RHB money maRket FUnD annUaL RePoRt 2017 … Rating Services Berhad or its equivalent ... (+4.0%),...

RHB money maRket FUnD

annUaL RePoRt 2017

Incorporating the audited Financial Statements

For the financial year ended 31 December 2017

RHB asset management Sdn Bhd (174588-X)

Head OfficeLevel 8, Tower 2 & 3, RHB Centre Jalan Tun Razak50400 Kuala Lumpur, Malaysia

Tel : +603 9205 8000

Fax : +603 9205 8100

www.rhbgroup.com

1

GENERAL INFORMATION ABOUT THE FUND

Name, Category and Type

Fund Name - RHB Money Market Fund

Fund Category - Money market fund

Fund Type - Income fund

Investment Objective, Policy and Strategy

Objective of the Fund

This Fund aims to provide investors with a high level of liquidity^ whilst providing reasonable returns by investing in low risk investments.

^Note: Redemption monies of this Fund will generally be paid the day following the next business day (a working day when the Manager is open for business) after receipt by the Manager of request to repurchase.

Strategy

This Fund seeks to achieve its objective through investments in a portfolio of money market instruments and other short term debentures and placements of deposits with financial institutions. Investments in debentures issued by financial institutions or private entities must at the point of purchase, carry a credit rating of at least A/P3 by RAM Rating Services Berhad or its equivalent rating by any other rating establishment.

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

90% - 100% of Net Asset Value

- Investments in debentures, money market instruments and placements of deposits (“Permitted Investments”) with financial institutions which have a remaining maturity period of not more than 365 days.

0% - 10% of Net Asset Value

- Investments in Permitted Investments with financial institutions which have a remaining maturity period of more than 365 days but less than 732 days.

1

2

Investment Philosophy The Manager will form a strategy based on the interest rate outlook derived from economic aggregates such as inflation, economic growth and general monetary policies. Further, the Manager’s investment strategy will follow its views on the anticipated changes in the yield curve.

2

3

Investment Approach The Manager’s investment approach when making investments in Permitted Investments with financial institutions will evolve around the following principles:- 1) Interest rate anticipation – Forecast changes in interest rates and yield curve shapes. 2) Relative return analysis – Best risk-return trade-off within the financial institutions of same credit rating.

Performance Benchmark The performance of the Fund is benchmarked against the Interbank Overnight Deposit Rates as published by Bank Negara Malaysia.

3

4

Permitted Investments and Restrictions

This Fund may invest in debentures traded on Bursa Malaysia or any other market considered as an Eligible Market; Malaysian Government Securities, Treasury Bills, Bank Negara Malaysia Certificates/Bills, Government Investments Certificates; other obligations issued or guaranteed by the Malaysian Government, Bank Negara Malaysia, State Governments and Government-related agencies; Malaysian currency balances in hand, Malaysian currency deposits with financial institutions; Negotiable Instruments of Deposits, Bankers Acceptances; Cagamas Bonds, unlisted loan stocks and corporate bonds traded in the money market and either bank-guaranteed or carrying at least an A/P3 rating by RAM Rating Services Berhad or its equivalent rating by any other rating establishment; other collective investment schemes; financial derivatives; and any other investments permitted by the Securities Commission Malaysia from time to time.

Distribution Policy

Consistent with the Fund’s objective to provide reasonable returns, the Fund will distribute a substantial portion of its returns to unit holders. Distributions, if any, after deduction of taxation, if any, and expenses, are generally declared annually and will be reinvested.

4

5

MANAGER’S REPORT

MARKET REVIEW

During the year under review, the year started with local investors returned to the market in January – February 2017 and yield curve flattened somewhat due to portfolio re-positioning and demand dynamic. March 2017 was faced with profit taking activities which drove the yield curve higher amidst higher Federal Fund Rate (“Fed Fund Rate”). Come April 2017, Malaysian Ringgit (“MYR”) started to recover against US Dollar (“USD”) as risk sentiment improves, and the short-to-medium part of the yield curve tightened most due to its good trading liquidity profile and somewhat neutral duration positioning. This trend continue to May 2017 as foreign flow returns to Malaysia on the back of 4.79% of MYR recovery against USD. Yield curve tightening extended to the long and ultra-long tenor (i.e 10-year and 20-year above), with yields fell closed to 20 basis points (“bps”) in May 2017 alone. The trend lasted until June 2017. In July 2017, Bank Negara Malaysia (“BNM”) had a better assessment on global and local economies compared to the last meeting, market interpreted the assessment as potential hawkishness for the remaining of 2017. In August 2017, with hurricane Irma hitting United States (“US”) and the escalated tension between Washington and Pyongyang, United States Treasury (“UST”)tightened significantly which makes Emerging Market (“EM”) local government bond attractive to yield investors. Malaysia Government Securities (“MGS”) benefitted from this trend and we continue to see substantial buying interest from offshores investors. In September 2017, stronger US second quarter of year 2017 Gross Domestic Product (“GDP”) results and hawkish Federal Reserve Open Market Committee (“FOMC”) comments from policymakers again pushed EM yield higher. Coming into the fourth quarter of year 2017, focus has shifted towards the prospects of tax reform and talks about the next US Federal Reserve (“Fed”) Chair nomination and as widely anticipated by the market, Jerome Powell has been nominated to head the Fed and seen to smoothly continue the path of monetary policy for the US central bank. At the 13 December 2017 FOMC meeting, the Fed has increased its federal funds rate by 25 bps to a range of 1.25%-1.50% as widely expected. The most important takeaway was that despite the inclusion of fiscal stimulus, the median dot plots for 2018 continue to indicate three rate hikes and did not lead to a steeper path of hikes, a sign that the tax legislation moving through Congress would have a modest and possibly fleeting effect. Locally, at their last Monetary Policy Meeting (“MPC”) of the year, BNM has unexpectedly sounded hawkish in their MPC statement’s language by citing that the committee may consider reviewing current degree of monetary accommodation. This hawkish stand together with better Brent oil prices has sent USDMYR lower ie; continuous strengthening of MYR towards the year end. USDMYR closed the year 2017 at tremendously low of 4.061 from 4.487 recorded in December 2016. All in all, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year MGS were traded at 3.338% (December 2016: 3.52%), 3.531% (3.72%), 3.876% (4.13%), 3.905% (4.23%), 4.401% (4.71%), 4.580% (4.77%) and 4.850% (4.80%) respectively.

5

6

ECONOMIC REVIEW AND OUTLOOK

On the local economic front, Malaysia’s November 2017 Consumer Prices Index (“CPI”) rose 3.4% from a year ago as expected by the consensus due to higher transport and food costs. Based on seasonally adjusted term, the overall CPI for November increased 0.7% as compared to October and core inflation rose 2.2% compared to a year ago. The Statistics Department said among the major groups which recorded increases in November were the indices for transport (+10.8%), food and non-alcoholic beverages (+4.0%), restaurants and hotels (+2.8%), household equipment (+2.5%), health (+2.2%) and housing, water, electricity, gas and other fuels (+2.2%). The average price of one litre of RON95 petrol was RM2.30 in November 2017 compared to RM1.95 a year ago. As for RON97, the average price increased to RM2.59 in November 2017 from RM2.30 a year ago. Nevertheless, the reading bias skewed towards tighter monetary conditions. That said, the government has mooted the idea of mitigating the impact of higher crude oil prices should the RON95 prices rise beyond RM2.50 per litre for consecutive three months. If this is implemented, it would suggest some insulation of headline inflation from increases in global fuel prices. Historically, the headline inflation did see a pick-up and to some extent core inflation was also precede higher in the previous two event of minimum wage increase in 2013 and July 2016, even if the correlation does not imply causation. As such, we need to watch the next CPI prints and importantly, actions and comments by other major central banks to the extent they influenced global monetary policy. Lastly, third quarter of year 2017 Gross Domestic Product (“GDP”) accelerates further to 6.2% Year-on-Year (“YoY”) on stronger domestic demand. Current Account surplus widens to RM12.5 billion or 3.7% of GDP. The stronger growth further adds to expectation of Overnight Policy Rate (“OPR”) hike in 2018.

REVIEW OF FUND PERFORMANCE DURING THE YEAR

For the financial year under review, the Fund has registered a gain of 3.38%* in net asset value terms while its benchmark, Interbank Overnight Deposit Rates, recorded a gain of 3.01%*. The Fund has met its objective for the financial year under review.

*Source: Lipper Investment Management (“Lipper IM”), 18 January 2018

MARKET OUTLOOK AND STRATEGY GOING FORWARD

At the start of 2017, market consensus was a rebound in global growth, Advanced Economy (“AE”) inflation and a modest increase in policy rates. As it turned out, the growth forecasts were too low, while inflation forecast were again too high. Despite low inflation, AE monetary policy in 2017 have been slightly higher than market expectations.

6

7

Some of the most significant recent developments in the global economy are the broader higher growth, steady inflation and the rising AE policy rates. We continue to expect global economic outlook to largely characterized by these recent developments as the synchronized of global economy growth appears to be somewhat evidenced in recent major economies data and activities.

However, after picking up quite sharply in 2017, we expect global nominal Gross Domestic Product (“GDP”) growth to be moderate (not to the significant slowdown) due to higher base effects and the concentrated effort by central banks to raise policy rates could trigger slowdown in global growth as markets adjusting to a major tightening in financial conditions. With subdued inflation despite robust growth recently, financial imbalances appear to be building.

In 2018, expectation is for the handful of AE central banks to continue tightening path (US, UK, Canada, Australia and New Zealand) while global central banks purchases to fall from $180billion per month to roughly zero by end 2018. Fed’s balance sheet reduction should ramp up by end 2018 as planned to USD50billion per month. Given that, risk free asset supply will no doubt increase but not to a level that will derail the real economy recovery. Nevertheless, risk free assets corrections could still trigger or cause a global slowdown if the “forward guidance message” from central banks are significantly detached from the market participants.

Mirroring global growth trends, Malaysia’s growth data has continuously surprised on the upside in 2017 with the recent third quarter of year 2017 GDP recorded 6.2%, the fastest quarterly growth since second quarter of year 2014. Headline inflation is expected to be at the upper end of the forecast range of 3.5%-4.0% in 2017. Moving into 2018, headline inflation is projected to moderate at about 2.5%-3.5% on expectation of smaller effect from global cost factors. Nonetheless, from the mid-point of 3% inflation forecast in 2018, Bank Negara Malaysia (“BNM”) hawkish stand recently will bring the real interest rates back into positive territory. We therefore expect BNM to hike 25 basis points (“bps”) in 2018 but further tightening in policy rates will broadly depending on the incoming data as well as trajectory of global monetary conditions. In term of strategy, we are neutral on duration with mildly bullish in expectation that local demand dynamics tend to be more constructive in the first quarter of year 2018. As for the allocation, we overweight credit over government bonds for yield pick-up while strategically taking opportunity on the re-pricing rewards of government bonds.

7

8

PERFORMANCE DATA

Annual Total ReturnFinancial Year Ended

31 December 2017 2016 2015 2014 2013

% % % % %RHB Money Market Fund - Capital Return (0.55) 0.09 0.14 0.48 0.23- Income Return 3.95 3.34 3.24 2.76 2.67- Total Returns 3.38 3.43 3.38 3.25 2.91Interbank Overnight

Deposit Rates 3.01 3.12 3.25 3.15 2.99

Average Annual Return 1 Year

31.12.2016-31.12.2017

%

3 Years 31.12.2014-31.12.2017

%

5 Years 31.12.2012-31.12.2017

%

10 Years31.12.2007-31.12.2017

%RHB Money Market Fund 3.38 3.40 3.27 2.97

Interbank Overnight Deposit Rates 3.01 3.12 3.11 2.97

8

9

Performance of RHB Money Market Fund for the period from 31 December 2007 to 31 December 2017

Cumulative Return Over The Period (%)

Source: Lipper IM, 18 January 2018

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.

As at 31 December Fund Size 2017 2016 2015 Net Asset Value (RM million)* 154.02 145.08 184.61 Units In Circulation (million)* 152.18 142.56 181.60 Net Asset Value Per Unit (RM)* 1.0121 1.0176 1.0166 9

10

* The figures quoted are ex-distribution

# The MER for the financial year was consistent with the previous financial year(refer to Note 14).

## The PTR for the financial year was higher compared with the previous financial year due to more investment activities during the financial year under review(refer to Note 15).

DISTRIBUTION

For the financial year under review, the Fund has declared a net distribution of 4.0000 sen per unit, which is equivalent to a net yield of 3.87% based on the average net asset value for the financial year.

Financial Year Ended31 December

Historical Data 2017 2016 2015Unit PricesNAV - Highest (RM)* - Lowest (RM)*

1.05081.0110

1.05111.0170

1.04791.0151

Distribution and Unit SplitGross Distribution Per Unit (sen) 4.0000 3.4000 3.2900Net Distribution Per Unit (sen) 4.0000 3.4000 3.2900Ex date 20.12.2017 28.12.2016 16.12.2015NAV before distribution (cum) 1.0508 1.0511 1.0479NAV after distribution (ex) 1.0110 1.0173 1.0151

Unit Split - - -

OthersManagement Expense Ratio (MER)

(%) # 0.59 0.59 0.58Portfolio Turnover Ratio (PTR)

(times) ## 47.96 31.62 15.58

10

11

PORTFOLIO STRUCTURE

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

As at 31 December2017 2016 2015

Sectors % % %Commercial Papers 28.33 19.24 32.31Unquoted Bonds 50.56 38.08 50.37Liquid assets and other net current assets 21.11 42.68 17.32

100.00 100.00 100.00

The asset allocation is reflective of the Fund’s objective of providing investors with a high level of liquidity at reasonable returns.

11

12

BREAKDOWN OF UNIT HOLDINGS BY SIZE

Account Holders No. Of Units Held*Size of Holdings No. % (‘000) %5,000 and below 41 28.28 80 0.065,001 to 10,000 17 11.72 122 0.0810,001 to 50,000 37 25.52 740 0.5150,001 to 500,000 29 20.00 5,279 3.65500,001 and above 21 14.48 138,534 95.70Total 145 100.00 144,755 100.00

*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.

12

13

RHB MONEY MARKET FUNDSTATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

Note 2017 2016RM RM

ASSETSFinancial assets at fair value through profit

or loss (“FVTPL”) 5 121,514,327 83,153,169Deposits with licensed financial

institutions 6 32,591,923 61,984,208Bank balance 6 2,270 26,008Amount due from Manager - 3,768TOTAL ASSETS 154,108,520 145,167,153

LIABILITIESAccrued management fee 64,936 68,097Amount due to Trustee 6,494 6,810Other payables and accruals 7 14,689 14,906TOTAL LIABILITIES 86,119 89,813

NET ASSET VALUE 154,022,401 145,077,340

UNITHOLDERS’ FUNDSUnitholders’ capital 142,529,679 132,863,054Retained earnings 11,492,722 12,214,286

154,022,401 145,077,340

UNITS IN CIRCULATION (UNITS) 8 152,179,731 142,564,000

NET ASSET VALUE PER UNIT (EX-DISTRIBUTION) (RM) 1.0121 1.0176

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

13

RHB MONEY MARKET FUNDSTATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

Note 2017 2016RM RM

ASSETSFinancial assets at fair value through profit

or loss (“FVTPL”) 5 121,514,327 83,153,169Deposits with licensed financial

institutions 6 32,591,923 61,984,208Bank balance 6 2,270 26,008Amount due from Manager - 3,768TOTAL ASSETS 154,108,520 145,167,153

LIABILITIESAccrued management fee 64,936 68,097Amount due to Trustee 6,494 6,810Other payables and accruals 7 14,689 14,906TOTAL LIABILITIES 86,119 89,813

NET ASSET VALUE 154,022,401 145,077,340

UNITHOLDERS’ FUNDSUnitholders’ capital 142,529,679 132,863,054Retained earnings 11,492,722 12,214,286

154,022,401 145,077,340

UNITS IN CIRCULATION (UNITS) 8 152,179,731 142,564,000

NET ASSET VALUE PER UNIT (EX-DISTRIBUTION) (RM) 1.0121 1.0176

The accompanying notes are an integral part of the financial statements.13

14

RHB MONEY MARKET FUNDSTATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

Note 2017 2016RM RM

INVESTMENT INCOMEInterest income 9 5,559,374 6,438,666Net gain on financial assets at fair value

through profit or loss (“FVTPL”) 5 6,965 27,5185,566,339 6,466,184

EXPENSESManagement fee 10 (706,816) (807,627)Trustee’s fee 11 (70,682) (80,763)Audit fee (7,850) (7,500)Tax agent’s fee (2,500) (3,000)Other expenses (49,015) (58,462)

(836,863) (957,352)

Profit before taxation 4,729,476 5,508,832Taxation 12 - -Profit after taxation and total

comprehensive income for the financial year 4,729,476 5,508,832

Profit after taxation is made up as follows:

Realised amount 3,629,868 5,531,010Unrealised amount 1,099,608 (22,178)

4,729,476 5,508,832


15

RHB MONEY MARKET FUNDSTATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

Unitholders’ capital

Retained earnings

Total netasset value

RM RM RM

Balance as at 1 January 2016 173,214,323 11,392,456 184,606,779Movement in net asset value:Total comprehensive income for

the year - 5,508,832 5,508,832Creation of units arising from

applications 125,528,697 - 125,528,697Creation of units arising from

distribution 4,687,002 - 4,687,002Cancellation of units (170,566,968) - (170,566,968)Distribution (Note 13) - (4,687,002) (4,687,002)Balance as at 31 December 2016 132,863,054 12,214,286 145,077,340

Balance as at 1 January 2017 132,863,054 12,214,286 145,077,340Movement in net asset value: Total comprehensive income for

the year - 4,729,476 4,729,476Creation of units arising from

applications 159,205,644 - 159,205,644Creation of units arising from

distribution 5,451,040 - 5,451,040Cancellation of units (154,990,059) - (154,990,059)Distribution (Note 13) - (5,451,040) (5,451,040)Balance as at 31 December 2017 142,529,679 11,492,722 154,022,401


16

RHB MONEY MARKET FUNDSTATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

2017 2016RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

Proceeds from sale of investments 19,965,457 50,971,427Proceeds from redemption of investments 383,250,000 503,500,000

Purchase of investments (441,579,362) (484,980,327)Placements of deposits with licensed

financial institutions (6,342,599,629) (4,602,312,913)Proceeds from maturity of deposits with

licensed financial institutions 6,371,922,896 4,572,101,029Interest received from unquoted fixed

income securities 4,538,978 5,107,865Interest received from deposits with

licensed financial institutions 1,099,126 1,306,284Management fee paid (709,977) (825,083)Trustee’s fee paid (70,998) (82,509)Audit fee paid (7,500) (6,500)Tax agent’s fee paid - (2,800)Payment for other fees and expenses (52,082) (58,462)Net cash (used in)/generated from

operating activities (4,243,091) 44,718,011

CASH FLOWS FROM FINANCING ACTIVITIES

Cash proceeds from units created 159,209,412 125,524,930Payment for cancellations of units (154,990,059) (170,566,968)Net cash generated from/(used in)

financing activities 4,219,353 (45,042,038)


17

RHB MONEY MARKET FUNDSTATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017(CONTINUED)

2017 2016Note RM RM

Net decrease in cash and cash equivalents (23,738) (324,027)

Cash and cash equivalents at the beginning of the financial year 26,008 350,035

Cash and cash equivalents at the end of the financial year 2,270 26,008

Cash and cash equivalents comprise:Bank balance 6 2,270 26,008


18

RHB MONEY MARKET FUNDNOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECMBER 2017

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

The RHB Money Market Fund (hereinafter referred to as “the Fund”) was constituted pursuant to the execution of a Master Deed dated 27 April 2004 and as amended by the First Supplemental Deeds dated 8 June 2004, Second Supplemental Deeds dated19 October 2005, Third Supplemental Deeds dated 8 December 2005, Fourth Supplemental Deeds dated 28 February 2006, Fifth Supplemental Deeds dated 9 March 2006, Sixth Supplemental Deeds dated 22 September 2006, Seventh Supplemental Deeds dated 15 December 2006, Eighth Supplemental Deeds dated 30 January 2007, Ninth Supplemental Deeds dated 9 April 2007, Tenth Supplemental Deeds dated 14 May 2007, Eleventh Supplemental Deeds dated 15 May 2007, Twelfth Supplemental Deeds dated 27 June 2007, Thirteenth Supplemental Deeds dated 24 December 2007, Fourteenth Supplemental Deeds dated 28 February 2013, Fifteenth Supplemental Deeds dated 4 September 2013, Sixteenth Supplemental Deeds dated 2 March 2015, Seventeenth Supplemental Deeds dated 8 May 2015 and Eighteenth Supplemental Deeds 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 commenced operations on 20 January 2006 and will continue its operations until terminated according to the conditions provided under the Deed.

The principal activity of the Fund is to invest in Permitted Investments as set out in the Deed, which includes fixed income securities traded on Bursa Malaysia or any other market considered as an Eligible Market and short term money market instruments.

All investments will be subject to the Securities Commission’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 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 27 February2018.

18

19

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 financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, except as disclosed in this 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 revenues 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 amendments for the first time for the financial year beginning on 1 January 2017:

Amendments to MFRS 107 “Statement of Cash Flows – Disclosure Initiative” (effective from 1 January2017) introduce an additional disclosure on changes in liabilities arising from financing activities.

The adoption of these amendments did not have any impact on the current year or any prior period and is not likely to affect future periods.

19

20

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation of the financial statements (continued)

(b) The new standards and amendments to published standards 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 January 2018

MFRS 9 “Financial Instruments” (effective from 1 January 2018) will replace MFRS 139 “Financial Instruments: Recognition and Measurement”.

MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest.

For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the profit or loss, unless this creates an accounting mismatch.

MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised.

The above standards and amendments to published standards are not expected to have a significant impact on the Fund’s financial statements.

20

21


2.2 Financial assets

Classification

Financial assets are designated as fair value through profit or loss when they are managed and their performance are evaluated on a fair value basis.

The Fund designates its investments in unquoted fixed income securities and deposits with licensed financial institutions as financial assets at fair value through profit or loss at inception.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund’s loans and receivables comprise cash and cash equivalents andamount due from manager which are all due within 12 months.

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. Investments are initially recognised at fair value. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value.

Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in profit or loss as expenses.

Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership.

Unrealised gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are recognised in profit or loss in the financial year in which they arise.

Unquoted fixed income securities denominated in Ringgit Malaysia are revalued on a daily basis based on fair value prices quoted by a bond pricing agency (“BPA”) registered with the SC as per the SC Guidelines on Unit Trust Funds. Where such quotations are not available or where the Manager is of the view that the price quoted by the BPA for a specific unquoted fixed income security differs from the market price by more than 20 basis points, the Manager may use the market price, provided that the Manager:

21

22


2.2 Financial assets (continued)

Recognition and measurement (continued)

(i) Records its basis for using a non-BPA price;(ii) Obtains necessary internal approvals to use the non-BPA price; and(iii) Keeps an audit trail of all decisions and basis for adopting the market price.

Deposits with licensed financial institutions are stated at cost plus accrued interest calculated on the effective interest method over the year from the date of placement to the date of maturity of the respective deposits, which is a reasonable estimate of fair value due to the short-term nature of the deposits.

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Impairment of financial assets

For assets carried at amortised cost, the Fund assesses at the end of the financial year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in profit or loss. If ‘loans and receivables’ has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent financial year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined.

22

23


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 139 “Financial Instruments: Recognition and Measurement”, 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 accrued management fee, amount due to Trustee and other payables and accruals are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

A financial liability is de-recognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are de-recognised, and through the amortisation process.

2.4 Unitholder’s 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 assets 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 profit or loss of the Fund.

The outstanding units are carried at the redemption amount that is payable at each financial year if unitholder exercises the right to put the unit 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.

23

24


2.5 Distribution

Distribution to the Fund’s unitholders is accounted for as a deduction from realised reserves. A proposed distribution is recognised as a liability in the year in which it is approved by the Trustee.

2.6 Income recognition

Interest income from deposits with licensed financial institutions and unquoted fixed income securities are recognised on an accrual basis using the effective interest method.

Realised gain and loss on sale of unquoted fixed income securities is measured by the difference between the net disposal proceeds and the carrying amounts of the investments (adjusted for accretion of discount or amortisation of premium).

2.7 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.

2.8 Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise bank balance which is subject to an insignificant risk of changes in value.

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.

2.10 Segmental information

Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The operating results are regularly reviewed by the Manager and the Investment Committee. The Investment Committee assumes the role of chief operating decision maker, for performance assessment purposes and to make decisions about resources allocated to the investment segment based on the recommendation by the Investment & Security Selection Committee.

24

25

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks, which include management risk, market risk, price risk, interest rate risk, credit risk, liquidity risk, inflation risk, non-compliance 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 Guidelines on Unit Trust Funds.

Management risk

Poor management of the Fund may jeopardise the investment of each unitholder. Therefore, it is important for the Manager to set the investment policies and appropriate strategies to be in line with the investment objective before any investment activities can be considered. However, there can be no guarantee that these measures will produce the desired results.

Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The maximum risk resulting from financial instruments equals their fair value.

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 (other than those arising from interest rate risk).

The Fund’s overall exposure to price risk was as follows:

2017 2016RM RM

Financial assets at fair value through profit or loss:- Unquoted fixed income securities 121,514,327* 83,153,169*

* Includes interest receivable of RM719,057 (2016: RM728,770).

25

26

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Price risk (continued)

The table below summarises the sensitivity of the Fund’s profit or loss and net asset value to movements in prices of investments. The analysis is based on the assumption that the price of the investments fluctuates by 5% with all other variables held constant.

Change in price of

investments Market value

Impact on profit or loss and

net asset value% RM RM

2017-5 114,755,506 (6,039,764)0 120,795,270 -

+5 126,835,034 6,039,764

2016-5 78,303,179 (4,121,220)0 82,424,399 -

+5 86,545,619 4,121,220

Interest rate risk

In general, when interest rates rise, unquoted fixed income securities prices will tend to fall and vice versa. Therefore, the net asset value of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold an unquoted fixed income security till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the net asset value shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis.

This risk is crucial since bond portfolio management depends on forecasting interest rate movements. Bonds with longer maturity and lower yield coupon rates are more susceptible to interest rate movements.

26

27


Interest rate risk (continued)

Investors should note that fixed income securities (such as the bonds held by the Fund) and money market instruments are subject to interest rate fluctuations. Such investments may be subject to unanticipated rise in interest rates which may impair the ability of the issuers to make payments of interest and principal, especially if the issuers are highly leveraged. An increase in interest rates may therefore increase the potential for default by an issuer.

The table below summarises the sensitivity of the Fund’s profit or loss and net asset value to movements in prices of unquoted fixed income securities held by the Fund as a result of movement in interest rate. The analysis is based on the assumptions that the interest rate increased and decreased by 1% with all other variables held constant.

Impact on profit or loss and net asset value2017 2016RM RM

% Change in interest rate+ 1% (27,302) (12,617)- 1% 28,421 19,639

Credit risk

Credit risk refers to the possibility that the issuer of a security will not be able to make timely payments of interest or principal repayment on the maturity date. This may lead to a default in the payment of principal and interest and ultimately a reduction in the value of the Fund. In the case of the Fund, the Manager will endeavour to minimise this risk by selecting only issuers with prescribed and acceptable credit ratings.

27

28


Credit risk (continued)

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

Financial assets at fair value through

profit or loss

Deposits with licensed

financial institution and bank

balance

Other financial

assets* Total

2017RM RM RM RM

AAA 10,535,987 15,955,203 - 26,491,190AA1 10,168,740 - - 10,168,740AA2 20,292,015 16,638,990 - 36,931,005AA3 25,160,086 - - 25,160,086AA- 6,055,746 - - 6,055,746A1 616,742 - - 616,742A3 5,042,921 - - 5,042,921MARC-1** 23,782,861 - - 23,782,861NR 19,859,229 - - 19,859,229

121,514,327 32,594,193 - 154,108,520

2016AAA - 21,640,756 - 21,640,756AA2 17,203,543 21,717,840 - 38,921,383AA- 12,251,378 18,651,620 - 30,902,998A 5,019,788 - - 5,019,788A1 20,764,779 - - 20,764,779MARC-1 27,913,681 - - 27,913,681Others* - - 3,768 3,768

83,153,169 62,010,216 3,768 145,167,153

* Comprise amount due from Manager.** Sabah Development Bank Bhd

The financial assets of the Fund are neither past due nor impaired.

28

29


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 RM2017Accrued management fee 64,936 -Amount due to Trustee 6,494 -Other payables and accruals - 14,689

71,430 14,689

2016Accrued management fee 68,097 -Amount due to Trustee 6,810 -Other payables and accruals - 14,906

74,907 14,906

29

30


Inflation risk

Inflation reduces purchasing power of money. In an inflationary environment, fixed rate securities are exposed to higher inflation risks than inflation-linked securities. This risk can be minimised by investing in securities that can provide positive real rate of return.

Non-compliance risk

This is the risk of the Manager not complying with the internal policies, the Deeds of the Fund, all applicable laws or guidelines issued by the regulators. This may occur as a result of system failure or the inadvertence of the Manager. The magnitude of such risk and its impact on the Fund and/or unitholders are dependent on the nature and severity of the non-compliance. Non-compliance may adversely affect the Fund especially if the investment of the Fund has to be disposed at a lower price to rectify the non-compliance.

Capital risk

The capital of the Fund is represented by equity consisting of unitholders’ capital of RM142,529,679 (2016: RM132,863,054) and retained earnings of RM11,492,722 (2016: RM12,214,286). 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.

30

31

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 traded in 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 asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

The fair value of financial assets 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 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 arm’s length 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.

For instruments for which there is no active market, the Fund may use internally developed models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Valuation models are used primarily to value unlisted equities, debt securities and other debt instruments for which market were or have been inactive during the financial year. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions.

The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Fund holds.

Valuations are therefore adjusted, where appropriate, to allow for additional factors including model risk, liquidity risk and counterparty risk.

31

32

4. FAIR VALUE ESTIMATION (CONTINUED)

The fair values are based on the following methodologies and assumptions:

(i) For bank balances, deposits and placements with financial institutions with maturities less than 1 year, the carrying value is a reasonable estimate of fair value.

(ii) The carrying value less impairment 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 level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability

The determination of what constitutes ‘observable’ requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

32

33

4. FAIR VALUE ESTIMATION (CONTINUED)

Fair value hierarchy (continued)

The following table analyses within the fair value hierarchy the Fund’s financial assets (by class) measured at fair value:

Level 1 Level 2 Level 3 TotalRM RM RM RM

2017Financial assets at fair

value through profit or loss:

- Unquoted fixed income securities - 121,514,327 - 121,514,327

- Deposits with licensed financial institutions - 32,591,923 - 32,591,923

Total - 154,106,250 - 154,106,250

2016Financial assets at fair

value through profit or loss:

- Unquoted fixed income securities - 83,153,169 - 83,153,169

- Deposits with licensed financial institutions - 61,984,208 - 61,984,208

Total - 145,137,377 - 145,137,377

Financial instruments that trade in markets that are considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. Level 2 instruments include unquoted investments and deposits with licensed financial institutions. As Level 2 instruments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. The Fund’s policies on valuation of these financial assets are stated in Note 2.2.

The carrying value of the Fund’s deposits with licensed financial institutions approximates their fair value due to their short-term nature.

33

34

5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2017 2016RM RM

Financial assets designated as FVTPL:Unquoted fixed income securities 121,514,327 83,153,169

Net gain on financial assets at FVTPL comprised:- net realised gain on sale of financial assets at

FVTPL 2,042 49,696- net unrealised gain/(loss) on changes in fair values 4,923 (22,178)

6,965 27,518

Financial assets designated as FVTPL as at 31 December 2017 are as follows:

Name of Counter Rating Quantity Cost

Fair valueas at

31.12.2017

Fair value as at

31.12.2017 expressed

as a percentage of value of

the FundRM RM %

UNQUOTED FIXED INCOME SECURITIES

COMMERCIAL PAPERS

Sabah Development Bank Bhd(28/02/2018) NR 20,000,000 19,859,229 19,859,229 12.89

Sunway Bhd (08/01/2018) MARC 23,800,000 23,782,861 23,782,861 15.44

43,642,090 43,642,090 28.33

34

35

5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)

Financial assets designated as FVTPL as at 31 December 2017 are as follows: (continued)


Fair valueas at

31.12.2017

Fair value as at 31.12.2017expressed as a percentage

of value of the Fund

RM RM %UNQUOTED BONDS Alpha Circle Sdn Bhd – 5.00% (21/11/2018) AA- 3,500,000 3,521,378 3,520,560 2.29

Bahrain Mumtalakat

Holding – 5.35% (30/04/2018) A3 5,000,000 5,044,515 5,042,921 3.27

Berjaya land Bhd – 4.55%

(17/12/2018) AAA 10,000,000 10,025,751 10,026,492 6.51Gamuda Bhd – 4.215% (26/10/2018) AA3 5,000,000 5,040,293 5,033,126 3.27

Lafarge Cement Sdn Bhd –

4.40% (15/01/2018) AA2 10,000,000 10,207,560 10,209,042 6.63Orix Leasing Malaysia –4.30% (03/05/2019) AA2 10,000,000 10,071,906 10,082,973 6.55

Perbadanan Kemajuan Negeri Selangor –4.45%(31/10/2018) AA3 10,000,000 10,084,579 10,081,208 6.54

35

36




Fair valueas at

31.12.2017

Fair value as at 31.12.2017 expressed as a percentage


RM RM %UNQUOTED BONDS (CONTINUED)Perbadanan Kemajuan Negeri Selangor –4.50%(03/12/2018) AA3 10,000,000 10,043,672 10,045,752 6.52

PLUS Bhd –3.99% (12/01/2018) AAA 500,000 509,515 509,496 0.33

Quantum Solar Park – 4.86% (04/10/2019) AA- 2,500,000 2,535,447 2,535,185 1.65

Special Power Vehicle – 20.42%(17/05/2019) A1 500,000YTL Power Internation – 4.35% (24/08/2018) AA1 10,000,000

615,049

10,167,534

616,742

10,168,740

0.40

6.6077,867,199 77,872,237 50.56

TOTAL UNQUOTED FIXED INCOME SECURITIES 121,509,289 121,514,327 78.89

ACCUMULATED UNREALISED GAIN 5,038

TOTAL FINANCIAL ASSETS AT FVTPL 121,514,327

36

37




Fair valueas at

31.12.2016



RM RM %

UNQUOTED FIXED INCOME SECURITIES

COMMERCIAL PAPERS

Sunway Bhd - CP (31/01/2017) P1 28,000,000 27,913,681 27,913,681 19.24

27,913,681 27,913,681 19.24

UNQUOTED BONDSBahrain Mumtalakat -5.35% (30/04/2018) A1 5,000,000 5,202,751 5,220,249 3.61

Bahrain Mumtalakat

Holding – 5.50% (03/10/2017) A1 15,450,000 15,551,063 15,544,530 10.72

Bahrain Mumtalakat

Holding – 5.50% (03/10/2017) A 5,000,000 5,016,360 5,019,788 3.45

Bright Focus Bhd - 4.30% (24/01/2017) AA2 2,000,000 2,037,742 2,037,914 1.40

First Resources Ltd –4.45% (31/07/2017) AA2 5,000,000 5,106,689 5,093,296 3.52

37

38




Fair valueas at

31.12.2016



RM RM %UNQUOTED BONDS (CONTINUED)Orix Leasing

Malaysia –4.17% (05/05/2017) AA2 10,000,000 10,070,820 10,072,333 6.94

Tanjung Bin O&M - 4.25% (30/06/2017) AA- 12,000,000 12,253,948 12,251,378 8.44

55,239,373 55,239,488 38.08

TOTAL UNQUOTED FIXED INCOME SECURITIES 83,153,054 83,153,169 57.32

ACCUMULATED UNREALISED GAIN 115

TOTAL FINANCIAL ASSETS AT FVTPL 83,153,169

38

39

6. CASH AND CASH EQUIVALENTS

2017 2016RM RM

Deposits with licensed financial institutions* 32,591,923 61,984,208Bank 2,270 26,008

32,594,193 62,010,216

* Deposits with licensed financial institutions include interest receivable of RM11,042(2016: RM80,059).

2017 2016

Weighted average rate of return 3.73% 3.93%

Average maturity 2 days 5 days

7. OTHER PAYABLES AND ACCRUALS

2017 2016RM RM

Audit fee payable 7,850 7,500Tax agent's fee payable 5,200 2,700Sundry payables and accruals 1,639 4,706

14,689 14,906

8. UNITS IN CIRCULATION

2017 2016Units Units

As at beginning of the financial year 142,564,000 181,597,000Creation of units during the financial year

Arising from application Arising from distribution

154,031,0005,391,731

121,462,7044,607,296

Cancellation of units during the financial year (149,807,000) (165,103,000)As at end of the financial year 152,179,731 142,564,000

39

40

9. INTEREST INCOME

2017 2016RM RM

Interest income from unquoted fixed income securities 4,529,266 5,100,806

Interest income from deposits with licensed financial institutions 1,030,108 1,337,860

5,559,374 6,438,666

10. MANAGEMENT FEE

In accordance with the Deed, the Manager shall be entitled to a fee at a rate agreed between the Manager and the Trustee which the rate shall not exceed 2.00% per annum of the net asset value of the Fund, calculated on a daily basis.

The management fee provided in the financial statements is 0.50% (2016: 0.50%) per annum based on the net asset value of the Fund, calculated on a daily basis for the financial year.

There will be no further liability to the Manager in respect of management fee other than the amount recognised above.

11. TRUSTEE’S FEE

In accordance with the Deed, the Trustee shall be entitled to a fee at a rate agreed between the Manager and the Trustee which the rate shall not exceed 0.15% per annum of the net asset value, calculated on a daily basis and subject to a minimum of RM18,000 per annum.

The Trustee’s fee provided in the financial statements is 0.05% (2016: 0.05%) 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.

There will be no further liability to the Trustee in respect of trustee's fee other than the amount recognised above.

40

41

12. TAXATION

(a) Tax charge for the financial year

2017 2016RM RM

Current taxation - -

(b) Numerical reconciliation of income tax expense

The numerical reconciliation between the profit before taxation multiplied by the Malaysian statutory income tax rate and the tax expense of the Fund is as follows:

2017 2016RM RM

Profit before taxation 4,729,476 5,508,832

Tax calculated at a tax rate of 24% 1,135,074 1,322,120Tax effects of:- Investment income not subject to tax (1,335,921) (1,551,884)- Expenses not deductible for tax purposes 19,005 33,317- Restriction on tax deductible expenses for unit

trust funds 181,842 196,447Tax expense - -

13. DISTRIBUTION

Distributions to unitholders is from the following sources:

2017 2016RM RM

Prior financial year’s realised gain 2,110,090 2,431,347Interest Income 4,113,090 3,082,773

6,223,180 5,514,120Less: Expenses (772,140) (827,118)Distributions for the year 5,451,040 4,687,002

Total gross distributions per unit (sen) 4.0000 3.4000Total net distributions per unit (sen) 4.0000 3.4000

41

42

13. DISTRIBUTION (CONTINUED)

Included in the above distribution is an amount of RM2,110,090 (2016: RM2,431,347) derived from the previous financial year’s realised gain.

Gross distribution is derived using total income less total expenses.

Gross distribution per unit is derived from gross realised income less expense divided by the number of units in circulation, while net distribution per unit is derived from gross realised income less expenses and taxation divided by the number of units in circulation.

The net distribution consists of the following payout:

2017 2016RM RM

Reinvestment 5,451,040 4,687,002Distributions for the year 5,451,040 4,687,002

14. MANAGEMENT EXPENSE RATIO (“MER”)

2017 2016% %

MER 0.59 0.59

Management expense ratio includes management fee, Trustee’s fee, audit fee, tax agent's fee and other administrative expenses which is calculated as follows:

MER = (A + B + C + D + E) x 100 F

A = Management feeB = Trustee’s feeC = Audit feeD = Tax agent’s feeE = Other expenses excluding GST on transaction costsF = Average net asset value of the Fund for the financial year,

calculated on a daily basis

The average net asset value of the Fund for the financial year, calculated on a daily basis is RM141,358,634 (2016: RM161,522,780).

42

43

15. PORTFOLIO TURNOVER RATIO (“PTR”)

2017 2016The portfolio turnover ratio for the financial year

(times) 47.96 31.62

The portfolio turnover ratio is derived from the following calculation:

(Total acquisition for the financial year + total disposal for the financial year) 2Average net asset value of the Fund for the financial year calculated on a daily basis

where:

total acquisition for the financial year = RM6,784,178,991(2016: RM5,087,293,240)

total disposal for the financial year = RM6,775,271,560(2016: RM5,126,229,304)

16. UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER

The related parties and their relationship with the Fund are as follows:

Related parties Relationship

RHB Asset Management Sdn Bhd The Manager

RHB Investment Bank Berhad Holding company of the Manager

RHB Bank Berhad Ultimate holding company of the Manager

The number of units held by the Manager is as follows:

2017 2016Units RM Units RM

The Manager 7,424,103 7,513,935 2,915 2,966

The units are held beneficially by the Manager for booking purposes and were transacted at the prevailing market price. 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.

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

43

44

17. TRANSACTIONS BY THE FUND

Details of transactions by the Fund for the financial year ended 31 December 2017 are as follows:

BrokersValue of

trades

Percentageof totaltrades

Brokeragefees

Percentage of total

brokeragefees

RM % RM %

Kenanga Investment Bank Bhd 296,052,123 64.03 - -

RHB Investment Bank Bhd* 46,213,722 10.00 - -AmBank (M) Bhd 29,779,762 6.44 - -HSBC Bank (M) Bhd 25,177,500 5.45 - -Affin Hwang Investment

Bank Bhd 15,021,500 3.25 - -CIMB Bank Bhd 15,020,050 3.25 - -AmBank Islamic Bank Bhd 10,010,000 2.17 - -Standard Chartered Bank (M)

Bhd 10,007,397 2.16 - -OCBC Bank (M) Bhd 10,005,700 2.16 - -Other 5,057,000 1.09 - -

462,344,754 100.00 - -

44

45

17. TRANSACTIONS BY THE FUND (CONTINUED)

Details of transactions (including money market placements) by the Fund for the financial year ended 31 December 2016 are as follows:

* Included in transactions by the Fund are trades with RHB Investment Bank Bhd, the holding company of the Manager and RHB Bank Bhd, the ultimate holding company of the Manager. The Manager is of the opinion that all transactions with the related companies have been into in the normal course of business at agreed terms between the related parties.

Broker/financial institutionValue of

trades

Percentageof totaltrades

Brokeragefees

Percentage of total

brokeragefees

RM % RM %

CIMB Bank Bhd 1,893,826,510 37.16 - -Public Bank Bhd 1,719,493,299 33.74 - -Kenanga Investment Bank

Bhd 860,043,460 16.88 - -KAF Investment Bank Bhd 307,667,895 6.03 - -Affin Bank Bhd 107,453,589 2.11 - -Maybank Bhd 63,404,528 1.24 - -Hong Leong Bank Bhd 58,843,579 1.15 - -RHB Bank Bhd* 33,761,000 0.66 - -RHB Investment Bank Bhd* 23,040,450 0.45 - -Standard Chartered Bank (M)

Bhd 10,020,180 0.20 - -Others 18,979,700 0.38 - -

5,096,534,190 100.00 - -

45

46

18. SEGMENT INFORMATION

The Investment & Security Selection Committee of the Manager recommends strategic resource allocations of the Fund to the Investment Committee of the Manager (collectively referred to as "Committee"). The Investment Committee of the Manager will then endorse the strategic decision recommended by the Investment & Security Selection Committee for adoption on behalf of the Fund. The operating segments are determined based on the recommendation by the Investment & Security Selection Committee and reviewed by the Investment Committee.

The internal reporting provided to the Committee for the Fund’s assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of MFRS. The Committee is responsible for the Fund’s entire portfolio and considers the business from both geographic and investment perspective. Geographically, the Committee considers the performance of investments in Malaysia.

The reportable operating segments derive their income by seeking investments to achieve targeted returns commensurate with an acceptable level of risk within each portfolio. These returns consist of interest and gains on the appreciation in the value of investments which are derived from Malaysia.

There were no changes in the reportable segments during the financial year.

46

47

STATEMENT BY MANAGER

We, Patrick Chin Yoke Chung and Abdul Aziz Peru Mohamed, 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 financial statements set out on pages 13to 46 are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 December 2017 and of its financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

On behalf of the Manager

PATRICK CHIN YOKE CHUNG ABDUL AZIZ PERU MOHAMEDDirector Director

Kuala Lumpur27 February 2018

47

48

TRUSTEE’S REPORTTO THE UNITHOLDERS OF RHB MONEY MARKET FUND

We have acted as Trustee of RHB Money Market Fund (“the Fund”) for the financial year ended 31 December 2017. 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.

During the financial year, a distribution of 4.0000 sen per unit has been distributed to the unitholders of the Fund. We are of the view that the distribution is not inconsistent with the objective of the Fund.

For HSBC (Malaysia) Trustee Berhad

Tan Bee NieHead, Trustee Operations


48

49

INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OFRHB MONEY MARKET FUND

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Our opinion

In our opinion, the financial statements of RHB Money Market Fund (“the Fund”) give a true and fair view of the financial position of the Fund as at 31 December 2017 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 December 2017, and the statement of comprehensive income, 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 13 to 46.

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.

49

50

INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OFRHB MONEY MARKET FUND (CONTINUED)

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)

Information other than the financial statements and auditors’ report thereon

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

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

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

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

Responsibilities of the Manager for the financial statements

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

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

50

51



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.

51

52



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 members 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


52

53

CORPORATE INFORMATION

MANAGERRHB Asset Management Sdn Bhd

PRINCIPAL AND REGISTERED OFFICELevel 8, Tower 2 & 3, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur

BUSINESS OFFICELevel 8, Tower 2 & 3, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur

Email address: [email protected]: 03-9205 8000Fax: 03-9205 8100Website: http://www.rhbgroup.com

BOARD OF DIRECTORSMr Patrick Chin Yoke Chung (Non-Independent Non-Executive Chairman)Encik Abdul Aziz Peru Mohamed (Senior Independent Non-Executive Director)Mr Chin Yoong Kheong (Independent Non-Executive Director)Ms Ong Yin Suen (Managing Director)Dr. Ngo Get Ping (Independent Non-Executive Director)Ms Choo Shan (Independent Non-Executive Director) (Appointed on 3 July 2017)

INVESTMENT COMMITTEE MEMBERS Mr Patrick Chin Yoke Chung (Chairman) (Re-designated on 1 November 2017)Encik Abdul Aziz Peru Mohamed (Appointed on 1 November 2017)Ms Choo Shan (Appointed on 1 November 2017)YBhg Dato’ Darawati Hussain (Appointed on 1 December 2017)YBhg Dato’ Khairussaleh Ramli (Chairman) (Resigned on 1 November 2017)Mr Ong Seng Pheow (Resigned on 1 November 2017)YBhg Datuk Haji Faisal Siraj (Resigned on 1 December 2017)

CHIEF EXECUTIVE OFFICERMr Ho Seng Yee (Retired on 31 December 2017)

SECRETARYEncik Azman Shah Md Yaman (LS No. 0006901)

53

54

BRANCH OFFICE

Kuala Lumpur Office B-9-6, Megan Avenue 1No. 189, Jalan Tun Razak50400 Kuala LumpurTel: 03-2171 2755 Fax: 03-2770 0022

Sri Petaling Office

Penang Office

No. 53-1 & 53-2 Jalan Radin TengahBandar Baru Sri Petaling57000 Kuala LumpurTel: 03-9054 2470 Fax: 03-9054 0934

64-D, Level 5, Lebuh Bishop10200 PenangTel: 04-264 5639 / 04-263 4848Fax: 04-264 5640 / 04-262 8844

Butterworth Office 2677, Jalan Chain FerryTaman Inderawasih13600 Prai, PenangTel: 04-390 0022 Fax: 04-390 0023

Ipoh Office 4th Floor, 21-25Jalan Seenivasagam, Greentown30450 Ipoh, PerakTel: 05-242 4311 Fax: 05-242 4312

Johor Bahru Office 2nd Floor, 21 & 23Jalan Molek 1/30, Taman Molek81100 Johor Bahru, JohorTel: 07-358 3587 Fax: 07-358 3581

Kuantan Office B 32-34, 2nd Floor, Lorong Tun Ismail 8Sri Dagangan II25000 Kuantan, PahangTel: 09-517 3611 Fax: 09-517 3612

Kota Bharu Office No 3953-H, 1st FloorJalan Kebun Sultan15350 Kota Bharu, KelantanTel: 09-741 8539 Fax: 09-741 8540

54

55

Kota Kinabalu Office Lot No. C-02-04, 2nd FloorBlock C, Warisan SquareJalan Tun Fuad Stephens88000 Kota Kinabalu, SabahTel: 088-528 686/692 Fax: 088-528 685

Melaka Office 581B, Taman Melaka Raya75000 MelakaTel: 06-284 4211 Fax: 06-292 2212

Batu Pahat Office 53, 53-A and 53-B Jalan Sultanah83000 Batu Pahat, JohorTel: 07-438 0271 Fax: 07-438 0277

Miri Office Lot 1268, First FloorCentre Point Commercial CentreJalan Melayu98000 Miri, SarawakTel: 085-422 788 Fax: 085-415 243

Kuching Office Lot 172, Section 49, K.T.L.DJalan Chan Chin Ann93100 Kuching, SarawakTel: 082-245 611 Fax: 082-242 712

TRUSTEE HSBC (Malaysia) Trustee Berhad

BANKER RHB Bank Berhad

AUDITORS PricewaterhouseCoopers PLT

TAX ADVISER PricewaterhouseCoopers Taxation Services Sdn Bhd

DISTRIBUTORS Alliance Bank Malaysia BhdAmBank (M) BhdAm Investment Bank BhdApex Investment Services BhdAreca Capital Sdn BhdCIMB Investment Bank BhdCIMB-Principal Asset Management BhdCitibank BhdHong Leong Bank BhdiFAST Capital Sdn BhdKenanga Investment Bank BhdManulife Asset ManagementMalayan Banking Berhad

55

56

DISTRIBUTORS Phillip Mutual BhdRHB Investment Bank BhdStandard Chartered Bank (M) BhdUnited Overseas Bank (Malaysia) BhdRHB Asset Management Unit Trust Consultants

56

RHB money maRket FUnD annUaL RePoRt 2017 … Rating Services Berhad or its equivalent ... (+4.0%),...

Documents

Transcript of RHB money maRket FUnD annUaL RePoRt 2017 … Rating Services Berhad or its equivalent ... (+4.0%),...