Annual Report for AmMalaysia Equity. 31 October 2017

Transcription

1 Annual Report for AmMalaysia Equity 31 October 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 HSBC (Malaysia) Trustee Berhad Auditors and Reporting Accountants Ernst & Young Taxation Adviser Deloitte Tax Services Sdn Bhd AmMalaysia Equity

3 CONTENTS 1 Manager s Report 6 Independent Auditor s Report to the Unitholders 9 Statement of Financial Position 10 Statement of Comprehensive Income 11 Statement of Changes in Equity 12 Statement of Cash Flows 13 Notes to the Financial Statements 32 Statement by the Manager 33 Trustee s Report 34 Directory AmMalaysia Equity

4 MANAGER S REPORT Dear Unitholders, We are pleased to present you the Manager s report and the audited accounts of AmMalaysia Equity ( Fund ) for the financial year ended 31 October Salient Information of the Fund Name Category/Type Objective AmMalaysia Equity ( Fund ) Equity / Growth The Fund s investment objective is to provide long-term capital appreciation by investing in equity securities of companies listed on Bursa Malaysia Berhad. The Fund will invest in companies across a wide range of industries with above average growth potential*. Note: *Above average growth potential in this context refers to the earnings growth higher than the market average. Duration Performance Benchmark The Fund was established on 17 March 2010 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. FTSE Bursa Malaysia Emas Index. (obtainable from: 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 incidental. For the financial year under review, the size of the Fund stood at 2,017,943 units. Size of holding As at 31 October 2017 As at 31 October 2016 No of units held Number of unitholders No of units held Number of unitholders 5,000 and below 41, , ,001-10, , , ,001-50, , , , , , ,346, ,001 and above 1,103, ,

5 Fund Performance Data Portfolio Composition Details of portfolio composition of the Fund for the financial years as at 31 October are as follows: FY 2017 % FY 2016 % FY 2015 % Construction Consumer products Finance Industrial products Infrastructure Plantation 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 October are as follows: FY 2017 FY 2016 FY 2015 Net asset value (RM)* 2,628,370 4,086,734 3,355,147 Units in circulation* 2,017,943 3,481,239 3,004,335 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) 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 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 expenses incurred by the Fund divided by the average fund size calculated on a daily basis. The MER increased by 0.06% as compared to 2.00% per annum for the financial year ended 31 October 2016 mainly due to decrease in average fund size. (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 decreased by 1.64 times 2

6 (53.6%) as compared to 3.06 times for the financial year ended 31 October 2016 mainly due to decrease in investing activities. Average Total Return (as at 31 October 2017) AmMalaysia Equity (a) % FBM Emas/ RHB Tech (b) % One year Three years Five years Ten years Annual Total Return Financial Years Ended (31 October) AmMalaysia Equity (a) % FBM Emas % (a) Source: Novagni Analytics and Advisory Sdn Bhd. (b) FTSE Bursa Malaysia Emas Index ( FBM Emas )/RHB Technology Index ( RHB Tech ) (Obtainable from: Performance benchmark has been changed to FTSE Bursa Malaysia Emas Index with effect from 17 March 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 10.95% which was entirely capital growth in nature. Thus, the Fund s return of 10.95% has outperformed the benchmark s return of 6.89% by 4.06%. As compared with the financial year ended 31 October 2016, the net asset value ( NAV ) per unit of the Fund has increased by 10.95% from RM to RM1.3025, while units in circulation have decreased by 42.03% from 3,481,239 units to 2,017,943 units. The line chart below shows comparison between the annual performances of AmMalaysia Equity and its benchmark, FBM Emas for the financial years ended 31 October. 3

7 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? Strategies and Policies Employed The Fund has achieved its objective, outperforming the benchmark by 4.06% during the financial year under review. For the financial year under review, the Fund invested primarily in Malaysian equities. Liquid assets are strategically used for defensive measures in the short-term, if the Manager views market risk to be high. The Manager adopted a top-down investment approach followed by both quantitative and qualitative screens for stock selection. The Fund will actively balance between growth and defensive stocks depending on the Manager s view of the market cycle. The asset allocation and stock selection will be reviewed periodically depending on the country s economic and stock market outlook. Portfolio Structure The table below shows the asset allocation of the Fund for the financial years under review. As at % As at % Changes % Construction Consumer products Finance Industrial products Infrastructure Plantation (Forward) 4

8 As at % As at % Changes % REITs Technology Trading/Services Cash and others Total At the end of the financial year under review, there were some changes to the portfolio, the most notable being the increase in exposure to consumer and industrials, at the expense of trading/services, plantations and construction. Distribution/ Unit Splits State of Affairs Rebates and Soft Commission There was no income distribution and unit split declared for the financial year under review. There has been neither significant changes to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unitholders during the financial year under review. 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 year 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 Market Outlook During the first half of the financial year under review, the Malaysian stockmarket saw improved sentiment, particularly in small/mid-caps, where beneficiaries of the global improvement in demand, product cycles and a weak ringgit tended to be concentrated. Financials, a key component of the stockmarket, also saw stock prices rise as earnings showed signs of recovery on lower provisions, expanding margins and stronger economic activity. Foreign inflows contributed to the bullish sentiment during the early part of the year - this reversed in 2H17 however, as some corporate earnings began to disappoint and the ringgit continued to strengthen. Around the same time, the benchmark peaked and began to reverse direction. Whilst the strong performance in many stock markets across the world could be seen as justified by the improvement in global economic growth and trade, there are also some warning signs. The Malaysian market may have lagged ASEAN peers substantially, but it is not cheap, by any means. We will continue to hunt for companies with solid growth prospects, attractive economics protected by a moat of some sort, competent as well as honest managers, and whose stocks are selling at prices that provide an adequate margin of safety. Kuala Lumpur, Malaysia AmFunds Management Berhad 7 December

9 Independent auditors report to the unitholders of AmMalaysia Equity Report on the audit of the financial statements Opinion We have audited the financial statements of AmMalaysia Equity ( the Fund ), which comprise the statement of financial position as at 31 October 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 9 to 31. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 October 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. 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. 6

10 Independent auditors report to the unitholders of AmMalaysia Equity (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. 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. 7

11 Independent auditors report to the unitholders of AmMalaysia Equity (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 December

12 AmMalaysia Equity STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER Note RM RM ASSETS Investments 4 2,307,185 3,536,394 Deposits with financial institutions 5 328, ,436 Dividends receivable 2, Sundry receivables 6-119,809 Cash at banks 4,366 45,087 TOTAL ASSETS 2,642,980 4,124,646 LIABILITIES Amount due to Manager 7 3,622 5,146 Amount due to Trustee Sundry payables and accrued expenses 6 10,874 32,594 TOTAL LIABILITIES 14,610 37,912 EQUITY Unitholders capital 11(a) (821,594) 994,210 Retained earnings 11(b)(c) 3,449,964 3,092,524 TOTAL EQUITY 11 2,628,370 4,086,734 TOTAL EQUITY AND LIABILITIES 2,642,980 4,124,646 UNITS IN CIRCULATION 11(a) 2,017,943 3,481,239 NET ASSET VALUE PER UNIT sen sen The accompanying notes form an integral part of the financial statements. 9

13 AmMalaysia Equity STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 OCTOBER Note RM RM INVESTMENT INCOME Gross dividend income 80, ,021 Interest income 12,814 12,007 Net gain from investments: Financial assets at fair value through profit or loss ( FVTPL ) 9 331,825 83,920 Gross Income 425, ,948 EXPENDITURE Manager s fee 7 (49,471) (62,162) Trustee s fee 8 (1,649) (2,080) Auditors remuneration (4,500) (5,000) Tax agent s fee (5,000) (5,000) Custodian s fee (1,286) (392) Other expenses 10 (6,012) (8,063) Total Expenditure (67,918) (82,697) NET INCOME BEFORE TAX 357, ,251 LESS: INCOME TAX 13 (203) (234) NET INCOME AFTER TAX 357, ,017 OTHER COMPREHENSIVE INCOME - - TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 357, ,017 Total comprehensive income comprises the following: Realised income 462,877 25,787 Unrealised (loss)/gain (105,437) 102, , ,017 The accompanying notes form an integral part of the financial statements. 10

14 AmMalaysia Equity STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 OCTOBER 2017 Unitholders Retained Total capital earnings equity Note RM RM RM At 1 November ,640 2,964,507 3,355,147 Total comprehensive income for the financial year - 128, ,017 Creation of units 11(a) 2,720,023-2,720,023 Cancellation of units 11(a) (2,116,453) - (2,116,453) Balance at 31 October ,210 3,092,524 4,086,734 At 1 November ,210 3,092,524 4,086,734 Total comprehensive income for the financial year - 357, ,440 Creation of units 11(a) 528, ,629 Cancellation of units 11(a) (2,344,433) - (2,344,433) Balance at 31 October 2017 (821,594) 3,449,964 2,628,370 The accompanying notes form an integral part of the financial statements. 11

15 AmMalaysia Equity STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 OCTOBER Note RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 5,575,478 12,270,936 Dividends received 78, ,175 Interest received 12,814 12,007 Tax refunded - 2,231 Manager s fee paid (50,995) (61,183) Trustee s fee paid (1,707) (2,038) Tax agent s fee paid (5,000) (5,000) Custodian s fee paid (1,286) (392) Payments for other expenses (12,121) (14,606) Purchase of investments (3,914,746) (12,838,457) Net cash generated from/(used in) operating and investing activities 1,681,378 (514,327) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 528,629 2,720,023 Payments for cancellation of units (2,344,433) (2,116,453) Net cash (used in)/generated from financing activities (1,815,804) 603,570 NET (DECREASE)/ INCREASE IN CASH AND EQUIVALENTS (134,426) 89,243 CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 467, ,280 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 333, ,523 Cash and cash equivalents comprise: Deposits with financial institutions 5 328, ,436 Cash at banks 4,366 45, , ,523 The accompanying notes form an integral part of the financial statements. 12

16 AmMalaysia Equity NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION AmMalaysia Equity ( the Fund ) was established pursuant to a Deed dated 3 October 2001 as amended by Deeds Supplemental thereto ( the Deed ), between AmFunds Management Berhad as the Manager, HSBC (Malaysia) Trustee Berhad as the Trustee and all unitholders. By a Supplemental Master Deed dated 5 February 2010, the Fund has changed its name from AmNew Frontier to AmMalaysia Equity. The Fund was first set up with the objective of providing medium to long-term investors with a vehicle to pool and invest their funds in order to obtain reasonable returns through investing in securities with management and business philosophies of knowledge, innovation and technology. Pursuant to a unitholders meeting held on 2 December 2009 and the adjourned meeting on 22 December 2009, the Fund s investment objective was modified to provide long-term capital appreciation by investing in equity securities of companies listed on Bursa Malaysia Berhad. The Fund will invest in companies across a wide range of industries with above average growth potential. 2. 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 MFRS 15: Revenue From Contracts With Customers 1 January January

17 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: 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 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. Foreign currency transactions Transactions in currencies other than the Fund s functional currency (foreign currencies) are recorded in the functional currency using exchange rates prevailing at the transaction dates. At each reporting date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at the reporting date. All exchange gains or losses are recognised in profit or loss. 14

18 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. 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. 15

19 (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. 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. 16

20 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 RM RM Quoted equity securities in Malaysia 2,307,185 3,536,394 Details of investments as at 31 October 2017 are as follows: Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities in Malaysia Construction Gabungan AQRS Berhad 46,200 90,552 79, (Forward) 17

21 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities in Malaysia Consumer Products CCM Duopharma Biotech Berhad 36,400 77,168 75, Cocoaland Holdings Behad 38, , , Magni-Tech Industries Berhad 10,800 75,168 68, Nestle (Malaysia) Berhad 2, , , Padini Holdings Berhad 22, , , , , , Finance Allianz Malaysia Berhad 7, , , MNRB Holdings Berhad 51, , , Public Bank Berhad 6, , , , , , Industrial products Chemical Company of Malaysia Berhad 150, , , PETRONAS Chemicals Group Berhad 18, , , Wellcall Holdings Berhad 91, , , , , , Infrastructure project companies TIME dotcom Berhad 11, , , REITs IGB Real Estate investment Trust 61, , , Technology Globetronics Technology Berhad 16, , , (Forward) 18

22 Market value as a percentage of Number of Market Purchase net asset Name of company shares value cost value RM RM % Quoted equity securities in Malaysia Trading/Services Dialog Group Berhad 14,200 32,092 23, Genting Malaysia Berhad 17,900 90,037 88, Sime Darby Berhad 14, , , UZMA Berhad 59,700 86,565 78, Westports Holdings Berhad 34, , , , , , Total financial assets at FVTPL 713,020 2,307,185 2,236, Excess of market value over cost 70, DEPOSITS WITH FINANCIAL INSTITUTIONS RM RM At nominal value: Short-term deposits with licensed banks 328, ,400 At carrying value: Short-term deposits with licensed banks 328, ,436 Details of deposit with financial institution as at 31 October 2017 are as follows: Carrying value as a percentage of Maturity Nominal Carrying Purchase net asset date Bank value value cost value RM RM RM % Short-term deposit with a licensed bank (Forward) Malayan Banking Berhad 328, , ,

23 The weighted average effective interest rate and average remaining maturity of short-term deposit are as follows: Weighted average effective Remaining interest rate maturity % % Day Day Short-term deposits with licensed banks SUNDRY RECEIVABLES/PAYABLES AND ACCRUED EXPENSES Included in sundry receivables/payables and accrued expenses were amounts owing from/to financial institution for outstanding contracts where settlement were not due as follows: RM RM Amount owing from financial institution - 119,809 Amount owing to financial institution - (20,111) The normal trade credit period is three business days. 7. AMOUNT DUE TO MANAGER Manager s fee is at a rate of 1.50% (2016: 1.50%) 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 Manager s fee payable is one month. 8. AMOUNT DUE TO TRUSTEE Trustee s fee is at a rate of 0.05% (2016: 0.05%) 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. 9. NET GAIN FROM INVESTMENTS RM RM Net gain on financial assets at FVTPL comprised: Net realised gain/(loss) on sale of investments 437,243 (2,211) Net realised gain/(loss) on foreign currency exchange 19 (16,099) Net unrealised (loss)/gain on changes in fair values of investments (105,437) 102, ,825 83,920 20

24 10. OTHER EXPENSES Included in other expenses is Goods and Services Tax incurred by the Fund during the financial year amouting to RM4,315 (2016: RM4,721). 11. TOTAL EQUITY Total equity is represented by: Note RM RM Unitholders capital (a) (821,594) 994,210 Retained earnings Realised income (b) 3,379,101 2,916,224 Unrealised gain (c) 70, ,300 (a) UNITHOLDERS CAPITAL/UNITS IN CIRCULATION 2017 Number of 2,628,370 4,086, Number of units RM units RM At beginning of the financial year 3,481, ,210 3,004, ,640 Creation during the financial year 428, ,629 2,327,682 2,720,023 Cancellation during the financial year (1,891,899) (2,344,433) (1,850,778) (2,116,453) At end of the financial year 2,017,943 (821,594) 3,481, ,210 The negative balance of unitholders capital was due to the cancellation of units at a higher net asset value per unit following the price appreciation of the Fund as compared to the units being created at a lower net asset value per unit in prior years. (b) REALISED DISTRIBUTABLE RM RM At beginning of the financial year 2,916,224 2,890,437 Total comprehensive income for the financial year 357, ,017 Net unrealised loss/(gain) attributable to investments held transferred to unrealised reserve [Note 11(c)] 105,437 (102,230) (Forward) 21

25 RM RM Net increase in realised reserve for the financial year 462,877 25,787 At end of the financial year 3,379,101 2,916,224 (c) UNREALISED NON-DISTRIBUTABLE RM RM At beginning of the financial year 176,300 74,070 Net unrealised (loss)/gain attributable to investments held transferred from realised reserve [Note 11(b)] (105,437) 102,230 At end of the financial year 70, , UNITS HELD BY RELATED PARTIES The Manager and related parties to the Manager did not hold any units in the Fund as at 31 October 2017 and 31 October INCOME TAX RM RM Current financial year - local tax Income tax payable is calculated on investment income less deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, Pursuant to Schedule 6 of the Income Tax Act, 1967, local interest income derived by the Fund is exempted from tax. A reconciliation of income tax expense applicable to net income before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Fund is as follows: RM RM Net income before tax 357, ,251 Taxation at Malaysian statutory rate of 24% 85,834 30,780 Tax effects of: Income not subject to tax (126,951) (54,460) Effect of different tax rate (285) (328) (Forward) 22

26 RM RM Loss not deductible for tax purposes 25,305 4,395 Restriction on tax deductible expenses for unit trust fund 11,667 14,507 Non-permitted expenses for tax purposes 3,337 3,728 Permitted expenses not used and not available for future financial years 1,296 1,612 Tax expense for the financial year DISTRIBUTION No distribution was declared by the Fund for the financial years ended 31 October 2017 and 31 October MANAGEMENT EXPENSE RATIO ( MER ) The Fund s MER is as follows: % p.a. % p.a. Manager s fee Trustee s fee Fund s other expenses Total MER The MER of the Fund is the ratio of the sum of annualised fees and expenses incurred by the Fund to the average net asset value of the Fund calculated on a daily basis. 16. PORTFOLIO TURNOVER RATIO ( PTR ) The PTR of the Fund, which is the ratio of average total acquisitions and disposals of investments to the average net asset value of the Fund calculated on a daily basis, is 1.42 times (2016: 3.06 times). 17. SEGMENTAL REPORTING The Manager and Investment Committee of the Fund are responsible for allocating resources available to the Fund in accordance with the overall investment strategies as set out in the Investment Guidelines of the Fund. The Fund is managed by two segments: A portfolio of equity instruments; and A portfolio of fixed income instruments, including deposits with financial institutions. 23

27 The investment objective of each segment is to achieve consistent returns from the investments in each segment while safeguarding capital by investing in diversified portfolios. There have been no changes in reportable segments in the current financial year. The segment information provided is presented to the Manager and Investment Committee of the Fund Fixed 2016 Fixed Equity income Equity income portfolio portfolio Total portfolio portfolio Total RM RM RM RM RM RM Gross dividend income 80,922-80, , ,021 Interest income - 12,814 12,814-12,007 12,007 Net gain from investments: Financial assets at FVTPL 331, ,825 83,920-83,920 Total segment investment income for the financial year 412,747 12, , ,941 12, ,948 Financial assets at FVTPL 2,307,185-2,307,185 3,536,394-3,536,394 Deposits with financial institutions - 328, , , ,436 Dividends receivable 2,698-2, Amount owing from financial institutions , ,809 Total segment assets 2,309, ,731 2,638,614 3,657, ,436 4,079,559 Amount owing to financial institutions ,111-20,111 Total segment liabilities ,111-20,111 24

28 Expenses of the Fund are not considered part of the performance of any investment segment. The following table provides reconciliation between the net reportable segment income and net income after tax: RM RM Net reportable segment investment income 425, ,948 Less: Expenses (67,918) (82,697) Net income before tax 357, ,251 Less: Income tax (203) (234) Net income after tax 357, ,017 In addition, certain assets and liabilities are not considered to be part of the net assets or liabilities of an individual segment. The following table provides reconciliation between the net reportable segment assets and liabilities and total assets and liabilities of the Fund RM RM Total segment assets 2,638,614 4,079,559 Cash at banks 4,366 45,087 Total assets of the Fund 2,642,980 4,124,646 Total segment liabilities - 20,111 Amount due to Manager 3,622 5,146 Amount due to Trustee Sundry payables and accrued expenses 10,874 12,483 Total liabilities of the Fund 14,610 37, TRANSACTIONS WITH BROKERS AND FINANCIAL INSTITUTIONS Details of transactions with brokers and financial institutions for the financial year ended 31 October 2017 are as follows: Brokerage fee, stamp Brokers/Financial institution Transaction value duty and clearing fee RM % RM % Maybank Investment Bank Berhad 2,204, , AmInvestment Bank Berhad* 2,163, , Alliance Investment Bank Berhad 1,845, , Hong Leong Investment Bank Berhad 1,282, , JF Apex Securities Berhad 753, , CLSA Securities Malaysia Sdn Bhd 507, , (Forward) 25

29 Brokers/Financial institution Brokerage fee, stamp Transaction value duty and clearing fee RM % RM % Affin Hwang Investment Bank Berhad 307, , Public Investment Bank Berhad 128, KAF Seagroatt & Campbell Securities Sdn Bhd 123, CIMB Investment Bank Berhad 34, Total 9,350, , * A financial institution related to the Manager. The Manager and the Trustee are of the opinion that the above transactions have been entered in the normal course of business and have been established under terms that are no less favourable than those arranged with independent third parties. The above transactions were in respect of listed securities. 19. FINANCIAL INSTRUMENTS (a) Classification of financial instruments The significant accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities of the Fund in the statement of financial position by the class of financial instrument to which they are assigned, and therefore by the measurement basis. Loans and Financial Financial receivables liabilities at assets at amortised amortised at FVTPL cost cost Total RM RM RM RM 2017 Assets Investments 2,307, ,307,185 Deposit with financial institution - 328, ,731 Dividends receivable - 2,698-2,698 Cash at banks - 4,366-4,366 Total financial assets 2,307, ,795-2,642,980 (Forward) 26

30 Loans and Financial Financial receivables liabilities at assets at amortised amortised at FVTPL cost cost Total RM RM RM RM Liabilities Amount due to Manager - - 3,622 3,622 Amount due to Trustee Sundry payables and accrued expenses ,874 10,874 Total financial liabilities ,610 14, Assets Investments 3,536, ,536,394 Deposit with financial institution - 422, ,436 Dividends receivable Sundry receivables - 119, ,809 Cash at banks - 45,087-45,087 Total financial assets 3,536, ,252-4,124,646 Liabilities Amount due to Manager - - 5,146 5,146 Amount due to Trustee Sundry payables and accrued expenses ,594 32,594 Total financial liabilities ,912 37,912 Income, expense, gains and losses RM RM Net gain from financial assets at FVTPL 331,825 83,920 Income, of which derived from: Gross dividend income from financial assets at FVTPL 80, ,021 - Interest income from receivables 12,814 12,007 (b) Financial instruments that are carried at fair value The Fund s financial assets and liabilities at FVTPL are carried at fair value. The Fund uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Level 2: Level 3: quoted (unadjusted) prices in active markets for identical assets or liabilities; other techniques for which all inputs which have a significant effect on the recorded fair values are observable; either directly or indirectly; or techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. 27

31 The following table shows an analysis of financial instruments recorded at fair value by the level of the fair value hierarchy: Level 1 Level 2 Level 3 Total RM RM RM RM 2017 Financial assets at FVTPL 2016 Financial assets at FVTPL 2,307, ,307,185 3,536, ,536,394 (c) Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value due to their short period to maturity or short credit period: Deposits with financial institutions Dividends receivable Sundry receivables Cash at banks Amount due to Manager Amount due to Trustee Sundry payables and accrued expenses There are no financial instruments which are not carried at fair values and whose carrying amounts are not reasonable approximation of their respective fair values. 20. RISK MANAGEMENT POLICIES The Fund is exposed to a variety of risks that include market risk, credit risk, liquidity risk, single issuer risk, regulatory risk, country risk, management risk and non-compliance risk. Risk management is carried out by closely monitoring, measuring and mitigating the above said risks, careful selection of investments coupled with stringent compliance to investment restrictions as stipulated by the Capital Market and Services Act 2007, Securities Commission s Guidelines on Unit Trust Funds and the Deed as the backbone of risk management of the Fund. Market risk Market risk, in general, is the risk that the value of a portfolio would decrease due to changes in market risk factors such as equity prices, interest rates, foreign exchange rates and commodity prices. 28

32 (i) Price risk Price risk refers to the uncertainty of an investment s future prices. In the event of adverse price movements, the Fund might endure potential loss on its quoted investments. In managing price risk, the Manager actively monitors the performance and risk profile of the investment portfolio. The result below summarised the price risk sensitivity of the Fund s NAV due to movements of price by -5.00% and +5.00% respectively: Percentage movements in Sensitivity of the Fund s NAV price by: RM RM -5.00% (115,359) (176,820) +5.00% 115, ,820 (ii) Interest rate risk Interest rate risk will affect the value of the Fund s investments, given the interest rate movements, which are influenced by regional and local economic developments as well as political developments. Domestic interest rate on deposits and placements with licensed financial institutions are determined based on prevailing market rates. The result below summarised the interest rate sensitivity of the Fund s NAV, or theoretical value (applicable to money market deposit) due to the parallel movement assumption of the yield curve by +100bps and -100bps respectively: Parallel shift in yield Sensitivity of the Fund s NAV, or theoretical value curve by: RM RM +100 bps (9) (11) -100 bps 9 11 (iii) Currency risk Currency risk is associated with the Fund s assets and liabilities that are denominated in currencies other than the Fund s functional currency. Currency risk refers to the potential loss the Fund might face due to unfavorable fluctuations of currencies other than the Fund s functional currency against the Fund s functional currency. 29