RHB RESOURCES FUND ANNUAL REPORT 2020...RHB Resources Fund (21.39) (9.65) (3.67) (2.33) Resources...

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)


13

RHB RESOURCES FUND

STATEMENT OF CHANGES IN NET ASSET VALUE


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


14

RHB RESOURCES FUND

STATEMENT OF CASH FLOWS


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


15

RHB RESOURCES FUND

NOTES TO THE FINANCIAL STATEMENTS


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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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


(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)


% of Net

Asset Value

RM RM %


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




% of Net

Asset Value

RM RM %


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




% of Net

Asset Value

RM RM %


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


Investments as at 31 March 2019 are as follows:


% of Net

Asset Value

RM RM %


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




% of Net

Asset Value

RM RM %


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




% of Net

Asset Value

RM RM %


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




% of Net

Asset Value

RM RM %


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




% of Net

Asset

Value

RM RM %


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


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


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)


(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



(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


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: [email protected]

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

RHB RESOURCES FUND ANNUAL REPORT 2020...RHB Resources Fund (21.39) (9.65) (3.67) (2.33) Resources...

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Transcript of RHB RESOURCES FUND ANNUAL REPORT 2020...RHB Resources Fund (21.39) (9.65) (3.67) (2.33) Resources...