AmTotal Return 31 December 2017

Transcription

1 Annual Report for AmTotal Return 31 December 2017

2 TRUST DIRECTORY Manager AmFunds Management Berhad 9 th &10 th Floor, Bangunan AmBank Group 55 Jalan Raja Chulan Kuala Lumpur Board of Directors Raja Maimunah Raja Abdul Aziz Dato Mustafa Bin Mohd Nor Tai Terk Lin Goh Wee Peng Sum Leng Kuang Investment Committee Sum Leng Kuang Tai Terk Lin Dato Mustafa Bin Mohd Nor Zainal Abidin Mohd Kassim Goh Wee Peng Trustee AmanahRaya Trustees Berhad Auditors and Reporting Accountants Ernst & Young Taxation Adviser Deloitte Tax Services Sdn Bhd AmTotal Return

3 CONTENTS 1 Manager s Report 10 Independent Auditor s Report to the Unitholders 13 Statement of Financial Position 14 Statement of Comprehensive Income 15 Statement of Changes in Equity 16 Statement of Cash Flows 17 Notes to the Financial Statements 36 Statement by the Manager 37 Trustee s Report 38 Directory AmTotal Return

4 MANAGER S REPORT Dear Unitholders, We are pleased to present you the Manager s report and the audited accounts of AmTotal Return ( Fund ) for the financial year ended 31 December Salient Information of the Fund Name Category/ Type Objective AmTotal Return ( Fund ) Equity/Income and to a lesser extent growth AmTotal Return is designed as a medium to long-term investment with an objective of producing a regular income* stream and to a lesser extent capital growth. Note: *The income could be in the form of units or cash. Duration Performance Benchmark The Fund was established on 10 January 1989 and shall exist for as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. In some circumstances, the unitholders can resolve at a meeting to terminate the Fund. Malayan Banking Berhad 12-months Fixed Deposit Rate plus 3% spread. (obtainable via Note: The benchmark does not imply that the risk profile of the Fund is the same as the risk profile of the benchmark. Investors of the Fund will assume a higher risk compared to the benchmark. Hence, the returns of the Fund may be potentially higher due to the higher risk faced by the investors. Income Distribution Policy Breakdown of Unit Holdings by Size Income distribution (if any) is paid at least once every year. For the financial year under review, the size of the Fund stood at 118,315,705 units. Size of holding As at 31 December 2017 As at 31 December 2016 No of units held Number of unitholders No of units held Number of unitholders 5,000 and below 232, ,575,348 1,418 5,001-10, , ,198, ,001-50,000 6,817, ,767,691 1,664 50, ,000 6,482, ,355, ,001 and above 103,872, ,502,

5 Fund Performance Data Portfolio Composition Details of portfolio composition of the Fund for the financial years as at 31 December are as follows: FY 2017 % FY 2016 % FY 2015 % Communications Construction Consumer products Finance Hotels Industrial products Infrastructure project companies Plantation Properties REITs Technology Trading/Services Cash and others Total Note: The abovementioned percentages are calculated based on total net asset value. Performance Details Performance details of the Fund for the financial years ended 31 December are as follows: FY 2017 FY 2016 FY 2015 Net asset value ()* 48,706,769 46,118,150 57,420,746 Units in circulation* 118,315, ,399, ,047,497 Net asset value per unit ()* Highest net asset value per unit ()* Lowest net asset value per unit ()* Benchmark performance (%) Total return (%) (1) Capital growth (%) Income distribution (%) Gross distribution (sen per unit) Net distribution (sen per unit) Management expense ratio (%) (2) Portfolio turnover ratio (times) (3) * Above prices and net asset value per unit are shown as ex-distribution. Note: (1) Total return is the actual return of the Fund for the respective financial years computed based on the net asset value per unit and net of all fees. (2) Management expense ratio ( MER ) is calculated based on the total fees and 2

6 expenses incurred by the Fund divided by the average fund size calculated on a daily basis. The MER decreased by 0.10% as compared to 1.27% per annum for the financial year ended 31 December 2016 mainly due to decrease in expenses. (3) Portfolio turnover ratio ( PTR ) is calculated based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. The PTR increased by 0.30 times (30.9%) as compared to 0.97 times for the financial year ended 31 December 2016 mainly due to increase in investing activities. Average Total Return (as at 31 December 2017) AmTotal Return (a) % MBB (b) % One year Three years Five years Ten years Annual Total Return Financial Years Ended (31 December) AmTotal Return (a) % MBB (b) % (a) Source: Novagni Analytics and Advisory Sdn Bhd. (b) Malayan Banking Berhad ( MBB ) 12-month fixed deposit rate plus 3% (sources: Maybank Treasury Website). The Fund performance is calculated based on the net asset value per unit of the Fund. Average total return of the Fund and its benchmark for a period is computed based on the absolute return for that period annualised over one year. Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. Fund Performance For the financial year under review, the Fund registered a return of 15.60% comprising of 13.78% capital growth and 1.82% income distribution. Thus, the Fund s return of 15.60% has outperformed the benchmark s return of 6.10% by 9.50%. (Forward) 3

7 As compared with the financial year ended 31 December 2016, the net asset value ( NAV ) per unit of the Fund increased by 13.73% from to , while units in circulation decreased by 7.13% from 127,399,633 units to 118,315,705 units. The line chart below shows comparison between the annual performances of AmTotal Return and its benchmark, MBB, for the financial years ended 31 December. Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. Has the Fund achieved its objective? The Fund has been providing yearly income distribution of 1.82% to 4.39% over the last 3 financial years. Hence The Fund has met its objective of producing a regular income stream and to a lesser extent capital growth. Strategies and Policies Employed The Fund seeks to achieve its objective by invest between 70% and 95% of its NAV in equity and up to 30% of its NAV in fixed income instruments. In managing the Fund, The manager may opt to invest in the Investment either directly or via units trust funds. The Manager combines a top-down asset and sector allocation process with a bottomup stock selection process. The asset allocation will be reviewed periodically depending on the economic and stock market outlook. The manager will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and price to book multiples. Investment in fixed income instruments will be performed on active portfolio duration management on interest rate outlook. Individual bond selection is made by combining a bottom-up view of the market with a top down analysis of the macroeconomic fundamentals. The bottom up view is driven by vigorous in-house 4

8 credit research for each bond together with in-house risk limits. Various propriety models are used to provide top-down forecasts. The Fund invests in Malaysia and to a lesser extent, in foreign markets where the regulatory authorities are ordinary or associate members of the IOSCO. The Fund is actively managed. However, the frequency of its trading strategy will depend on investment opportunities. Portfolio Structure This table below is the asset allocation of the Fund for the financial years under review. As at % As at % Changes % Construction Consumer products Finance Industrial products Infrastructure project companies Plantation Properties REITs Technology Trading/Services Cash and others Total During the financial year under review, the Fund reduced weighting in Communications, Consumer products and Hotels and re-deployed money into Finance, Industrial products, Plantation and REITs. Distribution/ unit splits During the financial year under review, the Fund declared income distributions, detailed as follows: 0.33 sen per unit income distribution 0.33 sen per unit income distribution Change in the unit price prior and subsequent to the income distribution Before income distribution on 16 June 2017 () After income distribution on 16 June 2017 () Net asset value per unit Change in the unit Before income price prior and distribution on subsequent to the 20 December income distribution 2017 After income distribution on 20 December 2017 () () Net asset value per unit There was no unit split declared for the financial year under review. State of Affairs There has been neither significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unitholders during the financial period under review. 5

9 Rebates and Soft Commission It is our policy to pay all rebates to the Fund. Soft commissions received from brokers/dealers are retained by the Manager only if the goods and services provided are of demonstrable benefit to unitholders of the Fund. During the financial period under review, the Manager had received on behalf of the Fund, soft commissions in the form of fundamental database, financial wire services, technical analysis software and stock quotation system incidental to investment management of the Fund. These soft commissions received by the Manager are deem to be beneficial to the unitholders of the Fund. Market Review Year 2017 started on a positive note, spurred by foreign inflow on the back of an improving ringgit from 4.48/USD to 4.43/USD, and stabilizing oil prices at USD50-55/bbl. The market was also be boosted by some repositioning and reallocation of funds at the start of the year. Improving sentiment on local banks, and M&A newsflow on major GLCs such as Sime Darby and UMW further boosted the buoyant mood on local equities. Apart from that, deferment of punitive regulations (i.e. levy for foreign workers) until 2018 helped to recover investor confidence on less downside risk to future earnings. The month of February started off with another round of rallies in equities, supported by further net foreign inflows of c. 1 bil (YTD 2017:1.5 bil), with oil prices hovering within the USD52-55/bbl band and ringgit averaging 4.44/USD. We saw trading interest on all fronts i.e. big to small cap stocks. The index peaked above 1700 towards the end of February, but ended the month slightly lower at 1694 on profit taking. Post the February result season (for 4Q 2016 results), data shows that 21% of companies recorded results above our expectations - the best quarter so far in the past one year. Morgan Stanley Capital International ( MSCI ) Malaysia 2017 earnings were revised lower by -0.1% mom in February. However more significantly, it shows a bottoming of 2017 earnings expectation as this was the lowest negative revision since January Most upgrades came from Materials, Energy and Consumers sectors, whilst downgrades were from Real Estate, Telco and Utilities. In March, the global and regional equity markets continued their rallies. For the local bourse, trading interest shifted to mid and small-cap stocks and on property and technology stocks. Highlight of the month was the announcement of the Digital Free Trade Zone by the PM during Jack Ma s visit in KL. Maybank and CIMB also announced partnership with Ant Financial Services Group to enable the Alipay mobile wallet in Malaysia. Furthermore, Malaysian Digital Economy Corp announced that Multimedia Super Corridor companies have recorded new investments of 16.3 bil in The upward momentum continued in April, as sentiment was supported by a stronger ringgit, improving outlook for corporate earnings and strong inflow of foreign funds. The broader market outperformed the KLCI, with the FBM EMAS up 2.2% mom to 12,631pts. However, average daily value traded on Bursa in April fell by 8% mom to 2.8bn. The finance, technology and energy sectors outperformed the market. The energy sector outperformed, on the back of continued optimism about Saudi Aramco s potential USD7 bil investment in RAPID. The financial sector outperformed, 6

10 presumably on reflation trade. Materials were a major underperformer, led by Lafarge and PChem, on a weaker pricing environment. Consumer staples underperformed on lower CPO prices, while defensive utilities continued to underperform. After a strong performance in the first 4 months of 2017, the market paused its uptrend in May. News of the Bandar Malaysia deal cancellation by the Malaysian government caused dampened sentiment on fears of reversal of capital inflows from China; these were subsequently eased when Malaysia signed more MoUs with China at the OBOR conference one week later. Stronger-than-expected Gross Domestic Product ( GDP ) growth for 1Q17 was offset by an earnings season that did not see much surprise on the upside due to high expectations. In June, the market started the month trending higher but failed to hold on to its gain as profit-taking sets in due to concerns over valuations. The results release for the period of April-June saw substantial downgrades in consensus estimates in telcos, utilities, consumer discretionary & staples, whilst substantial upgrades were on technology, healthcare and energy. The market was range bound in the month of July, with a lack of catalysts to drive the market. Invest Malaysia saw a higher turnout however, indicating renewed investor interest in Malaysia. As usual, the government announced several measures at the event, including (1) the LEAP market (2) a single regulator for the property sector. The listing of Lotte Chemical Titan, the largest initial public offering ( IPO ) since 2012, turned out terribly for investors as the stock dropped 23% in a single day on 31 July after it announced a headline 67% QoQ and 72% YoY drop in 2Q17 net profit. Adjusted for exceptionals, the decline was more moderate at 17% QoQ and 36% YoY. However, due to the ineffective guidance by management, the damage to the stock s marketability has been substantial. The lackluster performance continued in the month of August. After seven consecutive months of net buy, foreign investors turned marginal net sellers of Malaysia equities at 0.3 bil. This brought the eight months cumulative foreign buy to 10.9 bil. This was consistent with their retracement in the other ASEAN emerging markets. For the month of August, the key attraction to the market development was the 2Q17 corporate results reporting season, where corporate results have been lackluster in general. Although 2Q17 corporate earnings report card has been somewhat subdued and unexciting, we believe that 2H17 earnings should be stronger due to 1) 2Q17 5.8% GDP growth is the strongest in the past 2 years; 2) Ringgit has been stabilising; 3) improving labour market coupled with continued wage growth and moderating inflation will support and spur domestic economy and 4) government's continuous effort in the ongoing roll-out of infrastructure projects. In September, foreign outflows continue, with net outflow of 0.8 bil (Aug: bil), bringing down the Year to Date ( YTD ) cumulative foreign buy to 10.0 bil. Crude oil price spiked 13.0% m.o.m to US$58/bbl, leading to outperformance in the Energy sector. The oil price were driven by hurricanes in US which have disrupted 7

11 some oil logistics; Geopolitical issue in middle-east where Turkey is threatening to stop oil flow from Iraq s Kurdish area which will affect up to 1.5% of global oil supply; Opec s rhetoric to extend production cut to Dec18 from Mac18. Telco and Material sectors were outperformers too. On the Malaysian Budget 2018 that announced in October, we saw a revenue growth of 6.5% (6.1% in 2017) balanced by a 6.5% increase in operating expenditure, while development expenditure remains unchanged. In terms of specific sectors, most of the impact was in: consumer, construction and property. 1) Consumer. Income tax lowered by 2% for individuals with taxable incomes of 20-70k. BR1M allocation remained the same at 6.8b and further allocation of up to 9.5b to address the high cost of living issue through subsidies. 2) Construction. Allocation and value of construction contacts mentioned in Budget 2018 was 210b, 112% increase from previous year. The major contracts mentioned, though not new, are East Coast Rail Link (55b), KL-Singapore High Speed Rail (50b), MRT3, Circle Line (40b), MRT2 and Sg Buloh-Serdang-Putrajaya (32b). As high as 73% of these contracts are related to rail and public transport. 3) Property. The biggest affordable housing scheme will be undertaken by PR1MA to build 210,000 houses priced below 250,000. Bank Negara Malaysia ( BNM ) kept the overnight policy rate ( OPR ) policy rate unchanged at 3.00% in its last meeting for the year on 9 Nov 2017, but gave relatively explicit guidance in the policy statement language with the addition of the phrase, The Monetary Policy Committee may consider reviewing the current degree of monetary accommodation. We deem this change in language as a signaling of a potential interest rate normalization as early as 1Q18. Foreign broking houses are quick to interpret the new language as telegraphing a hawkish stance with the expectation of a hike at the January meeting, a likely 25bps increase, as Bank Negara Malaysia ( BNM ) is in no rush in a balanced economic situation. The rationale for such hawkish stance include: a) Market expectation of a strong Gross Domestic Product ( GDP ) growth of above 5% for 2017 given the robust 3Q17 data (vis-à-vis government expectation of %) and a strong expectation of this sustaining in 2018 (government expectation of %); b) Rising inflation pressure from broadening economic growth and rising O&G prices; and c) Global economic recovery expectation. Latest 3Q17 domestic GDP growth was also announced during the month with a 6.2% y.o.y growth driven by domestic demand. The robust domestic demand growth of 6.6% was mainly driven by strength in private consumption (7.2%) and private investment (7.9%). Whilst the public sector spending ratcheted up by 4.1%. Exports expanded 11.8%, alongside higher imports of 13.4%. From the supply-side perspective, there was a strong pick-up in services (6.6%) and manufacturing (7.0%). Manufacturing wages growth remained in double-digit territory for the second consecutive quarter, at +10.6% (2Q: 11.2%). Growth was also supported by the third BR1M cash payment in August. Meanwhile, Moody s affirmed Malaysia s sovereign rating at A3/Stable on 7 Dec 2017 premised on: a) Government debt burden at 50.9% of GDP as of June 2017, will remain high but broadly stable. 8

12 b) Healthy and resilient growth prospects. Between , Moody's expects GDP growth to average 5.1%. This is balanced by: c) High exposure of the economy and financial system to availability and cost of external financing. For the period under review, Malayan Banking Berhad 12-months Fixed Deposit Rate plus 3% spread which The Fund s benchmark, was registering a return of 6.10%. Market Outlook The year 2017 ended with surprises. Earlier in the year, most investors would have thought that the global market would have been tough throughout The main culprits were 1) Trump winning the US presidency; 2) the impact of the Fed rate hikes; 3) political risks arising from various general elections in the Eurozone; 4) potential slowdown in China and 5) geopolitical risks in North Korea and the Middle East. The surprises came as global market continued to march higher throughout the year despite the concerns mentioned above. The global market was well supported by 1) the robust economic growth across the globe; 2) stronger corporate earnings, especially from the technology sector; 3) recovery of the oil price; 4) low inflation and interest rate environment; and 5) strong job market that boosted the consumer confidence, hence the recovery of consumer spending. We believe the vibrant global market would continue in 2018, as global economic growth projections have been generally revised upwards. The Malaysia market, which has been a laggard to the regional peers, was up by merely 9.45% in It would stand a good chance for a catch up in Hence, we have upgraded the local market to positive arising from the flowing factors: 1) GDP growth to remain strong after registering 6.2% in 3Q17, the fastest pace since 2014; 2) oil price recovery would benefit a net exporter country such as Malaysia; 3) post-election would provide some certainty to the government s policies that would help stabilizing foreign investors confidence; and 4) Ringgit is expected to remain firm. These have led us to favour sectors such as financial, oil and gas, consumer staples, exporters, small and mid-cap stocks that would likely benefit from the robust external growth and the rotational thematic play for the upcoming general election. Additional Information Following the renewal of the Master Prospectus effective from 10 September 2017, the Counterparty Credit Risk has been included on page 44 as the inclusion in the Fund explicitly describes the risk in counterparty dealing instead of issuer/obligor credit. The insertion of this risk is for clarity purposes. Counterparty Credit Risk Counterparty credit risk is the risk arising from the possibility that the counterparty may default or not able to fulfill a trade settlement prior or on the settlement date of the trade. This could adversely affect the value of the Fund. For more details, kindly refer to the Master Prospectus dated 10 September Kuala Lumpur, Malaysia AmFunds Management Berhad 7 February

13 Independent auditors report to the unitholders of AmTotal Return Report on the audit of the financial statements Opinion We have audited the financial statements of AmTotal Return ( the Fund ), which comprise the statement of financial position as at 31 December 2017, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 5 to 27. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 December 2017, and of its financial performance and cash flows for the year 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 Auditor s 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 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 is responsible for the other information. The other information comprises information in the Annual Report, but does not include the financial statements of the Fund and our auditors report thereon. The annual report is expected to be made available to us after the date of this auditors report. 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. 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. 10

14 Independent auditors report to the unitholders of AmTotal Return (cont d.) 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. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Manager and take appropriate action. Responsibilities of the Manager and the Trustees for the financial statements The Manager is responsible for the preparation of the 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 has no realistic alternative to do so. 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. Auditor s 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 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. As part of an audit in accordance with the approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the planning and performance of 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. 11

15 Independent auditors report to the unitholders of AmTotal Return (cont d.) 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 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. Other matters This report is made solely to the unitholders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Wan Daneena Liza Bt Wan Abdul Rahman No. 2978/03/18(J) Chartered Accountant Kuala Lumpur, Malaysia 7 February

16 AmTotal Return STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER Note ASSETS Investments 4 43,653,953 42,577,438 Dividends receivable 27,598 30,269 Sundry receivables 5-166,678 Cash at banks 5,311,030 3,551,092 TOTAL ASSETS 48,992,581 46,325,477 LIABILITIES Amount due to Manager 6 119,782 67,999 Amount due to Trustee 7 2,690 2,642 Distributions payable 125,459 85,503 Sundry payables and accrued expenses 37,881 51,183 TOTAL LIABILITIES 285, ,327 EQUITY Unitholders capital 10(a) 49,868,951 53,527,591 Accumulated losses 10(b)(c) (1,162,182) (7,409,441) TOTAL EQUITY 10 48,706,769 46,118,150 TOTAL EQUITY AND LIABILITIES 48,992,581 46,325,477 UNITS IN CIRCULATION 10(a) 118,315, ,399,633 NET ASSET VALUE PER UNIT - EX DISTRIBUTION sen sen The accompanying notes form an integral part of the financial statements. 13

17 AmTotal Return STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER Note INVESTMENT INCOME/(LOSS) Gross dividend income 1,298,717 1,331,659 Interest income 146, ,685 Net gain/(loss) from investments: Financial assets at fair value through profit or loss ( FVTPL ) 8 6,220,064 (2,467,197) Other unrealised foreign exchange loss - (1,756) Gross Income/(Loss) 7,665,153 (996,609) EXPENDITURE Manager s fee 6 (507,484) (524,448) Trustee s fee 7 (35,522) (36,711) Auditors remuneration - current financial year (8,500) (7,000) Auditors remuneration - under provision in prior year (1,500) - Tax agent s fee (5,200) (5,400) Other expenses 9 (37,244) (89,880) Total Expenditure (595,450) (663,439) NET INCOME/(LOSS) BEFORE TAX 7,069,703 (1,660,048) LESS: INCOME TAX 12 (2,919) (5,117) NET INCOME/(LOSS) AFTER TAX 7,066,784 (1,665,165) OTHER COMPREHENSIVE INCOME - - TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE FINANCIAL YEAR 7,066,784 (1,665,165) Total comprehensive loss comprises the following: Realised income 9,938,093 1,197,671 Unrealised losses (2,871,309) (2,862,836) 7,066,784 (1,665,165) Distributions for the financial year: Net distributions , ,239 Gross/net distributions per unit (sen) The accompanying notes form an integral part of the financial statements. 14

18 AmTotal Return STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 Unitholders Accumulated Total capital losses equity Note At 1 January ,264,783 (4,844,037) 57,420,746 Total comprehensive loss for the financial year - (1,665,165) (1,665,165) Creation of units 10(a) 1,206,004-1,206,004 Reinvestments of distributions 10(a),13 728, ,381 Cancellation of units 10(a) (10,671,577) - (10,671,577) Distributions 13 - (900,239) (900,239) Balance at 31 December ,527,591 (7,409,441) 46,118,150 At 1 January ,527,591 (7,409,441) 46,118,150 Total comprehensive income for the financial year - 7,066,784 7,066,784 Creation of units 10(a) 6,432,977-6,432,977 Reinvestments of distributions 10(a),13 606, ,393 Cancellation of units 10(a) (10,698,010) - (10,698,010) Distributions 13 - (819,525) (819,525) Balance at 31 December ,868,951 (1,162,182) 48,706,769 The accompanying notes form an integral part of the financial statements. 15

19 AmTotal Return STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 67,265,569 57,338,022 Dividends received 1,298,469 1,402,820 Interest received 146, ,685 Manager s fee paid (504,109) (535,263) Trustee s fee paid (35,474) (37,468) Tax agent s fee paid (5,000) (5,000) Payments for other expenses (60,746) (71,325) Purchase of investments (61,955,342) (48,802,688) Net cash generated from operating and investing activities 6,149,739 9,429,783 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 6,432,977 1,206,004 Payments for cancellation of units (10,649,602) (10,788,279) Distributions paid (173,176) (324,066) Net cash used in financing activities (4,389,801) (9,906,341) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,759,938 (476,558) EFFECTS ON FOREIGN EXCHANGE RATE CHANGES - (1,756) CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 3,551,092 4,029,406 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 5,311,030 3,551,092 Cash and cash equivalents comprise: Cash at banks 5,311,030 3,551,092 The accompanying notes form an integral part of the financial statements. 16

20 AmTotal Return NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFOATION AmTotal Return ( the Fund ) was established pursuant to a Deed dated 23 November 1988 as amended by Deeds Supplemental thereto ( the Deed ), between AmFunds Management Berhad as the Manager, AmanahRaya Trustees Berhad as the Trustee and all unitholders. The Fund was set up with the objective of providing medium and long-term investors with a vehicle to pool and invest their funds in order to obtain reasonable returns with a wider spread of investments. As provided in the Deed, the accrual period or financial year shall end on 31 December and the units in the Fund were first offered for sale on 4 January BASIS OF PREPARATION OF FINANCIAL STATEMENTS 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 are in compliance with International Financial Reporting Standards. The financial statements of the Fund have been prepared under the historical cost convention, unless otherwise stated in the accounting policies. Standards effective during the financial year The adoption of MFRS which have been effective during the financial year did not have any material financial impact to the financial statements. Standards issued but not yet effective As at the date of authorisation of these financial statements, the following Standards, which are relevant to the Fund, have been issued by MASB but are not yet effective and have not been adopted by the Fund. Effective for financial periods beginning on or after MFRS 9: Financial Instruments 1 January 2018 MFRS 15: Revenue From Contracts With Customers 1 January 2018 The Fund plans to adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are expected to have no significant impact to the financial statements of the Fund upon their initial application except as described below: 17

21 MFRS 9 Financial Instruments MFRS 9 reflects International Accounting Standards Board s ( IASB ) work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement ( MFRS 139 ). MFRS 9 will be effective for financial year beginning on or after 1 January The Fund is in the process of quantifying the impact of the first adoption of MFRS 9. Based on the Fund s preliminary assessment shows that there is a minimal impact on the classification and measurement of the Fund s financial assets and will continue to be measured at FVTPL. Further, there is no impact on the classification and measurement of the Fund s financial liabilities. 3. SIGNIFICANT ACCOUNTING POLICIES Income recognition 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. Dividend income is recognised when the Fund s right to receive payment is established. Interest income on short-term deposits is recognised on an accrual basis using the effective interest method. 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 at 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. Functional and presentation currency Functional currency is the currency of the primary economic environment in which the Fund operates that most faithfully represents the economic effects of the underlying transactions. The functional currency of the Fund is Ringgit Malaysia which reflects the currency in which the Fund competes for funds, issues and redeems units. The Fund has also adopted Ringgit Malaysia as its presentation currency. Statement of cash flows The Fund adopts the direct method in the preparation of the statement of cash flows. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with insignificant risk of changes in value. 18

22 Distribution Distributions are at the discretion of the Fund. A distribution to the Fund s unitholders is accounted for as a deduction from realised reserves. A proposed distribution is recognised as a liability in the period in which it is approved. Unitholders capital The unitholders capital of the Fund meets the definition of puttable instruments and is classified as equity instruments under MFRS 132 Financial Instruments: Presentation ( MFRS 132 ). 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, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition, and the categories applicable to the Fund include financial assets at fair value through profit or loss ( FVTPL ) and loans and receivables. (i) Financial assets at FVTPL 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 equity 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. Dividend revenue and interest earned elements of such instruments are recorded separately in Gross dividend income and Interest income respectively. For investments in quoted securities, market value is determined based on the closing price quoted on Bursa Malaysia Berhad. Unrealised gains or losses recognised in profit or loss are not distributable in nature. 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) Loans and receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. 19

23 Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Impairment of financial assets The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. (i) Loans and receivables carried at amortised cost 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 through the use of an allowance account. When loans and receivables become uncollectible, they are 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. 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, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund s financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest 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. 20

24 Classification of realised and unrealised gains and losses Unrealised gains and losses comprise changes in the fair value of financial instruments for the period and from reversal of prior period s unrealised gains and losses for financial instruments which were realised (i.e. sold, redeemed or matured) during the reporting period. Realised gains and losses on disposals of financial instruments classified at fair value through profit or loss are calculated using the weighted average method. They represent the difference between an instrument s initial carrying amount and disposal amount. Significant accounting estimates and judgments The preparation of the Fund s financial statements requires the Manager to make judgments, 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. The Fund classifies its investments as financial assets at FVTPL as the Fund may sell its investments in the short-term for profit-taking or to meet unitholders cancellation of units. 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 financial year. 4. INVESTMENTS Financial assets at FVTPL Quoted equity securities in Malaysia 43,653,953 42,577,438 Details of investments as at 31 December 2017 are as follows: Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value % Quoted equity securities in Malaysia Construction Gamuda Berhad 470,512 2,333,739 2,268, (Forward) 21

25 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value % Quoted equity securities in Malaysia Consumer products CCM Duopharma Biotech Berhad 989,486 2,503,400 2,339, Cocoaland Holdings Berhad 445,600 1,163,016 1,254, Magni-Tech Industries Berhad 129, , , Panasonic Manufacturing Malaysia Berhad 24, , , Poh Huat Resources Holdings Berhad 531, ,101 1,061, ,121,086 6,313,788 6,385, Finance AEON Credit Service (M) Berhad 107,700 1,449,642 1,502, Allianz Malaysia Berhad 70, ,800 1,031, CIMB Group Holdings Berhad 327,500 2,141,850 1,644, Malayan Banking Berhad 229,594 2,250,021 1,990, MNRB Holdings Berhad 545,000 1,253,500 1,514, ,280,594 8,050,813 7,682, Industrial products Chemical Company of Malaysia Berhad 429, , , HeveaBoard Berhad 575, , , Petron Malaysia Refining & Marketing Berhad 173,500 2,349,190 1,767, PETRONAS Chemicals Group Berhad 130,300 1,003, , Press Metal Aluminium Holdings Berhad 98, , , V.S. Industry Berhad 322, ,327 1,006, Wah Seong Corporation Berhad 1,567,500 1,739,925 1,718, Wellcall Holdings Berhad 698,700 1,048,050 1,117, (Forward) 3,995,933 9,123,389 8,896,

26 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value % Quoted equity securities in Malaysia Infrastructure Lingkaran Trans Kota Holdings Berhad 85, , , Plantations Sime Darby Plantation Berhad 163, , , Properties Eco World Development Group Berhad 1,004,000 1,385,520 1,647, REITs AXIS Real Estate Investment Trust 241, , , Technology Inari Amertron Berhad 154, , , Trading/Services Bermaz Auto Berhad 490,600 1,079,320 1,026, Dialog Group Berhad 424,328 1,065, , Genting Malaysia Berhad 178,400 1,004, , My E.G. Services Berhad 507,000 1,130,610 1,104, Pos Malaysia Berhad 312,000 1,638,000 1,567, Serba Dinamik Holdings Berhad 457,700 1,482,948 1,304, Sime Darby Berhad 163, , , Tenaga Nasional Berhad 191,956 2,929,249 1,783, UMW Oil & Gas Corporation Berhad 1,510, , , Uzma Berhad 1,001,700 1,282,176 1,533, Westports Holdings Berhad 451,000 1,668,700 1,668, ,688,654 14,103,192 12,189, Total financial assets at FVTPL 15,205,885 43,653,953 40,983, Excess of market value over cost 2,669,987 23

27 5. SUNDRY RECEIVABLES Included in sundry receivables was amount owing from broker for outstanding contract where settlement was not due as follows: Amount owing from broker - 166,678 The normal trade credit period is three business days. 6. AMOUNT DUE TO MANAGER Redemption of units* (78,669) (30,261) Manager s fee payable (41,113) (37,738) * The amount represents amount payable to the Manager for units redeemed. (119,782) (67,999) With effect from 1 January 2004 and as provided under Clause 26.2A of the Eight Supplemental Deed, the Manager s fee was revised to a base fee of 1% per annum of the net asset value of the Fund, calculated on a daily basis, plus a performance fee based on a rate of 1/8 above the one-year rolling fixed deposit rate of Malayan Banking Berhad or an equivalent Malaysian bank plus a spread of 3% per annum, subject to a maximum total Manager s fee of 6% per annum. No performance fee was accrued for the previous and current financial years. The normal credit period in the previous and current financial years for creation and redemption of units is three business days. The normal credit period in the previous and current financial years for Manager s fee payable is one month. 7. AMOUNT DUE TO TRUSTEE Trustee s fee is at a rate of 0.07% (2016: 0.07%) per annum on the net asset value of the Fund, calculated on a daily basis. The normal credit period in the previous and current financial years for Trustee s fee payable is one month. 24