QUARTERLY REPORT DECEMBER 2014 - ARECA ... Dec14...QUARTERLY REPORT DECEMBER 2014 ARECA Flexi...

QUA RTERLY REPORT DECEMBER 2014

ARECA Flexi 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 Flexi fixedINCOME Fund 9

QUARTERLY REPORT DECEMBER 2014


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) Tam Chiew Lin (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)

Teoh Boon Kiaw (Non-Independent)

Dr. Junid Saham (Independent)

AUDIT COMMITTEE MEMBERS Dato’ Wee Hoe Soon @ Gooi Hoe Soon

Wong Teck Meng

Dr. Junid Saham

TRUSTEE

RHB Trustees Berhad (573019-U)

6th Floor, Plaza OSK

Jalan Ampang

50450 Kuala Lumpur

Tel: 03-9207 7778 Fax: 03-2175 3223

AUDITOR

PricewaterhouseCoopers (AF1146)

Level 10, 1 Sentral, Jalan Travers

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 Travers

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 6697/6698

Fax: 605-249 6696

MALACCA

95A, Jalan Melaka Raya 24

Taman Melaka Raya

75000 Melaka

Tel : 606-282 9111

Fax: 606-283 9112

mailto:[email protected]:[email protected]



3

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

Name of the Fund Areca Flexi fixedINCOME Fund

Fund Category/

Type

Fixed Income (Wholesale Fund)/Income & Growth

Objective of the

Fund

To provide qualified investors with relatively steady income and moderate

capital appreciation over a short to medium-term by investing in fixed

income investments.

Benchmark Maybank’s 6-month fixed deposit rate

Distribution Policy

of the Fund

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

Profile of

unitholdings

* excluding units held

by the Manager

As at 31 December 2014

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 17 77.27 2.44 39.71

500,001 and above 5 22.73 3.71 60.29

Total* 22 100.00 6.15 100.00

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 3 January 2012

Initial Offer Price RM1.0000 per unit during the initial offer period of 21 days ended 23

January 2012

Pricing Policy

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

Value per unit

Financial year end 30 June



4

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

01.10.2014

to

31.12.2014

01.7.2014

to

30.9.2014

Net Asset Value (“NAV”)

Total Net Asset Value (RM million) 6.62* 6.54

Units in circulation (million units) 6.29* 6.32

NAV per unit (RM) 1.0525* 1.0351

* Ex-Distribution

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

Highest NAV per unit (RM) 1.0740* 1.0383

Lowest NAV per unit (RM) 1.0291* 1.0204

* Ex-Distribution

ASSET ALLOCATION % of NAV

Fixed Income Securities

Unquoted bonds-local - -

Unquoted bonds-foreign 79.44 79.62

Cash & cash equivalents including placements and repo 20.56 20.51

DISTRIBUTION Please refer to Note 2 for further information

Distribution date 30 Dec 2014 -

Gross distribution (sen per unit) 1.00 -

Net distribution (sen per unit) 1.00 -

NAV before distribution (RM per unit) 1.0615 (29 Dec) - NAV after distribution (RM per unit) 1.0520 (30 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 3 for further information

0.35 0.32

Portfolio turnover ratio (PTR) (times)


- -

TOTAL RETURN


Total Return (%) (0.05) (0.03)

- Capital Return (%) (0.96) (0.03)

- Income Return (%) 0.91 -

Annual Total Return (%) 10.92* (0.11)*

Benchmark: Average Maybank’s 6-month fixed deposit rate (%) 3.29* 3.17*

*Annualised for comparison purposely only



5

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 7.82 - -

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: Distribution of 1.00 sen per unit was declared on 30 December 2014, 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 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 December 2014, the Fund posted an annualized return of

10.92% against the benchmark, Maybank’s 6-month fixed deposit rate of 3.29%. With

SGD/MYR stronger, the over performance of the portfolio is a combination easing yields

and currency revaluation gains.

The Fund is currently 79.44% invested in solely SGD denominated bonds.

We are confident that the bond held will continue to perform while SGD to MYR trajectory

remain on track for steady growth.

Investment policy and strategy

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

of debentures, money market instruments and deposits with licensed institutions and any

other fixed income related instruments that are in line with the Fund's objective.

NAV per unit as at 31 December 2014 RM1.0525

Asset Allocation/ Portfolio Composition as at 31.12.2014 30.09.2014

Unquoted bonds-local - -

Unquoted bonds-foreign 79.44% 79.49%

Cash & cash equivalents 20.56% 20.51%

Performance of Areca Flexi fixedINCOME Fund

for the financial period since inception to 31 December 2014

79.44%

20.56%

Areca Flexi fixedINCOME Fund

Maybank 6 Months Fixed Deposit



7

MARKET REVIEW & OUTLOOK

ECONOMIC REVIEW & OUTLOOK

With Quantitative Easing ceasing in October, evidence showed that the U.S. continued to plot an

upward momentum in economic data. 4Q14 GDP was slower but encouraging at 2.5% supported

by the strongest consumer confidence level of 93.6 in seven years. Unemployment reached 5.6%

in December, lowest since June 2008 but long term inflation target of 2% was way off mark

trending down to 0.8% at end of 2014 coinciding with declining energy prices. Diverging global economic data may accord U.S. Federal Reserve Chairperson Janet Yellen’s patience in retaining

low interest rates for an extended period.

Europe continued to struggle with high unemployment and negative inflation. In China, 4Q14 GDP

grew by 7.3% albeit the lowest in almost two and a half decades. With inflation rate at 2%, below

their target 3.5%, interest rates were lowered 40bps to 5.6% in November, it was first cut in

more than two years and more stimuli are probable.

Meantime, inflation in Malaysia peaked in February at 3.5% while for the year, CPI rose 3.2%. It

has since eased to 2.7% in December. For the record, petrol pump prices reached its highest in

October at RM2.30 per liter. Exports remained strong with trade balance healthy surprising many with a surplus of RM9.2 bil in December. Malaysia’s need to “re-budget” demonstrates our

reliance on oil revenue. Its price retracement and our desire to reign in fiscal debt to protect our

credit standing can only mean a supportive monetary policy in order to maintain a healthy growth

path.

FIXED INCOME MARKET REVIEW & OUTLOOK

Despite raising Overnight Policy Rate (OPR) in July, 10 years MGS yields eased below 4% proving strong offshore presence. Foreign holdings of all Malaysian Government debts in Ringgit reached

its peak in July/August totalling in excess RM242 bil. However, records at the end of December

2014 showed a reversal to the tune of RM30 bil of outflow since its peak.

For the 4Q14, the Government raised RM19.0 bil through 6 MGS/GII issues. In addition there was

one Skim Perumahan Kerajaan issue of RM1.4 bil. As of end December 2014, foreigners held

RM151.1 bil MGS/GII or 28.2% of outstanding papers. PDS issued for the period October to

December was RM21.6 bil of which foreign participation stands at RM13.9bil or 4.2% of total PDS

outstanding.

For this period, benchmark 3, 5 and 10 years MGS rose between 16 and 18 bps to 3.695%, 3.849%

and 4.102% respectively. On the PDS front, yield curve increased slightly between 1 and 9 bps with AAA most sensitive to MGS moves.

As for Singapore, 10-year government benchmark bond yields declined 19 bps to 2.28%. Its safe-

haven status in the region appeared to have pressed yields lower. SGD/MYR also strengthened

2.7% to 2.639 from 2.57, signifying possible flow across causeway when MYR weakened with

falling oil price.

BNM’s determination of rates will more likely be led by domestic numbers and issues rather than

external factors affecting MYR strength.

Low interest rates are also needed to cushion the impact of the imminent implementation of the

Goods and Services Tax (GST) which directly affects households’ disposable income. In fact, I venture to guess that one might speculate the possibility of even a cut in interest rates.



8

T R U S T E E ’ S R E P O R T

For The Period Ended 31 December 2014

To the Unit holders of Areca Flexi fixedINCOME Fund

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

ended 31 December 2014. 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

Deed, the Securities Commission Malaysia's Guidelines on Wholesale Funds, the Capital Markets and Services Act, 2007 and other applicable laws;

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

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

regulatory requirements; and

(d) the distribution to the unitholders during the financial period ended 31 December 2014 is

consistent with the objectives of the Fund.

For and on behalf of the Trustee

RHB TRUSTEES BERHAD (Company No: 573019-U)

TONY CHIENG SIONG UNG

DIRECTOR

Kuala Lumpur

23 February 2015

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 Flexi fixedINCOME Fund

We, Wong Teck Meng and Dato’ Wee Hoe Soon @ Gooi Hoe Soon, 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 Deed and give a true and fair

view of the financial position of the Fund as at 31 December 2014 and of its results, changes in

net asset attributable to unitholders and cash flows of the Fund for the financial period ended 31

December 2014 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

EXECUTIVE DIRECTOR

DATO’ WEE HOE SOON @ GOOI HOE SOON

INDEPENDENT DIRECTOR

Kuala Lumpur

23 February 2015



9

UNAUDITED STATEMENT OF FINANCIAL POSITION

As At 31 December 2014 31.12.2014 30.9.2014

Note RM RM

Current Assets

Financial assets at fair value through profit

or loss 4 5,259,242 5,206,530

Cash and cash equivalents 5 1,466,364 1,350,958

Total Assets 6,725,606 6,557,488

Current Liabilities

Accrued management fee 7,136 6,675

Other payables & accruals 6,400 11,900

Amount due to manager 91,506 11,900

Total Liabilities 105,042 18,575

Net Asset Value of the Fund 6,620,564 6,538,913

Equity

Unit holders’ capital 6,100,780 6,129,118

Retained earnings 519,784 409,795

Total Net Asset Attributable to Unit Holders 6,620,564 6,538,913

Number of Units in Circulation 6,290,073 6,316,968

Net Asset Value Per Unit (Ex-Distribution) 1.0525 1.0351

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



10

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME For The Financial Period Ended 31 December 2014

01.10.2014

to

31.12.2014

01.7.2014

to

30.9.2014

RM RM

Investment Income Interest income 79,202 77,810

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

through profit or loss 116,841 (58,996)

196,043 18,814

Expenses

Management fee 20,820 20,508

Trustee's fee - -

Audit fee - -

Tax agent's fee - -

Administrative expenses 2,065 30

22,885 20,538

Net Income/(Loss) Before Taxation 173,158 (1,724)

Taxation - -

Net Income/(Loss) After Taxation And Total

Comprehensive Income For The Financial

Period

173,158 (1,724)

Net Income/(Loss) After Taxation Is Made Up As Follows: Realised amount 56,317 57,272

Unrealised amount 116,841 (58,996)

173,158 (1,724)




11

UNAUDITED STATEMENT OF CHANGES IN EQUITY

For The Financial Period Ended 31 December 2014

Unit holders’

capital

Retained

earnings

Total net

asset

value

Balance as at 1 October 2014 6,129,118 409,795 6,538,913

Movement in unit holders’ capital:

Creation of units arising from application - - -

Creation of units arising from distribution 63,169 - 63,169

Cancellation of units (91,507) - (91,507)

Distribution - (63,169) (63,169)

Total comprehensive income for the financial period - 173,158 173,158

Balance as at 31 December 2014 6,100,780 519,784 6,620,564

Balance as at 1 July 2014 6,129,118 411,519 6,540,637

Movement in unit holders’ capital: Creation of units arising from application - - -

Creation of units arising from distribution - - -

Cancellation of units - - -

Total comprehensive loss for the financial period - (1,724) (1,724)

Balance as at 30 September 2014 6,129,118 409,795 6,538,913

UNAUDITED STATEMENT OF CASH FLOWS

For The Financial Period Ended 31 December 2014

01.10.2014

to

31.12.2014

01.7.2014

to

30.9.2014

Note RM RM

Cash Flows From Investing And Operating

Activities

Proceeds from disposal of investments - -

Purchase of investments - - Interest received from deposits with licensed

financial institutions 12,448 11,353

Interest received from unquoted fixed income

securities 130,883 -

Management fee paid (20,360) (20,486)

Payment for other fees and expenses (7,565) (30)

Net Cash Flow Generated From/(Used In)

Operating Activities 115,406 (9,163)

Cash Flows From Financing Activities

Cash proceeds from creation of units 63,169 -

Payment for cancellation of units - -

Distribution paid (63,169) -

Net Cash Flow Generated From/(Used In) Financing

Activities - -

Net Increase/(Decrease) In Cash And Cash

Equivalents 115,406 (9,163)

Cash And Cash Equivalents At The Beginning Of

The Financial Period

1,350,958

1,360,121

Cash And Cash Equivalents At The End Of The

Financial Period 5 1,466,364 1,350,958




12

NOTES TO THE FINANCIAL STATEMENTS – 31 December 2014

1 THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

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

custodian structure on 3 January 2012. A trustee was later appointed for the Fund with the

signing of a Trust Deed dated 28 April 2011 and 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 7 of

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

with financial institutions. The Fund commenced operations on 3 January 2012 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 qualified investors with relatively steady income and

moderate capital appreciation over a short to medium-term by investing in fixed income

investments.

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

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 and foreign exchange/currency risk), credit risk, liquidity risk, business risk,

country 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.

Financial instruments of the Fund are as follows:

Loan and

receivables

Financial

assets at fair

value through

profit or loss Total

31 December 2014

Unquoted fixed income securities - 5,259,242 5,259,242

Cash and cash equivalents 1,466,364 - 1,466,364

1,466,364 5,259,242 6,725,606

30 September 2014

Unquoted fixed income securities - 5,206,530 5,206,530

Cash and cash equivalents 1,350,958 - 1,350,958

1,350,958 5,206,530 6,557,488



13

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

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:

31.12.2014

RM

30.9.2014

RM

Financial asset at fair value through profit or loss 5,259,242 5,206,530

(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 fixed income securities portfolio management

depends on forecasting interest rate movements. Valuation for unquoted fixed income

securities move inversely to interest rate movements, therefore as interest rate rise,

the demand for unquoted fixed income securities decrease and vice versa. Furthermore,

unquoted fixed income securities with longer maturity and lower 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

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.

(c) Currency risk

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

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

Ringgit Malaysia may be affected favourably or unfavourably by exchange control

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

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

denominated assets and thus, diversifying the risk of single currency exposure.



14

In the normal course of investment, 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.

Credit risk

Credit risk refer 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 redemptions of units payable to the Manager are governed by the Securities

Commission's Guidelines on Wholesale Funds.

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

securities.

Credit risk is concern for unquoted fixed income securities. The risk arises when 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 refer to the emphasis on credit

analysis conducted to determine issuers' or guarantors' ability to service promised payments.

The maximum exposure 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

Amount

due from Manager

RM

Total

RM


Finance

AAA - 3,975 - 3,975

AA2 - 641,629 - 641,629

AA3/AA- - 820,760 - 820,760

Unquoted fixed income

securities:

Non-rated 5,259,242 - - 5,259,242

5,259,242 1,466,364 - 6,725,606

As at 30 September 2014

Finance

AAA - 839 - 839

AA2 - 646,095 - 646,095

AA3/AA- - 704,024 - 704,024

Unquoted fixed income

securities:

Non-rated 5,206,530 - - 5,206,530

5,206,530 1,350,958 - 6,557,488

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.



15

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

More than

one month

Total

RM RM RM


Amount due to Manager

- management fee 7,136 - 7,136

- cancellation of units 91,506 91,506 Other payables and accrued expenses - 6,400 6,400

Contractual cash outflows 98,642 6,400 105,042


Accrued management fee 6,675 - 6,675

Other payables and accrued expenses - 11,900 11,900

Contractual cash outflows 6,675 11,900 18,575

Business risk

Business 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 invest 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 constructing a

diversified investment portfolio.

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

Fund. Liquidity is monitored everyday to ensure the Fund is not affected especially by

unexpected redemption.

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

breach, the compliance unit can quickly notify the Fund Manager to take corrective action.

In managing the Fund, the Fund Manager has established policies and procedures outlining

the internal control mechanism, reporting responsibilities and internal audit and compliance

function.

The performance and investment activities of the Fund are regularly reviewed by the

Investment Committee and the Board of Directors of the Manager.

Country risk

When a Fund invests into foreign markets, the foreign investments portion may be affected

by risks specific to a country in which it invests in. Such risk includes changes in the

country’s economic fundamentals, social and political stability, currency movements and

foreign investment policies. The factors may have impact on the prices of the Fund’s

investment in that country and consequently may also affect the Fund’s NAV and its growth.

For the Fund, country risk is managed through investing in securities in countries which are

well researched.



16

Capital risk

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

retained earnings. 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 unit holders. 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 unit holders 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

The fair value of financial assets and financial liabilities 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. Prior to 1 July 2013, the quoted market price used for

financial assets held by the Fund was the current bid price; the quoted market price for

financial liabilities is the current asking price. The Fund adopted MFRS 13 "Fair Value

Measurement" from 1 July 2013 and changed its fair valuation inputs to utilise the last

traded market price for both financial assets & financial liabilities.

An active market is a market which transactions for the asset or liability take place with

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

The fair value of financial assets and financial liabilities that are not traded in an active

market is determined by using valuation techniques. The Fund uses a variety of methods

and makes assumptions that are based on market conditions existing at each periodend date.

Valuation techniques used for non-standardised financial instruments such as options,

currency swaps and other over-the-counter derivatives, include the use of comparable

recent arm’s length transactions, reference to other instruments that are substantially the

same, discounted cash flow analysis, option pricing models and other valuation techniques

commonly used by market participants making the maximum use of market inputs and

relying as little as possible on entity-specific inputs.

For instruments for which there is no active market, the Fund may use internally developed

models, which are usually based on valuation methods and techniques generally recognised

as standard within the industry. Valuation models are used primarily to value unlisted

securities, debt securities and other debt instruments for which market were or have been

inactive during the financial year. Some of the inputs to these models may not be market

observable and are therefore estimated based on assumptions.

The output of a model is always an estimate or approximation of a value that cannot be

determined with certainty, and valuation techniques employed may not fully reflect all

factors relevant to the positions the Fund holds.

The fair value are based on the following methodology and assumptions:

(i) Bank balance and deposits with financial institutions with maturities less than 1 year,

the carrying value is a reasonable estimate of fair value.

(ii) The carrying value less impairment provision of receivables and payables are assumed

to approximate their fair values. The carrying value of the financial assets and financial

liabilities approximate their fair value due to their short term nature.

Valuations are therefore adjusted, where appropriate, to allow for additional factors including

model risk, liquidity risk and counterparty risk.

Fair value hierarchy

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.



17

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.

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

class) measured at fair value:

Level 1

RM

Level 2

RM

Level 3

RM

Total

RM


Financial assets at fair value through

profit or loss at inception: - unquoted fixed income securities - 5,259,242 - 5,259,242


Financial assets at fair value through profit or loss at inception:

- unquoted fixed income securities - 5,206,530 - 5,206,530

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.

3 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

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

accordance with Malaysian Financial Reporting Standards (“MFRS”) and International

Financial Reporting Standards (“IFRS”).

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.



18

4 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

31.12.2014 30.9.2014

RM RM

Designated at fair value through profit or loss

5,259,242

5,206,530

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

- realised gain on disposal - - - unrealised fair value gain/(loss) 116,841 (58,996)

116,841 (58,996)

Financial assets at fair value through profit or loss as at 31 December 2014 are as follows:

Nominal

value Name of Issuer Carrying

value

Fair value

as at

31.12.2014

Fair value

as at

31.12.2014

expressed as

a % of value

of the Fund RM RM %

Bond in

Singapore

SGD

2,000,000

5.125% Genting Singapore PLC

12/09/2017 NR 5,142,401 5,259,242 79.44

Total bond in Singapore 5,142,401 5,259,242 79.44

Total unquoted fixed income

securities 5,142,401 5,259,242 79.44

Accumulated unrealised gain on

financial assets at fair value

through profit or loss 116,841

Fair value of financial assets at

fair value through profit or

loss

5,259,242



19

Financial assets at fair value through profit or loss as at 30 September 2014 are as follows:

Nominal

value Name of Issuer Carrying

value

Fair value as at

30.9.2014

Fair value

as at

30.9.2014

expressed as

a % of value

of the Fund RM RM RM %

Bond in

Singapore

SGD

2,000,000

5.125% Genting Singapore PLC

12/09/2017 NR 5,265,526 5,206,530 79.62

Total bond in Singapore 5,265,526 5,206,530 79.62

Total unquoted fixed income

securities 5,265,526 5,206,530 79.62

Accumulated unrealised loss on financial assets at fair value

through profit or loss (58,996)

Fair value of financial assets at

fair value through profit or

loss

5,206,530

5 CASH AND CASH EQUIVALENTS

01.10.2014

to

31.12.2014

RM

01.7.2014

to

30.9.2014

RM

Deposits with licensed financial institutions 1,462,389 1,350,119

Bank balance with a licensed bank 3,975 839

1,466,364 1,350,958

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:

31.12.2014 30.9.2014

% %

Deposits with licensed financial institutions

3.42

3.35

The deposits have an average maturity of 19 days.

6 QUARTERLY ACCOUNTS

The quarterly accounts for the 3-month period ended 31 December 2014 have not been

audited.

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