Maybank Malaysia Sukuk Fund

Transcription

1 Maybank Malaysia Sukuk Fund Annual Report for the financial year ended 31 January 2016

2 MAYBANK MALAYSIA SUKUK FUND Content Page Manager's report 1-11 Trustee's report 12 Statement by manager 13 Report of the shariah adviser 14 Independent auditors' report Statement of comprehensive income 17 Statement of financial position 18 Statement of changes in equity 19 Statement of cash flows 20 Notes to the financial statements 21-45

3 Maybank Malaysia Sukuk Fund Maybank Malaysia Sukuk Fund Manager s Report For the financial year ended 31 January Fund Information 1. Type of fund Income 2. Category of fund Sukuk 3. Fund launching date / commencement date 8 January 2014 / 24 February Fund s investment objective The Fund aims to provide investors with annual income through investing in portfolio of Sukuk. 5. Fund distribution policy Distribution, if any, shall be on an annual basis and will be made from the realised income of the Fund. 1

4 Maybank Malaysia Sukuk Fund 6. Breakdown of Unit Holdings by size Fund Size As at 31 January 2016, the size of the Fund stood at 19,619,444 units. Breakdown of Unit Holdings Unit Holdings No. of Unit Holders % No. of 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 ,618** Total , * Represents 1000 units held by the Manager ** Represents units held by the related party of the Manager 2

5 Maybank Malaysia Sukuk Fund Risk Factors General Risks An Investor should consider the following when investing in the Fund:- i. Market risk The value of investment may increase or decrease due to changes in market factors such as uncertainties in the economy, political and social environment that impact large portions of the market. This is a risk associated with all securities and cannot be eliminated. Hence, the Manager will monitor the financial markets closely and act on any adverse news accordingly. ii. iii. iv. Inflation risk Inflation creates uncertainties over the future value of investments. There is a risk that the Fund may generate a return on investment lower than the inflation rate. This would reduce investors purchasing power per RM even though the nominal value of the investment in monetary terms has increased. Liquidity risk Liquidity risk arises from the lack of ease which an investment can be traded at or near its fair value, depending on the volume traded on the market. It may occur when the Fund holds a security which is thinly traded, or when the Fund experiences large redemptions which in turn, would require the selling of securities at a point in time when prices are unfavorable due to for example, insufficient buyers in the market at the actual/desires price. This risk is mitigated by diversifying the investment in a wide range of securities and avoiding securities with poor liquidity. Management risk The performance of the Fund is very much dependent on the experience, expertise and investment techniques of the fund manager while the quality of management is also dependent on internal circumstances such as operational matters within the Manager. Poor management of the Fund would adversely affect the Fund s performance and jeopardise investment of Unit Holders. In order to reduce this risk, the implementation of internal controls and a structured investment process and operational procedures has been put in place by the Manager. v. Non-compliance risk This risk refers to the possibility that the Manager may not follow the provisions set out in this Prospectus or the Deed or the laws, rules, guidelines or internal operating policies which governs the Fund. Non-compliance may occur directly due to factors such as human error or system failure and can also occur indirectly due to amendment on the relevant regulatory frameworks, laws, rules, and other legal practices affecting the Fund. This risk may result in 3

6 Maybank Malaysia Sukuk Fund operational disruptions and potential losses to the Fund. The Manager aims to reduce this risk by placing stringent internal policies and procedures and compliance monitoring processes to ensure that the Fund is in compliance with the relevant fund regulations or guidelines. vi. Financing risk The price of units in the Fund fluctuates according to the value of the underlying portfolio. Investors should assess the inherent risk of investing with borrowed money which should include the following: The ability to service the financing payments and the effect of increase in profit rates on financing payments; and (in a case where Units are used as collateral to the financing) the ability to provide additional collateral should Unit prices fall beyond a certain level. Investors are discouraged from financing the purchase of units via borrowings and should assess the inherent risk of investing with borrowed money as returns are not guaranteed. vii. Returns are not guaranteed Investor should be aware that there is no guarantee of any returns i.e income distribution or capital appreciation by investing in a fund. Unlike fixed deposits placed directly by the investors into any financial institutions which carry a specific rate of return, a fund does not provide a fixed rate of return. Specific Risks of the Fund i. Company specific risk Specific risks to Shariah-compliant securities issued by a company apply as there are adverse conditions or negative sentiments which a company can be uniquely exposed to, be it from the view of management issues, deteriorating business fundamentals or losing competitiveness. As a consequence, the price of Shariah-compliant securities issued by such company might fall and subsequently affect the Fund s performance. The impact of a specific company may be reduced as the Fund invests in a wide portfolio of investments thereby spreading the element of this risk through diversification. ii. Profit rate risk This refers to the risk that the investment value of the Fund may generally be reduced due to a rise in future profit rates. Profit rate risk is particularly borne by profit-bearing assets, such as Shariah-compliant money market instruments or Sukuk. In the event that a Sukuk is held till maturity, the profit rate changes will not affect the yields of the Sukuk. However, investors should be aware that 4

7 Maybank Malaysia Sukuk Fund whether the Fund will hold any Sukuk until maturity will depend on actual and expected changes in profit rates. Profit rates in Shariah-compliant money market instruments will fluctuate according to the overnight policy rate determined by Bank Negara Malaysia. On the other hand, Sukuks are tradable and therefore, profit rates will be determined by supply and demand for such investments in the trading market. Shariah-compliant money market instruments and Sukuk prices generally moves inversely with profit rates, the prices will decline when profit rate rises or are expected to rise. The price volatility is normally greater for longer-tenure profit-bearing asset rather than shorter-tenure profit-bearing asset as they are more sensitive to profit rate changes. The Manager attempts to mitigate the profit rate risk of the Fund by managing the duration structure of the profit-bearing assets according to the Manager's view of the future profit rate trend. When profit rates are expected to increase, the Fund will switch to profit bearing assets with shorter duration and are less sensitive to profit rate changes. iii. Default risk This risk will arise when the issuer of a Sukuk fails to make timely payments of the profits and/or principal payments on the maturity date. Shariah-compliant deposits that the Fund has placed with financial institutions are also exposed to credit/default risk. If the issuer or financial institutions become insolvent, the Fund may suffer capital losses with regards to the capital invested and profit foregone, causing the performance of the Fund to be adversely affected. Investors are reminded that the risks listed above may not be exhaustive and if necessary, they should consult their adviser(s), e.g. their bankers, lawyers, stockbrokers or independent financial consultants for a better understanding of the risks. 5

8 Maybank Malaysia Sukuk Fund Performance Review Key performance data of the Fund for the period under review. Category FYE FYE Assets Allocation % % Investment in Sukuk Cash and other receivables Other payables Total Net Asset Value (NAV) (RM 000) 19,988 20,299 Units In Circulation (Units 000) 19,619 19,619 Net Asset Value Per Unit (RM) Highest Net Asset Value Per Unit (RM) Lowest Net Asset Value Per Unit (RM) Total Return (%)** - Capital Growth Income Distribution Total Return (%) Gross Distribution Sen Per Unit (RM) Net Distribution Sen Per Unit (RM) Management Expense Ratio (MER)(%) Portfolio Turnover Ratio (Times) * FYE 2015 represents a period from 8 January 2014 to 31 January ** Source: Novagni Analytics and Advisory Sdn Bhd Basis of calculation and assumption made in calculating the returns:- The performance figures are a comparison of the growth/decline in NAV for the stipulated period taking into account all the distribution payable (if any) during the stipulated period. An illustration of the above would be as follow:- Capital return = NAV per Unit end / NAV per Unit begin 1 Total return = Capital return x Income return 1 6

9 1-Feb Feb-15 1-Mar Mar Mar Apr Apr May May-15 7-Jun Jun-15 5-Jul Jul-15 2-Aug Aug Aug Sep Sep Oct Oct-15 8-Nov Nov-15 6-Dec Dec-15 3-Jan Jan Jan-16 Maybank Malaysia Sukuk Fund Performance of Maybank Malaysia Sukuk fund from 1 February 2015 to 31 January % 3.00% 2.50% 3.30% 3.29% 2.00% 1.50% 1.00% 0.50% 0.00% Malaysia Sukuk 12 Mth GIA Benchmark: 12-month General Investment Account (GIA) Source: Novagni Analytics and Advisory Sdn Bhd Investors are reminded that past performance of the Fund is not necessarily indicative of its future performance and that unit prices and investment returns may fluctuate. Maybank Malaysia Sukuk Fund recorded a return of 3.29% for the period from 1 February 2015 to 31 January 2016, compared to the benchmark of 3.30% over the same period. For the performance review period, the Fund underperformed the benchmark for the following reasons: Sell-off in Malaysian Government Securities ( MGS ) in August 2015 which saw yields moved higher by 9 to 36 bps that came from a sell-off in emerging markets bonds and stock markets caused by China s easing measures announced by the People s Bank of China ( PBOC ). Price drop in the portfolio s holding of corporate sukuks following the sell-off in MGS. Given the Fund performance during the period under review, we believe the Fund s objective of providing annual income through investing in a portfolio of sukuks have been met. 7

10 Maybank Malaysia Sukuk Fund Market Review In 2015, markets were driven by timing of the first Fed hiking cycle, slowing China growth and weakening of commodity prices. US Treasury ( UST ) yields were volatile throughout the year with the 10-year plunging to a record low of 1.64% in January before climbing up to 2.48% in June. The volatility was largely driven by the expectation of the US Fed s policy decision. Even as late as September, the Fed held the Fed Fund Rate ( FFR ) at near zero due to concerns on global developments despite persistent improvement in the US labour market that showed the jobless rate was approaching the full employment level. The Fed finally raised the FFR in its Federal Open Market Committee ( FOMC ) meeting in December by 25 basis points ( bps ), a move that by then most investors had already priced in. The 10-year finally ended in the year at 2.27%. In January 2016, UST yields declined on the back of sell-off in the global stock market triggered by slump in crude oil prices and uncertainties over China s growth outlook and policies. The 10-year ended the month at 1.92%. While the Fed attempted to embark on a normalizing rate cycle, the rest of the world was looking at easing in an effort to revive stalling economies and fight deflation, with the European Central Bank ( ECB ) launching its quantitative easing programme while China devalued its currency in August Central Banks in Australia, India, Singapore and South Korea to name a few cut or held their profit rates at record lows. This policy divergence helped strengthen the USD which in turn added to the commodity slump which fueled global deflationary concerns. In the local market, foreign holdings were largely affected by sizeable amount of outflows especially in the third quarter of 2015 ( 3Q2015 ) as global investors liquidated their holdings in government bonds ( govvies ) i.e. MGS and Government Investment Issues ( GII ) on the back of ringgit s continued slide ahead of a US rate hike, a slump in oil prices and domestic political noise. MGS yields were volatile during 2015, starting the year with a spike in the 10- year MGS yield to 4.27% in early part of January from but sharply recovered to 3.77% in early February before settling to a trading range of 3.80% to 4.10% until May. In June, yields started rising on the back of worries that Fitch would lower Malaysia s sovereign rating and on outflows from Malaysian debt securities. Ringgit also started weakening in June and finally broke MYR4/USD in mid-august. The 10-year MGS saw yields soared to a high of 4.47% in August as USD/MYR broke 4.000, around the same time that China devalued its currency. Overall, the local govvies ended the year 2015 on a mixed note as the yield curve steepened. The 10-year GII yield climbed 3bps y-o-y to 4.13% while the 3-year note fell 45bps to 3.23% as at end In January 2016, GII rallied supported by increase in crude oil prices and Ringgit as well as boosted by unexpected Statutory Reserve Requirement ( SRR ) cut in the second part of the month. Bank Negara Malaysia ( BNM ) kept the Overnight Policy Rate ( OPR ) unchanged throughout 2015 and also during its January 2016 meeting. However, BNM gave dovish signals in its latest Monetary Policy Committee ( MPC ) statement while unexpectedly cut the SRR by 50bps from 4.0% to 3.5% in order to provide sufficient liquidity in the financial system. On the corporate bond front, the govvies sell-off spilled over to the Private Debt Securities ( PDS ) market with corporate bond spreads widening. The net selling pressure was mainly driven by anticipation in upcoming primary deals as well as due to investors taking cautious 8

11 Maybank Malaysia Sukuk Fund stance heading into December FOMC meeting as indicated by heavier weight on short duration position. Market Outlook Following the Fed s rate hike in December, the focus has shifted to the trajectory of future rate hikes which will depend on momentum of the economy, inflation, job markets, financial conditions and external developments. Malaysia s economic data has continued to show relative health, however challenges remain both in terms of domestic demand and external headwinds. Sluggish commodity prices and rising cost of living continue to drag, although the weak MYR continues to support the manufacturing sector s performance and ultimately, exports. Although the MYR has rebounded slightly post-year end 2015, potential capital outflows, a benign external environment, and persistent concerns over China remain in the overhang. The ongoing rationalization of 1 Malaysia Development Berhad ( 1MDB ), coupled with the closure of related investigations should improve sentiment and reduce contingent risks. Overall, we view the official Gross Domestic Product ( GDP ) growth forecast of 4.0% - 4.5% to still be healthy, considering the difficult external environment, and Malaysia s so far successful fiscal rebalancing. That said, the direction of crude oil and Liquefied Natural Gas ( LNG ) prices continues to have a wide-ranging impact on the country s fiscal position, current account balance, currency and oil & gas investment activities. We also expect volatility to be a recurring theme in 2016 as monetary policies diverge with the Fed possibly hiking rates by another 50-75bps even as the ECB and PBOC ease further. We do not discount the possibility of volatile swings of inflows and outflows into the domestic bond market during the 1H2016. However, we take comfort in the fact that there is a large pool of domestic institutional investors that would be able to support the domestic bond market should there be another round of sell-off. We see a potential OPR cut of 25bps by BNM in the later part of 2016 to support growth, although the timing and magnitude of any change will be data-dependent. Investment Strategy We will continue to look for attractive sukuk investments to trade and also improve the portfolio current yield of 4.62% with the cash available. Aside from the sukuk secondary market, we will also look into new primary issuances which offers us higher yields to deliver the required performance. As of 31 January 2016, the Fund is % invested due to dividends payable to unit holders. 9

12 Maybank Malaysia Sukuk Fund Asset Allocation As at 31 January 2016, % of the Fund was invested in Ringgit Malaysia denominated Sukuk due to dividends payable to unitholders. Asset allocation as at 31 January 2016 ASSET ALLOCATION RM % Ringgit Malaysia denominated Sukuk 20,133, Cash and other receivables 864, Other payables -1,009, TOTAL 19,988, Illiquid Holdings There were no illiquid holdings in the fund as at 31 January 2016 Net Asset Value Net asset value (NAV) as at 31 January 2016 NAV (RM) 19,988,440 Units in circulation 19,619,444 NAV per unit (RM) Performance Data Return of Maybank Malaysia Sukuk Fund as at 31 January 2015 Period MMSF Benchmark 1 February 2015 to 31 January % 3.30% Benchmark: 12-month General Investment Account (GIA), as at 31 July 2014 Investors are reminded that past performance of the Fund is not necessarily indicative of its future performance and that unit prices and investment returns may fluctuate. 10

13 Maybank Malaysia Sukuk Fund Policy on Soft Commission Soft commissions receive from brokers will be retained by the Manager as goods and services, such as research materials and advisory services that assist in decision making process relating to the investment of the Fund (i.e. research materials, data and quotation services, computer hardware and software incidental to the investment management of the Fund and investment advisory services) which are of demonstrable benefits to the Unit Holders. 11

14 MAYBANK MALAYSIA SUKUK FUND TRUSTEE S REPORT TO THE UNITHOLDERS OF MAYBANK MALAYSIA SUKUK FUND FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016 We have acted as Trustee of Maybank Malaysia Sukuk Fund for the financial year ended 31 January 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) (d) 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 (Amendment) Act 2012 ("CMSA") and other applicable laws; Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; Creation and cancellation of units are carried out in accordance with the Deeds and relevant regulatory requirements; and The distribution of returns for the year are tied to and reflect the objectives of the Fund. For and on behalf of TMF TRUSTEES MALAYSIA BERHAD SHU WAI LING Director - Fund Services Kuala Lumpur, Malaysia 28 March

15 MAYBANK MALAYSIA SUKUK FUND STATEMENT BY MANAGER We, Datuk Mohaiyani Shamsudin and Badrul Hisyam Bin Abu Bakar, being two of the Directors of Maybank Asset Management Sdn. Bhd. do hereby state that, in the opinion of the Manager, the accompanying financial statements set out on pages 17 to 45 are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Maybank Malaysia Sukuk Fund as at 31 January 2016 and of its results, changes in equity and cash flows for the financial year then ended. For and on behalf of the Manager Datuk Mohaiyani Shamsudin Badrul Hisyam Bin Abu Bakar Kuala Lumpur, Malaysia 28 March

16 MAYBANK MALAYSIA SUKUK FUND Report of the Shariah Adviser To the unitholders of MAYBANK MALAYSIA SUKUK FUND We have acted as the Shariah Adviser of the Maybank Malaysia Sukuk 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 year ended 31 January For and on behalf of the Shariah Adviser of Maybank Malaysia Sukuk Fund. Dr. Aznan Bin Hasan Chairman of the Shariah Committee Kuala Lumpur, Malaysia 28 March

17 Independent Auditors Report to the Unitholders of MAYBANK MALAYSIA SUKUK FUND Report on the financial statements We have audited the financial statements of Maybank Malaysia Sukuk Fund ("the Fund") which comprise the statement of financial position as at 31 January 2016 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 17 to 45. Manager s and Trustee s responsibility for the financial statements The Manager of the Fund is responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 15

18 Independent Auditors Report to the Unitholders of MAYBANK MALAYSIA SUKUK FUND (Cont'd.) Opinion In our opinion, the financial statements have been properly drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of the Fund as at 31 January 2016 and of its financial performance, the changes in equity and the cash flows of the Fund for the financial year then ended. Other matters This report is made solely to the Unitholders of the Fund, as a body, in accordance with the Securities Commission's Guidelines on Unit Trust Funds in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Lee Pei Yin No. 3189/05/17(J) Chartered Accountant Kuala Lumpur, Malaysia 28 March

19 MAYBANK MALAYSIA SUKUK FUND STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016 INVESTMENT INCOME to Note RM RM (restated) Profit income 914, ,519 Net gain from investments on FVTPL financial assets - Realised income 58,061 54,795 Unrealised (loss)/gain (61,550) 62, , ,459 EXPENSES Manager's fee 3 206, ,796 Trustee's fee 4 10,306 9,440 Auditors remuneration 8,000 8,000 Tax agent's fee 2,500 0 Administrative expenses 14,422 1, , ,150 Net income before tax 670, ,309 Income tax expense Net income after tax 670, ,309 Net income after tax is made up of the following: Net realised income 731, ,164 Net unrealised income (61,550) 62, , ,309 Dividend for the year: Net dividend ,972 - Gross dividend per unit (sen) Net dividend per unit (sen) The accompanying notes are an integral part of the financial statements. 17

20 MAYBANK MALAYSIA SUKUK FUND STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 2016 ASSETS Note RM RM (restated) Investments 6 20,133,458 18,080,532 Deposit with financial institution 7 654,000 1,538,000 Profit income receivables 201, ,262 Cash at bank 9,682 9,590 Amount due from financial institution - 517,954 TOTAL ASSETS 20,998,386 20,325,338 LIABILITIES Due to Manager 8 17,676 17,170 Due to Trustee Dividend payable 980,972 - Other payables 10,414 8,000 TOTAL LIABILITIES 1,009,946 26,029 EQUITY Unitholders' capital 19,611,000 19,611,000 Retained earnings 377, ,309 TOTAL EQUITY / NET ASSET VALUE ("NAV") 10 19,988,440 20,299,309 TOTAL EQUITY AND LIABILITIES 20,998,386 20,325,338 UNITS IN CIRCULATION 10(a) 19,619,444 19,619,444 NAV PER UNIT The accompanying notes are an integral part of the financial statements. 18

21 MAYBANK MALAYSIA SUKUK FUND STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016 Distributable Unitholders' retained capital earnings AFS Total Note 10(a) Note 10(b) reserve equity RM RM RM RM At 8 January 2014 (Date of launch) Total comprehensive income for the period - 688, ,309 Creation of units 20,001, ,001,000 Cancellation of units (390,000) - - (390,000) At 31 January ,611, ,309-20,299,309 At 1 February 2015 (as previously stated) - 625,079 63, ,309 Effect from prior year adjustment - 63,230 (63,230) - At 1 February 2015 (as restated) 19,611, ,309-20,299,309 Total comprehensive income for the year - 670, ,103 Dividend (Note 11) - (980,972) - (980,972) At 31 January ,611, ,440-19,988,440 The accompanying notes are an integral part of the financial statements. 19

22 MAYBANK MALAYSIA SUKUK FUND STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 JANUARY to RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 8,294,409 9,758,148 Purchase of investments (9,832,870) (28,239,694) Profit income received 892, ,257 Manager's fee paid (205,617) (171,626) Trustee's fee paid (10,281) (8,581) Payment of other fees and expenses (22,508) (1,914) Net cash used in operating and investing activities (883,908) (18,063,410) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created - 20,001,000 Cash paid on units cancelled - (390,000) Net cash generated from financing activities - 19,611,000 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS FOR THE YEAR/PERIOD (883,908) 1,547,590 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR/DATE OF LAUNCH 1,547,590 - CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR/PERIOD 663,682 1,547,590 Cash and cash equivalents comprise of: Cash at bank 9,682 9,590 Deposit with financial institution with maturity of less than 3 months (Note 7) 654,000 1,538, ,682 1,547,590 The accompanying notes are an integral part of the financial statements. 20

23 MAYBANK MALAYSIA SUKUK FUND NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JANUARY THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Maybank Malaysia Sukuk Fund ( the Fund ) was constituted pursuant to the execution of a Deed dated 14 December 2012 between the Manager, Maybank Asset Management Sdn. Bhd. ( Maybank AM ), the first supplementary deed dated 9 July 2014, second supplementary deed dated 20 March 2015 and the Trustee, TMF Trustees Malaysia Berhad and the registered holders of the Fund. The launch date of the Fund is on 8 January The principal activity of the Fund is to invest the between 70% - 98% of the Fund's NAV in a portfolio of Ringgit Malaysia denominated Sukuk issued by Malaysian issuers and Malaysian financial institutions with a minimum Sukuk rating of A- by RAM or equivalent rating by MARC. The Manager will also invest between 2% - 30% of the Fund's NAV in Shariah-compliant liquid assets including Shariah-compliant money market instruments and placement in Shariahcompliant 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. Maybank AM is a wholly-owned subsidiary of Maybank Asset Management Group Berhad, which in turn is a wholly-owned subsidiary of Malayan Banking Maybank AM has appointed Maybank Islamic Asset Management Sdn Bhd ( MIAM ) as the External Investment Manager for the Fund. 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 Wholesale Funds issued by the Securities Commission of Malaysia ("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. MIAM is a wholly-owned subsidiary of MAMG. MIAM was incorporated on 15 April 2013 with an authorised capital and paid-up capital of RM3.0 million. MIAM is a holder of a capital markets services licence to carry out Islamic fund management business pursuant to Section 61 of the CMSA. The financial statements were authorised for issues by the Board of Directors of the Manager in accordance with a resolution of the Directors on 28 March

24 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 ) and International Financial Reporting Standards. The Fund has adopted the Standards, Amendments to Standards and Interpretation Committee ("IC") Interpretations which have become effective during the financial year ended 31 January The adoption of the above did not result in material impact to the financial The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below and are presented in Ringgit Malaysia ( RM ). During the financial year ended 31 January 2016, there was a change in accounting policy on the classification of the Company s financial assets on its investments from Available-For-Sale ( AFS ) to Fair Value through Profit and Loss ( FVTPL ). The change in accounting policy was arising from management undertaking a retrospective assessment to review the appropriateness of classifying the Fund s investments as AFS on initial recognition. It was concluded that classifying the investments as FVTPL will be more appropriate to reflect the nature and objective of the Fund. In prior financial period ended 31 January 2015, the investments of the Fund were classified and recognised as Available-For-Sale ( AFS ), whereby gains and losses arising from changes in fair value were recognised in the other comprehensive income, except for impairment losses and foreign exchange gains and losses (for monetary items), which were recognised in profit or loss. As a result of this change in accounting policy to re-designate all of the Fund s investments to FVTPL, the following changes were made: full retrospective application to adjust prior period results and presentation in the statement of financial position and statement of comprehensive income as if the new accounting policy had always been applied with the relevant comparatives being restated. There is no opening balance for prior period presented for the statement of financial position as the Fund was launch on 8 January 2014; any gains and losses from changes in fair value on the Fund s FVTPL investments from initial recognition will be recognised directly in profit or loss in the respective financial period; and AFS reserve in the Statement of Changes in Equity will no longer be applicable. The effect from prior year adjustment is disclosed in Note

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.2 Standards issued but not yet effective As at the date of authorisation of these financial statements, the following Standards, Amendments to Standards and IC Interpretations have been issued by the Malaysian Accounting Standards Board ("MASB") but are not yet effective and have not been adopted by Effective for annual periods Description beginning on or after Annual Improvements to MFRSs Cycle Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January January January 2016 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Deferred Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations Amendments to MFRS 127: Equity Method in Separate Financial Statements Amendments to MFRS 101: Disclosure Initiatives Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception MFRS 14 Regulatory Deferral Accounts MFRS 9 Financial Instruments MFRS 15 Revenue from Contracts with Customers 1 January January January January January January January 2018 The Fund will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any significant impact to the financial statements of the Fund upon their initial application except as described below: (i) Amendments to MFRS 101: Disclosure Initiatives The amendments to MFRS 101 include narrow-focus improvements in the following five areas: 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.2 Standards issued but not yet effective (cont'd) (i) Amendments to MFRS 101: Disclosure Initiatives (cont'd) - Materiality - Disaggregation and subtotals - Notes structure - Disclosure of accounting policies - Presentation of items of other comprehensive income arising from equity accounted investments The Fund does not anticipate that the application of these amendments will have a material impact on the Fund s results as this would only impact the presentation and disclosures of the Fund's financial statements. (ii) MFRS 9 Financial Instruments In November 2014, MASB issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The impact of adoption of MFRS 9 is being assessed by the Fund. 2.3 Summary of significant accounting policies (a) 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 determines the classification of its financial assets at initial recognition, and the category applicable to the Fund are FVTPL financial assets and financing and receivables. A financial asset is derecognised when: (1) The rights to receive cash flows from the asset have expired; or 24

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Summary of significant accounting policies (cont'd) (a) Financial assets (cont'd) (2) The Fund have 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 have transferred substantially all the risks and rewards of the asset; or - the Fund have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the financial asset. (i) FVTPL financial assets Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading by the Fund include fixed income securities acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in Net gain or loss on financial assets at fair value through profit or loss. Profit earned element of such instrument is recorded in Profit income. Exchange differences, if any, on financial assets at FVTPL are not recognised separately in profit or loss but are included in net gains or net losses on changes in fair value of financial assets at FVTPL. 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. (ii) Financing and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as financing and receivables. The Fund includes short term receivables in this classification. Subsequent to initial recognition, financing and receivables are measured at amortised cost using the effective profit rate method. Gains and losses are recognised in profit or loss when the financing and receivables are derecognised or impaired, and through the amortisation process. A financial asset is derecognised where the asset is disposed and the contractual right to receive cash flows from the asset has expired. 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. 25

28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Summary of significant accounting policies (cont'd) (ii) Financing and receivables (cont'd) Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, i.e. the date that the Fund commits to purchase or sell the (b) Impairment of financial assets At each reporting date the Fund will assess whether there is any objective evidence that a financial asset is impaired. Financing and receivables To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund consider 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. (c) Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139 Financial Instruments: Recognition and Measurement, are recognised in the statement of financial position when, and only when, the Fund become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as other financial liabilities. 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 profit rate method. 26

29 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Summary of significant accounting policies (cont'd) (c) Financial liabilities (cont'd) 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. (d) Fair value mesurement 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 categorized 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) (ii) (iii) Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Level 3 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 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. (e) 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 Ringgit Malaysia (RM), which is also the Fund s functional currency. (f) Unitholders' capital The Unitholders contributions to the Fund is classified as equity instrument. 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. 27

30 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Summary of significant accounting policies (cont'd) (g) Dividend distributions Dividend distributions are distributed on a annually basis in accordance with the information memorandum. A dividend distribution to the Fund s Unitholders is accounted for as a deduction from realised reserves except where dividend is sourced out of distribution equalisation which is accounted for as a deduction from Unitholders capital. A proposed dividend is recognised as a liability in the period in which it is approved. (h) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and deposits with financial institution with original maturity of three months or less which have an insignificant risk of changes in value. (i) 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 rate method. (j) 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. No deferred tax is recognised as no temporary differences have been identified Significant accounting estimates and judgements The preparation of the Fund s financial statements requires the Manager to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future. No major judgments have been made by the Manager in applying the Fund s accounting policies. There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year. 28

31 3. MANAGER'S FEE The Manager's fee is computed on a daily basis at 1.00% (2015: 1.00%) per annum of the NAV of the fund before deducting the Manager's fee and Trustee's fee for that particular day. 4. TRUSTEE'S FEE The Trustee's fee is computed on a daily basis at 0.05% (2015: 0.05%) per annum of the NAV of the Fund before deducting the Manager's fee and Trustee's fees for that particular day. 5. INCOME TAX EXPENSE Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial year. The tax charge for the financial year is in relation to the taxable income earned by the Fund after deducting tax allowable 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 tax at the statutory income tax rate to income tax expense at the effective income tax rate is as follows: to RM RM (restated) Net income before tax 670, ,309 Tax at Malaysian statutory rate of 25% (2015: 25%) 167, ,077 Effects of profit on deposits and other income not subject to tax (227,863) (224,115) Effect of expenses not deductible for tax purposes 60,337 52,038 Tax expense for the year/period INVESTMENTS Details of financial assets at FVTPL as at 31 January 2016 are as follows: Unquoted fixed income securities Quantity/ Nominal Cost Fair value % of amount RM RM NAV Government of Malaysia 1,300,000 1,303,831 1,285, % %

32 6. INVESTMENTS (CONT'D) Unquoted fixed income securities (cont'd) Quantity/ Nominal Cost Fair value % of amount RM RM NAV Government of Malaysia 800, , , % % Government of Malaysia 300, , , % % Anih Berhad 900, , , % % Golden Asset 1,100,000 1,090,231 1,063, % Management Berhad % Jimah East Power Sdn Bhd 400, , , % % MMC Corporation Berhad 600, , , % % Tanjung Bin Energy Sdn Bhd 600, , , % % Malaysia Airport Holdings Berhad 500, , , % % Aman Sukuk Berhad 300, , , % % Aman Sukuk Berhad 1,700,000 1,700,000 1,711, % % AM Islamic Bank Berhad 350, , , % % AM Islamic Bank Berhad 1,250,000 1,249,524 1,254, % % Anih Berhad 700, , , % %