Advantage Global Equity Volatility Focused€¦ · Portfolio turnover ratio (times) (3) 0.36 0.22...
Transcript of Advantage Global Equity Volatility Focused€¦ · Portfolio turnover ratio (times) (3) 0.36 0.22...
Annual Report for
Advantage Global Equity Volatility Focused30 April 2020
Advantage Global Equity Volatility Focused
TRUST DIRECTORY
Manager AmFunds Management Berhad
9th & 10th Floor, Bangunan AmBank Group 55 Jalan Raja Chulan 50200 Kuala Lumpur
Board of Directors Jeyaratnam A/L Tamotharam Pillai
Dato’ Mustafa Bin Mohd Nor Tai Terk Lin
Sum Leng Kuang Goh Wee Peng
Investment Committee Sum Leng Kuang
Tai Terk Lin Dato’ Mustafa Bin Mohd Nor
Zainal Abidin Bin Mohd Kassim Goh Wee Peng
Trustee Deutsche Trustees Malaysia Berhad
Auditors and Reporting Accountants Ernst & Young PLT
Taxation Adviser Deloitte Tax Services Sdn Bhd
Advantage Global Equity Volatility Focused
CONTENTS
1 Manager’s Report
19 Independent Auditor’s Report to the Unitholders
23 Statement of Financial Position
24 Statement of Comprehensive Income
25 Statement of Changes in Equity
26 Statement of Cash Flows
27 Notes to the Financial Statements
50 Statement by the Manager
51 Trustee’s Report
52 Directory
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MANAGER’S REPORT
Dear Unitholders,
We are pleased to present you the Manager’s report and the audited accounts of Advantage Global Equity Volatility Focused (“Fund”) for the financial year ended 30 April 2020.
Salient Information of the Fund
Name
Advantage Global Equity Volatility Focused (“Fund”)
Category/ Type
Wholesale (Feeder Fund) / Income and Growth
Name of the Target Fund
HSBC Global Investment Funds – Global Equity Volatility Focused
Objective The Fund aims to provide long term total return from a combination of income* and capital growth by investing in a portfolio of global equities. Note: * The income could be in the form of units or cash. Any material change to the investment objective of the Fund would require Unit Holders’ approval.
Duration The Fund was established on 20 August 2015 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
MSCI All Country World Index (“MSCI ACWI”) (obtainable from www.aminvest.com)
Note: The MSCI All Country World Index (“MSCI ACWI”) is only used as a reference for investment performance comparison purpose. The Fund is not managed against MSCI ACWI. The risk profile of the Fund is not the same as the risk profile of the MSCI ACWI. Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
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Income Distribution Policy
MYR Hedged Class Subject to availability of income, distribution will be paid at least quarterly and can be in the form of units or cash. Other Classes except for MYR Hedged Class Subject to availability of income, distribution will be paid at least quarterly and will be reinvested into the Class. Note: Income distribution amount (if any) for each of the Classes could be different subject to the sole discretion of the Manager. For MYR Hedged Class only, if income distribution earned does not exceed MYR1,000, it will be automatically reinvested.
Breakdown of Unit Holdings by Size
For the financial year under review, the size of the Fund for AUD Hedged Class (AUD) stood at 5,752,956 units and for MYR Hedged Class (MYR) stood at 42,873,192 units. AUD Hedged Class (AUD)
Size of holding As at 30 April 2020 As at 30 April 2019
No of units held
Number of unitholder
No of units held
Number of unitholder
5,000 and below - - - -
5,001-10,000 - - - -
10,001-50,000 - - - -
50,001-500,000 - - - -
500,001 and above 5,752,956 1 10,423,387 1
MYR Hedged Class (MYR)
Size of holding As at 30 April 2020 As at 30 April 2019
No of units held
Number of unitholder
No of units held
Number of unitholder
5,000 and below - - - -
5,001-10,000 - - - -
10,001-50,000 - - - -
50,001-500,000 - - - -
500,001 and above 42,873,192 1 57,514,609 1
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Fund Performance Data
Portfolio Composition
Details of portfolio composition of the Fund for the financial years as at 30 April are as follows:
FY 2020
%
FY 2019
%
FY 2018
%
Foreign collective investment scheme 95.15 98.69 95.34
Forward contract 1.78 -0.48 -1.00
Cash, other assets and liabilities 3.07 1.79 5.66
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 2020
FY 2019
FY 2018
Net asset value (USD)*
- AUD Hedged Class 3,619,347 7,936,900 9,353,712
- MYR Hedged Class 9,952,521 15,355,218 9,338,023
Units in circulation*
- AUD Hedged Class 5,752,956 10,423,387 11,407,799
- MYR Hedged Class 42,873,192 57,514,609 33,356,326
Net asset value per unit in USD*
- AUD Hedged Class 0.6291 0.7615 0.8199
- MYR Hedged Class 0.2321 0.2670 0.2799
Net asset value per unit in respective currencies*
- AUD Hedged Class (AUD) 0.9612 1.0824 1.0862
- MYR Hedged Class (MYR) 0.9970 1.1032 1.0974
Highest net asset value per unit in respective currencies*
- AUD Hedged Class (AUD) 1.1654 1.1171 1.1541
- MYR Hedged Class (MYR) 1.1983 1.1325 1.1443
Lowest net asset value per unit in respective currencies*
- AUD Hedged Class (AUD) 0.7356 0.9391 1.0070
- MYR Hedged Class (MYR) 0.7632 0.9542 1.0012
Benchmark performance (%)
- AUD Hedged Class 0.73 10.22 10.98
- MYR Hedged Class -3.16 8.62 1.16
Total return (%)(1)
- AUD Hedged Class -9.25 1.69 9.45
- MYR Hedged Class -7.71 2.57 10.12
Capital growth (%)
- AUD Hedged Class -11.37 -0.28 7.85
- MYR Hedged Class -9.77 0.60 6.99
Income distribution (%)
- AUD Hedged Class 2.12 1.97 1.60
- MYR Hedged Class 2.06 1.97 3.13
Gross distribution per unit in respective currencies
- AUD Hedged Class (AUD) 2.29 cent 2.14 cent 1.61 cent
- MYR Hedged Class (MYR) 2.27 sen 2.16 sen 3.22 sen
(Forward)
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FY 2020
FY 2019
FY 2018
Net distribution per unit in respective currencies
- AUD Hedged Class (AUD) 2.29 cent 2.14 cent 1.61 cent
- MYR Hedged Class (MYR) 2.27 sen 2.16 sen 3.22 sen
Management expense ratio (%)(2) 0.41 0.44 0.49
Portfolio turnover ratio (times) (3) 0.36 0.22 0.76
* Above prices and net asset value per unit are shown as ex-distribution. Note: (1) Total return is the actual return of the Fund for the 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 decreased by 0.03% as compared to 0.44% per annum for the financial year ended 30 April 2019 mainly due to decrease in expenses.
(3) Portfolio turnover ratio (“PTR”) is calculated based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. The PTR increased by 0.14 times (63.6%) as compared to 0.22 times for the financial year ended 30 April 2019 mainly due to increase in investing activities.
Average Total Return (as at 30 April 2020)
Advantage Global Equity Volatility
Focused(a) %
MSCI ACWI(b) %
One year
- AUD Hedged Class -9.25 0.73
- MYR Hedged Class -7.71 - 3.16
Three years
- AUD Hedged Class 0.33 7.20
- MYR Hedged Class 1.39 2.09
Since launch (20 August 2015)
- AUD Hedged Class 2.52 6.57
- MYR Hedged Class 3.39 4.93
Annual Total Return
Financial Years/Period Ended (30 April)
Advantage Global Equity Volatility
Focused(a) %
MSCI ACWI(b)
%
2020
- AUD Hedged Class -9.25 0.73
- MYR Hedged Class -7.71 - 3.16
2019
- AUD Hedged Class 1.69 10.22
- MYR Hedged Class 2.57 8.62
2018
- AUD Hedged Class 9.45 10.98
- MYR Hedged Class 10.12 1.16
(Forward)
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Financial Years/Period Ended (30 April)
Advantage Global Equity Volatility
Focused(a) %
MSCI ACWI(b)
%
2017
- AUD Hedged Class 8.05 14.71
- MYR Hedged Class 8.53 25.10
2016(c)
- AUD Hedged Class 2.97 -4.60
- MYR Hedged Class 3.36 -5.79
(a) Source: Novagni Analytics and Advisory Sdn Bhd. (b) MSCI All Country World Index (“MSCI ACWI”) (obtainable from
www.aminvest.com) (c) Total actual return for the financial period from 20 August 2015 (date of
commencement) to 30 April 2016. 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 price and investment returns may go down, as well as up.
Fund Performance
AUD Hedged Class (AUD) For the financial year under review, the Fund registered a negative return of 9.25% comprising of negative 11.37% capital and 2.12% income distribution. Thus, the Fund’s negative return of 9.25% has underperformed the benchmark’s return of 0.73% by 9.98%. As compared with the financial year ended 30 April 2019, the net asset value (“NAV”) per unit of the fund decreased by 11.20% from AUD1.0824 to AUD0.9612, while units in circulations decreased by 44.81% from 10,423,387 units to 5,752,956 units. The line chart below shows comparison between the annual performances of Advantage Global Equity Volatility Focused and its benchmark, MSCI All Country World Index, for the financial period/years ended 30 April.
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MYR Hedged Class (MYR) For the financial year under review, the Fund registered a negative return of 7.71% comprising of negative 9.77% capital growth and 2.06% income distribution. Thus, the Fund’s negative return of 7.71% has underperformed the benchmark’s negative return of 3.16% by 4.55%. As compared with the financial year ended 30 April 2019, the net asset value (“NAV”) per unit of the fund decreased by 9.63% from RM1.1032 to RM0.9970, while units in circulations decreased by 25.46% from 57,514,609 units to 42,873,192 units. The line chart below shows comparison between the annual performances of Advantage Global Equity Volatility Focused and its benchmark, MSCI All Country World Index, for the financial period/years ended 30 April.
Note: Past performance is not necessarily indicative of future performance and that unit price and investment returns may go down, as well as up.
Performance of the Target Fund
Fund Performance Review of the Target Fund – HSBC Global Investment Funds - Global Equity Volatility Focused (AM2) (“the Target Fund”)
Period Fund return1 in USD as at 30 April 2020
Reference Benchmark2 return in USD as at 30
April 2020
1 month 5.60% 10.71%
3 months -16.61% -11.97%
6 months -13.59% -7.68%
1 year -10.69% -4.96%
3 years (annualized) 0.77% 4.46%
5 years (annualized) 0.72% 4.37%
Since Inception3 (annualized)
1.32% 4.36%
(Forward)
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1Net of relevant prevailing sales charges 2Reference Benchmark: MSCI AC World Net 3Inception Date: 26 June 2014 Past performance is not indicative of future performance Over one year, the Target Fund declined by 10.69% in USD terms and over 3 months, declined by 16.61% in USD terms. May 2019 Contributors to relative performance included Everest Re, which delivered better than expected earnings for the quarter, driven by lower catastrophe losses and higher revenues from insurance premiums. Additionally, Guangdong Investment, an infrastructure investment company, gained given its defensive characteristics. Detractors included Phillips 66, which fell on weaker oil prices. Furthermore, 3M saw negative momentum continue throughout May after lowering its profit expectations and stating it will cut jobs to counteract the poor performance. The company cite weakness across automotive and electronics divisions as well as lacklustre demand from China. During the period, no positions were initiated, whilst Unicredit was sold. Sector and country allocation effects are residual to the stock selection process. Sector allocation was neutral for the month as contribution from an underweight exposure to Consumer Discretionary was offset by an underweight exposure to Utilities. Country allocation was positive given an overweight exposure to the UK. Style factor effects were positive for the period. June 2019 Contributors to relative performance included IQVIA Holdings, which gained following an investor day where management updated their longer term targets as synergies from the Quintiles/IMS merger continue to drive revenue and margin growth. Additionally, Phillips 66 gained with higher oil prices given rising tensions in the Middle East. Detractors included Deutsche Wohnen, which fell in the aftermath of an announcement from Berlin city senate member for urban development, who proposed a five-year rent freeze in the city. Furthermore, Everest Re Group saw some profit taking at the end of the month following a period of strong gains. During the period, there was no portfolio turnover. Sector and country allocation effects are residual to the stock selection process. Sector allocation was neutral for the month as contribution from an underweight exposure to Real Estate was offset by an underweight exposure to Consumer Discretionary. Country allocation was neutral. Style factor effects were neutral for the period. July 2019 Contributors to relative performance included Tokyo Electron, which gained with other chip-makers on higher chip prices, a result of production cuts in response to Japan’s decision to limit the sale of key manufacturing materials to South Korean companies. Additionally, Phillips 66 gained with other refiners as gasoline futures advanced in the aftermath of news that Philadelphia Energy Solutions was to close
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its refinery, the largest on the east coast. The positive news flow continued as the company reported solid earnings that saw all segments finish ahead of consensus. Detractors included SAP, which fell after posting slower growth in new cloud bookings, a metric that indicates future revenues. The company cited trade tensions for a delay in software spending in Asia. Additionally, Secom fell on no stock-specific news. During the period, positions were initiated in Orsted and Philip Morris International, whilst Altria, Barrick Gold, British American Tobacco and Sekisui was sold. Sector and country allocation effects are residual to the stock selection process. Sector allocation was negative for the period given an underweight exposure to Communication Services, whilst at the country level, effects were positive given an overweight exposure to the UK. Style factor effects were neutral for the period. August 2019 Detractors from relative performance included Prudential, which fell with others in the insurance industry on trade tensions and falling government yields, a source of income for the industry. Furthermore, BHP fell with iron ore prices on the back of weakening demand amid trade tensions and recovering supply. Contributors included Home Depot, which gained as the company confirmed same store sales had increased in the second quarter, with the company citing the stable housing market and a healthy consumer as the main drivers. Additionally, Secom advanced on strong first quarter earnings that showed solid operating profits and investments in security services, a catalyst for long-term expansion. During the period, there was no portfolio turnover. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were negative for the period given an underweight exposure to Real Estate. At the country level, effects were also negative given an overweight exposure to the UK. Style factor effects were neutral for the period. September 2019 Contributors to relative performance included Everest Re and Muenchener Rueckver, which advanced with other insurers as Hurricane Dorian changed direction, subsequently missing landfall, and avoiding the potential of costly damage. Detractors included Guangdong Investment, which fell with other defensive names as global equities saw a rotation out of defensives to more value oriented equities. Additionally, Cyberagent fell after some profit taking following recent strong quarterly earnings. During the period, there was no portfolio turnover. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were positive for the period, however, no one sector elicited a material effect. At the country level, effects were neutral as contribution from an underweight exposure to the USA was offset by an underweight exposure to
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Switzerland and overweight the Netherlands. Style factor effects were neutral for the period. October 2019 Contributors to relative performance included Leggett & Platt, which gained on news that the US Department of Commerce placed anti-dumping tariffs on all future imports of Chinese mattresses in response to their findings that the goods had flooded the US market at below fair market value. Additionally, Phillips 66 gained at the start of the month on the back of an announced share repurchase program, and finished the month strongly on the back of a solid earnings beat. Detractors included Capgemini, which fell after guidance was cut as a result of softening UK banking demand on the back of Brexit concerns. Furthermore, IQVIA saw some pullback during the month on no stock specific news. The stock remains a top performer for the year, sizeably outperforming the market and peers. During the period, a position was initiated in M&G, whilst no positions were sold. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were neutral with no one sector eliciting a material effect. At the country level, effects were negative given an overweight exposure to the UK. Style factor effects were neutral for the period. November 2019 Detractors from relative performance included Secom, which saw some profit taking following a period of strong returns and third quarter results that came in ahead of consensus. Furthermore, Compass Group fell sharply on restructuring charges due to a weaker outlook at its European business, given the deteriorating macro environment in Europe. Contributors included Walt Disney, which released fourth quarter results that came in ahead of consensus driven by lower than expected operating expenses. Additionally, Humana advanced with other healthcare names on news of a more moderate healthcare policy than was originally thought. During the period, positions were initiated KBC Group and LG Household & Health Care, whilst HSBC Holdings and Kao Corp were sold. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were marginally positive given an underweight exposure to Real Estate. At the country level, effects were marginally negative given an overweight exposure to the UK.
Style factor effects were neutral for the period.
December 2019 During the period the Target Fund outperformed the index.
Stock selection was the main driver of performance with the top contributors including Orsted, a utility services company that develops, constructs and operates offshore wind farms and power stations, and Samsung Electronics. Detractors from relative performance included Walt Disney and Phillips 66, a downstream energy company whose operations include oil refining, marketing and transportation.
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During the period, there was no portfolio turnover. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were negative given an overweight exposure to Industrials. At the country level, effects were also negative given an overweight exposure to Germany. Style factor effects were neutral for the period. January 2020 During the period the Target Fund underperformed the index. Detractors from relative performance included Phillips 66, a US based downstream energy company, and ICBC, a Chinese based bank that offers deposits, loans, fund underwriting, foreign currency settlements and other services. Contributors included BAE Systems, a UK based manufacturer of weapons and defence systems, and Cyberagent, a Japanese based company that operates a blog media website, an advertising agency and foreign exchange website. The company also creates PC and mobile contents such as advertisements and games. During the period, there was no portfolio turnover. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were neutral. At the country level, effects were also negative given an overweight exposure to the UK and underweight exposure to the US. Style factor effects were neutral for the period. February 2020 Detractors from relative performance included BHP Group a global resources company that explores and mines minerals such as coal, iron ore, gold and copper, and Phillips 66, a US based downstream energy company. Contributors included Rentokil Initial, a provider of facilities management and essential support services, such as pest control, hygiene and work-wear to governments and commercial sector organisations, and ICBC, a Chinese based bank that offers deposits, loans, fund underwriting, foreign currency settlements and other services. During the period, a position was initiated in Visa, whilst Eni, Citigroup and M&G were sold. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were negative given an overweight exposure to Industrials. At the country level, effects were also negative given an overweight exposure to the UK. Style factor effects were neutral for the period. March 2020 During the period the Target Fund outperformed the index. Contributors to relative performance included Guangdong Investment, an infrastructure company that operates water supply, power and electricity and other
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infrastructure businesses, and Secom a provider of security services including online centralised security, home security systems and home medical services. Detractors from relative performance included Phillips 66, a US based downstream energy company, and BNP Paribas, a French banking institution that provides services including asset management and investment advisory. During the period, no positions were initiated, whilst Masco and Otsuka were sold. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were neutral, whilst at the country level, effects were positive given an underweight exposure to Brazil. April 2020 Contributors to relative performance included Iqvia, a US based health care services company that offers a broad range of solutions including clinical development strategies and prescriptive analytics, and Phillips 66, a US based downstream energy company. Detractors from relative performance included Everest Re, a provider of reinsurance services to property and casualty insurers in the United States and international markets, and an underweight position in Amazon.com. During the period, a position was initiated in Fastenal, whilst United Technologies was sold. Sector and country allocation effects are residual to the stock selection process. At the sector level, effects were negative given an underweight exposure to Consumer Discretionary. At the country level, effects were also negative given and overweight exposure to the UK and underweight the USA.
Source: HSBC Global Asset Management (Singapore) Limited, as at 30 April 2020
Has the Fund achieved its objective?
For the financial year under review, the Fund is in line with its stated objective to provide long-term capital growth by investing in the Target Fund which invests primarily in a portfolio of global equities.
Strategies and Policies Employed
Strategies and Policies of the Target Fund Investment Objective The Target Fund aims to provide long-term total return (meaning capital growth and income) by investing in shares (or securities that are similar to shares) of companies around the world. The Target Fund aims to have a lower volatility (less fluctuation in the Target Fund’s share prices) than the MSCI All Country World Index. Investment Strategy In normal market conditions, at least 90% of the Target Fund’s assets are invested in company securities. The Target Fund can also invest in Real Estate Investment Trusts financial derivative instruments and collective investment schemes. There aren’t restrictions on the market values of the companies held in the Target Fund. The Target Fund uses a technique called portfolio optimisation that selects stocks that are less correlated to one another. This has the effect of diversifying the Target Fund which should in turn lower its volatility. The Target Fund 's maximum exposure to China A-shares and China B-shares is 20% of its assets. The Target
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Fund will not invest more than 10% of its assets in a combination of participation notes and convertible securities. See the Prospectus for a full description of the investment objectives and derivative usage. Source: HSBC Global Asset Management (Singapore) Limited, at 30 April 2020 Strategies and Policies of the Fund
For the financial year under review, the Fund seeks to achieve its investment objective by investing a minimum of 95% of the Fund’s NAV in the HSBC Global Investment Funds - Global Equity Volatility Focused.
Portfolio Structure
This table below is the asset allocation of the Fund for the financial years under review.
As at 30.4.2020
%
As at 30.4.2019
%
Changes
%
Foreign collective investment scheme 95.15 98.69 -3.54
Forward contract 1.78 -0.48 2.26
Cash, other assets and liabilities 3.07 1.79 1.28
Total 100.00 100.00
For the financial year under review, the Fund has invested 95.15% of its NAV in the foreign collective investment scheme, 1.78% in forward contract and the balance of 3.07% was held in cash, other assets & liabilities.
Cross Trades
There were no cross trades undertaken during the financial year under review.
Distribution/ Unit Splits
During the financial year under review, the Fund declared income distributions, detailed as follows: AUD Hedged Class (AUD)
Date of distribution
Distribution per unit (sen)
NAV per unit Cum-Distribution
(AUD)
NAV per unit Ex-Distribution
(AUD)
24-Jul-19 0.22 1.0953 1.0931
22-Oct-19 1.00 1.0924 1.0824
23-Jan-20 0.48 1.1538 1.1493
23-Apr-20 0.59 0.9320 0.9262
MYR Hedged Class (MYR)
Date of distribution
Distribution per unit (sen)
NAV per unit Cum-Distribution
(RM)
NAV per unit Ex-Distribution
(RM)
24-Jul-19 0.23 1.1182 1.1159
22-Oct-19 0.97 1.1197 1.1100
23-Jan-20 0.48 1.1868 1.1819
23-Apr-20 0.59 0.9666 0.9606
There was no unit split declared for the financial year under review.
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State of Affairs
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.
Rebates and Soft Commission
Soft commissions received from brokers/dealers are retained by the Manager only if the goods and services provided are in the form of research services that assist in the decision-making process relating to the Fund’s investments. During the financial year under review, the Manager had received on behalf of the Fund, soft commissions as allowed under regulatory requirements to carry out investment management functions for the Fund. These soft commissions received by the Manager are deemed to be beneficial to the unitholders of the Fund.
Market Review
May 2019
Global Equities fell during May as Sino-US trade tensions once again became more heated, raising concerns of global growth and spurring investors to seek safe-haven assets.
The US and China were the worst performers as trade tensions escalated with both countries imposing sanctions on one another’s exports. The US also saw weak economic data during the month with figures showing less business investment and lower consumer spending. A similar picture could be seen in China as Industrial Production data and retail sale figures both came in light of expectations.
At the opposite end of the spectrum was Russia, which gained from investors seeking investments that are relatively unaffected by the ongoing trade tensions, and off the back of Gazprom’s decision to hike its dividend. Brazil also gained as the reports confirmed that the country’s government was ready to enact much needed social security and tax reforms.
Across the central banks; The US Federal Reserve stated its belief that slower inflation is “transitory”, although remains sensitive to downside risks to growth. Soft economic growth and few signs of underlying inflation pressures mean that the European Central Bank remains in dovish mode. In the UK, the Bank of England projected a stronger UK growth trajectory, although rate hikes remain less likely amid Brexit uncertainty. The Bank of Japan has stated its intention to keep rates on hold until at least spring 2020. Low inflation implies this timetable could be extended. In China, amid downside risks to growth, the People’s Bank of China vowed to continue with targeted stimulus, while keeping the renminbi stable.
June 2019
Global Equities gained during June on an easing of Sino-US trade tensions and more dovish sentiments from the major central banks.
The US and China were the main drivers of returns for global equities as both advanced on easing trade tensions. The Argentinian equity market also saw strong gains through the month as the incumbent president, Macri, chose Pichetto as a candidate for vice president, implying a more centrist stance.
At the opposite end of the spectrum was Pakistan, which saw the market fall on FX headwinds, with the Rupee the only emerging market currency to fall during the period.
Across the central banks; a lack of inflation pressure has allowed the US Federal Reserve to adopt a more dovish tone amid increased downside risks to growth. At its June meeting, European Central Bank President Draghi opened the door to policy easing, noting renewed asset purchases had been discussed. Contrastingly, in the UK, the Bank of England continues to have a bias to hike, conditional on a
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smooth Brexit. In Japan, inflation is set to remain well below the Bank of Japan’s 2% target, thus, we expect monetary policy to remain expansionary for the time being. Finally, in China, the 2019 Government Work Report provided a mandate for looser policy by the People’s Bank of China.
July 2019
Global Equities gained modestly in July as positive moves seen across developed markets were offset by weakness across emerging markets given US dollar strength.
The main driver of performance was US equities, which were buoyed by the tech sector given that a number of companies delivered solid earnings releases and rose on speculation of renewed trade talks with China. Turkish equities also advanced over the period as the country’s central bank decided to cut interest rates, citing an improved inflation outlook, and resulting in a rally in the Lira.
The main laggards included the UK, which performed well in local currency terms, however, weakness in the pound resulted in poor performance in USD terms. South Korean equities also finished in negative territory amid an ongoing trade dispute with Japan.
Across the central banks; a lack of inflation pressure is allowing the US Federal Reserve to lean against the increased downside risks to growth. While market pricing may prove to be too aggressive, some “insurance” policy easing is very likely. The European Central Bank also looks increasingly likely to engage in policy easing, although it faces some constraints. In the UK, the Bank of England switched to an easing bias, reflecting increased downside risks from global conditions and Brexit. In Japan, soft underlying growth and below-target inflation mean the Bank of Japan policy will likely remain expansionary. In China, the 2019 Government Work Report provided a mandate for looser policy by the People’s Bank of China.
August 2019
Global equities fell in August amid an escalation in US-China trade tensions and some disappointing economic data releases in Europe and China.
The main driver of performance was US equities, which finished in negative territory on the back of growth concerns and the ongoing trade tensions. Chinese equities also lagged as the US imposed new tariffs on Chinese imports. UK equities followed close behind given Brexit uncertainty and the increased likelihood that the UK may leave the EU without a deal.
At the other end of the spectrum was Egypt, which gained on news that the central bank had cut interest rates.
Across the central banks; at July’s US Federal Reserve policy meeting, Chair Powell confirmed that the 25bp rate cut was ‘insurance’ against slower global growth, trade tensions and weak inflation. The European Central Bank struck a dovish tone, with the September meeting likely to see rate cuts and a re-launch of its bond buying programme. The Bank of England struck a cautious tone at its August’s meeting, with the path for policy ultimately affected by upcoming political developments. The Bank of Japan has signalled it could ease policy if economic activity cools or it sees a strengthening of the Yen. Finally, amid trade headwinds, the People’s Bank of China is likely to act to maintain stable credit growth, with targeted support to private sector businesses.
September 2019
Global equities advanced in September on softening Sino-US trade tensions and a
15
more dovish stance by the major central banks.
At the country level, the two main drivers of performance were the US and Japan, which both gained on the back of easing trade tensions and a more dovish US Federal Reserve. Moreover, Turkey equities also performed well as the Turkish Central bank took action to combat disinflation and reduced interest rates sizeably. At the opposite end of the spectrum was China, which finished flat as gains realised earlier in the month were offset by news that President Trump was considering blocking US investment in China and delisting a number of Chinese companies listed in the US. However, the month ended on a softer note with a number of tariff exemptions being announced.
Across the central banks; The US Federal Reserve is likely to continue its gradual easing of policy in the near term to reduce the chance that US growth is dragged lower by soft global growth and persistent geopolitical uncertainty. The European Central Bank delivered a substantial easing package at its September meeting, including the restarting of net asset purchases. The Bank of England remains non-committal on the policy outlook, with future decisions ultimately affected by upcoming political developments. The Bank of Japan has signalled it could ease policy if activity cools or the yen strengths. Finally, the People’s Bank of China has signalled its willingness to offer more policy support if needed, but large-scale stimulus is unlikely.
October 2019
Global equities rose in October as the US and China agreed a truce in their trade conflict with an interim “mini” deal, subsequently allaying fears of a global economic slowdown.
At the country level, the US was one of the best performers as the market gained on positive news from the Sino-US trade negotiations. US equities were also buoyed by the Fed decision to cut interest rates and signalling that there are unlikely to be any changes, in either direction, in the near future. Following close behind was Japanese equities, which also gained on the positive trade news emanating from the US and China, in addition to indications from the UK and EU that a “Hard Brexit” will be avoided.
At the opposite end of the spectrum was Turkey, where equity markets saw a pullback on concerns of potential US sanctions in response to the Turkish military action in Northern Syria.
Across the central banks; The US Federal Reserve cut rates at its October meeting amid subdued inflation expectations, soft global growth and persistent geopolitical uncertainty. The European Central Bank signalled that a significant degree of monetary accommodation is still required to meet their inflation objective. The Bank of England remains non-committal on the policy outlook, with future decisions ultimately affected by upcoming political developments. The Bank of Japan signalled that it could ease policy to achieve its inflation target, although has provided little detail on potential easing options. Finally, the People’s Bank of China eased policy in September and are willing to offer more support if needed, but large-scale stimulus is unlikely.
November 2019
Global equities rose in November as the US and China came closer to agreeing the terms of a “phase one” trade deal.
At the country level, the US was the main driver as it gained on positive news regarding a preliminary trade deal with China, better than expected corporate earnings and solid economic data releases. The UK also gained as polls showed
16
that the conservative party would gain a majority in the house of commons, avoiding the chances of a hung parliament and the resultant political uncertainty.
At the opposite end of the spectrum was Brazil, which saw a pullback on a weakening Real and political protests across the region, specifically surrounding conflicts within Bolsonaro’s party. Korean equities also performed poorly on a combination of currency weakness and a weak earnings season.
Across the central banks; The US Federal Reserve cut rates at its November meeting but signalled an end to the easing cycle as long as there isn’t a material weakening in data. The European Central Bank remained in “wait and see” mode as they assess the impact of their significant policy easing package in September. In the UK, two Bank of England members voted for a rate cut in November, but the majority of rate-setters prefer to see how the political situation develops. The Bank of Japan signalled it could ease policy to achieve its inflation target, however, it provided little detail on potential easing options. While in China, the People’s Bank of China eased policy slightly and signalled that they may offer more support where needed, but large-scale stimulus is unlikely.
December 2019
Global equities rose in December as the US and China agreed terms for a “phase one” trade deal.
As expected, given the positive trade news, both the US and China equity markets advanced and were the main driver of returns. At the opposite end of the spectrum was the UAE and Israel, which were the only two countries to finish in negative territory.
Across the central banks; After three cuts in 2019, the US Federal Reserve has signalled a pause and now appears data dependent, with the bar for a rate cut far lower than for a rate hike. Given low growth and inflation, the European Central Bank may engage in more policy action, however, divisions remain on the Governing Council. In the UK, two Bank of England MPC members voted for a rate cut in December, although the bulk of members prefer to see how the political situation develops. Stressing downside risks from abroad, the Bank of Japan signalled it could ease policy if economic activity continues to cool, while the People’s Bank of China continues to nudge interest rates lower and is willing to offer more support if needed, but large-scale stimulus is unlikely.
January 2020
Global equities fell in January as a rally early in the month was offset amid uncertainty following the outbreak of the novel coronavirus (2019-nCoV) in China.
At the country level, very few countries finished in positive territory as concerns surrounding the spread of the coronavirus, and its potential impact to global growth, deterred many investors. The worst performers included the US, and the UK, which retreated as the commodity heavy index suffered amid falling oil and metal prices.
Across the central banks; After three cuts in 2019, the US Federal Reserve signalled a pause with growth levels at around trend. The European Central Bank could engage in more aggressive quantitative easing and/or deposit rate cuts, given weak growth and inflation, however, splits on the Governing Council may constrain action.
In the UK, weak growth and inflation led to two Bank of England MPC members voting for a rate cut in January. The Bank of Japan signalled it could ease policy if economic activity cools, while in China the People’s Bank of China continued easing policy late in 2019 and is likely to offer more support if needed, but large-scale stimulus is unlikely.
17
February 2020 Global equities fell in February as a rally earlier in the month following a fall in new cases of COVID-19 in China was offset by fears of a pandemic following a jump in new cases more globally.
Across the central banks; the bar for a rate cut by the US Federal Reserve is far lower than for a rate hike, especially given the downside risks from COVID-19. The European Central Bank could engage in more aggressive QE and/or deposit rate cuts amid the economic impact of the virus. The Bank of England voted 7-2 to keep rates on hold in January, but policy easing remains possible amid Brexit uncertainty. Following a sharp economic contraction in Q4 and the ongoing risks, the Bank of Japan is likely to ease; although they remain fairly constrained. The People’s Bank of China has been easing monetary policy in response to the outbreak of COVID-19 in China – we expect this to continue until activity has recovered.
March 2020
Global equities sold off in March, reflecting a sharp deterioration in the global economic outlook as COVID-19 containment measures were ramped up.
Central banks and finance ministries across the globe eased policy at an unprecedented pace, including measures not seen before. The US Federal Reserve, European Central Bank and Bank of England all significantly boosted asset purchase programmes and introduced huge liquidity provision measures. Fiscal policy was loosened in previously-unseen ways in many developed economies, with the recently approved US stimulus package the largest in the country's history. Emerging market central banks also took similar measures and cut interest rates rapidly.
However, it is important to note that macro policy cannot stop the precipitous near-term fall in output, which is a supply shock. The aim is to prevent significant second round effects on demand and a persistent reduction in supply capacity.
April 2020
MSCI All Country World returned 10.6% in April as the COVID-19 containment measures across the world have proved effective in slowing down the number of new cases whilst in China, restrictions are being gradually lifted for the economy to return back to economic activity.
US stocks rose as the number of new COVID-19 cases began to plateau, showing signs of a slowdown in the spread of the virus, and the US Federal Reserve expanded its lending programmes and support in credit markets to high yield ETFs. Given this, markets were able to shrug off the data releases of the rapidly rising US unemployment rate and the first batch of weak quarterly corporate earnings. The S&P500 rose 12.7% in the month.
European stocks rose as the COVID-19 pandemic in Europe neared its peak and policymakers across the region discussed strategies to relax containment measures. Investor optimism overcame the negative economic sentiment from the record low PMI data in the Eurozone and the UK and weak quarterly corporate earnings. The Stoxx Europe 600 rose 6.2% and the FTSE All Share rose 5.0% in the month.
Asian stocks rose as China gradually eased its lockdown measures, with businesses reopening and people returning to work. Elsewhere, a raft of stimulus support packages was announced across the region including Japan’s $1.1trn stimulus package and Hong Kong’s $18bn relief measures. The Shanghai Composite rose 4.0% and the Nikkei 225 rose 6.8% in the month.
18
Source: HSBC Global Asset Management (Singapore) Limited, as at 30 April 2020
Market Outlook
While the COVID 19 pandemic represents a very significant challenge for the global economy, the recent sell off has materially increased our measure of prospective returns. Our measure of the global equity risk premium (excess return over cash) now looks very attractive. After the recent sharp falls in developed market government bond yields, the relative attractiveness of equities over bonds has increased further. Further, a much looser global policy setting means there is scope for a recovery in risk assets as global economic conditions stabilise.
However, investor should be aware of the risks. The outbreak and quick spread of COVID 19 highlights that we remain in an “age of uncertainty”. What began in China as a localised shock has now become a “sudden stop” in global activity. Global corporate earnings growth is expected to significantly deteriorate. Volatility is likely to remain elevated whilst there are risks that containment measures create lasting damage to the supply side of the economy. Your equity portfolio aims to deliver diversified global equity exposure with lower volatility. Lower volatility can offer a smoother performance pattern that can help investors stay invested and capture long-term returns. The portfolio aims to invest in companies with an attractive combination of profitability and valuation. These quality companies typically have sustainable business models, strong balance sheets and good management. These stocks are combined with an aim to deliver a portfolio with lower volatility.
Source: HSBC Global Asset Management (Singapore) Limited, as at 30 April 2020
Additional Information
The following information was updated: 1) The following information was updated in the First Supplementary Information
Memorandum dated 5 July 2019:
Income Distribution Policy
MYR Hedged Class Subject to availability of income, distribution will be paid at least quarterly and can be in the form of units or cash. Other Classes except for MYR Hedged Class Subject to availability of income, distribution will be paid at least quarterly and will be reinvested into the Class. Note: Income distribution amount (if any) for each of the Classes could be different subject to the sole discretion of the Manager. For MYR Hedged Class only, if income distribution earned does not exceed MYR1,000, it will be automatically reinvested.
2) Seohan Soo resigned as a Non-Independent, Non-Executive Director for
AmFunds Management Berhad with effect from 1st January 2020.
Kuala Lumpur, Malaysia AmFunds Management Berhad 24 June 2020
Independent auditors’ report to the unitholders of
Advantage Global Equity Volatility Focused
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Advantage Global Equity Volatility Focused (“theFund”), which comprise the statement of financial position as at 30 April 2020, and the statementof comprehensive income, statement of changes in equity and statement of cash flows for thefinancial year then ended, and notes to the financial statements, including a summary ofsignificant accounting policies, as set out on pages 23 to 49.
In our opinion, the accompanying financial statements give a true and fair view of the financialposition of the Fund as at 30 April 2020, and of its financial performance and cash flows for thefinancial year then ended in accordance with Malaysian Financial Reporting Standards andInternational Financial Reporting Standards.
Basis for opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia andInternational Standards on Auditing. Our responsibilities under those standards are furtherdescribed in the Auditor’s Responsibilities for the Audit of the Financial Statements section of ourreport. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide 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 theInternational Code of Ethics for Professional Accountants (including International IndependenceStandards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordancewith 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 theinformation in the annual report of the Fund, but does not include the financial statements of theFund and our auditors’ report thereon.
Our opinion on the financial statements of the Fund does not cover the other information and wedo not express any form of assurance conclusion thereon.
19
Independent auditors’ report to the unitholders of
Advantage Global Equity Volatility Focused (cont’d.)
Information other than the financial statements and auditors’ report thereon (cont’d.)
In connection with our audit of the financial statements of the Fund, our responsibility is to readthe other information and, in doing so, consider whether the other information is materiallyinconsistent with the financial statements of the Fund or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement ofthis other information, we are required to report the 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 atrue and fair view in accordance with Malaysian Financial Reporting Standards and InternationalFinancial Reporting Standards. The Manager is also responsible for such internal control as theManager determines is necessary to enable the preparation of financial statements of the Fundthat 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 theFund’s ability to continue as a going concern, disclosing, as applicable, matters related to goingconcern and using the going concern basis of accounting unless the Manager either intends toliquidate 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 otherrecords 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 theFund, as a whole are free from material misstatement, whether due to fraud or error, and to issuean 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 inMalaysia and International Standards on Auditing will always detect a material misstatementwhen 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 economicdecisions of users taken on the basis of these financial statements.
20
Independent auditors’ report to the unitholders of
Advantage Global Equity Volatility Focused (cont’d.)
Auditor’s responsibilities for the audit of the financial statements (cont’d.)
As part of an audit in accordance with the approved standards on auditing in Malaysia andInternational Standards on Auditing, we exercise professional judgment and maintainprofessional skepticism throughout the planning and performance of the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements of theFund, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basisfor our opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the Fund’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the Manager.
• Conclude on the appropriateness of the Manager’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Fund’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditors’ report to the related disclosures in the financialstatements or, if such disclosures are inadequate, to modify our opinion. Our conclusionsare 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 theFund, including the disclosures, and whether the financial statements of the Fund representthe underlying transactions and events in a manner that achieves fair presentation.
We communicate with the Manager regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.
21
Independent auditors’ report to the unitholders of
Advantage Global Equity Volatility Focused (cont’d.)
Ernst & Young PLT Lee Pei Yin
202006000003 (LLP0022760 - LCA) & AF 0039 No. 03189/05/2021 J
Chartered Accountants Chartered Accountant
Kuala Lumpur, Malaysia
24 June 2020
Other matters
This report is made solely to the unitholders of the Fund, as a body, in accordance with theGuidelines on Unlisted Capital Markets Products under the Lodge and Launch Frameworkissued by Securities Commissions Malaysia and for no other purpose. We do not assumeresponsibility to any other person for the content of this report.
22
Advantage Global Equity Volatility Focused
STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2020
2020 2019 Note USD USD
ASSETS
Investment 4 12,913,844 22,988,019
Derivative assets 5 244,467 -
Amount due from Target Fund Manager 6 - 249,000
Amount due from Manager 7 23,388 23,204
Distribution receivable - 55,105
Cash at banks 495,096 421,217TOTAL ASSETS 13,676,795 23,736,545
LIABILITIES
Derivative liabilities 5 2,727 112,127
Amount due to Manager 7 99,186 328,074
Amount due to Trustee 8 528 1,042
Sundry payables and accrued expenses 2,486 3,184
TOTAL LIABILITIES 104,927 444,427
EQUITY
Unitholders’ capital 10(a)(b) 16,696,472 23,627,172
Accumulated losses 10(c)(d) (3,124,604) (335,054)TOTAL EQUITY 10 13,571,868 23,292,118
TOTAL EQUITY AND LIABILITIES 13,676,795 23,736,545
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
− AUD Hedged Class 10 3,619,347 7,936,900
− MYR Hedged Class 10 9,952,521 15,355,218
13,571,868 23,292,118
UNITS IN CIRCULATION
− AUD Hedged Class 10(a) 5,752,956 10,423,387 − MYR Hedged Class 10(b) 42,873,192 57,514,609
NET ASSET VALUE (“NAV”) PER UNIT IN USD
− AUD Hedged Class 0.6291 0.7615 − MYR Hedged Class 0.2321 0.2670
NAV PER UNIT IN RESPECTIVE CURRENCIES
− AUD Hedged Class (AUD) 0.9612 1.0824 − MYR Hedged Class (MYR) 0.9970 1.1032
The accompanying notes form an integral part of the financial statements.
23
Advantage Global Equity Volatility Focused
STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
2020 2019 Note USD USD
INVESTMENT LOSS
Distribution income 462,950 746,709
Net loss from investment:
− Financial assets at fair value through profit or
loss (“FVTPL”) 9 (2,835,099) (1,311,601)
Other unrealised foreign exchange gain 13 99
(2,372,136) (564,793)
EXPENDITURE
Manager’s fee 7 (59,329) (77,072)
Trustee’s fee 8 (8,763) (10,974)
Auditors’ remuneration (1,571) (1,652)
Tax agent’s fee (798) (839)
Other expenses (1,023) (1,662)
(71,484) (92,199)
Net loss before tax (2,443,620) (656,992)
Less: Income tax 12 - -
Net loss after tax (2,443,620) (656,992)
Other comprehensive income - -
Total comprehensive loss for the financial year (2,443,620) (656,992)
Total comprehensive loss comprises the following:
Realised loss (1,120,470) (798,728)
Unrealised (loss)/gain (1,323,150) 141,736
(2,443,620) (656,992)
Distributions for the financial year
Net distributions 13 345,930 447,005
Gross/net distributions per unit in respective currencies
− AUD Hedged Class (AUD) 13 2.29 cent 2.14 cent− MYR Hedged Class (MYR) 13 2.27 sen 2.16 sen
The accompanying notes form an integral part of the financial statements.
24
Advantage Global Equity Volatility Focused
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
Retained
earnings/
Unitholders’ (Accumulated Total
capital loss) equity Note USD USD USD
At 1 May 2018 17,922,792 768,943 18,691,735
Total comprehensive loss for
the financial year - (656,992) (656,992)
Creation of units
− AUD Hedged Class 10(a) 2,283,078 - 2,283,078
− MYR Hedged Class 10(b) 8,194,005 - 8,194,005
Reinvestments of distributions
− AUD Hedged Class 10(a) 181,960 - 181,960
− MYR Hedged Class 10(b) 265,045 - 265,045
Cancellation of units
− AUD Hedged Class 10(a) (3,177,653) - (3,177,653)
− MYR Hedged Class 10(b) (2,042,055) - (2,042,055)
Distributions
− AUD Hedged Class 13 - (181,960) (181,960)
− MYR Hedged Class 13 - (265,045) (265,045)Balance at 30 April 2019 23,627,172 (335,054) 23,292,118
At 1 May 2019 23,627,172 (335,054) 23,292,118
Total comprehensive loss for
the financial year - (2,443,620) (2,443,620)
Creation of units
− AUD Hedged Class 10(a) 556,298 - 556,298
− MYR Hedged Class 10(b) 4,108,832 - 4,108,832
Reinvestments of distributions
− AUD Hedged Class 10(a) 105,769 - 105,769
− MYR Hedged Class 10(b) 240,161 - 240,161
Cancellation of units
− AUD Hedged Class 10(a) (4,186,608) - (4,186,608)
− MYR Hedged Class 10(b) (7,755,152) - (7,755,152)
Distributions
− AUD Hedged Class 13 - (105,769) (105,769)
− MYR Hedged Class 13 - (240,161) (240,161)Balance at 30 April 2020 16,696,472 (3,124,604) 13,571,868
The accompanying notes form an integral part of the financial statements.
25
Advantage Global Equity Volatility Focused
STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
2020 2019
USD USD
CASH FLOWS FROM OPERATING AND
INVESTING ACTIVITIES
Proceeds from sale of investment 10,658,513 1,932,614
Purchase of derivative instruments (1,415,302) (1,470,363)
Distribution received 518,055 691,604
Manager’s fee paid (62,650) (75,574)
Trustee’s fee paid (9,277) (10,707)
Tax agent’s fee paid (844) (759)
Payments for other expenses (3,246) (3,662)
Purchase of investment (2,109,000) (7,266,000)
Net cash generated from/(used in) operating and
investing activities 7,576,249 (6,202,847)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from creation of units 4,665,193 10,766,629
Payments for cancellation of units (12,167,563) (4,899,048)
Net cash (used in)/generated from financing activities (7,502,370) 5,867,581
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 73,879 (335,266)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF FINANCIAL YEAR 421,217 756,483
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 495,096 421,217
Cash and cash equivalents comprise:Cash at banks 495,096 421,217
The accompanying notes form an integral part of the financial statements.
26
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
1. GENERAL INFORMATION
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
Standards effective during the financial year
Standards issued but not yet effective
Advantage Global Equity Volatility Focused (“the Fund”) was established pursuant to a
Deed dated 23 July 2015 (“the Deed”), between AmFunds Management Berhad as the
Manager, Deutsche Trustees Malaysia Berhad as the Trustee and all unitholders.
The Fund aims to provide long term total return from a combination of income and capital
growth by investing in a portfolio of global equities. Being a feeder fund, a minimum of 95%
of the Fund’s NAV will be invested in the HSBC Global Investment Funds – Global Equity
Volatility Focused (“Target Fund”), which is a separate unit trust fund managed by HSBC
Investment Funds (Luxembourg) S.A. (“Target Fund Manager”). As provided in the Deeds,
the “accrual period” or financial period shall end on 30 April and the units in the Fund were
first offered for sale on 20 August 2015.
The financial statements were authorised for issue by the Chief Executive Officer of the
Manager on 24 June 2020.
The financial statements of the Fund have been prepared on a historical cost basis, except
as otherwise stated in the accounting policies and comply with Malaysian Financial
Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards Board
(“MASB”) and International Financial Reporting Standards (“IFRS”).
The adoption of MFRS which have been effective during the financial year did not have
any material financial impact to the financial statements.
The Fund will adopt the following MFRSs and Amendments to MFRSs when they become
effective in the respective financial periods and these MFRSs and Amendments to MFRSs
are not expected to have any material impact to the financial statements of the Fund upon
initial application.
27
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (CONT’D.)
Standards issued but not yet effective (cont’d.)
Effective for
financial periods
beginning on or after
Revised Conceptual Framework for Financial Reporting 1 January 2020
Amendments to MFRS 3 - Definition of a Business 1 January 2020
Amendments to MFRS 101 and MFRS 108 - Definition of Material 1 January 2020
Amendments to MFRS 7, MFRS 9 and MFRS 139 - 1 January 2020
Interest Rate Benchmark Reform
MFRS 17 Insurance Contracts 1 January 2021
Amendments to MFRS 10 and MFRS 128: Sale or Contribution Deferred
of Assets between an Investor and its Associate or Joint Venture
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Income recognition
(i) Distribution income
(ii) Gain or loss on disposal of investment
3.2 Income tax
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.
Distribution income is recognised when the Fund’s right to receive payment is
established.
On disposal of investment, the net realised gain or loss on disposal is measured
as the difference between the net disposal proceeds and the carrying amount of
the investment. The net realised gain or loss is recognised in profit or loss.
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.
28
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)
3.3 Functional and presentation currency
3.4 Foreign currency transactions
3.5 Statement of cash flows
The Fund adopts the direct method in the preparation of the statement of cash flows.
3.6 Distribution
3.7 Unitholders’ capital
3.8 Financial assets – initial recognition and measurement
(i) Initial recognition
Financial assets and financial liabilities are recognised when the Fund becomes
a party to the contractual provisions of the instrument. Regular way purchases
and sales of financial assets are recognised using trade date accounting or
settlement date accounting. The method used is applied consistently for all
purchases and sales of financial assets that belong to the same category of
financial assets.
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 United States Dollar (“USD”)
which is the currency in which the sale and purchase of the Fund’s investment are
denominated and settled. The Fund has also adopted USD as its presentation
currency.
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 USD at exchange rates ruling at the reporting date. All exchange gains
or losses are recognised in profit or loss.
Cash equivalents are short-term, highly liquid investment that is 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 income. A proposed distribution is
recognised as a liability in the period in which it is approved. Distribution is either
reinvested or paid in cash to the unitholders on the income payment date.
Reinvestment of units is based on the NAV per unit on the income payment date,
which is also the time of creation.
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”).
29
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)
3.8 Financial assets – initial recognition and measurement (cont’d.)
(ii) Initial measurement
(iii) “Day 1” profit or loss
3.9 Financial assets – classification and subsequent measurement
3.10 Financial assets under MFRS 9
(i) Classification and measurement
All financial assets are recognised initially at fair value plus, in the case of
financial assets not recorded at FVTPL, transaction costs that are attributable to
the acquisition of the financial asset. All financial liabilities are recognised initially
at fair value and, in the case of financial liabilities not recorded at FVTPL, net of
directly attributable transaction costs.
At initial measurement, if the transaction price differs from the fair value, the
Fund immediately recognises the difference between the transaction price and
fair value (a “Day 1” profit or loss) in profit or loss provided that fair value is
evidenced by a quoted price in an active market for an identical asset or liability
(i.e. Level 1 input) or based on a valuation technique that uses only data from
observable markets. In all other cases, the difference between the transaction
price and model value is recognised in profit or loss on a systematic and rational
basis that reflects the nature of the instrument over its tenure.
The Fund subsequently measures its investment in collective investment schemes
(“CIS”) and unquoted derivative instruments at FVTPL. Distributions earned whilst
holding the investment is recognised in profit or loss when the right to the payment
has been established. Gains and losses on the investment, realised and unrealised,
are included in profit or loss.
The classification of financial assets depends on the Fund’s business model of
managing the financial assets in order to generate cash flows (“business model
test”) and the contractual cash flow characteristics of the financial instruments
(“SPPI test”). The business model test determines whether cash flows will result
from collecting contractual cash flows, selling the financial assets, or both and
the assessment is performed on a portfolio basis. The SPPI test determines
whether the contractual cash flows are solely for payments of principal and
interest and the assessment is performed on a financial instrument basis.
30
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)
3.10 Financial assets under MFRS 9 (cont’d.)
(i) Classification and measurement (cont’d.)
The Fund may classify its financial assets under the following categories:
Financial assets at amortised cost
Financial assets at FVOCI
Financial assets at FVTPL
A financial asset is measured at amortised cost if it is held within a business
model whose objective is to hold financial assets in order to collect contractual
cash flows and its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding. The Fund includes in this category deposits with financial
institutions, cash at banks, amount due from the Target Fund Manager, amount
due from the Manager and other receivables.
A financial asset is measured at fair value through other comprehensive income
(“FVOCI”) if its business model is both to hold the asset to collect contractual
cash flows and to sell the financial asset. In addition, the contractual terms of
the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the outstanding principal.
These investment are initially recorded at fair value and transaction costs are
expensed in the profit or loss. Subsequent to initial recognition, these investment
are remeasured at fair value. All fair value adjustments are initially recognised
through OCI. Debt instruments at FVOCI are subject to impairment assessment.
Any financial assets that are not measured at amortised cost or FVOCI are
measured at FVTPL. 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 FVTPL”.
Distribution income elements of such instruments is recorded separately in
“Distribution income”. Exchange differences on financial assets at FVTPL are not
recognised separately in profit or loss but are included in net gain or net loss on
changes in fair value of financial assets at FVTPL.
Instruments that qualify for amortised cost or FVOCI may be irrevocably
designated as FVTPL, if doing so eliminates or significantly reduces a
measurement or recognition inconsistency. Equity instruments are normally
measured at FVTPL, nevertheless, the Fund is allowed to irrevocably designate
equity instruments that are not held for trading as FVOCI, with no subsequent
reclassification of gains or losses to profit or loss.
31
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)
3.11 Financial liabilities – classification and subsequent measurement
3.12 Derecognition of financial instruments
(i) Derecognition of financial asset
- the rights to receive cash flows from the asset have expired, or
-
-
-
(ii) Derecognition of financial liability
3.13 Financial instruments – expected credit losses (“ECL”)
-
-
-
Financial liabilities issued by the Fund are classified as financial liabilities at amortised
cost, where the substance of the contractual arrangement results in the Fund having
an obligation either to deliver cash or another financial asset to the holder. After initial
measurement, financial liabilities are subsequently measured at amortised cost using
the effective interest method. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the
effective interest rate.
A financial asset (or, where applicable a part of a financial asset or part of a
group of similar financial assets) is derecognised when:
the Fund has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a “pass-through” arrangement; and
either:the Fund has transferred substantially all the risks and rewards of the
asset, or
the Fund has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
A financial liability is derecognised when the obligation under the liability is
discharged, cancelled or expired. Gains and losses are recognised in profit or
loss when the liabilities are recognised, and through the amortisation process.
The Fund assesses on a forward-looking basis the ECL associated with its financial
assets at amortised cost. The Fund recognises a loss allowance for such losses at
each reporting date. The measurement of ECL reflects:
an unbiased and probability-weighted amount that is determined by evaluating a
range of possible outcomes;
the time value of money; and
reasonable and supportable information that is available without undue cost or
effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
The ECL in respect of financial assets at amortised cost, if any, is recognised in profit
or loss.
32
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)
3.13 Financial instruments – expected credit losses (“ECL”) (cont’d.)
3.14 Determination of fair value
3.15 Classification of realised and unrealised gains and losses
3.16 Significant accounting estimates and judgments
The fair value of foreign exchange - forward contracts is calculated by making
reference to prevailing forward exchange rates for contracts with similar maturity
profiles in the market. Derivative are carried as assets when the fair value is positive
and as liabilities when the fair value is negative.
Realised gains and losses on disposals of financial instruments classified at FVTPL
are calculated using the weighted average method. They represent the difference
between an instrument’s initial carrying amount and disposal amount.
Financial assets together with the associated allowance are written off when it has
exhausted all practical recovery efforts and there is no realistic prospect of future
recovery. The Fund may also write-off financial assets that are still subject to
enforcement activity when there is no reasonable expectation of full recovery. If a
write-off is later recovered, the recovery is credited to profit or loss.
For the investment in CIS, fair value is determined based on the closing NAV per unit
of the foreign CIS. Purchased cost is the price that the Fund paid when buying it
investment. The difference between purchased cost and fair value is treated as
unrealised gain or loss and is recognised in profit or loss. Unrealised gains or losses
recognised in profit or loss are not distributable in nature.
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.
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 investment as financial assets at FVTPL as the Fund may sell
its investment 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.33
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
4. INVESTMENT
2020 2019
USD USD
Financial assets at FVTPL
At cost:
Foreign CIS 13,830,385 22,227,530
At fair value:
Foreign CIS 12,913,844 22,988,019
Details of investment are as follows:
Fair value
as a
Number Fair Purchased percentage
Foreign CIS of units value cost of NAV
USD USD %
2020
HSBC Global Investment
Funds– Global Equity
Volatility Focused Fund (“Target Fund”) 1,346,033 12,913,844 13,830,385 95.15
Shortfall of fair value overpurchased cost (916,541)
2019
HSBC Global Investment
Funds– Global Equity
Volatility Focused Fund (“Target Fund”) 22,227,530 22,988,019 22,227,530 98.69
Excess of fair value overpurchased cost 760,489
A minimum of 95% of its NAV will be invested in the Target Fund. However, the asset
allocation may be reduced due to creation of units at the point of reporting date. The ratio
will be adjusted back to the minimum level after the reporting period, if need be.
34
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
5.
Maturity Notional Fair value
date amount USD
2020
Australian Dollar 29.5.2020 98,898 88
Australian Dollar 29.5.2020 115,524 (147)
Australian Dollar 29.5.2020 5,190,530 99,056
Australian Dollar 29.5.2020 136,912 2,611
Ringgit Malaysia 29.5.2020 1,306,918 963
Ringgit Malaysia 29.5.2020 1,029,418 3,414
Ringgit Malaysia 29.5.2020 40,745,653 135,498
Ringgit Malaysia 29.5.2020 842,903 2,837
Ringgit Malaysia 29.5.2020 727,657 (2,580)
2019
Australian Dollar 31.5.2019 11,769,086 (98,316)
Ringgit Malaysia 31.5.2019 62,330,402 (13,546)
Ringgit Malaysia 31.5.2019 1,125,992 (265)
6. AMOUNT DUE FROM TARGET FUND MANAGER
The amount due from the Target Fund Manager was for the sale of investment where
settlement was not due as at the financial year end.
The normal trade credit period is three business days.
The table below shows the fair values of derivative financial instruments, recorded as
assets (being derivatives which are in a net gain position) or liabilities (being derivatives
which are in a net loss position), together with their notional amounts. The notional
amount, recorded gross, is the amount of a derivative's underlying asset, foreign exchange
currency and is the basis upon which changes in the value of derivatives are measured.
The notional amounts indicate the volume of transactions outstanding at the end of the
financial year.
DERIVATIVE INSTRUMENTS
Derivative instruments comprise forward currency contracts. The forward currency
contracts entered into during the financial year were for hedging against the currencies
exposure arising mainly from creation of unitholders in the foreign currencies that are not
denominated in USD. As the Fund has not adopted hedge accounting during the financial
year, the change in the fair value of the forward currency contract is recognised
immediately in the statement of comprehensive income.
35
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
7. AMOUNT DUE FROM/TO MANAGER
2020 2019 Note USD USD
(a) Due from Manager
Creation of units (i) 23,388 23,204
(b) Due to Manager
Redemption of units (ii) 95,040 320,607
Manager’s fee payable (iii) 4,146 7,467
99,186 328,074
(i) The amount represents amount receivable from the Manager for units created.
(ii) The amount represents amount payable to the Manager for units redeemed.
(iii)
2020 2019
% p.a. % p.a.
Manager’s fee charged by the Target Fund Manager,
on the NAV of the Target Fund (Note a) 1.50 1.50
Manager’s fee charged by the Manager, on the NAV
of investment in the Target Fund (Note b) 0.30 0.30
Manager’s fee charged by the Manager, on the
remaining NAV of the Fund (Note b) 1.80 1.80
Note a)
Note b)
The normal credit period in the previous and current financial years for Manager’s fee
payable is one month.
The Fund’s share of Manager’s fee to the Target Fund Manager has been
accounted for as part of net unrealised changes in fair value of investment in
foreign CIS.
The Manager’s fee of the Fund chargeable in the Statement of
Comprehensive Income relates to 0.30% on the NAV of investment in the
Target Fund and 1.80% on the remaining NAV of the Fund.
As the Fund is investing in the Target Fund, the Manager’s fee was charged as
follows:
The normal credit period in the previous and current financial years for creation and
redemption of units is three business days.
36
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
8. AMOUNT DUE TO TRUSTEE
9. NET LOSS FROM INVESTMENT
2020 2019
USD USD
Net loss on financial assets at FVTPL comprised:
– Net realised (loss)/gain on sale of investment (105,146) 26,510
– Net realised loss on settlement of derivative contracts (1,415,302) (1,470,363)
– Net realised gain/(loss) on foreign currency
exchange 8,512 (9,385)
– Net unrealised (loss)/gain on changes in fair value
of investment (1,677,030) 66,050
– Net unrealised gain from revaluation of
derivative contracts 353,867 75,587
(2,835,099) (1,311,601)
10. TOTAL EQUITY
Total equity is represented by:
2020 2019
Note USD USD
Unitholders’ capital − AUD Hedged Class (a) 4,956,581 8,481,122
Unitholders’ capital − MYR Hedged Class (b) 11,739,891 15,146,050
Accumulated losses
− Realised losses (c) (2,449,868) (983,468)
− Unrealised (loss)/gain (d) (674,736) 648,414
13,571,868 23,292,118
Trustee’s fee is at a rate of 0.05% (2019: 0.05%) per annum on the NAV 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.
37
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
10. TOTAL EQUITY (CONT’D.)
(a) Unitholders' capital/units in circulation – AUD Hedged Class
Number of Number of
units USD units USD
At beginning of the
financial year 10,423,387 8,481,122 11,407,799 9,193,737
Creation during the
financial year 754,490 556,298 2,916,818 2,283,078
Distribution reinvested
(Note 13) 147,726 105,769 238,967 181,960
Cancellation during
the financial year (5,572,647) (4,186,608) (4,140,197) (3,177,653)
At end of the
financial year 5,752,956 4,956,581 10,423,387 8,481,122
(b) Unitholders' capital/units in circulation – MYR Hedged Class
Number of Number of
units USD units USD
At beginning of the
financial year 57,514,609 15,146,050 33,356,326 8,729,055
Creation during the
financial year 14,844,470 4,108,832 30,776,922 8,194,005
Distribution reinvested
(Note 13) 931,343 240,161 1,015,090 265,045
Cancellation during
the financial year (30,417,230) (7,755,152) (7,633,729) (2,042,055)
At end of the
financial year 42,873,192 11,739,891 57,514,609 15,146,050
(c) Realised - distributable
2020 2019
USD USD
At beginning of the financial year (983,468) 262,265
Net realised loss for the financial year (1,120,470) (798,728)
Distributions out of realised income (Note 13) (345,930) (447,005)
At end of the financial year (2,449,868) (983,468)
2020 2019
20192020
38
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
10. TOTAL EQUITY (CONT’D.)
(d) Unrealised - non-distributable
2020 2019
USD USD
At beginning of the financial year 648,414 506,678
Net unrealised (loss)/gain for the financial year (1,323,150) 141,736
At end of the financial year (674,736) 648,414
11. UNITS HELD BY RELATED PARTIES
The related parties and their relationship with the Fund are as follows:
Related parties Relationship
AmFunds Management Berhad The Manager
AmInvestment Bank Berhad
AMMB Holdings Berhad
Subsidiaries and associates of AMMB Subsidiaries and associate companies of the
as disclosed in its financial ultimate holding company of the Manager
statements
12. INCOME TAX
Pursuant to Schedule 6 of the Income Tax Act 1967, provided that the exemption shall not
apply to the interest paid or credited to a unit trust that is a wholesale fund which is a
money market fund. Interest income earned by Funds other than other money market fund
is exempted from tax.
Holdings company of the Manager
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.
Ultimate holding company of the Manager
There were no units held by the Manager or any related party as at 30 April 2020 and 30
April 2019.
39
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
12. INCOME TAX (CONT’D.)
2020 2019
USD USD
Net loss before tax (2,443,620) (656,992)
Taxation at Malaysian statutory rate of 24% (2019: 24%) (586,469) (157,678)
Tax effects of:
Income not subject to tax (198,082) (219,590)
Loss not allowed for tax deduction 767,394 355,140
Restriction on tax deductible expenses 13,307 17,201
Non-permitted expenses for tax purposes 2,371 3,016
Permitted expenses not used and not available for
future financial years 1,479 1,911
Tax expense for the financial year - -
13. DISTRIBUTIONS
2020 2019
USD USD
Distribution income 417,414 539,204
Less: Expenses (71,484) (92,199)
Total amount of distributions 345,930 447,005
Gross/net distributions per unit in respective currencies
− AUD Hedged Class (AUD) 2.29 cent 2.14 cent
− MYR Hedged Class (MYR) 2.27 sen 2.16 sen
Distributions made out of:
− Realised income [Note 10(c)] 345,930 447,005
Comprising:
Distributions reinvested 345,930 447,005
The above distributions have been proposed before taking into account the net realised
loss of USD1,511,936 (2019: USD1,453,238) and net unrealised loss of USD674,736
which are carried forward to the next financial year.
Distributions to unitholders for the financial year are from the following sources:
A reconciliation of income tax expense applicable to net loss before tax at the statutory
income tax rate to income tax expense at the effective income tax rate of the Fund is as
follows:
40
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
14.
The Fund’s MER is as follows:
2020 2019
% p.a. % p.a.
Manager’s fee 0.34 0.37
Trustee’s fee 0.05 0.05
Fund’s other expenses 0.02 0.02
Total MER 0.41 0.44
15. PORTFOLIO TURNOVER RATIO (“PTR”)
16. SEGMENTAL REPORTING
17.
Target Fund ManagerUSD %
HSBC Investment Funds (Luxembourg) S.A. 12,510,000 100.00
The PTR of the Fund, which is the ratio of average total acquisitions and disposals of
investment to the average NAV of the Fund calculated on a daily basis, is 0.36 times (2019:
0.22 times).
MANAGEMENT EXPENSE RATIO (“MER”)
The MER of the Fund is the ratio of the sum of annualised fees and expenses incurred by
the Fund to the average NAV of the Fund calculated on a daily basis.
Transaction value
As stated in Note 1, the Fund is a feeder fund whereby a minimum of 95% of the Fund’s
NAV will be invested in the Target Fund.
As the Fund operates substantially as a feeder fund which invests primarily in the Target
Fund, it is not possible or meaningful to classify its investment by separate business or
geographical segments.
TRANSACTIONS WITH THE TARGET FUND MANAGER
Details of transactions with the Target Fund Manager for the financial year ended 30 April
2020 are as follows:
There was no transaction with financial institutions related to the Manager, during the
financial year.
The above transactions were in respect of investment in foreign CIS. Transactions in this
investment do not involve any commission or brokerage.
41
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
18. FINANCIAL INSTRUMENTS
(a) Classification of financial instruments
Financial Financial Financial
assets/ assets at liabilities at
liabilities amortised amortised
at FVTPL cost cost Total
USD USD USD USD
Assets
Investment 12,913,844 - - 12,913,844
Derivative assets 244,467 - - 244,467
Amount due from
Manager - 23,388 - 23,388
Cash at banks - 495,096 - 495,096
Total financial assets 13,158,311 518,484 - 13,676,795
Liabilities
Derivative liabilities 2,727 - - 2,727
Amount due to Manager - - 99,186 99,186
Amount due to Trustee - - 528 528
Sundry payables and
accrued expenses - - 2,486 2,486
Total financial liabilities 2,727 - 102,200 104,927
Assets
Investment 22,988,019 - - 22,988,019
Amount due from
Target Fund Manager - 249,000 - 249,000
Amount due from
Manager - 23,204 - 23,204
Dividend receivables - 55,105 - 55,105
Cash at banks - 421,217 - 421,217
Total financial assets 22,988,019 748,526 - 23,736,545
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.
2020
2019
42
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
18. FINANCIAL INSTRUMENTS (CONT’D.)
(a) Classification of financial instruments (cont’d.)
Financial Financial Financial
assets/ assets at liabilities at
liabilities amortised amortised
at FVTPL cost cost Total
USD USD USD USD
2019 (cont’d.)
Liabilities
Derivative liabilities 112,127 - - 112,127
Amount due to Manager - - 328,074 328,074
Amount due to Trustee - - 1,042 1,042
Sundry payables and
accrued expenses - - 3,184 3,184
Total financial liabilities 112,127 - 332,300 444,427
and losses
2020 2019
USD USD
Net loss on financial assets at FVTPL (2,835,099) (1,311,601)
Income, of which derived from:
− Distribution income from financial assets
at FVTPL 462,950 746,709
− Other unrealised foreign exchange gain 13 99
(b) Financial instruments that are carried at fair value
The Fund’s financial assets and liabilities are carried at fair value.
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:
Level 3:
other techniques for which all inputs which have a significant effect on the
recorded fair values are observable; either directly or indirectly; or
The Fund uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
techniques which use inputs which have a significant effect on the recorded
fair value that are not based on observable market data.
Income, expense, gains
43
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
18. FINANCIAL INSTRUMENTS (CONT’D.)
(b) Financial instruments that are carried at fair value (cont’d.)
Level 1 Level 2 Level 3 Total
USD USD USD USD
Financial assets at
FVTPL:
– Investment - 12,913,844 - 12,913,844
– Derivative assets - 244,467 - 244,467
- 13,158,311 - 13,158,311
Financial liability at
FVTPL:
– Derivative liabilities - 2,727 - 2,727
Financial assets at
FVTPL:– Investment - 22,988,019 - 22,988,019
Financial liability at
FVTPL:
– Derivative liabilities - 112,127 - 112,127
(c)
• Amount due from Target Fund Manager
• Amount due from/to Manager
• Distribution receivable
• Cash at banks
• Amount due to Trustee
• Sundry payables and accrued expenses
The following table shows an analysis of financial instruments recorded at fair value by
the level of the fair value hierarchy:
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.
2020
2019
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:
44
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(a) Market risk
(i) Price risk
Percentage movements
in price by: 2020 2019
USD USD
-5.00% (645,692) (1,149,401) +5.00% 645,692 1,149,401
(ii) Currency 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.
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.
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 investment
in the Target Fund. In managing price risk, the Manager actively monitors the
performance and risk profile of the investment portfolio.
Sensitivity of the
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:
Fund’s NAV
Risk management is carried out by closely monitoring, measuring and mitigating the above
said risks, careful selection of investment coupled with stringent compliance to investment
restrictions as stipulated by the Capital Market and Services Act 2007, Securities
Commission’s Guidelines on Unlisted Capital Market Products under the Lodge and Launch
Framework and the Deed as the backbone of risk management of the Fund.
The result below summarised the currency risk sensitivity of the Fund’s NAV due
to appreciation/depreciation of the Fund’s functional currency against currencies
other than the Fund’s functional currency.
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.
45
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.)
(a) Market risk (cont’d.)
(ii) Currency risk (cont’d.)
(a) AUD Hedged Class
2020 2019
USD USD
Hedged amount 7,778 59,479
Percentage movements in
currencies other than the 2020 2019Fund’s functional currency: USD USD
+5.00% 406 2,974 -5.00% (406) (2,974)
(b) MYR Hedged Class
2020 2019
USD USD
Hedged amount 68,048 15,596
Percentage movements in
currencies other than the 2020 2019Fund’s functional currency: USD USD
+5.00% 6,324 780 -5.00% (6,324) (780)
Assets/(liabilities) USD % of USD % ofdenominated in equivalent NAV equivalent NAV
Australian Dollar
Amount due from
Manager 336 - * - -
Amount due to
Manager - - (311,745) (1.34)
336 0.00 (311,745) (1.34)
Notional amount
Sensitivity of the Fund’s NAV
2020 2019
The net unhedged financial assets and financial liabilities of the Fund that are not
denominated in Fund’s functional currency are as follows:
Notional amount
Sensitivity of the Fund’s NAV
46
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.)
(a) Market risk (cont’d.)
(ii) Currency risk (cont’d.)
Assets/(liabilities) USD % of USD % ofdenominated in equivalent NAV equivalent NAV
Malaysian Ringgit
Amount due from
Manager 23,052 0.17 23,204 0.10
Amount due to
Manager (95,040) (0.70) (8,862) (0.04)
Cash at bank 13,559 0.10 8 - *
(58,429) (0.43) 14,350 0.06
* represents less than 0.01%
(b) Credit risk
(c) Liquidity risk
Cash at banks are held for liquidity purposes and are not exposed to significant credit
risk.
The Fund, as a feeder fund, invests significantly all its assets in the Target Fund. The
Target Fund manages the risk by setting internal counterparty limits and undertaking
internal credit evaluation to minimise such risk.
Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting
obligations associated with financial liabilities that are settled by delivering cash or
another financial asset. Exposure to liquidity risk arises because of the possibility that
the Fund could be required to pay its liabilities or redeem its units earlier than expected.
This is also the risk of the Fund experiencing large redemptions, when the Investment
Manager could be forced to sell large volumes of its holdings at unfavorable prices to
meet redemption requirements.
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. Credit risk applies to short-term
deposits, distributions receivable and derivatives assets. The issuer of such
instruments may not be able to fulfill the required interest payments or repay the
principal invested or amount owing. These risks may cause the Fund’s investment to
fluctuate in value.
2020 2019
47
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.)
(c) Liquidity risk (cont’d.)
(d) Single issuer risk
(e) Regulatory risk
(f) Country risk
(g) Management risk
(h) Non-compliance risk
The specific risks associated to the Target Fund include market risk, securities risk,
emerging market risk, settlement and credit risks, regulatory and accounting standards
risks, political risk, custody risk and liquidity risk.
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 investment of the Fund when the Fund is
forced to rectify the non-compliance.
Poor management of the Fund may cause considerable losses to the Fund that in turn
may affect the NAV of the Fund.
The risk of price fluctuation in foreign securities may arise due to political, financial and
economic events in foreign countries. If this occurs, there is a possibility that the NAV
of the Fund may be adversely affected.
The Fund’s financial liabilities have contractual maturities of not more than six months.
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 deposit with licensed financial institution 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.
The Fund, as a feeder fund, invests significantly all its assets in the Target Fund. The
Target Fund is restricted from investing in securities issued by any issuer in excess of a
certain percentage of its NAV. Under such restriction, the risk exposure to the
securities of any single issuer is diversified and managed by the Target Fund Manager
based on internal/external ratings.
Any changes in national policies and regulations may have effects on the capital
market and the NAV of the Fund.
48
Advantage Global Equity Volatility Focused
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 APRIL 2020
20. CAPITAL MANAGEMENT
No changes were made in the objective, policies or processes during the financial years
ended 30 April 2020 and 30 April 2019.
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 NAV from the performance of its investment.
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.
49
Advantage Global Equity Volatility Focused
STATEMENT BY THE MANAGER
For and of behalf of the Manager
GOH WEE PENG
Chief Executive Officer
AmFunds Management Berhad
Kuala Lumpur, Malaysia
24 June 2020
I, Goh Wee Peng, for and on behalf of the Manager, AmFunds Management Berhad, for
Advantage Global Equity Volatility Focused (the “Fund”) 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 2020 and the comprehensive income, the changes in equity and cash flows of the Fund
for the financial year then ended.
50
TRUSTEE’S REPORT
TO THE UNITHOLDERS OF ADVANTAGE GLOBAL EQUITY VOLATILITY FOCUSED
(a)
(b)
(c)
For Deutsche Trustees Malaysia Berhad
Ng Hon Leong Richard Lim Hock Seng
Head, Trustee Operations Chief Executive Officer
Kuala Lumpur
24 June 2020
We have acted as Trustee for Advantage Global Equity Volatility Focused (the “Fund”) for the
financial year ended 30 April 2020. To the best of our knowledge, for the financial year under
review, AmFunds Management Berhad (the “Manager”) has operated and managed the Fund in
accordance with the following:-
limitations imposed on the investment powers of the Manager under the Deed(s), the
Securities Commission’s Guidelines on Unlisted Capital Market Products under The
Lodge and Launch Framework, the Capital Markets and Services Act 2007 and other
applicable laws;
valuation and pricing of the Fund is carried out in accordance with the Deed(s) of the
Fund and any regulatory requirements; and
creation and cancellation of units for the Fund are carried out in accordance with the
Deed(s) of the Fund and any regulatory requirements.
We are of the view that the distributions made during the financial year ended 30 April 2020 by
the Manager are not inconsistent with the objectives of the Fund.
51
52
DIRECTORY
Head Office 9th & 10th 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
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 to Thursday),
Friday (8.45 a.m. to 5.00 p.m.)
03 2032 2888 | aminvest.com | [email protected] m
AmFunds Management Berhad 198601005272 (154432-A)