Post on 03-Aug-2020
RHB RESOURCES FUND
ANNUAL REPORT 2020
For the financial year ended 31 March 2020
1
GENERAL INFORMATION ABOUT THE FUND
Fund Name, Category and Type
Fund Name - RHB Resources Fund
Fund Category - Equity fund
Fund Type - Growth fund
Investment Objective, Policy and Strategy
Objective of the Fund
This Fund aims to achieve long term* capital appreciation through investments in
securities of companies whose businesses are in or are substantially related to the
natural resources sectors.
* Note: “long term” in this context refers to a period of between 5 – 7 years.
Strategy
The Fund will invest in securities of and securities relating to companies whose
businesses are in or are substantially related to the natural resources sectors such
as but not limited to plantations (e.g. palm oil, rubber, timber), oil and gas
including without limitation, the development, production and/or distribution of
services, equipment and/or downstream products or services that are derived from
these sectors. These are companies that have attractive growth potential, sound
fundamentals and good management, and whose securities are listed or traded in
the Asia Pacific markets such as Malaysia, Australia, China, Hong Kong SAR,
India, Indonesia, Japan, New Zealand, Philippines, Singapore, South Korea, Sri
Lanka, Taiwan and Thailand.
The asset allocation of the Fund will be as follows:-
Up to 98% of
Net Asset Value
- Investments in securities of companies whose
businesses are in or are substantially related to the
natural resources sectors.
2% - 5% of
Net Asset Value
- Investments in liquid assets including bonds, money
market instruments and deposits with financial
institutions.
Subject to the range stipulated above, the above asset allocation will be reviewed
from time to time depending on the judgement of the Manager as to the general
market and economic conditions.
2
Performance Benchmark
The performance of this Fund is benchmarked against Resources Index, a
composite benchmark comprising:
50% FBM Asian Palm Oil Plantation Index (RM) (or such other equivalent
index as may be substituted by Bursa Malaysia Securities Berhad);
25% Bloomberg Asia Pac Mining Index (RM); and
25% MSCI Asia Pac Energy (RM)
Permitted Investments
This Fund may invest in securities traded on the Bursa Malaysia Securities Berhad
or any other market considered as an eligible market, unlisted securities, collective
investment schemes, securities/instruments in foreign markets, financial
derivatives, structured products, liquid assets (including money market
instruments and deposits with any financial institutions), participate in the lending
of securities, and any other investments permitted by the Securities Commission
Malaysia from time to time.
Distribution Policy
Consistent with the Fund’s objective to achieve long term capital appreciation,
distributions will therefore be of secondary importance. Distributions, if any, after
deduction of taxation and expenses are generally declared annually and will be
reinvested.
3
MANAGER’S REPORT
MARKET REVIEW
Over the reporting period from April 2019 to March 2020, the palm oil sector has
begun to turn around after a dismal two years before COVID-19 struck in year
2020 and led to a massive demand destruction. Crude palm oil (“CPO”) price saw
a sharp recovery in fourth quarter of year 2019 (“4Q19”) and ended year 2019 at
RM3,035/t, 77.00% above November-2018 lows. This is followed by a dismal
performance (CPO price -21.00% Year-to-Date (“YTD”), regional plantation
companies are down -21% YTD on aggregate as well) as the uncertainty around
resolution of the COVID-19 crisis puts a lid on both prices and sentiment.
Oil prices were range-bound for the first half of June 2019 after news of soaring
crude inventories in the United States (“US”). However, prices quickly turned on
geopolitical tensions and saw a sharp boost after the attacks on two tankers in the
Gulf of Oman in the middle of June 2019, in which the US blamed Iran for the
attack. This is followed by another price surge in the event of the 14th September
2019 drone attack on a Saudi Arabia Abqaiq and Khurais oil facilities, removing
about c.5.00% (~5.7mbpd) of global total oil supply. While countries continue to
pinpoint the blame, geopolitical concerns and huge supply fears led to the rally. In
2020, oil prices suffered a dramatic collapse when Saudi Arabia surprised investors
by launching a price war with one-time ally Russia in March 2020. This shocking
move comes after Organization of Petroleum Exporting Countries (“OPEC”) and
Russia failed to reach an agreement over supply cuts to address the declining
demand for oil. Saudi Arabia has announced plans to raise production to 12.3
million bpd from 1st April 2020, up from its current production of 9.7 million bpd.
Oil prices have since collapsed to levels below the Global Financial Crisis (year
2009) and the US shale boom (year 2016) periods. Global oil supply is expected to
remain at about 100.8mbpd while demand to is expected to fall to 97mbpd as
demand from China slowed during the outbreak, resulting in an oversupply
condition for first quarter of year 2020 (“1Q20”). The oversupply condition is
expected to further deteriorate going into second quarter of year 2020 (“2Q20”),
and could further increased to 5.7mbpd of excess supply.
Gold was the spotlight for the month of June 2019, returning close to 8.00% with
investors flocking to safe haven assets amid weakening global economic outlook.
This sentiment was further supported by the Fed’s dovish turn in the latest June’s
Federal Open Market Committee (“FOMC”) meeting, and where the market had
then priced in a 100.00% implied probability rate cut in the upcoming Fed meeting
on 30-31 July 2019. Gold rose to a high of US$1,439/oz before retreating slightly
toward the end of the month. Gold’s rally is showing signs of fatigue after the metal
registered a 3.00% Month-on-Month (“MoM”) drop in September, a contrast to its
rally in the months preceding September 2019. Disappointing economic data and
4
signs of weaker global growth as well as mounting geopolitical tensions haven’t
been enough to sustain the strength in gold. However, the COVID-19 pandemic
has investors flocking to safe haven assets such as gold, which showed tremendous
resilience and outperformance when all other commodities suffered in 1Q20.
REVIEW OF FUND PERFORMANCE AND STRATEGY DURING THE
YEAR
The Fund registered negative return of 21.44%* over the reporting period but
outperformed the benchmark with reported a negative return of 22.27%*. The
Fund’s outperformance through the volatile period was a display of capabilities in
our rigorous stock selection.
Over the reporting period, positive value add was able to offset the value
detractions. The Fund saw value-add coming from our overweight positions in the
CPO sector during year 2019 and the eventual tapering of positions heading into
year 2020. Positive value-add also came from an underweight position in the
material sector across the board as supply was generally greater than demand which
led to lower commodity prices and the relatively poorer returns of the sector.
On the flipside, value detraction was primarily from the energy sector. The
dramatic collapse of oil prices in March 2020 when a price war erupted between
the Saudis and Russian has caught most investors off-guard and cause our oil
positions in the fund to suffer losses. We have since reduced some positions in the
O&G sector to account for the structurally damaged oil supply and demand
dynamics which will also render a O&G sector de-rating.
MARKET OUTLOOK AND STRATEGY GOING FORWARD
COVID-19 has indubitably destroyed the demand for CPO amidst a global
recession. The rapid spread of COVID-19 continues to cause disruptions across the
world, particularly palm oil trade movement, while low oil prices have eroded
biodiesel prospects. We are less concerned on Indonesia’s B30 prospects, however,
we foresee government support to be the last resort. Instead, biodiesel demand from
other countries (~8.00% of palm oil demand) is at the risk of disappearing. Oil
World now projects a 0.10% decline in global palm oil demand for year 2020,
marking the first decline in 22 years. As mentioned above, we are seeing huge loss
in demand and so we are now lowering our exposure to this sector and stick only
with very selective CPO companies with excellent balance sheet.
We continue to like cement names which will benefit from a resumption of activity
in China as well as a concerted stimulus by both central and local governments.
Our last channel check suggested that the resumption of cement production
accelerated in March 2020.
5
The low oil prices will hurt companies with high cost per barrel and economies that
are largely dependent on oil revenue. However, Saudi Arabia, Russia and the US
are probably unwilling to compromise in the current price war situation, although
the situation is highly fluid. The market is also already starting to see large
inventory builds as well, which would lead to a further steepening of the forward
curve into contango to cover the quickly rising costs of storing all these barrels. As
such, oil prices will remain low in the near term. However, any further decline to
oil prices would likely be temporary as current oil prices are at breakeven levels
for most oil companies.
In summary, we have trimmed our positions in CPO companies in light of the
demand destruction and are now favoring China material plays such as cement to
capitalize on the recovery of the Chinese industrial activities, notwithstanding the
impact of COVID-19. We have also trimmed our positions in oil-related stocks
given that the low oil prices are likely to remain going into the quarters ahead.
6
PERFORMANCE DATA
Annual Total Returns
Financial Year Ended 31 March
2020
%
2019
%
2018
%
2017
%
2016
%
RHB Resources Fund
- Capital Return (21.44) (1.15) (5.05) 22.26 (8.01)
- Income Return - - - - -
- Total Return (21.44) (1.15) (5.05) 22.26 (8.01)
Resources Index (22.27) (3.16) (4.18) 24.77 (9.45)
Average Total Returns
1 Year
31.03.2019-
31.03.2020
%
3 Years
31.03.2017-
31.03.2020
%
5 Years
31.03.2015-
31.03.2020
%
10 Years
31.03.2010-
31.03.2020
%
RHB Resources
Fund (21.39) (9.65) (3.67) (2.33)
Resources Index (22.21) (10.31) (4.01) (3.56)
7
Performance of RHB Resources Fund
for the period from 31 March 2010 to 31 March 2020
Cumulative Return Over The Period (%)
Source: Lipper IM, 10 April 2020
The abovementioned performance figures are indicative returns based on daily Net
Asset Value of a unit (as per Lipper Database) since inception.
The calculation of the above returns is based on computation methods of Lipper.
Note : Past performance is not necessarily indicative of future performance and
unit prices and investment returns may go down, as well as up.
The abovementioned performance computations have been adjusted to
reflect distribution payments and unit splits wherever applicable.
8
As at 31 March
Fund Size 2020 2019 2018
Net Asset Value (RM million) 16.06 23.87 28.93
Units In Circulation (million) 37.01 43.23 51.79
Net Asset Value Per Unit (RM) 0.4338 0.5522 0.5585
Financial Year Ended
31 March
Historical Data 2020 2019 2018
Unit Prices
NAV - Highest (RM) 0.5836 0.5954 0.6041
- Lowest (RM) 0.3940 0.5007 0.5564
Distribution and Unit Split - - -
Others
Management Expense Ratio (MER)
(%) #
1.67
1.92
1.82
Portfolio Turnover Ratio (PTR)
(times) ##
0.78
1.34
0.22
# The MER for the financial year was lower compared with the previous
financial year due to lower expenses incurred for the financial year under
review.
## The PTR for the financial year was lower compared with the previous financial
year due to lower average net asset value for the financial year under review.
9
DISTRIBUTION
During the financial year under review, no distribution has been proposed by the
Fund.
PORTFOLIO STRUCTURE
The asset allocations of the Fund as at reporting date were as follows:
As at 31 March
Sectors
2020
%
2019
%
2018
%
Equities
Consumer Products & Services 13.36 24.27 -
Energy 27.02 30.34 -
Industrial Products - 2.83 10.63
Infrastructure Project Companies - - 3.18
Materials 25.57 26.53 -
Mining - - 20.13
Plantations 24.12 8.23 40.26
Technology - - 2.76
Trading/Services - 0.51 21.81
Utilities - 2.64 - 90.07 95.35 98.77
Liquid assets and other net
current assets 9.93 4.65 1.23
100.00 100.00 100.00
10
BREAKDOWN OF UNIT HOLDINGS BY SIZE
Account Holders No. Of Units Held*
Size of Holdings No. % (‘000) %
5,000 and below 136 35.14 386 1.04
5,001 to 10,000 75 19.38 550 1.49
10,001 to 50,000 132 34.11 3,102 8.38
50,001 to 500,000 36 9.30 5,034 13.60
500,001 and above 8 2.07 27,933 75.49
Total 387 100.00 37,005 100.00
* Excluding Manager’s stock
SOFT COMMISSION
The Fund Manager may only receive soft commission in the form of research and
advisory services that assist in the decision-making process relating to the Fund’s
investments.
During the financial year under review, the soft commission received from the
brokers had been retained by the Manager as the goods and services provided are
of demonstrable benefit to the unitholders.
11
RHB RESOURCES FUND
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Note 2020 2019
RM RM
ASSETS
Investments 5 14,460,575 22,759,858
Deposits with licensed financial
institutions
6 1,041,501
-
Bank balances 6 589,725 1,104,296
Dividends receivables 31,338 104,630
Tax recoverable - 2,605
TOTAL ASSETS 16,123,139 23,971,389
LIABILITIES
Amount due to Manager 1,716 18,071
Accrued management fee 21,124 30,460
Amount due to Trustee 845 1,218
Other payables and accruals 43,884 52,368
TOTAL LIABILITIES 67,569 102,117
NET ASSET VALUE 16,055,570 23,869,272
EQUITY
Unitholders’ capital 8,568,960 11,954,479
Retained earnings 7,486,610 11,914,793
16,055,570 23,869,272
UNITS IN CIRCULATION (UNITS) 7 37,011,000 43,226,000
NET ASSET VALUE PER UNIT (RM) 0.4338 0.5522
The accompanying notes are an integral part of the financial statements.
12
RHB RESOURCES FUND
STATEMENT OF INCOME AND EXPENSES
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2020
Note 2020 2019
RM RM
(LOSS)/INCOME
Dividend income 557,394 957,812
Interest income from deposits with
licensed financial institutions
5,577 15,370
Net loss on investments 5 (4,488,761) (414,002)
Net foreign currency exchange loss (23,986) (37,408)
(3,949,776) 521,772
EXPENSES
Management fee 8 (325,983) (394,006)
Trustee’s fee 9 (13,040) (15,761)
Audit fee (7,350) (7,350)
Tax agent’s fee (3,500) (45,025)
Transaction costs (99,604) (218,444)
Other expenses (13,006) (42,336)
(462,483) (722,922)
Net loss before taxation (4,412,259) (201,150)
Taxation 10 (15,924) (83,330)
Net loss after taxation (4,428,183) (284,480)
Net loss after taxation is
made up of the following:
Realised amount (823,619) 195,858
Unrealised amount (3,604,564) (480,338)
(4,428,183) (284,480)
The accompanying notes are an integral part of the financial statements.
13
RHB RESOURCES FUND
STATEMENT OF CHANGES IN NET ASSET VALUE
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2020
Unitholders’
capital
Retained
earnings/
(accumulated
losses)
Total net
asset value
RM RM RM
Balance as at 1 April 2018 16,726,716 12,199,273 28,925,989
Movement in net asset value:
Net loss after taxation - (284,480) (284,480)
Creation of units arising from
applications 464,248 - 464,248
Cancellation of units (5,236,485) - (5,236,485)
Balance as at 31 March 2019 11,954,479 11,914,793 23,869,272
Balance as at 1 April 2019 11,954,479 11,914,793 23,869,272
Movement in net asset value:
Net loss after taxation - (4,428,183) (4,428,183)
Creation of units arising from
applications 1,144,855 - 1,144,855
Cancellation of units (4,530,374) - (4,530,374)
Balance as at 31 March 2020 8,568,960 7,486,610 16,055,570
The accompanying notes are an integral part of the financial statements.
14
RHB RESOURCES FUND
STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2020
Note 2020 2019
RM RM
CASH FLOWS FROM OPERATING
ACTIVITIES
Proceeds from sale of investments 18,387,248 37,660,180
Purchase of investments (14,685,166) (32,493,167)
Dividends received 614,545 941,406
Interest received from deposits with
licensed financial institutions
5,577 15,370
Management fee paid (335,319) (404,620)
Trustee’s fee paid (13,413) (16,186)
Payment for other expenses (32,281) (71,508)
Tax paid - (85,935)
Net cash generated from operating activities 3,941,191 5,545,540
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash proceeds from units created 1,144,855 464,248
Cash paid for units cancelled (4,546,729) (5,339,185)
Net cash used in financing activities (3,401,874) (4,874,937)
Net increase in cash and cash equivalents 539,317 670,603
Foreign currency translation differences (12,387) (31,680)
Cash and cash equivalents at the beginning
of the financial year
1,104,296
465,373
Cash and cash equivalents at the
end of the financial year
6 1,631,226 1,104,296
The accompanying notes are an integral part of the financial statements.
15
RHB RESOURCES FUND
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2020
1. THE FUND, THE MANAGER AND THEIR PRINCIPAL
ACTIVITIES
The RHB Resources Fund (hereinafter referred to as “the Fund”) was constituted
pursuant to the execution of a master deed dated 27 April 2004 as modified via its
first supplemental master deed dated 8 June 2004, second supplemental master
deed dated 19 October 2005, third supplemental master deed dated 8 December
2005, fourth supplemental master deed dated 28 February 2006, fifth supplemental
master deed dated 9 March 2006, sixth supplemental master deed dated 22
September 2006, seventh supplemental master deed dated 15 December 2006,
eighth supplemental master deed dated 30 January 2007, ninth supplemental
master deed dated 9 April 2007, tenth supplemental master deed dated 14 May
2007, eleventh supplemental master deed dated 15 May 2007, twelfth
supplemental master deed dated 27 June 2007, thirteenth supplemental master
deed dated 24 December 2007, fourteenth supplemental master deed dated 28
February 2013, fifteenth supplemental master deed dated 4 September 2013,
sixteenth supplemental master deed dated 2 March 2015, seventeenth
supplemental master deed dated 8 May 2015, eighteenth supplemental master deed
dated 25 May 2015 and nineteenth supplemental master deed dated 3 June 2015
(collectively referred to as “the Deeds”) between RHB Asset Management Sdn
Bhd (“the Manager”) and HSBC (Malaysia) Trustee Berhad (“the Trustee”).
The Fund was launched on 16 May 2006 and will continue its operations until
terminated according to the conditions provided in the Deeds.
All investments will be subject to the Securities Commission Malaysia’s (“SC”)
Guidelines on Unit Trust Funds, SC requirements, the Deeds, except where
exemptions or variations have been approved by the SC, internal policies and
procedures and objective of the Fund.
The main objective of the Fund is to achieve long term capital appreciation through
investments in securities of companies whose businesses are in or are substantially
related to the natural resources sectors.
The Manager, a company incorporated in Malaysia, is a wholly-owned subsidiary
of RHB Investment Bank Berhad, effective 6 January 2003. Its principal activities
include rendering of investment management services, management of unit trust
funds and private retirement schemes and provision of investment advisory
services.
These financial statements were authorised for issue by the Manager on 10 June
2020.
16
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation of the financial statements
The financial statements have been prepared under the historical cost convention,
as modified by revaluation of financial assets and financial liabilities (including
derivative instruments) at fair value through profit or loss, except those as disclosed
in the summary of significant accounting policies, and in accordance with
Malaysian Financial Reporting Standards (“MFRS”) and International Financial
Reporting Standards (“IFRS”).
The preparation of financial statements in conformity with MFRS and IFRS
requires the use of certain critical accounting estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of
income and expenses during the financial year. It also requires the Manager to
exercise its judgement in the process of applying the Fund’s accounting policies.
Although these estimates and judgement are based on the Manager’s best
knowledge of current events and actions, actual results may differ.
(a) The Fund has applied the following interpretation to existing standard and
amendments to published standard for the first time for the financial year
beginning on 1 April 2019:
IC Interpretation 23 ‘Uncertainty over Income Tax Treatments’ provides
guidance on how to recognise and measure deferred and current income
tax assets and liabilities where there is uncertainty over a tax treatment.
If an entity concludes that it is not probable that the tax treatment will be
accepted by the tax authority, the effect of the tax uncertainty should be
included in the period when such determination is made. An entity shall
measure the effect of uncertainty using the method which best predicts
the resolution of the uncertainty.
17
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.1 Basis of preparation of the financial statements (continued)
(a) The Fund has applied the following interpretation to existing standard and
amendments to published standard for the first time for the financial year
beginning on 1 April 2019: (continued)
Annual Improvements to MFRSs 2015 – 2017 Cycle: Amendments to
MFRS 112 ‘Income Taxes’ clarify that where income tax consequences
of dividends on financial instruments classified as equity is recognised
(either in profit or loss, other comprehensive income or equity) depends
on where the past transactions that generated distributable profits were
recognised. Accordingly, the tax consequences are recognised in
statement of income and expenses when an entity determines payments
on such instruments are distribution of profits (that is, dividends). Tax on
dividend should not be recognised in equity merely on the basis that it is
related to a distribution to owners.
The adoption of interpretation to the existing standard and amendments to
published standard did not have any impact on the current year or any prior
period and is not likely to affect future periods.
(b) Amendments and interpretations which are relevant to the Fund but not yet
effective and have not been early adopted are as follows:
(i) Financial year beginning on/after 1 April 2020
The Conceptual Framework for Financial Reporting
(“Framework”) (effective 1 January 2020)
The Framework was revised with the primary purpose to assist the
International Accounting Standards Board (“IASB”) to develop
IFRS that are based on consistent concepts and enable preparers to
develop consistent accounting policies where an issue is not
addressed by an IFRS.
18
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.1 Basis of preparation of the financial statements (continued)
(b) Amendments and interpretations which are relevant to the Fund but not yet
effective and have not been early adopted are as follows: (continued)
(i) Financial year beginning on/after 1 April 2020 (continued)
The Conceptual Framework for Financial Reporting (“Framework”)
(effective 1 January 2020) (continued)
Key changes include:
- increasing the prominence of stewardship in the objective of
financial reporting
- reinstating prudence as a component of neutrality
- defining a reporting entity, which may be a legal entity, or a
portion of an entity
- revising the definitions of an asset and a liability
- removing the probability threshold for recognition and adding
guidance on derecognition
- adding guidance on different measurement basis, and stating that
profit or loss is the primary performance indicator and that, in
principle, income and expenses in other comprehensive income
should be recycled where this enhances the relevance or faithful
representation of the financial statements.
No changes will be made to any of the current accounting
standards. However, entities that rely on the Framework in
determining their accounting policies for transactions, events or
conditions that are not otherwise dealt with under the accounting
standards will need to apply the revised Framework from 1 April
2020.
Amendments to MFRS 101 and MFRS 108 ‘Definition of Material’
(effective 1 January 2020) clarify the definition of materiality and use
a consistent definition throughout MFRSs and the Conceptual
Framework for Financial Reporting.
The revised Framework and adoption of the amendments to published
standards are not expected to give rise to any material impact on the financial
statements of the Fund.
19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.2 Financial assets
Classification
The Fund classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value through profit or loss
(“FVTPL”), and
those to be measured at amortised cost
The Fund classifies its investments based on both the Fund’s business model for
managing those financial assets and the contractual cash flow characteristics of
the financial assets. The portfolio of financial assets is managed and performance
is evaluated on a fair value basis. The Fund is primarily focused on fair value
information and uses that information to assess the assets’ performance and to
make decisions. The Fund has not taken the option to irrevocably designate any
equity securities as fair value through other comprehensive income. The
contractual cash flows of the Fund’s debt securities are solely principal and
interest, however, these securities are neither held for the purpose of collecting
contractual cash flows nor held both for collecting contractual cash flows and for
sale. The collection of contractual cash flows is only incidental to achieving the
Fund’s business model’s objective. Consequently, all investments are measured
at fair value through profit or loss.
The Fund classifies cash and cash equivalents, and dividend receivables at
amortised cost as these financial assets are held to collect contractual cash flows
consisting of the amount outstanding.
20
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.2 Financial assets (continued)
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade date -
the date on which the Fund commits to purchase or sell the asset. Financial assets
and financial liabilities at fair value through profit or loss are initially recognised
at fair value. Transaction costs are expensed as incurred in the statement of income
and expenses.
Financial assets are derecognised when the rights to receive cash flows from the
investments have expired or the Fund has transferred substantially all risks and
rewards of ownership.
Subsequent to initial recognition, all financial assets at fair value through profit or
loss are measured at fair value. Gains or losses arising from changes in the fair
value of the ‘financial assets at fair value through profit or loss’ category are
presented in statement of income and expenses in the period in which they arise.
Dividend income from financial assets at fair value through profit or loss is
recognised in the statement of income and expenses within dividend income when
the Fund’s right to receive payments is established.
Quoted investments are initially recognised at fair value and subsequently re-
measured at fair value based on the market price quoted on the relevant stock
exchanges at the close of the business on the valuation day, where the close price
falls within the bid-ask spread. In circumstances where the close price is not within
the bid-ask spread, the Manager will determine the point within the bid-ask spread
that is most representative of the fair value.
If a valuation based on the market price does not represent the fair value of the
securities, for example during abnormal market conditions or when no market price
is available, including in the event of a suspension in the quotation of the securities
for a period exceeding 14 days, or such shorter period as agreed by the Trustee,
then the securities are valued as determined in good faith by the Manager, based
on the methods or bases approved by the Trustee after appropriate technical
consultation.
21
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.2 Financial assets (continued)
Recognition and measurement (continued)
Deposits with licensed financial institutions are stated at cost plus accrued interest
calculated on the effective interest method over the period from the date of
placement to the date of the statement of financial position, which is a reasonable
estimate of fair value due to the short-term nature of the deposits.
Financial assets at amortised cost are subsequently carried at amortised cost using
the effective interest method.
Impairment of financial assets
The Fund measures credit risk and expected credit losses using probability of
default, exposure at default and loss given default. Management considers both
historical analysis and forward looking information in determining any expected
credit loss. Management considers the probability of default to be close to zero as
these instruments have a low risk of default and the counterparties have a strong
capacity to meet their contractual obligations in the near term. As a result, no loss
allowance has been recognised based on the 12-month expected credit losses as any
such impairment would be wholly insignificant to the Fund.
22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.2 Financial assets (continued)
Significant increase in credit risk
A significant increase in credit risk is defined by management as any contractual
payment which is more than 30 days past due or a counterparty credit rating which
has fallen below BBB/Baa.
Definition of default and credit-impaired financial assets
Any contractual payment which is more than 90 days past due is considered credit
impaired.
Write-off
The Fund writes off financial assets, in whole or in part, when it has exhausted all
practical recovery efforts and has concluded there is no reasonable expectation of
recovery. The assessment of no reasonable expectation of recovery is based on
unavailability of debtor’s sources of income or assets to generate sufficient future
cash flows to repay the amount. The Fund may write off financial assets that are
still subject to enforcement activity. Subsequent recoveries of amounts previously
written off will result in impairment gains. There are no write-offs/recoveries
during the financial year.
23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.3 Financial liabilities (continued)
Financial liabilities are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability.
Financial liabilities, within the scope of MFRS 9, are recognised in the statement
of financial position when, and only when, the Fund becomes a party to the
contractual provisions of the financial instrument.
The Fund’s financial liabilities which include amount due to Manager, accrued
management fee, amount due to Trustee and other payables and accruals are
recognised initially at fair value plus directly attributable transaction cost and
subsequently measured at amortised cost using the effective interest method.
A financial liability is derecognised when the obligation under the liability is
extinguished. Gains and losses are recognised in statement of income and expenses
when the liabilities are derecognised, and through the amortisation process.
2.4 Unitholders’ capital
The unitholders’ contributions to the Fund meet the criteria of the definition of
puttable instruments to be classified as equity instruments under MFRS 132
“Financial Instruments: Presentation”. Those criteria include:
the units entitle the holder to a proportionate share of the Fund’s net asset
value;
the units are the most subordinated class and class features are identical;
there is no contractual obligations to deliver cash or another financial asset
other than the obligation on the Fund to repurchase; and
the total expected cash flows from the units over its life are based
substantially on the statement of income and expenses of the Fund.
The outstanding units are carried at the redemption amount that is payable at each
financial year if unitholders exercise the right to put the units back to the Fund.
Units are created and cancelled at prices based on the Fund’s net asset value per
unit at the time of creation or cancellation. The Fund’s net asset value per unit is
calculated by dividing the net assets attributable to unitholders with the total
number of outstanding units.
24
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.5 Income recognition
Dividend income from quoted investments is recognised when the Fund’s right to
receive payment is established. Dividend income is received from financial assets
measured at FVTPL.
Interest income from deposits with licensed financial institutions are recognised on
an accrual basis using the effective interest method.
Interest income is calculated by applying the effective interest rate to the gross
carrying amount of a financial asset except for financial assets that subsequently
become credit-impaired. For credit-impaired financial assets, the effective interest
rate is applied to the net carrying amount of the financial assets (after deduction of
the loss allowance).
Realised gain or loss on sale of quoted investments is arrived at after accounting
for cost of investments, determined on the weighted average cost method.
Net income or loss is the total of income less expenses.
2.6 Taxation
Current tax expense is determined according to Malaysian tax laws and includes
all taxes based upon the taxable income earned during the financial year.
Tax on dividend income from foreign quoted investments is based on the tax
regime of the respective countries that the Fund invests in.
2.7 Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise
bank balances and deposits with licensed financial institutions which are subject to
an insignificant risk of changes in value.
25
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.8 Amount due from/to stockbrokers
Amounts due from/to stockbrokers represent receivables for securities sold and
payables for securities purchased that have been contracted for but not yet settled
or delivered on the date of the statement of financial position respectively. The
amount due from stockbrokers balance is held for collection.
These amounts are recognised initially at fair value and subsequently measured at
amortised cost. At each reporting date, the Fund shall measure the loss allowance
on amounts due from stockbrokers at an amount equal to the lifetime expected
credit losses if the credit risk has increased significantly since initial recognition.
If, at the reporting date, the credit risk has not increased significantly since initial
recognition, the Fund shall measure the loss allowance at an amount equal to 12-
month expected credit losses. Significant financial difficulties of the stockbroker,
probability that the stockbroker will enter bankruptcy or financial reorganisation,
and default in payments are all considered indicators that a loss allowance may be
required.
2.9 Presentation and functional currency
Items included in the financial statements of the Fund are measured using the
currency of the primary economic environment in which the Fund operates (the
“functional currency”). The financial statements are presented in Ringgit Malaysia
(“RM”), which is the Fund’s presentation and functional currency.
Due to mixed factors in determining the functional currency of the Fund, the
Manager has used its judgement to determine the functional currency that most
faithfully represents the economic effects of the underlying transactions, events and
conditions and have determined the functional currency to be in RM primarily due
to the following factors:
Part of the Fund’s cash is denominated in RM for the purpose of making
settlement of the creation and cancellation.
The Fund’s units are denominated in RM.
The Fund’s significant expenses are denominated in RM.
26
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.10 Foreign currency translation
Foreign currency transactions in the Fund are accounted for at exchange rates
prevailing at the transaction dates. Foreign currency monetary assets and liabilities
are translated at exchange rates prevailing at the reporting date. Exchange
differences arising from the settlement of foreign currency transactions and from
the translation of foreign currency monetary assets and liabilities are recognised in
statement of income and expenses.
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Fund is exposed to a variety of risks, which include market risk, price risk,
interest rate risk, currency risk, credit risk, liquidity risk and capital risk.
Financial risk management is carried out through internal control processes
adopted by the Manager and adherence to the investment restrictions as stipulated
in the SC Malaysia Guidelines on Unit Trust Funds.
Market risk
Securities may decline in value due to factors affecting securities markets generally
or particular industries represented in the securities markets. The value of a security
may decline due to general market conditions which are not specifically related to
a particular company, such as real or perceived adverse economic conditions,
changes in the general outlook for corporate earnings, changes in interest or
currency rates or adverse investors’ sentiment generally. They may also decline
due to factors that affect a particular industry or industries, such as labour shortages
or increased production costs and competitive conditions within an industry.
Equity securities generally have greater price volatility than fixed income
securities. The market price of securities owned by a unit trust fund might go down
or up, sometimes rapidly or unpredictably.
27
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(CONTINUED)
Price risk
Price risk is the risk that the fair value of an investment of the Fund will fluctuate
because of changes in market prices.
The Fund is exposed to equity securities price risk (other than those arising from
interest rate risk) for its investments of RM14,460,575 (2019: RM22,759,858) in
equity securities.
The sensitivity analysis is based on the assumption that the price of the quoted
equity security fluctuate by +/(-) 5% with all other variables held constant, the
impact on statement of income and expenses and net asset value is +/(-)
RM723,029 (2019: RM1,137,993).
Interest rate risk
Interest rate risk is the risk that the value of the Fund’s investments and its return
will fluctuate because of changes in market interest rate. The Fund’s exposure to
the interest rate risk is mainly confined to short term placements with financial
institutions. The Manager overcomes the exposure by way of maintaining deposits
on short term basis. Therefore, exposure to interest rate risk fluctuation is minimal.
28
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(CONTINUED)
Currency risk
Currency risk is associated with financial instruments that are quoted and/or priced
in foreign currency denomination. Malaysian based investor should be aware that
if the Ringgit Malaysia appreciates against the currencies in which the portfolio of
the investment is denominated, this will have an adverse effect on the net asset
value of the Fund and vice versa. The Fund did not have any significant financial
liabilities denominated in foreign currencies as at the financial year end date.
The Manager or its fund management delegate could utilise two pronged
approaches in order to mitigate the currency risk; firstly by spreading the
investments across different currencies (i.e. diversification) and secondly, by
hedging the currencies when it deemed necessary.
The sensitivity analysis is based on the assumption that the foreign exchange rate
fluctuates by +/(-) 5% with all other variables held constant, the impact on
statement of income and expenses and net asset value is +/(-) RM558,056 (2019:
RM1,097,423).
29
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(CONTINUED)
Currency risk
Investments
Receivables
Cash and
cash
equivalents
Total
RM RM RM RM
2020
Australian Dollar 2,053,137 10,126 - 2,063,263
Chinese Yuan 185,842 - 9 185,851
Hong Kong Dollar 3,364,088 - - 3,364,088
Indonesian Rupiah - - 45 45
Indian Rupee 1,269,522 - - 1,269,522
Japanese Yen 486,409 1,266 - 487,675
Korean Won 336,593 - 5,435 342,028
Singapore Dollar 2,144,331 - 536,997 2,681,328
Thai Baht 747,300 19,946 - 767,246
United State Dollar - - 67 67
10,587,222 31,338 542,553 11,161,113
2019
Australian Dollar 5,236,255 70,858 - 5,307,113
Hong Kong Dollar 5,748,861 - - 5,748,861
Indonesian Rupiah 670,141 - 49 670,190
Indian Rupee 928,345 - - 928,345
Japanese Yen 1,219,086 16,585 - 1,235,671
Korean Won 1,143,191 5,911 9,235 1,158,337
Singapore Dollar 5,122,735 - 996,615 6,119,350
Thai Baht 725,704 11,276 - 736,980
United State Dollar - - 43,627 43,627
20,794,318 104,630 1,049,526 21,948,474
30
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(CONTINUED)
Credit risk
Credit risk refers to the possibility that the issuer of a particular investment will not
be able to make timely or full payments of principal or income due on that investment.
The risk arising from placements of deposits in licensed financial institutions is
managed by ensuring that the Fund will only place deposits in reputable licensed
financial institutions.
The following table sets out the credit risk concentrations of the Fund:
Cash and
cash
equivalents
Other
financial
assets*
Total
2020 RM RM RM
Financial institutions:
AAA 1,631,226 - 1,631,226
Others* - 31,338 31,338
1,631,226 31,338 1,662,564
2019
Financial institutions:
AAA 1,104,296 - 1,104,296
Others* - 104,630 104,630
1,104,296 104,630 1,208,926
* Comprise amount dividend receivables.
31
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(CONTINUED)
Liquidity risk
Liquidity risk is the risk that the Fund will encounter difficulty in meeting its
financial obligations.
Liquidity risk exists when particular investments are difficult to sell. As such, the
Fund may not be able to sell such illiquid investments at an advantageous time or
price to meet its liquidity requirements. Unit trust funds with principal investment
strategies that involve securities or securities with substantial market and/or credit
risk tend to have the greater exposure to liquidity risk. As part of its risk
management, the Manager will attempt to manage the liquidity of the Fund through
asset allocation and diversification strategies within the portfolio. The Manager
will also conduct constant fundamental research and analysis to forecast future
liquidity of its investments.
The table below summarises the Fund’s financial liabilities into relevant maturity
groupings based on the remaining period from the statement of financial position
date to the contractual maturity date. The amounts in the table are the contractual
undiscounted cash flows.
Less than
1 month
Between
1 month
to 1 year
RM RM
2020
Amount due to Manager 1,716 -
Accrued management fee 21,124 -
Amount due to Trustee 845 -
Other payables and accruals - 43,884
23,685 43,884
2019
Amount due to Manager 18,071 -
Accrued management fee 30,460 -
Amount due to Trustee 1,218 -
Other payables and accruals - 52,368
49,749 52,368
32
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(CONTINUED)
Capital risk
The capital of the Fund is represented by equity consisting of unitholders’ capital
of RM8,568,960 (2019: RM11,954,479) and retained earnings of RM7,486,610
(2019: RM11,914,793). The amount of equity can change significantly on a daily
basis as the Fund is subject to daily subscriptions and redemptions at the discretion
of unitholders. The Fund’s objective when managing capital is to safeguard the
Fund’s ability to continue as a going concern in order to provide returns for
unitholders and benefits for other stakeholders and to maintain a strong capital base
to support the development of the investment activities of the Fund.
4. FAIR VALUE ESTIMATION
Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date (i.e. an exit price).
The fair value of financial assets and liabilities traded in an active market (such as
publicly traded derivatives and trading securities) are based on quoted market
prices at the close of trading on the financial year end date.
An active market is a market in which transactions for the assets or liabilities take
place with sufficient frequency and volume to provide pricing information on an
ongoing basis.
The fair value of financial assets and liabilities that are not traded in an active
market is determined by using valuation techniques. The Fund uses a variety of
methods and makes assumptions that are based on market conditions existing at
each financial year end date. Valuation techniques used for non-standardised
financial instruments such as options, currency swaps and other over-the-counter
derivatives, include the use of comparable recent transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by market
participants making the maximum use of market inputs and relying as little as
possible on entity-specific inputs.
33
4. FAIR VALUE ESTIMATION (CONTINUED)
The fair values are based on the following methodologies and assumptions:
(i) For bank balance and deposits with licensed financial institutions with maturities
less than 1 year, the carrying value is a reasonable estimate of fair value.
(ii) The carrying value of receivables and payables are assumed to approximate their
fair values due to their short term nature.
Fair value hierarchy
The Fund adopted MFRS 13 “Fair Value Measurement” in respect of disclosures about
the degree of reliability of fair value measurement. This requires the Fund to classify
fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy has the following
levels:
Level 1: Quoted prices (unadjusted) in active market for identical assets or
liabilities
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices)
Level 3: Inputs for the asset and liability that are not based on observable market
data (that is, unobservable inputs)
The following table analyses within the fair value hierarchy the Fund’s financial assets
at fair value through profit or loss (by class) measured at fair value:
Level 1 Level 2 Level 3 Total
RM RM RM RM
2020
Investments:
- Quoted investments 14,460,575 - - 14,460,575
2019
Investments:
- Quoted investments 22,759,858 - - 22,759,858
Investments in active listed equities, i.e. quoted investments whose values are based
on quoted market prices in active markets are classified within Level 1. The Fund does
not adjust the quoted prices for these instruments. The Fund’s policies on valuation of
these financial assets are stated in Note 2.2.
34
5. INVESTMENTS
2020 2019
RM RM
Investments:
- Quoted investments - local 3,873,352 1,965,540
- Quoted investments - foreign 10,587,223 20,794,318
14,460,575 22,759,858
2020
2019
Net loss on investments: RM RM
- Net realised gain/(loss) on sale of
investments (897,711)
36,529
- Net unrealised loss on changes in fair value (3,591,050) (450,531)
(4,488,761) (414,002)
Investments as at 31 March 2020 are as follows:
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
LOCAL
MALAYSIA
Plantations
IOI Corporation Bhd 400,000 1,706,310 1,600,000 9.96
Kuala Lumpur
Kepong Bhd
71,100
1,733,064
1,476,036
9.19
Sime Darby
Plantation Bhd
161,400
834,028
797,316
4.97
4,273,402 3,873,352 24.12
TOTAL QUOTED
INVESTMENTS - LOCAL
4,273,402
3,873,352
24.12
35
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2020 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN
AUSTRALIA
Energy
Woodside Petroleum Ltd 4,600 426,148 220,480 1.37
Materials
BHP Billiton Ltd 15,156 1,422,374 1,156,073 7.20
Newcrest Mining Ltd 7,116 475,574 431,727 2.69
Rio Tinto Ltd 1,100 248,759 244,857 1.52
2,146,707 1,832,657 11.41
TOTAL AUSTRALIA 2,572,855 2,053,137 12.78
HONG KONG
Energy
China Oilfield Services
Ltd
187,000
687,502
622,120
3.88
CNOOC Ltd 170,000 900,126 767,618 4.78
PetroChina Co Ltd 114,000 311,146 179,816 1.12
1,898,774 1,569,554 9.78
Materials
Anhui Conch Cement
Co Ltd
14,500
380,986
433,670
2.70
China Molybdenum Co
Ltd
118,000
231,409
142,216
0.89
China Resources
Cement Holdings Ltd
86,000
353,923
441,821
2.75
Zijin Mining Group Co
Ltd
479,000
633,899
776,827
4.84
1,600,217 1,794,534 11.18
TOTAL HONG
KONG 3,498,991 3,364,088 20.96
36
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2020 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN (CONTINUED)
INDIA
Energy
Reliance Industries Ltd 17,172 1,067,614 1,092,055 6.80
Materials
Hindustan Zinc Ltd 20,000 244,358 177,467 1.10
TOTAL INDIA 1,311,972 1,269,522 7.90
CHINA
Materials
China Molybdenum
Co Ltd
88,000
215,003
185,842
1.16
TOTAL CHINA 215,003 185,842 1.16
JAPAN
Energy
Inpex Corp 15,300 655,673 371,431 2.31
Materials
Sumitomo Metal
Mining Co Ltd 1,300 195,742 114,978 0.72
TOTAL JAPAN 851,415 486,409 3.03
37
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2020 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN (CONTINUED)
KOREA
Energy
SK Innovation Co Ltd 1,096 341,872 336,593 2.10
TOTAL KOREA 341,872 336,593 2.10
SINGAPORE
Consumer Products &
Services
First Resources Ltd 41,000 196,132 149,936 0.94
Golden Agri-Resources
Ltd
1,150,000
983,981
490,066
3.05
Wilmar International
Ltd
154,100
1,586,607
1,504,329
9.37
2,766,720 2,144,331 13.36
TOTAL SINGAPORE 2,766,720 2,144,331 13.36
THAILAND
ENERGY
PTT Exploration &
Production PCL 84,300 1,077,398 747,301 4.66
TOTAL THAILAND 1,077,398 747,301 4.66
TOTAL QUOTED INVESTMENTS
– FOREIGN 12,636,226 10,587,223 65.95
TOTAL INVESTMENTS 16,909,628 14,460,575 90.07
38
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2019 are as follows:
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
LOCAL
MALAYSIA
Plantations
Genting Plantation
Berhad 74,000 733,467 784,400 3.29
IOI Corporation Bhd 50,000 217,830 223,000 0.93
Kuala Lumpur
Kepong Bhd 19,000 455,557 471,200 1.97
Sime Darby
Plantation Bhd 97,000 481,393 486,940 2.04
1,888,247 1,965,540 8.23
TOTAL QUOTED
INVESTMENTS - LOCAL 1,888,247 1,965,540 8.23
39
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2019 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN
AUSTRALIA
Energy
Oil Search Ltd 36,600 883,991 832,912 3.49
Woodside Petroleum
Ltd 4,600 426,148 461,671 1.93
1,310,139 1,294,583 5.42
Materials
BHP Billiton Ltd 16,900 1,558,181 1,885,745 7.90
Newcrest Mining Ltd 14,100 704,092 1,042,744 4.37
Rio Tinto Ltd 2,800 633,206 794,755 3.33
South32 Ltd 20,200 164,610 218,428 0.91
3,060,089 3,941,672 16.51
TOTAL AUSTRALIA 4,370,228 5,236,255 21.93
HONG KONG
Energy
China Oilfield
Services Ltd 211,000 873,914 930,247 3.90
CNOOC Ltd 206,000 1,238,880 1,574,361 6.60
Kunlun Energy Co
Ltd 54,000 259,767 230,212 0.96
PetroChina Co Ltd 230,000 725,921 608,647 2.55
3,098,482 3,343,467 14.01
Industrial Products
& Services
China Everbright
International Ltd 59,000 231,439 244,779 1.03
40
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2019 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN (CONTINUED)
HONG KONG (CONTINUED)
Materials
China Molybdenum
Co Ltd 286,000 560,873 487,708 2.04
China Resources
Cement Holdings Ltd 26,000 101,104 109,491 0.46
Zijin Mining Group
Co Ltd 479,000 633,899 809,354 3.39
1,295,876 1,406,553 5.89
Trading/Services
China Resources
Power Holdings Ltd 20,000 119,564 122,696 0.51
Utilities
Enn Energy Holdings
Ltd 16,000 601,863 631,366 2.64
TOTAL HONG KONG 5,347,224 5,748,861 24.08
INDIA
Energy
Reliance Industries Ltd 7,500 395,421 602,216 2.52
Materials
Hindustan Zinc Ltd 20,000 244,358 326,129 1.37
TOTAL INDIA 639,779 928,345 3.89
41
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2019 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN (CONTINUED)
INDONESIA
Consumer Products &
Services
Astra Agro Lestari Tbk 208,744 918,901 670,141 2.81
TOTAL INDONESIA 918,901 670,141 2.81
JAPAN
Energy
Inpex Corp 15,300 655,673 595,451 2.50
JXTG Holdings Inc 25,000 650,902 466,892 1.96
1,306,575 1,062,343 4.46
Materials
Sumitomo Metal
Mining Co Ltd 1,300 195,742 156,743 0.66
TOTAL JAPAN 1,502,317 1,219,086 5.12
KOREA
Energy
SK Innovation Co Ltd 330 235,567 212,535 0.89
Industrial Products &
Services
Hyundai Heavy
Industries Holdings Co
Ltd 360 519,357 430,130 1.80
Materials
Korea Zinc Co Ltd 300 499,371 500,526 2.10
TOTAL KOREA 1,254,295 1,143,191 4.79
42
5. INVESTMENTS (CONTINUED)
Investments as at 31 March 2019 are as follows: (continued)
Name of Counter Quantity Cost Fair Value
% of Net
Asset
Value
RM RM %
QUOTED INVESTMENTS -
FOREIGN (CONTINUED)
SINGAPORE
Consumer Products &
Services
First Resources Ltd 416,000 2,002,279 2,055,384 8.61
Golden Agri-Resources Ltd 870,000 730,781 733,894 3.07
Wilmar International Ltd 234,000 2,234,991 2,333,457 9.78
4,968,051 5,122,735 21.46
TOTAL SINGAPORE 4,968,051 5,122,735 21.46
THAILAND
ENERGY
PTT Exploration &
Production PCL 45,000 728,819 725,704 3.04
TOTAL THAILAND 728,819 725,704 3.04
TOTAL QUOTED INVESTMENTS –
FOREIGN 19,729,614 20,794,318 87.12
TOTAL INVESTMENTS 21,617,861 22,759,858 95.35
43
6. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise:
2020 2019
RM RM
Deposits with licensed financial institutions 1,041,501 -
Bank balances 589,725 1,104,296
1,631,226 1,104,296
7. UNITS IN CIRCULATION
2020 2019
Units Units
At the beginning of the financial year 43,226,000 51,789,000
Creation of units arising from applications
during the financial year 2,117,000 807,000
Cancellation of units during
the financial year (8,332,000) (9,370,000)
At the end of the financial year 37,011,000 43,226,000
8. MANAGEMENT FEE
In accordance with the Master Prospectus, the management fee provided in the
financial statements is 1.50% (2019: 1.50%) per annum based on the net asset
value of the Fund, calculated on a daily basis for the financial year.
9. TRUSTEE’S FEE
In accordance with the Master Prospectus, the Trustee’s fee provided in the
financial statements is 0.06% (2019: 0.06%) per annum based on the net asset
value of the Fund, calculated on a daily basis for the financial year. The minimum
Trustee’s fee is waived as agreed by the Trustee and Manager.
44
10. TAXATION
(a) Tax charge for the financial year
2020 2019
RM RM
Underprovision of tax in prior year 2,605 -
Current taxation - foreign 13,319 83,330
(b) Numerical reconciliation of income tax expense
The numerical reconciliation between the net loss before taxation multiplied by
the Malaysian statutory income tax rate and the tax expense of the Fund is as
follows:
2020 2019
RM RM
Net loss before taxation (4,412,259) (201,150)
Tax calculated at statutory income tax rate of 24% (1,058,942) (48,276)
Tax effects of:
- Loss not deductible for tax purposes/ (income
not subject to tax) 947,946 (125,225)
- Expenses not deductible for tax purposes 30,996 75,203
- Restriction on tax deductible expenses for unit
trust funds 80,000 98,298
Underprovision of tax in prior year 2,605 -
Foreign tax in other countries 13,319 83,330
Tax expense 15,924 83,330
11. MANAGEMENT EXPENSE RATIO (“MER”)
2020
%
2019
%
MER 1.67 1.92
The MER ratio is calculated based on total expenses excluding investment
transaction related costs of the Fund to the average net asset value of the Fund
calculated on a daily basis.
45
12. PORTFOLIO TURNOVER RATIO (“PTR”)
2020 2019
PTR (times)
0.78
1.34
The PTR ratio is calculated based on average of acquisition and disposals of the
Fund for the financial year to the average net asset value of the Fund calculated on
a daily basis.
13. UNITS HELD BY THE MANAGER AND PARTIES RELATED TO
THE MANAGER
The number of units held by the Manager and related party are as follows:
2020 2019
Units RM Units RM
The Manager 5,551 2,408 5,141 2,839
RHB Capital Nominees
(Tempatan Sdn Bhd 2,534,006 1,099,252 1,409,018 778,060
The units are held beneficially by the Manager for booking purposes. The Manager
is of the opinion that all transactions with the related parties have been entered into
in the normal course of business at agreed terms between the related parties.
The units held by RHB Capital Nominees (Tempatan) Sdn Bhd, a wholly owned
subsidiary of ultimate holding company of the Manager, are under nominees
structure.
Other than the above, there were no units held by the Directors or parties related
to the Manager.
The holding company and the ultimate holding company of the Manager is RHB
Investment Bank Berhad and RHB Bank Berhad respectively. The Manager treats
RHB Bank Berhad group of companies including RHB Investment Bank Berhad
and its subsidiaries as related parties.
46
14. TRANSACTIONS BY THE FUND
Details of transactions by the Fund for the financial year ended 31 March 2020 are as
follows:
Percentage
Percentage of total
Brokers/ Value of of total Brokerage brokerage
financial institutions trades trades fees fees
RM % RM %
China Int Capital Corp
HK Sec Ltd
4,718,144
14.26
10,653
14.15
Citigroup Global Market
Singapore
4,453,218
13.46
10,576
14.04
Credit Suisse (HK) Ltd 3,617,997 10.94 8,576 11.39
Citigroup Global
Markets Asia Ltd
3,565,383
10.78
7,131
9.47
Macquarie Bank Limited
Hong Kong
2,448,786
7.40
4,898
6.50
CIMB Investment Bank
Bhd
2,158,883
6.53
6,141
8.15
J.P. Morgan Securities
Malaysia
2,069,560
6.26
4,139
5.50
RHB Investment Bank
Bhd*
1,279,098
3.87
3,837
5.09
Instinet Pacific Limited 1,274,128 3.85 2,644 3.51
J.P. Morgan Securities
PLC
827,476
2.50
1,833
2.43
Others 6,662,954 20.15 14,888 19.77
33,075,627 100.00 75,316 100.00
* Included in transactions by the Fund are trades with the holding company of the
Manager, RHB Investment Bank Bhd. The Manager is of the opinion that all
transactions with the related companies have been entered into in the normal course
of business at agreed terms between the related parties.
47
14. TRANSACTIONS BY THE FUND (CONTINUED)
Details of transactions by the Fund for the financial year ended 31 March 2019 are
as follows:
Percentage
Percentage of total
Brokers/ Value of of total Brokerage brokerage
financial institutions trades trades fees fees
RM % RM %
Citigroup Global
Markets Asia Ltd 12,449,975 17.74 26,219 15.73
China Int Capital Corp
HK Sec Ltd 10,376,609 14.79 25,942 15.56
Macquarie Capital
Securities Ltd 8,178,590 11.65 18,946 11.37
J.P. Morgan Securities
PLC 7,112,807 10.13 13,343 8.00
RHB Securities Hong
Kong Ltd* 6,307,784 8.99 18,090 10.85
Credit Suisse (HK) Ltd 5,783,920 8.24 14,089 8.45
CIMB Securities (India)
Pte Ltd 3,007,385 4.29 10,526 6.32
Credit Suisse First
Boston (Singapore) 2,620,674 3.73 5,241 3.14
CLSA Singapore Pte Ltd 2,192,758 3.12 4,262 2.56
CLSA Limited 1,865,217 2.66 5,029 3.02
Others* 10,284,890 14.66 24,997 15.00
70,180,609 100.00 166,684 100.00
* Included in transactions by the Fund are trades with the holding company of the
Manager, RHB Investment Bank Bhd, of which the value of trades amounted to
RM1,081,518 and brokerage fees amounted to RM3,245 and a related company of
the Manager, RHB Securities Hong Kong Ltd. The Manager is of the opinion that
all transactions with the related companies have been entered into in the normal
course of business at agreed terms between the related parties.
48
15. FINANCIAL INSTRUMENTS BY CATEGORIES
2020 2019
Financial assets RM RM
Financial assets at fair value through
profit or loss (‘FVTPL’)
• Quoted investments 14,460,575 22,759,858
Financial assets at amortised cost
• Deposit with licensed financial
institutions
1,041,501
-
• Bank balances 589,725 1,104,296
• Dividend receivables 31,338 104,630
1,662,564 1,208,926
Financial liabilities
Financial liabilities at amortised cost
• Amount due to Manager 1,716 18,071
• Accrued management fee 21,124 30,460
• Amount due to Trustee 845 1,218
• Other payables and accruals 43,884 52,368
67,569 102,117
16. SIGNIFICANT AND SUBSEQUENT EVENT TO THE FINANCIAL
YEAR
The worsening of the macro-economic outlook as a result of Covid-19, both
domestically and globally, has impacted the Fund’s performance during and after the
financial year end.
The Manager is monitoring the situation closely and will be managing the portfolio to
achieve the Fund’s objective.
49
STATEMENT BY MANAGER
We, Dato’ Darawati Hussain and Ong Yin Suen, two of the Directors of RHB Asset
Management Sdn Bhd, do hereby state that in the opinion of the Directors of the
Manager, the accompanying statement of financial position, statement of income
and expenses, statement of changes in net asset value, 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 of 31 March 2020 and
of its financial performance and cash flows for the financial year then ended and
comply with the provisions of the Deeds.
On behalf of the Manager
DATO’ DARAWATI HUSSAIN ONG YIN SUEN
Director Director
10 June 2020
50
TRUSTEE’S REPORT TO THE UNITHOLDERS OF
RHB RESOURCES FUND
We have acted as Trustee of RHB Resources Fund (“the Fund”) for the financial
year ended 31 March 2020. To the best of our knowledge, RHB Asset Management
Sdn Bhd (“the Management Company”), has operated and managed the Fund in
accordance with the following:
(a) limitations imposed on the investment powers of the Management Company
and the Trustee under the Deeds, the Securities Commission’s Guidelines on
Unit Trust Funds, the Capital Markets and Services Act 2007 and other
applicable laws;
(b) valuation/pricing is carried out in accordance with the Deeds and any
regulatory requirements; and
(c) creation and cancellation of units are carried out in accordance with the Deeds
and any regulatory requirements.
For HSBC (Malaysia) Trustee Berhad
Tan Bee Nie
Manager, Investment Compliance Monitoring
Kuala Lumpur
10 June 2020
51
INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF
RHB RESOURCES FUND
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Our opinion
In our opinion, the financial statements of RHB Resources Fund (“the Fund”) give
a true and fair view of the financial position of the Fund as at 31 March 2020 and
of its financial performance and its cash flows for the financial year then ended in
accordance with Malaysian Financial Reporting Standards and International
Financial Reporting Standards.
What we have audited
We have audited the financial statements of the Fund, which comprise the
statement of financial position as at 31 March 2020, and the statement of income
and expenses, statement of changes in net asset value 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 48.
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 “Auditors’ 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.
52
INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS
OF
RHB RESOURCES FUND (CONTINUED)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
(CONTINUED)
Information other than the financial statements and auditors’ report thereon
The Manager of the Fund is responsible for the other information. The other
information comprises Manager’s report, but does not include the financial
statements of the Fund and our auditors’ report thereon.
Our opinion on the financial statements of the Fund does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements of the Fund, our
responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements of
the Fund or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of the Manager for the financial statements
The Manager of the Fund 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
terminate the Fund, or has no realistic alternative but to do so.
53
INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS
OF
RHB RESOURCES FUND (CONTINUED)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
(CONTINUED)
Auditors’ 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 with approved standards on auditing in Malaysia
and International Standards on Auditing will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia
and International Standards on Auditing, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
(a) Identify and assess the risks of material misstatement of the financial
statements of the Fund, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
(b) Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of Fund’s
internal control.
(c) Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Manager.
54
INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF
RHB RESOURCES FUND (CONTINUED)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Auditors’ responsibilities for the audit of the financial statements (continued)
(d) Conclude on the appropriateness of the Manager’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Fund’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditors’ report to the related disclosures in the financial statements
of the Fund or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of
our auditors’ report. However, future events or conditions may cause the
Fund to cease to continue as a going concern.
(e) Evaluate the overall presentation, structure and content of the financial
statements of the Fund, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with the Manager regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
OTHER MATTERS
This report is made solely to the unitholders of the Fund and for no other purpose.
We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS PLT
(LLP0014401-LCA & AF 1146)
Chartered Accountants
Kuala Lumpur
10 June 2020
55
CORPORATE INFORMATION
MANAGER
RHB Asset Management Sdn Bhd
REGISTERED OFFICE Level 10, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur
PRINCIPAL AND BUSINESS OFFICE
Level 8, Tower Two & Three, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur
Email address: rhbam@rhbgroup.com
Tel: 03-9205 8000
Fax: 03-9205 8100
Website: http://www.rhbgroup.com
BOARD OF DIRECTORS Mr Yap Chee Meng (Independent Non-Executive Chairman)
Mr Chin Yoong Kheong (Senior Independent Non-Executive Director)
Dr. Ngo Get Ping (Independent Non-Executive Director)
Ms Ong Yin Suen (Managing Director/Chief Executive Officer)
YBhg Dato’ Darawati Hussain (Independent Non-Executive Director)
(Appointed with effect from 28 May 2020)
Puan Sharifatu Laila Syed Ali (Independent Non-Executive Director)
(Resigned with effect from 29 May 2020)
INVESTMENT COMMITTEE MEMBERS Mr Yap Chee Meng (Independent Chairman)
YBhg Dato’ Darawati Hussain
Puan Sharifatu Laila Syed Ali
CHIEF EXECUTIVE OFFICER Ms Ong Yin Suen
SECRETARY
Encik Azman Shah Md Yaman (LS No. 0006901)
56
BRANCH OFFICE
Kuala Lumpur Office B-9-6, Megan Avenue 1
No. 189, Jalan Tun Razak
50400 Kuala Lumpur
Tel: 03-2171 2755/ 03-2166 7011
Fax: 03-2770 0022
Sri Petaling Office
Level 1 & 2, No 53 Jalan Radin Tengah
Bandar Baru Seri Petaling
57000 Kuala Lumpur
Tel: 03-9054 2470 Fax: 03-9054 0934
Batu Pahat Office 53, 53-A and 53-B Jalan Sultanah
83000 Batu Pahat, Johor
Tel: 07-438 0271/ 07-438 0988
Fax: 07-438 0277
Ipoh Office No.7A, Persiaran Greentown 9,
Pusat Perdagangan Greentown,
30450 Ipoh, Perak
Tel: 05-242 4311 Fax: 05-242 4312
Johor Bahru Office No 34 Jalan Kebun Teh 1
Pusat Perdagangan Kebun Teh
80250 Johor Bahru, Johor
Tel: 07-221 0129 Fax: 07-221 0291
2nd Floor, 21 & 23
Jalan Molek 1/30, Taman Molek
81100 Johor Bahru, Johor
Tel: 07-358 3587 Fax: 07-3583581
Kuantan Office B 32-34, 2nd Floor, Lorong Tun Ismail 8
Sri Dagangan II
25000 Kuantan, Pahang
Tel: 09-517 3611 Fax: 09-517 3612
Kuching Office Lot 133, Section 20, Sublot 2 & 3,
1st Floor, Jalan Tun Ahmad Zaidi Adruce,
93200 Kuching, Sarawak
Tel: 082-550 838 Fax: 082-550 508
57
Kuching Office Yung Kong Abell, Units 1-10,
2nd Floor Lot 365,
Section 50 Jalan Abell,
93100 Kuching, Sarawak
Tel: 082-245 611 Fax: 082-230 326
Kota Bharu Office Ground Floor, No 3486-G,
Jalan Sultan Ibrahim,
15050 Kota Bharu, Kelantan
Tel: 09-740 6891 Fax: 09-740 6890
Kota Kinabalu Office Lot No. C-02-04, 2nd Floor
Block C, Warisan Square
Jalan Tun Fuad Stephens,
88000 Kota Kinabalu,
Sabah
Tel: 088-528 686/088-528 692
Fax: 088-528 685
Melaka Office 581B, Taman Melaka Raya
75000 Melaka
Tel: 06-284 4211/ 06-281 4110
Fax: 06-292 2212
Miri Office Lot 1268 & 1269, Second Floor
Centre Point Commercial Centre
Jalan Melayu
98000 Miri, Sarawak
Penang Office 3rd Floor, 44 Lebuh Pantai,
Georgetown, 10300 Penang
Tel: 04-264 5639 Fax: 04-264 5640
Prai Office First Floor, No. 1797-1-04,
Kompleks Auto World,
Jalan Perusahaan, Juru Interchange,
13600 Perai, Penang.
Tel: 04-506 2116/ 04-506 0216
Fax: 04-505 9996
58
TRUSTEE HSBC (Malaysia) Trustee Berhad
BANKER RHB Bank Berhad
AUDITORS PricewaterhouseCoopers PLT
TAX ADVISER PricewaterhouseCoopers Taxation Services Sdn Bhd
DISTRIBUTORS RHB Bank Berhad RHB Investment Bank Berhad RHB Asset Management Sdn Bhd
Alliance Bank Malaysia Berhad
AmBank Berhad
AmInvestment Bank Berhad
APEX Investment Services Berhad
Areca Capital Sdn Bhd
CIMB Bank Berhad
CIMB Investment Bank Berhad
CIMB Wealth Advisor
Citibank Berhad
Genexus Advisory Sdn Bhd
Hong Leong Bank Berhad
HSBC Bank (M) Berhad
iFast Capital Sdn Bhd
Kenanga Investment Bank Berhad
Manulife Asset Management Services Berhad
Malayan Banking Berhad
Phillip Mutual Berhad
Standard Chartered Bank (Malaysia) Berhad
United Overseas Bank (Malaysia) Berhad