cover quarterlyreport sfi-fa (yy) - areca capital

Quarterly Report March 2016 For the Period Ended 31 March 2016

Q U ART E RL Y R EP ORT M ARC H 2016

ARECA Steady fixedINCOME FUND

Contents

CORPORATE DIRECTORY 2

MANAGER’S REPORT

Fund Information, Performance & Review 3

Market Review & Outlook 7

TRUSTEE’S REPORT 9

STATEMENT BY THE MANAGER 9

UNAUDITED FINANCIAL STATEMENTS FOR

Areca Steady fixedINCOME Fund 10

QUARTERLY REPORT MARCH 2016

ARECA Steady f ixedINCOME FUND

2

C O RP O RA TE D I RE C TO RY

MANAGER

Areca C apital Sdn Bhd (740840-D)

107, Blok B, P usat Dagangan Phileo Damansara 1

No. 9 , Jalan 16/11, O ff 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, C hairman)

Wong Teck Meng (Executive)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal A bidin

(Non-Executive Non-Independent)

Dr. Junid Saham (Independent)

INVESTMENT COMMITTEE MEMBERS


(Independent, C hairman)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal A bidin

(Non-Independent)

Dr. Junid Saham (Independent)

AUDIT COMMITTEE MEMBERS


Wong Teck Meng

Dr. Junid Saham

TRUSTEE

RHB T rustees Berhad (573019-U)

10th Floor, P laza OSK

Jalan A mpang

50450 Kuala Lumpur

Tel: 03-9207 7777 Fax: 03-2175 3288

AUDITOR

P ricewaterhouseCoopers (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

P ricewaterhouseCoopers 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 NA G E R’ S O F F IC E A N D B RA NC H E S

HEAD OFFICE

107, Blok B, P usat Dagangan Phileo Damansara 1 , No. 9 , Jalan 16/11, O ff 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 , (Firs t Floor)

Pers iaran Greentown 5

Greentown Business Centre

30450 Ipoh, Perak

Tel : 605-249 6697/6698

Fax: 605-249 6696

MALACCA

95, Jalan Melaka Raya 24

Taman Melaka Raya

75000 Melaka

Tel : 606-282 9111

Fax: 606-283 9112

mailto:[email protected]

mailto:[email protected]



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 sophis ticated investors with a s table stream of consis tent income

while maintaining capital stability by inves ting in fixed income inves tments

with medium to long term inves tment horizon.

Benchmark Maybank’s 12-month fixed deposit rate

Distribution Policy

of the Fund

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

In the absence of instruc tions to the contrary from a Unit Holder, the

Manager is entitled to reinves t the income dis tributed from the Fund in

additional units of that Fund at the NAV per unit at the end of the

dis tribution day with no entry fee.

Prof ile of

unitholdings

* excluding units held

by the Manager

As at 31 March 2016

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 - - - -

50 ,001 to 500,000 22 53.66 4 .71 15.17

500,001 and above 19 46.34 26.31 84.83

Total* 41 100.00 31.02 100.00

Rebates & Soft

Commissions

The Manager retains soft commiss ions received from s tockbrokers , provided

these are of demonstrable benefit to unitholders . The soft commiss ions may

take the form of goods and services such as data and quotation services ,

computer software inc idental to the management of the Fund and

investment related publications . C ash rebates , if any, are direc ted 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 P ric ing – Selling and repurchase of units by the Manager are at Net

Asset V alue per unit

Financial year end 30 June



4

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

1.1.2016

to

31.3.2016

1.10.2015 to

31.12.2015

Net Asset Value (“NAV”)

Total Net Asset Value (RM million) 33.25 32.39*

Units in circulation (million units ) 31.02 30.49*

NAV per unit (RM) 1 .0720 1 .0624*

* Ex-Distribution

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

policy

Highest NAV per unit (RM) 1 .0723 1 .0818*

Lowest NAV per unit (RM) 1 .0619 1 .0624*

* Ex-Distribution

ASSET ALLOCATION % of NAV

Fixed Income Securities

Quoted securities-local 1 .13 1 .32

Unquoted bonds-local 77.66 85.93

Floating rate negotiable instrument of deposit 2 .99 3 .02

Collective investment scheme 0 .09 0 .09

Cash & cash equivalents including placements and repo 18.13 9 .64

DISTRIBUTION

Distribution date - 31 Dec 2015 Gross distribution (sen per unit) - 2 .00 Net distribution (sen per unit) - 2 .00

NAV before distribution (RM per unit) - 1 .0816 (30 Dec) NAV after distribution (RM per unit) - 1 .0624 (31 Dec)

UNIT SPLITS

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

EXPENSE/ TURNOVER

Management expense ratio (MER) (%)

Please refer to Note 2 for further information

0 .34 0 .34

Portfolio turnover ratio (PTR) (times)


0 .08 0 .06

TOTAL RETURN


Total Return (%) 0 .90 1 .02

- Capital Return (%) 0 .90 (0 .85)

- Income Return (%) - 1 .87

Annual Total Return (%) 3 .67* 4 .10*

Benchmark: Average Maybank’s 12-month fixed deposit rate (%) 3 .33* 3 .33*

* Annualised for comparison purpose only



5

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 4 .33 3 .70 4 .70

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 inves tments) 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: 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 3: 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 4: Fund performance figures are calculated based on NAV to NAV and assume reinvestment of

distributions (if any) at NAV. The total return is sourced from Lipper. Benchmark data is sourced from

Malayan Banking Berhad.

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 ended 31 March 2016 , the Fund posted an annualized return of 3 .67%

against the benchmark, Maybank’s 12-month fixed depos it rate of 3 .33%. The portfolio

bettered the benchmark as a result of maintaining a favorable duration and c redits that

benefitted from interes t rates environment.

The Fund is 80.6% inves ted with exposure to 17 MYR denominated issues in a diverse

spread of sectors . The largest sec tor exposure remains the banking / finance (34.1%)

with an average modified duration of 2 .4 years . We also hold 1 .1% in loan s tocks .

Moving forward, we look forward to rais ing our duration to reap from a low and

accommodative interes t rates policy.

Investment Policy and Strategy

The Fund primarily inves ts in a divers ified 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 March 2016 RM1.0720

Asset Allocation/ Portfolio Composition as at 31.3.2016 31.12.2015

Quoted securities-local 1 .13% 1.32%

Unquoted bonds-local 77.66% 85.93%

Floating rate negotiable

instrument of deposit 2 .99% 3.02%

Collective investment

scheme 0.09% 0.09%

Cash & cash equivalents 18.13% 9.64%

Performance of Areca Steady f ixedINCOME Fund for the financial period since inception to 31 March 2016

18.13%

77.66%

2.99%

0.09% 1.13%

Areca St eady fixedINCOME Fund

Maybank 12 Months Fixed Deposit Rate



7

MARKET REVIEW & OUTL OOK

E CO NO MI C R E VI EW & O U TL OOK

Following las t year end’s optimism, the opposite has to be said of the s tart of Q1 2016. With lower

manufac turing and growth data in C hina, the s tock market of the world’s second larges t economy

was dealt a severely embarrassing blow. C ircuit breakers whic h were ins talled to curb excessive

swings were ins tead the catalyst. C oupled with market ‘shattering’ 2% devaluation of the Yuan,

pos t admittance to access of the much vaunted Spec ial Drawing Rights , a supplementary reserve

set up by International Monetary Fund (IMF), the stock market los t 15% of its value within the

first 2 weeks of trading, leading the world to lose about 9% of stock value. C hina’s export plunge

and lower Gross Domestic P roduc t (GDP) growth overshadowed United States (US) recovery.

P rac tically in full employment and s lowly recovering inflation rate, the US is not amiss if they had

expec ted the Federal (Fed) Fund rate to continue its hawkish path as the plot graph had sugges ted

back in December. However, the influence of C hina in world trade today is far more reaching than

2 decades ago. Recognising that, the Federal Reserve released a dovish s tatement in January’s

Federal O pen Market Committee (FOMC) meet thus reduc ing rate hikes expec tations from 4 to 2

for the year. Meanwhile, Japan and the European Central Bank (ECB) were far from convinc ing in

their recovery leading the Bank O f Japan (BOJ) to adopt negative rates environment while Europe

reduced key rates to zero, deeper negative depos it ra tes and expanded its asset purchase program.

Further dis tractions arose in the form of a potential ‘Brexit’ as the United Kingdom (UK) mull a

referendum on their European Union (EU) membership.

C rude oil price s lid to a 12 year low dipping below US$30 per barrel on lower global growth, 4

decade high oil reserves in the US and inability to agree to curtail oil produc tion among large oil

produc ing nations . However, it recovered to hit US$40 towards end of Q1 as hope of produc tion

freeze builds .

At the same time, things looked brighter for Malaysia as well with 4Q2015 GDP better than

expec ted at 4 .5%. Signs of improving exports data aided by rising oil price in the latter half of this

quarter pushed MYR to the bes t performing currency after a poor showing last quarter as ‘risk on’

mode returned. Trading from 4.40 to below 3 .80 to USD, the ignominy that is 1MDB began to

recede.



8

FIXED INCOME MARKET REVIEW & OUTLOOK

The mini global stock market meltdown in January prompted Bank Negara Malays ia (BNM) to cut

Statutory Reserve Ratio from 4% to 3 .5% as liquidity quickly left our shores exiting s tocks and

bonds . MYR weakened above 4 .40.

Market then learnt that global recovery will be subdued. Responding to that, 10 -year benchmark

US T reasury eased from 2.25% at the start of the quarter to a low of 1 .65% before c lawing to

1 .80% at end of Q1 never peaking above 2% since falling below at end of January. This also

reflec ts the watered down aggress ive rate hike outlook after the US rate hike in December.

Not long after, USD s trength began to wane and fund managers raised their appetite for Emerging

Market (EM) currenc ies and risks , benefiting Malays ia significantly. Foreign holdings in Malays ian

sovereign papers rose RM11.5 bil to RM212.4 bil. For the 1 st quarter of 2016, the government

raised RM25.5 bil through 8 Malaysian Government Securities (MGS)/Government Inves tment

Issues (GII) issues with tenures ranging from 3 to 30 years . As of end March 2016, foreigners held

RM186.7 bil MGS/GII or 31.1% of total outs tanding government debt. PDS issued for the period

January to March this year was RM25.8 bil. O utstanding issued P rivate Debt Securities (PDS)

exc luding quas i-government s tood at RM369.0 bil at end of Q1 2016 of which foreign partic ipation

was only RM14.2bil or 3 .9%.

Overnight P olicy Rate (OPR) was kept unchanged this quarter.

The market is pos itively antic ipating the introduc tion of the new Bank Negara Governor in Datuk

Muhammad Ibrahim, the chosen successor of the outgoing Tan Sri Dato’ Dr Zeti. A smooth

trans ition with more of the same style of governance is expec ted. As such, an accommodative

monetary policy will likely prevail for the next two OPR meetings .

For this period, the yield curve bullishly flattened with s trong foreign and local demand buying up

5 years and above tenures . Benchmark 3 , 5 and 10 years MGS recorded 3 .22%, 3 .45% and

3 .82%. O n the PDS front, high grade AAA trekked MGS curve as inves tors loaded their portfolios

as easy rates continue to dominate.



9

T RU S T E E ’ S RE P O RT

For The Period Ended 31 March 2016

To the Unit holders of Areca Steady f ixedINCOME Fund

We have ac ted as T rus tee of A reca Steady fixedINCOME Fund (the “Fund”) for the financial period

ended 31 March 2016 . In our opinion and to the best of our knowledge, A reca C apital Sdn Bhd, the

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

(a) limitations imposed on the inves tment powers of the Manager and the T rustee under the

Deeds , the Securities Commiss ion Malays ia’s Guidelines on Unlisted Capital Market

P roduc ts under the Lodge and Launch Framework , the Capital Markets and Services Act

2007 and other applicable laws;

(b) valuation or pricing is carried out in accordance with the Deed and any regulatory

requirements; and

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

regulatory requirements .

For and on behalf of the Trustee

RHB TRUSTEES BERHAD (Company No: 573019-U)

TONY CHIENG SIONG UNG

DIRECTOR

Kuala Lumpur

17 May 2016

S T A T E ME NT BY T HE MA NA G E R

To the Unit holders of Areca Steady f ixedINCOME Fund

We, Wong Teck Meng and Dato’ Wee Hoe Soon @ Gooi Hoe Soon, two of the Direc tors of A reca

Capital Sdn Bhd, do hereby s tate that in our opinion as the Manager, the unaudited financ ial

s tatements are drawn up in accordance with the provisions of the Deed and give a true and fair

view of the financial position of the Fund as at 31 March 2016 and of its results , changes in net

asset attributable to unitholders and cash flows of the Fund for the financ ial period ended 31

March 2016 in accordance with the Malaysian Financial Reporting Standards and International

Financ ial Reporting Standards .

For and on behalf of the Manager

ARECA CAPITAL SDN BHD

WONG TECK MENG

EXECUTIVE DIRECTOR

DATO’ WEE HOE SOON @ GOOI HOE SOON

INDEPENDENT DIRECTOR

Kuala Lumpur

17 May 2016



10

UNAUDITED STATEMENT OF FINANCIAL POSITION

As At 31 March 2016

31.03.2016 31.12.2015

Note RM RM

Current Assets

Financ ial assets at fair value through profit

or loss 4 27,215,686 29,263,223

Cash and cash equivalents 5 6 ,076,430 3 ,166,807

Total Assets 33 ,292,116 32,430,030

Current Liabilities

Accrued management fee 36,486 36,912

Other payables and accruals 678 4 ,028

Total Liabilities 37 ,164 40,940

Net Asset Value of the Fund 33 ,254,952 32,389,090

Equity

Unit holders ’ capital 31 ,386,889 30,810,505

Retained earnings 1 ,868,063 1 ,578,585

Total Net Asset Attributable to Unit Holders 33 ,254,952 32,389,090

Number of Units in Circulation 31 ,021,742 30,485,323

Net Asset Value Per Unit (Ex-Distribution) 1 .0720 1 .0624

The accompanying notes form an integral part of these financial statements .



11

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

For The Financial Period Ended 31 March 2016

1.1.2016

to

31.3.2016

1.10.2015

to

31.12.2015

RM RM

Investment Income

Interest income 406,839 419,625

Net (loss )/gain on financial assets at fair value

through profit or loss

(8 ,036)

30,637

398,803 450,262

Expenses

Management fee 100,987 97,840

T rustee's fee - 2 ,802

Audit fee - -

Tax agent’s fee - -

Adminis trative expenses 8 ,338 12,973

109,325 113,615

Net Prof it Before Taxation 289,478 336,647

Taxation - -

Net Prof it After Taxation And Total Comprehensive

Income For The Financial Period 289,478 336,647

Net Prof it After Taxation Is Made Up As Follows:

Realised amount 294,814 824,081

Unrealised amount (5 ,336) (487,434)

289,478 336,647




12

UNAUDITED STATEMENT OF CHANGES IN EQUITY


Unit holders’

capital

Retained

earnings

Total net

asset value

RM RM RM

Balance as at 1 January 2016 30,810,505 1 ,578,585 32,389,090

Movement in unit holders ’ capital:

C reation of units aris ing from application 1 ,176,384 - 1 ,176,384

C reation of units aris ing from dis tribution - - -

Cancellation of units (600,000) - (600,000)

Distribution - - -

Total comprehensive income for the financial

period - 289,478 289,478

Balance as at 31 March 2016 31,386,889 1 ,868,063 33,254,952

Balance as at 1 October 2015 31,452,862 1 ,840,379 33,293,241

Movement in unit holders ’ capital:

C reation of units aris ing from application 598,441 - 598,441

C reation of units aris ing from dis tribution - - -

Cancellation of units (1 ,240,798) - (1 ,240,798)

Distribution - (598,441) (598,441)

Total comprehensive income for the financial

period - 336,647 336,647

Balance as at 31 December 2015 30,810,505 1 ,578,585 32,389,090




13

UNAUDITED STATEMENT OF CASH FLOW S


1.1.2016

to

31.3.2016

1.10.2015

to

31.12.2015

Note RM RM

Cash Flows From Operating Activities

P roceeds from disposal of inves tments 3 ,983,700 3 ,744,732

Purchase of inves tments (1 ,965,663) (1 ,021,816)

Interest received from depos its with licensed

financ ial institutions 31,996 28,255

Interest received from unquoted fixed income

securities 396,307 481,946

Management fee paid (101,389) (109,563)

Payment for other fees and expenses (11,712) (11,006)

Net cash flows generated from operating activities 2 ,333,239 3 ,112,548

Cash Flows From Financing Activities

P roceeds from c reation of units 1 ,176,384 598,441

Payment for cancellation of units (600,000) (1 ,240,798)

Distribution paid - (598,441)

Net cash flows generated from/(used in) financ ing

ac tivities 576,384 (1 ,240,798)

Net Increase In Cash And Cash Equivalents 2 ,909,623 1 ,871,750

Cash And Cash Equivalents At The Beginning

Of The Financial Period 3 ,166,807

1 ,295,057

Cash And Cash Equivalents At The End Of The

Financial Period 5 6 ,076,430 3 ,166,807




14

NOTES TO THE FINANCIAL STATEMENTS – 31 March 2016

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 s truc ture on 11 May 2009. A trustee was later appointed for the Fund with the

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

dated 15 A ugust 2013 (“the Deed”) between A reca C apital Sdn Bhd as the Manager, RHB

T rustees Berhad as the T rustee and all the registered unitholders of the Fund.

The princ ipal ac tivity of the Fund is to invest in inves tments as defined under Schedule 6 of

the Deed, which include money market ins truments , fixed income securities and depos its

with financ ial ins titutions . The Fund commenced operations on 11 May 2009 and will

continue its operations until terminated by the T rus tee in accordance with P art 11 of the

Deed.

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

cons istent income while maintaining capital stability by inves ting in fixed income investments

with medium to long term inves tment horizon.

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

princ ipal activities are managing private and unit trus t funds .

2 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund seeks to provide sophis ticated investors with a s table s tream of consis tent income

while maintaining capital s tability by inves ting in fixed income inves tments with medium to

long term investment horizon. In order to meet its s tated inves tment objectives , th e 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 polic ies are implemented to

provide effec tive ways to reduce future risk and enhance future re turns within the Fund’s

mandate.

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

interes t rate risk and foreign exchange/currency risk), c redit risk, liquidity risk, business risk

and capital risk.

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

Manager and adherence to the investment restrictions as s tipulated Deed.

Financ ial instruments of the Fund as follows:

Loan and

receivables

Financial

assets at fair

value through

prof it or loss Total

31 March 2016

Quoted securities - 375,000 375,000

Unquoted fixed income securities - 26 ,809,919 26,809,919

Collective investment scheme - 30 ,767 30,767

Cash and cash equivalents 6 ,076,430 - 6 ,076,430

6 ,076,430 27,215,686 33,292,116



15

Loan and

receivables

Financial

assets at fair

value through

prof it or loss Total

31 December 2015

Quoted securities - 427,500 427,500

Unquoted fixed income securities - 28 ,805,202 28,805,202

Collective investment scheme - 30,521 30,521

Cash and cash equivalents 3 ,166,807 - 3 ,166,807

3 ,166,807 29,263,223 32,430,030

All current liabilities are financial liabilities which are carried at amortised cos t.

Market risk

(a) P rice risk

P rice risk arises mainly for uncertainty about future prices of investments . I t represents

the potential loss the Fund might suffer through holding market pos itions 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 inves tment portfolio.

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

31.3.2016 31.12.2015

RM RM

Financ ial assets at fair value through

profit or loss

33 ,292,116

32,430,030

(b) Interest rate risk

Cash flow interest rate risk is the risk that the future cash flows of a financ ial

ins trument 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 interes t 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, inves tors should be aware that should the

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

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

affected at maturity. In order to mitigate interes t 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 analys is .

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

forecas ting interes t rate movements . P rices 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 interes t rate movements .

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

and money market instruments are subjec t to interes t rate fluctuations . Such



16

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

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

issuers are highly leveraged. A n inc rease in interes t rates may therefore inc rease 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 interes t rate fluc tuations is minimal.

(c ) Currency risk

As the Fund may inves t its assets in securities denominated in a wide range of

currenc ies other than Ringgit Malaysia, the net asset value of the Fund expressed in

Ringgit Malays ia may be affected favourably or unfavourably by exchange control

regulations or changes in the exchange rates between Ringgit Malaysia and such other

currenc ies . The risk is minimised through investing in a wide range of foreign

currenc ies denominated assets and thus , divers ifying the risk of single currency

exposure.

In the normal course of inves tment, the Manager will usually not hedge foreign

currency exposure. The Manager may however depending on prevailing market

circumstances at a particular point in time, choose to use forward, option contracts or

other derivatives for hedging and risk reduction purposes .

C redit risk

C redit risk refers to the ability of an issuer or counterparty to make timely payments of

interes t, principals and proceeds from realisation of inves tment. The Manager manages the

c redit risk by undertaking c redit evaluation to minimise such risk.

C redit risk aris ing from placements on deposits in licensed financial institutions is managed

by ensuring that the Fund will only place depos its in reputable licensed financ ial institutions .

The settlement terms of the proceeds from the c reation of units' receivable from the

Manager and redemption of units payable to the Manager are governed by the SC's

Guidelines on Unlisted C apital Market P roducts under the Lodge and Launch Framework.

C redit 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 princ ipal amount upon

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

capital invested and income foregone. Management of the c redit risk is largely accounted for

by the Fund’s management of issue-specific risk. This refers to the emphas is on c redit

analys is conduc ted to determine issuers ’ or guarantors ’ ability to service promised payments .

The maximum exposure to c redit risk before any c redit enhancements is the carrying

amount of the financ ial assets is set out below:



17

Financial assets at

fair value through

prof it or loss

RM

Cash and

Cash

Equivalents

RM

Total

RM

As at 31 March 2016

Finance

AAA - 4 ,337 4 ,337

AA3/AA- - 5 ,551,766 5 ,551,766

A2/A - 520,327 520,327

Quoted securities 375,000 - 375,000

Collective investment scheme 30,767 - 30,767

Unquoted fixed income securities :

AAA 2 ,091,046 - 2 ,091,046

AA1/AA+ - - -

AA2/AA 1 ,897,574 - 1 ,897,574

AA3/AA- 17,491,043 - 17,491,043

A1/A + 1,116,099 - 1 ,116,099

A2/A 1 ,032,821 - 1 ,032,821

Non-rated 3 ,181,336 - 3 ,181,336

27,215,686 6 ,076,430 33,292,116

As at 31 December 2015

Finance

AAA - 5 ,923 5 ,923

AA3/AA- - 3 ,160,884 3 ,160,884

Quoted securities 427,500 - 427,500

Collective investment scheme 30,521 - 30,521

Unquoted fixed income securities :

AAA 2 ,082,568 - 2 ,082,568

AA1/AA+ 506,367 - 506,367

AA2/AA 2 ,364,708 - 2 ,364,708

AA3/AA- 18,537,709 - 18,537,709

A1/A + 1,139,030 - 1 ,139,030

A2/A 1 ,017,052 - 1 ,017,052

Non-rated 3 ,157,768 - 3 ,157,768

29,263,223 3 ,166,807 32,430,030

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

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

financ ial year are neither pas t due nor impaired.

Liquidity risk

Liquidity risk is the risk that inves tments cannot be readily sold at or near its ac tual value

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

manages this risk by maintaining suffic ient level of liquid assets to meet antic ipated

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 financ ial liabilities into relevant maturity groupings

based on the remaining period at the s tatement of financial position date to the contrac tual

maturity date. The amounts in the table below are the contrac tual undiscounted cash flows .



18

Less than

one month

Between

one

month to

one year

Total

RM RM RM

As at 31 March 2016

Accrued management fee 36,486 - 36,486

Other payables and accrued expenses - 678 678

Contrac tual cash outflows 36,486 678 37,164

As at 31 December 2015

Accrued management fee 36,912 - 36,912

Other payables and accrued expenses - 4 ,028 4 ,028

Contrac tual cash outflows 36,912 4 ,028 40,940

Bus iness risk

Bus iness risk of emerging companies with a short track record that tends to be higher than

matured and well-established companies . The Fund gives preference to inves t in companies

with a reasonable track record compared to a new company.

The Manager can manage the market cycles and short-term fluctuations by virtue of its

experience, the analytical process adopted by its Fund Manager and by construc ting a

divers ified investment portfolio.

Redemption and subsc ription of units are important in the day -to-day management of the

Fund. Liquidity is monitored everyday to ensure the Fund is not affec ted espec ially by

unexpec ted redemption.

The compliance unit is in place to ensure no breaches in investment limits . I f there is any

breach, the compliance unit can quickly notify the Fund Manager to take correc tive ac tion.

In managing the Fund, the Fund Manager has es tablished policies and procedures outlining

the internal control mechanism, reporting respons ibilities and internal audit and compliance

func tion.

The performance and inves tment activities of the Fund are regularly reviewed by the

Investment Committee and the Board of Direc tors of the Manager.

Capital risk

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

retained earnings . The amount of equity can change significantly on a daily basis as the Fund

is subjec t to daily subsc riptions and redemptions at the disc retion of shareholders . The Fund’s

objec tive 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 s takeholders and

to maintain a s trong capital base to support the development of the investment ac tivities of

the Fund.

Fair value estimation

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

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

an exit price).

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

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

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

traded price falls within the bid-ask spread. In circumstances where the last traded price is



19

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 transac tions for the asset take place with suffic ient

frequency and volume to provide pric ing information on an ongoing bas is .

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

using valuation techniques .

Fair value hierarchy

(i) The table below analyses financ ial ins truments 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 direc tly (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 bas is of the lowes t level input that is s ignificant to the

fair value measurement in its entirety. For this purpose, the s ignificance of an input is

assessed against the fair value measurement in its entirety. I f a fair value measurement

uses observable inputs that require significant adjustment based on unobservable i nputs ,

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 spec ific 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 dis tributed or updated, reliable and verifiable, not proprietary, and provided by

independent sources that are actively involved in the relevant market.

The following table analyses within the fair value hierarchy the Fund’s financial assets (b y

class) measured at fair value:

Level 1 Level 2 Level 3 Total

RM RM RM RM

31 March 2016


profit or loss :

- quoted securities 375,000 - - 375,000

- unquoted fixed income securities 26 ,809,918 - 26,809,918

-collec tive inves tment scheme 30,767 - - 30 ,767

31 December 2015


profit or loss :

- quoted securities 427,500 - - 427,500

- unquoted fixed income securities 28 ,805,202 - 28,805,202

-collec tive inves tment scheme 30,521 - - 30 ,521

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

therefore classified within Level 1 , inc lude ac tive quoted securities . The Fund does not adjust

the quoted prices for these instruments .



20

Financ ial instruments that trade in markets that are considered to be ac tive but are valued

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

observable inputs are c lass ified within Level 2 , these include unquoted fixed income securities.

As Level 2 ins truments include positions that are not traded in ac tive markets and/or are

subjec t to trans fer res trictions , valuations may be adjusted to reflec t illiquidity and/or non -

trans ferability, which are generally based on available market informati on.

(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 s tatements have been prepared under the historical cos t convention in

accordance with the Malaysian Financ ial Reporting Standards (“MFRS”) and International

Financ ial Reporting Standards (“IFRS”).

The preparation of financ ial s tatements in conformity with the MFRS and IFRS requires the

use of certain c ritical accounting es timates and assumptions that affec t the reported

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

of the financial s tatements , and the reported amounts of revenues and expenses during the

reported financ ial year. I t 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 bes t knowledge of current events and actions , ac tual results

may differ.

4 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

31.3.2016 31.12.2015

RM RM

Designated at fair value through profit or loss

- Q uoted inves tments 375,000 427,500

- Unquoted fixed income securities 26 ,809,919 28,805,202

- C ollec tive inves tment scheme 30,767 30,521

27 ,215,686 29,263,223

Net (loss )/gain on assets at fair value through

profit or loss :

-realised (loss)/gain on disposals (2 ,700) 518,071

-unrealised fair value loss (5 ,336) (487,434)

(8 ,036) 30,637



21

Financ ial assets at fair value through profit or loss as at 31 March 2016 are as follows:

Unquoted Fixed Income Securities

Nominal

value Name of Issuer Carrying

value

Fair value

as at

31.3.2016

Fair value

as at

31.3.2016

expressed as a

percentage of

value of the

Fund

RM RM RM %

6,000,000 5 .15% A lpha C ircle Sdn Bhd

19/11/2019 AA- 6 ,144,635 6 ,143,795 18.48

3 ,000,000 8 .25% Hong Leong Bank Berhad

09/09/2039 AA3 3 ,335,318 3 ,322,418 9 .99

2 ,000,000 2 .00% Eas tern & O riental

Berhad 06/03/2020 NR 2 ,167,640 2 ,185,675 6 .58

2 ,000,000 4 .66% Jati Cakerawala Sdn Bhd

31/07/2018 AA3 2 ,011,527 2 ,018,027 6 .07

2 ,000,000 4 .50% AMMB Holdings Berhad

08/08/2019 AA3 1 ,982,955 1 ,990,375 5 .99

1 ,250,000 6 .70% CIMB Bank Berhad

07/10/2038 AA 1 ,346,971 1 ,345,059 4 .04

1 ,000,000 8 .25% A mBank (M) Berhad

18/08/2039 A1 1 ,118,009 1 ,116,099 3 .36

1 ,000,000 5 .46% TRIplc Ventures Sdn Bhd

08/10/2021 AAA 1 ,069,860 1 ,080,900 3 .26

1 ,000,000 7 .50% DRB-Hicom Berhad

28/12/2114 A 1 ,035,750 1 ,032,820 3 .11

1 ,000,000 5 .60% CIMB Thai Bank Public

Company Limited 05 /07/2024

AA3 1 ,017,201 1 ,023,791 3 .08

1 ,000,000 4 .82% Sports Toto Malaysia Sdn

Bhd 28/06/2019 AA- 1 ,009,099 1 ,011,599 3 .04

1 ,000,000 4 .90% Gulf Investment

Corporation 30/08/2016 AAA 1 ,013,836 1 ,010,146 3 .04

1 ,000,000 5 .35% Golden Assets

International Finance Limited

05/08/2019 AA3 968,488 959,828 2 .89

500,000 7 .50% PBFin Berhad

05/06/2059 AA2 552,365 552,515 1 .66

500,000 4 .85% A lpha C ircle Sdn Bhd

17/11/2017 AA- 509,871 511,006 1 .54

500,000 4 .80% UEM Sunrise Bhd

08/04/2022 AA- 505,834 510,204 1 .53

1 ,000,000 5 .90% CIMB 5 -Year Callable

KLIBOR Range Acc rual FRNID

17/10/2018 NR 977,962 995,662 2 .99

Total unquoted fixed income

securities 26,767,321 26,809,919 80.65

Quoted Securities

TRADING/SERVICES

500,000 Barakah-O ffshore-RCULS 13/18 427,500 375,000 1 .13



22

Collective Inves tment Scheme

30,073 Areca Islamic C ash Fund 30,521 30,767 0 .09

Total investments 27,225,342 27,215,686 81.87

Unrealised loss on financ ial

assets at fair value through

profit or loss (9 ,656)

Total fair value of financ ial


profit or loss

27,215,686

Financ ial assets at fair value through profit or loss as at 31 December 2015 are as follows:

Unquoted Fixed Income Securities

Nominal


value

Fair value

as at

31.12.2015

Fair value

as at

31.12.2015

expressed as a

percentage of

value of the

Fund

RM RM RM %

6,000,000 5 .15% A lpha C ircle Sdn Bhd

19/11/2019 AA- 6 ,028,356 6 ,067,596 18.74

3 ,000,000 8 .25% Hong Leong Bank Berhad

09/09/2039 AA3 3 ,411,423 3 ,397,023 10.49

2 ,000,000 2 .00% Eas tern & O riental

Berhad 06/03/2020 NR 2 ,162,168 2 ,179,968 6 .74

2 ,000,000 4 .66% Jati Cakerawala Sdn Bhd

31/07/2018 AA3 2 ,031,603 2 ,034,763 6 .28

2 ,000,000 4 .50% AMMB Holdings Berhad

08/08/2019 AA3 2 ,004,528 2 ,005,888 6 .19

1 ,250,000 6 .70% CIMB Bank Berhad

07/10/2038 AA 1 ,331,466 1 ,326,091 4 .09

1 ,000,000 8 .25% A mBank (M) Berhad

18/08/2039 A1 1 ,143,850 1 ,139,030 3 .52

1 ,000,000 5 .46% TRIplc Ventures Sdn Bhd

08/10/2021 AAA 1 ,054,567 1 ,056,247 3 .27

1 ,000,000 5 .60% CIMB Thai Bank Public

Company Limited 05 /07/2024

AA3 1 ,038,260 1 ,031,470 3 .18

1 ,000,000 4 .90% Gulf Investment

Corporation 30/08/2016 AAA 1 ,026,471 1 ,026,321 3 .17

1 ,000,000 4 .30% Noble Group Limited

29/01/2016 AA2 1 ,017,842 1 ,018,092 3 .14

1 ,000,000 7 .50% DRB-Hicom Berhad

28/12/2114 A 1 ,016,872 1 ,017,052 3 .14

1 ,000,000 4 .82% Sports Toto Malaysia Sdn

Bhd 28/06/2019 AA- 994,992 997,082 3 .08

1 ,000,000 5 .35% Golden Assets

International Finance Limited

05/08/2019 AA3 1 ,020,150 982,120 3 .03

500,000 7 .50% PBFin Berhad

05/06/2059 AA2 544,116 543,016 1 .68

500,000 4 .70% YTL Power International

Berhad 13/10/2021 AA1 503,377 506,367 1 .56



23

Nominal


value

Fair value

as at

31.12.2015

Fair value

as at

31.12.2015

expressed as a

percentage of

value of the

Fund

500,000 4 .85% A lpha C ircle Sdn Bhd

17/11/2017 AA- 502,525 503,825 1 .56

500,000 4 .80% UEM Sunrise Bhd

08/04/2022 AA- 497,680 499,850 1 .54

500,000 4 .50% Hong Leong Bank Berhad

21/6/2024 AA2 493,876 495,601 1 .53

1 ,000,000 5 .90% CIMB 5 -Year Callable

KLIBOR Range Acc rual FRNID

17/10/2018 NR 955,600 977,800 3 .02

Total unquoted fixed income

securities 28,779,722 28,805,202 88.95

Quoted Securities

TRADING/SERVICES

500,000 Barakah-O ffshore-RCULS 13/18 450,000 427,500 1 .32

Collective Inves tment Scheme

30,073 Areca Islamic C ash Fund 30,283 30,521 0 .09

Total investments 29,260,005 29,263,223 90.36

Unrealised loss on financ ial


profit or loss (3 ,218)

Total fair value of financ ial


profit or loss

29,263,223

5 CASH AND CASH EQUIVALENTS

31.3.2016 31.12.2015

RM RM

Bank balance with a licensed bank 4 ,337 5 ,923

Depos it with licensed financial ins titutions 6 ,072,093 3 ,160,884

6 ,076,430 3 ,166,807

The effective weighted average interest rate of short-term depos its with licensed financ ial

ins titutions per annum as at the date of s tatement of financial pos ition are as follows:

31.3.2016 31.12.2015

% %

Deposits with a licensed financial ins titution

3 .35

3 .47

The deposit have an average maturity of 7 days .

6 QUARTERLY ACCOUNTS

The quarterly accounts for the 3-month period ended 31 March 2016 have not been audited.

cover quarterlyreport sfi-fa (yy) - areca capital

Documents