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RHB ASIAN TOTAL RETURN FUND

INTERIM REPORT 2020

For the financial period ended 30 June 2020

1

GENERAL INFORMATION ABOUT THE FUND

Name, Category and Type

Fund Name - RHB Asian Total Return Fund

Fund Category - Feeder Fund Fund Type - Income and growth Fund

Investment Objective, Policy and Strategy

Objective of the Fund

The Fund aims to provide stable current income and capital appreciation by

investing in debt securities issued by Asian corporations, financial institutions,

governments and their agencies (including money market instruments). The Asian

countries include but are not limited to Singapore, Malaysia, Thailand, Indonesia,

Philippines, Hong Kong SAR, South Korea, Taiwan, China, Australia, New

Zealand and Japan.

Strategy

The Fund invests principally in United Asian Bond Fund (“Target Fund”)

launched on 8 March 2000 (SGD Class). The Target Fund is a collective

investment scheme domiciled in Singapore investing in debt securities issued by

Asian corporations, Asian financial institutions, Asian government and their

agencies (including money market instruments) by generally maintaining an

exposure of at least 70% and above in such debt securities.

The Manager may, in consultation with the Trustee, replace the Target Fund with

another collective investment scheme with a similar objective if, in the Manager’s

opinion, the Target Fund no longer meets the Fund’s investment objective, or

when acting in the interest of the unit holders. However, unit holders’ approval

must be obtained.

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

At least 95% of

Net Asset Value

- Investments in the Target Fund

Up to 5% of

Net Asset Value

- Investments in liquid assets to provide for liquidity purpose

2

Performance Benchmark JP Morgan Asia Credit Index Total Return Composite (“JPMACI”) Permitted Investments The Fund may invest in local or foreign collective investment schemes (including

exchange traded funds), financial derivatives, liquid assets and any other

investment permitted by the Securities Commission Malaysia from time to time.

Distribution Policy

Annual distribution, subject to the availability of income at the end of the financial

period.

3

MANAGER’S REPORT

TARGET FUND PERFORMANCE

For the six months ended 30 June 2020, the target Fund registered a positive return

of 2.24% (in Singapore Dollar (“SGD”) terms), compared with a positive return of

6.10% (in SGD terms) in the benchmark JP Morgan Asia Credit Index (“JACI”)

Total Return Composite.

During the period under review, the target Fund’s underperformance versus its

benchmark was largely due to overweight positioning in non-investment grade as

the risk sentiment soured drastically. Despite invested in defensive non-investment

grade assets, the target fund manager were not spared by the indiscriminate sell-off

across all assets. Continuous redemption flows from the target fund had its

negative impact magnified as the credit market entered into a liquidity vacuum in

March, with bids only at distorted levels.

Specifically, trimming of the target fund overweight in non-investment grade

segment to fund the substantial redemptions had hurt the target fund drastically in

March. However, with the indiscriminate sell off faded and market refocused on

credit differentiation, the target fund was able to recoup some of the earlier losses.

The target fund enjoyed the three consecutive months of robust rallies by staying

invested in convicted defensive non-investment grade bonds. On credit sector

front, the target fund overweight in Real estate and Quasi sovereigns was offset by

the underweight in Sovereigns and technology, media, and telecom (“TMT”).

As at end June 2020, the target Fund held 61.10% in investment grade credit,

21.00% in non-investment grade credits, 13.03% in unit trust fund and 4.87% in

cash. Interest rate hedge was about 0% of NAV via United States Treasury

(“UST”) future contracts. The target Fund was mainly overweight in the

Consumer, Financials, Real Estate while mainly underweight in the Sovereign, Oil

& Gas and TMT sectors.

In terms of country allocation of the target fund, the allocation of the target fund

was 50.34% in China, 13.03% in Singapore, 12.54% in Indonesia, 10.24% in

Hong Kong, 2.61% in South Korea, 1.87% in Sri Lanka, 1.69% in Thailand,

1.20% in India, 1.61% in others and 4.87% in Cash.

FUND PERFORMANCE

During the period under review, the Fund has generated a return of 2.83%* as

compared with the benchmark gain of 7.13%*. The Fund is working to meet the

objective of provide stable current income and capital appreciation to its investors.

* Source: Lipper Investment Management (“Lipper IM”), 9 July 2020

4

ECONOMIC AND MARKET OUTLOOK

An unprecedented volatile first half in 2020 as clouded by tremendous stresses due

from a global pandemic. After a spectacular 2019 performance, markets continued

its climb higher during the first two months of 2020 before a cliff-like fall in

March. Asian credit market saw one of its worst performing month since the

2007/08 Global Financial Crisis. Fear was spreading like wild fire as the world

was fighting for its lives against this global coronavirus pandemic. Global

lockdowns and extreme expectations on economic impacts quickly gathered pace

and brought all investors involved in risk assets to its knees. To add woes, Saudi

Arabia’s decision to increase oil production following failure in talk with Russia

quickly sent oil prices to 30% lower and sent investors on flight to safety.

Fortunately, global central banks were seen swiftly stepping in with committed

and continuous easing measures to assist businesses, and unprecedented bond

purchases that helped investors to regain confidence in markets. For instance,

Unites States (“US”) Federal Reserve (“Fed”) announced emergency rate cuts of

50bps in early March and another 100bps later in less than two weeks later,

coupled with US Dollar (“USD”)700 billion worth of quantitative easing program

as pre-emptive measure to curb economic slowdown associated with this global

virus pandemic. Risk sentiment unexpectedly swung from a gloom and doom

scenario in March to one where only positivism was observed. Risk assets gained

positive momentum as we stepped into next few months. Adding to this optimism

were normal global production resumption, stabilization of COVID-19 cases

across the world, the confirmation of drug Remdesivir being able to aid in

COVID-19 treatment as well as lifting of lockdowns starting from May. Overall,

5-year US treasury yield fell massively by 140 basis points (“bps”) to 0.29% as at

end June 2020 from 1.69% as of end December 2019. For the same period, Asian

credit spreads widened substantially by 99 bps to 354bps from 255bps.

TARGET FUND STRATEGY & OUTLOOK

Moving ahead, the target fund manager are inclined to turn neutral on risk as a

market consolidation is likely after recent months of robust rallies. In the near

term, more focus will likely be placed on the potential negative headlines such as

more confirmation of this second wave of COVID-19 cases, more geopolitical

unrest between US and China, as well as the reduced attractiveness of bond

valuation alongside continuous new issuance supply. More negative headlines of

businesses in financial stresses or even business failures were also inevitable as the

global economy readjusts itself to adapt in the world of “new normal”. Having said

that, the expectation of a second half economic recovery will not change much as

we are again a step closer to a potential vaccine for this COVID-19. This robust

economic recovery in the second half of this year into next year remains the main

booster for investors to stay or get invested. Hence, any massive sell-off may be

5

seen as a window of opportunity for investors to gather quality high yielding bond

assets over the low underlying risk free US treasury yield.

Overall, the target fund manager broad strategy remains to advocate defensive

carry in 2020, need to stay calm and ride through this volatile period. Enormous

liquidity pumped into the global system, coupled with the anchored Asian demand

and manageable supply will be a favorable technical contributor towards the

returns for Asia Credit asset into 2020. All said, the target fund manager reiterate

the importance of credit differentiation and staying invested. The target fund

manager will continue to scrutinize issuers’ profile for adequacy, their abilities to

cope with the impacts during this challenging viral period and to evaluate the new

potential business strategies they devised as we move ahead into the “new normal”

world.

As at end June 2020, the average Asian credit spread stood at about 354bps which

was about 86bps wider than its three-year historical average of 268bps and about

88bps wider than its five-year historical average of 266bps. Overall, the target

fund manager continue to like the non-investment grade segment as this segment

offers a much higher carry but stay increasingly cautious on credit selection. The

target fund manager believe the need for yield remains while credit differentiation

is paramount. On the duration strategy, the target fund manager will be staying

broadly neutral to slightly short in overall duration. That said, the target fund

manager might engage in tactical duration positioning.

6

PERFORMANCE DATA

31.12.2019-

30.06.2020

%

Annual Total Returns

Financial Year Ended 31 December

2019

%

2018

%

2017

%

2016

%

2015

%

RHB Asian Total

Return Fund

- Capital Return 2.83 7.48 (1.29) (4.96) 7.42 23.86

- Income Return - - - - - -

- Total Return 2.83 7.48 (1.29) (4.96) 7.42 23.86

JPMACI 7.13 10.21 1.33 (4.57) 10.56 26.24

Average Annual Returns

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 Asian Total

Return Fund 2.84 1.57 4.96 4.74

JPMACI 9.25 4.74 7.67 8.65

7

Performance of RHB Asian Total Return Fund

for the period from 30 June 2010 to 30 June 2020

Cumulative Return Over The Period (%)

Source: Lipper IM, 9 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.

8

As at

30.06.2020

As At 31 December

Fund Size 2019 2018 2017

Net Asset Value (RM million)

15.13 17.60 19.79 31.40 Units In Circulation (million) 21.82 26.10 31.55 49.41

Net Asset Value Per Unit (RM) 0.6933 0.6742 0.6273 0.6355

01.01.2020-

30.06.2020

Financial Year Ended

31 December

Historical Data 2019 2018 2017

Unit Prices

NAV - Highest (RM) 0.7149 0.6918 0.6344 0.6795

- Lowest (RM) 0.6419 0.6257 0.5952 0.6355

Distribution and Unit Split - - - -

Others

Management Expense Ratio

(MER) (%) # 0.19 0.40 0.45 0.46

Portfolio Turnover Ratio (PTR)

(times) ## 0.08 0.15 0.22 0.20

#

##

The MER for the financial period was lower compared with previous

financial period due to lower expenses incurred for the financial period under

review.

The PTR for the financial period was lower compared with previous financial

period due to lesser investments activities for the financial period under

review.

DISTRIBUTION

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

Fund.

9

PORTFOLIO STRUCTURE

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

As at As at 31 December

30.06.2020 2019 2018 2017

% % % %

Sectors

Collective investment scheme 96.56 97.84 96.38 96.87

Liquid assets and other net current

assets 3.44 2.16 3.62 3.13

100.00 100.00 100.00 100.00

The asset allocation was reflective of the Fund’s investment strategy.

BREAKDOWN OF UNIT HOLDINGS BY SIZE

Account Holders No. Of Units Held*

Size of Holdings No. % (‘000) %

5,000 and below 2 11.11 7 0.03 5,001 to 10,000 - - - -

10,001 to 50,000 6 33.33 106 0.49

50,001 to 500,000 4 22.23 1,010 4.63

500,001 and above 6 33.33 20,695 94.85

Total 18 100.00 21,818 100.00

* 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.

10


UNAUDITED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

Note 30.06.2020 31.12.2019

RM RM

ASSETS

Investments 5 14,609,662 17,215,710

Deposits with licensed financial

institutions 6 420,473 392,182

Bank balances 6 49,498 32,378

Amount due from Manager

34,650 3,382

Other receivables

40,801 45,851

TOTAL ASSETS

15,155,084 17,689,503

LIABILITIES

Amount due to Manager

- 63,375

Accrued management fee

15,568 19,297

Amount due to Trustee

747 926

Other payables and accruals

9,084 10,450

TOTAL LIABILITIES

25,399 94,048

NET ASSET VALUE

15,129,685 17,595,455

EQUITY

Unitholders’ capital

1,958,833 4,862,002

Retained earnings

13,170,852 12,733,453

15,129,685 17,595,455

UNITS IN CIRCULATION (UNITS) 7 21,823,000 26,098,000

NET ASSET VALUE PER UNIT (RM)

0.6933 0.6742

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

11


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

INCOME

Distribution of income from

investments

399,395 466,888

Interest income from deposits with

licensed financial institutions

4,295 9,120

Net gain on investments 5 66,208 938,930

Net foreign currency exchange

(loss)/gain

(1,012) 3,423

468,886 1,418,361

EXPENSES

Management fee 8 (16,962) (27,577)

Trustee’s fee 9 (4,835) (5,782)

Audit fee

(3,361) (3,325)

Tax agent’s fee

(5,022) (1,900)

Other expenses

(1,307) (1,472)

(31,487) (40,056)

Net income before taxation

437,399 1,378,305

Taxation 10 - -

Net income after taxation

437,399 1,378,305

Net income after taxation is made up

of the following:

Realised amount

388,192 457,670

Unrealised amount 49,207 920,635

437,399 1,378,305


12


UNAUDITED STATEMENT OF CHANGES IN NET ASSET VALUE


Unitholders’

capital

Retained

earnings

Total net

asset value

RM RM RM

Balance as at 1 January 2019 8,456,391 11,337,061 19,793,452

Movement in net asset value:

Net income after taxation - 1,378,305 1,378,305

Creation of units arising from

applications 2,234,401 - 2,234,401

Cancellation of units (3,325,953) - (3,325,953)

Balance as at 30 June 2019 7,364,839 12,715,366 20,080,205

Balance as at 1 January 2020 4,862,002 12,733,453 17,595,455

Movement in net asset value:

Net income after taxation - 437,399 437,399

Creation of units arising from

applications 529,775 - 529,775

Cancellation of units (3,432,944) - (3,432,944)

Balance as at 30 June 2020 1,958,833 13,170,852 15,129,685


13


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 investment

2,667,726 2,062,180

Purchase of investment

- (1,405,280)

Income distribution received from

investments

398,417 466,888

Interest received from deposits with

licensed financial institutions

4,295 9,120

Management fee paid

(11,145) (20,427)

Trustee’s fee paid

(5,014) (5,795)

Payment for other fees and expenses

(11,056) (9,492)

Net cash generated from operating

activities

3,043,223 1,097,194

CASH FLOWS FROM

FINANCING ACTIVITIES

Cash proceeds from units created

498,507 2,210,358

Cash paid for units cancelled

(3,496,319) (3,293,863)

Net cash used in financing activities

(2,997,812) (1,083,505)

Net increase in cash and cash

equivalents

45,411 13,689

Cash and cash equivalents at the

beginning of the financial period

424,560 719,302

Cash and cash equivalents at the end

of the financial period

469,971 732,991


14


NOTES TO THE UNAUDITED FINANCIAL STATEMENTS


1 THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

The RHB Asian Total Return Fund (hereinafter referred to as “the Fund”) was

constituted pursuant to the execution of a Master deed (conventional funds) dated

12 June 2008 as amended via its supplemental master deed (conventional funds)

dated 25 August 2008, second supplemental master deed (conventional funds)

dated 12 December 2008, third supplemental master deed (conventional funds)

dated 19 June 2009, fifth supplemental master deed (conventional funds) dated 26

April 2010, sixth supplemental master deed (conventional funds) dated 28 June

2010, ninth supplemental master deed (conventional funds) dated 7 March 2012,

tenth supplemental master deed (conventional funds) dated 13 April 2012,

fifteenth supplemental master deed (conventional funds) dated 30 April 2013,

sixteenth supplemental master deed (conventional funds) dated 24 September

2013, seventeenth supplemental master deed (conventional funds) dated 2 March

2015, eighteenth supplemental master deed (conventional funds) dated 20 May

2015 and nineteenth supplemental master deed (conventional funds) dated 3

August 2015 (collectively referred to as “the Deeds”) between RHB Asset

Management Sdn Bhd (“the Manager”) and HSBC (Malaysia) Trustee Berhad

(“the Trustee”).

The Fund was launched on 26 February 2007 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 defined in the Deeds.

The Fund is a feeder fund that invests in the United Asian Bond Fund (“Target

Fund”), a collective investment scheme domiciled in Singapore that is managed by

UOB Asset Management Limited, Singapore.

When the investment in the Target Fund does not meet the objectives of the Fund,

or when acting in the interest of the unitholders, the Manager may choose to

replace it with other collective investment scheme with similar objectives, subject

to the approval from the unitholders.

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.

15

1 THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

(CONTINUED)

The main objective of the Fund is to provide stable current income and capital

appreciation by investing in debt securities issued by Asian corporations, financial

institutions, governments and their agencies (including money market

instruments). The Asian countries include but are not limited to Singapore,

Malaysia, Thailand, Indonesia, Philippines, Hong Kong SAR, South Korea,

Taiwan, China, Australia, New Zealand and Japan.

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.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation of the financial statements

The financial statements have been prepared under the historical cost convention,

as modified by revaluation of financial assets and financial liabilities (including

derivative instruments) at fair value through profit or loss, except those as

disclosed in 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

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.

16


(CONTINUED)

2.1 Basis of preparation of the financial statements (continued)

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

to published 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

- 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.

17


(CONTINUED)

2.1 Basis of preparation of the financial statements (continued)

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

to published standards for the first time for the financial period beginning on

1 January 2020: (continued)

Amendments to MFRS 101 and MFRS 108 ‘Definition of Material’

(effective 1 January 2020) clarify the definition of materiality and use a

consistent definition throughout MFRSs and the Conceptual

Framework for Financial Reporting.

The revised Framework and adoption of the amendments to published

standards are not expected to give rise to any material impact on the

financial statements of the Fund.

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.

18


(CONTINUED)

2.2 Financial assets (continued)

Classification (continued)

The Fund classifies cash and cash equivalents, amount due from Manager and

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

contractual cash flows consisting of the amount outstanding.

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.

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.

Distribution income from financial assets at fair value through profit or loss is

recognised in the statement of income and expenses within distribution income

when the Fund’s right to receive payments is established.

Collective investment scheme is valued based on the last published net asset value

per unit or share of such collective investment scheme or, if unavailable, on the

average of the last published buying price and the last published selling price of

such unit or share (excluding any sales charge included in such selling price).

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.

19


(CONTINUED)

2.2 Financial assets (continued)

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.

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.

20


(CONTINUED)

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 Manager, accrued

management fee, amount due to Trustee and other payables and accruals are

recognised initially at fair value plus directly attributable transaction cost and

subsequently measured at amortised cost using the effective interest method.

A financial liability is derecognised when the obligation under the liability is

extinguished. Gains and losses are recognised in statement of income and expenses

when the liabilities are derecognised, and through the amortisation process.

2.4 Unitholders’ capital

The unitholders’ contributions to the Fund meet the criteria of the definition of

puttable instruments to be classified as equity instruments under MFRS 132

“Financial Instruments: Presentation”. 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.

21


(CONTINUED)

2.5 Income recognition

Distribution of income from collective investment scheme is recognised when the

Fund’s right to receive payment is established. Distribution of income is received

from financial assets measured at FVTPL.

Interest income from deposits with licensed financial institutions are recognised on

an accrual basis using the effective interest method.

Interest income is calculated by applying the effective interest rate to the gross

carrying amount of a financial asset except for financial assets that subsequently

become credit-impaired. For credit-impaired financial assets, the effective interest

rate is applied to the net carrying amount of the financial assets (after deduction of

the loss allowance).

Realised gain or loss on sale of collective investment scheme is arrived at after

accounting for cost of investments, determined on the weighted average cost

method.

Net income or loss is the total of income less expenses.

2.6 Taxation

Current tax expense is determined according to Malaysian tax laws and includes all

taxes based upon the taxable income earned during the financial period.

2.7 Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise

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

an insignificant risk of changes in value.

2.8 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.

22


(CONTINUED)

2.8 Presentation and functional currency (continued)

Due to mixed factors in determining the functional currency of the Fund, the

Manager has used its judgement to determine the functional currency that most

faithfully represents the economic effects of the underlying transactions, events

and conditions and have determined the functional currency to be in RM primarily

due to the following factors:

Part of the Fund’s cash is denominated in RM for the purpose of making

settlement of the creation and cancellation.

The Fund’s units are denominated in RM.

The Fund’s significant expenses are denominated in RM.

2.9 Foreign currency translation

Foreign currency transactions in the Fund are accounted for at exchange rates

prevailing at the transaction dates. Foreign currency monetary assets and liabilities

are translated at exchange rates prevailing at the reporting date. Exchange

differences arising from the settlement of foreign currency transactions and from

the translation of foreign currency monetary assets and liabilities are recognised in

statement of income and expenses.

3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks, which include market risk, price risk,

currency risk, interest rate risk, liquidity risk, credit 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

Market risk is a risk that arises when the prices of investments in the market place

are affected by circumstances such as general market or economic events. These

circumstances, which may be a local or global event, can affect a local market

where the Target Fund is invested in or global markets and subsequently, the value

of the Target Fund’s investments.

23


(CONTINUED)

Price risk

Price risk is the risk that the fair value of the investments of the Fund will fluctuate

because of changes in market prices (other than these arising from interest rate

risk).

The Fund is exposed to collective investments scheme price risk (other than those

arising from interest rate risk) for its investments of RM14,609,662 (31.12.2019:

RM17,215,710).

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

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

on statement of income and expenses and net asset value is +/(-) RM730,483

(31.12.2019: RM860,786).

Currency risk

The Fund invests in the Target Fund which is denominated in Singapore Dollar

(“SGD”). Fluctuations in foreign exchange rate between SGD and Ringgit

Malaysia will affect the value of the Fund’s foreign investments when converted to

local currency and subsequently the value of unitholders’ investment. As such, the

performance of the Fund will also be affected by the movements in the exchange

rate between SGD and Ringgit Malaysia.

The sensitivity analysis is based on the assumption that the foreign exchange rate

fluctuates by +/(-) 5% with all other variable remain constant, the impact on

statement of income and expenses and net asset value is +/(-) RM732,523

(31.12.2019: RM863,078).

Investments Receivables Total

RM RM RM

30.06.2020

Singapore Dollar 14,609,662

40,801

14,650,463

Investments Receivables Total

RM RM RM

30.11.2019

Singapore Dollar 17,215,710

45,851

17,261,561

24


(CONTINUED)

Interest rate risk

Interest rate risk is the risk that the cost or the value of the financial instruments

will fluctuate due to changes in market interest rates. The Fund’s exposure to the

interest rate risk is mainly from short term placements with licensed financial

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

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

Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in meeting its

financial obligations.

The Fund invests principally in the Target Fund. The liquidity risk that exists at the

Fund level is associated with the inability of the Target Fund to meet large

redemption requests in a timely manner. This is related to the risk of substantial

redemptions.

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

Accrued management fee 15,568 -

Amount due to Trustee 747 -

Other payables and accruals - 9,084

16,315 9,084

D

31.12.2019

Amount due to Manager 63,375

-

Accrued management fee 19,297

-

Amount due to Trustee 926

-

Other payables and accruals -

10,450

83,598

10,450

25


(CONTINUED)

Credit risk

Credit risk refers to the possibility that the issuer of a particular investment will not

be able to make timely or full payments of principal or income due on that

investment. The risk arising from placements of deposits in licensed financial

institutions is managed by ensuring that the Fund will only place deposits in

reputable licensed financial institutions. The 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 concentrations of the Fund:

Cash and

cash

equivalents

RM

Other

financial

assets*

RM

Total

RM

30.06.2020

Financial institutions:

AAA 469,971 - 469,971

Others - 75,451 75,451

469,971 75,451 545,422

30.06.2019

Financial institutions:

AAA 32,378 - 32,378

AA3 392,182 - 392,182

Others - 49,233 49,233

424,560 49,233 473,793

* Comprise amount due from Manager and other receivables.

26


(CONTINUED)

Capital risk

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

of RM1,958,833 (31.12.2019: RM4,862,002) and retained earnings of

RM13,170,852 (31.12.2019: RM12,733,453). 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.

27

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:

- Collective investment scheme

- foreign 14,609,662 - - 14,609,662

31.12.2019

Investments:

- Collective investment scheme

- foreign 17,215,710 - - 17,215,710

28

4 FAIR VALUE ESTIMATION (CONTINUED)

Investments in collective investment scheme, i.e. unit trust fund whose values are

based on published prices in active markets is 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:

- Collective investment scheme - foreign 14,609,662 17,215,710

01.01.2020 -

30.06.2020

01.01.2019 -

30.06.2019

RM RM

Net gain on investments comprised:

- Net realised gain on sale of investments 17,000 18,295

- Net unrealised gain on changes in fair value 49,208 920,635

66,208 938,930

Investments as at 30 June 2020 are as follows:

Name of Counter Quantity Cost Fair Value

% of

Net Asset

Value

RM RM %

COLLECTIVE INVESTMENT

SCHEME - FOREIGN

SINGAPORE

United Asian Bond Fund 2,746,402 14,383,426 14,609,662 96.56

29

5 INVESTMENTS (CONTINUED)

Investments as at 31 December 2019 are as follows:

Name of Counter Quantity Cost Fair Value

% of

Net Asset

Value

RM RM %

COLLECTIVE INVESTMENT

SCHEME - FOREIGN

SINGAPORE

United Asian Bond Fund 3,253,402 17,038,682 17,215,710 97.84

6 CASH AND CASH EQUIVALENTS

Cash and cash equivalent comprise:

30.06.2020 31.12.2019

RM RM

Deposits with licensed financial institutions 420,473 392,182

Bank balances 49,498 32,378

469,971 424,560

7 UNITS IN CIRCULATION

30.06.2020 31.12.2019

Units Units

At the beginning of the financial period/year 26,098,000 31,551,000

Creation of units arising from applications during

the financial period/year 773,000 5,878,000

Cancellation of units during the financial

period/year (5,048,000) (11,331,000)

At the end of the financial period/year 21,823,000 26,098,000

30

8 MANAGEMENT FEE

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

statements is 1.25% (01.01.2019 – 30.06.2019: 1.25%) per annum based on the net

asset value of the Fund, calculated on a daily basis for the financial period. As the

Fund invests in the Target Fund, the management fee charged by the Target Fund

is fully refunded to this Fund. There is no double charging of management fee to

the Fund.

9 TRUSTEE’S FEE

In accordance with the 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.

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 -

-

(b) Numerical reconciliation of income tax expense

The numerical reconciliation between the net 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 income before taxation 437,399

1,378,305

Tax calculated at statutory income tax rate of 24% 104,976

330,794

Tax effects of:

- Income not subject to tax (112,533)

(340,407)

- Expenses not deductible for tax purposes 2,669

2,159

- Restriction on tax deductible expenses 4,888

7,454

Tax expense -

-

31

11 MANAGEMENT EXPENSE RATIO (“MER”)

01.01.2020 -

30.06.2020

01.01.2019 -

30.06.2019

%

%

MER 0.19 0.21

The MER ratio is calculated based on total expenses 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) 0.08 0.09

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 5,160 3,577

5,506

3,712

RHB Capital Nominees

(Tempatan) Sdn Bhd 2,213,174 1,534,394 2,502,465 1,687,162

The units are held beneficially by the Manager for booking purposes. The Manager

is of the opinion that all transactions with the related parties have been entered into

in the normal course of business at agreed terms between the related parties. The units held by RHB Capital Nominees (Tempatan) Sdn Bhd, a wholly owned

subsidiary of ultimate holding company of the Manager, are under nominees

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

the Manager.

32

13 UNITS HELD BY THE MANAGER AND PARTIES RELATED TO

THE MANAGER (CONTINUED)

The holding company and the ultimate holding company of the Manager is RHB

Investment Bank Berhad and RHB Bank Berhad respectively. The Manager treats

RHB Bank Berhad group of companies including RHB Investment Bank Berhad

and its subsidiaries as related parties.

14 TRANSACTIONS BY THE FUND

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

as follows:

Fund Manager

Value of

trades

Percentage

of total

trades

Brokerage

fees

Percentage

of total

brokerage

fees

RM % RM %

UOB Asset Management

Ltd, Singapore 2,672,256 100.00 - -

Details of transactions by the Fund for the financial period ended 31 December

2019 are as follows:

Fund Manager

Value of

trades

Percentage

of total

trades

Brokerage

fees

Percentage

of total

brokerage

fees

RM % RM %

UOB Asset Management

Ltd, Singapore 5,909,655 100.00 - -

33

15 FINANCIAL INSTRUMENTS BY CATEGORIES

30.06.2020 31.12.2019

RM

RM

Financial assets

Financial assets at FVTPL

• Collective investment scheme 14,609,662 17,215,710

Financial assets at amortised cost

• Deposits with licensed financial

institutions 420,473 392,182

• Bank balances 49,498 32,378

• Amount due from Manager 34,650 3,382

• Other receivables 40,801 45,851

545,422 473,793

Financial liabilities

Financial liabilities at amortised cost

• Amount due to Manager - 63,375

• Accrued management fee 15,568 19,297

• Amount due to Trustee 747 926

• Other payables and accruals 9,084 10,450

25,399 94,048

16. SIGNIFICANT EVENT DURING 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.

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

to achieve the Fund’s objective.

34

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

35

TRUSTEE’S REPORT TO THE UNITHOLDERS OF


We have acted as Trustee of RHB Asian Total Return Fund (“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

36

CORPORATE INFORMATION

MANAGER

RHB Asset Management Sdn Bhd

REGISTERED OFFICE

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

PRINCIPAL AND BUSINESS OFFICE

Level 8, Tower Two & Three, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur

Email address: [email protected]

Tel: 03-9205 8000

Fax: 03-9205 8100

Website: 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)

37

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: 07-358 3581

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

38

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,

10300 Georgetown, 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

39

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

AmBank Berhad

Areca Capital Sdn Bhd

CIMB Investment Bank Berhad

Genexus Advisory Sdn Bhd

HSBC Bank (Malaysia) Berhad

iFast Capital Sdn Bhd

OCBC Bank (Malaysia) Berhad

Phillip Mutual Berhad

United Overseas Bank (Malaysia) Berhad

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