MAYBANK Q-TARGET RETURN FUND

Transcription

1 Maybank Asset Management Sdn Bhd ( M) Level 12 Tower C Dataran Maybank No.1 Jalan Maarof Kuala Lumpur Telephone Facsimile MAYBANK Q-TARGET RETURN FUND Annual report For the financial year ended 31 March 2018

2 CONTENT PAGE Manager's report 1-6 Trustee's report 7 Statement by Manager 8 Independent auditors report 9-12 Statement of comprehensive income 13 Statement of financial position 14 Statement of changes in equity 15 Statement of cash flows 16 Notes to the financial statements 17-48

3 Manager s report for the financial year ended 31 March 2018 A. Fund Information 1. Name of Fund Maybank Q-Target Return Fund (the "Fund") 2. Type of Fund Growth 3. Category of Fund Wholesale fund (mixed assets) 4. Duration of Fund The Fund is an open-ended fund. 5. Fund launch date 4 July Fund s investment objective The Fund is a mixed fund that aims to provide unitholders with returns above benchmark via a diversified portfolio of equity, fixed income securities and money market instruments and provide unitholders with capital appreciation over the medium to long term. 7. Fund distribution policy The Fund is not expected to distribute income. However, incidental distribution can be declared whenever appropriate. 8. Fund's performance benchmark The Benchmark for the Fund is a return of 6% per annum that would take into consideration of the following:- - The 6% return per annum is not guaranteed and only serves as a measure to compare the Fund s performance; - for comparison against the benchmark, total weighted rate of return will be applied; and - the Fund targets to achieve annualized 3-year rolling return above the benchmark. 9. Fund's investment policy and principal investment strategy Fund invests a minimum of 10% and a maximum of 75% of the Fund s Net Asset Value ("NAV") in equities; and other equity-related instruments such as convertible bonds and hybrid securities, warrants, transferable subscription rights and options and minimum of 20% and a maximum of 85% of the Fund s NAV in RM-denominated fixed income securities and minimum of 5% and a maximum of 70% of the Fund s NAV in fixed deposits and money market instruments. 1

4 01 Apr Apr May Jun Jul Aug Sep Sep Oct Nov Dec Jan Feb Mar Mar 18 MAYBANK Q-TARGET RETURN FUND Manager s report for the financial year ended 31 March 2018 (cont'd) B. Performance Review Returns of the Fund and its benchmark for the financial year ended 31 March 2018 are as follows: The Fund Benchmark Period % % 1 April 2017 to 31 March Performance of the Fund for the financial year ended 31 March 2018: 7.00% Maybank Q-Target Return Return 6% p.a. 6.00% 6.00% 5.00% 4.00% 3.68% 3.00% 2.00% 1.00% 0.00% Source: Novagni Analytics and Advisory Sdn Bhd, as at 31 March 2018 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. The Fund has generated a net return of 3.68% for the financial period ended 31 March 2018, compared to the benchmark which registered a return of 6.00% over the same period. The underperformance was due to the Fund's exposure to certain stocks that performed poorly. Pos Malaysia and United Malacca posted disappointed earnings results due to higher-thanexpected costs, higher staff costs for the former and high planting costs due to the young estate for the latter. Mid-size construction stocks such as Ekovest, Gabungan AQRS and Gadang underperformed. Taliworks underperformed as the uncertainty on the Selangor water deal grows which will be negative for its current outstanding payments owed by the Pengeluar Air Sungai Selangor (Splash). Destini and Dnex were detractors for the Fund as expectations of contract wins were further delayed given its exposure to government related projects. Lastly, Syarikat Takaful underperformed on negative sentiment on the back of the potential sale of a stake by Bank Islam (BIMB) and concerns rising competition due to the detariffication of motor insurance/takaful. 2

5 Manager s report for the financial year ended 31 March 2018 (cont'd) C. Market Review Equity Market Review Generally, 2017 proved to be a good year for Asia equity markets. Markets were surprisingly sanguine in spite of geopolitical risks and apart from some minor corrections, markets rose quite steadily throughout the year on the back of a continuing Goldilocks economy of synchronized global growth and low inflation. However, the laggard has been the Malaysia with KLCI rising only 8% compared to China, Hong Kong, Taiwan and Singapore market that were up about 20%. Consumer Price Index ( CPI ) rose +3.7% year-on-year ( YoY ) in October 2017, easing slightly from +4.3% in September 2017 and the high of +5.1% in March On a YoY basis, this largely eventuated as consumer product prices rose, coupled with sharper transport inflation on higher oil prices. Meanwhile, trade data in October 2017 saw a sharp month-on-month ( MoM ) increase after a volatile last 12 months, with exports rising by +18.9% YoY from 14.8% in September 2017, supported by the still-weak Malaysian Ringgit ("MYR") and a rebound in global trade. Elsewhere, import performance also accelerated at +20.9% YoY against +15.2% in June 2017, on continued inflow of consumer goods. As exports growth fell behind that of imports, the trade surplus widened to MYR10.56 billion from MYR8.60 billion in the previous month. Elsewhere, the Monetary Policy Committee ( MPC ) in January 2018 raised the key interest rate by 25 basis points ("bps"), in line with market expectations, stating that the the strong growth momentum is expected to continue in 2018, sustained by the strong global growth and positive spillovers from the external sector to the domestic economy. Growth has been broad-based, with key industries being the construction and services sectors, considering also that 2017 going into 2018 will see the Malaysian general elections. Bond Market Review In Malaysia, headline inflation continued to decelerate from near 8-year highs in the earlier months of the year, with the Consumer Price Index ( CPI ) rising +3.7% YoY in October 2017, easing slightly from +4.3% in September 2017 and the high of +5.1% in March On a YoY basis, this largely eventuated as consumer product prices rose, coupled with sharper transport inflation on higher oil prices. Elsewhere, the MPC meetings so far in the year have been relatively uneventful, with Bank Negara Malaysia ( BNM ) maintaining the Overnight Policy Rate ( OPR ) at 3% in early- November 2017, stating that the current policy remains supportive of the domestic economy s steady growth path, supported also by decelerating inflation. The last policy movement was a preemptive accommodative move in July 2016 which saw a 25 bps cut from 3.25%, to support economic growth. Malaysia s revised 2017 Budget points at targets of a fiscal deficit of 3.0% of GDP, based on GDP growth ranging between 4.0% - 5.0% in 2017, later revised to a narrower 4.3% - 4.8%. Growth has been broad-based, with key industries being the construction and services sectors, considering also that 2017 going into 2018 will likely see the Malaysian general elections. We view prospects to be healthy, as Gross Domestic Product ("GDP") growth up for the third quarter ended-september 2017 were well ahead of forecasts, coming in at +6.2% YoY. Elsewhere, US Federal Reserve ( Fed ) hawkish rhetoric peaked in mid-march 2017 and again in mid-june 2017, with the Federal Open Market Committee ( FOMC ) opting to raise interest rates by 25 bps at each meeting to 1.25% at the upper bound as of late-november Consensus expectations point at a further hike in December 2017, before going into the expected 2-3 hikes in

6 Manager s report for the financial year ended 31 March 2018 (cont'd) C. Market Review (cont'd) Bond Market Review (cont'd) In its January 2018 meeting, the MPC decided to raise the OPR by 25 bps to 3.25% to normalize the degree of monetary accommodation, on the back of sustained strong and synchronized global growth performance. Following OPR hike in January 2018, the MPC kept the OPR at 3.25% in its March 2018 meeting and sounded positive on domestic factors but raised caution on possible financial market swings and prospects of trade friction. D. Market Outlook Equity Market Outlook We expect the positive momentum in markets from 2017 to carry on, at least through first half of 2018, given ongoing synchronized global growth amidst a benign inflation and rates backdrop. However, tighter financial conditions may prove more of a challenge in second half of Over to Malaysia, economic data has performed well and surprised many in 2017, although hurdles remain both in terms of domestic demand and external headwinds. As commodity prices have stabilized to a degree, and there has been strong recovery of trade data, the outlook for the economy has turned optimistic, reflected by the weak but improving MYR. As the MYR unwinds previous losses and inflation drivers ease, we expect Bank Negara Malaysia's maneuverability to improve. The ongoing fallout from the Britain-EU exit referendum ( Brexit ) talks and weak election result for Prime Minister Theresa May, coupled with so far muted success in executing United States ("US") President Donald Trump s policies, saw markets endure sharp kneejerk reactions, which in some areas are yet to recover. This has been exacerbated over pockets of sharp volatility on geopolitical choppiness arising from North Korea and the Middle East. Overall, we view Malaysia s budgeted growth plan to be achievable, amid the mixed external environment, ongoing fiscal rebalancing, and likely undercurrent of higher inflation and uncertain consumption. The direction of crude oil and Liquefied Natural Gas ( LNG ) prices, on top of capital flows on the MYR, continues to have a wide-ranging impact on the country s fiscal position, current account balance, currency and oil & gas investment activities. The Budget 2018 highlighted the underlying theme of a slower rate of fiscal consolidation, reliant on higher GDP growth and oil prices, notwithstanding higher tax revenues and subsidy cuts. 4

7 Manager s report for the financial year ended 31 March 2018 (cont'd) D. Market Outlook (cont'd) Bond Market Outlook The trajectory of future rate hikes in 2018 will depend on momentum of the US economy, inflation, job markets, financial conditions and external developments. Therefore, a degree of volatility will likely persist in the next 3 to 6 months, as investors balance expectations of policy continuity by the Fed following the appointment of Jerome Powell as Fed Chairman, ongoing geopolitical risks, and reform and political developments out of the US. Against a backdrop of still benign inflation, and mixed economic data, reenergised flows into safe-haven assets likely will not require much persuasion. Decisive policy action and swift or peaceful resolution of geopolitical tensions will be crucial to calm investor concerns over threats to global and domestic economic growth and smoothen heightened volatility in the markets. After increasing its benchmark interest rates three times in 2017 and another in March 2018, as well as commencing its gradual balance sheet reduction in October 2017, we expect the Fed to hike another two times in 2018 on improving employment and inflation figures in the US. Consequently, the 10-year US Treasury yield is expected to trade at a higher band between 2.80% and 3.20% on expectation of inflationary environment in the US. We expect to continue seeing volatile swings in the inflows and outflows in the domestic bond market during However, domestic demand from institutional investors will be able to provide support to the domestic bond market during another round of sell-off. This would provide some liquidity in the MGS, GIIs, GGs and AAA bonds. We expect BNM to maintain its key OPR at 3.25% throughout the remaining of 2018 after its 25 bps January 2018 hike. E. Investment Strategies Equity strategy: With equity markets now at fair valuations, we believe that earnings growth/momentum, rather than price-earnings ratio (P/E ratio) expansion, will be a more important driver of share price performance in We remain positive on Malaysian equities as recent corporate earnings and economic statistics continue to support this thesis. We continue to be invested in sectors with resilient and earnings visibility. We think earnings delivery and execution of strategioes will be crucial as expectations from investing communities have already been built-up during the 2017 strong market recovery. As the government has already announced higher budget for operational expenditure in Budget 2018, we should also focus on companies that will benefit from improvement in domestic consumption e.g. consumer staples and financials. We overweight on growth sectors, steady yielding companies should anchor the portfolio to weather the potential volatility, especially running to general election, which is expected to be in second quarter of We believe that the second half of 2018 should provide more positive returns to investors in the absence of uncertainties over election results. Bond strategy: We remain our slight overweight call on duration for this fund, but we remain cautious on the back of market volatility driven by withdrawal of quantitative easing by major central banks and fairly widespread normalization of policy rates globally. We remain constructive for Ringgit Fixed Income over the medium term, given its properties as a resilient asset class, generating positive returns even as global fixed income has provided negative returns over the same period. 5

8 Manager s report for the financial year ended 31 March 2018 (cont'd) F. Asset Allocation The comparison of the Fund s asset allocation as at 31 March 2018 to the previous financial year is as follows: Asset allocation RM % RM % Quoted equities 1,507, ,632, Unquoted fixed income securities 1,480, ,134, Cash, deposits with licensed financial institutions and other net assets 386, , Total 3,375, ,690, G. NAV as at 31 March 2018 Below is the summary of the NAV of the Fund: Changes (%) NAV (RM) 3,375,168 11,690,554 (71.13) Units in circulation (unit) 3,045,674 10,933,701 (72.14) NAV per unit (RM) H. Soft Commissions and Rebates The Manager and its delegates will not retain any form of soft commissions or rebates from or otherwise share in any commission with any broker in consideration for directing dealings in the investments of the Fund unless the commissions received are 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 year ended 31 March 2018, the Manager and its delegates did not receive any soft commissions and rebates from brokers or dealers. 6

9 TRUSTEE'S REPORT TO THE UNITHOLDERS OF MAYBANK Q-TARGET RETURN FUND FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 We have acted as Trustee of Maybank Q-Target Return Fund (the "Fund ) for the financial year ended 31 March 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 Malaysia's Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework, the Capital Markets and Services Act 2007 and other applicable laws; Valuation and pricing is carried out in accordance with the Deed and any regulatory requirements; and Creation and cancellation of units of the Fund have been carried out in accordance with the Deeds and relevant regulatory requirements. For and on behalf of RHB Trustees Berhad TONY CHIENG SIONG UNG Director Kuala Lumpur, Malaysia 21 May

10 STATEMENT BY MANAGER We, Dr Hasnita Binti Dato' Hashim and Ahmad Najib Bin Nazlan, being two of the Directors of Maybank Asset Management Sdn Bhd (the "Manager") do hereby state that, in the opinion of the Manager, the accompanying financial statements set out on pages 13 to 48 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 Q-Target Return Fund as at 31 March 2018 and of its results, changes in equity and cash flows for the financial year then ended and comply with the requirements of the Deeds. For and on behalf of the Manager Dr Hasnita Binti Dato' Hashim Ahmad Najib Bin Nazlan Kuala Lumpur, Malaysia 21 May

11 Independent Auditors Report to the Unitholders of MAYBANK Q-TARGET RETURN FUND Report on the audit of the financial statements Opinion We have audited the financial statements of Maybank Q-Target Return Fund (the "Fund"), which comprise the statement of financial position as at 31 March 2018 of the Fund, and statement of comprehensive income, statement of changes in equity and statement of cash flows of the Fund for the period then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, as set out on pages 13 to 48. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the as at 31 March 2018, and of its financial performance and cash flows for the period then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial statements and auditors report thereon The Manager of the Fund ("the Manager ) is responsible for the other information. The other information comprises the information included in the annual report of the Fund, but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. 9

12 Independent Auditors Report to the Unitholders of MAYBANK Q-TARGET RETURN FUND (cont'd) Information other than the financial statements and auditors report thereon (cont'd.) In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager and Trustee for the financial statements The Manager is responsible for the preparation of financial statements of the Fund that 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 of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. The Trustee is responsible for overseeing the Fund s financial reporting process. The Trustee is also 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 responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 10

13 Independent Auditors Report to the Unitholders of MAYBANK Q-TARGET RETURN FUND (cont'd) Auditors responsibilities for the audit of the financial statements (cont'd.) As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements of the Fund represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 11

14 Independent Auditors Report to the Unitholders of MAYBANK Q-TARGET RETURN FUND (cont'd) Other matters This report is made solely to the unitholders of the Fund, as a body, in accordance with the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the Securities Commission 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 /05/2019 J Chartered Accountant Kuala Lumpur, Malaysia 21 May

15 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 Note RM RM INVESTMENT INCOME Interest income 3 137, ,323 Dividend income 101, ,737 Net realised gain from available-for-sale ("AFS") financial assets 869, ,443 Impairment loss on AFS financial assets (79,600) (89,507) Other income ,029, ,796 EXPENSES Manager's fee 4 65, ,189 Trustee's fee 5 3,288 18,000 Auditor s remuneration 5,500 5,500 Tax agent's fee 5,700 2,500 Administrative expenses 10,549 12,658 90, ,847 Net income before tax 938, ,949 Income tax expense 6 - (4,529) Net income after tax 938, ,420 Other comprehensive (expense)/income: Item that may be reclassified subsequently to profit or loss: Net gain on fair value changes 242, ,723 Net realised gain transferred to profit or loss (790,130) (36,977) Total other comprehensive (expense)/income (547,580) 407,746 Total comprehensive income for the financial year 390,839 1,021,166 Net income after tax is made up of the following: Net realised income 938, , , ,420 The accompanying notes form an integral part of the audited financial statements. 13

16 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 Note RM RM ASSETS Cash at bank 547 3,549 Deposit with a licensed financial institution 7 374, ,000 Interest receivable 21,486 54,029 Due from brokers 8-74,940 AFS financial assets 9 2,988,176 10,766,439 Dividends receivable 2,366 8,440 Tax recoverable 3,556 3,556 TOTAL ASSETS 3,390,131 11,771,953 LIABILITIES Due to Manager 10 4,058 60,663 Due to Trustee ,892 Other payables and accruals 12 10,752 9,844 TOTAL LIABILITIES 14,963 81,399 NET ASSET VALUE ("NAV") OF THE FUND 3,375,168 11,690,554 EQUITY Unitholders' capital 13(a) 3,276,680 11,982,905 Accumulated losses 13(b) (154,465) (1,092,884) AFS reserve 252, ,533 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 13 3,375,168 11,690,554 NUMBER OF UNITS IN CIRCULATION (UNIT) 13(a) 3,045,674 10,933,701 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the audited financial statements. 14

17 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 Unitholders' Accumulated capital losses AFS Total Note 13(a) Note 13(b) reserve equity RM RM RM RM As at 1 April ,408,282 (1,706,304) 392,787 21,094,765 Total comprehensive income for the financial year - 613, ,746 1,021,166 Creation of units 342, ,734 Cancellation of units (10,768,111) - - (10,768,111) As at 31 March ,982,905 (1,092,884) 800,533 11,690,554 As at 1 April ,982,905 (1,092,884) 800,533 11,690,554 Total comprehensive income for the financial year - 938,419 (547,580) 390,839 Creation of units 48, ,962 Cancellation of units (8,755,187) - - (8,755,187) As at 31 March ,276,680 (154,465) 252,953 3,375,168 The accompanying notes form an integral part of the audited financial statements. 15

18 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 10,586,400 19,389,136 Purchase of investments (2,503,275) (9,267,157) Interest received 182, ,468 Dividends received 107, ,234 Manager's fee paid (73,114) (161,186) Trustee's fee paid (14,027) (8,059) Payment of other fees and expenses (20,841) (27,451) Net cash generated from operating and investing activities 8,265,482 10,640,985 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 48, ,734 Cash paid on units cancelled (8,804,446) (10,810,592) Net cash used in financing activities (8,755,484) (10,467,858) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (490,002) 173,127 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 864, ,422 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 374, ,549 Cash and cash equivalents comprise: Cash at bank 547 3,549 Deposits with financial institution with original maturity of 3 months or less (Note 7) 374, , , ,549 The accompanying notes form an integral part of the audited financial statements. 16

19 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Maybank Q-Target Return Fund (the "Fund ) was constituted pursuant to the execution of a Deed dated 24 June 2011, the Second supplemental deed dated 4 December 2013, the Third supplemental deed dated 30 March 2015 and the Fourth supplemental deed dated 10 August 2015 (collectively referred to as "Deeds"), between the Manager, Maybank Asset Management Sdn Bhd ( Maybank AM ) and the Trustee, RHB Trustees Bhd. The principal activity of the Fund is to invest a minimum of 10% and a maximum of 75% of the Fund s NAV in equities; and other equity-related instruments such as convertible bonds and hybrid securities, warrants, transferable subscription rights and options and minimum of 20% and a maximum of 85% of the Fund s NAV in RM-denominated fixed income securities and minimum of 5% and a maximum of 70% of the Fund s NAV in fixed deposits and money market instruments. 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 Act 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 Bhd, which in turn is a whollyowned subsidiary of Malayan Banking Bhd ("MBB"). The financial statements were authorised for issue by the Board of Directors (the "Directors") of the Manager in accordance with a resolution of the Directors on 21 May 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 ) as issued by the International Accounting Standards Board ( IASB ). The Fund had adopted the MFRS, Amendments to Standards and IC Interpretations which have become effective during the financial year ended 31 March The adoption of the new pronouncements did not result in any material impact to the financial statements. The financial statements are prepared on a historical cost basis except as disclosed in the accounting policies in Note 2.3 to Note 2.16 to the financial statements. The financial statements are presented in Ringgit Malaysia. 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.2 Standards and amendments issued but not yet effective The following are standards, amendments to standards and interpretations issued by the MASB, but not yet effective, up to the date of issuance of the Fund's financial statements. The Fund intends to adopt the relevant standards, if applicable, when they become effective. Description Effective for annual periods beginning on or after MFRS 2 Share-based Payment - Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2) 1 January 2018 MFRS 9 Financial Instruments 1 January 2018 MFRS 9 Prepayment Features with Negative Compensation (Amendments to MFRS 9) 1 January 2019 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 16 Leases 1 January 2019 MFRS 128 Long-term Interests in Associates and Joint Ventures (Amendments to MFRS 128) 1 January 2019 Annual Improvements to MFRSs Cycle (i) Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards 1 January 2018 (ii) Amendments to MFRS 128 Investments in Associates and Joint Ventures 1 January 2018 MFRS 140 Transfers of Investment Property (Amendments to MFRS 140) 1 January 2018 IC Interpretation 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 IC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019 Annual Improvements to MFRSs Cycle (i) Amendments to MFRS 3 Business Combinations and MFRS 11 Joint 1 January 2019 Arrangements (ii) Amendments to MFRS 112 Income Tax 1 January 2019 (iii) Amendments to MFRS 123 Borrowing Costs 1 January 2019 MFRS 10 Consolidated Financial Statements - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be announced (Amendments to MFRS 10) by MASB MFRS 128 Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or To be announced Joint Venture (Amendments to MFRS 128) by MASB 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.2 Standards and amendments issued but not yet effective (cont'd) The Fund expects that the adoption of the above standards, amendments to standards and interpretations will not have any material impact to the financial statements in the year of initial application, except as discussed below: (i) MFRS 9 Financial Instruments MFRS 9 replaces MFRS 139 Financial Instruments: Recognition and Measurement ("MFRS 139"). MFRS 9 requires financial assets to be classified on the basis of the business model within which they are held and their contractual cash flow characteristic. The Fund will classify its financial assets in the following measurement categories: - those to be measured subsequently at fair value, and - those to be measured at amortised cost. There will be no changes to the subsequent measurement of these financial assets. MFRS 9 requires impairment assessments to be based on an expected loss model ("ECL"), replacing the MFRS 139 incurred loss model. The ECL model applies to financial assets measured at amortised cost. The Fund will adopt MFRS 9 on 1 April On the date of the initial application, the Fund will adopt the modified approach whereby the AFS financial assets will be reclassified to financial assets at fair value through profit or loss, and AFS reserve will be transferred to nondistributable retained earnings brought forward. There will not be an impact to the performance results and the NAV of the Fund. 2.3 Financial assets Financial assets are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, 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: AFS financial assets and loans 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. 19

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.3 Financial assets (cont'd) (a) AFS financial assets (cont'd) Classification AFS financial assets are financial assets that are either in this category or not classified in any of the other categories such as financial assets at FVTPL or loans and receivables. Recognition and measurement Regular purchases and sales of AFS financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the asset. AFS financial assets are initially recognised at fair value. Directly attributable transaction costs are included in the initial measurement of AFS financial assets. After initial recognition, AFS financial assets are measured at fair value. Any gains and losses from changes in fair value of the AFS financial assets are recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses on monetary instruments, dividend income and interest income calculated using the effective interest method, which are recognised in statement of profit and loss. When securities classified as AFS are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are included in the statement of profit and loss as 'net realised gains/(losses) from AFS financial assets'. Interest income on AFS debt investments calculated using the effective interest method is recognised in profit or loss. Dividends on AFS equity instruments are recognised in the statement of profit and loss when the Fund s right to receive payment is established. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price or binding dealer price quotations, without any deduction for transaction costs. Quoted equities in Malaysia are valued at last done market price quoted on the Bursa Malaysia Berhad at the date of the statement of financial position. Unquoted fixed income securities denominated in Ringgit Malaysia ("RM") are revalued on a daily basis based on fair value prices quoted by a Bond Pricing Agency ("BPA"). If a valuation based on market price does not represent the fair value of the 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 quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted securities are valued as determined in a 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) Loans and receivables Classification Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. The Fund loans and receivables comprise cash at bank, deposit with a licensed financial institution, amount due from brokers, interest receivable and dividend receivable. Recognition and measurement Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in the statement of profit and loss when the loans and receivables are derecognised or impaired, and through the amortisation process. 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, if any, 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 of the Fund whether there is any objective evidence that a financial asset of the Fund is impaired. (i) AFS financial assets Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as AFS financial assets are impaired. If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on AFS equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For AFS debt investments, impairment losses are subsequently reversed in profit or loss, up to the amount previously recognised as impairment loss, if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss. (ii) Loans and receivables To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in 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. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 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 and other payables and accruals as other financial liabilities. Recognition and measurement Financial liabilities are recognised in the statement of financial position when and only when the Fund becomes a party to the contractual provisions of the financial instruments. The Fund s financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest rate method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. 2.7 Fair value measurement The Manager measures the Fund's financial instruments at fair value, at each reporting date of the Fund. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: (i) (ii) In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Fund. 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. 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.7 Fair value measurement (cont'd) All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: (i) Level 1 - (ii) Level 2 - (iii) Level 3 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Fund determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting date. For the purpose of fair value disclosures, the Fund has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. 2.8 Functional and 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. 2.9 Unitholders' capital The unitholders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: (i) (ii) (iii) (iv) the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. 24

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) 2.9 Unitholders' capital (cont'd) The outstanding units are carried at the redemption amount that is payable at each financial year if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. Distribution equalisation represents the average distributable amount included in the creation and cancellation prices of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are cancelled Distributions Any distribution to the Fund s unitholders is accounted for as a deduction from realised reserves except where 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 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and deposits with a licensed financial institution with original maturity of three months or less which have an insignificant risk of changes in value Revenue Revenue 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. Revenue is measured at the fair value of consideration received or receivable. Interest income from unquoted fixed income securities includes amortisation of premium and accretion of discount, and is recognised using the effective interest rate method. Interest income from deposits with a licensed financial institution is recognised on the accruals basis using the effective interest rate method. Dividend income is recognised when the right to receive has been established. Realised gain or loss on disposal of unquoted fixed income securities is accounted for as the difference between the net disposal proceeds and the carrying amount of the investments, determined on cost adjusted for accretion of discount or amortisation or premium. 25