Annual Report for
30 April 2017
AmConservative
AmConservative
TRUST DIRECTORY
Manager
AmFunds Management Berhad
9th & 10
th Floor, Bangunan AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Board of Directors
Raja Maimunah Raja Abdul Aziz
Mustafa Mohd Nor
Tai Terk Lin
Sum Leng Kuang
Goh Wee Peng
Investment Committee
Sum Leng Kuang
Tai Terk Lin
Mustafa Mohd Nor
Zainal Abidin Mohd Kassim
Trustee
HSBC (Malaysia) Trustee Berhad
Auditors and Reporting Accountants
Ernst & Young
Taxation Adviser
Deloitte Tax Services Sdn Bhd
AmConservative
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
38 Statement by the Manager
39 Trustee’s Report
40 Directory
1
MANAGER’S REPORT
Dear Unitholders,
We are pleased to present you the Manager’s report and the audited accounts of AmConservative
(“Fund”) for the financial year ended 30 April 2017.
Salient Information of the Fund
Name AmConservative (“Fund”)
Category/
Type
Fixed Income/Income
Objective AmConservative aims to preserve capital and provide a stream of income* by
having a bigger exposure to fixed income investments than equities.
Note: *The income could be in the form of units or cash.
Duration AmConservative was established on 11 September 2003 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.
Performance
Benchmark
15% FTSE Bursa Malaysia Top100 Index
(obtainable from: www.bursamalaysia.com)
85% Quantshop Medium MGS Index
(source www.fundslogic.com)
Income
Distribution
Policy
Income distribution (if any) is paid at least twice every year.
Breakdown
of Unit
Holdings by
Size
For the financial year under review, the size of the Fund stood at 11,489,994 units.
Size of holding As at 30 April 2017 As at 30 April 2016
No of units
held
Number of
unitholders
No of units
held
Number of
unitholders
5,000 below 55,537 21 53,181 20
5,001-10,000 96,408 13 135,241 18
10,001-50,000 628,764 34 711,543 38
50,001-500,000 1,117,113 8 1,428,883 11
500,001 above 9,592,172 3 14,669,137 3
2
Fund Performance Data
Portfolio
Composition
Details of portfolio composition of the Fund for the financial years as at 30 April are
as follows:
FY
2017
%
FY
2016
%
FY
2015
%
Construction 0.81 2.37 1.25
Consumer products 3.18 1.95 1.16
Finance 2.93 - -
Industrial products 1.98 1.12 1.37
Plantations - 0.97 0.76
Properties 4.55 2.24 1.05
Technology - 3.28 1.36
Trading/Services 5.26 3.52 4.51
Corporate bonds 71.24 76.02 78.28
Malaysian Government Securities 5.30 - -
Cash and others 4.75 8.53 10.26
Total 100.00 100.00 100.00
Note: The abovementioned percentages are calculated based on total net asset
value.
Performance
Details
Performance details of the Fund for the financial years ended 30 April are as follows:
FY
2017
FY
2016
FY
2015
Net asset value (RM) 7,391,161 10,484,179 14,696,610*
Units in circulation 11,489,994 16,997,985 23,990,824*
Net asset value per unit (RM) 0.6433 0.6168 0.6126*
Highest net asset value per unit (RM) 0.6540 0.6294 0.6131*
Lowest net asset value per unit (RM) 0.6093 0.6007 0.5862*
Benchmark performance (%) 4.13 2.87 3.21
Total return (%)(1)
8.83 4.75 3.58
- Capital growth (%) 4.45 0.78 3.58
- Income distribution (%) 4.38 3.97 -
Gross distribution (sen per unit) 2.70 2.43 -
Net distribution (sen per unit) 2.70 2.43 -
Management expense ratio (%)(2)
1.69 1.74 1.77
Portfolio turnover ratio (times)(3)
0.25 0.53 1.38
* Above prices and net asset value per unit are not shown as ex-distribution.
Note:
(1) Total return is the annualised 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
expense incurred by the Fund divided by the average fund size calculated on a
daily basis. The MER decreased by 0.05% as compared to 1.74% per annum for
the financial year ended 30 April 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
3
the average fund size calculated on a daily basis. The PTR decreased by 0.28
times (52.8%) as compared to 0.53 times for the financial year ended 30 April
2016 mainly due to decrease in investing activities.
Average Total Return (as at 30 April 2017)
AmConservative(a)
%
15% of FBM KLCI/
FBMT 100 & 85%
MMGS(b)
%
One year 8.83 4.12
Three years 5.70 3.35
Five years 6.47 3.63
Ten years 4.71 3.99
Annual Total Return
Financial Years Ended
(30 April)
AmConservative(a)
%
15% of FBM KLCI/
FBMT 100 & 85%
MMGS(b)
%
2017 8.83 4.12
2016 4.75 2.87
2015 3.58 3.21
2014 8.35 3.12
2013 6.94 5.01
(a) Source: Novagni Analytics and Advisory Sdn Bhd.
(b) Until 9 September 2009-
– 85% Medium Malaysian Government Securities Index (“MMGS”) & 15%
FTSE Bursa Malaysia KLCI (“FBMT KLCI”).
Effective from 10 September 2009 onwards-
– 85% Medium Malaysian Government Securities Index (“MMGS”) & 15%
FTSE Bursa Malaysia Top 100 Index (“FBMT 100”). (Obtainable from:
www.bursamalaysia.com for FBMT100 and source: www.fundslogic.com for
MMGS).
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 8.83%
comprising of 4.45% capital growth and 4.38% of income distribution.
Thus, the Fund return of 8.83% has outperformed the benchmark’s return of 4.12%
by 4.71%.
As compared with the financial year ended 30 April 2016, the net asset value
(“NAV”) per unit of the Fund increased by 4.30% from RM0.6168 to RM0.6433,
while units in circulations decreased by 32.40% from 16,997,985 units to
4
11,489,994 units.
The line chart below shows comparison between the annual performances of
AmConservative and its benchmark, 85% MMGS and 15% FBMT 100, for the
financial years ended 30 April.
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?
For the financial year under review, the Fund has met its objective by preserving the
capital and providing a stream of income by having a bigger exposure to fixed
income investments than equities.
Strategies and
Policies
Employed
Equity
For the financial year under review, the Fund achieved its objective by investing up
to a maximum 30% of its NAV in income producing equity securities. Value-add
from equity investments is derived from active stock selection with focus on
undervalued stocks relative to its earnings growth potential and/or its intrinsic value.
In the event that outlook for equity investments is not conducive, the Fund can
choose to have zero exposure in equity securities.
Fixed Income
For the financial year under review, the Fund achieved its objective by investing up
to a maximum 100% of its NAV in fixed income instruments. In buying and selling
fixed income instruments for the Fund, the Manager used active tactical duration
management, yield curve positioning and credit spread arbitraging. This approach
also involves an analysis of general economic and market conditions. It also involves
the use of models that analyse and compare expected returns and assumed risk.
Under this approach, the Manager focused on fixed income instruments that would
deliver favourable return in light of the risk. The Investment industry outlook that
provide the potential for capital appreciation.
The Manager has adopted an active trading stance, and will not consider portfolio
turnover as a limiting factor in ensuring that the Fund meets its investment objective.
5
Portfolio
Structure
This table below is the asset allocation of the Fund for the financial years under
review.
As at
30-4-2017
%
As at
30-4-2016
%
Changes
%
Construction 0.81 2.37 -1.56
Consumer products 3.18 1.95 1.23
Finance 2.93 - 2.93
Industrial products 1.98 1.12 0.86
Plantations - 0.97 -0.97
Properties 4.55 2.24 2.31
Technology - 3.28 -3.28
Trading/Services 5.26 3.52 1.74
Corporate bonds 71.24 76.02 -4.78
Malaysian Government Securities 5.30 - 5.30
Cash and others 4.75 8.53 -3.78
Total 100.00 100.00
The portfolio continues to be skewed towards Fixed Income securities with corporate
bonds and Malaysian Government Securities consisting of 76.54% of the total fund
size. Meanwhile, a total of 18.71% was invested in equities while cash holdings were
at 4.75%.
Distribution /
Unit Splits
During the financial year under review, the Fund declared income distribution,
detailed as follow:
1.60 sen per
unit income
distribution
Change in the unit price
prior and subsequent to
the income distribution
Before income
distribution on
27 October 2016
(RM)
After income
distribution on
27 October 2016
(RM)
Net asset value per unit 0.6331 0.6171
1.10 sen per
unit income
distribution
Change in the unit price
prior and subsequent to
the income distribution
Before income
distribution on
26 April 2017
(RM)
After income
distribution on
26 April 2017
(RM)
Net asset value per unit 0.6540 0.6430
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 unit holders during the
financial year under review.
Rebates
and Soft
Commission
It is our policy to pay all rebates to the Fund. Soft commission 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
6
Manager are deem to be beneficial to the unitholders of the Fund.
Market
Review
In May 2016, Bank Negara Malaysia (“BNM”) kept the Overnight Policy Rate
(“OPR”) and Statutory Reserve Requirement (“SRR”) ratio unchanged at 3.25% and
3.50% respectively as widely expected in Datuk Muhammad Ibrahim’s inaugural
Monetary Policy Committee (“MPC”) meeting as BNM Governor. The tone of the
MPC statement was largely neutral with the stance broadly similar to the previous
MPC statements. BNM also reiterated its expectations for the domestic economy to
expand by 4.0 – 4.5% in 2016 while inflation is expected to trend lower for the
remaining parts of the year from the average Consumer Price Index (“CPI”) of 3.4%
in the first quarter of 2016 (“1Q16”). This followed the release of Malaysia’s 1Q16
Gross Domestic Product (“GDP”) data which grew at a slower pace of 4.2% year-on-
year (“YoY”), on the back of weakness in exports and soft private investment growth
while on a quarter to quarter basis, the domestic economy grew 1.0%, compared to
1.5% previously.
In June 2016, Malaysia reported a positive growth in exports of 1.6% YoY for the
month of April 2016, while imports contracted by 2.3%, thus leaving a positive trade
balance of RM9.1b. Main contributors to exports came from the E&E sector which
showed an encouraging growth of 2.1% versus 0.5% in the preceding month. On the
inflation front, May’s CPI eases marginally to 2.0% YoY matching market
expectations. Since the implementation of Goods and Services Tax (“GST”) in April
2015, the initial price shock has faded while the current record low pump prices
continue to keep inflationary pressure in check. Meanwhile, Malaysia’s
unemployment rate continued to inch up in April. At 3.6%, the unemployment figure
is at the highest since 2010. Finally, Malaysia’s Ringgit appreciated versus USD by
2.9% from RM4.15 to RM4.03 at as end June. The Ringgit has been volatile in June
primarily due to two key events, the Federal Open Market Committee (“FOMC”)
meeting as well as the UK Referendum on Brexit.
In July 2016, Malaysia reported a negative growth in exports of -0.9% YoY for the
month of May 2016, its first drop in 4 months. This was against market expectation
of 2.0% growth. Nevertheless, Malaysia’s trade surplus continues to be in the
positive albeit narrowing to RM3.26b (April: RM9.06b) which brings cumulative
trade surplus to RM36.3b Year-to-Date (“YTD”). To recap, the biggest news of the
month came from BNM which unexpectedly cut the Overnight Policy Rate (“OPR”)
by 25bps to 3.00% at its July 2016 meeting. This was the first monetary policy move
since July 2014. BNM’s Governor was also reported as explaining that the cut was a
pre-emptive move in light of the recent UK Referendum on Brexit event as well as
weaker global growth prospects in the near term. On the inflation front, June’s CPI
softened again to 1.6% YoY, below consensus expectations. Average inflation for
1H2016 is now around 2.7% which is in line with BNM’s guidance of 2 - 3% for
2016.
In August 2016, Malaysia exports bounced back into gain of 3.4% y-o-y in June after
falling by -0.9% in May and compared with +1.6% in April. Meanwhile, the foreign
exchange reserves increased marginally by USD0.1b to USD97.3b as at 29 July
2016. The current account surplus in the balance of payments narrowed to
MYR1.9bn in 2Q 2016, after recording a surplus of MYR5.0bn in 1Q and compared
with a surplus of MYR8.1bn in 2Q 2015. This was attributed to a smaller surplus in
the merchandise trade account and a larger deficit in the income transfers.
Meanwhile, the financial account registered a higher net inflow of MYR9.5bn in 2Q,
compared with an inflow of MYR5.8bn in the previous quarter. The improvement
7
was mainly due to a rebound in net inflow on other investments and a larger net
inflow of direct investments. On the other hand, the slowdown in the Malaysian
economy continued with real GDP growing at a slower pace of 4.0% y-o-y in 2Q
2016, from +4.2% in 1Q and +4.5% in 4Q 2016. The overall growth was dragged
lower by a cutback in inventories and subdued exports.
In September 2016, Malaysia’s Purchasing Managers’ Index (“PMI”) reading rose to
48.6 in September from 47.4 in August 2016. This marked the highest reading in
eight months. Nevertheless, it was still the eighteenth consecutive month of
contraction as indicated by the sub 50 reading. On the inflation front, headline
inflation reading for August rebounded to 1.5% versus consensus expectation of
1.3%. Main drivers were non-food items particularly cultural services which saw
inflation surging from 1.0% in July to 6.1% YoY in August. Finally, the banking
sector’s loan growth moderated for the twelfth consecutive month to 4.2% YoY in
August from 5.1% YoY in July. Notably, this is the lowest level in at least 13 years,
as lending activities continue to face headwinds from a slowing economy, tepid
deposit growth and rising loan impairments.
In October 2016, Malaysia’s foreign exchange reserves rose by USD0.2bn to
USD97.7bn as at 30 September 2016, from USD97.5bn registered at end-August and
compared to USD95.3bn at end-December 2015. On the inflation front, the headline
inflation rate remained stable in September, as the easing in cost of food and
beverages was mitigated by the smaller magnitude of decline in cost of transport. The
core inflation rate inched lower in September. Growth of the broader money supply,
M3, slowed to 2.2% y-o-y in September, from +2.4% in August, due to a decline in
external operations and a slowdown in demand for funds by the private and public
sector. Meanwhile, loan growth was stable at 4.2% y-o-y in September, unchanged
from the previous month but lower compared with +5.6 in July, as the deceleration in
growth of household loans were mitigated by the marginal increase in business loans.
In November 2016, Malaysia’s foreign exchange reserves rose by USD0.5bn to
USD98.3bn as at 15 November 2016, from USD97.8bn registered at end-October
2016 and compared to USD95.3bn at end-December 2015. CPI for Oct 2016 came
in marginally lower at 1.4% YoY compared to Sep 2016’s reading on 1.5% YoY. 3Q
GDP was 4.3% YoY, higher than consensus expectations of 4.0% YoY (2Q: 4.0%,
1Q: 4.2%). GDP growth was boosted by higher consumer spending which grew 6.4%
YoY, supported by wage and employment growth. Private investment eased slightly
to 4.7% from 5.6% in 2Q, attributed to a decline in spending on machinery and
equipment. Government spending also slowed to 3.1% from 6.5% in 2Q, on the back
of lower spending on supply and services. BNM left its OPR unchanged at 3.00%, as
expected by the market given the significant degree of financial market volatility
following Donald Trump's presidential victory. Compared to September, BNM
slightly upgraded its view on global growth in 2017, but retained its assessment that
the domestic economy remains on track to expand as projected in 2016 and 2017.
In December 2016, Malaysia’s manufacturing PMI continues to remain below the 50-
level mark coming in unchanged at 47.1 in December. This was the twenty first
consecutive months of contraction. On the trade front, exports were below
expectations, recording a contraction of 8.6% YoY in October (September: -3.0%).
Consensus expectations were for a contraction of -5.6%. Imports meanwhile also fell
by 6.6% YoY (September: -0.1%) driven by broad-based declines in capital imports
(-2.0%), intermediate imports (-8.9%), and consumption imports (-8.0%).
Nevertheless, trade surplus continues to be positive at RM9.76b (September:
8
RM7.56b). Indicative of the huge foreign outflows in the month of November,
Malaysia’s foreign reserves fell USD1.4b to USD96.4b. This was the lowest reserve
level since March 2016. The current level of reserves is sufficient to cover 1.2 times
of short-term external debt and 8.3 months of retained imports. During the month,
BNM announced several measures to enhance onshore foreign exchange liquidity
effective 5 December 2016. The measures include the liberalization and deregulation
of the onshore MYR hedging market, streamlining treatment for investment in
foreign currency assets and incentives and treatment of export proceeds. These pre-
emptive measures were implemented to stabilise the ringgit and support financial
stability amid further broad strengthening of the USD. Finally, the banking sector’s
loan growth showed signs of bottoming. For the month of November, growth
accelerated to 5.3% YoY (October: 4.5%) and a robust 0.9% Manager of Managers’
(“MoM”), resulting in YTD annualised loan growth improving to 4.7% (10M2016:
4.0%). The main driver of loan growth was in working capital loans (+1.6% MoM vs
average MoM run rate of +0.3%). In terms of consumer loans, residential property
loan growth remained stable at 9.5% YoY while automobile loans remain mired in
negative territory at -0.8% YoY.
In January 2017, after increasing by USD 0.2b and USD 0.5b in October and
November respectively, Malaysia’s foreign reserves fell by USD3.7b to USD 94.6b
in December. This was the lowest reserve level the start of the year and the decline
was spurred by considerable foreign outflows. The current level of reserves is
sufficient to cover 1.2 times of short-term external debt and 8.3 months of retained
imports. In comparison Malaysia’s foreign reserves stood at USD 95.3bn at end-
December 2015. On the trade front exports & imports rebounded 11.2% YoY. BNM
left the policy rate unchanged at 3.00% in its latest meeting, with a more upbeat
statement on the external sector and higher inflation expectation for 2017. The
general expectation is that BNM will leave the rate unchanged in 2017, against the
backdrop of expected Fed rate hike(s) during the year.
In February 2017, Malaysia’s 4Q16 GDP growth was printed at 4.5% vs consensus
of 4.4%, in line with BNM’s forecasts of 4.0-4.5%. The growth came on the back of
moderate rebound in exports/imports and resilient domestic demand in the 4 Qtr.
2016 budget deficits met the 3.1% of GDP target allaying concerns on the
sovereign’s ratings. Further, despite the persistent weakness in the MYR, Malaysia
external reserves remained resilient; it stood unchanged from end-January at US$95b
in mid-February. The January CPI print came in much higher than expected today at
3.2%, vs consensus estimate of 2.7%. The upside surprise was driven by 2 factors: 1)
domestic fuel price increases, and 2) food prices due to bad weather and also lagged
impact of cooking oil subsidy removals.
In March 2017, BNM released the 2016 Annual Report where the central bank
projected Malaysia’s GDP to grow at 4.3% - 4.8% for 2017. The higher growth
projection is based on a rebound in exports as well as resilient domestic demand.
Inflation, however, is expected to spike upwards to 3% - 4% (2016: 2.1%) due
mainly to cost-driven factors i.e. pass-through impact from an elevated retail oil
prices. In the same report, BNM also projects Malaysia’s current account surplus to
remain positive at RM17.4b (2016: RM25.2b). Meanwhile, as at end 2016, the top
five Foreign Direct Investments (“FDI”) contributor was Singapore (RM115b), Japan
(RM70b), China & HK (RM53b), Netherlands (RM48b) and United States (RM36b).
In 2016, out of the RM207.9b approved investments, the Services sector command
68% while the Manufacturing sector command a lower share of 28%. The bulk of
investments in the Manufacturing sector came from Petroleum Products, E&E
9
Products, Basic Metal Products and Transport Equipment while the usual Real
Estate, Financial Services, Utilities and Distributive Trade dominate the Services
Sector. Finally, the banking sector’s loan growth for February slipped slightly to
5.3% YoY from 5.6% YoY in the previous month. The moderation in February’s
loan growth was caused by a slower Household loan growth of +5.1% whilst
business loan was unchanged at 5.4%.
In April 2017, Malaysian CPI crossed 5% in March 2017 at 5.1% YoY (expectation
5.2%, Feb 4.5%). While February 2017 numbers were tempered by the base effect
from Chinese New Year, March numbers finally show the impact of the two 20 sen
price hikes on RON95 hike in January and February, which brings inflation up from
1.8% YoY in December 2016 (Jan: 3.2%, Feb: 4.5%) to well past 5% on primary
effects alone. Incidentally petrol prices remained unchanged in Mar 2017 with
RON95 at RM2.30/litre and RON97 at RM2.60/litre, but Diesel price was hiked 5
sen to RM2.20/litre. Exports continued to pick up to 26.5% YoY in February, its
quickest pace in almost seven years, partly on the back of a recovery in global
demand and partly a low base effect. Finally, regulated short-selling of government
bonds will be liberalised by widening the access to all domestic investors. BNM also
announced the relaxation of onshore hedging by allowing registered non-bank
entities fully and actively hedging their Foreign Exchange (“FX”) exposures.
Market
Outlook
Bank Negara Malaysia (“BNM”) stated in April that the economy appears capable of
growing that at the upper end of its 4.5-4.8 per cent annual growth projection for
2017. The central bank also stated it expects inflation to trend down and that it
maintains its projection of 3-4% inflation for 2017. March 2017’s Consumer Price
Index (“CPI”) print of 5.1% was the highest in 8 years; however going forward we
expect the CPI reading to be lower given the recent decline in crude oil prices and
the strengthening of the MYR.
The reason for the surge in the CPI can be attributed to the lower base in prior year as
well as the multiple price hikes in petrol pump prices via RON95, RON97 and
Diesel. In other words, Malaysia’s headline inflation is largely cost-push and not
demand-driven. In fact, core inflation remains below 3.0% (Mar: 2.5%) and BNM
has acknowledged as much in its recent Monetary Policy Committee (“MPC”)
statement stating that “the cost-driven inflation is not expected to have a significant
impact on the broader price trends given the stable domestic demand conditions.
Core inflation is expected to increase modestly.”
Given the above and based on BNM’s actions in the past, we opine that the current
higher inflation pressures are unlikely to trigger an Overnight Policy Rate (“OPR”)
hike, given lingering growth risks, and the absence of strong demand conditions
leading to second-round effects on domestic inflation.
Kuala Lumpur, Malaysia
AmFunds Management Berhad
7 June 2017
Independent auditors’ report to the unitholders of
AmConservative
Report on the audit of the financial statements
Opinion
Basis for opinion
Independence and other ethical responsibilities
Information other than the financial statements and 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.
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.
We have audited the financial statements of AmConservative (“the Fund”), which comprise the
statement of financial position as at 30 April 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 13
to 37.
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Fund as at 30 April 2017, and of its financial performance and its cash flows for the
year then ended in accordance with Malaysian Financial Reporting Standards and International
Financial Reporting Standards.
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.
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.
10
Independent auditors’ report to the unitholders of
AmConservative (cont’d.)
Responsibilities of the Manager and the Trustees for the financial statements
Auditor’s responsibilities for the audit of the financial statements
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.
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.
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.
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.
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:
11
Independent auditors’ report to the unitholders of
AmConservative (cont’d.)
Other matters
Ernst & Young Wan Daneena Liza Bt Wan Abdul Rahman
AF: 0039 No. 2978/03/18(J)
Chartered Accountants Chartered Accountant
Kuala Lumpur, Malaysia
7 June 2017
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.
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.
12
AmConservative
STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2017
2017 2016
Note RM RM
ASSETS
Investments 4 7,040,280 9,589,376
Deposits with financial institutions 5 223,321 605,056
Net amount due from Manager 6 - 356,787
Dividend receivables - 1,400
Sundry receivables 7 110,968 -
Cash at banks 72,098 421
TOTAL ASSETS 7,446,667 10,553,040
LIABILITIES
Net amount due to Manager 6 11,046 -
Amount due to Trustee 8 299 404
Sundry payables and accrued expenses 44,161 68,457
TOTAL LIABILITIES 55,506 68,861
EQUITY
Unitholders’ capital 11(a) 6,853,553 10,301,440
Retained earnings 11(b)(c) 537,608 182,739
TOTAL EQUITY 11 7,391,161 10,484,179
TOTAL EQUITY AND LIABILITIES 7,446,667 10,553,040
UNITS IN CIRCULATION 11(a) 11,489,994 16,997,985
NET ASSET VALUE PER UNIT
─ EX DISTRIBUTION 64.33 sen 61.68 sen
The accompanying notes form an integral part of the financial statements.
13
AmConservative
STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2017
2017 2016
Note RM RM
INVESTMENT INCOME
Gross dividend income 34,880 70,240
Interest income 451,291 548,354
Net gain from investments:
− Financial assets at fair value through profit or
loss (“FVTPL”) 9 357,537 138,370
Gross Income 843,708 756,964
EXPENDITURE
Manager’s fee 6 (130,688) (185,122)
Trustee’s fee 8 (4,356) (6,171)
Auditors’ remuneration (4,500) (4,500)
Tax agent’s fee (5,000) (5,000)
Other expenses 10 (3,241) (13,781)
Total Expenditure (147,785) (214,574)
NET INCOME BEFORE TAX 695,923 542,390
LESS:INCOME TAX 13 - -
NET INCOME AFTER TAX 695,923 542,390
OTHER COMPREHENSIVE INCOME - -
TOTAL COMPREHENSIVE INCOME FOR THE
FINANCIAL YEAR 695,923 542,390
Total comprehensive income comprises the following:
Realised income 484,151 562,688
Unrealised gain/(loss) 211,772 (20,298)
695,923 542,390
Distributions for the financial year:
Net distributions 14 341,054 460,559
Gross/net distributions per unit (sen) 14 2.70 2.43
The accompanying notes form an integral part of the financial statements.
14
AmConservative
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2017
Unitholders’ Retained Total
capital earnings equity
Note RM RM RM
At 1 May 2015 14,498,981 197,629 14,696,610Total comprehensive income for the
financial year - 542,390 542,390Creation of units 11(a) 5,470,106 - 5,470,106
Reinvestments of distributions 11(a) 456,990 - 456,990
Cancellation of units (10,221,358) - (10,221,358)
Distributions 96,721 (557,280) (460,559)
Balance at 30 April 2016 10,301,440 182,739 10,484,179
At 1 May 2016 10,301,440 182,739 10,484,179Total comprehensive income for the
financial year - 695,923 695,923Creation of units 11(a) 2,140,487 - 2,140,487Reinvestments of distributions 11(a),14 340,753 - 340,753Cancellation of units 11(a) (5,929,127) - (5,929,127)
Distributions 14 - (341,054) (341,054)
Balance at 30 April 2017 6,853,553 537,608 7,391,161
The accompanying notes form an integral part of the financial statements.
15
AmConservative
STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2017
2017 2016
Note RM RM
CASH FLOWS FROM OPERATING AND
INVESTING ACTIVITIES
Proceeds from sale of investments 6,747,440 9,356,040
Dividends received 36,280 69,646
Interest received 461,162 648,119
Manager’s fee paid (133,190) (191,217)
Trustee’s fee paid (4,461) (6,374)
Tax agent’s fee paid (5,000) (5,000)
Payments for other expenses (32,037) (32,786)
Purchase of investments (3,961,646) (4,695,473)
Net cash generated from operating and investing
activities 3,108,548 5,142,955
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from creation of units 2,511,252 5,123,805
Payments for cancellation of units (5,929,557) (10,272,921)
Distribution paid (301) (3,569)
Net cash used in financing activities (3,418,606) (5,152,685)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (310,058) (9,730)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF FINANCIAL YEAR 605,477 615,207
CASH AND CASH EQUIVALENTS AT END OF
FINANCIAL YEAR 295,419 605,477
Cash and cash equivalents comprise:
Deposits with financial institutions 5 223,321 605,056
Cash at banks 72,098 421
295,419 605,477
The accompanying notes form an integral part of the financial statements.
16
AmConservative
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Standards effective during the financial year
Standards issued but not yet effective
Effective for
financial periods
beginning on or after
MFRS 9: Financial Instruments
MFRS 15: Revenue From Contracts With Customers
1 January 2018
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.
AmConservative (“the Fund”) was established pursuant to a Deed dated 11 September 2003 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.
The Fund was set up with the objective of preserving capital and provides a stream of income by
having a bigger exposure to fixed income investments than equities. As provided in the Deed, the
“accrual period” or financial year shall end on 30 April and the units in the Fund were first
offered for sale on 16 September 2003.
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.
The adoption of MFRS which have been effective during the financial year did not have any
material financial impact to the financial statements.
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:
16
MFRS 9 Financial Instruments
3. SIGNIFICANT ACCOUNTING POLICIES
Income recognition
Income tax
Functional and presentation currency
Statement of cash flows
Distribution
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 2018. The Fund is in the process of
quantifying the impact of the first adoption of MFRS 9.
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 fixed income securities and short-term deposits are recognised on an accrual basis
using the effective interest method, which includes the accretion of discounts and amortisation of
premiums.
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 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.
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.
Distributions are at the discretion of the Fund. A distribution to the Fund’s unitholders is
accounted for as a deduction from realised reserves except where distribution is sourced out of
distribution/loss equalisation which is accounted for as a deduction from/addition to unitholders’
capital. A proposed distribution is recognised as a liability in the period in which it is approved.
17
Unitholders’ capital
Distribution/loss equalisation
Financial assets
(i) Financial assets at FVTPL
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.
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 and fixed income securities acquired principally for the purpose of
selling in the near term.
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”).
For investments in quoted securities, market value is determined based on the closing price
quoted on Bursa Malaysia Securities Berhad and for investments in unquoted fixed income
securities, fair value is determined based on the indicative prices from Bond Pricing Agency
Malaysia Sdn Bhd plus accrued interest, which includes the accretion of discount and
amortisation of premium. Adjusted cost of investments relates to the purchase cost plus
accrued interest, adjusted for amortisation of premium and accretion of discount, if any,
calculated over the period from the date of acquisition to the date of maturity of the respective
securities as approved by the Manager and the Trustee. Unrealised gains or losses recognised
in profit or loss are not distributable in nature.
Distribution/loss equalisation represents the average distributable amount included in the creation
and cancellation prices of units. This amount is either refunded to unitholders by way of
distribution and/or adjusted accordingly when units are cancelled.
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.
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.
18
(ii) Loans and receivables
Impairment of financial assets
(i) Loans and receivables carried at amortised cost
Financial liabilities
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.
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.
Financial assets with fixed or determinable payments that are not quoted in an active market
are classified as loans and receivables.
The Fund assesses at each reporting date whether there is any objective evidence that a financial
asset is impaired.
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 are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability.
19
Classification of realised and unrealised gains and losses
Significant accounting estimates and judgments
4. INVESTMENTS
2017 2016
RM RM
Financial assets at FVTPL
Quoted equity securities in Malaysia 1,382,800 1,619,330
Unquoted fixed income securities in Malaysia 5,657,480 7,970,046
7,040,280 9,589,376
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.
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.
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.
20
Details of investments as at 30 April 2017 are as follows:
Market
value as a
percentage of
Number of Market Purchase net asset
Name of company shares value cost valueRM RM %
Quoted equity securities in Malaysia
Construction
Mudajaya Group Berhad 50,000 60,000 46,655 0.81
Consumer products
Cocoaland Holdings Berhad 60,000 160,200 89,819 2.17
Homeritz Corporation Berhad 80,000 75,200 78,712 1.01
140,000 235,400 168,531 3.18
Finance
Alliance Financial Group Berhad 30,000 123,900 120,476 1.68
Insas Berhad 100,000 92,500 85,729 1.25
130,000 216,400 206,205 2.93
Industrial products
Press Metal Berhad 50,000 146,500 35,139 1.98
Properties
Eastern & Oriental Berhad 70,000 133,000 107,808 1.80
Malaysian Resources Corporation
Berhad 80,000 121,600 111,441 1.65
Sunsuria Berhad 55,000 81,400 80,790 1.10
205,000 336,000 300,039 4.55
Trading/Services
Chin Hin Group Berhad 100,000 135,000 89,530 1.83
Dialog Group Berhad 70,000 136,500 113,721 1.85
SMRT Holdings Berhad 450,000 117,000 162,402 1.58
620,000 388,500 365,653 5.26
Total quoted securities 1,195,000 1,382,800 1,122,222 18.71
21
Fair value
as a
percentage
Maturity Credit Nominal Fair Adjusted of net asse
date Issuer rating value value cost valueRM RM RM %
Unquoted fixed income securities in Malaysia
Corporate bonds
28.06.2019 TF Varlik
Kiralama
A.S. AA 1,050,000 1,073,726 1,089,284 14.53
31.03.2020 KT Kira
Sertifikalari
Varlik
Kiralama
A.S. AA 1,300,000 1,312,803 1,309,154 17.76
15.04.2020 DRB-Hicom
Berhad A 500,000 500,308 501,480 6.77
19.11.2020 Special
Power
Vehicle
Berhad A 200,000 329,270 334,579 4.45
02.10.2026 UMW Holding
Berhad AA 500,000 503,018 505,318 6.81
28.10.2026 Celcom
Networks
Sdn Bhd AA 400,000 408,046 405,421 5.52
12.01.2027 Projek
Lebuhraya
Usahasama
Berhad AAA 500,000 517,110 515,196 6.99
10.01.2031 Projek
Lebuhraya
Usahasama
Berhad AAA 600,000 621,487 627,457 8.41
5,050,000 5,265,768 5,287,889 71.24
Malaysian Government Securities
31.05.2035 Government
of Malaysia NR 400,000 391,712 387,104 5.30
securities 5,450,000 5,657,480 5,674,993 76.54
Total financial assets at FVTPL 7,040,280 6,797,215 95.25
Excess of fair value over cost 243,065
Total unquoted fixed income
22
2017 2016
% %
Corporate bonds 5.55 5.45
Malaysian Government Securities 4.57 -
1 year to More than 5 years 5 years
RM RM
At nominal value:
Corporate bonds 3,050,000 2,000,000
Malaysian Government Securities - 400,000
At nominal value:Corporate bonds 3,950,000 3,500,000
5. DEPOSITS WITH FINANCIAL INSTITUTIONS
2017 2016
RM RM
At nominal value:
Short-term deposits with licensed banks 223,300 605,000
At carrying value:
Short-term deposits with licensed banks 223,321 605,056
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
Public Bank
Berhad 223,300 223,321 223,300 3.02
The weighted average effective yield on unquoted investments are as follows:
Effective yield
Analyses of the remaining maturity of unquoted investments as at 30 April 2017 and 30 April
2016 are as follows:
2017
2016
Details of deposit with financial institution as at 30 April 2017 are as follows:
02.05.2017
23
2017 2016 2017 2016
% % Days Days
Short-term deposit with a licensed
bank 3.45 3.35 2 3
6. NET AMOUNT DUE (TO)/FROM MANAGER
2017 2016
RM RM
Net (redemption)/creation of units* (1,424) 368,911
Manager’s fee payable (9,622) (12,124)
(11,046) 356,787
*
7. SUNDRY RECEIVABLES
2017 2016
RM RM
Amount owing from financial institutions 110,968 -
The normal trade credit period is three business days.
8. AMOUNT DUE TO TRUSTEE
Included in sundry receivables were amounts owing from financial institutions for outstanding
contracts where settlement were not due as follows:
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.
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.
The amount represents net amount (payable to)/receivable from the Manager for units
(redeemed)/created.
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 weighted average effective interest rate and average remaining maturity of short-term
deposits are as follows:
Weighted average effective
interest rate Remaining maturity
24
9. NET GAIN FROM INVESTMENTS
2017 2016
RM RM
Net gain on financial assets at FVTPL comprised:
− Net realised gain on sale of investments 145,765 158,668
− Net unrealised gain/(loss) on changes in fair values
of investments 211,772 (20,298)
357,537 138,370
10. OTHER EXPENSES
11. TOTAL EQUITY
Total equity is represented by:
2017 2016Note RM RM
Unitholders’ capital (a) 6,853,553 10,301,440
Retained earnings
– Realised gain (b) 294,543 151,446
– Unrealised gain (c) 243,065 31,293
7,391,161 10,484,179
(a) UNITHOLDERS’ CAPITAL/UNITS IN CIRCULATION
2017 2016
Number of Number of
units RM units RM
At beginning of the financial
year 16,997,985 10,301,440 23,990,824 14,498,981
Creation during the financial
year 3,418,744 2,140,487 8,934,753 5,470,106
Distributions reinvested 544,073 340,753 752,842 456,990
Cancellation during the
financial year (9,470,808) (5,929,127) (16,680,434) (10,221,358)
Distributions out of distribution/
loss equalisation (Note 14) - - - 96,721
At end of the financial
year 11,489,994 6,853,553 16,997,985 10,301,440
Included in other expenses is Goods and Services Tax incurred by the Fund during the financial
year amounting to RM10,266 (2016: RM12,224).
25
(b) REALISED – DISTRIBUTABLE
2017 2016
RM RM
At beginning of the financial year 151,446 146,038
Total comprehensive income for the financial year 695,923 542,390Net unrealised (gain)/loss attributable to investments held
transferred to unrealised reserve [Note 11(c)] (211,772) 20,298
Distributions out of realised reserve (Note 14) (341,054) (557,280)
Net increase in realised reserve for the financial year 143,097 5,408
At end of the financial year 294,543 151,446
(c) UNREALISED – NON-DISTRIBUTABLE
2017 2016
RM RM
At beginning of the financial year 31,293 51,591Net unrealised gain/(loss) attributable to investments held
transferred from realised reserve [Note 11(b)] 211,772 (20,298)
At end of the financial year 243,065 31,293
12. UNITS HELD BY RELATED PARTIES
13. INCOME TAX
Pursuant to Schedule 6 of the Income Tax Act, 1967, local interest income derived by the Fund is
exempted from tax.
The Manager and parties related to the Manager did not hold any units in the Fund as at 30 April
2017 and 30 April 2016.
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:
Income tax payable is calculated on investment income less deduction for permitted expenses as
provided for under Section 63B of the Income Tax Act, 1967.
26
2017 2016
RM RM
Net income before tax 695,923 542,390
Taxation at Malaysian statutory rate of 24% 167,022 130,200
Tax effects of:
Income not subject to tax (202,490) (186,500)
Loss not deductible for tax purpose - 4,900
Restriction on tax deductible expenses for unit trust fund 29,201 40,900
Non-permitted expenses for tax purposes 3,023 6,000
Permitted expenses not used and not available for future
financial years 3,244 4,500
Tax expense for the financial year - -
14. DISTRIBUTIONS
2017 2016
RM RM
Gross dividend income 26,982 69,791
Interest income 349,100 544,410
Net realised gain on sale of investments 112,757 157,653
Distribution/loss equalisation - (96,721)
488,839 675,133
Less: Expenses (147,785) (214,574)
Total amount of distributions 341,054 460,559
Gross/net distributions per unit (sen) 2.70 2.43
Distributions made out of:
─ Realised reserve [Note 11(b)] 341,054 557,280
─ Distribution/loss equalisation [Note 11(a)] - (96,721)
341,054 460,559
Comprising:
Distributions reinvested [Note 11(a)] 340,753 456,990
Cash distributions 301 3,569
341,054 460,559
Distributions to unitholders declared on 27 October 2016 and 26 April 2017 (declared on 8
October 2015 and 20 April 2016 for the previous financial year) are from the following sources:
27
15. MANAGEMENT EXPENSE RATIO (“MER”)
The Fund’s MER is as follows:
2017 2016
% p.a. % p.a.
Manager’s fee 1.50 1.50
Trustee’s fee 0.05 0.05
Fund’s other expenses 0.14 0.19
Total MER 1.69 1.74
16. PORTFOLIO TURNOVER RATIO (“PTR”)
17. SEGMENTAL REPORTING
− A portfolio of equity instruments; and−
2017 2016Fixed Fixed
Equity income Equity income
portfolio portfolio Total portfolio portfolio Total
RM RM RM RM RM RM
Gross
dividend
income 34,880 - 34,880 70,240 - 70,240
Interest
income - 451,291 451,291 - 548,354 548,354
(Forward)
A portfolio of fixed income instruments, including deposits with financial institutions.
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.
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.
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 0.25 times (2016: 0.53
times).
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:
28
2017 2016 Fixed Fixed
Equity income Equity income
portfolio portfolio Total portfolio portfolio Total
RM RM RM RM RM RM
Net gain/(loss)
from investments:
‒ Financial
assets
at FVTPL 429,873 (72,336) 357,537 89,284 49,086 138,370
Total segment
investment
income for
the financial
year 464,753 378,955 843,708 161,540 597,440 756,964
Financial
assets at
FVTPL 1,382,800 5,657,480 7,040,280 1,619,330 7,970,046 9,589,376
Deposits with
financial
institutions - 223,321 223,321 - 605,056 605,056
Dividend
receivable - - - 1,400 - 1,400
Amount owing
from
financial
institutions 110,968 - 110,968 - - -
Total segment
assets - 1,493,768 5,880,801 7,374,569 1,620,730 8,575,102 10,195,832
There were no segment liabilities as at 30 April 2017 and 30 April 2016.
2017 2016RM RM
Net reportable segment investment income 843,708 756,964
Less: Expenses (147,785) (214,574)
Net income before tax 695,923 542,390
Less: Income tax - -
Net income after tax 695,923 542,390
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:
29
2017 2016
RM RM
Total segment assets 7,374,569 10,195,832
Net amount due from Manager - 356,787
Cash at banks 72,098 421
Total assets of the Fund 7,446,667 10,553,040
Total segment liabilities - -
Net amount due to Manager 11,046 -
Amount due to Trustee 299 404
Sundry payables and accrued expenses 44,161 68,457
Total liabilities of the Fund 55,506 68,861
18.
Brokerage fee, stamp
Transaction value duty and clearing fee
Brokers/Financial institutions RM % RM %
Malayan Banking Berhad 135,114,700 43.05 - -
Public Bank Berhad 96,549,400 29.81 - -
CIMB Bank Berhad 67,252,475 21.43 - -
RHB Bank Berhad 10,079,000 3.21 - -
Standard Chartered Bank Malaysia Berhad 2,143,058 0.68 - -
AmInvestment Bank Berhad* 1,928,386 0.61 5,957 68.62
Hong Leong Investment Bank Berhad 1,802,405 0.57 - -
RHB Investment Bank Berhad 933,340 0.30 - -
Public Investment Bank Berhad 683,167 0.22 2,725 31.38
Citibank Berhad 385,142 0.12 - -
Total 316,871,073 100.00 8,682 100.00
*
TRANSACTIONS WITH BROKERS AND FINANCIAL INSTITUTIONS
Details of transactions with brokers and financial institutions for the financial year ended 30 April
2017 are as follows:
The above transactions were in respect of listed securities, fixed income instruments and money
market deposits. Transactions in fixed income instruments and money market deposits do not
involve any commission or brokerage.
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.
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.
30
19. FINANCIAL INSTRUMENTS
(a) Classification of financial instruments
Loans and Financial
Financial receivables liabilities at
assets at at amortised amortised
FVTPL cost cost Total
RM RM RM RM
Assets
Investments 7,040,280 - - 7,040,280
Deposits with financial institutions - 223,321 - 223,321
Sundry receivables - 110,968 - 110,968
Cash at banks - 72,098 - 72,098
Total financial assets 7,040,280 406,387 - 7,446,667
Liabilities
Net amount due to Manager - - 11,046 11,046
Amount due to Trustee - - 299 299
Sundry payables and accrued expenses - - 44,161 44,161
Total financial liabilities - - 55,506 55,506
Assets
Investments 9,589,376 - - 9,589,376
Deposits with financial institutions - 605,056 - 605,056
Net amount due from Manager - 356,787 - 356,787
Dividend receivable - 1,400 - 1,400
Cash at banks - 421 - 421
Total financial assets 9,589,376 963,664 - 10,553,040
Liabilities
Amount due to Trustee - - 404 404
Sundry payables and accrued expenses - - 68,457 68,457
Total financial liabilities - - 68,861 68,861
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.
2017
2016
31
2017 2016
RM RM
Net gain from financial assets at FVTPL 357,537 138,370
Income, of which derived from:
– Gross dividend income from financial assets at FVTPL 34,880 70,240
– Interest income from financial assets at FVTPL 412,825 507,384
– Interest income from loans and receivables 38,466 40,970
(b) Financial instruments that are carried at fair value
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:
Level 3:
Level 1 Level 2 Level 3 Total
RM RM RM RM
1,382,800 5,657,480 - 7,040,280
1,619,330 7,970,046 - 9,589,376
(c)
Deposits with financial institutions
Net amount due from/to Manager
Dividend receivable
Sundry receivables
Cash at banks
Amount due to Trustee
Income, expense, gains
and losses
The Fund uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
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.
The following table shows an analysis of financial instruments recorded at fair value by the
level of the fair value hierarchy:
Financial assets at FVTPL
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:
2017Financial assets at FVTPL
2016
The Fund’s financial assets and liabilities at FVTPL are carried at fair value.
32
Sundry payables and accrued expenses
20. RISK MANAGEMENT POLICIES
Market risk
(i) Price risk
Percentage movements in
price by: 2017 2016
RM RM
-5.00% (69,140) (80,967)
+5.00% 69,140 80,967
(ii) Interest rate 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, 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 (yield curve), foreign exchange rates and
commodity prices.
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:
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 rates on deposits and placements with licensed financial institutions are
determined based on prevailing market rates.
The result below summarised the interest rates 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:
Sensitivity of the Fund’s NAV
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.
The Fund is exposed to a variety of risks that include market risk, credit risk, liquidity risk, single
issuer risk, regulatory risk, management risk and non-compliance risk.
33
Parallel shift in yield
curve by: 2017 2016
RM RM
+100bps (278,975) (403,163)
-100bps 306,427 440,183
Credit risk
(i) Credit quality of financial assets
As a % of As a % of
debt net asset
Credit rating RM securities value
AAA 1,138,597 20.13 15.40AA 3,297,593 58.29 44.62
A 829,578 14.66 11.22
NR 391,712 6.92 5.30
5,657,480 100.00 76.54
AAA 632,274 7.93 6.03
AA 6,138,863 77.03 58.55
A 1,198,909 15.04 11.44
7,970,046 100.00 76.02
A As a % of
As a % of net asset
RM of deposits value
P1/MARC-1 223,321 100.00 3.02
(Forward)
The following table analyses the Fund’s portfolio of debt securities by rating category as at 30
April 2017 and 30 April 2016:
2016
For deposits with financial institutions, the Fund only makes placements with financial
institutions with sound rating. The following table presents the Fund’s portfolio of deposits by
rating category as at 30 April 2017 and 30 April 2016:
Credit rating
2017
2017
Sensitivity of the Fund's NAV, or theoretical value
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss to
the Fund by failing to discharge an obligation. The Fund can invest up to 100% of the net asset
value in fixed income instruments. As such the Fund would be exposed to the risk of bond issuers
and financial institutions defaulting on its repayment obligations which in turn would affect the
net asset value of the Fund.
34
A
s
As a % of
As a % of net asset
RM of deposits value
P1/MARC-1 605,056 100.00 5.77
(ii) Credit risk concentration
As a % of As a % of debt net asset
Sector RM securities value
Diversified holdings 2,316,129 40.94 31.34
Finance 1,465,438 25.90 19.83
Infrastructure and utilities 1,875,913 33.16 25.37
5,657,480 100.00 76.54
Construction 845,426 10.61 8.06
Diversified holdings 2,431,707 30.51 23.19
Finance 1,077,862 13.52 10.28
Industrial product 1,005,955 12.62 9.60
Infrastructure and utilities 1,894,479 23.77 18.07
Plantation 714,618 8.97 6.82
7,970,047 100.00 76.02
There is no geographical risk as the Fund invests only in investments in Malaysia.
Liquidity risk
Objectives and assumptions
For each security in the Fund, the cash flows are projected according to its asset class. Each
asset class, if any, follows the calculation method as below:
Liquidity risk is defined as the risk of being unable to raise funds or borrowing to meet payment
obligations as they fall due. The Fund maintains sufficient level of liquid assets, after consultation
with the Trustee, to meet anticipated payments and cancellations of units by unitholders. Liquid
assets comprise of deposits with licensed financial institutions and other instruments, which are
capable of being converted into cash within 5 to 7 days. The Fund’s policy is to always maintain a
prudent level of liquid assets so as to reduce liquidity risk.
Concentration of risk is monitored and managed based on sectorial distribution. The table
below analyses the Fund’s portfolio of debt securities by sectorial distribution as at 30 April
2017 and 30 April 2016:
2017
2016
2016
Cash at banks are held for liquidity purposes and are not exposed to significant credit risk.
Credit rating
35
(i) For bonds
(a)
(b)
Cash received from bonds are calculated as follows:
$ = cash received
R = coupon rate p.a.
F = coupon frequency
For zero coupon bonds, F = 0
At maturity: $ = Nominal
For F > 0
Before maturity: coupon payment, $ = Nominal * (R/F)
At maturity: maturity payment, $ = Nominal + (Nominal * R/F)
(ii) For money market instruments and deposits
$ = cash received
R = interest rate p.a.
F = time to maturity (days)
At maturity: $ = Nominal + (Nominal*R*d/365)
0 – 1 1 – 2 2 – 3 3 – 4 4 – 5 More than
year years years years years 5 years
RM RM RM RM RM RM
Financial assets
Investments 338,510 339,152 3,157,560 362,905 118,545 3,235,923
Deposits with
financial
institutions 223,384 - - - - -
Cash at banks 72,098 - - - - -
Other assets 110,968 - - - - -
Total assets 744,960 339,152 3,157,560 362,905 118,545 3,235,923
Financial liabilities
Other liabilities 55,506 - - - - -
(Forward)
For coupon-bearing bonds, the coupons could be paid on annual, bi-annual or
quarterly basis.
The nominal amount and interest will be paid at maturity date. Cash received are
calculated as follows:
Contractual cash flows (undiscounted)
2017
The following table presents the undiscounted contractual cash flows from different asset and
liability classes in the Fund:
For zero-coupon bonds, the nominal amount will be returned at maturity date.
36
0 – 1 1 – 2 2 – 3 3 – 4 4 – 5 More than
year years years years years 5 years
RM RM RM RM RM RM
Financial assets
Investments 489,540 489,540 489,540 3,990,540 678,640 4,694,900
Deposits with
financial
institutions 605,222 - - - - -
Cash at banks 421 - - - - -
Other assets 358,187 - - - - -
Total assets 1,453,370 489,540 489,540 3,990,540 678,640 4,694,900
Financial liabilities
Other liabilities 68,861 - - - - -
Single issuer risk
Regulatory risk
Management risk
Non-compliance risk
21. CAPITAL MANAGEMENT
No changes were made in the objective, policies or processes during the financial years ended 30
April 2017 and 30 April 2016.
2016
The primary objective of the Fund’s capital management is to ensure that it maximises
unitholders’ value by expanding its fund size to benefit from economies of scale and achieving
growth in net asset value from the performance of its investments.
The Fund manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Fund may issue new or bonus
units, make distribution payment, or return capital to unitholders by way of redemption of units.
Poor management of the Fund may cause considerable losses to the Fund that in turn may affect
the net asset value of the Fund.
This is the risk of the Manager, the Trustee or the Fund not complying with internal policies, the
Deed of the Fund, securities law or guidelines issued by the regulators. Non-compliance risk may
adversely affect the investments of the Fund when the Fund is forced to rectify the non-
compliance.
Internal policy restricts the Fund from investing in securities issued by any issuer of not more than
a certain percentage of its net asset value. Under such restriction, the risk exposure to the
securities of any single issuer is diversified and managed based on internal/external ratings.
Any changes in national policies and regulations may have effects on the capital market and the
net asset value of the Fund.
Contractual cash flows (undiscounted)
37
AmConservative
STATEMENT BY THE MANAGER
GOH WEE PENG
For and on behalf of the Manager
AmFunds Management Berhad
Kuala Lumpur, Malaysia
7 June 2017
I, GOH WEE PENG, for and on behalf of the Manager, AmFunds Management Berhad, for
AmConservative do hereby state that in the opinion of the Manager, the accompanying statement
of financial position, statement of comprehensive income, statement of changes in equity, statement
of cash flows and the accompanying notes are drawn up in accordance with Malaysian Financial
Reporting Standards and International Financial Reporting Standards so as to give a true and fair
view of the financial position of the Fund as at 30 April 2017 and the comprehensive income, the
changes in equity and cash flows of the Fund for the financial year then ended.
38
39
TRUSTEE’S REPORT
40
DIRECTORY
Head Office 9th Floor, Bangunan AmBank Group
55, Jalan Raja Chulan, 50200 Kuala Lumpur
Tel: (03) 2032 2888 Facsimile: (03) 2031 5210
Email: [email protected]
Postal Address AmFunds Management Berhad
P.O Box 13611, 50816 Kuala Lumpur
Related Institutional Unit Trust Agent
AmBank (M) Berhad Head Office
Company No. 8515-D 31st Floor, Menara AmBank
No. 8 Jalan Yap Kwan Seng, 50450 Kuala Lumpur
AmInvestment Bank Berhad Head Office
Company No. 23742-V 22nd Floor, Bangunan AmBank Group
55 Jalan Raja Chulan, 50200 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 2032 2888 between 8.45 a.m. to 5.45 p.m. (Monday - Thursday),
Friday (8.45 a.m. to 5.00 p.m.)
Semi-Annual Report28 February 2015
03 2132 2888 | aminvest.com | [email protected]
AmFunds Management Berhad (155432-A)
