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Annual Report for

AmIncome Management31 July 2020

AmIncome Management

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

AmIncome Management

CONTENTS

1 Manager’s Report

7 Independent Auditor’s Report to the Unitholders

11 Statement of Financial Position

12 Statement of Comprehensive Income

13 Statement of Changes in Equity

14 Statement of Cash Flows

15 Notes to the Financial Statements

47 Statement by the Manager

48 Trustee’s Report

49 Directory

1

MANAGER’S REPORT

Dear Unitholder, We are pleased to present you the Manager’s report and the audited accounts of AmIncome Management (“Fund”) for the financial year ended 31 July 2020. Salient Information of the Fund

Name

AmIncome Management (“Fund”)

Category/ Type

Fixed Income / Income

Objective The Fund is a fixed income fund which aims to provide income* and liquidity** over the short to medium-term. Note: * Income distribution (if any) will be reinvested. ** Liquidity means that investor may receive their withdrawal proceeds within 2 Business Days after redemption application is received by the Manager on or before the cut-off time. Any material change to the investment objective of the Fund would require Unit Holders’ approval.

Duration The Fund was established on 2 December 2013 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

AmBank (M) Berhad 12-month conventional fixed deposit rate (“AMBB”). (Available at www.aminvest.com) Note: The risk profile of the Fund’s investment is higher than the risk profile of the performance benchmark and consequently, the Fund is expected to outperform the performance benchmark.

Income Distribution Policy

Subject to availability of income, distribution is paid at least twice every year and will be reinvested.

Breakdown of Unit Holdings by Size

For the financial year under review, the size of the Fund stood at 388,621,214 units.

Size of holding As at 31 July 2020 As at 31 July 2019

No of units held

Number of unitholders

No of units held

Number of unitholders

5,000 and below - - - -

5,001-10,000 - - - -

10,001-50,000 47,561 1 19,499 1

50,001-500,000 264,364 1 - -

500,001 and above 388,309,289 1 295,841,839 1

2

Fund Performance Data

Portfolio Composition

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

FY 2020

%

FY 2019

%

FY 2018

%

Corporate bonds 82.33 63.18 71.87

Malaysian government bonds - 10.16 -

Money market deposits and cash equivalents

17.67

26.66

28.13

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 2020

FY 2019

FY 2018

Net asset value (RM)* 412,504,383 310,011,399 395,480,913

Units in circulation* 388,621,214 295,861,338 383,016,662

Net asset value per unit (RM)* 1.0615 1.0478 1.0325

Highest net asset value per unit (RM)* 1.0630 1.0509 1.0352

Lowest net asset value per unit (RM)* 1.0463 1.0326 1.0227

Benchmark performance (%) 2.60 3.27 3.25

Total return (%)(1) 4.28 5.03 3.74

- Capital growth (%) 1.38 1.56 1.01

- Income distribution (%) 2.90 3.47 2.73

Gross distribution (sen per unit) 3.04 3.58 2.79

Net distribution (sen per unit) 3.04 3.58 2.79

Management expense ratio (%)(2) 0.41 0.41 0.43

Portfolio turnover ratio (times)(3) 1.25 0.63 0.49

*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 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.

(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 0.62 times (98.4%) as compare to 0.63 times for the financial year ended 31 July 2019 mainly due to increase in investing activities.

(Forward)

3

Average Total Return (as at 31 July 2020)

AmIncome Management(a)

% AMBB (b)

%

One year 4.28 2.60

Three years 4.35 3.04

Five years 3.14 3.12

Since launch (2 December 2013) 2.52 3.16

Annual Total Return

Financial Years Ended (31 July)

AmIncome Management(a)

% AMBB (b)

%

2020 4.28 2.60

2019 5.03 3.27

2018 3.74 3.25

2017 2.74 3.15

2016 0.00 3.34

(a) Source: Novagni Analytics and Advisory Sdn Bhd. (b) AmBank (M) Berhad 12-month conventional fixed deposit rate (“AMBB”).

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

Fund Performance

For the financial year under review, the Fund registered a return of 4.28% comprising of 1.38% capital growth and 2.90% income distribution. Thus, the Fund’s return of 4.28% has outperformed the benchmark’s return of 2.60% by 1.68%. As compared with the financial year ended 31 July 2019, the net asset value (“NAV”) per unit of the Fund increased by 1.31% from RM1.0478 to RM1.0615, while units in circulation increased by 31.35% from 295,861,338 units to 388,621,214 units. The line chart below shows comparison between the annual performances of AmIncome Management and its benchmark, AMBB, for the financial years ended 31 July. (Forward)

4

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 objective by providing income and liquidity over the short to medium-term.

Strategies and Policies Employed

The Fund invested primarily in fixed income instruments such as sovereign, quasi-sovereign and corporate bonds, accepted bills, negotiable instrument of deposits, repurchase agreement (Repo) and deposits with financial institutions.

Portfolio Structure

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

As at 31.7.2020

%

As at 31.7.2019

%

Changes

%

Corporate bonds 82.33 63.18 19.15

Malaysian government bonds - 10.16 -10.16

Money market deposits and cash equivalents

17.67

26.66

-8.99

Total 100.00 100.00

During the financial year under review, the Fund invested 82.33% of its NAV in corporate bonds while the balance was held in money market deposits and cash equivalents.

Cross Trades There were no cross trades undertaken during the financial year under review.

5

Distribution/ Unit Splits

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

Date of distribution

Distribution per unit (sen)

NAV per unit Cum-Distribution

(RM)

NAV per unit Ex-Distribution

(RM)

30-Aug-19 0.31 1.0530 1.0499

30-Sep-19 0.31 1.0529 1.0498

31-Oct-19 0.31 1.0525 1.0494

29-Nov-19 0.31 1.0522 1.0491

31-Dec-19 0.31 1.0523 1.0492

31-Jan-20 0.31 1.0551 1.0520

28-Feb-20 0.31 1.0588 1.0557

31-Mar-20 0.27 1.0490 1.0463

30-Apr-20 0.15 1.0535 1.0520

29-May-20 0.15 1.0566 1.0551

30-Jun-20 0.15 1.0573 1.0558

30-Jul-20 0.15 1.0630 1.0615

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

During the year, the management company did not receive soft commissions by virtue of transactions conducted for the Fund.

Market Review

On 7 July 2020, the Bank Negara Malaysia (BNM) Monetary Policy Committee (MPC) cut the Overnight Policy Rate (OPR) by 25bps to the historical low of 1.75% and struck a mildly dovish tone in its policy statement. It marked the 4th OPR cut of the year which brought the total year-to-date OPR reduction to 125bps. With the rate cut already partially priced earlier in the month, the Malaysia Government Securities (MGS) / Government Investment Issue (GII) yields were down 3-8bps in the trading following the policy action. The MGS/GII markets continued to rally through the remainder of July. While there was some intermittent profit taking, bullish sentiment dominated the market following the rate cut. Given recent steepness of the curve, investors were also picking up value in the long end which saw yields compression of more than 40bps MoM. The MGS/GII market has also taken cue from the rally in United States (US) Treasuries which sent the 10 year Treasury yield to approximately 0.54% (a low that was last reached in early March), following the release of US 2nd-quarter Gross Domestic Product (GDP) data (approximately 33% contraction YoY) and Federal Open Market Committee (FOMC) maintaining its accommodative stance in its July meeting. Overall, the MGS/GII curves bull flattened to end the month with yields trading 30-48bps lower relative to end-June levels. Investors’ appetite was also reflected in the decent bid-to-cover (BTC) ratios recorded for the 4 government bond auctions with total amount of MYR19b (i.e. average size of MYR4.75b per auction). The 3 year MGS, 10 year GII, 15 year MGS, and 7 year GII auctions garnered BTC ratios of 2.51x, 2.59x, 2.11x, and 2.05x respectively.

6

In the corporate bonds space, credit spreads continued to widen, especially in the long end, mainly as a result of the MGS/GII rally. Primary issuance pipeline saw increased activity as corporate issuers sought to tap the market given current low interest rates; and to shore up their liquidity position amidst weakened economic prospect. Among corporate issuers that priced their bonds during the month, Tenaga Nasional Bhd and Gamuda Land (T12) Sdn Bhd saw overwhelming demand and priced the bonds about 20 bps below the initial guidance, reflecting investors’ appetite for stronger names and ample liquidity onshore. Foreign fund flows data released during the month showed that there had been inflows of MYR7.8b into the MGS market in June (May: MYR1.9b), given increased anticipation of the above-mentioned OPR cut. During the month, Malaysian Ringgit (MYR) also strengthened from MYR3.29/USD to MYR3.23/USD. In economic data releases, jobs data showed that unemployment rate inched up further to 5.3% in May (April: 5.0%); while deflation continued in June with Consumer Price Index (CPI) reading of -1.9% YoY (May 2020: -2.9%). For 1H2020, the CPI is recorded at -0.8% YoY.

Market Outlook

We maintain our constructive view on local bond market. With the expectation of weak post- Movement Control Order (MCO) recovery, we do not discount possibility of further easing by the BNM in late 2020/2021. We note that the risk of second/third wave infections and political uncertainty, both locally and globally, continue to constrain economic growth outlook. Bond market sentiments should remain positive given BNM’s dovish stance and downside growth risks in 2020/1H2021 which might necessitate further OPR cut by the BNM. The quantum of further easing by the central bank would depend on: a) development surrounding the COVID-19 Pandemic; and b) further escalation of geopolitical tensions [including US-China and US-

European Union (EU) trade wars]. Market liquidity remains ample and demand for fixed income instruments is expected to remain strong despite concern on increased MGS/GII supply.

Additional Information

The following information was updated: 1. 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 September 2020

Independent auditors’ report to the unit holders of

AmIncome Management

Report on the audit of the financial statements

Opinion

Basis for opinion

Independence and other ethical responsibilities

Information other than the financial statements and auditors’ report thereon

We have audited the financial statements of AmIncome Management (“the Fund”), which comprise the statement of financial position as at 31 July 2020, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 11 to 46.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 July 2020, and of its financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

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

The Manager is responsible for the other information. The other information comprises the information in the annual report of the Fund, but does not include the financial statements of the Fund and our auditors’ report thereon.

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

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 Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

7


AmIncome Management (cont’d.)

Information other than the financial statements and auditors’ report thereon (cont’d.)

Responsibilities of the Manager and the Trustees for the financial statements

Auditor’s responsibilities for the audit of the financial statements

In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is material misstatement of this other information, we are required to report the fact. We have nothing to report in this regard.

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

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

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

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

8



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 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 Fundrepresent the underlying transactions and events in a manner that achieves fairpresentation.

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.

9



Other matters

Ernst & Young PLT Lee Pei Yin

202006000003 (LLP0022760-LCA) & AF 0039 No. 03189/05/2021 J

Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

24 September 2020

This report is made solely to the unit holders 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.

10

AmIncome Management

STATEMENT OF FINANCIAL POSITION

AS AT 31 JULY 2020

2020 2019Note RM RM

ASSETS

Investments 4 339,623,124 227,381,056

Amount due from Manager 5(a) 223,047 129,880

Deposits with financial institutions 6 73,400,318 83,542,008

Cash at bank 759 824 TOTAL ASSETS 413,247,248 311,053,768

LIABILITIES

Amount due to Manager 5(b) 132,237 101,144

Amount due to Trustee 7 20,042 16,432

Distribution to be reinvested 12 582,932 917,170

Sundry payables and accrued expenses 7,654 7,623 TOTAL LIABILITIES 742,865 1,042,369

NET ASSET VALUE (“NAV”) OF THE FUND 412,504,383 310,011,399

EQUITY

Unit holders’ capital 9(a) 400,091,571 302,438,336

Retained earnings 9(b)(c) 12,412,812 7,573,063 NET ASSETS ATTRIBUTABLE TO UNIT

HOLDERS 9 412,504,383 310,011,399

UNITS IN CIRCULATION 9(a) 388,621,214 295,861,338

NAV PER UNIT (RM)− EX-DISTRIBUTION 1.0615 1.0478

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

11

AmIncome Management

STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 JULY 2020

2020 2019Note RM RM

INVESTMENT INCOME

Interest income 15,913,041 14,883,485

loss (“FVTPL”) 8 2,631,940 2,597,396

18,544,981 17,480,881

EXPENDITURE

Manager’s fee 5 (1,448,568) (1,169,230)

Trustee’s fee 7 (238,012) (200,440)

Auditors’ remuneration (3,000) (3,000)Tax agent’s fee (4,100) (4,100)Cutodian’s fee (1,579) (1,272)Other expenses (4,301) (3,813)

(1,699,560) (1,381,855)

Net income before tax 16,845,421 16,099,026 Less: Income tax 11 - - Net income after tax, representing total

comprehensive income for the financial year 16,845,421 16,099,026

Total comprehensive income comprises the following:

Realised income 14,236,046 13,934,181

Unrealised gain 2,609,375 2,164,845

16,845,421 16,099,026

Distributions for the financial year

Net distributions 12 12,005,672 11,209,698

Gross/net distributions per unit (sen) 12 3.04 3.58


Net gain from investments:

− Financial assets at fair value through profit or

12

AmIncome Management

STATEMENT OF CHANGES IN EQUITY


Unit holders’ Retained Total

capital earnings equity Note RM RM RM

At 1 August 2018 392,797,178 2,683,735 395,480,913

Total comprehensive income

for the financial year - 16,099,026 16,099,026

Creation of units 9(a) 366,606,886 - 366,606,886

Reinvestments of distributions 9(a) 11,326,673 - 11,326,673

Cancellation of units 9(a) (468,292,401) - (468,292,401)

Distributions 12 - (11,209,698) (11,209,698)Balance at 31 July 2019 302,438,336 7,573,063 310,011,399

At 1 August 2019 302,438,336 7,573,063 310,011,399

Total comprehensive income

for the financial year - 16,845,421 16,845,421

Creation of units 9(a) 444,043,363 - 444,043,363

Reinvestments of distributions 9(a) 12,339,910 - 12,339,910

Cancellation of units 9(a) (358,730,038) - (358,730,038)

Distributions 12 - (12,005,672) (12,005,672)Balance at 31 July 2020 400,091,571 12,412,812 412,504,383


13

AmIncome Management

STATEMENT OF CASH FLOWS


2020 2019Note RM RM

CASH FLOWS FROM OPERATING AND

INVESTING ACTIVITIES

Proceeds from sale of investments 459,834,615 240,902,326

Interest received 18,849,665 16,419,941

Manager’s fee paid (1,417,475) (1,195,734)

Trustee’s fee paid (234,402) (204,631)

Tax agent’s fee paid (4,100) (4,100)

Custodian's fee paid (1,579) (1,272)

Payments for other expenses (7,269) (7,019)

Purchase of investments (572,381,368) (180,416,738)

Net cash (used in)/generated from operating and

investing activities (95,361,913) 75,492,773

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from creation of units 443,950,196 374,952,664 Payments for cancellation of units (358,730,038) (468,292,401)Net cash generated from/(used in) financing

activities 85,220,158 (93,339,737)

NET DECREASE IN CASH AND CASH

EQUIVALENTS (10,141,755) (17,846,964)CASH AND CASH EQUIVALENTS AT

BEGINNING OF FINANCIAL YEAR 83,542,832 101,389,796 CASH AND CASH EQUIVALENTS AT

END OF FINANCIAL YEAR 73,401,077 83,542,832

Cash and cash equivalents comprise:

Deposits with financial institutions 6 73,400,318 83,542,008

Cash at bank 759 824

73,401,077 83,542,832


14

AmIncome Management

NOTES TO THE FINANCIAL STATEMENTS


1. GENERAL INFORMATION

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Standards effective during the financial year

Standards issued but not yet effective

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”),

International Financial Reporting Standards (“IFRS”) and the Securities Commission Malaysia’s

Guidelines on Unit Trust Funds in Malaysia.

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.

AmIncome Management (“the Fund”) was established pursuant to a Deed dated 30 May 2013

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

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

holders.

The Fund is a fixed income fund which aims to provide income and liquidity over the short to

medium-term. As provided in the Deed, the “accrual period” or financial year shall end on 31

July and the units in the Fund were first offered for sale on 2 December 2013.

The financial statements were authorised for issue by the Manager on 24 September 2020.

15

AmIncome Management



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

Amendments to MFRSs contained in the document entitled

“Annual Improvements to MFRS Standards 2018−2020” 1 January 2022

Reference to the Conceptual Framework (Amendments to

MFRS 3 Business Combinations)* 1 January 2022

Property, Plant and Equipment−Proceeds before Intended Use

(Amendments to MFRS 116 Property, Plant and Equipment)* 1 January 2022

Onerous Contracts−Cost of Fulfilling a Contract (Amendments to

MFRS 137 Provisions, Contingent Liabilities and

Contingent Assets) 1 January 2022

Amendments to MFRS 101: Presentation of Financial Statements

Classification of Liabilities as Current or Non-Current 1 January 2023

MFRS 17 Insurance Contracts * 1 January 2023

Amendments to MFRS 17 Insurance Contracts 1 January 2023

Amendments to MFRS 10 and MFRS 128: Sale or Contribution

of Assets between an Investor and its Associate or Joint

Venture* Deferred

*These MFRS and Amendments to MFRSs are not relevant to the Fund.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Income recognition

(i) Interest income

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

effective interest method. Effective interest 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 interest rate, but

not future credit losses.

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

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

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

measuring the impairment loss.

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.

16

AmIncome Management



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

3.1 Income recognition (cont’d.)

(ii) Gain or loss on disposal of investments

3.2 Income tax

3.3 Functional and presentation currency

3.4 Statement of cash flows

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

3.5 Distributions

3.6 Unit holders’ capital

The unit holders’ capital of the Fund meets the definition of puttable instruments and is

classified as equity instruments under MFRS 132 Financial Instruments: Presentation

(“MFRS 132”) .

On disposal of investments, the net realised gain or loss on disposal is measured as

the difference between the net disposal proceeds and the carrying amount of the

investments. The net realised gain or loss is recognised in profit or loss.

Current tax assets and liabilities are measured at the amount expected to be recovered

from or paid to the tax authorities. The tax rates and tax laws used to compute the amount

are those that are enacted or substantively enacted at the reporting date.

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

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

equity.

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

Fund operates that most faithfully represents the economic effects of the underlying

transactions. The functional currency of the Fund is Ringgit Malaysia (“RM”) which reflects

the currency in which the Fund competes for funds, issues and redeems units. The Fund

has also adopted RM as its presentation currency.

Cash equivalents are short-term, highly liquid investments that are readily convertible to

cash with insignificant risk of changes in value.

Distributions are at the discretion of the Fund. A distribution to the Fund’s unit holder 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 unit holder 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.

17

AmIncome Management




3.7 Financial assets – initial recognition and measurement

(i) Initial recognition

(ii) Initial measurement

(iii) “Day 1” profit or loss

3.8 Financial assets – classification and subsequent measurement

Business model

All financial assets are recognised initially at fair value, 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 classification and subsequent measurement of debt instruments held by the Fund are

determined based on their business model and cash flow characteristics.

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 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.

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3.8 Financial assets – classification and subsequent measurement (cont’d.)

Cash flow characteristics

3.9 Financial assets 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

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 interest (“SPPI”).

In making this assessment, the Fund considers whether the contractual cash flows are

consistent with a basic lending arrangement, i.e. interest includes only consideration for

time value of money, credit risk, other basic lending risks and a profit margin that is

consistent with a basic lending arrangement. Financial assets with embedded derivatives

are considered in their entirety when determining whether their cash flows are SPPI.

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.

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 bank, amounts

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 interest on the outstanding principal.

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3.9 Financial assets under MFRS 9 (cont’d.)

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

Financial assets at FVOCI (cont’d.)

Financial assets at FVTPL

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

-

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 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”. Interest earned element of such

instrument is recorded separately in “Interest income”.

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 holders. 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:

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AmIncome Management




3.11 Derecognition of financial instruments (cont’d.)

(i) Derecognition of financial asset (cont’d.)

-

-

(ii) Derecognition of financial liability

3.12 Financial instruments – expected credit losses (“ECL”)

-

-

-

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.

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.

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.

For investments classified as FVOCI - debt instruments, the cumulative fair value

change recognised in OCI is recycled to profit or loss.

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3.13 Determination of fair value

3.14 Classification of realised and unrealised gains and losses

3.15 Significant accounting estimates and judgments

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 FVTPL are

calculated using the weighted average method. They represent the difference between an

instrument’s initial carrying amount and disposal amount.

The preparation of the Fund’s financial statements requires the Manager to make

judgments, estimates and assumptions that affect the reported amounts of revenues,

expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting

date. However, uncertainty about these assumptions and estimates could result in

outcomes that could require a material adjustment to the carrying amount of the asset or

liability in the future.

The Fund classifies its investments as financial assets at FVTPL as the Fund may sell its

investments in the short-term for profit-taking or to meet unit holders’ 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.

For investments in local fixed income securities, nominal value is the face value of the

securities and fair value is determined based on the indicative prices from Bond Pricing

Agency Malaysia Sdn Bhd plus accrued interest, which includes the accretion of discount

and amortisation of premium. Adjusted cost of investments relates to the purchased cost

plus accrued interest, adjusted for amortisation of premium and accretion of discount, if

any, calculated over the period from the date of acquisition to the date of maturity of the

respective securities as approved by the Manager and the Trustee. The difference

between adjusted 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.

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4. INVESTMENTS

2020 2019

RM RM

Financial assets at FVTPL

At nominal value:

Corporate bonds 325,000,000 190,300,000

Malaysian government bonds - 31,100,000

325,000,000 221,400,000

At fair value:

Corporate bonds 339,623,124 195,888,342

Malaysian government bonds - 31,492,714

339,623,124 227,381,056

Details of investments are as follows:

Fair

value as a

Maturity Credit Nominal Fair Adjusted percentage

date Issuer rating value value cost of NAV

RM RM RM %

2020

Corporate bonds

14.08.2020 Tanjung Bin

Power

Sdn. Bhd. AA 3,000,000 3,065,237 3,065,242 0.74

19.10.2020 Malayan

Banking

Berhad AA 20,000,000 20,373,663 20,339,571 4.94

27.10.2020 Alliance

Bank

Malaysia

Berhad A 20,000,000 20,425,715 20,385,689 4.95

19.11.2020 Special

Power

Vehicle

Berhad A 5,000,000 5,491,492 5,491,414 1.33

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4. INVESTMENTS (CONT’D.)

Fair

value as a



RM RM RM %

2020 (cont’d.)

Corporate bonds (cont’d.)

18.12.2020 Alliance

Bank

Malaysia

Berhad A 10,000,000 10,163,262 10,127,731 2.46

12.05.2021 Jimah Energy

Ventures

Sdn Bhd AA 5,000,000 5,351,743 5,318,164 1.30

25.05.2021 CIMB Group

Holdings

Berhad A 5,000,000 5,154,544 5,122,137 1.25

23.06.2021 Sarawak

Energy

Berhad AAA 3,000,000 3,090,695 3,030,796 0.75

13.10.2021 YTL Power

International

Berhad AA 10,000,000 10,369,556 10,165,417 2.51

28.10.2021 Celcom

Networks

Sdn Bhd AA 5,000,000 5,202,552 5,088,382 1.26

19.11.2021 Special Power

Vehicle

Berhad A 3,000,000 3,824,215 3,816,785 0.93

31.03.2022 GENM

Capital

Berhad AAA 5,000,000 5,230,435 5,087,244 1.27

08.06.2022 Genting

Capital

Berhad AAA 10,000,000 10,326,070 10,010,989 2.50


International

Berhad AA 25,000,000 25,933,822 25,440,344 6.29

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Fair

value as a



RM RM RM %

2020 (cont’d.)


13.01.2023 Kedah

Cement

Sdn Bhd

(fka Lafarge

Cement

Sdn Bhd A 35,000,000 35,321,247 35,093,092 8.56

23.02.2023 AmBank

Islamic

Berhad* AA 5,000,000 5,392,538 5,112,888 1.31

16.03.2023 Gamuda

Berhad AA 1,000,000 1,060,240 1,041,732 0.26

09.05.2023 Danum

Capital

Berhad AAA 10,000,000 10,489,895 10,421,746 2.53

06.06.2023 Batu Kawan

Berhad AA 5,000,000 5,221,149 5,218,752 1.27

04.12.2023 Jimah East

Power Sdn

Bhd AA 5,000,000 5,371,949 5,381,048 1.30

12.04.2024 Digi

Telecommunications

Sdn. Bhd. AAA 5,000,000 5,419,069 5,354,661 1.31

08.07.2024 CIMB Thai

Bank Public

Company

Limited AA 10,000,000 10,262,551 10,053,994 2.49

29.08.2024 Celcom

Networks

Sdn Bhd AA 5,000,000 5,533,584 5,460,901 1.34

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AmIncome Management




Fair

value as a



RM RM RM %

2020 (cont’d.)


07.10.2024 Telekom

Malaysia

Berhad AAA 5,000,000 5,469,478 5,370,620 1.33

20.12.2024 MBSB Bank

Berhad A 15,000,000 15,768,538 15,721,084 3.82

27.12.2024 Malaysia

Airports

Capital

Berhad AAA 20,000,000 21,079,167 20,904,182 5.11

16.05.2025 Encorp

Systembilt

Sdn Bhd AA 5,000,000 5,598,762 5,600,068 1.36

18.06.2025 Pelabuhan

Tanjung

Pelepas

Sdn Bhd AA 20,000,000 20,380,721 20,088,121 4.94

25.07.2025 Toyota

Capital

Malaysia

Sdn Bhd AAA 5,000,000 5,022,549 5,004,185 1.22

12.08.2025 Kuala Lumpur

Kepong

Berhad AA 5,000,000 5,536,808 5,449,432 1.34

15.08.2025 Sabah

Development

Bank

Berhad AA 20,000,000 21,681,370 20,455,590 5.26

21.08.2025 Sabah

Development

Bank

Berhad AA 3,000,000 3,251,250 3,066,842 0.79

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Fair

value as a



RM RM RM %

2020 (cont’d.)


18.09.2026 Digi

Telecommunications

Sdn. Bhd. AAA 10,000,000 10,593,834 10,321,848 2.57

16.07.2027 Leader

Energy

Sdn. Bhd. AA 2,000,000 2,018,151 2,003,411 0.49

28.06.2030 Gamuda

Berhad AA 5,000,000 5,147,273 5,039,729 1.25

Total financial assets at

FVTPL 325,000,000 339,623,124 334,653,831 82.33

Excess of fair value over adjusted cost 4,969,293

2019

Corporate bonds

08.08.2019 Sabah

Development

Bank

Berhad AA 18,000,000 18,371,315 18,367,707 5.92

09.08.2019 Bakun Hidro

Power

Generation

Sdn Bhd AAA 1,000,000 1,019,465 1,019,206 0.33

19.08.2019 Sabah

Development

Bank

Berhad AA 10,000,000 10,218,863 10,216,896 3.30

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Fair

value as a



RM RM RM %

2019 (cont’d.)


10.09.2019 Hong Leong

Bank

Berhad AA 10,000,000 10,373,419 10,363,585 3.35

30.12.2019 DRB-Hicom

Berhad A 15,500,000 15,824,513 15,615,647 5.10


Berhad A 12,500,000 13,132,617 12,901,718 4.24

03.04.2020 CIMB Group

Holdings

Berhad AA 10,000,000 10,351,488 10,307,420 3.34

06.07.2020 Krung Thai

Bank Public

Company

Limited AA 15,000,000 15,185,901 15,108,740 4.90


Berhad A 2,300,000 2,333,874 2,311,291 0.75

23.06.2021 Sarawak

Energy

Berhad AA 3,000,000 3,095,345 3,046,735 1.00

30.06.2021 Sports Toto

Malaysia

Sdn Bhd AA 5,000,000 5,035,471 5,026,105 1.62


International

Berhad AA 20,000,000 20,613,137 20,368,765 6.65

28.10.2021 Celcom

Networks

Sdn Bhd AA 5,000,000 5,167,102 5,108,441 1.67

31.03.2022 GENM

Capital

Berhad AAA 5,000,000 5,212,649 5,093,513 1.68

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Fair

value as a



RM RM RM %

2019 (cont’d.)


08.06.2022 Genting

Capital

Berhad AAA 10,000,000 10,239,470 9,985,073 3.30


International

Berhad AA 10,000,000 10,227,275 10,082,153 3.30

22.06.2022 UMW Holdings

Berhad AA 8,000,000 8,262,388 8,087,364 2.66

29.08.2022 Celcom

Networks

Sdn Bhd AA 5,000,000 5,239,415 5,106,700 1.69

AmBank (M)

Berhad* AA 5,000,000 5,289,231 5,112,481 1.71

AmBank

Islamic

Berhad* AA 5,000,000 5,289,231 5,112,481 1.71

16.03.2023 Gamuda

Berhad AA 5,000,000 5,219,045 5,095,461 1.68

29.03.2024 Hong Leong

Financial

Group

Berhad A 5,000,000 5,157,884 5,082,534 1.66

08.07.2024 CIMB Thai

Bank Public

Company

Limited AA 5,000,000 5,029,244 5,013,644 1.62

190,300,000 195,888,342 193,533,660 63.18

* Financial institutions related to the Manager.

23.02.2023

23.02.2023

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Fair

value as a



RM RM RM %

2019 (cont’d.)

Malaysian government bonds

31.10.2019 Government

of

Malaysia NR 6,000,000 6,063,926 6,063,795 1.96


of

Malaysia NR 7,100,000 7,176,748 7,176,611 2.31


of

Malaysia NR 18,000,000 18,252,040 18,247,072 5.89

31,100,000 31,492,714 31,487,478 10.16

Total financial assets at

FVTPL 221,400,000 227,381,056 225,021,138 73.34

Excess of fair value over adjusted cost 2,359,918

2020 2019

% %

Corporate bonds 3.19 3.94

Malaysian government bonds - 3.20

The weighted average effective yield on investments are as follows:

Effective yield

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Less than 1 year to 5 More than

1 year years 5 years

RM RM RM

At nominal value:

Corporate bonds 71,000,000 209,000,000 45,000,000

At nominal value:

Corporate bonds 94,300,000 96,000,000 -

Malaysian government bonds 13,100,000 18,000,000 -

5. AMOUNT DUE FROM/(TO) MANAGER

2020 2019

Note RM RM

(a) Due from ManagerCreation of units (i) 223,047 129,880

(b) Due to ManagerManager’s fee payable (ii) 132,237 101,144

(i)

(ii)

2020

2019

Manager’s fee is at a rate of 0.35% (2019: 0.35%) 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 Manager’s fee

payable is one month.

The amount represents amount receivable from the Manager for units created.

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

redemption of units is three business days.

Analyses of the remaining maturity of investments as at 31 July 2020 and 31 July 2019 are as

follows:

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AmIncome Management



6. DEPOSITS WITH FINANCIAL INSTITUTIONS

2020 2019

RM RM

At nominal value:Short-term deposits with licensed banks 73,397,000 83,535,000

At carrying value:Short-term deposits with licensed banks 73,400,318 83,542,008

Details of deposits with financial institutions are as follows:

Carrying

value as a Maturity Nominal Carrying percentage date Bank value value of NAV

RM RM %

Short-term deposits with licensed banks

03.08.2020 Malayan Banking Berhad 23,397,000 23,398,058 5.67

03.08.2020 Public Bank Berhad 50,000,000 50,002,260 12.12

73,397,000 73,400,318 17.79

Short-term deposits with licensed banks

01.08.2019 Public Bank Berhad 52,000,000 52,004,416 16.78

01.08.2019 RHB Bank Berhad 31,535,000 31,537,592 10.17

83,535,000 83,542,008 26.95

2020

2019

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6. DEPOSITS WITH FINANCIAL INSTITUTIONS (CONT’D.)

2020 2019 2020 2019

% % Days Day

Short-term deposits withlicensed banks 1.65 3.06 3 1

7. AMOUNT DUE TO TRUSTEE

8. NET GAIN FROM INVESTMENTS

2020 2019

RM RM

Net gain on financial assets at FVTPL comprised:

− Net realised gain on sale of investments 22,565 432,551 − Net unrealised gain on changes in fair values of

investments 2,609,375 2,164,845

2,631,940 2,597,396

9. TOTAL EQUITY

Total equity is represented by:

2020 2019Note RM RM

Unit holders’ capital (a) 400,091,571 302,438,336 Retained earnings

− Realised income (b) 7,443,519 5,213,145 − Unrealised gain (c) 4,969,293 2,359,918

412,504,383 310,011,399

Trustee’s fee is at a rate of 0.06% (2019: 0.06%) per annum on the NAV of the Fund,

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

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

deposits are as follows:

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

one month.

Weighted average

effective interest rate Remaining maturity

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AmIncome Management



9. TOTAL EQUITY (CONT’D.)

(a) Unit holders’ capital/units in circulation

Number of Number of

units RM units RM

At beginning of the

financial year 295,861,338 302,438,336 383,016,662 392,797,178 Creation during the

financial year 421,919,475 444,043,363 352,503,338 366,606,886 Distribution

reinvested 11,743,922 12,339,910 10,917,105 11,326,673 Cancellation during the

financial year (340,903,521) (358,730,038) (450,575,767) (468,292,401)At end of the

financial year 388,621,214 400,091,571 295,861,338 302,438,336

(b) Realised – distributable

2020 2019

RM RM

At beginning of the financial year 5,213,145 2,488,662 Net realised income for the financial year 14,236,046 13,934,181 Distributions out of realised income (Note 12) (12,005,672) (11,209,698)At end of the financial year 7,443,519 5,213,145

(c) Unrealised – non-distributable

2020 2019

RM RM

At beginning of the financial year 2,359,918 195,073 Net unrealised gain for the financial year 2,609,375 2,164,845 At end of the financial year 4,969,293 2,359,918

2020 2019

34

AmIncome Management



10. 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 Holdings company of the Manager

AMMB Holdings Berhad Ultimate holding company of the Manager

Subsidiaries and associates of Subsidiaries and associate companies of

AMMB as disclosed in its financial the ultimate holding company of the

statements Manager

11. INCOME TAX

2020 2019

RM RM

Net income before tax 16,845,421 16,099,026

Taxation at Malaysian statutory rate of 24% (2019: 24%) 4,042,901 3,863,766 Tax effects of:

Income not subject to tax (4,450,795) (4,195,411)Restriction on tax deductible expenses for unit trust fund 313,868 253,312 Non-permitted expenses for tax purposes 59,153 50,187 Permitted expenses not used and not available for

future financial years 34,873 28,146 Tax expense for the financial year - -

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:

There were no units held by the Manager or any related party as at 31 July 2020 and 31 July

2019.

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.

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.

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AmIncome Management



12. DISTRIBUTIONS

2020 2019

RM RM

Interest income 13,685,825 12,235,946 Net realised gain on sale of investments 19,407 355,607

13,705,232 12,591,553 Less: Expenses (1,699,560) (1,381,855)Total amount of distributions 12,005,672 11,209,698

Gross/net distributions per unit (sen) 3.04 3.58

Distributions made out of:− Realised income [Note 9(b)] 12,005,672 11,209,698

Comprising:

Distributions reinvested 11,422,740 10,292,528 Distributions to be reinvested 582,932 917,170

12,005,672 11,209,698

13. MANAGEMENT EXPENSE RATIO (“MER”)

The Fund’s MER is as follows:

2020 2019

% p.a. % p.a.

Manager’s fee 0.35 0.35 Trustee’s fee 0.06 0.06 Fund’s other expenses -* -*Total MER 0.41 0.41

* represents less than 0.01%

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.

Gross distribution per unit is derived from gross realised income less expense divided by the

number of units in circulation, while net distribution per unit is derived from gross realised

income less expenses and taxation divided by the number of units in circulation.

Distributions to unit holders for the financial year are from the following sources:

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AmIncome Management



14. PORTFOLIO TURNOVER RATIO (“PTR”)

15. SEGMENTAL REPORTING

16. TRANSACTIONS WITH FINANCIAL INSTITUTIONS

Financial institutions RM %

Standard Chartered Bank Malaysia Berhad 217,802,203 24.27 AmBank (M) Berhad* 162,963,053 18.16 Hong Leong Bank Berhad 129,543,138 14.44 CIMB Bank Berhad 97,009,356 10.81 RHB Investment Bank Berhad 87,178,365 9.70 Malayan Banking Berhad 40,738,036 4.54 Citibank Berhad 38,907,204 4.34 HSBC Bank Malaysia Berhad 37,273,846 4.15 Bank Islam Malaysia Berhad 26,708,784 2.98 Alliance Bank Malaysia Berhad 20,436,219 2.28 Others# 38,836,095 4.33

Total 897,396,299 100.00

* A financial institution related to the Manager.

#

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

investments to the average NAV of the Fund calculated on a daily basis, is 1.25 times

(2019: 0.63 times).

The above transactions were in respect of fixed income instruments. Transactions in these

investments do not involve any commission or brokerage.

In accordance with the objective of the Fund, substantially all of the Fund’s investments are

made in the form of fixed income securities and money market instruments in Malaysia. The

Manager is of the opinion that the risk and rewards from these investments are not

individually or segmentally distinct and hence the Fund does not have a separately

identifiable business or geographical segments.

Details of transactions with financial institutions for the financial year ended 31 July 2020

are as follows:

Transaction value

Included in the category of others were transactions amounting to RM5,238,723 with a

related financial institution, AmInvestment Bank Berhad.

The Manager is 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.

37

AmIncome Management



17. FINANCIAL INSTRUMENTS

(a) Classification of financial instruments

Financial Financial

Financial assets at liabilities at

assets at amortised amortised

FVTPL cost cost Total

RM RM RM RM

2020

Assets

Investments 339,623,124 - - 339,623,124

Amount due from

Manager - 223,047 - 223,047

Deposits with financial

institutions - 73,400,318 - 73,400,318

Cash at bank - 759 - 759Total financial assets 339,623,124 73,624,124 - 413,247,248

Liabilities

Amount due to Manager - - 132,237 132,237

Amount due to Trustee - - 20,042 20,042

Distribution to be

reinvested - - 582,932 582,932

Sundry payables and

accrued expenses - - 7,654 7,654

Total financial liabilities - - 742,865 742,865

2019

Assets

Investments 227,381,056 - - 227,381,056

Amount due from

Manager - 129,880 - 129,880

Deposits with financial

institutions - 83,542,008 - 83,542,008

Cash at bank - 824 - 824Total financial assets 227,381,056 83,672,712 - 311,053,768

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.

38

AmIncome Management



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

2019 (cont’d.)

Liabilities

Amount due to Manager - - 101,144 101,144

Amount due to Trustee - - 16,432 16,432

Distribution to be

reinvested - - 917,170 917,170

Sundry payables and

accrued expenses - - 7,623 7,623

Total financial liabilities - - 1,042,369 1,042,369

2020 2019

RM RM

Net gain from financial assets at FVTPL 2,631,940 2,597,396

Income, of which derived from:

– Interest income from financial assets at FVTPL 13,527,206 12,428,052

– Interest income from financial assets atamortised cost 2,385,835 2,455,433

(b) Financial instruments that are carried at fair value

Level 1:

Level 2:

Level 3:

Income, expense, gains and

losses

The Fund’s financial assets and liabilities are carried at fair value.

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

financial instruments by valuation technique:

quoted (unadjusted) prices in active markets for identical assets or

liabilities;

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

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

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

fair value that are not based on observable market data.

39

AmIncome Management



17. FINANCIAL INSTRUMENTS (CONT’D.)

(b) Financial instruments that are carried at fair value (cont’d.)

Level 1 Level 2 Level 3 Total

RM RM RM RM

2020

Financial assets at FVTPL - 339,623,124 - 339,623,124

2019

Financial assets at FVTPL - 227,381,056 - 227,381,056

(c)

• Amount due from/to Manager• Deposits with financial institutions• Cash at bank• Amount due to Trustee• Distribution to be reinvested • Sundry payables and accrued expenses

18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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

said risks, careful selection of investments coupled with stringent compliance to 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.

The Fund is exposed to a variety of risks that include market risk, credit risk, liquidity risk,

single issuer risk, regulatory risk, management risk and non-compliance risk.

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

the level of the fair value hierarchy:

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.

40

AmIncome Management



18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.)

(a) Market risk

The Fund’s market risk is affected primarily by the following risks:

(i) Interest rate risk

Parallel shift in yield

curve by: 2020 2019

RM RM

+100 bps (8,822,183) (3,463,060)

-100 bps 9,201,069 3,551,363

Financial markets have experienced and may continue to experience significant

volatility resulting from the spread of a novel coronavirus known as Covid-19. The

outbreak of Covid-19 has resulted in travel and border restrictions, quarantines, supply

chain disruptions, lower consumer demand and general market uncertainty. The

outcomes of global and local financial market are highly uncertain and cannot be

predicted at this point in time. Due to this, the Manager of the Fund is unable to reliably

estimate the quantitative impact of Covid-19 towards the Fund’s performance for the

next twelve months. The Manager of the Fund will continue actively monitor the

developments in the market to minimise any potential impact to the Fund.

Interest rate risk will affect the value of the Fund’s investments, given the interest

rate movements, which are influenced by regional and local economic

developments as well as political developments.

Domestic interest rates on deposits and placements with licensed financial

institutions are determined based on prevailing market rates.

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

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

+100bps and -100bps respectively:

Sensitivity of the Fund’s

NAV, theoretical value

The Fund’s principal exposure to market risk arises primarily due to changes in the

market environment, global economic and geo-political developments.

41

AmIncome Management




(b) Credit risk

(i) Credit quality of financial assets

As a % of

debt As a % of Credit rating RM securities NAV

2020

AAA 76,721,192 22.59 18.59

AA 166,752,919 49.10 40.44

A 96,149,013 28.31 23.30

339,623,124 100.00 82.33

2019

AAA 16,471,584 7.24 5.31

AA 142,967,870 62.88 46.12

A 36,448,888 16.03 11.75

NR 31,492,714 13.85 10.16

227,381,056 100.00 73.34

As a % As a % of Credit rating RM of deposits NAV

P1/MARC-1 73,400,318 100.00 17.79

P1/MARC-1 83,542,008 100.00 26.95

2019

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

risk.

2020

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 its NAV in money market instruments and fixed income instruments. As

such the Fund would be exposed to the risk of bond issuers and financial institutions

defaulting on its repayment obligations which in turn would affect the NAV of the Fund.

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

category as at 31 July 2020 and 31 July 2019:

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 2020 and 31 July 2019:

42

AmIncome Management




(b) Credit risk (cont’d.)

(ii) Credit risk concentration

As a % of

debt As a % of Sector RM securities NAV

2020

Construction and engineering 11,806,275 3.48 2.87

Diversified holdings 10,489,895 3.09 2.53

Financial services 117,495,980 34.60 28.49

Industrial products 35,321,247 10.40 8.56

Infrastructure and utilities 138,195,265 40.68 33.50

Plantation and agriculture 10,757,957 3.17 2.61

Trading and services 15,556,505 4.58 3.77339,623,124 100.00 82.33

2019

Construction and engineering 5,219,045 2.30 1.68

Diversified holdings 39,553,392 17.39 12.75

Financial services 85,266,576 37.50 27.51

Infrastructure and utilities 45,361,739 19.95 14.64

Public finance 31,492,714 13.85 10.16

Trading and services 20,487,590 9.01 6.60

227,381,056 100.00 73.34

(c) Liquidity risk

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

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

distribution as at 31 July 2020 and 31 July 2019:

There is no geographical risk as the Fund invests only in investments in Malaysia.

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 unit holders.

Liquid assets comprise of deposits 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.

43

AmIncome Management




(c)

The following table presents the undiscounted contractual cash flows from different asset and liability classes in the Fund:

0 – 1 1 – 2 2 – 3 3 – 4 4 – 5 More than

year years years years years 5 years

RM RM RM RM RM RM

2020

Financial assets

Investments 85,633,378 69,071,649 63,768,205 25,926,923 79,111,782 47,343,604

Amount due from Manager 223,047 - - - - -

Dseposits with financial institution 73,410,272 - - - - -

Cash at bank 759 - - - - -

Total assets 159,267,456 69,071,649 63,768,205 25,926,923 79,111,782 47,343,604

Financial liabilities

Amount due to Manager 132,237 - - - - -

Amount due to Trustee 20,042 - - - - -

Distribution to be reinvested 582,932 - - - - -

Sundry payables and accrued expenses 7,654 - - - - -

Total liabilities 742,865 - - - - -

Liquidity risk (cont’d.)

Contractual cash flows (undiscounted)

44

AmIncome Management




(c) Liquidity risk (cont’d.)

0 – 1 1 – 2 2 – 3 3 – 4 4 – 5 More than

year years years years years 5 years

RM RM RM RM RM RM

2019

Financial assets

Investments 117,064,777 13,197,903 79,894,402 21,332,805 10,448,592 -

Amount due from Manager 129,880 - - - - -

Deposits with financial institutions 83,542,008 - - - - -

Cash at bank 824 - - - - -

Total assets 200,737,489 13,197,903 79,894,402 21,332,805 10,448,592 -

Financial liabilities

Amount due to Manager 101,144 - - - - -

Amount due to Trustee 16,432 - - - - -

Distribution to be reinvested 917,170 - - - - -

Sundry payables and accrued expenses 7,623 - - - - -

Total liabilities 1,042,369 - - - - -

Contractual cash flows (undiscounted)

45

AmIncome Management




(d) Single issuer risk

(e) Regulatory risk

(f) Management risk

(g) Non-compliance risk

19. CAPITAL MANAGEMENT

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

more than a certain percentage of its NAV. Under such restriction, the risk exposure to

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

internal/external ratings.

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

ended 31 July 2020 and 31 July 2019.

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

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

growth in NAV from the performance of its investments.

The Fund manages its capital structure and makes adjustments to it, in light of changes in

economic conditions. To maintain or adjust the capital structure, the Fund may issue new or

bonus units, make distribution payment, or return capital to unit holders by way of

redemption of units.

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

market and the NAV of the Fund.

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

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

Non-compliance risk may adversely affect the 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.

46

AmIncome Management

STATEMENT BY THE MANAGER

For and on behalf of the Manager

GOH WEE PENG

Executive Director

Kuala Lumpur, Malaysia

24 September 2020

I, Goh Wee Peng, as the Director of AmFunds Management Berhad (the “Manager”), do hereby

state that in the opinion of the Manager, the accompanying financial statements 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 AmIncome Management

(the “Fund”) as at 31 July 2020 and the comprehensive income, the changes in equity and cash

flows for the financial year then ended and comply with the requirements of the Deeds.

47

TRUSTEE’S REPORT

TO THE UNIT HOLDERS OF AMINCOME MANAGEMENT

(a)

(b)

(c)

Richard Lim Hock Seng

Chief Executive Officer

Kuala Lumpur

24 September 2020

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 have acted as the Trustee for AmIncome Management (the “Fund”) for the financial year

ended 31 July 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:

We are of the view that the distributions made during this financial year ended 31 July 2020 by

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

Ng Hon Leong

Head, Trustee O

fund report - amincome management - aminvest · duration the fund was established on 2 december...

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