CONTENTS FUND INFORMATION 1 INVESTMENT OBJECTIVE, POLICY AND STRATEGY 1 MANAGER S OVERVIEW 1

Transcription

1 CONTENTS FUND INFOATION 1 INVESTMENT OBJECTIVE, POLICY AND STRATEGY 1 MANAGER S OVERVIEW 1 MANAGER S REPORT 2-6 Equity Market Review Equity Market Outlook & Strategy Portfolio Structure Performance of Fund and Benchmark Breakdown of Unitholdings UNAUDITED FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS 7-31 Statement of Assets and Liabilities Income Statement Statement of Changes in Net Assets Attributable To Unitholders Cash Flow Statement Notes to the Financial Statements REBATES AND SOFT COMMISSIONS 32 STATEMENT BY MANAGER 32 TRUSTEE S REPORT 32 CORPORATE INFOATION 33 Page

2 FUND INFOATION Period of Trust : Subject to occurrence of any events as stated under Clause of the Guidelines on Unit Trust Funds Fund Category : Equity Fund Type : Capital Growth Relevant Benchmark : Kuala Lumpur Composite Index ( KLCI ) Distribution Policy : Subject to the availability of income at the end of the financial year INVESTMENT OBJECTIVE, POLICY AND STRATEGY MANAGER S OVERVIEW Investment Objective To achieve long term growth through capital appreciation with all income, including profits on realisation of investments, being automatically reinvested for its compounding effect. Investment Policy The main objective of the Investment Policy is to implement a plan of action to achieve the highest probability of investment returns from the Fund s portfolio of securities. Investment Strategy The Fund invests primarily in Malaysian public listed companies with strong growth potential. The Manager utilises a strategy that seeks attractively priced companies in undervalued sectors, or in sectors that have strong upward stock price momentum, which demonstrate strong increases in earnings per share and continue to strengthen their fundamental capabilities and competitive positions, amongst others. We are pleased to present to you the Interim Report of RHB Capital Fund incorporating the Unaudited Financial Statements for the Six-Month Financial Period Ended 31 October During the financial period under review, the Fund registered an investment income of 1,991,220 after accounting for 545,791 net realised loss on sale of investments. The Fund registered a loss of 25.97%* compared to a loss of 32.52%* in the KLCI. The total return since inception was 40.83%* as opposed to the KLCI s loss of 10.60%*. Based on the unaudited financial statements, the Net Asset Value per unit of the Fund decreased 27.90% from per unit as at 30 April 2008 to per unit on 31 October The number of units in circulation decreased from million units as at 30 April 2008 to million units as at 31 October The Fund has declared a gross distribution of 2.00 sen per unit for all the unitholders on 13 June As a result of the distribution, the Net Asset Value per unit has dropped from to The Fund has fulfilled its investment objective by investing primarily in Malaysian public listed companies with strong growth potential. * Source: Lipper Hindsight 1

3 MANAGER S REPORT Equity Market Review 1 May 2008 to 31 October 2008 Global equity markets remained volatile for the sixmonth period ended 31 October 2008 as the subprime turmoil faced with further writedowns in the US as well as Europe, coupled with the rollercoaster performance of crude oil and commodity prices. Sentiments remained cautious as concerns over global inflation which emerged earlier gave way to fears of a global credit crunch with the situation in the US and Europe worsening as reputable financial institutions such as Lehman Brothers, AIG and Fortis were in dire straits. Central banks globally, which initially were on a tightening monetary stance, soon changed their tune, as apprehension over a global recession gave rise. The US Federal Reserve attempted to alleviate the situation by proposing a US$700 billion bailout plan which was finally approved after being rejected earlier by US lawmakers. Domestically, the Kuala Lumpur Composite Index ( KLCI ) was not spared from the heightened volatility and higher risk aversion that global equity markets were experiencing. Further dampening sentiments was the changing political landscape that gave rise after the 12 th General Election. As sentiments remained subdued with a lack of fresh leads insight coupled with downgrades by various research houses, the KLCI recorded a loss of 32.52% for the period under review. The KLCI started the review period on a slightly stronger footing, recovering from the sharp plunge in the month of March after the 12 th General Election to reach the 1,300-point level in early May. However, the local barometer soon headed south on the back of negative performances on Wall Street as well as soaring crude oil prices, which reached a high of US135/barrel in May. Investor sentiments were further dampened by inflationary concerns as the Government announced a significant hike in petrol prices and electricity tariffs in June Despite some reprieve on the inflationary front with crude oil prices retreating after hitting a high of US$145/barrel in July 2008, investors were treated to another shock as the repercussions of the subprime turmoil deepened into a credit crunch with Lehman Brothers filing for bankruptcy and the Federal Reserve having to rescue AIG. The bailout plan formulated by the US Federal Reserve failed to boost sentiments as US lawmakers rejected it at the end of September, which caused a slight panic in financial markets, before voting to approve the amended plan a few days later in early October Investor sentiments continued to take a beating in October with a meltdown on global equity markets as concerns were now focused on slowing global economic growth and the possibility of a global recession. The KLCI continued to head south, in tandem with global equity markets, touching an intraday low of points on 28 October 2008 before ending the review period at points, losing points or 32.52%. Equity Market Outlook & Strategy Domestically, economic growth is expected to come in within expectations for 2008, underpinned by domestic demand as well as rising intra-asian trade, particularly to China, which will provide some cushion to the economy as exports continue to be soft given the current economic outlook in the US. However, Gross Domestic Product ( GDP ) growth is expected to be slower in 2H08 on the back of the recent hike in petrol prices and electricity tariffs which have given rise to inflationary pressures as well as softer global economic conditions. The Government has since lowered its previous official projection of the country s economy from 5.7% to 5.0% for 2008 and from 5.4% to 3.5% for Other economic fundamentals remain strong with rising foreign exchange reserves and ample liquidity in the system. On the interest rate front, Bank Negara Malaysia ( BNM ) is expected to keep the Overnight Policy Rate ( OPR ) stable at 3.5% with the flexibility to manoeuvre should the need arise. Despite reprieve on the inflationary front with crude oil prices retreating to below US$100/barrel, concerns are now focused on economic growth. Corporate earnings such as those of plantation companies have already been downgraded as commodity prices have declined and uncertainty continues to linger with the gloomy outlook especially in the US and Europe. 2

4 Albeit valuations falling to attractive levels, investor sentiments will continue to remain fragile with higher risk aversion as the jury is still out on whether the end of the subprime saga is near. Against this backdrop, we expect the stock market to remain volatile with a downside bias in the short term, driven by developments in the US and global financial markets as well as the changing domestic political landscape. As such, we remain cautiously optimistic on the local bourse, focusing on fundamentally sound stocks with good earnings visibility, strong cashflows and sound management. Stocks with attractive dividend yields also continue to remain on our radar screen in uncertain times such as these. From a sector perspective, we continue to favour sectors with strong earnings visibility and lower correlation to global macroeconomic conditions, given the heightened external risks. 3

5 PORTFOLIO STRUCTURE PORTFOLIO STRUCTURE AS AT 31 OCTOBER 2008 As at 31 October 2008, % of the Fund has been invested in equities, 3.20% in Collective Investment Scheme-RHB Islamic Cash Management Fund & RHB Cash Management Fund and the balance of % was held in liquid assets and other net current assets. As compared to 30 April 2008, the Fund invested 82.64% in equities and the balance of 17.36% in liquid assets and other net current assets. As at 31 October 2008, the top five holdings in terms of market value in the portfolio were Sime Darby Berhad, MISC Berhad, TM International Berhad, Malayan Banking Berhad and Tenaga Nasional Berhad. The changes in core holdings for the period included the addition of MISC Berhad and Tenaga Nasional Berhad replacing IOI Corporation Berhad, and Bumiputra-Commerce Holdings Berhad. The Fund s detailed holdings in the various sectors are shown below:- Collective Investment Schemes 3.20% Warrants 0.04% Liquid assets and other net current assets 30.38% Second Board 2.44% Consumer Products 2.87% Mesdaq 1.61% Finance 10.91% Trading/Services 35.35% Industrial Products 0.62% Properties 0.72% Construction 2.81% Plantations 6.22% Infrastructure Project Companies 2.83% PERFOANCE OF FUND AND BENCHMARK Total Return** Six-Month % One- Year % Two- Year % Three- Year % Four-Year % Five-Year % Since Inception (12 April 1995) % RHB Capital Fund (25.97) (31.64) (7.31) 0.13 (0.46) (1.75) KLCI (32.52) (38.91) (12.62) (5.18) (10.60) Average Annual Return** Six-Month % One- Year % Two- Year % Three- Year % Four-Year % Five-Year % Since Inception (12 April 1995) % RHB Capital Fund (44.93) (31.57) (3.72) 0.04 (0.12) (0.35) 2.56 KLCI (54.18) (38.83) (6.51) (1.75) (0.82) Source: Lipper Hindsight ** The above Total Return and Average Annual Return are indicative returns based on daily Net Asset Value of a unit since inception. Notes: Unit prices and returns may fluctuate, past performance figures shown are not necessarily indicative of future performance. 4

6 Other Performance Data Performance Data 30 April April April 2008 Portfolio Composition (%) Trading/Services Consumer Products Industrial Products Construction Plantations Properties Finance Infrastructure Project Companies Warrants Mesdaq Local Loan Stocks, Notes and Bonds Second Board Other Liquid assets and other net current assets Total Portfolio Holdings Net Asset Value () 173,484, ,199, ,567,002 Units in Circulation 220,250, ,995, ,111,000 Net Asset Value Per Unit () Net Asset Value Per Unit Highest () Net Asset Value Per Unit Lowest () Management Expense Ratio (%) Portfolio Turnover (Times) # Total Return (%) (1.26)** Return on Capital (%) (1.26)** Return on Income (%) - - -** Kuala Lumpur Composite Index (KLCI) (%) (3.21)** The Management Expense Ratio remain unchanged for the financial year ended 30 April # The lower portfolio turnover ratio reflected the cautious stance taken for most part of the financial year given the softer outlook for the global economy as well as rising volatility in the equity market. Source: Normandy Research. ** Source: Lipper Hindsight. 5

7 BREAKDOWN OF UNITHOLDINGS AS AT 31 OCTOBER 2008 Size of Holdings Unitholders Unitholdings Number % ( 000) units % 5,000 and below , ,001 to 10, , ,001 to 50, , ,001 to 500, , ,001 and above , Total* 2, , *Note: Including Manager's Stock. INTERIM DISTRIBUTION DECLARED ON 13 JUNE SEN PER UNIT Impact of NAV arising from Interim Distribution for the Six-Month Financial Period Ended 31 May 2008 Sen Per Unit Net asset value per unit before interim distribution Less: Interim distribution of 2.00 sen gross per unit (net: 1.23 sen per unit) 1.23 Net asset value per unit after interim distribution

8 UNAUDITED FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AS AT 31 OCTOBER 2008 (UNAUDITED) INVESTMENTS Note Quoted investments 6 66,722, ,754,473 Collective investment schemes 7 3,217,670 - LIQUID ASSETS 69,940, ,754,473 Deposits with licensed financial institutions 8 28,859,905 26,739,788 Bank balance 10,172 21,207 OTHER ASSETS 28,870,077 26,760,995 Amount due from stockbrokers 1,286, ,344 Amount due from Manager 12,334 - Interest receivable 12,166 6,379 Dividend receivable 134, ,340 Tax recoverable 374, ,335 Other receivable 1,014-1,820,878 1,783,398 TOTAL ASSETS 100,631, ,298,866 LIABILITIES Amount due to stockbrokers - 2,498,498 Amount due to Manager 150, ,986 Amount due to Trustee 5,409 7,199 Other payables and accruals 9 20,192 37,181 LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS) 176,281 2,731,864 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS ,455, ,567,002 REPRESENTED BY: Fair value of outstanding units ,455, ,567,002 Units in circulation ,898, ,111,000 Net asset value per unit (ex-distribution) The notes on pages 11 to 31 form an integral part of these financial statements. 7

9 INCOME STATEMENT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2008 (UNAUDITED) INCOME Note to to Dividend income 1,989,738 2,706,327 Interest income from deposits with licensed financial institutions 547, ,664 Net realised (loss)/gain on sale of investments (545,791) 5,935,884 EXPENSES 1,991,220 8,983,875 Management fee 11 (972,182) (1,121,437) Trustee s fee 12 (38,997) (44,858) Audit fee (4,900) (4,900) Tax agent s fee (2,000) (2,000) Administrative expenses (9,844) (17,470) (1,027,923) (1,190,665) Net income before finance cost and taxation 963,297 7,793,210 FINANCE COST Net distribution 13 (1,803,259) - Net (loss)/income before taxation (839,962) 7,793,210 Taxation 14 (330,700) (502,300) (Decrease)/increase in net assets attributable to unitholders (1,170,662) 7,290,910 Net (loss)/income after taxation is made up as follows: Realised amount (1,170,662) 7,290,910 The notes on pages 11 to 31 form an integral part of these financial statements. 8

10 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2008 (UNAUDITED) to to Net assets attributable to unitholders at the beginning of the financial period 148,567, ,199,763 Movement due to units created and released during the financial period: Amounts on creation of units 1,855,359 17,500,552 Amounts on release of units (9,897,613) (17,307,022) Net (decrease)/increase in net assets attributable to unitholders during the financial period: 140,524, ,393,293 Net (loss)/income for the financial period (1,170,662) 7,290,910 Net change in fair value reserve (38,899,034) 3,286,817 Net assets attributable to unitholders at the end of the financial period 100,455, ,971,020 The notes on pages 11 to 31 form an integral part of these financial statements. 9

11 CASH FLOW STATEMENT FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2008 (UNAUDITED) CASH FLOW FROM INVESTING AND OPERATING ACTIVITIES to to Proceeds from sale of investments 49,731,860 51,718,517 Purchase of investments (39,270,694) (45,392,783) Dividends received 2,050,300 1,834,571 Interest received from deposits with licensed financial institutions 541, ,142 Management fee paid (1,017,940) (1,116,352) Trustee s fee paid (40,787) (44,654) Payment for other fees and expenses (33,731) (56,822) Net cash inflow from investing and operating activities 11,960,494 7,283,619 CASH FLOW FROM FINANCING ACTIVITIES Cash proceeds from units created 1,843,025 16,275,068 Payment for release of units (9,891,178) (18,063,296) Payment for income distribution (1,803,259) - Net cash outflow from financing activities (9,851,412) (1,788,228) Net increase in cash and cash equivalents 2,109,082 5,495,391 Cash and cash equivalents at the beginning of the financial period 26,760,995 17,487,856 Cash and cash equivalents at the end of the financial period 28,870,077 22,983,247 Cash and cash equivalents comprise: Deposits with licensed financial institutions 28,859,905 22,907,741 Bank balance 10,172 75,506 28,870,077 22,983,247 The notes on pages 11 to 31 form an integral part of these financial statements. 10

12 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - 31 OCTOBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES The Unit Trust Fund (hereinafter referred to as the Fund ) was constituted under the name RHB Capital Fund pursuant to the execution of the Deed dated 27 March 1995 and Supplemental Deeds dated 1 July 1997, 3 September 1998, 10 August 2001 and 25 January 2008 between RHB Investment Management Sdn Bhd* ( the Manager ), Mayban Trustees Berhad ( the Trustee ) and the registered Unitholders of the Fund. Pursuant to this, the Manager on 12 June 2008 had registered and lodged with the Securities Commission ( SC ) a Master Deed that also covers the Fund. This Master Deed shall hereafter supersede all existing Deeds relating to the Fund. The Fund commenced operations on 12 April 1995 and will continue its operations until terminated by the Trustee as provided under Clause 4 of the Master Deed. The principal activity of the Fund is to invest in Permitted Investments as defined under Item 15 of Schedule 2 of the Master Deed, which comprises securities (including unlisted securities in Malaysia), other collective investment schemes, futures contracts, securities lending, liquid assets and any other forms of investment as may be approved by the relevant authorities from time to time. All investments will be subject to the SC Guidelines on Unit Trust Funds, SC requirements, the Master Deed, except where exemptions or variations have been approved by the SC, internal policies and procedures and objective of the Fund. The main objective of the Fund is to achieve long-term growth through capital appreciation with all income including profits on realisation of investments, being automatically reinvested for its compounding effect. The Manager, a company incorporated in Malaysia, is a wholly-owned subsidiary of RHB Investment Bank Berhad, effective 6 January Its principal activities include rendering of investment management services to institutions, trust funds, pension and retirement funds, insurance funds, private clients and management of unit trust funds. * With effect from 1 January 2008, the entire assets and liabilities of the unit trust business of RHB Unit Trust Management Berhad ( RHBUTM ) was transferred to RHB Investment Management Sdn Bhd ( RHBIM ) by way of a Business Transfer Agreement and a Vesting Order. Accordingly, RHBIM assumed the role of the Manager for all the unit trust funds managed by RHBUTM prior to 1 January FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks, which include single issuer risk, fund management risk, interest rate risk, liquidity risk and credit risk. Financial risk management is carried out through internal control process adopted by the Manager and adherence to the investment restrictions as stipulated in the SC Guidelines on Unit Trust Funds. Single issuer risk The value of Fund s holding in the share capital of any single issuer must not exceed 10% of the net asset value. The Fund is also restricted to investment in transferable securities and money market instruments issued by any issuers of not more than 15% of its net asset value. Furthermore, the Fund is restricted to invest in transferable securities and money market instruments issued by any group of companies of not more than 20% of its net asset value. Under such restrictions, the exposure risk to the securities of any single issuer or any group of companies is minimised. 11

13 2 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Fund management risk The selection of securities which make up the investments of the Fund is subjective and the securities selected may perform better or worse than the overall market. This risk is managed by having a professional and experienced Fund Manager who has access to research materials and independent market analysis to enable fully informed decisions in investments to be made. Interest rate risk As at the date of the Statement of Assets and Liabilities, all the financial assets and financial liabilities are noninterest bearing except for deposits with licensed financial institutions of 28,859,905 ( : 26,739,788), which have maturity of less than one year. Liquidity risk The Fund maintains sufficient level of liquid assets, after consultation with the Trustee, to meet anticipated payments and cancellations of units by unit holders. Liquid assets comprise cash, deposits with licensed financial institutions and other instruments which are capable of being converted into cash within 7 days. Credit risk Credit risk refers to the ability of an issuer or a counter party to make timely payments of interest, principals and proceeds from realisation of investments. The credit risk arising from placements of deposits in licensed financial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed financial institutions. For amount due from stockbrokers, the settlement terms are governed by the relevant rules and regulations as prescribed by the Bursa Malaysia Securities Berhad ( Bursa Securities ). The settlement terms of the proceeds from the creation of units receivable from the Manager are governed by the SC Guidelines on Unit Trust Funds. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Basis of preparation of the financial statements The financial statements of the Fund have been prepared under the historical cost convention in accordance with the Financial Reporting Standards ( FRS ), the Malaysian Accounting Standards Board ( MASB ) Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the SC Guidelines on Unit Trust Funds. (i) The new accounting standards that are effective for the Fund s financial period beginning on or after 1 July 2007, are as follows: FRS 112 Income Taxes FRS 124 Related Party Disclosures Revised standards that have no significant changes compared to the original standards: FRS 107 FRS 118 FRS 137 Cash Flow Statements Revenue Provisions, Contingent Liabilities and Contingent Assets All changes in accounting policies have been made in accordance with the transitional provisions in the respective standards. The new standards adopted by the Fund have been applied retrospectively. The adoption of the new standards did not have a material impact on the financial statements of the Fund. 12

14 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.1 Basis of preparation of the financial statements (continued) (ii) The new standard that has been issued which is relevant to the Fund and has not been early adopted is: FRS 139 Financial Instruments: Recognition and Measurement (effective for accounting period beginning on or after 1 January 2010). The new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Fund will apply this standard when effective. 3.2 Creation and cancellation of units The Fund issues cancellable units, which are cancelled at the holder s option and are classified as financial liability. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding units are carried at the redemption amount that is payable at the balance sheet date if the holder exercises the right to put the unit back to the Fund. Units are created and cancelled at the holder s option 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 is calculated by dividing the net assets attributable to unitholders with the total number of outstanding units. In accordance with the SC Guidelines on Unit Trust Funds, investment positions are valued based on the last traded market price for the purpose of determining the net asset value per unit for creations and cancellations. 3.3 Investments Investments are recorded at cost, which include transaction costs, and subsequently revalued to their fair values as at the date of the statement of assets and liabilities. In accordance with the Master Deed, quoted investments are valued in the financial statements at the last done market price quoted on the Bursa Securities as at the date of the statement of assets and liabilities. In accordance with the Master Deed, collective investment schemes are valued based on the last published net asset value per unit or share of such collective investment schemes at the date of statement of assets and liabilities. Surplus or deficit on revaluation is transferred to the fair value reserve included in net assets attributable to unitholders and is not distributable. 3.4 Proceeds and payments on creation and cancellation of units The net asset value per unit is computed for each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as financial liability in the Statement of Assets and Liabilities and are stated at fair value representing the price at which unitholders can redeem the units from the Fund. 3.5 Finance cost Proposed distributions to holders of redeemable units are recognised in the income statement upon approval by the Board of Directors of the Manager. The distribution to the unitholders is recognised as finance cost in the income statement. 13

15 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.6 Income recognition Interest income from deposits with financial institutions is recognised on an accrual basis. Dividend income from the Malaysian quoted investments is recognised on the ex-dividend date. Realised gain and loss on sale of quoted investments is arrived at after accounting for cost of investments, determined on the weighted average cost method. 3.7 Taxation Current tax expense is determined according to Malaysian tax laws and also in accordance with the tax laws of the jurisdictions in which the Fund is invested in. 3.8 Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise cash and bank balances and deposits that are highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 3.9 Amount due from/to stockbrokers Amount due from/to stockbrokers is carried at approved transaction amount as stated in contract notes Presentation and functional currency The financial statements are presented in Ringgit Malaysia, which is the Fund s functional and presentation currency Segmental information A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments Financial instruments Financial instruments comprise financial assets and financial liabilities. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm s length transaction. The information presented herein represents the estimates of fair values as at the date of the statement of assets and liabilities. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future each cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. 14

16 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.12 Financial instruments (continued) A range of methodologies and assumptions have been used in deriving the fair values of the Fund s financial instruments at the date of the statement of assets and liabilities. The total fair value of each financial instrument is not materially different from the total carrying value. The fair values are based on the following methodologies and assumptions: (a) Short term deposits For deposits and placements with financial institutions with maturities of less than three months, the carrying value is a reasonable estimate of fair value. For deposits and placements with maturities of three months and above, the estimated fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity. (b) Quoted investments The estimated fair value is based on quoted and observable market prices. (c) Collective investment schemes The estimated fair value is based on the published net asset value per unit. (d) Other short term financial instruments Other short term financial instruments comprise interest receivable, amount due from/to Manager, accrued/rebate management fee, amount due to Trustee and payables and accruals. The carrying values of the assets and liabilities are assumed to approximate their fair values due to the short tenure of less than one year. 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES The preparation of financial statements in conformity with Financial Reporting Standards in Malaysia and the SC Guidelines on Unit Trust Funds requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of financial statements, and the reported amounts of income and expenses during the reported financial period. Although these estimates are based on Manager s best knowledge of current events and actions, actual results may differ from those estimates. Estimates and judgments are continually evaluated by the Manager and the Trustee and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. 5 NET ASSETS ATTRIBUTABLE TO UNITHOLDERS In accordance with the provisions of the Fund s Master Deed, investments with prices quoted in over the counter markets or by market makers are stated at the last traded price on the valuation date for the purpose of determining Net Asset Value per unit for creations and cancellations and for various fee calculations. Net assets attributable to unitholders represent a liability in the statement of assets and liabilities, carried at the redemption amount that would be payable at the statement of assets and liabilities date if the unitholder exercised the right to redeem unit of the Fund. 15

17 6 QUOTED INVESTMENTS (i) Quoted investments as at 31 October 2008 are as follows: Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % MAIN BOARD CONSUMER PRODUCTS 45,000 British American Tobacco (Malaysia) Bhd 1,894,547 1,845, ,000 PPB Group Bhd 1,505,552 1,039, ,400,099 2,884, FINANCE 672,000 Alliance Financial Group Bhd 1,831,354 1,223, ,040,000 AMMB Holdings Bhd 3,046,489 2,225, ,250 Malayan Banking Bhd 6,081,942 3,912, ,600 Public Bank Bhd 3,941,879 3,353, ,000 Public Bank Bhd - Foreign 252, , ,154,444 10,964, INDUSTRIAL PRODUCTS 582,000 Coastal Contracts Bhd 1,422, , INFRASTRUCTURE PROJECT COMPANIES 144,000 DiGi.Com Bhd 2,194,120 2,649, ,400 Lingkaran Trans Kota Holdings Bhd 272, , ,466,832 2,838, PLANTATIONS 247,000 Asiatic Development Bhd 1,858, , ,000 Boustead Holdings Bhd 1,844, , ,000 IOI Corporation Bhd 4,880,229 2,218, ,000 Kuala Lumpur Kepong Bhd 2,362,123 1,271, ,000 Kulim (Malaysia) Bhd 1,289, , ,200 Kwantas Corporation Bhd 1,170, , ,405,223 6,247,

18 6 QUOTED INVESTMENTS (CONTINUED) (i) Quoted investments as at 31 October 2008 are as follows: (continued) Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % MAIN BOARD (CONTINUED) CONSTRUCTION 986,600 Gamuda Bhd 2,606,618 1,470, ,100,000 Malaysian Resources Corporation Bhd 1,924, , ,000 WCT Bhd 1,042, , ,000 WCT Bhd - ICPS 2007/ , , ,772,049 2,825, PROPERTIES 260,000 SP Setia Bhd 1,037, , TRADING/SERVICES 579,000 Berjaya Sports Toto Bhd 2,424,294 2,536, ,000,000 Dialog Group Bhd 1,684, , ,700 Genting Bhd 819, , ,000 Kencana Petroleum Bhd 1,738,142 1,037, ,000 Media Prima Bhd 1,234, , ,100 MISC Bhd 4,006,614 4,565, ,000 MISC Bhd - Foreign 85,281 81, ,488,000 MMC Corporation Bhd 4,707,381 2,916, ,000 PLUS Expressways Bhd 1,545,113 1,431, ,000 Resorts World Bhd 381, , ,430,000 SapuraCrest Petroleum Bhd 1,925,279 1,022, ,229,435 Sime Darby Bhd 9,336,338 7,622, ,000 Tanjong Public Limited Company 1,436,903 1,250, ,000 Telekom Malaysia Bhd 1,887,719 2,915, ,000 Tenaga Nasional Bhd 4,849,266 3,421, ,500 TM International Bhd 6,785,879 4,034, ,847,890 35,508,

19 6 QUOTED INVESTMENTS (CONTINUED) (i) Quoted investments as at 31 October 2008 are as follows: (continued) Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % SECOND BOARD 2,112,400 Ramunia Holdings Bhd 3,198,871 2,450, MESDAQ 1,792,800 MY E.G. Services Bhd 1,570,328 1,613, WARRANTS 25 SP Setia Bhd - WB ,400 WCT Bhd - WB 39,600 43, ,607 43, TOTAL QUOTED INVESTMENTS 92,315,159 66,722, FAIR VALUE RESERVE (25,592,451) (ii) Quoted investments as at 30 April 2008 are as follows: Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % MAIN BOARD CONSUMER PRODUCTS 45,000 British American Tobacco (Malaysia) Bhd 1,894,547 1,923, ,000 UMW Holdings Bhd 1,168,641 1,320, ,063,188 3,243,

20 6 QUOTED INVESTMENTS (CONTINUED) (ii) Quoted investments as at 30 April 2008 are as follows: (continued) Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % MAIN BOARD (CONTINUED) FINANCE 780,000 Alliance Financial Group Bhd 2,232,386 2,418, ,000 AMMB Holdings Bhd 1,234,638 1,222, ,000 Bumiputra-Commerce Holdings Bhd 4,254,410 5,452, ,000 Bursa Malaysia Bhd 1,499,641 1,521, ,061,250 Malayan Banking Bhd 8,826,614 8,490, ,600 Public Bank Bhd 4,126,924 4,977, ,174,613 24,081, INDUSTRIAL PRODUCTS 582,000 Coastal Contracts Bhd 1,422,090 1,367, ,596,200 Kinsteel Bhd 2,178,217 2,266, ,000 KNM Group Bhd 3,013,540 2,752, ,613,847 6,386, INFRASTRUCTURE PROJECT COMPANY 128,000 DiGi.Com Bhd 1,606,249 3,110, PLANTATIONS 487,000 Asiatic Development Bhd 3,654,745 3,969, ,621,000 IOI Corporation Bhd 10,276,056 11,833, ,000 Kuala Lumpur Kepong Bhd 3,825,283 4,258, ,000 Kulim (Malaysia) Bhd 3,771,624 3,921, ,200 Kwantas Corporation Bhd 906, , ,434,592 24,864,

21 6 QUOTED INVESTMENTS (CONTINUED) (ii) Quoted investments as at 30 April 2008 are as follows: (continued) Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % MAIN BOARD (CONTINUED) CONSTRUCTION 465,000 Gamuda Bhd 1,505,888 1,450, ,275,000 Malaysian Resources Corporation Bhd 3,981,184 3,412, ,000 WCT Bhd 1,029,023 2,085, ,000 WCT Bhd - ICPS 2007/ , , ,714,095 7,387, PROPERTIES 440,250 SP Setia Bhd 1,757,149 1,866, ,000 YNH Property Bhd 1,381,297 1,156, ,138,446 3,023, TRADING/SERVICES 339,000 Berjaya Sports Toto Bhd 1,293,612 1,728, ,000 Dialog Group Bhd 1,039, , ,700 Genting Bhd 4,569,840 5,162, ,000 Kencana Petroleum Bhd 1,738,142 1,599, ,000 Magnum Corporation Bhd 653, , ,000 Media Prima Bhd 445, , ,200 MISC Bhd 4,029,739 5,104, ,000 MISC Bhd - Foreign 85,280 92, ,388,000 MMC Corporation Bhd 4,494,844 5,107, ,000 PLUS Expressways Bhd 1,545,113 1,738, ,030,000 SapuraCrest Petroleum Bhd 1,482,161 1,545, ,414,435 Sime Darby Bhd 10,774,699 13,578, ,000 Tanjong Public Limited Company 776, , ,500 Telekom Malaysia Bhd 839,765 2,463, ,500 TM International Bhd 6,126,925 5,580, ,895,115 46,666,

22 6 QUOTED INVESTMENTS (CONTINUED) (ii) Quoted investments as at 30 April 2008 are as follows: (continued) Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Counter cost value of the Fund % SECOND BOARD 1,474,400 Ramunia Holdings Bhd 2,197,809 2,211, MESDAQ 1,792,800 MY E.G. Services Bhd 1,570,328 1,739, WARRANTS 25 SP Setia Bhd - WB ,400 WCT Engineering Bhd - WB 39,600 39, ,607 39, TOTAL QUOTED INVESTMENTS 109,447, ,754, FAIR VALUE RESERVE 13,306,583 7 COLLECTIVE INVESTMENT SCHEMES (i) Collective investment schemes as at 31 October 2008 are as follows: Market value as at Market expressed as a Aggregate value as at percentage of Quantity Name of Fund cost value of the Fund % 1,206,628 RHB Islamic Cash Management Fund * 1,206,628 1,206, ,011,042 RHB Cash Management Fund * 2,011,042 2,011, FAIR VALUE RESERVE - 3,217,670 3,217, * These Funds are managed by the Manager of the Fund, RHB Investment Management Sdn Bhd. 21

23 7. COLLECTIVE INVESTMENT SCHEMES (CONTINUED) RHB Islamic Cash Management Fund RHB Islamic Cash Management Fund is a money market (Shariah) Fund constituted by a Deed dated 30 April 2008, between RHB Investment Management Sdn Bhd ( the Manager ) and OSK Trustees Berhad ( the Trustee ) and is now governed under a Master Deed dated 12 June 2008, which shall hereafter supersede all existing Deeds relating to the Fund. The money market (Shariah) Fund objective is to provide liquidity and a regular stream of income by investing in Shariah-compliant money market instruments as follows: (a) Permitted Investments as defined under Item 15 of Schedule 4 of the Master Deed, which comprised debentures, money market instruments and placement in deposits that are Shariah-compliant; and (b) any other forms of investments as may be approved by the relevant authorities from time to time. RHB Cash Management Fund RHB Cash Management Fund is a money market Fund constituted by a Deed dated 31 July 2007, between the Manager, RHB Investment Management Sdn Bhd and OSK Trustees Berhad ( the Trustee ) and is now governed under a Master Deed dated 12 June 2008, which shall hereafter supersede all existing Deeds relating to the Fund. The money market Fund objective is to provide liquidity and regular income for investors through investments primarily in the money market by investing in: (a) Permitted Investments as defined under Item 15 of Schedule 9 of the Master Deed, which comprised debentures, money market instruments and placement in deposits; and (b) any other forms of investment as may be approved by the relevant authorities from time to time. (ii) There is no collective investment scheme held as at 30 April SHORT TE DEPOSITS Deposits with licensed financial institutions: - Investment banks 10,179, Commercial banks 16,674,722 26,739,788 - Other financial institutions 2,005,523-28,859,905 26,739, % % Weighted average effective interest rate Deposits with licensed financial institutions of the Fund have an average maturity of 7 days ( : 6 days). 22

24 9 OTHER PAYABLES AND ACCRUALS Audit fee payable 4,900 9,800 Tax agent's fee payable 2,000 4,000 Sundry payables and accruals 13,292 23,381 20,192 37, NUMBER OF UNITS IN CIRCULATION AND NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Units Units As at the beginning of the financial period/year 148,111, ,567, ,995, ,199,763 Creation arising from distribution 1,900,000 1,811, Creation arising from application 54,000 44,279 18,717,000 19,595,227 Release of units (11,167,000) (9,897,613) (22,601,000) (23,693,370) Net (decrease)/increase in net assets attributable to unitholders - (1,170,662) - 13,787,202 Net change in fair value reserve - (38,899,034) - (15,321,820) As at the end of the financial period/year 138,898, ,455, ,111, ,567,002 Approved size of the Fund 750,000, ,000,000 The maximum number of units that can be issued out for circulation is 750,000,000. As at 31 October 2008, the number of units yet to be issued is 611,102,000 ( : 601,889,000). 11 MANAGEMENT FEE Item 10 of Schedule 2 of the Master Deed provides that the Manager shall be entitled at the rate agreed between the Manager and the Trustee which rate shall not exceed 1.50% per annum of the net asset value of the Fund, calculated on a daily basis. The management fee provided in the financial statements is 1.50% (2007: 1.50%) 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 collective investment schemes, any management fee charged by the investment collective schemes to the Fund will be fully refunded in units. In accordance with the SC Guidelines on Unit Trust Funds, there is no double charging of management fee to the Fund. 12 TRUSTEE S FEE Item 11 of Schedule 2 of the Master Deed provides that the Trustee shall be entitled at the rate agreed between the Manager and the Trustee which rate shall not exceed 1.0% per annum of the net asset value of the Fund, calculated on a daily basis. The Trustee s fee provided in the financial statements is 0.06% (2007: 0.06%) per annum based on the net asset value of the Fund calculated on a daily basis. 23

25 13 FINANCE COST to to Dividend income 4,840,429 - Interest income from deposits with licensed financial institutions 552,254-5,392,683 - Less: Expenses (2,460,083) - Taxation (1,129,341) - Net distribution amount 1,803,259 - Interim distribution on 13 June 2008 ( : NIL) to to Gross distribution per unit (sen) Net distribution per unit (sen) Net distribution above are sourced from previous year s realised income. The above distribution was made before taking into account unrealised losses of 25,592,451. Gross distribution is derived using total income less total expenses. Gross distribution per unit is derived from gross realised income less expenses divided by the number of units in circulation, while net distribution for unit is derived from gross realised income less expenses and taxation divided by the number of units in circulation. 24

26 14 TAXATION (a) Tax charge for the financial period to to Current taxation 330, ,300 (b) Numerical reconciliation of income tax expenses The tax on the net income before taxation differs from theoretical amount that would arise using the statutory income tax rate of Malaysia as follows: to to Net income before taxation 963,297 7,793,210 Tax calculated at a tax rate of 26% (2007: 27%) 250,457 2,104,167 Tax effect of: - Income not subject to tax (151,439) (1,892,417) - Expenses not deductible for tax expenses 10,996 12,606 - Restriction on tax deductible expenses for unit trust funds 220, ,944 Tax expense 330, , MANAGEMENT EXPENSE RATIO ( MER ) to to % % MER 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 fee B = Trustee s fee C = Audit fee D = Tax agent's fee E = Administrative expenses F = Average net asset value of the Fund, calculated on a daily basis 25

27 The average net asset value of the Fund for the financial period is 129,278,786 (2007: 148,299,690). 16 PORTFOLIO TURNOVER to to The portfolio turnover for the financial period (times) The portfolio turnover is derived from the following calculation: (Total acquisition for the financial period + total disposal for the financial period) 2 Average net asset value of the Fund for the financial period calculated on a daily basis where: total acquisition for the financial period = 36,772,196 (2007: 46,883,136) total disposal for the financial period = 50,687,256 (2007: 43,344,897) 17 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 RHB Investment Management Sdn Bhd RHB Investment Bank Bhd RHB Bank Bhd Relationship The Manager Holding company of the Manager Ultimate holding company of Manager Units held by the Manager and parties related to the Manager No of No of units units The Manager 4,638 3,354 4,081 4,094 The units are held beneficially by the Manager for bookings purpose. In additional to related party disclosures mentioned elsewhere in the financial statements, set out below is other significant related party balance. The related party transactions described below carried out on terms and conditions obtainable in transactions with unrelated parties unless otherwise stated: Significant related party balance Deposits with licensed financial institutions: - RHB Investment Bank Bhd 5,627,000-26

28 18 TRANSACTIONS WITH BROKERS Details of transactions with the top 10 brokers for the financial period ended 31 October 2008 are as follows: Percentage Percentage of total Value of of total Brokerage brokerage No. Broker trades trades fees fees % % 1. RHB Investment Bank Bhd* 29,973, , HLG Securities Sdn Bhd 9,353, , CIMB Investment Bank Bhd 9,126, , HwangDBS Investment Bank Bhd 7,945, , Kenanga Investment Bank Bhd 7,922, , Affin Investment Bank Bhd 6,052, , Aseambankers Malaysia Bhd 4,990, , MIDF Amanah Investment Bank Bhd 3,251, , AmInvestment Bank Bhd 2,543, , Credit Suisse Securities (Malaysia) Sdn Bhd 552, , ,710, , * Included in transactions by the Fund are trades conducted on normal terms in the stockbroking industry with RHB Investment Bank Bhd, a company related to the Manager. Details of transactions with the top 10 brokers for the financial year ended 30 April 2008 are as follows: Percentage Percentage of total Value of of total Brokerage brokerage No. Broker trades trades fees fees % % 1. RHB Investment Bank Bhd* 61,702, , HLG Securities Sdn Bhd 24,209, , HwangDBS Investment Bank Bhd 19,998, , CIMB Investment Bank Bhd 19,288, , Affin Investment Bank Bhd 18,281, , Kenanga Investment Bank Bhd 17,278, , Aseambankers Malaysia Bhd 13,985, , MIDF Amanah Investment Bank Bhd 13,335, , OSK Investment Bank Bhd 12,560, , AmInvestment Bank Bhd 10,172, , ,812, , * Included in transactions by the Fund are trades conducted on normal terms in the stockbroking industry with RHB Investment Bank Bhd, a company related to the Manager. 27