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Quarterly ReportDec 2018

For the Period Ended 31 December 2018

QUA RTERLY REPORT DECEMBER 2018

ARECA Steady fixedINCOME FUND

Contents

CORPORATE DIRECTORY 2

MANAGER’S REPORT

Fund Information, Performance & Review 3

Market Review & Outlook 7

TRUSTEE’S REPORT 8

STATEMENT BY THE MANAGER 8

UNAUDITED FINANCIAL STATEMENTS FOR

Areca Steady fixedINCOME Fund 9

QUARTERLY REPORT DECEMBER 2018


2

C O R P O R A T E D I R E C T O R Y

MANAGER

Areca Capital Sdn Bhd (740840-D)

107, Blok B, Pusat Dagangan Phileo Damansara 1

No. 9, Jalan 16/11, Off Jalan Damansara

46350 Petaling Jaya, Selangor

Tel: 603-7956 3111, Fax: 603-7955 4111

website: www.arecacapital.com

e-mail: [email protected]

BOARD OF DIRECTORS

Dato’ Wee Hoe Soon @ Gooi Hoe Soon

(Independent, Chairman)

Wong Teck Meng (Executive)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Non-Executive Non-Independent)

Dr. Junid Saham (Independent)

INVESTMENT COMMITTEE MEMBERS

Dato’ Wee Hoe Soon @ Gooi Hoe Soon

(Independent, Chairman)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Non-Independent)

Dr. Junid Saham (Independent)

TRUSTEE

RHB Trustees Berhad (573019-U)

Level 10, Tower 1, RHB Centre

Jalan Tun Razak

50400 Kuala Lumpur

Tel: 03-9280 8799 Fax: 03-9280 8796

AUDITOR

PricewaterhouseCoopers (AF1146)

Level 10, 1 Sentral, Jalan Rakyat

Kuala Lumpur Sentral, P O Box 10192

50706 Kuala Lumpur

Tel: 03-2173 1188, Fax: 03-2173 1288

TAX ADVISER

PricewaterhouseCoopers Taxation

Services Sdn Bhd (464731-M) Level 10, 1 Sentral, Jalan Rakyat

Kuala Lumpur Sentral, P O Box 10192

50706 Kuala Lumpur

Tel: 03-2173 1188, Fax: 03-2173 1288

M A N A G E R ’ S O F F I C E A N D B R A N C H E S

HEAD OFFICE

107, Blok B, Pusat Dagangan Phileo Damansara 1, No. 9, Jalan 16/11, Off Jalan Damansara,

46350 Petaling Jaya, Selangor

Tel: 603-7956 3111, Fax: 603-7955 4111

website: www.arecacapital.com

e-mail: [email protected]

PENANG – PULAU TIKUS

368-2-02 Belissa Row

Jalan Burma, Georgetown

10350 Pulau Pinang Tel : 604-210 2011

Fax: 604-210 2013

PERAK – IPOH

11A, (First Floor)

Persiaran Greentown 5

Greentown Business Centre

30450 Ipoh, Perak Tel : 605-249 6697

Fax: 605-249 6696

MALACCA

95, Jalan Melaka Raya 24

Taman Melaka Raya

75000 Melaka

Tel : 606-282 9111 Fax: 606-283 9112

SARAWAK - KUCHING

1st Floor, Sublot 3

Lot7998, Block 16

KCLD, Cha Yi Goldland Jalan Tun Jugah/ Stutong

93350 Kuching, Sarawak

Tel: 082-572 472



3

F U N D I N F O R M A T I O N

Name of the Fund Areca Steady fixedINCOME Fund

Fund Category/

Type

Fixed Income (Wholesale Fund)/Income

Objective of the

Fund

To provide sophisticated investors with a stable stream of consistent income

while maintaining capital stability by investing in fixed income investments

with medium to long term investment horizon

Performance

Indicator

Maybank’s 12-month fixed deposit rate

Distribution

Policy of the Fund

Yearly or more frequent, subject to availability of the distributable income.

In the absence of instructions to the contrary from unit holder, the Manager

is entitled to reinvest the income distributed from the Fund in additional

units of that Fund at the NAV per unit at the end of the distribution day with

no entry fee.

Profile of

unitholdings

* excluding units held

by the Manager

As at 31 December 2018

Size of Holding

(Units)

No. of

accounts

%

No. of

units held

‘million

%

Up to 5,000 - - - -

5,001 to 10,000 - - - -

10,001 to 50,000 2 3.33 0.04 0.11

50,001 to 500,000 36 60.00 9.41 23.04

500,001 and above 22 36.67 31.39 76.85

Total* 60 100.00 40.84 100.00

Rebates & Soft

Commissions

The Manager retains soft commissions received from stockbrokers,

provided these are of demonstrable benefit to unitholders. The soft

commissions may take the form of goods and services such as data and

quotation services, computer software incidental to the management of the

Fund and investment related publications. Cash rebates, if any, are directed

to the account of the Fund. During the period under review, the Manager

had not received any soft commissions.

Inception Date 11 May 2009

Initial Offer Price RM1.0000 per unit during the initial offer period of 21 days ended 31 May

2009

Pricing Policy

Single Pricing – Selling and repurchase of units by the Manager are at Net

Asset Value per unit

Financial year end 30 June



4

F U N D P E R F O R M A N C E

1.10.2018

to

31.12.2018

1.7.2018

to

30.9.2018

Net Asset Value (“NAV”)

Total Net Asset Value (RM million) 44.86* 48.25

Units in circulation (million units) 40.84* 43.75

NAV per unit (RM) 1.0982 1.1030

* Ex-Distribution

HIGHEST & LOWEST NAV Please refer to Note 1 for further information on NAV and pricing policy

Highest NAV per unit (RM) 1.1164 1.1030

Lowest NAV per unit (RM) 1.0966 1.0874

ASSET ALLOCATION % of NAV

Fixed Income Securities

Quoted securities-local 0.00 0.13

Unquoted bonds-local 62.51 59.59

Collective investment schemes 33.75 32.20

Cash & cash equivalents including placements and

repo 3.74 8.08

DISTRIBUTION

Please refer to Note 2 for further information

Distribution date 21 Dec 2018 -

Gross distribution (sen per unit) 2.00 -

Net distribution (sen per unit) 2.00 -

NAV before distribution (RM per unit) 1.1166 (20 Dec) -

NAV after distribution (RM per unit) 1.0966 (21 Dec) -

UNIT SPLITS There was no unit split exercise for the financial period under review.

EXPENSE/ TURNOVER

Management expense ratio (MER) (%)


0.22 0.23

Portfolio turnover ratio (PTR) (times)


0.05 0.08

TOTAL RETURN


Total Return (%) 1.38 1.46

- Capital Return (%) (0.44) 1.46

- Income Return (%) 1.82 -

Annual Total Return (%) 5.59* 5.93*

Performance Indicator: Average Maybank’s 12-month fixed

deposit rate (%)

* Annualised for comparison purpose only

3.39* 3.39*



5

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 5.15 4.86 4.71

NOTES:

Note 1: Selling of units by the Management Company (i.e. when you purchase units and invests in the Fund)

and redemption of units by the Management Company (i.e. when you redeem your units and liquidate your

investments) will be carried out at NAV per unit (the actual value of a unit). The entry/ exit fee (if any)

would be computed separately based on your net investment/ liquidation amount.

Note 2: Net distribution of 2.00 sen per unit was declared on 21 December 2018 and was automatically

reinvested into additional units on the same day at NAV per unit after distribution at no entry fee.

Note 3: MER is calculated based on the total fees and expenses incurred by the Fund, divided by the average

net asset value calculated on a daily basis.

Note 4: PTR is computed based on the average of the total acquisitions and total disposals of the investment

securities of the Fund, divided by the average net asset value calculated on a daily basis.

Note 5: Fund performance figures are calculated based on NAV to NAV and assume reinvestment of

distributions (if any) at NAV. The total return data and the performance indicator are sourced from Lipper.

Past performance is not necessarily indicative of future performance. Unit prices and

investment returns may go down, as well as up



6

F U N D R E V I E W

For the quarter ending 31 December 2018, the Fund posted an annualised quarterly

return of 5.59% against the benchmark 12mth FD of 3.39%. The Fund outperformed

the benchmark on the backdrop of a US rate hike but stable domestic interest rates climate. Corporate bonds continue to enjoy a healthy demand with trading market

pensive wary of overbearing US-China trade rift.

The Fund is 62.5% invested across a diverse spread of 18 MYR denominated corporate

bond issues. The largest sector exposure is Banking/Finance (17.4%) followed closely

by Tradings/Services sector (15.8%) with an average modified duration of 1.16 years.

The low duration is due to our sizable exposure to other Collective Investment Schemes

(33.7%) which can be called upon anytime. Credit exposure of our corporate bonds is

dominated by AA ratings (27.4%).

Looking ahead, we look to increase the portfolio duration with whatever idle cash remains so as to maximize returns in light of expected accommodative interest rates

policy.

Investment Policy and Strategy

The Fund primarily invests in a diversified portfolio of fixed income investments with

intention to hold until maturity. The Fund focuses mainly on quality debentures with

maturity of 3 to 7 years with small exposure to other maturity periods.

NAV per unit as at 31 December 2018 RM1.0982

Asset Allocation/ Portfolio Composition as at 31.12.2018 30.9.2018

Quoted securities-local - 0.13%

Unquoted bonds-local 62.51% 59.59%

Collective investment

scheme 33.75% 32.20%

Cash & cash equivalents 3.74% 8.08%

Performance of Areca Steady fixedINCOME Fund

for the financial period since inception to 31 December 2018

62.51

%

33.75

%

3.74

%

Areca Steady fixedINCOME Fund

Maybank 12 Months Fixed Deposit Rate



7

MARKET REVIEW & OUTLOOK US 3Q2018 GDP grew at 3.0% y-o-y, highest since 2Q2015 and a strong 3.5% q-o-q. Labour data continue to sparkle with November unemployment rate revisiting the 49-year low of 3.7% before

ticking up to 3.9% in December. Inflation slid to a 17 month low in December to 1.9% on declining

gasoline prices. However, core inflation held up above 2% throughout the quarter with 12-months

moving average at 2.13%. The Federal Reserve raised Fed Funds rates for the fourth time this year

as expected in December to 2.50%.

A last minute ’90 day ceasefire’ was called at the fringe of G20 summit in Buenos Aires at the start

of December, deferring the imminent increase of tariffs from 10% to 25% imposed on USD$200

billion worth of Chinese imports installed in September. Trade imbalance has not improved as year

to date (till Nov) data shows an increase of 11% when compared with same period year before. Furthermore, December witnessed one of the choppiest months in recent stock market’s history.

Dow Jones lost more than 3 800 points for the month at one point before recording the highest one

day gain of 1 086 points over the week of Christmas. Trump’s frustration boiled over with him ranting

against Federal Reserve Chairman who predictably raised rates and in effect the USD$ strength,

which in part negates the intended impact of the tariffs.

Meantime growth in China continue to taper down with 4Q GDP recording 6.4%, the lowest since

early 2009. They continue to focus on domestic issues with fiscal expansions of widening tax

deductions and increased infrastructure spending. Aided by a 1% cut to Reserve Ratio in October

(4th cut this year), they have directed banks to grow SME loans while attempting to steer GDP

towards consumption based.

Apart from the distractions of Brexit, the ECB has maintained their interest rates policy and continue

to wind down their bond buying program. They remain confident that the supportive monetary policy

will be necessary to sustain the momentum until the middle of 2019.

Malaysia’s economy expanded 4.7% for the 4th quarter 2018 bringing the whole year growth to 4.7%

vs 5.9% in previous year. Inflation was muted with December reading at 0.2% while registering 1%

for the whole year due to lower petrol prices and effect of 3 months ‘tax holiday’ when phasing out

GST for SST between July till August. Foreign Reserves declined to USD101.4 billion (or RM419.5

billion) at the end of December against end September’s USD103.0 billion (or RM427.0 bil).

FIXED INCOME MARKET REVIEW & OUTLOOK

In this 3-month period from October to December, the 10-year US Treasury benchmark could not

sustain above psychological 3% after hitting a 7½ year high at 3.23%. With one too many hikes,

concerns with slowing global growth and continued trade rift between the two largest economies,

the market pursued low risk assets bringing 10 year yields to 2.69% at year end. Market was further

confounded when 2/10 spreads narrowed to just 11 basis points, a level last seen in mid-2007.

Investors turned around losing confidence of any more hikes in the year ahead amidst a converted

dovish Fed Reserve.

There was only 1 Overnight Policy rate meetings in Malaysia this period with the OPR left unchanged at 3.25%. Bank Negara Malaysia recognizes the increased downside risk to momentum of global

growth due in part to ongoing US-China trade tensions and resulting weaker external demand. BNM

remains confident that domestic consumption will continue to support our growth.

This quarter saw a small net foreign outflow from domestic sovereign market of RM0.5 bil. For the

year, the register reads a net outflow of RM19.8 bil. Currently, foreign investors hold RM170.8 bil of

our domestic sovereign debt or 23.1% of total outstanding issues, lowest level since 2011. The

meagre net flow is a positive step towards stability when compared to the first half of 2018 despite

environment of increasing attractiveness of the US markets against weaker emerging markets

sentiment.



8

T R U S T E E ’ S R E P O R T

For The Period Ended 31 December 2018

To the Unit holders of Areca Steady fixedINCOME Fund

We have acted as Trustee of Areca Steady fixedINCOME Fund (the “Fund”) for the financial period

ended 31 December 2018. In our opinion and to the best of our knowledge, Areca Capital Sdn Bhd,

the Manager has operated and managed the Fund in accordance with the following:-

(a) limitations imposed on the investment powers of the Manager and the Trustee under the

Deeds, the Securities Commission Malaysia’s Guidelines on Unlisted Capital Market Products

under the Lodge and Launch Framework, 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;

(c) creation and cancellation of units are carried out in accordance with the Deeds and relevant

regulatory requirements; and

(d) the distribution of RM0.020 (net) to the unitholders during the financial period ended 31

December 2018 is consistent with the objectives of the Fund.

For and on behalf of the Trustee

RHB TRUSTEES BERHAD

(Company No: 573019-U)

MOHD SOFIAN BIN KAMARUDDIN

VICE PRESIDENT

LEE YIT CHENG

HEAD, GROUP INT’L OPS SUPPORT &

TRUSTEES OPS

Kuala Lumpur

27 February 2019

S T A T E M E N T B Y T H E M A N A G E R

To the Unit holders of Areca Steady fixedINCOME Fund

We, WONG TECK MENG and EDWARD ISKANDAR TOH BIN ABDULLAH, two of the Directors of

Areca Capital Sdn Bhd, do hereby state that in our opinion as the Manager, the unaudited financial

statements are drawn up in accordance with the provisions of the Deeds and give a true and fair

view of the financial position of the Fund as at 31 December 2018 and of its results, changes in net

assets attributable to unitholders and cash flows of the Fund for the financial period 31 December

2018 in accordance with the Malaysian Financial Reporting Standards and International Financial

Reporting Standards.

For and on behalf of the Manager

ARECA CAPITAL SDN BHD

WONG TECK MENG

CEO/EXECUTIVE DIRECTOR

EDWARD ISKANDAR TOH BIN ABDULLAH

CIO/EXECUTIVE DIRECTOR

Kuala Lumpur

27 February 2019



9

UNAUDITED STATEMENT OF FINANCIAL POSITION

As At 31 December 2018 31.12.2018 30.9.2018

Note RM RM

Current Assets

Financial assets at fair value through profit

or loss 5 43,179,232 44,353,759

Cash and cash equivalents 6 1,726,662 3,986,237

Total Assets 44,905,894 48,339,996

Current Liabilities

Amount due to Manager 5,756 42,604

Accrued management fee 31,355 33,100

Other payables and accruals 11,970 11,970

Total Liabilities 49,081 87,674

Net Asset Value of the Fund 44,856,813 48,252,322

Equity

Unit holders’ capital 41,962,499 45,226,894

Retained earnings 2,894,314 3,025,428

Total Net Asset Attributable to Unit Holders 44,856,813 48,252,322

Number of Units in Circulation 40,844,312 43,748,533

Net Asset Value Per Unit (Ex-Distribution) 1.0982 1.1030

The accompanying Notes form an integral part of these Financial Statements



10

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

For The Financial Period Ended 31 December 2018

1.10.2018

to

31.12.2018

1.7.2018

to

30.9.2018

Note RM RM

Investment Income

Interest income 452,784 379,757

Dividend income - 90,000

Net gain on financial assets at fair value

through profit or loss

5

328,520

211,937

781,304 681,694

Expenses Management fee 105,451 93,786

Tax agent’s fee 2,000 -

Other expenses 414 134

107,865 93,920

Net Profit Before Taxation 673,439 587,774

Taxation (2,196) (1,464)

Net Profit After Taxation And Total

Comprehensive Income For The Financial

Period

671,243

586,310

Net Profit After Taxation Is Made Up As Follows:

Realised amount 321,610 379,173

Unrealised amount 349,633 207,137

671,243 586,310




11

UNAUDITED STATEMENT OF CHANGES IN EQUITY


Unit

holders’

capital

Retained

earnings Total net

asset value

RM RM RM

Balance as at 1 October 2018 45,226,894 3,025,428 48,252.322

Movement in unit holders’ capital:

Creation of units arising from application 14,523,358 - 14,523,358 Creation of units arising from distribution - - -

Cancellation of units (17,787,753) - (17,787,753

)

Total comprehensive income for the financial

period - 671,243 671,243

Distribution (Note 4) - (802,357) (802,357)

Balance as at 31 December 2018 41,962,499 2,894,314 44,856,813

Balance as at 1 July 2018

35,453,952

2,439,118

37,893,070

Movement in unit holders’ capital:

Creation of units arising from application 10,651,393 - 10,651,393

Cancellation of units (878,451) - (878,451)

Total comprehensive income for the financial

period - 586,310 586,310

Balance as at 30 September 2018 45,226,894 3,025,428 48,252,322



12


UNAUDITED STATEMENT OF CASH FLOWS


1.10.2018

to 31.12.2018

1.7.2018

to 30.9.2018

Note RM RM

Cash Flows From Investing and Operating

Activities

Proceeds from disposal of investments 4,127,810 2,004,800

Purchase of investments (2,522,959) (10,018,442)

Interest received from deposits with licensed

financial institutions

41,375

19,755

Interest received from unquoted fixed income

securities

309,451

306,557

Dividend Received - 90,000

Management fee paid (107,195) (88,790)

Tax paid (2,196) (1,464)

Payment for other fees and expenses (2,260) (10,099)

Net Cash Flows Generated From/(Used In)

Investing and Operating activities

1,844,026

(7,697,683)

Cash Flows From Financing Activities

Proceeds from creation of units 14,523,358 10,651,393

Payment for cancellation of units (17,824,601) (835,847)

Distribution paid (802,358) -

Net Cash Flows (Used In)/Generated From

Financing Activities (4,103,601) 9,815,546

Net (Decrease)/Increase In Cash And Cash

Equivalents (2,259,575) 2,117,863

Cash And Cash Equivalents At The Beginning

Of The Financial Period 3,986,237 1,868,374

Cash And Cash Equivalents At The End Of

The Financial Period 6 1,726,662 3,986,237



13


NOTES TO THE FINANCIAL STATEMENTS – 31 December 2018

1 THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Areca Steady fixedINCOME Fund (“the Fund”) is a wholesale fund that was formed under a

custodian structure on 11 May 2009. A trustee was later appointed for the Fund with the

signing of a Trust Deed dated 24 July 2009 as modified by the First Supplemental Deed dated

15 August 2013 (“the Deed”) between Areca Capital Sdn Bhd as the Manager, RHB Trustees

Berhad as the Trustee and all the registered unitholders of the Fund.

The principal activity of the Fund is to invest in investments as defined under Schedule 6 of

the Deed, which include money market instruments, fixed income securities and deposits with

financial institutions. The Fund commenced operations on 11 May 2009 and will continue its

operations until terminated by the Trustee in accordance with Part 11 of the Deed.

The objective of the Fund is to provide sophisticated investors with a stable stream of

consistent income while maintaining capital stability by investing in fixed income investments

with medium to long term investment horizon.

The Manager of the Fund is Areca Capital Sdn Bhd, a company incorporated in Malaysia. Its

principal activities are managing private and unit trust funds.

2 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT OBJECTIVES AND POLICIES

Financial instruments of the Fund as follows:

Loan and

receivables

RM

Financial

assets at

fair value

through

profit or

loss

RM

Total

RM

31 December 2018

Quoted securities - - -

Unquoted fixed income securities

- 28,039,415 28,039,415

Collective investment schemes - 15,139,817 15,139,817

Cash and cash equivalents 1,726,662 - 1,726,662

1,726,662 43,179,232 44,905,894

30 September 2018

Quoted securities - 65,000 65,000 Unquoted fixed income

securities - 28,753,843 28,753,843

Collective investment schemes - 15,534,916 15,534,916

Cash and cash equivalents 3,986,237 - 3,986,237

3,986,237 44,353,759 48,339,996

All current liabilities are financial liabilities which are carried at amortised cost.



14

The Fund seeks to provide sophisticated investors with a stable stream of consistent income

while maintaining capital stability by investing in fixed income investments with medium to

long term investment horizon. In order to meet its stated investment objectives, the Fund

utilises risk management for both defensive and proactive purposes. Rigorous analysis of

sources of risk in the portfolio is carried out and the following policies are implemented to

provide effective ways to reduce future risk and enhance future returns within the Fund’s

mandate.

The Fund is exposed to a variety of risks which include market risk (including price risk and

interest rate risk ), credit risk, liquidity risk and capital risk.

Financial risk management is carried out through internal control processes adopted by the

Manager and adherence to the investment restrictions as stipulated in the Deed and Securities

Commission’s Guidelines on Unlisted Capital Market Products Under the Lodge and Launch

Framework.

Market risk

(a) Price risk

Price risk arises mainly for uncertainty about future prices of investments. It represents

the potential loss the Fund might suffer through holding market positions in the face of

price movements. The Manager manages the risk of unfavourable changes in prices by

continuous monitoring of the performance and risk profile of the investment portfolio.

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

31.12.2018 30.9.2018

RM RM

Financial assets at fair value

through

profit or loss*

43,179,232

44,353,759

* Include interest receivable RM378,740 (30.9.2018: RM366,935)

(b) Interest rate risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument

will fluctuate because of changes in market interest rates.

Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate

due to changes in market interest rates.

In general, when interest rates rise, unquoted fixed income securities prices will tend to

fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest

rates rise or are expected to rise. However, investors should be aware that should the

Fund holds an unquoted fixed income securities till maturity, such price fluctuations

would dissipate as it approaches maturity, and thus the growth of the NAV shall not be

affected at maturity. In order to mitigate interest rates exposure of the Fund, the

Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based

on its continuous fundamental research and analysis.

This risk is crucial in a bond fund since bond portfolio management depends on

forecasting interest rate movements. Prices of bonds move inversely to interest rate

movements, therefore as interest rates rise, the prices of bonds decrease and vice versa.

Furthermore, bonds with longer maturity and lower yield coupon rates are more

susceptible to interest rate movements.

Investors should note that fixed income securities (such as the bonds held by the Fund)

and money market instruments are subject to interest rate fluctuations. Such

investments may be subject to unanticipated rise in interest rates which may impair the



15

ability of the issuers to make payments of interest and principal, especially if the issuers

are highly leveraged. An increase in interest rates may therefore increase the potential

for default by an issuer.

The Fund’s investments in deposits with licensed financial institutions are short term in

nature. Therefore, exposure to interest rate fluctuations is minimal.

Credit risk

Credit risk refers to the ability of an issuer or counterparty to make timely payments of interest,

principals and proceeds from realisation of investment. The Manager manages the credit risk

by undertaking credit evaluation to minimise such risk.

Credit risk arising from placements on 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

and redemption of units payable to the Manager are governed by the Securities Commissions

Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework.

The Fund seeks to mitigate credit/default risk by investing in high quality fixed income

securities.

Credit risk is a concern for unquoted fixed income securities. The risk arises when an issuer is

unable to service any profit/contractual coupon or repay the principal amount upon

redemption. In such cases, investors may suffer significant losses with respect to their capital

invested and income foregone. Management of the credit risk is largely accounted for by the

Fund’s management of issue-specific risk. This refers to the emphasis on credit analysis

conducted to determine issuers’ or guarantors’ ability to service promised payments.

The maximum exposure to credit risk before any credit enhancements is the carrying amount

of the financial assets is set out below:

Financial

assets at

fair value

through

profit or

loss

RM

Cash and

Cash

Equivalents

RM

Total

RM

31 December 2018

Finance

AAA - 6,921 6,921

AA- - 1,719,741 1,719,741

Collective investment scheme

Not rated 15,139,817 - 15,139,817

Quoted securities

Not rated - - -

Unquoted fixed income

securities:

A 1,017,338 - 1,017,338

A1/A+ 4,656,111 - 4,656,111

AA3/AA- 11,296,965 - 11,296,965

AA1/AA+ 1,014,860 - 1,014,860

AAA 6,685,514 - 6,685,514

AA2/AA - - -

Non-rated 3,368,627 - 3,368,627

43,179,232 1,726,662 44,905,894



16

Financial

assets at

fair value

through

profit or

loss

RM

Cash and Cash

Equivalents

RM

Total

RM

30 September 2018 Finance

AAA - 8,941 8,941

AA- - 3,977,296 3,977,296

Collective investment scheme

Not rated 15,534,916 - 15,534,916

Quoted securities

Not rated 65,000 - 65,000

Unquoted fixed income

securities

A 1,034,390 - 1,034,390

A1/A+ 3,069,347 - 3,069,347

AA3/AA- 12,829,289 - 12,829,289

AA1/AA+ 1,033,498 - 1,033,498

AAA 5,656,341 - 5,656,341

AA2/AA 1,812,413 - 1,812,413

Non-rated 3,318,565 - 3,318,565

44,353,759 3,986,237 48,339,996

The Manager considers the risk of material loss in the event of non-performance by the

counterparties of the Fund to be unlikely. All financial assets of the Fund at the end of the

financial period are neither past due nor impaired.

Liquidity risk

Liquidity risk is the risk that investments cannot be readily sold at or near its actual value

without taking a significant discount. This will result in lower NAV of the Fund. The Manager

manages this risk by maintaining sufficient level of liquid assets to meet anticipated payment

and cancellations of unit by unit holders. Liquid assets comprise bank balance, deposit with a

licensed financial institution and other instruments, which are capable of being converted into

cash within 7 days.

The table below analyses the Fund's financial liabilities into relevant maturity groupings based

on the remaining period at the statement of financial position date to the contractual maturity

date. The amounts in the table below are the contractual undiscounted cash flows.

Less than

one month

Between

one month

to one

year

Total

RM RM RM

As at 31 December 2018

Amount due to Manager 5,756 - 5,756

Accrued management fee 31,355 - 31,355 Other payables and accrued expenses - 11,970 11,970

Contractual cash outflows 37,111 11,970 49,081

As at 30 September 2018

Amount due to Manager 42,604 - 42,604

Accrued management fee 33,100 - 33,100 Other payables and accrued expenses - 11,970 11,970



17

Contractual cash outflows 75,704 11,970 87,674

Capital risk

The capital of the Fund is represented by equity consisting of unit holders’ capital and

accumulated losses. 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 shareholders. 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 shareholders and benefits for other stakeholders and to

maintain a strong capital base to support the development of the investment activities of the

Fund.

Fair value estimation

Fair value is defined as the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement date (i.e.

an exit price).

The fair value of financial assets traded in active market (such as publicly traded derivatives

and trading securities) are based on quoted market prices at the close of trading on the year

end date. The Fund utilises the last traded market price for financial assets where the last

traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Fund Manager will determine the point within the bid-ask spread

that is representative of the fair value.

An active market is a market in which transactions for the asset take place with sufficient

frequency and volume to provide pricing information on an ongoing basis.

The fair value of financial assets that are not traded in an active market is determined by using

valuation techniques.

Fair value hierarchy

(i) The table below analyses financial instruments carried at fair value by valuation method. The

different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within level 1 that are observable for

the asset or liability, either directly (that is, as prices) or indirectly (that is,

derived from prices).

• Level 3: Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs)

The level in the fair value hierarchy within which the fair value measurement is categorised in

its entirety is determined on the basis of the lowest level input that is significant to the fair

value measurement in its entirety. For this purpose, the significance of an input is assessed

against the fair value measurement in its entirety. If a fair value measurement uses observable

inputs that require significant adjustment based on unobservable inputs, that measurement is

a Level 3 measurement.

Assessing the significance of a particular input to the fair value measurement in its entirety

requires judgment, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgment by the Fund.

The Fund considers observable data to be that market data that is readily available, regularly

distributed or updated, reliable and verifiable, not proprietary, and provided by independent

sources that are actively involved in the relevant market.



18

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

measured at fair value:

Level 1 Level 2 Level

3

Total

RM RM RM RM

31 December 2018

Financial assets at fair value

through profit or loss:

- collective investment schemes 15,139,817 - - 15,139,817 - quoted securities - - - -

- unquoted fixed income securities - 28,039,415 - 28,039,415

15,139,817 28,039,415 - 43,179,232

30 September 2018

Financial assets at fair value through profit or loss:

- collective investment schemes 15,534,916 - - 15,534,916

- quoted securities 65,000 - - 65,000

- unquoted fixed income securities - 28,753,843 - 28,753,843

15,599,916 28,753,843 - 44,353,759

Investments whose values are based on quoted market prices in active markets, and are

therefore classified within Level 1, include active quoted securities. The Fund does not adjust

the quoted prices for these instruments.

Financial instruments that trade in markets that are considered to be active but are valued

based on quoted market prices, dealer quotations or alternative pricing sources supported by

observable inputs are classified within Level 2, these include unquoted fixed income securities.

As Level 2 instruments include positions that are not traded in active markets and/or are subject

to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-

transferability, which are generally based on available market information.

(ii) The carrying value of cash and cash equivalents and all current liabilities are a reasonable

approximation of their fair values due to their short term nature.

3 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements have been prepared under the historical cost convention in accordance

with the Malaysian Financial Reporting Standards (“MFRS”) and International Financial Reporting Standards (“IFRS”), as modified by financial assets at fair value through profit or

loss.

The preparation of financial statements in conformity with the MFRS and IFRS requires the use

of certain critical accounting estimates and assumptions that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements, and the reported amounts of revenues and expenses during the reported financial

year. It also requires the Manager to exercise their judgment in the process of applying the

Fund’s accounting policies. Although these estimates and judgment are based on the Manager’s best knowledge of current events and actions, actual results may differ.

4 NET DISTRIBUTION

31.12.2018 30.9.2018

RM RM

Distribution to unitholders is from the following

sources:

- Previous year’s realised gains 457,439 -



19

31.12.2018 30.9.2018

RM RM

912,418 -

Less: Expenses (107,865) -

Taxation (2,196)

Net distribution 802,357 -

The distribution above has been made as

follows:

Distribution on 21 December 2018

- Gross distribution per unit (sen) 2.00 -

- Net distribution per unit (sen) 2.00 -

5 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

31.12.2018 30.9.2018

RM RM

Designated at fair value through profit or loss

- Quoted investments - 65,000

- Unquoted fixed income securities 28,039,415 28,753,843

- Collective investment schemes 15,139,817 15,534,916

43,179,232 44,353,759

Net gain on financial assets at fair value

through profit or loss:

-realised loss on disposals (21,113) 4,800 -unrealised fair value gain 349,633 207,137

328,520 211,937

Financial assets at fair value through profit or loss are as follows:

Name of Issuer

Nominal

value

RM

Carrying

Value

RM

Fair value as at

31.12.2018

RM

Fair value

as at

31.12.2018

expressed as a

percentage of

value of the

Fund

% 31.12.2018

Bond in Malaysia

5.15% Alpha Circle Sdn Bhd

19/11/2019 (AA-) 6,000,000 6,041,083 6,046,483 13.48

8.25% EON Bank Berhad 09/09/2039 (AA3) 3,000,000 3,178,707 3,152,727 7.03

2.00% Eastern & Oriental

Berhad 06/03/2020 (Not

Rated) 3,500,000 3,336,592 3,368,627 7.51

4.93% Al-Dzahab Assets Berhad

11/09/2020 (AAA) 2,000,000 4,060,245 2,044,685 4.56



20

Name of Issuer

Nominal

value

RM

Carrying

Value

RM

Fair value

as at

31.12.2018

RM

Fair value

as at

31.12.2018

expressed as a

percentage of

value of the

Fund

% 5.40% CIMB Group Holdings

Berhad 25/05/2016 (A1) 1,500,000 1,515,534 1,545,204 3.44

3.00% Triplc Ventures Sdn Bhd

08/10/2021 (AAA) 1,000,000 1,044,546 1,044,146 2.33

5.30% GENM Capital Berhad

11/07/2028 (AAA (S)) 1,000,000 1,048,236 1,056,706 2.36 5.50% Al-Dazhab Assets Berhad

21/06/2021 (AAA) 1,000,000 1,029,058 1,029,427 2.29 8.25% Ambank (M) Berhad

18/08/2039 (A1) 1,000,000 1,061,848 1,054,038 2.35

5.30% Sabah Development

Bank Berhad 11/05/2022

(AA1) 1,000,000 1,020,720 1,014,860 2.26

5.60% CIMB Thai Bank Public

Company Limited 05/07/2024 (AA3) 1,000,000 1,034,473 1,032,943 2.30

5.35% Golden Asset

International Finance

05/08/2019 (A1)

1,000,000

1,025,843

1,025,043

2.29

5.90% DRB-Hicom Berhad

01/07/2019 (A+) 1,000,000 1,031,876 1,031,826 2.30 7.50% DRB-Hicom Berhad

15/04/2020 (A) 1,000,000 1,016,307 1,017,337 2.27 4.90% KMCOB Capital Berhad

14/12/2020 (AAA (FG)) 1,000,000 1,002,016 1,003,047 2.24

6.23% Lebuhraya Duke Fasa 3

Sdn Bhd 21/08/2037 (AA-) 500,000 555,795 557,655 1.24

4.80% UEM Sunrise Bhd

08/04/2022 (AA-) 500,000 507,972 507,158 1.13

4.34% Sarawak Hidro Sdn Bhd

09/08/2024 (AAA) 500,000 507,363 507,503 1.13

Total unquoted fixed income securities

27,500,000 30,018,214 28,039,415 62.51

Accumulated unrealised gain on unquoted fixed income

securities at fair value

through profit or loss (1,978,799)

Total unquoted fixed income


through profit or loss 28,039,415



21

Name of Issuer

Nominal

value

RM

Carrying

Value

RM

Fair value

as at

31.12.2018

RM

Fair value

as at

31.12.2018

expressed as a

percentage of

value of the

Fund

%

Name of Counter

Quantity Aggregate

cost

Fair value

as at

31.12.2018

Fair value

as at

31.12.2018

expressed as a

percentage of

value of the

Fund Units RM RM %

Collective Investment Schemes

Areca Income Trust Fund 170,746 - 90,205 0.20

Areca Progressive Income Fund

2.0 5,000,000 5,000,000 5,031,500 11.22

Areca Situational Income Fund 7,441,221 7,463,145 7,948,712 17.72

Areca Situational Income 2.0 Fund 2,000,000 2,008,200 2,069,400 4.61

Total collective investment

scheme at fair value through

profit or loss 14,611,967 14,471,345 15,139,817 33.75

Accumulated unrealised gain on

collective investment


profit or loss

668,472



profit or loss

15,139,817

Name of Issuer

Nominal

value

RM

Carrying

Value

RM

Fair value

as at

30.9.2018

RM

Fair value

as at

30.9.2018

expressed as a

percentage of

value of the

Fund

% 30.9.2018

Bond in Malaysia


19/11/2019 (AA-) 6,000,000 6,103,701 6,115,581 12.67 8.25% Hong Leong Bank Berhad

09/09/2039 (AA3) 3,000,000 3,135,427 3,114,967 6.45

2.00% Eastern & Oriental

Berhad 06/03/2020 (Not

Rated) 3,500,000 3,288,377 3,318,564 6.88

4.93% Al-Dzahab Assets Berhad

11/09/2020 (AAA) 2,000,000 2,019,792 2,019,652 4.18



22

Name of Issuer

Nominal

value

RM

Carrying

Value

RM

Fair value

as at

30.9.2018

RM

Fair value

as at

30.9.2018

expressed as a

percentage of

value of the

Fund

% 6.70% CIMB Bank Berhad

07/10/2038 (AA) 1,250,000 1,296,458 1,289,970 2.68

3.00% Triplc Ventures Sdn Bhd

08/10/2021 (AAA) 1,000,000 1,055,379 1,057,859 2.19

8.25% Ambank (M) Berhad

18/08/2039 (A1) 1,000,000 1,047,531 1,040,601 2.16 5.50% Al Dzahab Assets Berhad

21/06/2021 (AAA) 1,000,000 1,042,479 1,042,469 2.16 5.30% Genm Capital Berhad

11/07/2028 (AAA) 1,000,000 1,011,616 1,034,587 2.14

5.30% Sabah Development

Bank Berhad 11/05/2022

(AA1) 1,000,000 1,033,918 1,033,498 2.14

5.60% CIMB Thai Bank Public

Company Limited 05/07/2024 (AA3) 1,000,000 1,020,651 1,020,051 2.11

5.35% Golden Asset

International Finance

05/08/2019 (A1)

1,000,000

1,010,695

1,012,065

2.10

5.90% DRB-Hicom Berhad

01/07/2019 (A+) 1,000,000 1,016,101 1,016,681 2.11

4.50% AMMB Holdings Berhad

08/08/2019 (AA3) 1,000,000 1,006,251 1,007,691 2.09

7.50% DRB-Hicom Berhad 15/04/2020 (A) 1,000,000 1,031,670 1,034,390 2.14

6.23% Lebuhraya Duke Fasa 3

Sdn Bhd 21/08/2037 (AA-) 500,000 544,253 547,773 1.14

7.50% PBFIN Berhad

05/06/2059 (AA2) 500,000 525,198 522,443 1.08

4.80% UEM Sunrise Bhd

08/04/2022 (AA-) 500,000 510,560 513,825 1.07


21/11/2018 (AA-) 500,000 509,312 509,402 1.06 4.34% Sarawak Hidro Sdn Bhd

09/08/2024 (AAA) 500,000 497,754 501,774 1.04


securities

28,250,000 28,707,123 28,753,843 59.59

Accumulated unrealised gain on

unquoted fixed income


through profit or loss 46,720



through profit or loss 28,753,843



23

Name of Counter

Quantity Aggregate

cost

Fair value

as at

30.9.2018

Fair value

as at

30.9.2018

expressed as a

percentage of

value of the

Fund Units RM RM %

Collective Investment Schemes

Areca Income Trust Fund 1,376,662 - 719,581 1.50

Areca Progressive Income Fund 5,000,000 5,000,000 5,023,500 10.40

Areca Situational Income Fund 7,441,221 7,463,145 7,768,635 16.10

Areca Situational Income 2.0

Fund 2,000,000 2,008,200 2,023,200 4.20


scheme at fair value through profit or loss 15,817,883 14,471,345 15,534,916 32.20

Accumulated unrealised gain on collective investment


profit or loss

1,063,571



profit or loss

15,534,916

Quoted securities

TRADING/SERVICES

Barakah-La 500,000 679,000 65,000 0.13

Total quoted securities in

Malaysia 500,000 679,000 65,000 0.13

Accumulated unrealised loss on quoted securities at fair value

through profit or loss

(614,000)

Total quoted securities at fair

value through profit or loss

65,000

6 CASH AND CASH EQUIVALENTS

31.12.2018 30.9.2018

RM RM

Bank balance with a licensed bank 6,921 8,941

Deposit with a licensed financial institution 1,719,741 3,977,296

1,726,662 3,986,237



24

The effective weighted average interest rate of short-term deposits with licensed financial

institutions per annum as at the date of statement of financial position are as follows:

31.12.2018 30.9.2018

% %

Deposits with licensed financial institutions

3.45

3.30

The deposit has an average maturity of 10 days (30.9.2018:3 days).

7 QUARTERLY ACCOUNTS

The quarterly accounts for the 3-month period ended 31 December 2018 have not been

audited.

Kuching Branch1st Floor, Sublot 3Lot 7998, Block16 KCLD, Cha Yi GoldlandJalan Tun Jugah / Stutong93350 Kuching, SarawakT 082-572 472

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