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Page 1: QUARTERLY REPORT MARCH 2015 - Areca Capital...QUARTERLY REPORT MARCH 2015 ARECA Steady fixedINCOME FUND 5 1-yr 3-yrs 5-yrs Average Total Return per annum (%) 3.61 3.55 5.59 NOTES:
Page 2: QUARTERLY REPORT MARCH 2015 - Areca Capital...QUARTERLY REPORT MARCH 2015 ARECA Steady fixedINCOME FUND 5 1-yr 3-yrs 5-yrs Average Total Return per annum (%) 3.61 3.55 5.59 NOTES:
Page 3: QUARTERLY REPORT MARCH 2015 - Areca Capital...QUARTERLY REPORT MARCH 2015 ARECA Steady fixedINCOME FUND 5 1-yr 3-yrs 5-yrs Average Total Return per annum (%) 3.61 3.55 5.59 NOTES:

QUA RTERLY REPORT MA RCH 2015

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

Page 4: QUARTERLY REPORT MARCH 2015 - Areca Capital...QUARTERLY REPORT MARCH 2015 ARECA Steady fixedINCOME FUND 5 1-yr 3-yrs 5-yrs Average Total Return per annum (%) 3.61 3.55 5.59 NOTES:

QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

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) - Resigned w.e.f. 6 March 2015

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)

- Resigned w.e.f. 16 February 2015

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

95, Jalan Melaka Raya 24

Taman Melaka Raya

75000 Melaka

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

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

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.

Benchmark 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 a 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 March 2015

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 1 2.27 0.03 0.10

50,001 to 500,000 24 54.55 4.29 14.57

500,001 and above 19 43.18 25.14 85.33

Total* 44 100.00 29.46 100.00

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

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

4

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

01.1.2015

to

31.3.2015

01.10.2014

to

31.12.2014

Net Asset Value (“NAV”)

Total Net Asset Value (RM million) 32.82 32.42*

Units in circulation (million units) 29.94 30.04*

NAV per unit (RM) 1.0961 1.0792*

* Ex-Distribution

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

Highest NAV per unit (RM) 1.0962 1.0930*

Lowest NAV per unit (RM) 1.0791 1.0790*

* Ex-Distribution

ASSET ALLOCATION % of NAV

Fixed Income Securities

Quoted securities-local 1.40 1.31

Unquoted bonds-local 79.50 74.11

Unquoted bonds-foreign 8.14 12.25

Floating rate negotiable instrument of deposit 9.17 9.14

Cash & cash equivalents including placements and repo 1.79 3.19

DISTRIBUTION

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) - 1.0887 (29 Dec) NAV after distribution (RM per unit) - 1.0790 (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 2 for further information

0.31 0.32

Portfolio turnover ratio (PTR) (times)

Please refer to Note 3 for further information

0.03 0.12

TOTAL RETURN

Please refer to Note 4 for further information

Total Return (%) 1.57 (0.05)

- Capital Return (%) 1.57 (0.96)

- Income Return (%) - 0.91

Annual Total Return (%) 6.50* (0.18)*

Benchmark: Average Maybank’s 12-month fixed deposit rate (%) 3.34* 3.34*

* Annualised for comparison purpose only

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

5

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 3.61 3.55 5.59

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: 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.

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

6

F U N D R E V I E W

For the quarter ended 31 March 2015, the Fund posted an annualized return of 6.50%

against the benchmark, Maybank’s 12-month fixed deposit rate of 3.34%. The portfolio

outperformed the benchmark as a consequence of the favourable bond market environment this quarter.

The Fund is fully invested at 98.21% with exposure to 19 MYR denominated issues in a

diverse spread of sectors. The largest sector exposure remains the banking / finance

(45.00%) with an average modified duration of 3.3 years. We also hold 1.40% in loan

stocks while our exposure to SGD denominated issues amount to 8.14% of the portfolio.

Going forward, we look to invest in new creditworthy issues with the potential of gaining

from the yield curve slope and stable interest rates environment.

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 March 2015 RM1.0961

Asset Allocation/ Portfolio Composition as at 31.3.2015 31.12.2014

Quoted securities-local 1.40% 1.31%

Unquoted bonds-local 79.50% 74.11%

Unquoted bonds-foreign 8.14% 12.25%

Floating rate negotiable

instrument of deposit 9.17% 9.14%

Cash & cash equivalents 1.79% 3.19%

Performance of Areca Steady fixedINCOME Fund

for the financial period since inception to 31 March 2015

79.50%

9.17%

8.14% 1.79% 1.40%

Areca Steady fixedINCOME Fund

Maybank 12 Months Fixed Deposit Rate

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

7

MARKET REVIEW & OUTLOOK

ECONOMIC REVIEW & OUTLOOK

Picking up from the US Quantitative Easing (QE) taper towards the end of 2014, 1Q 2015 witnessed the announcement of European Central Bank's (ECB) version of QE. Together with the

ongoing Japanese QE program, this ensured the continuity of an ample global liquidity

environment and in turn prolonging the bond market rally and depression of interest rates.

In the US, pick-up in consumer confidence and improved labour conditions prompted a switch from

‘considerable period of time’ to ‘patient’ and finally to its removal when referring to retaining

Federal Fund rates at current low levels. Reference is now made to inflation target of 2%; again

to indicate when ‘lift-off’ of rate hike may occur, which has been carefully crafted to describe a

return to normalcy as opposed to tightening intentions. The market is beginning to shift from June

to September as the anticipated ‘lift-off’ date.

In what appears to be pre-emptive, several central banks reduced benchmark interest rates or

widened currency bands resulting in weaker currencies in an attempt to address weaker economic

outlook or to ward off disruptive excessive liquidity from their systems. The Swiss National Bank

even disbanded its 4-year peg to the Euro days before ECB’s QE announcement causing volatile

reactions in the forex market. Negative benchmark rates and bond yields in several Europe nations

ensued, as the market prepared for ECB’s €60 bil a month bond buying program.

Diverging from the US, weaker global growth and worldwide disinflation combined with a plunge in

oil prices, encouraged nations to take the rate cut move. They include Canada, Australia, China,

India, South Korea, Thailand and Indonesia. Singapore, which manages its monetary policy

through Nominal Effective Exchange Rate (NEER), lowered the curve prompting weakness in line with regional trend.

The ‘off the cliff’ drop in oil price negatively affected our nation’s revenue through anticipated

lower dividend payout from Petronas. A re-budget was announced in January. On the flip side,

lower oil price has translated to lower ‘managed float’ petrol pump price, resulting in lower

inflation in 1Q. However, Bank Negara Malaysia (BNM), however, resisted the temptation to join in

the rate cut act, citing that our monetary policy is already accommodative. I believe, that for

Malaysia, the lower inflation will be mitigated by the impending GST imposition in April which may

provide reason for BNM to ‘wait and see’ the after-effects on economic data especially spending

trends.

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

8

FIXED INCOME MARKET REVIEW & OUTLOOK

A liquidity driven bond rally kept global bond markets buoyant. The Federal Reserve’s patient and

cautious steps to normalise rates have also helped suppress benchmark 10 year US Treasuries in a

range of 1.65-2.25% throughout the quarter.

In Malaysia, mirroring the upbeat global sovereign bond market, 5 year Malaysian Government

Securities (MGS) trended down in a 3.60-3.85% range. Foreign holdings of total Malaysian Government debts in Ringgit declined further this quarter from RM212 bil to RM200 bil. However,

upon further analysis, short term discounted instruments contributed a drop of RM19 bil while

longer term MGS and Government Investment Issues (GII) enjoyed a resurgence of interest with

an increase of RM6.8 bil. This shows confidence despite the bad press from 1MDB financial strain

and the likely sovereign credit rating downgrade by FITCH.

For 1Q 2015, the Government raised RM23.0 bil through seven MGS/GII issues. In addition two

Skim Perumahan Kerajaan were issued, totaling RM4 bil. As of end March 2015, foreigners held

RM157.9 bil MGS/GII or 28.8% of outstanding MGS/GII. Private Debt Securities (PDS) issued for

the period in review was RM14.8 bil. Foreigners hold a meager RM13.6 bil or 2.9% of total PDS outstanding.

For this period, benchmark 3, 5 and 10 years MGS eased between 23 and 32 bps to 3.371%,

3.601% and 3.869% respectively. On the PDS front, yield curve flattened with long end lower by

13 bps.

As for Singapore, 10 year government benchmark bond yields ended the quarter almost

unchanged at 2.27% but endured a swing between 1.80-2.50% during this term. SGD/MYR

strengthened further by 1.9% to 2.6969 despite Monetary Authority of Singapore (MAS) lowering

inflation target and slope of NEER.

BNM would likely wait to observe the net effect of lower oil price and GST before guidance can be fairly obtained. In all likelihood Overnight Policy Rate (OPR) may be retained throughout the year

although sentiment swung from a 'likely rate hike' (last quarter) to a' slim chance of rate cut'

(start of Q1) to a status of data dependent.

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

9

T R U S T E E ’ S R E P O R T

For The Period Ended 31 March 2015

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 March 2015. 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; and

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

8 May 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 Steady 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 March 2015 and of its results, changes in net

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

March 2015 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

8 May 2015

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

10

UNAUDITED STATEMENT OF FINANCIAL POSITION

As At 31 March 2015 31.3.2015 31.12.2014

Note RM RM

Current Assets

Financial assets at fair value through profit

or loss 4 32,236,511 31,388,886

Cash and cash equivalents 5 621,546 1,073,122

Total Assets 32,858,057 32,462,008

Current Liabilities

Accrued management fee 34,781 34,402

Other payables and accruals 3,800 3,800

Total Liabilities 38,581 38,202

Net Asset Value of the Fund 32,819,476 32,423,806

Equity

Unit holders’ capital 30,258,215 30,368,378

Retained earnings 2,561,261 2,055,428

Total Net Asset Attributable to Unit Holders 32,819,476 32,423,806

Number of Units in Circulation 29,943,407 30,044,317

Net Asset Value Per Unit (Ex-Distribution) 1.0961 1.0792

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

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

11

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

For The Financial Period Ended 31 March 2015

1.1.2015

to

31.3.2015

1.10.2014

to

31.12.2014

RM RM

Investment Income

Interest income 406,578 404,984

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

through profit or loss

200,544

(315,587)

607,122 89,397

Expenses

Management fee 100,689 103,858 Trustee's fee - -

Audit fee - -

Tax agent’s fee - -

Administrative expenses 600 2,460

101,289 106,318

Net Income Before Taxation 505,833 (16,921)

Taxation - -

Net Income/(Loss) After Taxation And Total

Comprehensive Income For The Financial Period 505,833 (16,921)

Net Income/(Loss) After Taxation Is Made Up As

Follows:

Realised amount 430,439 338,523

Unrealised amount 75,394 (355,444)

505,833 (16,921)

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

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

12

UNAUDITED STATEMENT OF CHANGES IN EQUITY

For The Financial Period Ended 31 March 2015

Unit holders’

capital

Retained

earnings

Total net

asset value

RM RM RM

Balance as at 1 January 2015

30,368,378

2,055,428

32,423,806

Movement in unit holders’ capital:

Creation of units arising from application - - - Creation of units arising from distribution - - -

Cancellation of units (110,163) - (110,163)

Total comprehensive income for the financial

period - 505,833 505,833

Balance as at 31 March 2015 30,258,215 2,561,261 32,819,476

Balance as at 1 October 2014

35,477,723

2,370,033

37,847,756

Movement in unit holders’ capital:

Creation of units arising from application - - - Creation of units arising from distribution 297,684 - 297,684

Cancellation of units (5,407,029) - (5,407,029)

Distribution - (297,684) (297,684)

Total comprehensive loss for the financial period - (16,921) (16,921)

Balance as at 31 December 2014 30,368,378 2,055,428 32,423,806

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

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

13

UNAUDITED STATEMENT OF CASH FLOWS

For The Financial Period Ended 31 March 2015

01.1.2015

to

31.3.2015

01.10.2014

to

31.12.2014 Note RM RM

Cash Flows From Operating Activities

Proceeds from disposal of investments 1,331,000 5,296,256

Purchase of investments (2,073,500) (2,501,800)

Interest received from deposits with licensed

financial institutions 8,807 8,524

Interest received from unquoted fixed income

securities 493,191 427,962

Management fee paid (100,311) (108,251)

Payment for other fees and expenses (600) (9,760)

Net cash flows (used in)/generated from

operating activities (341,413) 3,112,931

Cash Flows From Financing Activities

Proceeds from creation of units - 297,684

Payment for cancellation of units (110,163) (5,407,029)

Distribution paid - (297,684)

Net cash flows used in financing activities (110,163) (5,407,029)

Net Decrease In Cash And Cash Equivalents (451,576) (2,294,098)

Cash And Cash Equivalents At The Beginning Of The Financial Period

1,073,122

3,367,220

Cash And Cash Equivalents At The End Of The

Financial Period 5 621,546 1,073,122

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

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

14

NOTES TO THE FINANCIAL STATEMENTS – 31 March 2015

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

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

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 Deed.

Financial instruments of the Fund as follows:

Loan and

receivables

Financial

assets at fair

value through

profit or loss Total

31 March 2015

Quoted securities - 460,000 460,000

Unquoted fixed income securities - 31,776,511 31,776,511

Cash and cash equivalents 621,546 - 621,546

621,546 32,236,511 32,858,057

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QUARTERLY REPORT MARCH 2015

ARECA Steady fixedINCOME FUND

15

Loan and

receivables

Financial

assets at fair

value through

profit or loss Total

31 December 2014

Quoted securities - 425,000 425,000

Unquoted fixed income securities - 30,963,886 30,963,886

Cash and cash equivalents 1,073,122 - 1,073,122

1,073,122 31,388,886 32,462,008

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

Market risk

(a) Price risk

This risk refer to changes and developments in regulations, politics, and the economy

of the country. The very nature of a unit trust fund, however, helps mitigate this risk

because a fund would generally hold a well-diversified portfolio of securities from

different market sectors so that collapse of any one security or any one market sector

would not impact too greatly on the value of the fund.

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

31.3.2015 31.12.2014

RM RM

Financial assets at fair value through

profit or loss

32,236,511

31,388,886

(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

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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.

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 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

Commission's Guidelines on Wholesale Funds.

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:

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Financial assets at

fair value through

profit or loss

RM

Cash and

Cash

Equivalents

RM

Total

RM

As at 31 March 2015

Finance

AAA - 1,310 1,310

AA3/AA- - 620,236 620,236

Quoted securities 460,000 - 460,000

Unquoted fixed income securities:

AAA 1,085,659 - 1,085,659

AA1/AA+ 511,075 - 511,075

AA2/AA 4,195,810 - 4,195,810

AA3/AA- 17,076,650 - 17,076,650

A1/A+ 1,141,793 - 1,141,793

Non-rated 7,765,524 - 7,765,524

32,236,511 621,546 32,858,057

As at 31 December 2014

Finance

AAA - 31,683 31,683

AA3/AA- - 1,041,439 1,041,439

Quoted securities 425,000 - 425,000

Unquoted fixed income securities:

AAA 1,064,076 - 1,064,076 AA1/AA+ 503,426 - 503,426

AA2/AA 5,206,048 - 5,206,048

AA3/AA- 16,083,088 - 16,083,088

A1/A+ 1,166,667 - 1,166,667

Non-rated 6,940,581 - 6,940,581

31,388,886 1,073,122 32,462,008

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 year 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.

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Less than

one month

More

than one

month

Total

RM RM RM

As at 31 March 2015

Accrued management fee 34,781 - 34,781

Other payables and accrued expenses - 3,800 3,800

Contractual cash outflows 34,781 3,800 38,581

As at 31 December 2014

Accrued management fee 34,402 - 34,402

Other payables and accrued expenses - 3,800 3,800

Contractual cash outflows 34,402 3,800 38,202

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.

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 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

The fair value of financial assets and 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 was 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 and financial liabilities.

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

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

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

determined by using valuation techniques. The Fund uses a variety of methods and makes

assumptions that are based on market conditions existing at each year end date. Valuation

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

and other over-the-counter derivatives, include the use of comparable recent 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 licensed 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. 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.

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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 March 2015

Financial assets at fair value through

profit or loss:

- quoted securities 460,000 - - 460,000 - unquoted fixed income securities - 31,776,511 - 31,776,511

31 December 2014

Financial assets at fair value through

profit or loss:

- quoted securities 425,000 - - 425,000

- unquoted fixed income securities - 30,963,886 - 30,963,886

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.

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”).

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 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

31.3.2015 31.12.2014

RM RM

Designated at fair value through profit or loss

- Quoted investments 460,000 425,000

- Unquoted fixed income securities 31,776,511 30,963,886

32,236,511 31,388,886

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31.3.2015 31.12.2014

RM RM

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

profit or loss:

-realised gain on disposals 125,150 39,857

-unrealised fair value gain/(loss) 75,394 (355,444)

200,544 (315,587)

Financial assets at fair value through profit or loss as at 31 March 2015 are as follows:

Nominal

value Name of Issuer Carrying

value

Fair value as at

31.3.2015

Fair value

as at 31.3.2015

expressed as a

percentage of

value of the

Fund RM RM RM %

6,000,000 5.15% Alpha Circle Sdn Bhd

19/11/2019 AA- 6,097,415 6,118,355 18.64

3,000,000 8.25% Hong Leong Bank Berhad

09/09/2039 AA3 3,411,218 3,397,418 10.35

2,000,000 2.00% Eastern & Oriental

Berhad 06/06/2020 NR 2,077,062 2,082,039 6.34

2,000,000 4.66% Jati Cakerawala Sdn Bhd

31/07/2018 AA3 1,999,296 2,007,096 6.12 2,000,000 4.50% AMMB Holdings Berhad

08/08/2019 AA3 1,982,655 1,994,695 6.08

1,250,000 6.70% CIMB Bank Berhad

07/10/2038 AA 1,373,317 1,362,654 4.15

1,000,000 8.25% AmBank (M) Berhad

18/08/2039 A1 1,145,873 1,141,793 3.48

1,000,000 5.46% TRIplc Ventures Sdn Bhd

08/10/2021 AAA 1,077,539 1,085,659 3.31

1,000,000 5.60% CIMB Thai Bank Public Company Limited 05/07/2024

AA3 1,030,838 1,034,548 3.15

1,000,000 5.35% Golden Assets

International Finance Limited

05/08/2019 AA3 1,019,672 1,011,332 3.08

1,000,000 4.30% Noble Group Limited

29/01/2016 AA2 1,005,226 1,008,046 3.07

1,000,000 4.40% AmIslamic Bank Berhad

30/09/2021 AA3 1,003,781 1,005,031 3.06

750,000 4.75% Hong Leong Bank Berhad 30/12/2020 AA2 761,544 761,859 2.32

500,000 7.50% PBFin Berhad

05/06/2059 AA2 567,571 563,721 1.72

500,000 4.70% YTL Power International

Berhad 13/10/2021 AA1 509,220 511,075 1.56

500,000 4.85% Alpha Circle Sdn Bhd

17/11/2017 AA- 507,326 508,176 1.55

500,000 4.50% Hong Leong Bank Berhad

21/06/2024 AA2 498,214 499,529 1.52

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Nominal

value Name of Issuer Carrying

value

Fair value

as at

31.3.2015

Fair value

as at

31.3.2015

expressed as a

percentage of

value of the

Fund

1,000,000 5.00% Maybank 3-Year Callable

KLIBOR Range Accrual FRNID

21/07/2017 NR 1,007,579 1,009,589 3.08

1,000,000 5.50% Hong Leong Bank Berhad

5-Year Callable KLIBOR Range Accrual FRNID 02/08/2018

NR 984,526 1,007,685 3.07

1,000,000 5.90% CIMB 5-Year Callable

KLIBOR Range Accrual FRNID

17/10/2018 NR 960,244 992,144 3.02

Total bonds in Malaysia 29,020,116 29,102,444 88.67

Bond in

Singapore

SGD

1,000,000 5.125% Genting Singapore Ltd

12/09/2017 NR 2,595,946 2,674,067 8.14

Total bonds in Singapore 2,595,946 2,674,067 8.14

Total unquoted fixed income

securities 31,616,062 31,776,511 96.81

Quoted Securities

TRADING/SERVICES

500,000 Barakah-Offshore-RCULS 13/18 425,000 460,000 1.40

Total investments 32,041,062 32,236,511 98.21

Unrealised gain on financial assets at fair value through

profit or loss 195,449

Total fair value of financial

assets at fair value through

profit or loss

32,236,511

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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

percentage of

value of the

Fund RM RM RM %

6,000,000 5.15% Alpha Circle Sdn Bhd

19/11/2019 AA- 6,032,563 6,021,223 18.58

3,000,000 8.25% Hong Leong Bank Berhad

09/09/2039 AA3 3,533,745 3,472,245 10.71

2,000,000 4.66% Jati Cakerawala Sdn Bhd

31/07/2018 AA3 2,024,203 2,023,043 6.24

2,000,000 4.50% AMMB Holdings Berhad

08/08/2019 AA3 2,010,480 2,005,340 6.18 1,250,000 6.70% CIMB Bank Berhad

07/10/2038 AA 1,357,241 1,352,665 4.17

1,000,000 8.25% AmBank (M) Berhad

18/08/2039 A1 1,173,328 1,166,668 3.60

1,000,000 3.00% TRIplc Ventures Sdn Bhd

08/10/2021 AAA 1,068,646 1,064,076 3.28

1,000,000 5.60% CIMB Thai Bank Public

Company Limited 05/07/2024

AA3 1,041,860 1,045,260 3.22 1,000,000 5.35% Golden Assets

International Finance Limited

05/08/2019 AA2 1,031,820 1,033,450 3.19

1,000,000 4.40% AmIslamic Bank Berhad

30/09/2021 AA3 1,016,310 1,014,630 3.13

1,000,000 4.30% Noble Group Limited

29/01/2016 AA2 1,014,672 1,016,182 3.13

750,000 4.75% Hong Leong Bank Berhad

30/12/2020 AA2 755,618 752,760 2.33

500,000 7.50% PBFin Berhad 05/06/2059 AA2 558,924 558,324 1.72

500,000 4.70% YTL Power International

Berhad 13/10/2021 AA1 505,751 503,426 1.56

500,000 4.85% Alpha Circle Sdn Bhd

17/11/2017 AA- 502,472 501,347 1.55

500,000 4.50% Hong Leong Bank Berhad

21/06/2024 AA2 496,616 492,666 1.52

1,000,000 5.00% Maybank 3-Year Callable

KLIBOR Range Accrual FRNID 21/07/2017 NR 1,009,863 1,007,853 3.11

1,000,000 5.50% Hong Leong Bank Berhad

5-Year Callable KLIBOR Range

Accrual FRNID 02/08/2018

NR 1,019,438 996,279 3.07

1,000,000 5.90% CIMB 5-Year Callable

KLIBOR Range Accrual FRNID

17/10/2018 NR 1,009,052 961,052 2.96

Total bonds in Malaysia 27,162,602 26,988,489 83.25

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Nominal

value Name of Issuer Carrying

value

Fair value

as at

31.12.2014

Fair value

as at

31.12.2014

expressed as a

percentage of

value of the

Fund

Bond in

Singapore

SGD

1,000,000 5.125% Genting Singapore Ltd

12/09/2017 NR 2,571,201 2,629,621 8.10

500,000

4.25% Guoco LL IHT Pte Ltd

23/05/2015 NR 1,314,885 1,345,776 4.15

Total bonds in Singapore 3,886,086 3,975,397 12.25

Total unquoted fixed income

securities 31,048,689 30,963,886 95.50

Quoted Securities

TRADING/SERVICES

500,000 Barakah-Offshore-RCULS 13/18 675,000 425,000 1.31

Total investments 31,723,688 31,388,886 96.81

Unrealised loss on financial

assets at fair value through

profit or loss (334,802)

Total fair value of financial

assets at fair value through

profit or loss

31,388,886

5 CASH AND CASH EQUIVALENTS

31.3.2015 31.12.2014

RM RM

Bank balance with a licensed bank 1,310 31,683

Deposits with licensed financial institutions 620,236 1,041,439

621,546 1,073,122

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:

31.3.2015 31.12.2014

% %

Deposits with licensed financial institutions

3.35

3.29

The deposit have an average maturity of 6 days.

6 QUARTERLY ACCOUNTS

The quarterly accounts for the 3-month period ended 31 March 2015 have not been audited.

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