Quarterly Report for US-Canada Income and Growth. 30 April 2018

Transcription

1 Quarterly Report for US-Canada Income and Growth 30 April 2018

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 Binti 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 Bin Mohd Kassim Goh Wee Peng Trustee Deutsche Trustees Malaysia Berhad Auditors and Reporting Accountants Ernst & Young Taxation Adviser Deloitte Tax Services Sdn Bhd US-Canada Income and Growth

3 CONTENTS 1 Manager s Report 9 Condensed Statement of Financial Position 10 Condensed Statement of Comprehensive Income 11 Condensed Statement of Changes in Equity 12 Condensed Statement of Cash Flows 13 Statement by the Manager 14 Directory US-Canada Income and Growth

4 MANAGER S REPORT Dear Unitholders, We are pleased to present you the Manager s report and the unaudited quarterly accounts of US- Canada Income and Growth ( Fund ) for the financial period from 1 February 2018 to 30 April Salient Information of the Fund Name Category/ Type Name of the Target Fund Objective US-Canada Income and Growth ( Fund ) Wholesale (Feeder Fund) / Income and Growth Allianz Income and Growth The Fund seeks to provide regular income* and to a lesser extent long term** capital appreciation by investing in the Target Fund, which will be investing in equities securities, debt securities and convertible securities. Note: * Income distribution (if any) is paid on a quarterly basis. ** Long term means the investment horizon should at least be five (5) years. Duration Performance Benchmark The Fund was established on 17 June 2014 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. S&P 500 Index. (obtainable via: Note: The S&P 500 Index is only used as a reference for investment performance comparison purpose. The Fund is not managed against the S&P 500 Index. The risk profile of the Fund is not the same as the risk profile of the S&P 500 Index. Income Distribution Policy Breakdown of Unit Holdings by Size Subject to availability of income, distribution will be paid on a quarterly basis. For the financial period under review, the size of the Fund stood at 74,578,484 units. Size of holding As at 30 April 2018 As at 31 January 2018 No of units held Number of unitholders No of units held Number of unitholders 5,000 and below ,001-10,000 5, , ,001-50, , , , , ,001 and above 74,033,

5 Fund Performance Data Portfolio Composition Details of portfolio composition of the Fund for the financial periods as at 30 April 2018, 31 January 2018 and three financial years/period as at 31 July are as follows: As at As at FY 2017 FY 2016 As at Foreign collective investment scheme 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 periods ended 30 April 2018, 31 January 2018 and three financial years ended 31 July are as follows: 3 months ended months ended FY 2017 FY ½ months ended Net asset value (RM) 70,218,020* 87,874, ,849,179 11,744,621 21,826,612 Units in circulation 74,578,484* 89,988, ,051,534 12,371,656 21,087,293 Net asset value per unit (RM) * Highest net asset value per unit (RM) * Lowest net asset value per unit (RM) * Benchmark performance () Total return () (1) Capital growth () Income distribution () Gross distribution (sen per unit) (Forward)

6 3 months ended months ended FY 2017 FY ½ months ended Net distribution (sen per unit) Management expense ratio () (2) Portfolio turnover ratio (times) (3) * Above prices and net asset value per unit are not shown as ex-distribution. Note: (1) Total return is the actual return of the Fund for the respective financial periods/years computed based on the net asset value per unit and net of all fees. (1) Management expense ratio ( MER ) is calculated based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. The MER increased by 0.01 as compared to 0.70 per annum for the financial period ended 31 January 2018 mainly due to decrease in average fund size. (2) 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 0.03 times (60.0) as compared to 0.05 times for the financial period ended 31 January 2018 mainly due to increase in investing activities. Average Total Return (as at 30 April 2018) US-Canada Income and Growth (a) S&P 500 Index (b) One year Three years Since launch (17 June 2014) Annual Total Return Financial Years/Period Ended (31 July) US-Canada Income and Growth (a) S&P 500 Index (b) (c) (a) Source: Novagni Analytics and Advisory Sdn Bhd. (b) S&P 500 Index (obtainable via: (c) Total actual return for the financial period 17 June 2014 (date of launch) to 31 July 2015.

7 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 period under review, the Fund registered a negative return of 3.58 which was entirely capital growth in nature. Thus, the Fund s negative return of 3.58 has outperformed the benchmark s negative return of 5.27 by As compared with the financial period ended 31 January 2018, the net asset value ( NAV ) per unit of the Fund decreased by 3.58 from RM to RM0.9415, while units in circulations decreased by from 89,988,090 units to 74,578,484 units. The line chart below shows comparison between the annual performances of US- Canada Income and Growth and its benchmark, S&P 500 Index, for the financial period/years ended 31 July. Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. Target Fund Performance Fund Performance Review of the Target Fund Allianz Income and Growth ( the Target Fund ) For the period, the Allianz Income & Growth AM H2-SGD returned For comparison purposes, the Russell 1000 Growth Index returned The ICE BofA Merrill Lynch All US Convertibles Index and the ICE BofA Merrill Lynch US High Yield Master II Index returned and -0.89, respectively 3. By way of comparison, the 10-year Treasury declined and the S&P 500 was also lower by

8 The Target Fund contended with the equity market volatility during the 3 months period. Equity markets corrected sharply in February where S&P 500 Index fell from peak to trough and then fluctuated over the past 2 months. The VIX index, which started the year at 11, spiked above 50 on an intraday basis and finished 45 higher by the end of April. Convertibles weathered the volatility nicely by providing good protection on the downside, while high yield provided additional buffering to limit downside participation. Individual sleeve performance was consistent with respective market returns. The theme of reduced option premia monetization carried forward until mid- February. The Target Fund immediately took advantage of the new opportunities provided by the elevated volatility environment. With the new volatility environment, the Target Fund continued to opportunistically take advantage of additional, select buy-write structures throughout the period. Source: Allianz Global Investors U.S. LLC (the Target Fund s investment manager) 1 Target Fund performance is calculated in the respective Target Fund currency on a NAV-to-NAV basis with gross dividends re-invested, USD terms. Data as at 30 April Factset, 30 April BofA Merrill Lynch, 30 April Bloomberg. 30 April Strategies and Policies Employed Strategies and Policies of the Target Fund The Income and Growth strategy is a core holding that invests primarily in a portfolio of one-third high-quality large-cap stocks, one-third high-yield bonds and one-third convertible bonds. This "three-sleeve" approach allows the Strategy to offer an attractive risk/return profile. The Strategy aims to provide a steady income stream with increased potential upside and less downside risk. The Strategy also supplements its income stream with a covered call strategy. As a result the Income and Growth Strategy aims to capture multiple sources of income while participating in the upside potential of equities, with potentially less volatility than a pure stock investment. The Income and Growth investment team applies a forward-looking philosophy and employs a disciplined, fundamental approach which facilitates the early identification of corporate bond issuers demonstrating improving fundamental characteristics. The companies/issues selected for the portfolio exceed minimum credit statistics and exhibit the highest visibility of future expected operating performance. Macro factors are assessed at the individual issuer level. The final investment implementation occurs after a comparative analysis is conducted between an issuer s high yield bond, convertible security or equity with covered call. The investment team then selects which investment would provide the most optimal total return, depending on the current market environment. Source: Allianz Global Investors U.S. LLC (the Target Fund s investment manager) Strategies and Policies of the Fund For the financial period under review, the Fund seeks to achieve its investment 5

9 objective by investing a minimum of 95 of the Fund s NAV in the Allianz Income and Growth at all times. This implies that this Fund has a passive strategy. Portfolio Structure This table below is the asset allocation of the Fund for the financial periods under review. As at As at Changes Foreign collective investment scheme Cash and others Total For the financial period under review, the Fund has invested of its NAV in the foreign collective investment scheme and the balance of 2.05 in cash and others. Cross Trades Distribution/ Unit Splits State of Affairs Rebates and Soft Commission There are no cross trades for the Fund during this financial period under review. There was no income distribution and unit split declared for the financial period under review. 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. It is our policy to pay all rebates to the Fund. Soft commission received from brokers/dealers is 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 Several factors influenced the three key markets during the period, including positive economic trends, improving corporate fundamentals, the Federal Reserve s actions and commentary, and geopolitical concerns. Major US economic reports during quarter were predominately healthy and supported a positive operating environment for companies. Manufacturing and service surveys signaled continued expansionary activity, consumer confidence hit a 14-year high, payrolls surged and fourth-quarter GDP was revised higher to 2.9. Corporate fundamentals continue to improve with most companies reporting betterthan-expected financial results and positive outlooks, citing increasing demand, a more favorable regulatory environment and recent tax-reform benefits. Furthermore, both net leverage and interest coverage ratios improved over the quarter. Long-term interest rates rose since the beginning of the year, as the 10-year US Treasury yield climbed from 2.41 to 2.94 at the end of April. The rise in interest rates helped drive a surge in new convertible issuance as companies acted to lock-in 6

10 lower coupon rates. Long duration fixed income was adversely impacted whereas high-yield spreads provided some cushion to absorb the move. The reduced interestrate sensitivity of high yield and convertible bonds provided portfolio diversification benefits as Treasuries and investment-grade bonds declined more than 2. Optimistic economic commentary from new Fed Chair Jerome Powell fueled speculation that the Federal Reserve may adopt a more aggressive policy stance. Consistent with prior expectations, the Fed raised its benchmark interest rate by 25 basis points during its March meeting to a range of 1.50 to 1.75, and signaled two more rate hikes were likely in For 2019, the Fed indicated an additional rate hike from two to three. Fear of a global trade war potentially disrupting global growth and higher inflation weighed on investor sentiment during the quarter. The Trump administration levied tariffs on imported steel and aluminum, and signaled the potential for additional tariffs on other goods imported from China. Source: Allianz Global Investors (the Target Fund s investment manager) Market Outlook Equity market volatility increased over the period, but positive market fundamentals remain. Solid corporate earnings growth and an improving global economic outlook continue to be supportive of investments in risk assets. Despite a more volatile backdrop, convertible and high-yield bond performance expectations should not deviate from their historical return profile of 1) delivering a compelling total return with less volatility than stocks and 2) providing fixed-income diversification benefits in rising interest-rate environments compared to US Treasuries and investment-grade corporate bonds. A case for mid-single digit yearly returns for each of the three asset classes is still supportable. High-yield defaults in 2018 are expected to remain below their long-term historical average. Spreads ended at 372 basis points over comparable Treasuries widening in the quarter, but not materially 1. This stage of the market cycle can be compared to the mid-1990s and mid-2000s market environments that exhibited economic stability, low defaults and healthy company fundamentals. Equity valuations have contracted versus earlier observed premiums to historical averages. Earnings growth expectations for the current year are unchanged, and the future year earnings projection forecasts a continued positive improvement. The investment team s disciplined approach of focusing on companies that are exceeding expectations and improving their credit statistics will be rewarded as those companies differentiate themselves from their peer groups. In this environment, companies that have reasonable earnings visibility should command premium valuations relative to other companies. The team continues to build the portfolio one company at a time, by identifying companies that are opportunistically capitalizing on change. In addition, we are maintaining the discipline of seeking to identify the best total-return candidates with the optimal risk and reward profile. A discriminating environment that rewards corporations for exceeding expectations bodes well for the Income and Growth strategy s investment process. 7

11 Source: Allianz Global Investors (the Target Fund s investment manager) 1 BofA Merrill Lynch, 30 April Kuala Lumpur, Malaysia AmFunds Management Berhad 7 June

12 US-Canada Income and Growth CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL (unaudited) (audited) RM RM ASSETS Investment 68,777, ,840,381 Deposits with financial institutions 868,083 2,036,581 Cash at bank 912,388 1,398,588 TOTAL ASSETS 70,558, ,275,550 LIABILITIES Amount due to Manager 324,013 1,405,853 Amount due to Trustee 3,678 5,682 Sundry payables and accrued expenses 12,367 14,836 TOTAL LIABILITIES 340,058 1,426,371 EQUITY Unitholders capital 72,096, ,262,713 (Accumulated loss)/retained earnings (1,878,833) 3,586,466 TOTAL EQUITY 70,218, ,849,179 TOTAL EQUITY AND LIABILITIES 70,558, ,275,550 UNITS IN CIRCULATION 74,578, ,051,534 NET ASSET VALUE PER UNIT EX DISTRIBUTION sen sen The accompanying notes form an integral part of the financial statements. 9

13 US-Canada Income and Growth CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 FEBRUARY 2018 TO 30 APRIL to to RM RM INVESTMENT (LOSS)/INCOME Distribution income 1,597,790 2,067,688 Interest income 14,742 17,431 Net loss from investment: Financial assets at fair value through profit or loss ( FVTPL ) (4,540,756) (1,297,528) Gross Income (2,928,224) 787,591 EXPENDITURE Manager s fee (112,315) (132,460) Trustee s fee (11,583) (12,971) Auditors remuneration (1,603) (1,549) Tax agent s fee (937) (918) Other expenses (10,457) (11,318) Total Expenditure (136,895) (159,216) NET (LOSS)/INCOME BEFORE TAX (3,065,119) 628,375 LESS: INCOME TAX - - NET (LOSS)/INCOME AFTER TAX (3,065,119) 628,375 OTHER COMPREHENSIVE INCOME - - TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE FINANCIAL PERIOD (3,065,119) 628,375 Total comprehensive (loss)/income comprises the following: Realised income 672,237 1,711,025 Unrealised loss (3,737,356) (1,082,650) (3,065,119) 628,375 Distribution for the financial period: Net distribution 9-1,515,570 Gross/net distribution per unit (sen) The accompanying notes form an integral part of the financial statements 10

14 US-Canada Income and Growth CONDENSED STATEMENT OF CHANGES IN EQUITY (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 FEBRUARY 2018 TO 30 APRIL 2018 Retained earnings/ Unitholders (Accumulated Total capital loss) equity RM RM RM At 1 February ,968,511 1,035,111 51,003,622 Total comprehensive income for the financial period - 628, ,375 Creation of units 58,992,809-58,992,809 Reinvestments of distributions 1,515,570-1,515,570 Cancellation of units (455,682) - (455,682) Distributions - (1,515,570) (1,515,570) Balance at 30 April ,021, , ,169,124 At 1 February ,688,399 1,186,286 87,874,685 Total comprehensive loss for the financial period - (3,065,119) (3,065,119) Cancellation of units (14,591,546) - (14,591,546) Balance at 30 April ,096,853 (1,878,833) 70,218,020 The accompanying notes form an integral part of the financial statements. 11

15 US-Canada Income and Growth CONDENSED STATEMENT OF CASH FLOWS (Unaudited) FOR THE FINANCIAL PERIOD FROM 1 FEBRUARY 2018 TO 30 APRIL to to RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investment 13,037,525 - Distributions received 1,597,790 2,067,688 Interest received 14,742 17,431 Manager s fee paid (122,859) (97,443) Trustee s fee paid (12,646) (9,681) Tax agent s fee paid (4,028) (3,500) Payments for other expenses (9,828) (8,810) Purchase of investment - (65,709,397) Net cash generated from/(used in) operating and investing activities 14,500,696 (63,743,712) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units - 68,312,366 Payments for cancellation of units (15,071,182) (455,682) Net cash (used in)/generated from financing activities (15,071,182) 67,856,684 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (570,486) 4,112,972 CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL PERIOD 2,350,957 1,264,988 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL PERIOD 1,780,471 5,377,960 Cash and cash equivalents comprise: Deposits with financial institutions 868,083 5,375,708 Cash at bank 912,388 2,252 1,780,471 5,377,960 The accompanying notes form an integral part of the financial statements. 12

16 US-Canada Income and Growth STATEMENT BY THE MANAGER I, GOH WEE PENG, for and on behalf of the Manager, AmFunds Management Berhad, for US- Canada Income and Growth do hereby state that in the opinion of the Manager, the accompanying condensed statement of financial position, condensed statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flows are drawn up so as to give a true and fair view of the financial position of the Fund as at 30 April 2018 and the comprehensive income, the changes in equity and cash flows of the Fund for the quarter then ended. GOH WEE PENG For and on behalf of the Manager AmFunds Management Berhad Kuala Lumpur, Malaysia 7 June

17 DIRECTORY Head Office 9 th Floor, Bangunan Ambank Group 55, Jalan Raja Chulan, Kuala Lumpur Tel: (03) Facsimile: (03) enquiries@aminvest.com Postal Address AmFunds Management Berhad P.O Box 13611, Kuala Lumpur Related Institutional Unit Trust Agent AmBank (M) Berhad Company No D AmInvestment Bank Berhad Company No V Head Office 31 st Floor, Menara AmBank No. 8 Jalan Yap Kwan Seng, Kuala Lumpur Head Office 22 nd Floor, Bangunan AmBank Group 55 Jalan Raja Chulan, Kuala Lumpur For more details on the list of IUTAs, please contact the Manager. For enquiries about this or any of the other Funds offered by AmFunds Management Berhad Please call between 8.45 a.m. to 5.45 p.m. (Monday to Thursday), Friday (8.45 a.m. to 5.00 p.m.) 14

18 Semi-Annual Report 28 February aminvest.com AmFunds Management Berhad ( A)