RHB EQUITY TRUST - Fundsupermart.com Malaysia · 2020-02-25 · RHB Equity Trust - Capital Return...

RHB EQUITY TRUST

INTERIM REPORT 2020

For the financial period ended 30 June 2020

1

GENERAL INFORMATION ABOUT THE FUND

Name, Category and Type

Fund Name - RHB Equity Trust

Fund Category - Equity Fund

Fund type - Growth Fund

Investment Objective, Policy and Strategy

Objective of the Fund

This Fund aims to provide investors with capital growth through investments in

stocks with high growth potential over a medium to long term* period.

*Note: “medium to long term” in this context refers to a period of between 3 – 7 years.

Strategy

The asset allocation of the Fund will be as follows:-

90% - 98% of

Net Asset Value

- Investments in securities of companies that have good growth

potential. In managing these investments, the Fund may invest

up to 50% of the Fund’s Net Asset Value in Asia ex-Japan

markets.

2% - 10% 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 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 the Fund is benchmarked against Equity Index. The performance

of the Fund cannot be compared directly with any specific publicly available

benchmark such as the FBM KLCI nor the MSCI AC Asia Ex-Japan Index as the

Fund may invest up to 50% of its Net Asset Value in securities of foreign markets.

As such, a benchmark comprising 70% of the performance of the FBM KLCI and

30% of the MSCI AC Asia Ex-Japan Index is used for comparative purposes as it

best reflects the Fund’s underlying investments.

The KLCI was discontinued on 5 July 2009. Hence, the figures herein comprise the

performance of KLCI from 6 September 1999 to 5 July 2009 and FBM KLCI from 6

July 2009 onwards.

Permitted Investments

This Fund may invest in securities traded on the Bursa Malaysia 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 capital growth, 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

EQUITY MARKET REVIEW

Year 2020 started with some optimism on global growth United States (“US”)

and China reached an agreement to end the trade disputes. However, the positive

sentiment was quickly turned into negative when Covid-19 severely affected

Wuhan cities in China trigger the city being lock-down. Following that, various

countries which were heavily affected also started to locked down the cities. The

lock down has impacted the supply chain to the manufacturing activities across

the world. Various government across the world to come up with stimulus

package and central bankers cuts interest rate. Malaysia government has also

unveiled a Malaysian Ringgit (“MYR”) 250 billion of stimulus package or

17.00% of Gross Domestic Product (“GDP”) to help cushion the impact of the

slowing economy. Corporates are facing with lower profit and cash flow problem.

This has resulted in the massive sell down of stock market across the globe

which FTSE Bursa Malaysia (“FBM”) Kuala Lumpur Composite Index (“KLCI”)

(“FBMKLCI”) also suffers badly. FBMKLCI touched its lowest level year to

date at 1,207 level but managed to close higher at 1,219 level on 19 March 2020.

The index has fallen into bear market territory due to the possibility of a global

recession in year 2020 as a result of Covid-19 pandemic outbreak. The

FBMKLCI Index has rebounded since then and closed at 1,350 level on 31

March 2020. The index down by 234 pts or 15.00% in the first quarter of year

2020. However, FBMKLCI tends to outperform during market downturn.

The FBMKLCI Index up 56.89 points or 4.20% in April 2020. Foreigners were

net sellers again participated in the index rally. The index up 15.40% from the

low of 1,219.72 touched on 19 March 2020. Market sentiments lifted by

optimism of reopening of economy in various countries. The index closed at

1,473.25 on the last trading day of May 2020 up 4.70% for the month of May

2020. The foreigners were still net sellers participated in the index rally. Retailers

are mixed whilst local institutions were net buyers of the market. Bursa Malaysia

saw continued high trading volumes continued this week. Retail segment were

dominating the small cap stocks. The FBMKLCI index was struggling to stay

above 1,500 level during the month of June 2020 due to the absence of positive

fresh leads and global negative factors that affected the sentiment of the equity

market. With a confluence of negative factors like the uncertain quick global

economic recovery, the resurgence of coronavirus infections worldwide, the

potential uplifting of short-selling ban domestically post 30 June 2020 and

possible snap election in second half of year 2020 (“2H20”), the index

consolidated in June 2020 after touched the high of 1,590. The FBMKLCI index

closed down by -5.53% for first half of year 2020 (“1H20”) and stayed at

1,500.97.

4

ECONOMIC REVIEW AND OUTLOOK

On the local economic front, Malaysia’s Consumer Prices Index (“CPI”) report

for May 2020 was below expectation and contracted at -2.90%, remained at

decades low following same reading in April 2020. The fall in inflation was

mainly driven by weaker oil prices, coupled with lesser economic activities

during the movement control order (“MCO”) period which started in mid-March

2020. On top of that, low electricity prices will be the other driver for low

inflation in year 2020. Headline CPI could turn less negative in coming month of

June 2020 following the jump in RON95 prices in the first 26 days of the month.

Further increase in RON95 prices could reduce CPI drag in the 2H20.

Nevertheless, demand-pull pressures would likely remain muted, given

headwinds to consumer recovery from the continuing social distancing and

further weakness in the labour market. Currently the average year-to-date

("YTD") Brent oil price is still hovering about USD46/barrel which is above the

Government’s assumption for average oil price at around USD35/barrel,

indicated during the release of the recent stimulus package. We opine the

Government’s medium-term fiscal consolidation roadmap remains on track

although the self-imposed ceiling of debt to GDP ratio of 55.00% to breach

slightly above on temporarily basis.

REVIEW OF FUND PERFORMANCE AND STRATEGY DURING THE

PERIOD

For the period under review, the RHB Equity Trust Fund registered a negative

return of 8.15%* against its benchmark negative return of 4.56%. The fund

underperformed its benchmark by 3.59% during the period under review.

The underperformance of the Fund was due to illiquid stock selection that the

fund has invested and also due to low equity exposure when market is on its

recovery after first quarter as the intention was to protect the Fund due to

recession risk of Covid-19.

The investment strategy and policy employed during the period under review

were in line with the investment strategy and policy as stated in the prospectus.

The fund has not achieved its objective of providing long term wealth

accumulation through capital appreciation as the benchmark return was also

negative.

*Source: Lipper for Investment Management (“Lipper IM”), 06 July 2020

5

EQUITY MARKET OUTLOOK & STRATEGY

We noticed that the downward earnings revision during year 2008/2009 Global

Financial Crisis (“GFC”) ended at the bottom of the quarter GDP. The corporate

earnings started to be revised upwards from second quarter of year 2009

(“2Q09”). The index rose on sustainable basis as the investors were more certain

on the recovery in the economy.

We are assuming GDP to register its worst contraction in the second quarter of

2020 and would gradually improve from third quarter of year 2020 (“3Q20”) due

to the gradual reopening of the economy from May 2020. Hence, we foresee that

the downward earnings revision is expected to bottom in the second quarter of

year 2020 (“2Q20”). Corporate earnings will be slowly improved as economy

starts to recover from 3Q20.

Hence, we would also expect the index to perform from the 2H20 due to the

upgrade in earnings. We noticed that the corporate earnings recovered by 12.00%

from April 2009 until December 2009 and increased further by 24.00% in year

2010.

However, we don’t expect the recovery in the corporate earnings to be as strong

as during GFC due to the possibility of second wave of Covid-19 which will

restrict the economy from fully reopened and therefore companies from operating

at full capacity. We would also expect lower consumption due to the high

unemployment numbers.

We are factoring in lower corporate earnings recovery compared with after GFC.

Below is the scenario should earnings recover by 5.00% in the 2H20 and a

further 15.00% in year 2021. We may also see earnings downgrade in the 3Q20

due to the lower earnings from the Banking sector due to the impact of interest

rate cut but it should be minimized by the strong earnings from the gloves sector.

The positive development is there was no earnings revision downward from May

2020 to June 2020.

6

Potential FBMKLCI Index Target Based on Price Earnings Ratio

Earnings

Growth

EPS 10Y

Average PE

Index

Target

5% 2H

2020

95.2 15.8 1504

15% 2021 109.5 15.8 1730

Source: RHBAM, Bloomberg 2 July 2020

The economy is likely to contract by 3.00%-5.00% in year 2020 and recover by

5.00% to 8.00% in year 2021. International Monetary Fund (“IMF”) is

forecasting Malaysia’s GDP to contract by 3.80% in year 2020 and recover by

6.30% in year 2021. From another valuation perspective based on GDP we are

assuming 5.00% contraction in year 2020 and GDP to recover by 5.00% in year

2021. Slightly conservative than IMF forecast for Malaysia.

Potential FBMKLCI Index Target Based on Market Cap/GDP

GDP Mkt

Cap/GDP

Factor

Index

Target

-5% 2020 3x 1650

+5% 2021 3x 1740

Source: RHBAM, Bloomberg 2 July 2020

Note: 3x market cap/GDP factor is used based on the historical Mkt Cap/GDP

when the economy started to recover after GFC

Earnings Yield Gap (“EYG”) Valuation

Source: Bloomberg 26 June 2020

Normally the EYG works inversely against the FBMKLCI index except at the

beginning of the economic cycle where the index moves in tandem with the

earnings yield gap.

Source: Bloomberg 26 June 2020

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

800

1000

1200

1400

1600

1800

2000

FBMKLCI Index Earnings Yield Gap

7

We expect the interest rate to remain low or going down lower due to weak

economy resulting from the Covid-19 pandemic. In addition, the collapsed in the

demand due to the pandemic is expected to keep the inflation low. Hence, equity

will in in favour over Bond.

From EYG perspective, based on expectations that interest rate is likely to

remain low until year 2022 and benign inflation and based on the assumption that

GDP is going to recover gradually due to fiscal stimulus and liquidity injection,

the FBMKLCI index potential target is 16.00% from 1,473 index level or 1,700

index level.

To conclude, based on the three valuation method above, the FBMKLCI index is

likely to trade up to 1,700 to 1,740 in the next one and a half years, which is

looking forward into year 2021. Meanwhile, the support for the index will be at

1,500, which is the index fair value for year 2020.

8

PERFORMANCE DATA

Annual Total Returns

31.12.2019-

30.06.2020

%

Financial Year Ended 31 December

2019

%

2018

%

2017

%

2016

%

2015

%

RHB Equity Trust

- Capital Return (8.15) (4.36) (30.72) (13.54) (25.32) (20.48)

- Income Return - - - 15.35 12.79 (22.66)

- Total Returns (8.15) (4.36) (30.72) 1.81 (15.77) (2.46)

Equity Index (4.56) 0.22 (8.67) 12.76 0.17 (0.84)

Average Annual Return

1 Year

30.06.2019-

30.06.2020

%

3 Years

30.06.2017-

30.06.2020

%

5 Years

30.06.2015-

30.06.2020

%

10 Years

30.06.2010-

30.06.2020

%

RHB Equity Trust (12.70) (18.23) (11.90) (1.48)

Equity Index (6.62) (3.37) (0.48) 2.71

9

Performance of RHB Equity Trust

for the period from 30 June 2010 to 30 June 2020

Cumulative Return Over The Year (%)

Source: Lipper IM, 06 July 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.

10

* The figures quoted are ex-distribution

# The MER for the financial period was higher compared with the previous

financial period due to lower average net asset value during the financial period

under review.

## The PTR for the financial period was higher compared with the previous

financial period due to more investment activities during the financial period

under review.

DISTRIBUTION

For the financial period under review, no distribution has been proposed by the Fund.

Fund Size

As at As at 31 December

30 June 2020 2019 2018 2017

Net Asset Value (RM million) 28.33 31.87 37.72 62.39*

Units In Circulation (million) 165.31 170.83 193.33 221.55*

Net Asset Value Per Unit (RM) 0.1714 0.1866 0.1951 0.2816*

Historical Data

01.01.2019- Year Ended 31 December

30.06.2020 2019 2018 2017

Unit Prices

NAV - Highest (RM) 0.1891 0.2001 0.2844 0.3829*

NAV - Lowest (RM) 0.1403 0.1833 0.1900 0.2787*

Distribution and Unit Split

Gross Distribution Per Unit

(sen)

- - - 5.0000

Net Distribution Per Unit (sen) - - - 5.0000

Ex date - - - 20.12.2017

NAV before distribution (cum) - - - 0.3316

NAV after distribution (ex) - - - 0.2817

Unit Split - - - -

Others

Management Expense Ratio

(MER) (%) #

0.86

1.65

1.69

1.68

Portfolio Turnover Ratio (PTR)

(times) ##

0.95

0.56

0.74

0.10

11

PORTFOLIO STRUCTURE

The asset allocations of the Fund as at reporting date were as follows:

As at As at 31 December

30 June 2020 2019 2018 2017

% % % %

Equities

Construction 1.33 2.64 - -

Consumer Products 7.74 17.69 22.04 27.35

Energy 3.94 5.10 0.82 -

Financial Services 18.70 21.76 22.82 5.23

Health Care 14.04 4.62 5.84 -

Industrial Products 5.64 13.57 28.90 19.88

Property 3.28 1.28 - -

Plantation 4.92 4.93 - -

Telecommunication 9.93 8.83 3.26 -

Trading/Services - - - 35.14

Transportation 0.48 2.35 1.33 -

Total Shareholder Return (“TSR”) &

Warrants

0.04

0.06

0.10

0.24

Technology 15.69 4.40 - -

Utilities 5.05 6.66 6.43 -

90.78 93.89 91.54 87.84

Liquid assets and other current assets 9.22 6.11 8.46 12.16

100.00 100.00 100.00 100.00

The asset allocation was reflective of the Manager’s stance to risk manage its

portfolio in an environment of volatile markets.

12

BREAKDOWN OF UNIT HOLDINGS BY SIZE

Account Holders No. Of Units Held*

Size of Holdings No. % (‘000) %

5,000 and below 222 11.29 358 0.22

5,001 to 10,000 318 16.17 2,294 1.39

10,001 to 50,000 770 39.14 19,733 11.94

50,001 to 500,000 615 31.27 85,090 51.47

500,001 and above 42 2.13 57,832 34.98

Total 1,967 100.00 165,307 100.00

*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 period 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.

13

RHB EQUITY TRUST

UNAUDITED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

Note 30.06.2020 31.12.2019

RM RM

ASSETS

Investments 5 25,719,150 29,925,832

Deposits with licensed financial

institutions

6

690,619

1,166,964

Bank balances 6 2,097,110 795,997

Amount due from brokers 544,499 -

Dividend receivables 54,935 96,318

TOTAL ASSETS 29,106,313 31,985,111

LIABILITIES

Amount due to brokers 719,517 -

Amount due to Manager 5,121 57,615

Accrued management fee 35,196 40,801

Amount due to Trustee 1,408 1,632

Other payables and accruals 14,464 10,741

TOTAL LIABILITIES 775,706 110,789

NET ASSET VALUE 28,330,607 31,874,322

EQUITY

Unitholders’ capital 50,596,542 51,569,248

Accumulated losses (22,265,935) (19,694,926)

28,330,607 31,874,322

UNITS IN CIRCULATION (UNITS) 7 165,313,455 170,833,455

NET ASSET VALUE PER UNIT (RM) 0.1714 0.1866

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

14

RHB EQUITY TRUST

UNAUDITED STATEMENT OF INCOME AND EXPENSES

FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2020

Note 01.01.2020-

30.06.2020

01.01.2019-

30.06.2019

RM RM

(LOSS)/INCOME

Dividend income 455,944 462,801

Interest income from deposits with

licensed financial institutions

37,692

29,569

Net (loss)/gain on investments 5 (2,648,932) 171,979

Net foreign currency exchange

gain

4,094

6,030

(2,151,202) 670,379

EXPENSES

Management fee 8 (211,837) (273,259)

Trustee’s fee 9 (8,474) (10,931)

Audit fee (3,464) (3,398)

Tax agent’s fee (9,625) (10,639)

Transaction costs (169,485) (56,447)

Other expenses (11,245) (6,515)

(414,130) (361,189)

Net (loss)/income before taxation (2,565,332) 309,190

Taxation 10 (5,677) (66,920)

Net (loss)/income after taxation (2,571,009) 242,270

Net (loss)/income after taxation is made up of

the following:

Realised amount (6,355,001) (4,726,651)

Unrealised amount 3,783,992 4,968,921

(2,571,009) 242,270


15

RHB EQUITY TRUST

UNAUDITED STATEMENT OF CHANGES IN NET ASSET VALUE


Unitholders’

capital

Accumulated

losses

Total net

asset value

RM RM RM

Balance as at 1 January 2019 55,864,059 (18,147,669) 37,716,390

Movement in net asset value:

Net income after taxation - 242,270 242,270

Creation of units arising from

applications

90,692

-

90,692

Cancellation of units (1,709,436) - (1,709,436)

Balance as at 30 June 2019 54,245,315 (17,905,399) 36,339,916

Balance as at 1 January 2020 51,569,248 (19,694,926) 31,874,322

Movement in net asset value:

Net loss after taxation - (2,571,009) (2,571,009)

Creation of units arising from

applications

78,578

-

78,578

Cancellation of units (1,051,284) - (1,051,284)

Balance as at 30 June 2020 50,596,542 (22,265,935) 28,330,607


16

RHB EQUITY TRUST

UNAUDITED STATEMENT OF CASH FLOWS


01.01.2020-

30.06.2020

01.01.2019-

30.06.2019

RM RM

CASH FLOWS FROM OPERATING

ACTIVITIES

Proceeds from sale of investments 24,014,057 8,125,007

Purchase of investments (22,442,356) (7,297,941)

Dividend received 491,779 540,875

Interest received from deposits with licensed

financial institutions

37,692

29,569

Management fee paid (217,442) (277,187)

Trustee’s fee paid (8,698) (11,089)

Payment for other fees and expenses (20,611) (30,510)

Net cash generated from operating activities 1,854,421 1,078,724

CASH FLOWS USED IN FINANCING

ACTIVITIES

Cash proceeds from units created 78,578 90,692

Cash paid for units cancelled (1,103,778) (1,687,926)

Net cash used in financing activities (1,025,200) (1,597,234)

Net increase/(decrease) in cash and cash

equivalents

829,221 (518,510)

Foreign currency translation differences (4,453) 5,992

Cash and cash equivalents at the beginning of

the financial period

1,962,961

3,083,037

Cash and cash equivalents at the end of the

financial period

2,787,729

2,570,519


17

RHB EQUITY TRUST

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS


1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

The RHB Equity Trust (“the Fund”) was constituted pursuant to the execution of a

Principal Deed dated 24 July 1996 as amended via its First Supplemental Deed dated

18 March 1998, Supplemental Master Deed dated 1 June 2009, Second Supplemental

Master Deed dated 4 September 2013, Third Supplemental Master Deed dated 2

March 2015 and Fourth Supplemental Master Deed dated 25 May 2015 (hereinafter

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 8 August 1996 and will continue its operations until

terminated according to the conditions provided in the deeds. The principal activity

of the Fund is to invest in Permitted Investments as set out in the Deeds.

All investments will be subject to the Securities Commission’s (“SC”) Malaysia

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 provide investors with capital growth through

investments in stocks with high growth potential over a medium to long term period.

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 25 August

2020.

18

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 the 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 revised Framework and amendments to

publish standards for the first time for the financial period beginning on 1

January 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.

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

19


(CONTINUED)

2.1 Basis of preparation of the financial statements (continued)

(a) The Fund has applied the following revised Framework and amendments to

publish standards for the first time for the financial period beginning on 1

January 2020. (continued)

The Conceptual Framework for Financial Reporting (“Framework”)

(effective 1 January 2020) (continued)

- 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 January 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 adoption of the amendments to published standards,

are not expected to give rise to any material impact on the financial statements

of the Fund.

20


(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, amount due from brokers and

dividend receivables at amortised cost as these financial assets are held to collect

contractual cash flows consisting of the amount outstanding.

21


(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 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.

22


(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.

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.

23


(CONTINUED)


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 the

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 period.

2.3 Financial liabilities

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 brokers, accrued

management fee, amount due to Manager, 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.

24


(CONTINUED)

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”. These 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 period if the 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.

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 is 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 are 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.

25


(CONTINUED)

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 period.

Tax on dividend income from foreign quoted investments are 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

deposits with licensed financial institutions and bank balances which are subject to

an insignificant risk of changes in value.

2.8 Amount due from/to brokers

Amounts due from/to brokers 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

brokers 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 brokers 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 broker, probability that the broker will

enter bankruptcy or financial reorganisation, and default in payments are all

considered indicators that a loss allowance may be required.

26


(CONTINUED)

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 expenses are denominated in RM.

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.

27

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.

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 RM25,719,150 (31.12.2019:

RM29,925,832) in quoted investments.

The sensitivity analysis is based on the assumption that the price of the quoted

securities investments fluctuate by +/(-) 5% with all other variables held constant,

the impact on statement of income and expenses and nest asset value is +/(-)

RM1,285,957 (31.12.2019: RM1,496,291).

28


(CONTINUED)

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 rates. The Fund’s exposure to the

interest rate risk is mainly confined to short term deposits with licensed financial

institutions. The Manager overcomes the exposure by way of maintaining deposits on

short term basis. Therefore, exposure to interest rate fluctuations is minimal.

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 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 analysis is based on the assumption that the foreign exchange rate fluctuates by

+/(-) 5%, with all other variables remain constants, the impact on statement of income

and expenses and net asset value is +/(-) RM384,458 (31.12.2019: RM209,296).

29


(CONTINUED)

Currency risk

Investments

Receivables

Cash and

cash

equivalents

Total

RM RM RM RM

30.06.2020

Hong Kong Dollar 2,067,722 25,113 - 2,092,835

Korean Won 2,631,547 - - 2,631,547

Singapore Dollar 421,733 - 2,042,375 2,464,108

Taiwan Dollar 497,514 3,139 - 500,653

Indonesian Rupiah - - 11 11

5,618,516 28,252 2,042,386 7,689,154

31.12.2019

Hong Kong Dollar 1,606,006 - - 1,606,006

Korean Won 834,679 - - 834,679

Singapore Dollar 475,143 - 742,509 1,217,652

Indonesian Rupiah 527,564 - 11 527,575

3,443,392 - 742,520 4,185,912

30


(CONTINUED)

Credit risk

Credit risk refers to the possibility that the issuer of a security will not be able to

make full payment of principal or income due on that investment.

The credit 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. For amount due from stockbrokers, the settlement terms are

governed by the relevant rules and regulations as prescribed by the respective stock

exchange. The settlement terms of the proceeds from the creation of units receivable

from the Manager are governed by the SC Malaysia Guidelines on Unit Trust Funds.

The following table sets out the credit risk concentration of the Fund:

Cash and

cash

equivalents

Other

financial

assets*

Total

RM RM RM

30.06.2020

AAA 2,787,729 - 2,787,729

Other - 599,434 599,434

2,787,729 599,434 3,387,163

31.12.2019

AAA 1,962,961 - 1,962,961

Other - 96,318 96,318

1,962,961 96,318 2,059,279

* Comprise dividend receivables and amount due from brokers.

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

30.06.2020

Amount due to brokers 719,517 -

Amount due to Manager 5,121 -

Accrued management fee 35,196 -

Amount due to Trustee 1,408 -

Other payables and accruals - 14,464

761,242 14,464

31.12.2019

Amount due to Manager 57,615 -

Accrued management fee 40,801 -

Amount due to Trustee 1,632 -

Other payables and accruals - 10,741

100,048 10,741

32


(CONTINUED)

Capital risk

The capital of the Fund is represented by equity consisting of unitholders’ capital of

RM50,596,542 (31.12.2019: RM51,569,248) and accumulated losses of

RM22,265,935 (31.12.2019: RM19,694,926). 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 period 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

period 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 balances 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

30.06.2020

Investments:

- Quoted investments 25,719,150 - - 25,719,150

31.12.2019

Investments:

- Quoted investments 29,925,832 - - 29,925,832

34

4. FAIR VALUE ESTIMATION (CONTINUED)

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.

5. INVESTMENTS

30.06.2020 31.12.2019

RM RM

Investments:

Quoted investments - local 20,100,634 26,482,440

Quoted investments - foreign 5,618,516 3,443,392

25,719,150 29,925,832

01.01.2020-

30.06.2020

01.01.2019-

30.06.2020

RM RM

Net (loss)/income on investments comprised:

- net realised loss on disposal (6,436,786) (4,790,988)

- net unrealised gain on changes in fair value 3,787,854 4,962,967

(2,648,932) 171,979

35

5. INVESTMENTS (CONTINUED)

Investments as at 30 June 2020 are as follows:

Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %

QUOTED INVESTMENTS -

LOCAL

MALAYSIA

Construction

Econpile Holdings Bhd 615,400 409,683 375,394 1.33

Consumer Products &

Services

Bermaz Auto Bhd 226,000 343,972 334,480 1.18

DRB-Hicom Bhd 351,400 612,270 600,894 2.12

Genting Bhd 123,400 854,238 505,940 1.78

SCC Holdings Bhd 857,960 638,020 330,315 1.17

2,448,500 1,771,629 6.25

Energy

Dialog Group Bhd 309,400 989,042 1,116,934 3.94

Financial Services

Bursa Malaysia Bhd 51,200 431,176 372,736 1.32

CIMB Group Holdings Bhd 244,264 1,332,561 869,580 3.07

Hong Leong Bank Bhd 29,000 386,442 408,320 1.44

Malayan Banking Bhd 199,100 1,959,725 1,495,241 5.28

Public Bank Bhd 130,400 2,630,868 2,151,600 7.59

6,740,772 5,297,477 18.70

Healthcare

Hartalega Holdings Bhd 30,200 207,209 392,600 1.39

Kossan Rubber Industries 85,300 381,598 725,903 2.56

Supermax Corporation Bhd 79,200 569,092 633,600 2.24

Top Glove Corporation Bhd 89,500 1,419,186 1,440,950 5.09

2,577,085 3,193,053 11.28

36



Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %


LOCAL (CONTINUED)

MALAYSIA

Industrial Products &

Services

ATA IMS Bhd 274,500 340,670 343,125 1.21

Petronas Chemicals Group

Bhd

88,000 673,758 545,600 1.92

Press Metal Aluminium

Holdings

88,700 351,075 401,811 1.42

SLP Resources Bhd 309,920 507,503 257,234 0.91

Tex cycle Technology

Malaysia

132,300

102,647

50,274

0.18

1,975,653 1,598,044 5.64

Plantation

Genting Plantations Bhd 23,000 240,371 226,090 0.80

IOI Corporation Bhd 170,800 758,525 741,272 2.62

Kuala Lumpur Kepong Bhd 19,200 391,096 426,240 1.50

1,389,992 1,393,602 4.92

Property

SP Setia Bhd 714,900 746,427 604,090 2.13

Technology

Globetronics Technology Bhd 340,100 741,945 727,814 2.57

JHM Consolidation Bhd 461,000 576,803 617,740 2.18

1,318,748 1,345,554 4.75

Telecommunications &

Media

Axiata Group Bhd 163,032 839,902 578,764 2.04

Maxis Bhd 75,000 384,701 402,750 1.42

Telekom Malaysia Bhd 203,200 827,004 843,280 2.98

2,051,607 1,824,794 6.44

37



Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %


LOCAL (CONTINUED)

MALAYSIA

Transportation

MMC Corporation Bhd 187,300 200,374 136,729 0.48

TSR & Warrants

Signature International Bhd 470,000 - 11,750 0.04

Utilities

Tenaga Nasional Bhd 123,200 1,783,006 1,431,584 5.05

TOTAL QUOTED INVESTMENTS -

LOCAL

22,630,889

20,100,634

70.95

38



Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %

QUOTED INVESTMENTS

- FOREIGN

CHINA

Technology

Kingdee International

Software

30,000

222,986

298,573

1.05

Healthcare

WUXI Biologics Cayman Inc 10,000 724,552 783,161 2.76

TOTAL CHINA 947,538 1,081,734 3.81

HONG KONG

Property

China Jinmao Holdings Group

Ltd

108,000

349,395

325,084

1.15


Media

Tencent Holdings Ltd 2,400 407,002 660,904 2.33

TOTAL HONG KONG 756,397 985,988 3.48

KOREA

Technology

Samsung Electronics Co Ltd 6,407 1,184,768 1,203,973 4.25

Samsung SDI Co Ltd 428 411,778 553,702 1.95

SK Hynix Incorporation 1,806 543,894 546,985 1.93

2,140,440 2,304,660 8.13


Media

Naver Corporation 344 233,603 326,887 1.16

TOTAL KOREA 2,374,043 2,631,547 9.29

39



Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %

QUOTED INVESTMENTS

– FOREIGN

(CONTINUED)

SINGAPORE

Consumer Products &

Services

First Resources Ltd 98,900 542,556 421,733 1.49

TOTAL SINGAPORE 542,556 421,733 1.49

TAIWAN

Technology

Taiwan Semiconductor

Manufacturing

11,000

493,370

497,514

1.76

TOTAL TAIWAN 493,370 497,514 1.76

TOTAL QUOTED INVESTMENTS

- FOREIGN 5,113,904 5,618,516 19.83

TOTAL INVESTMENTS 27,744,793 25,719,150 90.78

40


Investments as at 31 December 2019 are as follows:

Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %


LOCAL

MALAYSIA

Construction

Gamuda Bhd 216,000 626,162 842,400 2.64

Consumer Products

Berjaya Food Bhd 320,000 844,692 441,600 1.39

DRB-Hicom Bhd 290,000 582,401 690,200 2.17

Genting Bhd 185,000 1,280,665 1,119,250 3.51

SCC Holdings Bhd 4,728,860 3,516,604 2,293,497 7.20

Signature International Bhd 200,000 207,925 90,000 0.28

6,432,287 4,634,547 14.55

Energy

Dialog Group Bhd 330,000 1,040,210 1,138,500 3.57

Yinson Holdings Bhd 75,200 502,636 487,296 1.53

1,542,846 1,625,796 5.10

Financial Services

CIMB Group Holdings Bhd 334,564 2,340,738 1,723,005 5.40

Malayan Banking Bhd 288,400 2,966,446 2,491,776 7.82

Public Bank Bhd 140,000 3,198,406 2,721,600 8.54

8,505,590 6,936,381 21.76

Health Care

Hartalega Holdings Bhd 154,600 921,885 847,208 2.66

Kossan Rubber Industries 150,000 671,040 624,000 1.96

1,592,925 1,471,208 4.62

41


Investments as at 31 December 2019 are as follows: (continued)

Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %

QUOTED INVESTMENTS –

LOCAL (CONTINUED)

MALAYSIA (continued)

Industrial Products

Pecca Group Bhd 324,300 460,506 353,487 1.11

Petronas Chemicals Group

Bhd 120,000 1,034,046 882,000 2.77

SKP Resources Bhd 266,100 332,625 361,896 1.13

SLP Resources Bhd 505,520 827,803 586,403 1.84

Sunway Bhd 195,400 332,707 351,720 1.10

Tex Cycle Technology

Malaysia Bhd 3,850,000 2,987,090 1,309,000 4.11

5,974,777 3,844,506 12.06

Plantation

Genting Plantations Bhd 58,000 606,152 613,640 1.92

IOI Corporation Bhd 208,100 924,175 959,341 3.01

1,530,327 1,572,981 4.93

Property

IOI Properties Group Bhd 329,800 388,274 408,952 1.28

Technology

Inari Amertron Bhd 334,200 565,506 568,140 1.78

Telecommunications

Axiata Group Bhd 312,732 1,757,346 1,294,711 4.06

Digi.com Bhd 88,300 429,959 393,818 1.24

2,187,305 1,688,529 5.30

Transportation

MMC Corporation Bhd 760,000 813,048 748,600 2.35

42



Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %

QUOTED INVESTMENTS –

LOCAL (CONTINUED)

MALAYSIA (continued)

TSR & Warrants

Signature International Bhd 470,000 - 18,800 0.06

Utilities

Tenaga Nasional Bhd 160,000 2,315,593 2,121,600 6.66


- LOCAL 32,474,640 26,482,440 83.09

43



Name of Counter

Quantity

Cost

Fair Value

% of Net

Asset

Value

RM RM %

QUOTED INVESTMENTS

- FOREIGN

HONG KONG

Industrial Products

China Railway Construction 107,500 547,846 481,595 1.51

Telecommunications

Tencent Holdings Ltd 5,700 966,629 1,124,411 3.53

TOTAL HONG KONG 1,514,475 1,606,006 5.04

INDONESIA

Consumer Products

Astra Agro Lestari Tbk PT 122,700 468,348 527,564 1.65

KOREA REPUBLIC

Technology

Samsung Electronics Co Ltd 1,761 318,596 347,755 1.09

Samsung SDI Co Ltd 583 487,966 486,924 1.53

TOTAL KOREA

REPUBLIC

806,562

834,679

2.62

SINGAPORE

Consumer Products

Wilmar International Ltd 37,900 475,305 475,143 1.49


- FOREIGN 3,264,690 3,443,392 10.80

TOTAL INVESTMENTS 35,739,330 29,925,832 93.89

44

6. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise:

30.06.2020 31.12.2019

RM RM

Deposits with licensed financial institutions 690,619 1,166,964

Bank balances 2,097,110 795,997

2,787,729 1,962,961

7. UNITS IN CIRCULATION

30.06.2020 31.12.2019

Units Units

At the beginning of the financial period/year 170,833,455 193,328,455

Creation of units during the financial

period/year:

Arising from applications 460,000 860,000

Cancellation of units during the financial

period/year

(5,980,000)

(23,355,000)

At the end of the financial period/year 165,313,455 170,833,455

8. MANAGEMENT FEE

In accordance with the Master Prospectus, the management fee provided in the

financial statements is 1.50% (01.01.2019 – 30.06.2019: 1.50%) per annum based

on the net asset value of the Fund, calculated on a daily basis for the financial

period.

9. TRUSTEE’S FEE

In accordance with the Master Prospectus, the Trustee’s fee provided in the

financial statements is 0.06% (01.01.2019 – 30.06.2019: 0.06%) per annum based

on the net asset value of the Fund, calculated on a daily basis for the financial

period.

45

10. TAXATION

(a) Tax charge for the financial period

01.01.2020-

30.06.2020

01.01.2019-

30.06.2019

RM RM

Current taxation - foreign 5,677 66,920

(b) Numerical reconciliation of income tax expense

The numerical reconciliation between the net (loss)/income before taxation

multiplied by the Malaysian statutory income tax rate and the tax expense of the

Fund is as follows:

01.01.2020 -

30.06.2020

01.01.2019 -

30.06.2019

RM RM

Net (loss)/income before taxation (2,565,332) 309,190

Tax calculated at a statutory income tax rate of 24% (615,680) 74,206

Tax effects of:

- Loss not deductible for tax purposes/(income not

subject to tax)/

516,289

(160,891)

- Expenses not deductible for tax purposes 47,719 20,213

- Restriction on tax deductible expenses for unit

trust funds

51,672

66,472

- Foreign tax in other countries 5,677 66,920

Tax expense

5,677

66,920

46

11. MANAGEMENT EXPENSE RATIO (“MER”)

01.01.2020 -

30.06.2020

01.01.2019 -

30.06.2019

% %

MER 0.86 0.83

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.

12. PORTFOLIO TURNOVER RATIO (“PTR”)

01.01.2020 -

30.06.2020

01.01.2019 -

30.06.2019

PTR (times) 0.95 0.27

The PTR ratio is calculated based on average of acquisition and disposals of the

Fund for the financial period 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:

30.06.2020 31.12.2019

Units RM Units RM The Manager

RHB Capital Nominees

(Tempatan) Sdn Bhd

6,214

748,280

1,065

128,255

7,676

779,086

1,432

145,377

754,494 129,320 786,762 146,809

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 is under nominees structure.

Other than the above, there were no units held by the Directors or parties related to

the Manager.

47

14. TRANSACTIONS BY THE FUND

Details of transactions by the Fund for the financial period ended 30 June 2020 are

as follows:

Brokers/financial

institutions

Value of

trades

Percentage

of total

trades

Brokerage

fees

Percentage

of total

brokerage

fees

RM % RM %

RHB Investment Bank Bhd* 13,881,500 29.07 41,760 34.63

CGS-CIMB Securities Sdn

Bhd

7,945,555

16.64

20,632

17.11

Maybank Investment Bank

Bhd

7,514,645

15.74

17,955

14.89

Affin Hwang Investment

Bank Bhd

3,721,565

7.79

7,966

6.61

CGS-CIMB Securities Korea

Branch

3,327,657

6.97

6,655

5.52

KAF-Seagroatt & Campbell

Securities

1,869,607

3.92

5,194

4.31

Macquarie Capital Securities

(M) Sdn Bhd

1,489,778

3.12

2,980

2.47

Alliance Investment Bank

Bhd

1,451,970

3.04

2,904

2.41

MIDF Amanah Investment

Bank Berhad

1,327,001

2.78

4,007

3.32

CLSA Securities Malaysia

Sdn Bhd

1,306,907

2.74

2,631

2.18

Others 3,910,718 8.19 7,905 6.55

47,746,903 100.00 120,589 100.00

48

14. TRANSACTIONS BY THE FUND (CONTINUED)

Details of transactions by the Fund for the financial year ended 31 December 2019

are as follows:

Brokers/financial

institutions

Value of

trades

Percentage

of total

trades

Brokerage

fees

Percentage

of total

brokerage

fees

RM % RM %

RHB Investment Bank Bhd* 9,410,446 33.83 28,257 36.60

Maybank Investment Bank

Bhd 3,461,828

12.44

9,999

12.95

CGS-CIMB Securities Sdn

Bhd 2,974,760

10.69

7,674

9.94

MIDF Amanah Investment

Bank Berhad 2,076,587

7.46

6,230

8.07

KAF-Seagroatt & Campbell

Securities

1,794,262

6.45

5,383

6.97

CIMB Investment Bank

Berhad

1,648,519

5.93

4,945

6.41

CLSA Securities Malaysia

Sdn Bdn 1,477,214

5.31

2,954

3.83

RHB Securities Hong Kong

Ltd

1,380,960

4.96

3,090

4.00

Affin Hwang Investment

Bank Bhd

1,263,197

4.54

3,789

4.91

Macquarie Capital Securities

Ltd

742,190

2.67

1,514

1.96

Others 1,590,725 5.72 3,368 4.36

27,820,688 100.00 77,203 100.00

* Included in transactions by the Fund are trades with RHB Investment Bank

Bhd, the holding company of the Manager 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 the normal

course of business at agreed terms between the related parties.

49

15. FINANCIAL INSTRUMENTS BY CATEGORIES

30.06.2020 31.12.2019

RM

RM

Financial assets

Financial assets at fair value through

profit or loss (‘FVTPL’)

• Quoted investments 25,719,150 29,925,832

Financial assets at amortised cost

• Deposits with licensed financial

institutions

690,619 1,166,964

• Bank balances 2,097,110 795,997

• Dividend receivables 54,935 96,318

• Amount due from brokers 544,499 -

3,387,163 2,059,279

Financial liabilities

Financial liabilities at amortised cost

• Amount due to brokers 719,517 -

• Amount due to Manager 5,121 57,615

• Accrued management fee 35,196 40,801

• Amount due to Trustee 1,408

1,632

• Other payables and accruals 14,464 10,741

775,706 110,789

16. SIGNIFICANT AND SUBSEQUENT EVENT TO THE FINANCIAL

PERIOD

The worsening of the macro-economic outlook as a result of Covid-19, both

domestically and globally, has impacted in the Fund’s performance during and after

the financial period end.

The Manager is monitoring the situation closely and will be managing the portfolio

to achieve the Fund’s objective.

50

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 unaudited statement of financial position, unaudited

statement of income and expenses, unaudited statement of changes in net asset value,

unaudited statement of cash flows and the accompanying notes, are drawn up in

accordance with Malaysian Financial Reporting Standards and International

Financial Reporting Standards so as to give a true and fair view of the financial

position of the Fund as at 30 June 2020 and of its financial performance and cash

flows for the financial period then ended and comply with the provisions of the

Deeds.

On behalf of the Manager

Dato’ Darawati Hussain Ong Yin Suen

Director Director

25 August 2020

51

TRUSTEE’S REPORT TO THE UNITHOLDERS OF

RHB EQUITY TRUST

We have acted as Trustee of RHB Equity Trust (“the Fund”) for the financial period

ended 30 June 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

25 August 2020

52

CORPORATE INFORMATION

MANAGER

RHB Asset Management Sdn Bhd

PRINCIPAL AND REGISTERED OFFICE

Level 10, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur

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: 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)

http://www.rhbgroup.com/

53

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

54

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

Tel: 085-422 788 Fax: 085- 415 243

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

55

TRUSTEE HSBC (Malaysia) Trustee Berhad

BANKER RHB Bank Berhad

AUDITORS PricewaterhouseCoopers PLT

TAX ADVISER PricewaterhouseCoopers Taxation Services Sdn Bhd

DISTRIBUTORS RHB Asset Management Sdn Bhd

RHB Bank Berhad

RHB Investment Bank Berhad

Affin Bank Bhd

Alliance Bank Malaysia Bhd

AmBank (M) Bhd

AmInvestment Bank Bhd

APEX Investment Services Bhd

Areca Capital Sdn Bhd

CIMB Bank Bhd

CIMB Investment Bank Bhd

CIMB Wealth Advisor

Citibank Bhd

CUTA – Standard Financial Adviser

CUTA - Genexus Advisory Sdn Bhd

Hong Leong Bank Bhd

iFast Capital Sdn Bhd

Kenanga Investment Bank Bhd

Manulife Asset Management

Malayan Banking Bhd

OCBC Bank (Malaysia) Bhd

Phillip Mutual Bhd

Standard Chartered Bank Malaysia Bhd

United Overseas Bank (M) Bhd

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