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Annual Report for

AmDynamic Sukuk31 July 2019

AmDynamic Sukuk

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 Seohan Soo

Goh Wee Peng

Investment Committee Sum Leng Kuang

Tai Terk Lin Dato’ Mustafa Bin Mohd Nor

Zainal Abidin Bin Mohd Kassim Goh Wee Peng

Investment Manager AmIslamic Funds Management Sdn Bhd

Trustee Deutsche Trustees Malaysia Berhad

Shariah Adviser Amanie Advisors Sdn Bhd

Auditors and Reporting Accountants Ernst & Young

Taxation Adviser Deloitte Tax Services Sdn Bhd

AmDynamic Sukuk

CONTENTS

1 Manager’s Report

9 Independent Auditor’s Report to the Unitholders

13 Statement of Financial Position

14 Statement of Comprehensive Income

15 Statement of Changes in Equity

16 Statement of Cash Flows

17 Notes to the Financial Statements

43 Statement by the Manager

44 Trustee’s Report

45 Report of Shariah Adviser to the Unitholders

46 Directory

1

MANAGER’S REPORT

Dear Unitholders,

We are pleased to present you the Manager’s report and the audited accounts of AmDynamic Sukuk (“Fund”) for the financial year ended 31 July 2019.

Salient Information of the Fund

Name AmDynamic Sukuk (“Fund”)

Category/ Type

Sukuk / Growth

Objective The Fund aims to provide capital appreciation by investing primarily in Sukuk both locally and globally.

Note: Any material change to the investment objective of the Fund would require Unit Holder’s approval.

Duration The Fund was established on 12 June 2012 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

BPAM Corporates Sukuk Index (available at www.aminvest.com)

The performance benchmark has been changed from Bloomberg AIBIM Bursa Malaysia Sovereign Shariah Index (BMSSI) because BMSSI has been discontinued by Bloomberg effective 25 July 2015.

Note: The risk profile of the Fund may not be the same as the risk profile of the performance benchmark.

Income Distribution Policy

Class A and Class B : Income distribution (if any) is incidental.

Breakdown of Unit Holdings by Size

For the financial year under review, the size of the Fund for Class A stood at 6,147,176 units and for Class B stood at 854 units.

Class A

Size of holding As at 31 July 2019 As at 31 July 2018

No of units held

Number of unitholders

No of units held


5,000 and below - - - -

5,001-10,000 - - 9,879 1

10,001-50,000 10,132 1 - -

50,001-500,000 330,086 2 143,350 1

500,001 and above 5,806,958 3 4,565,251 3

(Forward)

2

Class B

Size of holding As at 31 July 2019 As at 31 July 2018

No of units held


No of units held


5,000 and below 854 1 2,899 1

5,001-10,000 - - - -

10,001-50,000 - - - -

50,001-500,000 - - - -

500,001 and above - - - -

Fund Performance Data

Portfolio Composition

Details of portfolio composition of the Fund for the financial years as at 31 July are as follows:

FY 2019

%

FY 2018

%

FY 2017

%

Corporate sukuk 69.10 86.96 90.85

Malaysian government bonds 16.66 - -

Money market deposit 14.46 13.23 9.45

Cash and others -0.22 -0.19 -0.30

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 31 July are as follows:

FY 2019

FY 2018

FY 2017

Net asset value (RM)

- Class A 8,424,207* 6,036,524 6,023,743

- Class B 1,083 3,342 3,204

Units in circulation

- Class A 6,147,176* 4,718,480 4,913,482

- Class B 854 2,899 2,899

Net asset value per unit (RM)

- Class A 1.3704* 1.2793 1.2260

- Class B 1.2670 1.1526 1.1052

Highest net asset value per unit (RM)

- Class A 1.4031* 1.2793 1.2263

- Class B 1.2670 1.1526 1.1053

Lowest net asset value per unit (RM)

- Class A 1.2804* 1.2258 1.1868

- Class B 1.1535 1.1049 1.0701

Benchmark performance (%)

- Class A 9.41 4.80 3.79

- Class B 9.41 4.80 3.79

(Forward)

3

FY 2019

FY 2018

FY 2017

Total return (%)(1)

- Class A 9.86 4.35 3.12

- Class B 9.93 4.31 3.07

- Capital growth (%)

- Class A 7.12 4.35 3.12

- Class B 9.93 4.31 3.07

- Income distribution (%)

- Class A 2.74 - -

- Class B - - -

Gross/Net distribution (sen per unit)

- Class A 3.50 - -

- Class B - - -

Management expense ratio (%)(2) 1.39 1.54 1.63

Portfolio turnover ratio (times)(3) 0.32 0.16 0.33

* Above prices and net asset value per unit are shown as ex-distribution.

Note:

(1) Total return is the annualised return of the Fund for the respective financialyears 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 andexpenses incurred by the Fund divided by the average fund size calculated ona daily basis. The MER decreased by 0.15% as compared to 1.54% per annumfor the financial year ended 31 July 2018 mainly due to decrease in expenses.

(3) Portfolio turnover ratio (“PTR”) is calculated based on the average of the totalacquisitions and total disposals of investment securities of the Fund divided bythe average fund size calculated on a daily basis. The PTR increased by 0.16times (100.0%) as compared to 0.16 times for the financial year ended 31 July2018 mainly due to increase in investing activities.

Average Total Return (as at 31 July 2019)

AmDynamic Sukuk(a) %

BPAMCSI/ AIBIM BMSSI **(b)

%

One year

- Class A 9.86 9.41

- Class B 9.93 9.41

Three years

- Class A 5.74 5.97

- Class B 5.73 5.97

Five years

- Class A 5.48 4.91

Since launch

- Class A (20 June 2012) 4.90 4.16

- Class B (16 March 2015) 5.56 5.58

(Forward)

4

Annual Total Return

Financial Years/Period Ended (31 July) AmDynamic Sukuk(a)

%

BPAMCSI/ AIBIM BMSSI**(b)

%

2019

- Class A 9.86 9.41

- Class B 9.93 9.41

2018

- Class A 4.35 4.80

- Class B 4.31 4.80

2017

- Class A 3.12 3.79

- Class B 3.07 3.79

2016

- Class A 5.01 6.24

- Class B 5.08 6.24

2015

- Class A 5.17 0.54

- Class B(c) 2.02 0.33

(a) Source: Novagni Analytics and Advisory Sdn Bhd.

(b) BPAM Corporates Sukuk Index (available at www.aminvest.com) ** Benchmark – from 20 June 2012 to 25 July 2015 –

Bloomberg AIBIM Bursa Malaysia Sovereign Shariah Index (BMSSI).

(c) Total annualised return for the financial period from 16 March 2015 (date of launch) to 31 July 2015.

The Fund performance is calculated based on net asset value per unit of the Fund. Average total return of the Fund and its benchmark for a period is computed based on the absolute return for that period annualised over one year. Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up.

Fund Performance

Class A For the financial year under review, the Fund registered a return of 9.86% which comprising of 7.12% capital growth and 2.74% income distribution. Thus, the Fund’s return of 9.86% has outperformed the benchmark’s return of 9.41% by 0.45%. As compared with the financial year ended 31 July 2018, the net asset value (“NAV”) per unit of the Fund increased by 7.12% from RM1.2793 to RM1.3704, while units in circulation increased by 30.28% from 4,718,480 units to 6,147,176 units. The line chart below shows comparison between the annual performances of AmDynamic Sukuk – Class A and its benchmark, AIBIM BMSSI/BPAMCSI, for the financial years ended 31 July.

(Forward)

5

Class B For the financial year under review, the Fund registered a return of 9.93% which was entirely capital growth in nature. Thus, the Fund’s return of 9.93% has outperformed the benchmark’s return of 9.41% by 0.52%. As compared with the financial year ended 31 July 2018, the net asset value (“NAV”) per unit of the Fund increased by 9.93% from RM1.1526 to RM1.2670, while units in circulation decreased by 70.54% from 2,899 units to 854 units. The line chart below shows comparison between the annual performances of AmDynamic Sukuk – Class B and its benchmark, BPAMCSI, for the financial period/years ended 31 July.

6

Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up.

Has the Fund achieved its objective?

The Fund has achieved its investment objective in providing capital appreciation by investing primarily in sukuk.

Strategies and Policies Employed

To achieve the investment objective, the Fund undertakes active management to enhance and optimize returns from investing in sovereign, quasi-sovereign and corporate sukuk. There is no minimum rating for a sukuk purchased or held by the Fund. This is to enable the Manager of the Fund to take a relatively high level of calculated credit risk for the Fund, justified by the relatively high level of expected return that could be generated by the Fund in return for taking the higher level of credit risk. In managing the Fund, the Manager may option to invest in the investments either directly or via collective investment schemes. In managing the Fund, the Manager of the Fund employs active tactical duration management; yield curve positioning and credit spread arbitrage. Credit spread arbitrage and yield curve positioning is part of relative value approach that involves analysis of general economic and market conditions and the use of models to analyze and compare expected returns as well as the assumed risks. The Manager will focus on sukuk that would deliver better returns to the Fund for a given level of risk. In addition, the Manager may also consider sukuk with favourable or improving credit outlook that provide the potential for capital appreciation for these investments. The Fund may invest in sukuk of varying maturities. The Fund’s investment maturity profile is subject to active tactical duration management in view of the interest rate scenario without any portfolio maturity limitation. The Fund may invest globally in foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (“IOSCO”).

Portfolio Structure

This table below is the asset allocation of the Fund for the financial years under review.

As at 31-7-2019

%

As at 31-7-2018

%

Changes

%

Corporate sukuk 69.10 86.96 -17.86

Malaysian government bonds 16.66 - 16.66

Money market deposit 14.46 13.23 1.23

Cash and others -0.22 -0.19 -0.03

Total 100.00 100.00

For the financial year under review, 69.10% of the Fund’s NAV invested in corporate Sukuk, 16.66% in Malaysian government bonds and 14.46% in money market deposit.

Cross Trades For the financial year under review, cross trade are conducted between the Fund and other funds managed by the Manager amounting to:

Financial Institutions Transaction Value

(RM)

Maybank Group 502,234.93

Total 502,234.93

7

Funds Transaction Value

(RM)

AmAl-Amin 502,234.93

Total 502,234.93

The investment committee has reviewed that the above transaction are in the best interest of the Fund and transacted on an arm’s length and fair value basis. Note: The above cross trades were done in the month of March 2019.

Distribution/ Unit splits

During the financial year under review, the Fund declared income distribution, detailed as follows:

Date of distribution

Distribution per unit (sen)

NAV per unit Cum-Distribution

(RM)

NAV per unit Ex-Distribution

(RM)

26 July 2019 3.50 1.4041 1.3691

There was no unit split declared for the financial year under review.

State of Affairs

There has been neither significant change to the state of affairs of the Fund nor any circumstances that materially affect any interests of the unitholders during the financial year under review.

Rebates and Soft Commission

It is our policy to pay all rebates to the Fund. Soft commissions received from brokers/dealers are retained by the Manager only if the goods and services provided are of demonstrable benefit to unitholders of the Fund. During the financial year under review, the Manager had received on behalf of the Fund, soft commissions in the form of fundamental database, financial wire services, technical analysis software and stock quotation system incidental to investment management of the Fund. These soft commissions received by the Manager are deemed to be beneficial to the unitholders of the Fund.

Market Review

During the period under review, yields declined significantly across the curve. The yields of 1 year and 3 year GIIs went down by 26bps and 32bps respectively. The longer ends rallied even more with 10 year and 20 year as yields plunged by 57bps and 84bps respectively. For full year 2018, the total foreign bond flow was negative at –MYR21.9b which led to the percentage of foreign holdings declining to 22.7%. On the inflation front, full year headline inflation for 2018 stood low at 1.0% (2017: 3.9%). Mainly due to the lower inflation amid zero-rating of the Government Service Tax (GST) from June till September 2018 (Consumer Price Index (CPI) growth was 0.9% in July and 0.2% in September) and low oil prices drove deflation in transport prices (CPI growth for November and December 2018 remain subdued at 0.2%). Bank Negara (BNM) kept the Overnight Policy Rate (OPR) unchanged at 3.25% in January and March 2019. While in May 2019, BNM lowered OPR by 25bps to 3.00%, widely regarded as pre-emptive easing against global and domestic growth risks. Downside risks are weighted on heightened uncertainties in the global and domestic environment, trade tensions and extended weakness in commodity related sectors. The local bond market sentiments had improved since the start of the year. The rally was well supported by the domestic demand despite the continuous foreign

8

outflows. Foreign fund flows data for May 2019 showed an outflow of MYR4.28b from MGS/GII markets, slightly reducing the percentage of foreign holding to 21% in May 2019. The robust domestic demand was spurred by the bullish local sentiment apace with global yields racing to the bottom and the Federal Reserve signalling potential rate cuts during the June’s Federal Open Market Committee (FOMC) meeting.

Market Outlook

We remain bullish on the Malaysian bond markets. We expect local bonds to continue rally in tandem with global bonds on the back of downward growth trajectory leading to higher tendency of easing by global central banks, scarcity of supply in local primary market and ample liquidity coupled with the low rates environment post BNM rate cuts.

Additional Information

The following information was updated: 1. Jeyaratnam A/L Tamotharam Pillai was appointed as an Independent Non-

Executive Chairman for AmFunds Management Berhad with effect from 1st April 2019.

Kuala Lumpur, Malaysia AmFunds Management Berhad 17 September 2019

Independent auditors’ report to the unitholders of

AmDynamic Sukuk

Report on the audit of the financial statements

Opinion

We have audited the financial statements of AmDynamic Sukuk (“the Fund”), which comprise the statement of financial position as at 31 July 2019, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 13 to 42.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 July 2019, and of its financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

Basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and other ethical responsibilities

We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Information other than the financial statements and auditors’ report thereon

The Manager is responsible for the other information. The other information comprises the Annual Report, but does not include the financial statements of the Fund and our auditors’ report thereon. The Annual Report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the financial statements of the Fund does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

9


AmDynamic Sukuk (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 read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Manager and Trustee of the Fund and take appropriate action to seek to have the uncorrected material misstatement appropriately brought to the attention of users for whom the auditors’ report is prepared.

Responsibilities of the Manager and the Trustees for the financial statements

The Manager is responsible for the preparation of the financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative to do so.

The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund, as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

10



·

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 and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Fund,whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.The risk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion 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 uncertainty existsrelated to events or conditions that may cast significant doubt on the Fund’s ability to continueas a going concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditors’ report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors’ report. However, future events or conditionsmay 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 and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

11



Ernst & Young Lee Pei Yin

AF: 0039 No. 03189/05/2021 J

Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

17 September 2019

Other matters

This report is made solely to the unitholders of the Fund, as a body, in accordance with the Guidelines on Unit Trust Funds issued by Securities Commission Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

12

AmDynamic Sukuk

STATEMENT OF FINANCIAL POSITION

AS AT 31 JULY 2019

2019 2018

Note RM RM

ASSETS

Shariah-compliant investments 4 7,226,130 5,252,099

Tax recoverable 3,655 5,444

Deposits with financial institutions 5 1,218,097 799,069

Cash at bank 3,167 2,920

TOTAL ASSETS 8,451,049 6,059,532

LIABILITIES

Amount due to Manager 6 14,849 5,397

Amount due to Trustee 7 905 877

Sundry payables and accrued expenses 10,005 13,392

TOTAL LIABILITIES 25,759 19,666

EQUITY

Unitholders’ capital 9(a)(b) 5,906,880 3,925,073

Retained earnings 9(c)(d) 2,518,410 2,114,793

TOTAL EQUITY 9 8,425,290 6,039,866

TOTAL EQUITY AND LIABILITIES 8,451,049 6,059,532

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS

− CLASS A 8,424,207 6,036,524

− CLASS B 1,083 3,342

8,425,290 6,039,866

UNITS IN CIRCULATION

− CLASS A 9(a) 6,147,176 4,718,480

− CLASS B 9(b) 854 2,899

NET ASSET VALUE PER UNIT

− CLASS A 137.04 sen 127.93 sen

− CLASS B 126.70 sen 115.26 sen

The accompanying notes form an integral part of the financial statements.

13

AmDynamic Sukuk

STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 JULY 2019

2019 2018

Note RM RM

SHARIAH-COMPLIANT INVESTMENT INCOME

Profit income 335,799 323,975

Other income – exit penalty 4,318 4,158

Net gain from Shariah-compliant investments:

− Financial assets at fair value through profit or

loss (“FVTPL”) 8 363,081 19,783

703,198 347,916

EXPENDITURE

Manager’s fee 6 (64,413) (59,969)

Trustee’s fee 7 (10,000) (10,000)

Auditors’ remuneration (4,500) (4,500)

Tax agent’s fee (4,100) (4,100)

Custodian’s fee (27) (27)

Other expenses (6,753) (13,881)

(89,793) (92,477)

Net income before tax 613,405 255,439

Less: income tax 11 - -

Net income after tax 613,405 255,439

Other comprehensive income - -

Total comprehensive income for the

financial year 613,405 255,439

Total comprehensive income comprises the following:

Realised income 267,464 280,624

Unrealised gain/(loss) 345,941 (25,185)

613,405 255,439

Distribution for the financial year

Net distribution 12 209,788 -

Gross/net distribution per unit (sen) 12 3.50 -


14

AmDynamic Sukuk

STATEMENT OF CHANGES IN EQUITY


Unitholders’ Unitholders’

capital - capital - Retained Total

Class A Class B earnings equity

Note RM RM RM RM

At 1 August 2017 4,164,682 2,911 1,859,354 6,025,947

Total comprehensive income

for the financial year - - 255,439 255,439

Creation of units 9(a) 169,501 - - 169,501

Cancellation of units 9(a) (412,021) - - (412,021)

Balance at 31 July 2018 3,922,162 2,911 2,114,793 6,039,866

At 1 August 2018 3,922,162 2,911 2,114,793 6,039,866

Total comprehensive income

for the financial year - - 613,405 613,405

Creation of units 9(a) 2,196,558 1,000 - 2,197,558

Reinvestment of distribution 9(a),12 209,788 - - 209,788

Cancellation of units 9(a)(b) (422,144) (3,395) - (425,539)

Distribution 12 - - (209,788) (209,788)

Balance at 31 July 2019 5,906,364 516 2,518,410 8,425,290


15

AmDynamic Sukuk

STATEMENT OF CASH FLOWS


2019 2018

Note RM RM

CASH FLOWS FROM OPERATING AND

INVESTING ACTIVITIES

Proceeds from sale of Shariah-compliant investments 1,220,900 1,041,621

Profit received 331,201 337,172

Other income – exit penalty 4,318 4,158

Manager’s fee paid (62,175) (59,831)

Trustee’s fee paid (9,973) (9,972)

Tax agent’s fee paid (4,100) (4,100)

Custodian’s fee paid (27) (27)

Tax refund/(paid) 1,789 (2,568)

Payments for other expenses (14,640) (22,423)

Purchase of Shariah-compliant investments (2,827,251) (811,388)

Net cash (used in)/generated from operating and

investing activities (1,359,958) 472,642

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from creation of units 2,196,758 169,301

Payments for cancellation of units (417,525) (412,021)

Net cash generated from/(used in) financing activities 1,779,233 (242,720)

NET INCREASE IN CASH AND CASH

EQUIVALENTS 419,275 229,922

CASH AND CASH EQUIVALENTS AT

BEGINNING OF FINANCIAL YEAR 801,989 572,067

CASH AND CASH EQUIVALENTS AT

END OF FINANCIAL YEAR 1,221,264 801,989

Cash and cash equivalents comprise:

Deposits with financial institutions 5 1,218,097 799,069

Cash at bank 3,167 2,920

1,221,264 801,989


16

AmDynamic Sukuk

NOTES TO THE FINANCIAL STATEMENTS


1. GENERAL INFORMATION

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Adoption of new standards

MFRS 9 Financial Instruments

MFRS 15 Revenue From Contracts With Customers

The financial statements were authorised for issue by the Chief Executive Officer of the

Manager on 17 September 2019.

AmDynamic Sukuk (“the Fund”) was established pursuant to a Deed dated 20 May 2011 as

amended by Deeds Supplemental thereto (“the Deed”), between AmFunds Management

Berhad as the Manager, Deutsche Trustees Malaysia Berhad as the Trustee and all

unitholders.

The Fund aims to provide capital appreciation by investing primarily in sukuk both locally

and globally. As provided in the Deed, the “accrual period” or financial year shall end on 31

July and the units in the Fund for class A and class B were first offered for sale on 12 June

2012 and 16 July 2014 respectively.

The financial statements of the Fund have been prepared in accordance with Malaysian

Financial Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards

Board (“MASB”) and are in compliance with International Financial Reporting Standards.

The financial statements of the Fund have been prepared under the historical cost

convention, unless otherwise stated in the accounting policies.

The accounting policies adopted are consistent with those of the previous financial year

except for the adoption of the following new standards which became effective for the first

time on 1 August 2018:

The adoption of these new standards did not have any material impact on the financial

statements of the Fund except for those arising from the adoption of MFRS 9 as disclosed

below. Other than the adoption of new accounting policies for financial instruments as

disclosed below, the Fund did not change its accounting policies or make retrospective

adjustments as a result of adopting the new standards.

17

AmDynamic Sukuk

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (CONT'D.)

MFRS 9 Financial Instruments

(i) Classification and measurement

(ii) Impairment

The loan loss impairment methodology is fundamentally changed under MFRS 9 as it

replaces MFRS 139’s incurred loss approach with a forward-looking expected credit

loss (“ECL”) approach. The impairment requirements based on ECL approach is

applicable for debt financial assets not held at FVTPL. The allowance for expected

losses are determined based on the expected credit losses associated with the

probability of default (“PD”) in the next twelve months unless there has been a

significant increase in credit risk since origination, in which case, the allowance is

based on the probability of default over the lifetime of the asset.

MFRS 9 replaces the provisions of MFRS 139 Financial Instruments: Recognition and

Measurement that relate to the recognition, classification and measurement, as well as

derecognition of financial instruments, impairment of financial assets and hedge

accounting. As permitted by the transitional provision of MFRS 9, comparative information

has not been restated. The impact arising from the adoption of MFRS 9 is as follows:

MFRS 9 requires all financial assets, other than equity instruments and derivatives, to

be classified on the basis of two criteria, namely the entity’s business model for

managing the assets, as well as the instruments’ contractual cash flow characteristics.

Financial assets are measured at amortised cost if they are held within a business

model whose objective is to hold financial assets in order to collect contractual cash

flows that are solely payments of principal and profit. If the financial assets are held

within a business model whose objective is achieved by both selling financial assets

and collecting contractual cash flows that are solely payments of principal and profit,

the assets are measured at fair value through other comprehensive income (“FVOCI”).

Any financial assets that are not measured at amortised cost or FVOCI are measured

at fair value through profit or loss (“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.

Upon the adoption of MFRS 9 on 1 August 2018, all the Fund’s investments in the debt

securities continue to be measured at FVTPL.

There is no impact on the Fund’s accounting for financial liabilities, as the new

requirements only affect the accounting for financial liabilities that are designated at

FVTPL and the Fund does not have any such liabilities.

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2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (CONT'D.)

MFRS 9 Financial Instruments (cont'd.)

(ii) Impairment (cont'd.)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Income recognition

(i) Profit income

(ii) Gain or loss on disposal of investments

The Fund has established a policy to perform an assessment at the end of each

reporting period of whether credit risk has increased significantly since initial

recognition by considering the change in the risk of default occurring over the

remaining life of the financial instrument. To calculate ECL, the Fund has estimated the

risk of a default occurring on the financial instrument during its expected life. ECLs are

estimated based on the present value of all cash shortfalls over the remaining expected

life of the financial asset, i.e. the difference between the contractual cash flows that are

due to the Fund under the contract and the cash flows that the Fund expect to receive,

discounted at the effective profit rate of the financial asset.

For all profit-bearing financial assets, profit income is calculated using the effective

profit method. Effective profit rate is the rate that exactly discounts estimated future

cash payments or receipts through the expected life of the financial instrument or a

shorter period, where appropriate, to the net carrying amount of the financial asset.

The calculation takes into account all contractual terms of the financial instrument and

includes any fees or incremental costs that are directly attributable to the instrument

and are an integral part of the effective profit rate, but not future credit losses.

On disposal of Shariah-compliant investments, the net realised gain or loss on disposal

is measured as the difference between the net disposal proceeds and the carrying

amount of the Shariah-compliant investments. The net realised gain or loss is

recognised in profit or loss.

Once the recorded value of a financial asset or a group of similar financial assets has

been reduced due to an impairment loss, profit income continues to be recognised

using the rate of profit used to discount the future cash flows for the purpose of

measuring the impairment loss.

There was no ECL impact on the Fund’s financial assets at amortised cost upon the

adoption of MFRS 9 on 1 August 2018 or during the current financial year.

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.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

3.2 Income tax

3.3 Functional and presentation currency

3.4 Statement of cash flows

3.5 Distribution

3.6 Unitholders’ capital

3.7 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.

The Fund adopts the direct method in the preparation of the statement of cash flows.

Cash equivalents are short-term, highly liquid Shariah-compliant investments that are

readily convertible to cash with insignificant risk of changes in value.

Distributions are at the discretion of the Fund. A distribution to the Fund’s unitholders is

accounted for as a deduction from realised reserves. A proposed distribution is recognised

as a liability in the period in which it is approved.

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”).

Current taxes are recognised in profit or loss except to the extent that the tax relates to

items recognised outside profit or loss, either in other comprehensive income or directly in

equity.

Functional currency is the currency of the primary economic environment in which the Fund

operates that most faithfully represents the economic effects of the underlying transactions.

The functional currency of the Fund is Ringgit Malaysia which reflects the currency in which

the Fund competes for funds, issues and redeems units. The Fund has also adopted

Ringgit Malaysia as its presentation currency.

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.

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3.7 Financial assets – initial recognition and measurement (cont'd.)

(ii) Initial measurement

(iii) “Day 1” profit or loss

3.8 Financial assets – classification and subsequent measurement

(i) Business model

(ii) Cash flow characteristics

The classification and subsequent measurement of debt instruments held by the Fund are

determined based on their business model and cash flow characteristics.

The business model reflects how the Fund manages the financial assets in order to

generate cash flows. That is, whether the Fund’s objective is solely to collect the

contractual cash flows from the assets, or is to collect both the contractual cash flows

and cash flows arising from the sale of assets. If neither of these is applicable (e.g. the

financial assets are held for trading purposes), then the financial assets are classified

as part of “other” business model. Factors considered by the Fund in determining the

business model for a portfolio of assets include past experience on how the cash flows

for these assets were collected, how the asset’s performance is evaluated and reported

to key management personnel, and how risks are assessed and managed.

Where the business model is to hold the financial assets to collect contractual cash

flows, or to collect contractual cash flows and sell, the Fund assesses whether the

financial assets contractual cash flows represent solely payment of principal and profit

(“SPPP”). In making this assessment, the Fund considers whether the contractual cash

flows are consistent with a basic financing arrangement, i.e. profit includes only

consideration for time value of money, credit risk, other basic financing risks and a

profit margin that is consistent with a basic financing arrangement. Financial assets

with embedded derivatives are considered in their entirety when determining whether

their cash flows are SPPP.

All financial assets are recognised initially at fair value plus, in the case of financial

assets not recorded at fair value through profit or loss, 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

fair value through profit or loss, 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.

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3.9 Financial instruments under MFRS 9

(i) Classification and measurement

The Fund may classify its financial assets under the following categories:

Financial assets at amortised cost

Financial assets at FVOCI

Financial assets at FVTPL

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 (“SPPP 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 SPPP test determines whether the contractual

cash flows are solely for payments of principal and profit and the assessment is

performed on a financial instrument basis.

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 profit on the principal amount outstanding. The Fund includes in this

category deposits with financial institutions, cash at banks, amount due from

brokers/financial institutions, 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 profit on the outstanding principal.

These investments are initially recorded at fair value and transaction costs are

expensed in the profit or loss. Subsequent to initial recognition, these investments 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 fair value to profit or loss (“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”.

Profit earned element of such instrument is recorded in “Profit 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.

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3.9 Financial instruments under MFRS 9 (cont'd.)

(i) Classification and measurement (cont'd.)

Financial assets at FVTPL (cont'd.)

3.10 Financial liabilities – classification and subsequent measurement

3.11 Derecognition of financial instruments

(i) Derecognition of financial asset

- the rights to receive cash flows from the asset have expired, or

-

- the Fund has transferred substantially all the risks and rewards of the asset, or

-

(ii) Derecognition of financial liability

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

the Fund has neither transferred nor retained substantially all the risks and rewards

of the asset, but has transferred control of the asset.

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.

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 profit 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 profit rate.

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.

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3.12 Financial instruments – expected credit losses

-

- the time value of money; and

-

3.13 Determination of fair value

3.14 Classification of realised and unrealised gains and losses

For Shariah-compliant investments in local unquoted fixed income securities, fair value is

determined based on the indicative prices from Bond Pricing Agency Malaysia Sdn Bhd

plus accrued profit, which includes the accretion of discount and amortisation of premium.

Adjusted cost of investments relates to the purchase cost plus accrued profit, adjusted for

amortisation of premium and accretion of discount, if any, calculated over the period from

the date of acquisition to the date of maturity of the respective securities as approved by

the Manager and the Trustee. The difference between 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.

an unbiased and probability-weighted amount that is determined by evaluating a range

of possible outcomes;

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.

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.

Unrealised gains and losses comprise changes in the fair value of financial instruments for

the period and from reversal of prior period’s unrealised gains and losses for financial

instruments which were realised (i.e. sold, redeemed or matured) during the reporting

period.

Realised gains and losses on disposals of financial instruments classified at fair value

through profit or loss are calculated using the weighted average method. They represent

the difference between an instrument’s initial carrying amount and disposal amount.

The Fund assesses on a forward-looking basis the expected credit losses (“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:

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3.15 Significant accounting estimates and judgments

4. SHARIAH-COMPLIANT INVESTMENTS

2019 2018

RM RM

Financial assets at FVTPL

At nominal value:

Corporate sukuk 5,200,000 5,000,000

Government Investment Issues 1,300,000 -

6,500,000 5,000,000

At fair value:

Corporate sukuk 5,822,296 5,252,099

Government Investment Issues 1,403,834 -

7,226,130 5,252,099

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 Shariah-compliant investments as financial assets at FVTPL as the

Fund may sell its Shariah-compliant investments in the short-term for profit-taking or to

meet unitholders’ cancellation of units.

No major judgments have been made by the Manager in applying the Fund’s accounting

policies. There are no key assumptions concerning the future and other key sources of

estimation uncertainty at the reporting date, that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year.

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4. SHARIAH-COMPLIANT INVESTMENTS (CONT'D.)

Details of Shariah-compliant investments are as follows:

Fair value as a

percentage

Maturity Credit Nominal Fair Adjusted of net asset

date Issuer rating value value cost value

RM RM RM %

2019

Corporate sukuk

15.04.2020 DRB-Hicom

Berhad A 1,000,000 1,043,712 1,018,654 12.39

10.11.2023 Jimah Energy

Ventures

Sdn Bhd AA 300,000 372,610 363,809 4.42

30.04.2026 Westports

Malaysia

Sdn Bhd AA 200,000 218,509 209,219 2.59

16.03.2028 Tanjung Bin

Energy Issuer

Berhad AA 400,000 457,560 427,142 5.43

20.04.2028 UMW Holdings

Berhad A 800,000 917,529 852,749 10.89

04.01.2030 Edra Energy

Sdn Bhd AA 300,000 335,444 311,674 3.98

02.12.2030 Konsortium

Lebuhraya

Utara-Timur

(KL) Sdn

Bhd AA 500,000 543,403 526,004 6.45

04.12.2031 Jimah East

Power Sdn

Berhad AA 300,000 357,016 326,910 4.24

25.11.2033 Sarawak Energy

Berhad AA 400,000 438,692 403,580 5.21


Sdn Bhd AA 200,000 232,561 210,365 2.76


Berhad AA 500,000 551,024 507,370 6.54


Sdn Bhd AA 300,000 354,236 327,131 4.20

5,200,000 5,822,296 5,484,607 69.10

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Fair value as a

percentage



RM RM RM %

2019 (cont'd.)

Government Investment Issues

15.09.2039 Government of

Malaysia NR 1,300,000 1,403,834 1,374,667 16.66

Total financial assets at FVTPL 6,500,000 7,226,130 6,859,274 85.76

Excess of fair value over cost 366,856

2018

Corporate sukuk

02.09.2019 Bumitama Agri

Limited AA 500,000 512,811 510,819 8.49

15.04.2020 DRB-Hicom

Berhad A 1,000,000 1,020,226 1,014,029 16.89

10.11.2023 Jimah Energy

Ventures

Sdn Bhd AA 300,000 376,515 375,540 6.23

10.12.2024 MBSB Bank

Berhad AA 500,000 505,328 507,500 8.37

30.04.2026 Westports

Malaysia

Sdn Bhd AA 200,000 210,619 210,018 3.49

16.03.2028 Tanjung Bin

Energy Issuer

Berhad AA 400,000 436,228 428,937 7.22

20.04.2028 UMW

Holdings

Berhad A 500,000 525,775 508,960 8.71


Sdn Bhd AA 300,000 313,540 312,385 5.19

02.12.2030 Konsortium

Lebuhraya

Utara- Timur

(KL) Sdn

Bhd AA 500,000 514,661 527,354 8.52

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Fair value as a

percentage



RM RM RM %

2018 (cont'd.)

Corporate sukuk (cont'd.)

04.12.2031 Jimah East

Power

Sdn Bhd AA 300,000 336,157 328,255 5.57


Berhad AA 500,000 500,239 507,387 8.28

Total financial assets at FVTPL 5,000,000 5,252,099 5,231,184 86.96

Excess of fair value over cost 20,915

2019 2018

% %

Corporate sukuk 4.40 5.59Government Investment Issues 4.01 -

Less than 1 year to More than

1 year 5 years 5 years

RM RM RM

2019

At nominal value:

Corporate sukuk 1,000,000 300,000 3,900,000Government Investment Issues - - 1,300,000

2018

At nominal value:Corporate sukuk - 1,500,000 3,500,000

The weighted average effective yield on Shariah-compliant investments are as follows:

Effective yield

Analyses of the remaining maturity of Shariah-compliant investments as at 31 July 2019

and 31 July 2018 are as follows:

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5. DEPOSITS WITH FINANCIAL INSTITUTIONS

2019 2018

RM RM

At nominal value:

Short-term deposits with licensed Islamic banks 1,218,000 799,000

At carrying value:

Short-term deposits with licensed Islamic banks 1,218,097 799,069

Details of deposit with financial institutions are as follows:

Carrying

value as a

percentage

Maturity Nominal Carrying Purchase of net asset

date Bank value value cost value

RM RM RM %

2019

Short-term deposit with

licensed Islamic banks

01.08.2019 CIMB Islamic

Bank Berhad 500,000 500,040 500,000 5.94

01.08.2019 Maybank Islamic

Berhad 718,000 718,057 718,000 8.52

1,218,000 1,218,097 1,218,000 14.46

2018

Short-term deposit with

licensed Islamic banks

01.08.2018 CIMB Islamic

Bank Berhad 799,000 799,069 799,000 13.23

2019 2018 2019 2018

% % Day Day

Short-term deposits with licensed

Islamic banks 2.90 3.15 1 1

profit rate maturity

The weighted average effective profit rate and average remaining maturity of short-term

deposits are as follows:

Weighted average

effective Remaining

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6. AMOUNT DUE TO MANAGER

2019 2018

RM RM

(Redemption)/creation of units* (7,014) 200

Manager’s fee payable (7,835) (5,597)

(14,849) (5,397)

*

7. AMOUNT DUE TO TRUSTEE

8. NET GAIN FROM SHARIAH-COMPLIANT INVESTMENTS

2019 2018

RM RM

Net gain on financial assets at FVTPL comprised:

− Net realised gain on sale of Shariah-compliant investments 17,140 44,968

− Net unrealised gain/(loss) on changes in fair values of

Shariah-compliant investments 345,941 (25,185)

363,081 19,783

The normal credit period in the previous and current financial years for creation and

redemption of units is three business days.

Trustee’s fee is at a rate of 0.06% (2018: 0.06%) per annum on the net asset value of the

Fund, calculated on a daily basis, subject to a minimum fee of RM10,000 per annum.

The normal credit period in the previous and current financial years for Trustee’s fee

payable is one month.

The amount represents amount (payable to)/receivable from the Manager for units

(redeemed)/created.

Manager’s fee is at a rate of 1.00% (2018: 1.00%) per annum on the net asset value of the

Fund, calculated on a daily basis.

The normal credit period in the previous and current financial years for Manager’s fee

payable is one month.

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9. TOTAL EQUITY

Total equity is represented by:

2019 2018

Note RM RM

Unitholders’ capital - Class A (a) 5,906,364 3,922,162

Unitholders’ capital - Class B (b) 516 2,911

Retained earnings

− Realised income (c) 2,151,554 2,093,878

− Unrealised gain (d) 366,856 20,915

8,425,290 6,039,866

(a) UNITHOLDERS’ CAPITAL/UNITS IN CIRCULATION - CLASS A

Number of Number of

units RM units RM

At beginning of the

financial year 4,718,480 3,922,162 4,913,482 4,164,682

Creation during the

financial year 1,591,503 2,196,558 135,958 169,501

Distribution reinvested

(Note 12) 153,230 209,788 - -

Cancellation during the

financial year (316,037) (422,144) (330,960) (412,021)

At end of the financial

year 6,147,176 5,906,364 4,718,480 3,922,162

(b) UNITHOLDERS’ CAPITAL/UNITS IN CIRCULATION - CLASS B

Number of Number of

units RM units RM

At beginning of the

financial year 2,899 2,911 2,899 2,911

Creation during the

financial year 854 1,000 - -

Cancellation during the

financial year (2,899) (3,395) - -

At end of the financial year 854 516 2,899 2,911

2019 2018

2019 2018

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9. TOTAL EQUITY (CONT'D.)

(b) UNITHOLDERS’ CAPITAL/UNITS IN CIRCULATION - CLASS B (CONT'D.)

(c) REALISED - DISTRIBUTABLE

2019 2018

RM RM

At beginning of the financial year 2,093,878 1,813,254

Total comprehensive income for the financial year 613,405 255,439

Net unrealised (gain)/loss attributable to Shariah-

compliant investments held transferred to

unrealised reserve [Note 9(d)] (345,941) 25,185

Distributions out of realised reserve (Note 12) (209,788) -

Net increase in realised reserve for the financial year 57,676 280,624

At end of the financial year 2,151,554 2,093,878

(d) UNREALISED – NON-DISTRIBUTABLE

2019 2018

RM RM

At beginning of the financial year 20,915 46,100

Net unrealised gain/(loss) attributable to Shariah-

compliant investments held transferred from

realised reserve [Note 9(c)] 345,941 (25,185)

At end of the financial year 366,856 20,915

10. UNITS HELD BY RELATED PARTIES

The related party of and its relationship with the Fund are as follows:

Related parties

AmFunds Management Berhad

AmInvestment Bank Berhad

AMMB Holdings Berhad

Subsidiaries and associates of AMMB

as disclosed in its financial statements

Manager

the ultimate holding company of the

Relationship

The Manager

Holdings company of the Manager

Ultimate holding company of the Manager

Subsidiaries and associate companies of

The Manager charges an exit penalty fee of 1.00% (2018: 1.00%) on the net asset

value per unit of the Fund during the financial year. The exit penalty shall be placed

back to the Fund.

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10. UNITS HELD BY RELATED PARTIES (CONT'D.)

Number of Number of

units RM units RM

The Manager* - Class B 854 1,000 - -

*

11. INCOME TAX

2019 2018

RM RM

Net income before tax 613,405 255,439

Taxation at Malaysian statutory rate of 24% (2018 : 24%) 147,217 61,305

Tax effects of:

Income not subject to tax (167,731) (88,546)

Loss not allowed for tax deduction - 6,044

Restriction on tax deductible expenses for unit trust fund 12,710 14,893

Non-permitted expenses for tax purposes 7,428 5,647

Permitted expenses not used not available for

future financial years 376 657

Tax expense for the financial year - -

2019

Income tax payable is calculated on Shariah-compliant investments income less deduction

for permitted expenses as provided for under Section 63B of the Income Tax Act, 1967.

The Manager is the legal and beneficial owners of the units but did not hold any units

for Class A as at 31 July 2019 and 31 July 2018.

2018

The parties related to manager did not hold any units in the Fund as at 31 July 2019 and 31

July 2018.

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 wholesale money market

fund is exempted from tax.

A reconciliation of income tax expense applicable to net income before tax at the statutory

income tax rate to income tax expense at the effective income tax rate of the Fund is as

follows:

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12. DISTRIBUTION

Distribution to unitholders declared on 26 July 2019 is from the following sources:

2019 2018

RM RM

Profit income 281,587 -

Other income - exit penalty 3,621 -

Net realised gain on sale of Shariah-compliant investments 14,373 -

299,581 -

Less: Expenses (89,793) - Total amount of distribution 209,788 -

Gross/net distribution per unit (sen) 3.50 -

Distribution made out of:- Realised income [Note 9(c)] 209,788 -

Comprising:Distribution reinvested 209,788 -

13. MANAGEMENT EXPENSE RATIO (“MER”)

2019 2018

% p.a. % p.a.

Manager’s fee 1.00 1.00

Trustee’s fee 0.16 0.17

Fund’s other expenses 0.23 0.37

Total MER 1.39 1.54

14. PORTFOLIO TURNOVER RATIO (“PTR”)

The PTR of the Fund, which is the ratio of average total acquisitions and disposals of

Shariah-compliant investments to the average net asset value of the Fund calculated on a

daily basis, is 0.32 times (2018: 0.16 times).

The MER of the Fund is the ratio of the sum of annualised fees and expenses incurred by

the Fund to the average net asset value of the Fund calculated on a daily basis.

The Fund’s MER is as follows:

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15. SEGMENTAL REPORTING

16. TRANSACTIONS WITH FINANCIAL INSTITUTIONS

Financial institutions

RM %

Bank Islam Malaysia Berhad 1,065,996 26.09

Malayan Banking Berhad 912,035 22.32

CIMB Bank Berhad 883,642 21.63

RHB Investment Bank Berhad 524,583 12.84

AmBank Islamic Berhad* 400,000 9.79

AmBank (M) Berhad* 299,710 7.33

Total 4,085,966 100.00

*

17. FINANCIAL INSTRUMENTS

(a) Classification of financial instruments

Details of transactions with financial institutions for the financial year ended 31 July 2019 are

as follows:

Transaction value

In accordance with the objective of the Fund, substantially all of the Fund’s Shariah-

compliant investments are made in the form of Shariah-compliant fixed income securities in

Malaysia. The Manager is of the opinion that the risk and rewards from these Shariah-

compliant investments are not individually or segmentally distinct and hence the Fund does

not have a separately identifiable business or geographical segments.

Financial institutions related to the Manager. The Manager and the Trustee are of the

opinion that the above transactions have been entered in the normal course of

business and have been established under terms that are no less favourable than

those arranged with independent third parties.

The above transactions were in respect of Shariah-compliant fixed income instruments.

Transactions in these Shariah-compliant investments do not involve any commission or

brokerage.

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.

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17. FINANCIAL INSTRUMENTS (CONT'D.)

(a) Classification of financial instruments (cont'd.)

Financial Financial

Financial assets at liabilities at

assets at amortised amortised

FVTPL cost cost Total

RM RM RM RM

Assets

Shariah-compliant

investments 7,226,130 - - 7,226,130

Deposits with financial

institutions - 1,218,097 - 1,218,097

Cash at bank - 3,167 - 3,167

7,226,130 1,221,264 - 8,447,394

Liabilities

Amount due to Manager - - 14,849 14,849

Amount due to Trustee - - 905 905

Sundry payables and

accrued expenses - - 10,005 10,005

- - 25,759 25,759

Receivables Financial

Financial at liabilities at

assets at amortised amortised

FVTPL cost cost Total

RM RM RM RM

Assets

Shariah-compliant

investments 5,252,099 - - 5,252,099

Deposits with financial

institutions - 799,069 - 799,069

Cash at bank - 2,920 - 2,920

5,252,099 801,989 - 6,054,088

Liabilities

Amount due to Manager - - 5,397 5,397

Amount due to Trustee - - 877 877

Sundry payables and

accrued expenses - - 13,392 13,392- - 19,666 19,666

2019

2018

36

AmDynamic Sukuk


(a) Classification of financial instruments (cont'd.)

Income, expense, gains

and losses

2019 2018

RM RM

Net gain from financial assets at FVTPL 363,081 19,783

Income, of which derived from:

- Profit income from financial assets at FVTPL 316,344 310,844

- Profit income from financial assets/receivables

at amortised cost 19,455 13,131

(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:

Level 1 Level 2 Level 3 Total

RM RM RM RM

2019

Financial assets at FVTPL - 7,226,130 - 7,226,130

2018

Financial assets at FVTPL - 5,252,099 - 5,252,099

The Fund uses the following hierarchy for determining and disclosing the fair value of

financial instruments by valuation technique:

other techniques for which all inputs which have a significant effect on the

recorded fair values are observable; either directly or indirectly; or

techniques which use inputs which have a significant effect on the recorded

fair value that are not based on observable market data.

The following table shows an analysis of financial instruments recorded at fair value by

the level of the fair value hierarchy:

37

AmDynamic Sukuk


(c)

• Deposits with financial institutions

• Cash at bank

• Amount due to Manager

• Amount due to Trustee

• Sundry payables and accrued expenses

18. RISK MANAGEMENT POLICIES

(a) Market risk

(i) Rate of return risk

The result below summarised the rate of return sensitivity of the Fund’s NAV, or

theoretical value due to the parallel movement assumption of the yield curve by

+100bps and -100bps respectively:

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, rates of return (yield curve),

foreign exchange rates and commodity prices.

Rate of return risk will affect the value of the Fund’s Shariah-compliant investments,

given the rate of return movements, which are influenced by regional and local

economic developments as well as political developments.

Domestic profit rates on deposits and placements with licensed financial institutions

are determined based on prevailing market rates.

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/Shariah non-compliance risk.

Risk management is carried out by closely monitoring, measuring and mitigating the above

said risks, careful selection of Shariah-compliant investments coupled with stringent

compliance to Shariah-compliant investments restrictions as stipulated by the Capital Market

and Services Act 2007, Securities Commission’s Guidelines on Unit Trust Funds and the

Deed as the backbone of risk management of the Fund.

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:

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.

38

AmDynamic Sukuk

18. RISK MANAGEMENT POLICIES (CONT'D.)

(i) Rate of return risk (cont'd.)

Percentage shift in

yield by:

2019 2018

RM RM

+100 bps (546,733) (290,920)

-100 bps 621,817 321,073

(b) Credit risk

(i)

Credit rating

As a % of As a % of

debt net asset

RM securities value

2019

AA 3,861,055 53.43 45.82

A 1,961,241 27.14 23.28

NR 1,403,834 19.43 16.66

7,226,130 100.00 85.76

2018

AA 3,706,098 70.56 61.36

A 1,546,001 29.44 25.60

5,252,099 100.00 86.96

The following table analyses the Fund’s portfolio of debt securities by rating

category as at 31 July 2019 and 31 July 2018:

For deposits with financial institutions, the Fund only makes placements with

financial institutions with sound rating. The following table presents the Fund’s

portfolio of deposits by rating category as at 31 July 2019 and 31 July 2018:

Sensitivity of the Fund’s

NAV, or theoretical

value

Credit risk is the risk that the counterparty to a financial instrument will cause a financial

loss to the Fund by failing to discharge an obligation. The Fund can invest up to 100%

of the net asset value in Shariah-compliant fixed income instruments. As such the Fund

would be exposed to the risk of sukuk issuers and financial institutions defaulting on its

repayment obligations which in turn would affect the net asset value of the Fund.

Credit quality of financial assets

39

AmDynamic Sukuk


(b) Credit risk (cont'd.)

(i)

As a % of

As a % of net asset

Credit rating RM deposits value

2019

P1/MARC-1 1,218,097 100.00 14.46

2018

P1/MARC-1 799,069 100.00 13.23

(ii) Credit risk concentration

As a % of As a % of

debt net asset

Sector RM securities value

2019

Diversified holdings 1,961,241 27.14 23.28

Infrastructures and utilities 3,861,055 53.43 45.82

Public finance 1,403,834 19.43 16.66

7,226,130 100.00 85.76

2018

Diversified holdings 1,546,001 29.44 25.60

Financial services 505,328 9.62 8.37

Infrastructure and utilities 2,687,959 51.18 44.50

Plantation and agriculture 512,811 9.76 8.49

5,252,099 100.00 86.96

Cash at bank is held for liquidity purposes and is not exposed to significant credit

risk.

Concentration of risk is monitored and managed based on sectorial distribution.

The table below analyses the Fund’s portfolio of debt securities by sectorial

distribution as at 31 July 2019 and 31 July 2018:

There is no geographical risk as the Fund invests only in Shariah-compliant

investments in Malaysia.

Credit quality of financial assets (cont'd.)

40

AmDynamic Sukuk


(c) Liquidity risk

The following table presents the undiscounted contractual cash flows from different

asset and liability classes in the Fund:

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.

The Fund maintains sufficient level of liquid assets, after consultation with the Trustee,

to meet anticipated payments and cancellations of units by unitholders. Liquid assets

comprise of deposits with licensed financial institutions and other instruments, which

are capable of being converted into cash within 5 to 7 days. The Fund’s policy is to

always maintain a prudent level of liquid assets so as to reduce liquidity risk.

41

AmDynamic Sukuk


(d) Single issuer risk

(e) Regulatory risk

(f) Management risk

(g) Non-compliance/Shariah non-compliance risk

19. CAPITAL MANAGEMENT

The primary objective of the Fund’s capital management is to ensure that it maximises

unitholders’ value by expanding its fund size to benefit from economies of scale and

achieving growth in net asset value from the performance of its Shariah-compliant

investments.

No changes were made in the objective, policies or processes during the financial years

ended 31 July 2019 and 31 July 2018.

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.

Any changes in national policies and regulations may have effects on the capital market

and the net asset value of the Fund.

Poor management of the Fund may cause considerable losses to the Fund that in turn

may affect the net asset value of the Fund.

This is the risk of the Manager, the Trustee or the Fund not complying with internal

policies, the Deed of the Fund, securities law or guidelines issued by the regulators. In

the case of an Islamic Fund, this includes the risk of the Fund not conforming to

Shariah Investment Guidelines. Non-compliance risk may adversely affect the Shariah-

compliant investments of the Fund when the Fund is forced to rectify the non-

compliance.

Internal policy restricts the Fund from investing in securities issued by any issuer of not

more than a certain percentage of its net asset value. Under such restriction, the risk

exposure to the securities of any single issuer is diversified and managed based on

internal/external ratings.

42

AmDynamic Sukuk

STATEMENT BY THE MANAGER

Chief Executive Officer


17 September 2019

Goh Wee Peng

AmFunds Management Berhad

I, Goh Wee Peng, for and on behalf of the Manager, AmFunds Management Berhad, for

AmDynamic Sukuk (“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 31 July

2019 and the comprehensive income, the changes in equity and cash flows of the Fund for the

financial year then ended.

For and on behalf of the Manager

43

TRUSTEE’S REPORT

TO THE UNIT HOLDERS OF AMDYNAMIC SUKUK

(a)

(b)

(c)

Richard Lim Hock Seng

Chief Executive Officer


Ng Hon Leong

Head, Trustee Operations

13 September 2019

We have acted as Trustee for AmDynamic Sukuk (the “Fund”) for the financial year ended 31

July 2019. 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 Unit Trust Funds, the Capital Markets and Services

Act 2007 and other applicable laws;

valuation and pricing for 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 distribution made during this financial year ended 31 July 2019 by

the Manager is not inconsistent with the objectives of the Fund.

For Deutsche Trustees Malaysia Berhad

44

45

REPORT OF THE SHARIAH ADVISER TO THE UNITHOLDERS

of AmDynamic Sukuk

For The Financial Year Ended 31 July 2019

We have acted as the Shariah Adviser of AmDynamic Sukuk. Our responsibility is to ensure that the

procedures and processes employed by AmIslamic Funds Management Sdn Bhd and that the provisions

of the AmMaster Deed dated 20 May 2011 and Supplemental Deed dated 21 June 2012 are in

accordance with Shariah principles.

In our opinion, AmIslamic Funds Management Sdn Bhd has managed and administered AmDynamic

Sukuk in accordance with Shariah principles and complied with applicable guidelines, rulings or

decisions issued by the Securities Commission (SC) pertaining to Shariah matters. We confirm that the

investment portfolio of the Fund comprises securities and/or instruments which have been classified as

Shariah compliant by the Shariah Advisory Council (SAC) of the SC and/or Shariah Advisory Council

(SAC) of Bank Negara Malaysia (BNM), where applicable. For securities and/or instruments which are

not classified as Shariah-compliant by the SAC of the SC and/or SAC of BNM, we have determined that

such securities and/or instruments are in accordance with Shariah principles and have complied with the

applicable Shariah guidelines.

For Amanie Advisors Sdn Bhd

………………………………………….. Datuk Dr Mohd Daud Bakar Executive Chairman

13 September 2019

46

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.)

Semi-Annual Report28 February 2015

03 2032 2888 | aminvest.com | [email protected] m

AmFunds Management Berhad (154432-A)

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