MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND

Transcription

1 Maybank Asset Management Sdn Bhd Level 12 Tower C Dataran Maybank No.1 Jalan Maarof Kuala Lumpur Telephone Facsimile MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND Unaudited interim report for the six months financial period ended 31 July 2017

2 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND CONTENT PAGE Manager's report 1-9 Trustee's report 10 Report of the Shariah Adviser 11 Statement by Manager 12 Unaudited statement of comprehensive income 13 Unaudited statement of financial position 14 Unaudited statement of changes in equity 15 Unaudited statement of cash flows 16 Notes to the financial statements 17-51

3 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 A. Fund Information 1. Name of the Fund Maybank AsiaPac Ex-Japan Equity-I Fund (the Fund ) 2. Type of Fund Growth 3. Category of Fund Shariah-compliant quoted equity securities 4. Duration of the Fund The Fund is an open-ended fund. 5. Fund launch date 8 January Fund s investment objective The Fund aims to achieve long term capital growth by investing in Shariah-compliant quoted equity securities. 7. Fund distribution policy Distribution, if any, is incidental and will be made from the realised income of the Fund. 8. The Fund s performance benchmark MSCI AC Asia Pacific Islamic Ex-Japan Index 9. Has the Fund achieved its objective? The Fund has achieved its stated objective of capital growth during the financial period under review. For the financial period under review, the Fund delivered a total return of 13.76%, underperforming the benchmark's total return of 14.99%. 10. What are the Fund's investment policy and principle investment strategy? To achieve the Fund s objective, the Fund will invest between 70% to 98% of the Fund s NAV in Shariah-compliant equities listed or traded in the Asia Pacific ex-japan markets. The Manager will also invest between 2% to 30% of the Fund s NAV in Shariah-compliant liquid assets including Shariah-compliant money market instruments and placement in Shariahcompliant deposits. The Manager will adopt a top-down investment approach in constructing the Fund s portfolio. In adopting the top-down investment approach, the Manager takes into consideration the equity market outlook over the medium to long term horizon. Besides that, the Manager would also adopt a bottom-up investment process where individual stock analysis would be conducted for stock selection in constructing the Fund s portfolio. 1

4 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) A. Fund Information (cont'd) 10. What are the Fund's investment policy and principle investment strategy? (cont'd) Analysis conducted on a particular stock would be based on fundamental analysis comprising quantitative and qualitative analysis. Qualitative approach takes into consideration of, amongst others, the company s corporate governance, competency of its management, business cycles as well as competitive advantages. Quantitative approach would cover, amongst others, the company s profitability, its market capitalization, valuation, 11. The Fund would be actively managed, however, how active or the frequency of its trading strategy will very much depend on market opportunities. What was the net income distribution for the six month financial period ended 31 July 2017? The Fund did not make any distribution to the unitholders during the six month financial period ended 31 July 2017, hence there is no impact on NAV per unit resulted from the income distribution. 12. Breakdown of unit holdings by size Fund size As at 31 July 2017, the size of the Fund stood at 10,499,575 units. Breakdown of unit holdings as at 31 July 2017 Unit holdings No. of No. of unitholders % units ('000) % 5,000 units and below *0.01 5,001 to 10,000 units ,001 to 50,000 units ,001 to 500,000 units ,001 units and above ,499 **99.99 Total , * Represents 1,000 units held by Maybank Asset Management Sdn Bhd (the "Manager") ** Represent units held under an Institutional Unit Trust Agent ( IUTA ) and a related party of the Manager 2

5 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) B. Performance Review 1. Key performance data of the Fund 6 months to to to Shariah-compliant quoted equity securities (%) - Local Australia Hong Kong India Indonesia South Korea New Zealand Philippines Singapore Thailand Taiwan United States Cash and other net assets (%) Total (%) NAV (RM 000) 14,797 26,709 21,097 Units in circulation (units 000) 10,500 21,560 21,063 NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Annual return (%) (1) - Capital growth (%) (4.20) - Income distribution (%) Total return (%) (4.20) Distribution dates Gross/Net distribution per unit (sen)

6 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) B. Performance Review (cont'd) 1. Key performance data of the Fund (cont'd) to to to Management Expense Ratio ("MER") (%) (2) Portfolio Turnover Ratio ("PTR") (times) (3) Note: (1) Actual return of the Fund for the financial year is computed based on the daily average NAV per unit, net of Manager's and Trustee's fee. (2) (3) The Fund s MER increased from 0.91% ( to ) to 1.05% in the current six months financial period ended 31 July 2017 due to higher expenses during the financial period under review. The Fund s PTR increased from 0.37 times ( to ) to 0.72 times in the current six month financial period due to higher investing activities during the current financial period under review. Category 6 months to to to to Annual total return (%) (4.20) 4.56 Benchmark (%) (9.37) 9.33 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 4

7 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) B. Performance Review (cont'd) 2. Performance of the Fund since inception to 31 July 2017 Category 6 months 1 year 3 years Since to to to inception to % % % % Capital growth Income distribution Total return of the Fund Benchmark Average total return Source: Novagni Analytics and Advisory Sdn Bhd, as at 31 July 2017 For the six month financial period ended 31 July 2017, the Fund delivered a total return of 13.76% vis-à-vis the benchmark's total return of 14.99%. The Fund s active bets in Malaysia, Taiwan and Singapore helped the performance of the Fund while New Zealand and Indonesia markets were detractors to the Fund s performance. Top performers include Win Semiconductors Co Ltd (+88.7%), Malaysian Pacific Industries Bhd (+78.17%) and Padini Holdings Bhd (+52.65%) whilst losers in the Fund include Myer Holdings Ltd (-38.71%) and Japfa Comfeed Indonesia Tbk Pt (-27.19%). 5

8 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 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 follow:- 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 For the 6-month period ending July 2017, the MSCI Islamic Asia Pacific ex Japan ( MIAPJ ) index rose 18.97% in United States Dollar ("USD") terms. The global economy and markets entered 2017 on considerably firmer footing and higher expectations than last year. Growth momentum picked up and risk assets, particularly in developed markets, continued to rally in February and March. Investors unwound some of the reflation trades that had been put in place post Donald Trump s election win on diminishing confidence that the Donald Trump administration would be able to implement its stimulus plans following the failure to repeal Obamacare and given the judicial block of Donald Trump s immigration order earlier in the year. In addition, while the Federal Reserve ("Fed") did raise rates as widely expected, markets were positively surprised when the commentary proved to be less hawkish than initially feared. Accordingly, the USD saw some weakness against most Asian currencies. While 1Q2017 generally saw equity markets on a strong upward trajectory, 2Q2017 proved to be more volatile. Equity markets drifted lower in the first half of April 2017 as investors took some risk off the table ahead of the first round of French Presidential elections. Soft US economic data and rising geopolitical tension (e.g. in North Korea and the US military strike in Syria) added to investor nervousness. Markets rebounded however following the better-thanfeared outcome of the first round of French Presidential elections. Over in the US, President Donald Trump unveiled his tax plan which included sharp reductions in individual and business The month of May 2017 began on a positive note with centrist Emmanuel Macron winning the French Presidential elections by a wider-than-expected margin while liberal politician Moon Jae In won the Presidential elections in South Korea as widely expected. However, fears over the possible impeachment of US President Donald Trump resulted in a sell off mid-month that fortunately proved to be short-lived. Markets largely ignored bad news such as muted US retail sales, Moody s credit rating downgrade of China, Brazil s worsening political crisis etc. In general, commodities remained weak even the extension of Organisation of Petroleum Exporting Countries production cuts failed to lift oil prices. 6

9 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) C. Market Review (cont'd) Markets had a good start in June 2017 with the US markets hitting new record highs. The US Fed raised rates by 25 basis points ("bps") as widely expected but it was indications by several other central banks of possibly less stimulus in the future that led to a correction in bond markets and in turn, equity markets. In a surprising twist, the ruling Conservative Party lost its majority in the United Kingdoms elections thereby potentially weakening its position in Brexit negotiations instead of strengthening it as per Prime Minister Theresa May s original intention. In another significant development, MSCI announced that it would begin including China A-shares in its Emerging Markets index in 2018 albeit with a lower weighting than initially feared. Overall, July was a mixed bag for global equities regionally. The macro side was generally positive with dovish comments from US Fed Governor Yellen amidst a weak US CPI print and good US corporate earnings so far. China and India outperformed the rest of Asia Pacific ex Japan region. In China, better-than-expected economic data surprised the market as July 2017 s Caixin China Manufacturing PMY rose to 51.1 compared to 49.6 in June, beating market expectations of no change. Meanwhile, sentiment in India improved following the goods and services tax implementation, the monsoon season as well as better-than expected earnings and D. Market Outlook Overall, we remain positive on Asia Pacific ex Japan equities on the longer term as we believe the region s growth will be well supported by favorable demographics. In terms of valuation, Asia Pacific ex Japan is also trading at lower multiples of 13 times and is within the 10 year historical average price to earning ratio ("PER") of 12 to 13 times PER. This is more attractive relative to the developed world such as the US, where valuations are rich with markets trading at 18 times PER that is far above the historical average of 14 times. Nevertheless we expect volatility to continue as a recurring theme throughout 2017 as uncertainties over the trajectory and pace of policy execution especially in the US causes fluid capital flow and bouts of softer sentiment. Occasions of geopolitical instability could also worsen the fallout from black swan events. This includes the escalating verbal spat between North Korea and the US, which we feel will persist but unlikely to lead to war as well. Meanwhile, there is also rising tension in the Middle East, especially after the isolation and sanction imposed on Qatar by its Gulf neighbors. 7

10 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) E. Investment Strategy We continue to be somewhat wary given mixed macroeconomic data amidst elevated valuation multiples. August is also a seasonally weak month for Singapore and Malaysia markets in particular. Given strong year-to-date performance, markets remain vulnerable to profit taking. Within Asean, we overweight Philippines on continued optimism over the country s tax reform. President Duterte of the Philippines has managed to push through his tax reforms where more taxes would be raised to boost infrastructure spending. We remain underweight on Thailand given its high valuations, muted earnings growth and lack of near term catalysts. While the tourism sector remains a bright spot, Thailand continues to exhibit signs of still-weak domestic demand (e.g. weak bank earnings, weak retailers same-store-sales growth etc). Meanwhile, we are neutral on the other countries. As for sectors, we remain overweight on the technology space as China is still home to the largest, most profitable and rapidly growing internet companies. China has a large addressable market given the large population of 1.3bn. These Chinese internet companies have the potential to grow rapidly if they are able to capture this market with the right products and F. Asset Allocation The comparison of the Fund s asset allocation as at 31 July 2017 to the previous corresponding period is as below: Asset allocation RM % RM % Quoted equity securities 13,635, ,053, Cash, deposit with a licensed financial institution and other net assets 1,162, ,655, Total NAV 14,797, ,708, For the financial period under review, the Fund s allocation in Shariah-complian quoted equity securities has decreased from 93.80% to 92.15%, and conversely the allocation in cash, deposit with a licensed financial institution and other net assets (as liquidity for redemption purposes) has increased by 1.65% during the financial period under review. 8

11 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND MANAGER S REPORT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 (CONT'D) G. NAV as at 31 July Changes (%) NAV (RM) 14,797,269 26,708,797 (44.60) Units in circulation (units) 10,499,575 21,560,042 (51.30) NAV per unit (RM) Overall, the NAV of the Fund decreased by 44.60% from RM26.71 milllion to RM14.80 million from 31 January 2017 to 31 July 2017 due to the redemption of units by the unitholders. NAV per unit increased by 13.76% from RM to RM during the same period. 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 under review, the Manager and the Trustee did not receive any rebates from the brokers or dealers but have retained soft commission in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 9

12 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND TRUSTEE S REPORT TO THE UNITHOLDERS OF MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND FOR THE SIX MONTH FINANCIAL PERIOD ENDED 31 JULY 2017 We have acted as Trustee of Maybank Asiapac Ex-Japan Equity-I Fund (the "Fund") for the six month financial period ended 31 July 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 Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; Valuation/pricing was carried out in accordance with the Deeds and any regulatory requirements; and Creation and cancellation of units were carried out in accordance with the Deeds and relevant regulatory requirements; For and on behalf of TMF TRUSTEES MALAYSIA BERHAD Norhayati Azit Director - Fund Services Kuala Lumpur, Malaysia 29 September

13 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND REPORT OF THE SHARIAH ADVISER TO THE UNITHOLDERS OF MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND We have acted as the Shariah Adviser of the Maybank Asiapac Ex-Japan Equity-I Fund (the "Fund"). Our responsibility is to ensure that the procedures and the processes employed by Maybank Asset Management Sdn Bhd (the "Manager") is in accordance with the principles of Shariah. In our opinion, the Manager has managed and administered the Fund in accordance with the principles of Shariah and comply with applicable guidelines, ruling or decision issued by the Securities Commission on Shariah matters for the financial year ended 31 July In addition, we also confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the following: (a) (b) (c) the local Shariah governing bodies of the respective countries such as Shariah Advisory Council of the Securities Commission Malaysia ("SACSC") in Malaysia and/or Majelis Ulama Indonesia in Indonesia; and/ or any Shariah indices recognized internationally including but not limited to the MSCI Islamic Index Series. Any unlisted local securities which are not certified by the SACSC or foreign securities which are not certified by the Majelis Ulama Indonesia in Indonesia or listed under the list of Shariah-compliant securities issued by Shariah indices recognized internationally shall be determined in accordance with the ruling issued by the Shariah adviser. However, there are two quoted equity securities i.e. Best World International Ltd and Tencent Holding Ltd which have been reclassified as Shariah non-compliant. Both securities were purchased when it were under the list of Shariah compliant stock. As at 31 July 2017, the Fund held 35,700 units of Best World International Ltd stock and nil units of Tencent Holdings Ltd stock as it was disposed of during the period. The Manager shall dispose the Best World International Ltd securities and purify the excess profit, if any. 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. For and on behalf of the Shariah Adviser of the Fund Dr. Aznan Bin Hasan Chairman of the Shariah Committee of Maybank Islamic Berhad Kuala Lumpur, Malaysia 29 September

14 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND STATEMENT BY MANAGER I, Badrul Hisyam Bin Abu Bakar, being the Director of Maybank Asset Management Sdn Bhd do hereby state that, in the opinion of the Manager, the accompanying financial statements set out on pages 13 to 51 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 Asiapac Ex-Japan Equity-I Fund as at 31 July 2017 and of its results, changes in equity and cash flows for the financial period then ended and comply with the requirement of the Deeds. On behalf of the Manager Badrul Hisyam Bin Abu Bakar Kuala Lumpur, Malaysia 29 September

15 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 INVESTMENT INCOME to to Note RM RM Profit income 22,079 13,534 Dividend income 508, ,796 Net gain/(loss) on financial assets at fair value through profit or loss - Realised gain/(loss) 4,600,828 (780,689) - Unrealised (loss)/gain (970,114) 3,105,618 Net foreign exchange (loss)/gain (543,648) 249,540 3,617,775 2,899,799 EXPENSES Manager's fee 4 202, ,812 Trustee's fee 5 8,111 6,592 Auditors remuneration 4,711 4,725 Tax agent's fee 1,386 1,740 Administrative expenses 68,734 23, , ,783 Net income before taxation 3,332,049 2,698,016 Income tax expense 6 (63,186) (27,040) Net income after taxation 3,268,863 2,670,976 Total comprehensive income for the period 3,268,863 2,670,976 Net income after taxation is made up of the following: Net realised income 3,812,511 2,421,436 Net unrealised (loss)/gain (543,648) 249,540 3,268,863 2,670,976 The accompanying notes form an integral part of the audited financial statements. 13

16 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 JULY Audited Note RM RM ASSETS Cash at bank 7 41, ,661 Shariah-compliant deposit with a licensed financial institution 8 1,085, ,000 Due from broker 9-460,151 Due from Manager 10 10,993 - Financial assets at fair value through profit or loss - Shariah-compliant quoted equity securities 11 13,635,204 25,053,202 Profit income receivable Dividend income receivable 93,707 41,534 Other receivable TOTAL ASSETS 14,866,365 27,031,565 LIABILITIES Due to Manager 10 28,278 40,553 Due to Trustee 12 1,131 1,445 Due to broker 9-264,690 Provision of income purification 11(b) 32,194 - Other payables and accruals 13 7,493 16,080 TOTAL LIABILITIES 69, ,768 NET ASSET VALUE ("NAV") OF THE FUND 14,797,269 26,708,797 EQUITY Unitholders' capital 14(a) 6,169,319 21,349,710 Retained earnings 14(b) & 14(c) 8,627,950 5,359,087 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 14,797,269 26,708,797 NUMBER OF UNITS IN CIRCULATION (UNIT) 10,499,575 21,560,042 NAV PER UNIT (RM) The accompanying notes form an integral part of the audited financial statements. 14

17 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY 2017 Retained Unitholders' earnings capital Note 14(b) & Total Note 14(a) 14(c) equity RM RM RM At 1 February ,349,710 5,359,087 26,708,797 Total comprehensive income for the period - 3,268,863 3,268,863 Creation of units 3,789,864-3,789,864 Cancellation of units (18,970,255) - (18,970,255) At 31 July ,169,319 8,627,950 14,797,269 At 1 February ,804, ,824 21,096,694 Total comprehensive income for the period - 2,670,976 2,670,976 Creation of units 264, ,440 Cancellation of units (59,986) - (59,986) At 31 July ,009,324 2,962,800 23,972,124 The accompanying notes form an integral part of the audited financial statements. 15

18 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND UNAUDITED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY to to RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of financial assets at fair value through profit or loss 27,246,445 7,791,372 Purchase of financial assets at fair value through profit or loss (12,534,066) (8,539,374) Profit income received 22,057 13,851 Dividends received 390, ,974 Manager's fee paid (229,226) (162,939) Trustee's fee paid (8,992) (6,517) Payment of other fees and expenses (38,656) (32,910) Net cash (used in)/generated from operating and investing activities 14,847,671 (658,543) CASH FLOWS FROM FINANCING ACTIVITIES Cash received on units created 3,779, ,440 Cash paid on units cancelled (18,975,429) (59,986) Net cash generated from/(used in) financing activities (15,195,609) 204,454 NET INCREASE IN CASH AND CASH EQUIVALENTS FOR THE FINANCIAL PERIOD (347,938) (454,089) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 1,475,661 1,921,285 Effects of foreign exchange (8,695) 5,683 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 1,119,028 1,472,879 Cash and cash equivalents comprise: Cash at bank 41, ,879 Shariah-compliant deposit with a licensed financial institution with original maturity of less than 3 months (Note 8) 1,085, ,000 1,126,371 1,472,879 The accompanying notes form an integral part of the audited financial statements. 16

19 MAYBANK ASIAPAC EX-JAPAN EQUITY-I FUND NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 JULY THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Maybank AsiaPac Ex-Japan Equity-I Fund ( the Fund ) was constituted pursuant to the execution of a Trust Deed dated 14 December 2012, a First Supplemental Deed dated 20 March 2015 and a Second Supplemental Deed dated 10 December 2015 (collectively referred to as the "Deeds") between the Manager, Maybank Asset Management Sdn. Bhd. ( Maybank AM ) and the Trustee, TMF Trustees Malaysia Berhad. The principal activity of the Fund is to invest between 70% to 98% of the Fund's NAV in Shariahcompliant equities listed or traded in the Asia Pacific ex-japan markets. The Manager will also invest between 2% to 30% of the Fund's NAV in Shariah-compliant liquid assets including Shariahcompliant money market instruments and placement in Shariah-compliant deposits. The Manager of the Fund is Maybank AM, a company incorporated in Malaysia. It is a holder of the Capital Markets Services License with fund management as its regulated activity under the Capital Markets and Services (Amendment) Act 2012 ("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"). Maybank AM has appointed Maybank Islamic Asset Management Sdn Bhd ( MIAM ) as the External Investment Manager for the Fund. MIAM is a wholly-owned subsidiary of MAMG and is a holder of a capital markets services licence to carry out Islamic fund management business pursuant to Section 61 of the CMSA. The role and responsibilities of MIAM include management of the investment portfolio in accordance with the investment objective, subject to the CMSA and the Guidelines on Unit Trust Funds issued by the Securities Commission Malaysia (the "SC") and any other relevant guidelines issued by the SC as well as the terms and conditions of the investment management agreement between MIAM and Maybank AM. 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 ) issued by the International Accounting Standards Board ( IASB ). The Fund has adopted the MFRS, Amendments to Standards and Issue Committee ("IC") interpretations which have become effective during the 6 month financial period ended 31 July The adoption of the new pronouncements did not result in any material impact to the financial statements. The financial statement were prepared on a historical cost basis except as disclosed in the accounting policies in Note 2.3 to The financial statements are presented in Ringgit Malaysia ("RM"). 2.2 Standards and amendments to standards issued but not yet effective The following are standards and amendments to standards 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 MFRS 107 Statement of Cash Flows - Disclosure Initiative (Amendments to MFRS 107) 1 January 2017 MFRS 112 Income Taxes - Recognition of Deferred Tax for Unrealised Losses (Amendments to MFRS 112) 1 January 2017 MFRS 2 Share-based Payment - Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2) 1 January 2018 MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 15: Classification to MFRS 15 1 January 2018 MFRS 16 Leases 1 January 2019 Amendments to MFRS 10 and MFRS 128: Sale or To be Contribution of Assets between an Investor and its Associate announced by or Joint Venture MASB Annual Improvements to MFRSs Cycle (i) Amendments to MFRS 12 Disclosure of Interests in Other Entities 1 January 2017 (ii) Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards 1 January 2018 (iii) Amendments to MFRS 128 Investments in Associates and Joint Ventures 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

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 material impact on the financial statements in the period 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 requirements related to the fair value option for financial liabilities were also changed to address own credit risk. The adoption of MFRS 9 will have an effect on the classification and measurement of the reporting entity s financial assets, but will not have an impact on the classification and measurement of the reporting entity's financial liabilities. MFRS 9 requires impairment assessments to be based on an expected loss model, replacing the MFRS 139 incurred loss model. The Manager is currently assessing the impact to the financial statements of the Fund, on the adoption of this standard and intends to adopt MFRS 9 on the mandatory effective date, i.e. 1 January 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, in the case of financial assets not at fair value through profit or loss ("FVTPL"), directly attributable transaction costs. The Fund classifies its financial assets in the following categories: financial assets at fair value through profit or loss and financing and receivables. For investments, the classification depends on the purpose for which the investment were acquired. The Fund determines the classification of its financial assets at initial recognition. (a) Financial assets designated at fair value through profit or loss at inception Classification The Fund designates its investments in Shariah-compliant quoted equity securities as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss where they are managed, and their performance is evaluated on a fair value basis in accordance with the Fund's documented investment strategy. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Financial assets (cont'd) (a) Financial assets designated at fair value through profit or loss at inception (cont'd) Recognition and measurement Regular purchases and sale of financial assets are recognised on the trade date, the date on which the Fund commits to purchase or sell the assets. Shariah-compliant investments are initially recognised at fair value. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Unrealised gains or losses arising from changes in the fair value of those financial instruments are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial year which they arise. Exchange differences, if any, on financial assets at FVTPL are recognised separately in profit or loss with net foreign exchange gain or loss. Dividend income from financial assets at FVTPL is recognised in the statement of comprehensive income as part of gross dividend income when the Fund's right to receive payments is established. On disposal of investments, the net realised gain or loss on disposal is measured as the difference between the net disposal proceeds and the carrying amount of the investments. The net realised gain or loss is recognised in profit or loss. Shariah-compliant quoted equity securities in Malaysia are valued at the last done market price quoted on Bursa Malaysia Securities Bhd ( Bursa Securities ) at the date of the statement of financial position. Foreign Shariah-compliant quoted equity securities are valued at the last traded market price quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges. If a valuation based on the market price does not represent the fair value of the Shariahcompliant 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 Shariahcompliant quoted equity securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the Shariah-compliant quoted equity securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee after appropriate technical consultation. 20

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Financial assets (cont'd) (b) Financing and receivables Classification Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as financing and receivables. The Fund's financing and receivables comprise cash and cash equivalents (comprising cash at bank and Shariah-compliant deposit with a licensed financial institution) which are all due in within 12 months, amount due from broker, amount due from Manager, profit income receivable and dividend income receivable. Recognition and measurement Subsequent to initial recognition, financing and receivables are measured at amortised cost using the effective profit method. Gains and losses are recognised in the statement of profit and loss when the financing and receivables are derecognised or impaired, and through the amortisation process. Shariah-compliant deposit with a licensed financial institutions is stated at cost plus accrued profit calculated on the effective profit rate method over the period from the date of placement to the date of maturity of the respective deposit. 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. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 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. (a) Financing 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 profit rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. 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 profit or loss. 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, amount due to broker, provision for income purification and other payables and accruals as other 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 profit rate method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 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. 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 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities (ii) Level 2 - (iii) Level 3 - 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 the levels in the hierarchy by reassessing 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. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 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. (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 classified as equity instruments. 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 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and Shariah-compliant deposit with a financial institution with original maturity of three months or less which have an insignificant risk of changes in value Profit 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. Profit income is recognised using the effective profit method. 24

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.13 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. No deferred tax is recognised as no temporary differences have been identified 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 Amount due from/to brokers Amount due from and amount due to brokers represent receivables for investments sold and payables for 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 rate method, less provision for impairment for amounts due from brokers. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant broker. Significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired. Once a financial assets or a group of similar financial assets has been written down as a result of an impairment loss, profit rate income is recognised using the rate of profit rate used to discount the future cash flows for the purpose of measuring the impairment loss 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. 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. 25

28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.16 Critical accounting estimates and judgments (cont'd) Listed Shariah-compliant Securities Listed Shariah-compliant local and foreign securities will be valued daily based on the last done market price or such other basis as may be prescribed by the relevant laws from time to time including approved accounting standards. However, if:- (a) (b) a valuation based on the market price does not represent the fair value of the securities, for example during abnormal market conditions; or no market price is available, including in the event of a suspension in the quotation of securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the securities would be valued at fair value, as determined in good faith by the Manager based on the methods or bases approved by the Trustee after appropriate technical consultation. 3. SHARIAH INFORMATION OF THE FUND The Shariah Adviser confirmed that the investment portfolio of the Fund is Shariah-compliant, which comprises: i) ii) Shariah-compliant stock as per the approved list of MIAPJ Index (A subset of MSCI Islamic Indices) list, and cash placement and liquid assets in local market, which are placed with licensed Islamic financial institutions. 4. MANAGER'S FEE The Manager's fee is computed on a daily basis at 1.50% ( to : 1.50%) per annum ("p.a.") of the NAV of the Fund before deducting the Manager's fee and Trustee's fees. 5. TRUSTEE'S FEE The Trustee's fee is computed on a daily basis at 0.06% ( to : 0.06%) p.a.of the NAV of the Fund before deducting the Manager's fee and Trustee's fees. 26

29 6 INCOME TAX EXPENSE to to Tax charged for the financial period: RM RM Income tax expense for the period (63,186) (27,040) Income tax is calculated at the Malaysian statutory tax rate of 24% ( to : 24%) of the estimated assessable income for the financial period. The tax charge for the financial period is in relation to the taxable income earned by the Fund after deducting the permitted expenses. In accordance with Schedule 6 of the Income Tax Act 1967, profit income earned by the Fund is exempted from tax. A reconciliation of income tax expense applicable to net income before taxation at the statutory income tax rate to income tax expense at the effective income tax rate is as follows: to to RM RM Net income before taxation 3,332,049 2,698,016 Tax at Malaysian statutory rate of 24% (2016: 24%) (799,692) 647,524 Effect of income not subject to tax 868,266 (109,669) Effect of income tax deducted at source (63,186) (613,323) Effect of expenses not deductible for tax purposes (68,574) 48,428 Tax expense for the financial period (63,186) (27,040) 7. CASH AT BANK The table below indicates the currencies that the Fund have in cash at bank as at the reporting date. Audited RM RM RM 28, ,145 Indian Rupee ("INR") 3, ,030 Taiwan Dollar ("TWD") 9,345 47,486 41, ,661 27