RM) The accompanying notes form an integral part of the unaudited financial statements. 14

17 UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 Retained Unitholders' earnings Total capital Note 12(b) AFS equity Note 12(a) and 12(c) reserve RM RM RM RM At 1 July ,198, ,580 (685,523) 6,416,738 Total comprehensive income for the financial period - 127, , ,508 Creation of units 249, ,415 Cancellation of units (2,085,128) - - (2,085,128) Distributions (Note 13) 187,193 (258,090) - (70,897) At 31 December ,550, ,514 (307,039) 5,015,636 At 1 July ,289, ,138 (283,011) 4,608,331 Total comprehensive loss for the financial period - (91,865) (81,172) (173,037) Creation of units 610, ,629 Cancellation of units (1,412,694) - - (1,412,694) At 31 December ,487, ,273 (364,183) 3,633,229 The accompanying notes form an integral part of the unaudited financial statements. 15

18 UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES to to RM RM Proceeds from sale of investments 1,069,011 1,855,121 Purchase of investments (340,090) (245,295) Interest received 2,636 2,852 Dividends received 133, ,454 Other income received 819 9,608 Manager's and Trustee fee paid (24,516) (32,871) Payment of other fees and expenses (4,206) (11,148) Net cash generated from/(used in) operating and investing activities 837,151 1,733,721 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 610, ,585 Cash paid on units cancelled (1,435,902) (2,108,071) Distribution paid to unitholders (87,495) - Net cash (used in)/generated from financing activities (912,768) (1,852,486) NET INCREASE IN CASH AND CASH EQUIVALENTS FOR THE FINANCIAL PERIOD (75,617) (118,765) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 210, ,046 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 135, ,281 Cash and cash equivalents comprise: Cash at bank 1, ,281 Deposit with a licensed financial institution with original maturity of less than 3 months (Note 7) 134, , ,281 The accompanying notes form an integral part of the unaudited financial statements. 16

19 FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Maybank Global Bond Fund ( the Fund ) was constituted pursuant to the execution of a Principal Deed dated 19 October 2012 between the Manager, Maybank Asset Management Sdn. Bhd. ("Maybank AM") and the first supplementary Deed dated 2 September 2013, second supplementary Deed dated 20 March 2015, the Trustee, RHB Trustees Berhad and the registered holders of the Fund. The Fund aims to maximise investment return by investing in the Class A (mdis) SGD - H1 shares of the Templeton Global Bond Fund ("Target Fund"), a sub-fund of the Franklin Templeton Investment Funds managed by Franklin Advisers, Inc. The functional currency of the Target Fund is in US Dollar ("USD"), whereas the Shares of the Target Fund in which the Fund invests in are denominated in Singapore Dollar ("SGD"). The Target Fund is an open-ended collective investment scheme domiciled in the Grand Duchy of Luxembourg and was launched on 28 February The Target Fund is regulated by the Commission de Surveillance du Secteur Financier under Part I of the Luxembourg law of December 20, 2002 relating to undertakings for collective investment. At least 95% of the Funds NAV should be invested in the shares of the Target Fund and at least 2% to 5% of the Fund's NAV should be invested in liquid assets. All investments are subject to the Securities Commission Malaysia ("SC") Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework, SC requirements and the Deed, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund's objective. The Manager of the Fund is Maybank AM, a company incorporated in Malaysia. It is a holder of the Capital Markets Services Licence with fund management as its regulated activity under the Capital Markets and Services Act 2007 ("CMSA"). The principal place of business of Maybank AM is at Level 12, Tower C Dataran Maybank, No. 1 Jalan Maarof, Kuala Lumpur, Malaysia. Maybank AM is a wholly-owned subsidiary of Maybank Asset Management Group Berhad ("MAMG"), which in turn is a wholly-owned subsidiary of Malayan Banking Berhad ("MBB"). 2.1 Basis of preparation The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) as issued by the Malaysian Accounting Standards Board ( MASB ) and International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). The Fund has adopted the Standards, Amendments to Standards and Interpretation Committee Interpretations which have become effective during the financial period ended 31 December The adoption did not result in material impact to the financial statements. 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation (cont'd) The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies in Note 2.3 to Note The financial statements are presented in Ringgit Malaysia ( RM ). 2.2 Standards, amendments to standards and interpretations issued but not yet effective The following are standards, amendments to standards and interpretations issued by the MASB, but not yet effective, up to the date of issuance of the Fund's financial statements. The Fund intends to adopt the relevant standards, if applicable, when they become effective. Description Effective for for annual periods beginning on or after Annual Improvements to MFRSs Cycle 1 January 2018 Transfers of Investment Property (Amendments to MFRS 140) 1 January 2018 IC Interpretation 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 MFRS 2 Share-based Payment - Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2) 1 January 2018 MFRS 9 Financial Instruments 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 16 Leases 1 January 2019 IC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019 Annual Improvements to MFRSs Cycle 1 January 2019 MFRS 17 Insurance Contracts 1 January 2021 MFRS 10 Consolidated Financial Statements - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be announced (Amendments to MFRS 10) by MASB MFRS 10 Investment in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be announced (Amendments to MFRS 128) by MASB 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.2 Standards and amendments to standards issued but not yet effective (cont'd) The Fund expects that the adoption of the above standards will not have any material impact on the financial statements in the year of initial application except as discussed below: (i) MFRS 9 Financial Instruments MFRS 9 replaces MFRS 139 Financial Instruments: Recognition and Measurement ("MFRS 139"). MFRS 9 requires financial assets to be classified on the basis of the business model within which they are held and their contractual cash flow characteristic. The Fund will classify its financial assets in the following measurement categories: - those to be measured subsequently at fair value (through profit or loss), and - those to be measured at amortised cost There will be no changes to the subsequent measurement of these financial assets. The investment currently held as available-for-sale with gains and losses recorded in OCI will be measured at fair value through profit or loss instead, which will increase volatility in recorded profit or loss. The AFS reserve currently presented as accumulated OCI will be reclassified to opening retained earnings. MFRS 9 requires impairment assessments to be based on an expected loss model ("ECL"), replacing the MFRS 139 incurred loss model. The ECL model applies to financial assets measured at amortised cost. The Manager intends to adopt MFRS 9 on the mandatory effective date. 2.3 Financial assets Financial assets 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. When financial assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs. The classification depends on the purpose for which the investments were acquired. The Fund determines the classification of its financial assets at initial recognition, and the categories applicable to the Fund are AFS financial assets and loans and receivable. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Financial assets (cont'd) (a) AFS financial assets Classification AFS financial assets are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or investment prices, or that are not classified as financial assets at fair value through profit or loss. The Fund designates its investments in collective investment scheme in this category at inception. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade date, the date on which the Fund commits to purchase or sell the asset. Investments are initially recognised at fair value, plus directly attributable transaction costs. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price or binding dealer price quotations, without any deduction for transaction costs. Gains and losses arising from changes in fair value of AFS financial assets are recognised directly in other comprehensive income until the securities are derecognised or impaired at which time the cumulative gains or losses previously recognised in equity are recognised directly in the statement of income. Foreign exchange gains or losses of AFS financial assets are recognised in the statement of income in the period it arises. (b) Loans and receivables Classification Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. The Fund's loans and receivables comprise cash at bank, deposit with a licensed financial institution and other assets, interest receivable, and amount due from Manager. Recognition and measurement Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in the statement of profit and loss when the loans and receivables are derecognised or impaired, and through the amortisation process. 20

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.4 Derecognition on financial assets A financial asset is derecognised when: (1) The rights to receive cash flows from the asset have expired; or (2) The Fund has transferred its rights to receive cash flows from the financial asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass through" arrangement; and either: - the Fund has transferred substantially all the risks and rewards of the asset; or - the Fund has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the financial asset. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. 2.5 Impairment of financial assets The Manager assesses at each reporting date whether there is any objective evidence that a financial asset of the Fund is impaired. Loans and receivables To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in statement of comprehensive income. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in statement of comprehensive income. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.5 Impairment of financial assets (cont'd) AFS financial assets For debt securities, the Fund use criteria and measurement of impairment loss applicable for assets carried at amortised cost above. If in a subsequent period, the fair value of a debt instrument classified as AFS financial assets increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in statement of income, the impairment loss is reversed through statement of income. 2.6 Financial liabilities Classification Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies amount due to Manager, amount due to Trustee, distribution payable, and other payables and accruals as financial liabilities. Recognition and measurement 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. The Fund s financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest rate method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in statement of comprehensive income when the liabilities are derecognised, and through the amortisation process. 2.7 Fair value measurement The Manager measures the Fund's financial instruments at fair value, at each reporting date of the Fund. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: (i) (ii) In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Fund. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.7 Fair value measurement (cont'd) The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: (i) Level 1 - (ii) Level 2 - (iii) Level 3 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Fund determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting date. For the purpose of fair value disclosures, the Fund has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. 2.8 Functional and foreign currency (a) Functional and presentation currency 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 RM, which is also the Fund s functional currency. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.8 Functional and foreign currency (cont'd) (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of transactions or valuations where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when deferred in other comprehensive income as qualifying cash flow hedges. 2.9 Unitholders' capital The unitholders contributions to the Fund meet the criteria to be presented as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: (i) (ii) (iii) (iv) 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 statement of comprehensive income of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial period if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund's NAV per unit at the time of creation or cancellation. The Fund's NAV per unit is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. Distribution equalisation represents the average distributable amount included in the creation and cancellation prices of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are cancelled Distributions Any distribution to the Fund s unitholders is accounted for as a deduction from realised reserves except where distribution is sourced out of distribution equalisation which is accounted for as a deduction from unitholders capital. A proposed distribution is recognised as a liability in the period in which it is approved. 24

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.11 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and deposit with a licensed financial institution with original maturity of three months or less which have an insignificant risk of changes in value Income Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Interest income from short-term deposits is recognised on the accruals basis using the effective interest rate method. Dividends are recognised as revenue when the right to receive payment is established. Realised gain or loss on disposal of investment in collective investment scheme is accounted for as the difference between the net disposal proceeds and the carrying amount of the investments. Redemption fee income is charged to unitholders on cancellation of units before the maturity date and is recognised upon cancellation of units Income tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss, except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Current tax expense is determined according to Malaysian tax laws at the current tax rate based upon the taxable profit earned during the financial year. No deferred tax is recognised as no temporary differences have been identified. 25

28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.14 Segment reporting 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 the allocating resources and assessing performance of the operating segments Critical accounting estimates and judgments The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgments 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. 3. MANAGER'S FEE Manager's fee is computed daily based on 1.00% ( : 1.00%) per annum ("p.a.") of the NAV of the Fund before deducting the Manager's fee and Trustee's fees for that particular day. 4. TRUSTEE'S FEE Trustee's fee is computed daily based on 0.05% ( : 0.05%) p.a. of the NAV of the Fund before deducting the Manager's fee and Trustee's fee for that particular day, subject to a minimum fee of RM12,000 ( : RM12,000) per annum. The Manager has requested for and received the approval from the Trustee for the waiver of the minimum fee for the current and previous financial period. 26