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Interim Report Dec 2019

For the Period Ended 31 December 2019

Areca incomeTRUST Fund

I NTERIM REPORT DECEM BER 2019

ARECA incomeTRUST 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 10

UNAUDITED FINANCIAL STATEMENTS FOR ARECA incomeTRUST FUND

11

INTERIM REPORT DECEMBER 2019


2

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

MANAGER

Areca Capital Sdn Bhd

Company No: 200601021087 (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 Wong Teck Meng

(Chief Executive Officer Non-Independent)

Edward Iskandar Toh Bin Abdullah

(Executive Non-Independent)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Independent Non-Executive Chairman)

Dr. Junid Saham

(Independent Non-Executive)

INVESTMENT COMMITTEE MEMBERS

Dato’ Seri Lee Kah Choon (Independent Non-Executive)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Independent Non-Executive Chairman)

Dr. Junid Saham

(Independent Non-Executive)

TRUSTEE

Maybank Trustees Berhad

[Co No.: 1963001000109 (5004-P)]

8th Floor, Menara Maybank

100 Jalan Tun Perak

50050 Kuala Lumpur

Tel: 03-2078 8363, Fax: 03-2070 9387

AUDITOR

Deloitte PLT (LLP0010145-LCA) Level 16, Menara LGB

1 Jalan Wan Kadir, Taman Tun Dr. Ismail

60000 Kuala Lumpur

Tel: 03-7610 8888, Fax: 03-7726 8986

TAX ADVISER

Deloitte Tax Services Sdn Bhd (36421-T) Level 16, Menara LGB

1 Jalan Wan Kadir, Taman Tun Dr. Ismail

60000 Kuala Lumpur

Tel: 03-7610 8888, Fax: 03-7726 8986

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 BRANCH IPOH BRANCH MALACCA BRANCH

368-2-02 Belissa Row 11A, (First Floor) 95A, Jalan Melaka Raya 24

Jalan Burma, Georgetown Persiaran Greentown 5 Taman Melaka Raya

10350 Pulau Pinang Greentown Business Centre 75000 Melaka

Tel : 604-210 2011 30450 Ipoh, Perak Tel : 606-282 9111

Fax: 604-210 2013 Tel : 605-249 6697 Fax: 606-283 9112

Fax: 605-249 6696

KUCHING BRANCH

1st Floor, Sublot 3

Lot 7998, Block16

KCLD, Cha Yi Goldland

Jalan Tun Jugah / Stutong

93350 Kuching, Sarawak

Tel : 6082-572 472



3

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

Name of the Fund Areca incomeTRUST Fund

Fund Category/

Type

Fixed Income/ Income

Objective of the

Fund

To provide investors with short to medium term capital preservation and a regular

income

Benchmark Maybank’s 6-month fixed deposit rate

Distribution

Policy of the

Fund

Twice a year, subject to availability of distribution income. In the absence of

written instructions 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 December 2019

Size of Holding (Units) No. of

accounts %

No. of unit

held

(million)

%

Up to 5,000 36 9.94 0.10 0.02

5,001 to 10,000 16 4.42 0.12 0.03

10,001 to 50,000 90 24.86 2.41 0.56

50,001 to 500,000 145 40.06 21.80 5.07

500,001 and above 75 20.72 405.30 94.32

Total* 362 100.00 429.73 100.00

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 23 April 2007

Initial Offer Price RM0.5000 per unit during the initial offer period of 21 days ended 13 May 2007

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 R M A N C E

2019 2018 2017

NET ASSET VALUE (“NAV”) as at 31 December

Total Net Asset Value (RM million) 232.12 127.12 119.35

Units in circulation (million units) 429.74 240.63 234.76

NAV per unit (RM) 0.5401 0.5283 0.5084

2019 2018 2017

HIGHEST & LOWEST NAV PER UNIT for the period ended 31 December Please refer to Note 1 for further information on NAV and pricing policy

Highest NAV per unit (RM) 0.5404 0.5283 0.5084

Lowest NAV per unit (RM)

0.5287 0.5162 0.4996

2019 2018 2017

ASSET ALLOCATION % of NAV as at 31 December

Fixed Income Securities

Corporate bonds 74.06 71.26 80.41

Fixed Income Collective Investment Scheme 8.95 - 2.99

Preference shares 7.57 3.93 -

Cash & cash equivalent including placements & repo 9.42 24.81 16.60

DISTRIBUTION

There was no distribution for the financial period under review.

UNIT SPLITS

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

2019 2018 2017

EXPENSE/ TURNOVER for the period ended 31 December

Management expense ratio (MER) (%)

Please refer to Note 2 for further information

Portfolio turnover ratio (PTR) (times)


0.52 0.60 0.64

0.94 0.18 0.17

2019 2018 2017

TOTAL RETURN for the period ended 31 December


Total Return (%) 2.18 2.34 1.74

- Capital Return (%) 2.18 2.34 1.74

- Income Return (%) - - -

2019 2018 2017 2016 2015

Annual Total Return (%) 4.36 4.70 3.48 3.60 2.44

Benchmark: Average Maybank’s 6-month fixed

deposit rate (%) 3.06 3.33 3.07 3.10 3.27

1-yr 3-yrs 5-yrs

Average Total Return (%) 6.10 4.79 4.57



5

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 and the benchmark data are sourced Lipper.

Unit prices and distributions payable, if any, may go down as well as up. Past performance is not

necessarily indicative of future performance.



6

F U N D R E V I E W

The Fund posted an annualised return of 4.36% p.a. versus 3.06% p.a. by its benchmark, Maybank’s

6-month fixed deposit rate. Over this 6 months period, despite some uncertainties to Malaysia as an

investment destination, the accommodative interest rates environment and the continued inflows into

our fixed income markets allowed the portfolio to reap the benefits of our lengthening duration

strategy and hence its outperformance.

The Fund enjoys a good spread of corporate credit diversification with about 29 issues across various

industries, the largest being property constituting 11.8% of our holdings. However, the largest

exposure is to the Malaysian Government (34.9%) through their issuances and guarantees. From

rating perspective, 69.2% of the portfolio is in bonds (Government and Corporate) that are rated AA

or better. For further diversification, there is 9.0% held in other Collective Investment Schemes. The

Fund has achieved its objective in providing short to medium term capital preservation and a regular

income for the period under review.

Looking ahead, we will maintain the portfolio duration with an eye to take profit in the months ahead.

We believe the economic environment continue to need an accommodative monetary policy, which in

turn remains favourable for the fixed income market.

Performance of Areca incomeTRUST Fund

for the financial period since inception to 31 December 2019

Investment Policy and Strategy

The Fund invests primarily (at least two third of its assets) in fixed income securities and money

market instruments predominantly with a minimum credit rating of ‘A3’ by RAM or such equivalent

rating by other rating agencies.

NAV per unit as at 31 December 2019 RM0.5401

Asset Allocation / Portfolio Composition as at 31 December 2019 2018 2017

Fixed income securities 74.06% 71.26% 80.41%

Fixed income collective investment scheme 8.95% - 2.99%

Preference shares 7.57% 3.93% -

Cash & cash equivalents 9.42% 24.81% 16.60%

74.06%

7.57%

8.95%

9.42%

Areca incomeTRUST

Maybank 6 Months Fixed Deposit


MANAGER’S REPORT

7

MARKET REVIEW & OUTLOOK

The weakening United States (US) economy turned-around in the fourth quarter of the year by

registering a Gross Domestic Product (GDP) expansion of 2.3% over the same quarter of the previous

year. The first three quarters had registered a weakening trend of 2.7%, 2.3% and 2.1% respectively

which resulted in US Treasuries (UST) yields easing sharply across the curve and the 10y2y curve

inverting during the period amid growing recessionary fears. The US Federal Reserve (Fed) had cut

the federal funds rate (FFR) by 25 basis points (bps) each in July, September and October to support

the slowing economic growth amid weak global developments and muted inflation. However at its

October meeting, the central bank hinted at a pause in its easing cycle as it considered the current

stance of monetary policy appropriate to support sustained growth, strong labour market conditions

and inflation near the 2% target. In December, US President Donald Trump was impeached by the

House of Representatives on charges of abuse of power and obstruction of justice and the trial will

begin in early 2020 on whether to acquit or to remove him from office.

The European Central Bank (ECB), by contrast, maintained their key rates but hinted at possible rate

cuts and monetary easing whilst revising down its GDP and inflation forecasts for the year. It

resumed its monthly 20 billion Euro asset purchase program in November whilst Its new president

Christine Lagarde has called for more public investments by European governments to respond to the

challenges presented by trade tensions and technological disruptions amidst continuing weak trade

growth in the region.

Meanwhile, the UK held its general election in December 2019 and the ruling Conservative Party led

by the Prime Minister Boris Johnson gained a “historic” win and promised to deliver Brexit by 31

January. However, this resulted in continued losses for the local currency.

In China, trade surplus widened amid higher exports to ASEAN, South Korea and Japan. The People’s

Bank of China (PBoC) had devalued the Yuan in response to US tariffs and reformed its interest rate

to stimulate the economy. Credit growth rebounded by 10.7% although the central bank said it is not

looking to add any massive monetary stimulus. The economy slowed to its lowest level in nearly three

decades amid trade tensions, poor global economic growth and high off-balance sheet borrowings. The PBoC entered a rate-cutting cycle to prop up a slowing economy. Meanwhile, the US and China

reached an agreement on a phase one trade deal that involves a rollback of some tariffs and

increased agricultural purchases.

Malaysia’s economy grew by 4.4% and 3.6% year-on-year (yoy) in the third and fourth quarter of

2019, easing from a 4.9% expansion in the second quarter. This was the weakest GDP growth rate

since the third quarter of 2009 due mainly to a contraction in palm oil, crude oil and natural gas

output, and a 3.1% fall in exports amid global trade tensions. Considering 2019 full year, the

economy grew by 4.3%, the softest pace since 2016 and below the government’s forecast of 4.7%.

Bank Negara Malaysia (BNM) held its overnight policy rate (OPR) at 3% during its November meeting

stating that growth will continue to be supported by resilient private spending.

FIXED INCOME MARKET REVIEW & OUTLOOK

In third quarter, demand for government bonds (govvies) at public auctions remained robust,

supported by lower global rates and a benign inflation outlook. However, fourth quarter saw demand

for local govvies at public auctions suffering as the bid-to-cover (BTC) ratio declined. The total

combined outstanding MGS/GII declined to RM759.7 billion in December (June 2019: RM762.4 billion)

as the volume of matured MGS rose. Meanwhile, MGS outperformed in the secondary market with

both the 3y and 10y yields reaching multi-year lows. MGS yields fell as expectations that the Fed

would start its easing cycle and foreign demand gained traction. However, secondary market

performance turned weaker in September, mainly by nervous sentiment ahead of FTSE Russell’s

review announcement. MGS yields surged, with its yield curve steepening amid numerous external

headwinds, especially long-running issues of the US-China trade war and Brexit. At end-2019, MGS

yields settled at their multi-year lows with the 10y MGS shedding 33 bps to 3.30% (June: 3.63%).

Secondary market performance of MGS was supported by the significant decrease in US-China trade

tensions throughout the month.


MANAGER’S REPORT

8

In the second half of 2019, foreign investors continued to flock into the local bond market, raising

their holdings of local bonds by RM22.1 billion (1H2019: RM2.2 billion). This brought the total foreign

holdings of local bonds by end-2019 to RM204.7 billion, the highest since April 2018. Foreign demand

for local bonds was fueled by the de-escalation of US-China trade tensions as both parties made

significant progress towards a phase one trade deal. Strong foreign demand for MGS was the main

contributor to the improvement in foreign holdings of local bonds in 2H2019 (41.58% of total MGS

outstanding).

Going forward, the prospects for the global economy look increasingly uncertain with the outbreak of

the novel coronavirus in China. This is not surprising given that the Chinese economy accounts for an

estimated one-third of global growth. Hence, we do not discount the possibility of another pre-

emptive rate cut by BNM within the first half of 2020, if the outbreak continues to worsen and a

vaccine is not yet found. We continue to be cautiously optimistic on fixed income in the medium term

and continue to be fully invested in good quality credits of mid duration bonds for our fixed income

funds.


TRUSTEE’S REPORT

9

T R U S T E E ’ S R E P O R T

For The Financial Period Ended 31 December 2019

To the Unitholders of Areca incomeTRUST Fund

We have acted as Trustee for Areca incomeTRUST Fund (“the Fund”) for the financial period ended 31

December 2019. To the best of our knowledge, Areca Capital Sdn Bhd (“the Manager”) has managed

the Fund in the financial period under review in accordance with the following:-

1. limitations imposed on the investment powers of the Manager under the Deeds, securities laws

and Guidelines on Unit Trust Funds;

2. valuation and pricing of the Fund are carried out in accordance with the Deeds and any

regulatory requirement; and

3. creation and cancellation of units are carried out in accordance with the Deeds and any

regulatory requirement.

For Maybank Trustees Berhad

[Company No.: 196301000109 (5004-P)]

JULIA BINTI MUSTAFA

Chief Executive Officer

Kuala Lumpur

27 February 2020

INTERIM REPORT DECEMBER 2019 STATEMENT BY THE MANAGER

10

STATEMENT BY THE MANAGER

To the Unitholders of Areca incomeTRUST Fund

We, Wong Teck Meng and EDWARD ISKANDAR TOH BIN ABDULAH, two of the Directors of the

Manager, Areca Capital Sdn Bhd, do hereby state that in the opinion of the Manager, the

accompanying unaudited financial statements are drawn up in accordance with Financial Reporting

Standards and the Securities Commission Malaysia’s Guidelines on Unit Trust Funds in Malaysia so as

to give a true and fair view of the financial position of the Fund as of 31 December 2019 and the

financial performance and the cash flow of the Fund for the period ended on that date.

For and on behalf of the Manager,

Areca Capital Sdn Bhd

WONG TECK MENG

CEO/ EXECUTIVE DIRECTOR

EDWARD ISKANDAR TOH BIN ABDULLAH

CIO/ EXECUTIVE DIRECTOR

Kuala Lumpur

27 February 2020



11

UNAUDITED STATEMENT OF FINANCIAL POSITION

As Of 31 December 2019 31.12.2019 31.12.2018

Note RM RM

Assets Investments

Collective investment scheme 5 20,778,323 -

Unquoted fixed income securities 5 171,904,031 90,581,535

Preference shares 5 17,581,151 5,000,000

Total Investments 210,263,505 95,581,535

Other Assets

Amount due from Manager 6 1,754,135 27,909

Other receivables 7 1,869,126 1,489,731

Short-term deposits 8 18,533,227 30,250,994

Cash at bank 7,313 3,900

Total Other Assets 22,163,801 31,772,534

Total Assets 232,427,306 127,354,069

Unitholder’s Fund and Liabilities

Unitholders’ Fund

Unitholders’ capital 9 213,621,538 111,431,740

Unrealised reserve 10 4,957,650 1,605,465

Realised reserve 11 13,536,340 14,082,098

Net Asset Value Attributable to Unitholders 232,115,528 127,119,303

Liabilities

Other payables and accrued expenses 12 311,778 234,766

Total Liabilities 311,778 234,766

Total Unitholders’ Fund and Liabilities 232,427,306 127,354,069

Number of Units in Circulation 9 429,739,929 240,631,940

Net Asset Value Per Unit 13 0.5401 0.5283

The accompanying Notes form an integral part of the Financial Statements



12

UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For 6-month Period Ended 31 December 2019

1.7.2019 to 1.7.2018 to

31.12.2019 31.12.2018

Note RM RM

Investment Income

Interest income 3,923,274 2,999,712

Investment income from preference shares 242,705 -

Other income 52,931 5,000

Net gain from investments:

Investments at fair value through profit or loss

(“FVTPL”) 5 1,595,208 380,998

Total Investment Income 5,814,118 3,385,710

Expenditure

Management fee 14 1,072,453 673,844

Trustee’s fee 15 91,274 48,728

Audit fee 977 -

Other expenses 1,481 530

Total Expenditure 1,166,185 723,102

Net Income Before Tax 4,647,933 2,662,608

Income Tax Expense 16 - -

Net Income After Tax/Total Comprehensive Income

For The Period 4,647,933 2,662,608

Net Income After Tax Is Made Up Of:

Realised gain 3,905,474 1,669,602

Unrealised gain 742,459 993,006

4,647,933 2,662,608




13

UNAUDITED STATEMENT OF CHANGES IN NET ASSET VALUE


Unitholders’

capital

Realised

reserve

Unrealised

reserve

Total net

asset value

RM RM RM RM

As of 1 July 2018 104,110,943 12,412,496 612,459 117,135,898

Amounts received/receivable from units created 81,029,243 81,029,243

Amounts paid for units cancelled (73,708,446) (73,708,446)

Total comprehensive income for the

period 2,662,608 2,662,608

Net unrealised gain transferred to

unrealised reserve (993,006) 993,006

As of 31 December 2018 111,431,740 14,082,098 1,605,465 127,119,303

As of 1 July 2019 184,141,595 9,630,866 4,215,191 197,987,652

Amounts received/receivable from

units created 124,637,203 124,637,203

Amounts paid/payables for units

cancelled

(95,157,260) (95,157,260)

Total comprehensive income for the

period 4,647,933 4,647,933

Net unrealised gain transferred to unrealised reserve (742,459) 742,459

As of 31 December 2019 213,621,538 13,536,340 4,957,650 232,115,528




14

UNAUDITED STATEMENT OF CASH FLOWS


1.7.2019 to

31.12.2019

1.7.2018 to

31.12.2018

RM RM

Cash Flows (Used In)/ From Operating Activities

Proceeds from disposal of investments 87,463,338 36,003,916

Interest received 3,750,011 3,008,161

Investment income from preference shares 237,500 -

Other income 52,931 5,000

Purchase of investments (170,238,035) (26,993,655)

Management fee paid (888,788) (678,847)

Trustee’s fee paid (228,638) (48,247)

Payment for other fees and expenses (18,738) (17,800)

Net Cash (Used In)/ From Operating Activities (79,870,419) 11,278,528

Cash Flows From Financing Activities

Cash proceeds from units created 123,644,068 81,099,334

Payment for cancellation of units (95,068,260) (73,708,446)

Net Cash From Financing Activities 28,575,808 7,390,888

Net (Decrease)/Increase In Cash And Cash Equivalents (51,294,611) 18,669,416

Cash And Cash Equivalents At Beginning Of Period 69,835,151 11,585,478

Cash And Cash Equivalents At End Of Period 18,540,540 30,254,894

Cash and cash equivalents consist of the following amounts: 2019 2018

RM RM

Short-term deposits 18,533,227 30,250,994


18,540,540 30,254,894




15

NOTES TO THE FINANCIAL STATEMENTS

1 GENERAL INFORMATION

Areca incomeTRUST Fund (“the Fund”) was established pursuant to the Trust Deed dated 12

March 2007 as modified by the First Supplemental Deed dated 27 June 2007, Second

Supplemental Deed dated 14 April 2008, Third Supplemental Deed dated 21 October 2008,

Fourth Supplemental Master Deed dated 10 April 2009, Fifth Supplemental Master Deed dated 12

March 2013 and Sixth Supplemental Master Deed dated 6 September 2013 between Areca Capital

Sdn Bhd as the Manager, the Trustee and all the registered unitholders of the Fund (“the Deed”).

The principal activity of the Fund is to invest in investments as defined under Schedule 7 of the

Deed, which include fixed income securities issued by the Malaysian government or BNM or any

other government related bodies, issues guaranteed by the government of Malaysia or BNM or

any state government in Malaysia, deposit and issues by financial institution, corporate bonds,

foreign currency, units and shares in other collective investment schemes, derivatives such as

future contract, structured products and any other form of investment as may be permitted by

the relevant authorities from time to time. The Fund commenced operations on 23 April 2007 and

will continue its operations until terminated by the Trustee in accordance with Part 12 of the Deed.

The objective of the Fund is to provide investors with short to medium term capital preservation

and a regular income could be in the form of units or cash.

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 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements of the Fund have been prepared in accordance with Malaysian Financial

Reporting Standards (“MFRSs”) and International Financial Reporting Standards (“IFRSs”).

Adoption of New and Revised Malaysian Financial Reporting Standards and

Amendments

The Fund has applied the following Standards and Amendments for the first time for the financial

period beginning on 1 July 2018:

The adoption of these relevant new MFRSs, Amendments to MFRSs and IC Interpretation did not result in significant changes in the accounting policies of the Fund and has no significant effect on

the financial performance or position of the Fund except for the adoption of MFRS 9 as stated

below.

MFRS 9 Financial Instruments

MFRS 9 replaces MFRS 139, Financial Instruments: Recognition and Measurement (“MFRS 139”)

and introduces new requirements for classification and measurement of financial instruments,

impairment and disclosure requirements. Retrospective application is required, but restatement of comparative information is not compulsory.

(i) Classification and measurement of financial instruments:

From 1 July 2018, the Fund applied the following MFRS 9 classification approach to all types

of financial assets:

• Investments in debt instruments: There are 3 subsequent measurement categories:

amortised cost, fair value with changes either recognised through other

comprehensive income (“FVTOCI”) or through profit or loss (“FVTPL”).

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)

MFRS 15 Revenue from Contracts with Customers

Amendments to MFRSs Annual Improvements to MFRSs 2014-2016 Cycle



16

• Investments in equity instruments: These instruments are always measured at fair

value with changes in fair value presented in profit or loss unless the Fund has made

an irrevocable choice to present changes in fair value in other comprehensive income

for investments that are not held for trading.

• The new accounting policies for classification and measurement of financial

instruments under MFRS 9 are set out in Note 3.

The table below illustrates the classification and measurement of financial assets and

financial liabilities under MFRS 139 and MFRS 9 at the date of initial application, 1

July 2018.

Original measurement

category under MFRS

139

New measurement

category under MFRS 9

Finance assets

Amount due from Manager Loan and receivables At amortised cost

Other receivables Loan and receivables At amortised cost

Short-term deposits Loan and receivables At amortised cost

Cash at bank Loan and receivables At amortised cost

Financial liabilities

Other payables and accrued

expenses

Other financial liabilities At amortised cost

(ii) Impairment of financial assets

From 1 July 2018, the Fund applied the expected credit losses (“ECL”) model to determine

impairment on financial assets at amortised cost. The new accounting policies for

impairment under MFRS 9 are set out in Note 3.

Standards, Issue Committee (“IC”) Interpretation and Amendments in Issue But Not

Yet Effective

At the date of authorisation for issue of these financial statements, the new and revised

Standards, IC Interpretation and Amendments which were in issue but not yet effective and not

early adopted by the Fund are as listed below:

MFRS 16 Leases1

Amendments to:

MFRS 3 Business Combinations – Definition of Business2 MFRS 9 Prepayment Features with Negative Compensation1

MFRS 17 Insurance Contracts3

MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture4

MFRS 101 and MFRS 108 Definition of Material2

MFRS 128 Long-term Interests in Associates and Joint Ventures1

MFRS 119 Plan Amendment, Curtailment or Settlement1

IC interpretation 23 Uncertainty over Income Tax Treatments1

References to the Conceptual Framework in MFRS Standards2

Annual Improvements to MFRSs 2015 - 2017 Cycle 1 1 Effective for annual periods beginning on or after 1st January 2019 2 Effective for annual periods beginning on or after 1st January 2020 3 Effective for annual periods beginning on or after 1st January 2021 4 Effective date deferred to a date to be announced by MASB

The Manager of the Fund anticipates that the abovementioned Standards, IC Interpretations

and Amendments will be adopted in the annual financial statements of the Fund when they



17

become effective and that the adoption of these Standards, IC Interpretations and Amendments

will have no material impact on the financial statements of the Fund in the period of initial

application.

3 SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of the Fund have been prepared under the historical cost convention.

Historical cost is generally based on the fair value of the consideration given in exchange for

assets.

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

orderly transaction between market participants at the measurement date, regardless of whether

that price is directly observable or estimated using another valuation technique. In estimating the

fair value of an asset or a liability, the Fund takes into account the characteristics of the asset or

liability if market participants would take those characteristics into account when pricing the asset

or liability at the measurement date. Fair value for measurement and/or disclosure purposes in

these financial statements is determined on such a basis, except for share-based payment

transactions that are within the scope of MFRS 2, leasing transactions that are within the scope of

MFRS 117, and measurements that have some similarities to fair value but are not fair value,

such as net realisable value in MFRS 102 or value in use in MFRS 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,

2 or 3 based on the degree to which the inputs to the fair value measurements are observable

and the significance of the inputs to the fair value measurement in its entirety, which are

described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or

liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are

observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies adopted are set out below.

Income Recognition

Interest income from unquoted fixed income securities and short-term deposits is recognised on a

time proportion basis that reflects the effective yield on the asset.

Realised gain and loss on disposal of investments is arrived at based on net sales proceeds less

carrying value and from reversal of prior year’s unrealised gains and losses for financial

instruments which were realised (i.e. sold, redeemed or matured) during the reporting period.

Unrealised gains and losses comprise changes in the fair value of financial instruments for the

reporting period.

Transaction Costs

Transaction costs are costs incurred to acquire or dispose financial assets or liabilities at fair value

through profit or loss. They include fees and commissions paid to agents, advisors, brokers and

dealers. Transaction costs, when incurred, are immediately recognised in the profit or loss.

Income Tax

Income tax comprises Malaysian corporate tax for the reporting period, which is measured using

the tax rates that have been enacted or substantively enacted at the end of the reporting period.

No deferred tax is recognised as no temporary differences have been identified.

Distribution

Distributions are at the discretion of the Trustee. A distribution to the Fund’s unitholders is

accounted for as a deduction from realised reserve. A proposed distribution is recognised as a

liability in the period in which it is approved by the Trustee.



18

Functional and Presentation Currency

The financial statements are measured using the currency of the primary economic environment

in which the Fund operates (“functional currency”). The financial statements are presented in

Ringgit Malaysia (“RM”), which is also its functional currency.

Unitholders’ Capital

The unitholders’ contributions to the Fund meet the definition of puttable instruments classified as

equity instruments under the revised MFRS 132 “Financial Instruments: Presentation”.

The units in the Fund are puttable instruments which entitle the unitholders to a pro-rata share of

the net asset value of the Fund. The units are subordinated and have identical features. There is

no contractual obligation to deliver cash or another financial asset other than the obligation on

the Fund to repurchase the units. The total expected cash flows from the units in the Fund over

the life of the units are based on the change in the net asset value of the Fund.

Creation and Cancellation of Units

The Fund issues cancellable units, which are cancelled at the unitholder’s option and are classified

as equity. Cancellable units can be put back to the Fund at any time for cash equal to a

proportionate share of the Fund’s net assets value. The outstanding units is carried at the

redemption amount that is payable at the net assets value if the holder exercises the right to put

the unit back to the Fund.

Units are created and cancelled at the holder’s option at prices based on the Fund’s net asset

value per unit at the time of creation or cancellation. The Fund’s net asset value per unit is

calculated by dividing the net assets attributable to unitholders with the total number of

outstanding units.

Financial Instruments

MFRS 9 replaces the provisions of MFRS 139 that relates to the recognition, classification and

measurement of the financial assets and financial liabilities, derecognition of the financial

instruments and impairment of financial assets. The adoption of MFRS 9 ‘Financial Instruments’

from 1st July 2018 resulted in changes in accounting policies and adjustments to the amounts

recognised in the financial statements. The Fund has elected to apply the limited exemption in

MFRS 9 relating to transition for classification and measurement and impairment, and accordingly

has not restated comparative periods in the year of initial application.

As a consequence:

(a) any adjustments to carrying amounts of financial assets or liabilities are recognised at

the beginning of the current reporting period, with the difference recognised in opening

retained earnings;

(b) financial assets are not reclassified in the statements of financial position for the

comparative period; and

(c) provisions for impairment have not been restated in the comparative period.

Financial Assets

Accounting policies applied from 1 July 2018

(i) Classification

From 1 July 2018, the Fund classified its financial assets in the following measurement

categories:

• those to be measured subsequently at fair value (either through other

comprehensive income or through profit or loss), and

• those to be measured at amortised cost

The classification depends on the entity’s business model for managing the financial

assets and the contractual terms of the cash flows.



19

For assets measured at fair value, gains and losses will either be recorded in profit or

loss or other comprehensive income. For investments in equity instruments that are not

held for trading, the Fund can make an irrevocable election at the time of initial

recognition to account for the equity investment either at fair value through other

comprehensive income (“FVTOCI”) or fair value through profit or loss (“FVTPL”).

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the

date on which the Fund commits to purchase or sell the asset. Financial assets are

derecognised when the rights to receive cash flows from the financial assets have

expired or have been transferred and the Fund has transferred substantially all the risks

and rewards of ownership.

(iii) Measurement

At initial recognition, the Fund measures a financial asset at its fair value plus, in the

case of a financial asset not at FVTPL, transaction costs that are directly attributable to

the acquisition of the financial asset. Transaction costs of financial assets carried at

FVTPL are expenses in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when

determining whether their cash flows are solely payments of principal and interest

(“SPPI”).

Impairment of financial assets

Accounting policies applied from 1 July 2018

The Fund assesses at the end of each reporting period whether there is any objective evidence

that a financial asset is impaired.

The measurement of expected credit losses (“ECL”) is a function of the probability of default, loss

given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The

assessment of the probability of default and loss given default is based on historical data adjusted

by forward-looking information. As for the exposure at default, for financial assets, this is

represented by the financial assets’ gross carrying amount at the end of each reporting period.

The impairment methodology applied depends on whether there has been a significant increase in

credit risk.

The Fund applies the simplified approach under MFRS 9 which requires expected lifetime loss to

be recognised from initial recognition. The expected loss allowance is based on provisional matrix.

Derecognition of Financial Assets

The Fund derecognises a financial asset only when the contractual rights to the cash flows from

the asset expire, or when it transfers the financial asset and substantially all the risks and rewards

of ownership of the asset to another entity. If the Fund neither transfer nor retain substantially all

the risks and rewards of ownership and continues to control the transferred asset, the Fund

recognises its retained interest in the asset and an associated liability for amounts it may have to

pay. If the Fund retains substantially all the risks and rewards of ownership of a transferred

financial asset, the Fund continue to recognise the financial asset and also recognises a

collateralised borrowing for the proceeds received.

Equity instruments

The Fund subsequently measure all equity investments at fair value. Where the the Fund’s

management have elected to present fair value gains and losses on equity investments in other

comprehensive income, there is no subsequent reclassification of fair value gains and losses to

profit or loss following the derecognition of the investment. Dividends from such investments

continue to be recognised in profit or loss as other income when the Fund’s right to receive

payments is established.



20

Changes in the fair value of financial assets at FVTPL are recognised in other income/(losses) in

profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity

investments measured at FVTOCI are not reported separately from other changes in fair value.


Financial liabilities are classified as measured at amortised cost or FVTPL.

A financial liability is any liability with contractual obligation to deliver cash or another financial

asset to another enterprise, or to exchange financial instruments with another enterprise under

conditions that are potentially unfavourable.

(a) Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when financial liabilities are either

held for trading or it is designated as at FVTPL. Financial liabilities at FVTPL are

measured at fair value at the end of each reporting period, with any fair value

gains or losses recognised in profit or loss.

For financial liabilities where it is designated as fair value through profit or loss

upon initial recognition, the Company recognises the amount of change in fair

value of the financial liability that is attributable to change in credit risk in the

other comprehensive income and remaining amount of the change in fair value in

the profit or loss, unless the treatment of the effects of changes in the liability’s

credit risk would create or enlarge an accounting mismatch.

(b) Financial liabilities measured subsequently at amortised cost

Financial liabilities that are not held for trading, or designated as at FVTPL, are

measured subsequently at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a

financial liability and of allocating interest expense over the relevant period. The

effective interest rate is the rate that exactly discounts estimated future cash

payments (including all fees and points paid or received that form an integral

part of the effective interest rate, transaction costs and other premiums or

discounts) through the expected life of the financial liability, or (where

appropriate) a shorter period, to the amortised cost of a financial liability.

A financial liability is derecognised when the obligation under the liability is extinguished. When

an existing financial liability is replaced by another from the same lender on substantially

difference terms, or the terms of an existing liability are substantially modified, such an exchange

or modification is treated as derecognition of the original liability and the recognition of a new

liability, and the difference in the respective carrying amounts is recognised in profit or loss.

Investments

Investments in quoted securities are classified as at FVTPL and valued at the last market price

quoted on Bursa Malaysia at the end of the reporting period.

Unquoted fixed income securities are classified as FVTPL and are generally valued on a daily basis

with the appropriate prices by reference to quotes published by an approved bond pricing agency

(“BPA”). When no market prices are available or during abnormal market or when the Manager is

of the view that the quotes by the BPA differ from the ‘market price’ by 20 basis points, such

securities will be valued at ‘fair values’ in accordance with the requirements stipulated in the

Guidance Note issued by the Securities Commission Malaysia.

Investment in unlisted collective investment schemes are classified as FVTPL and are valued at

the last published repurchase price per unit of such collective investment scheme.

Investment in preference shares are classified as FVTPL and are valued at the latest market price

per unit of such preference shares.



21

Gains or losses arising from the changes in the fair value of the investments is recognised as

gains or losses from investments in profit or loss and transferred to unrealised reserve.

Classification of Realised and Unrealised Gains and Losses

Unrealised gains and losses comprise changes in the fair value of financial instruments for the

period and from reversal of prior period’s unrealised gains and losses for financial instruments

which were realised (i.e. sold, redeemed or matured) during the reporting period.

Provisions

The Fund recognises a liability as a provision if the outflows required to settle the liability are

uncertain in timing or amount.

A provision for onerous contracts is recognised when the Fund has a present legal or constructive

obligation as a result of a past event, and of which the outflows of resources on settlement are

probable and a reliable estimate of the amount can be made. No provision is recognised if these

conditions are not met.

Statement of Cash Flows

The Fund adopts the direct method in the preparation of statement of cash flows.

Cash equivalents are highly liquid investments with maturities of three months or less from the

date of acquisition and are readily convertible to cash with insignificant risk of changes in value.

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

(i) Critical judgements in applying accounting policies

In the process of applying the Fund’s accounting policies, which are described in Note 3

above, the Manager is of the opinion that there are no instances of application of

judgement which are expected to have a significant effect on the amounts recognised in

the financial statements.

(ii) Key sources of estimation uncertainty

The Manager believes that there are no key assumptions made concerning the future and

other key sources of estimation uncertainty at the end of the reporting period, that have a

significant risk of causing a material adjustment to the carrying amounts of assets and

liabilities within the next reporting period.

5 INVESTMENTS

Investments designated as FTVL are as follows:

2019 2018

At aggregate cost Note RM RM

Collective investment scheme 5(a) 20,839,730 -

Unquoted fixed income securities 5(b) 166,884,975 88,976,070

Preference shares 5(c) 17,220,000 5,000,000

204,944,705 93,976,070

2019 2018

At fair value RM RM

Collective investment scheme 5(a) 20,778,323 -

Unquoted fixed income securities 5(b) 171,904,031 90,581,535

Preference shares 5(c) 17,581,151 5,000,000

210,263,505 95,581,535



22

2019 2018

Net gain on investments at FVTPL comprised: RM RM

Realised loss on disposals (174,437) (612,008)

Accretion of discount of preference shares 666,035 -

Accreation of discount of preference shares 361,151 -

Net unrealised gain on changes in fair value 742,459 993,006

1,595,208 380,998

5(a) Details of collective investment scheme are as follows:

2019

Collective

Investment

Scheme Quantity

Market

Price

Aggregate

Cost

Carrying

Value Fair Value

Fair

Value

as a %

of Net

Asset

Value

Units RM RM RM RM %

Areca MoneyTrust Fund

41,556,646

0.500

20,839,730

20,826,949

20,778,323

8.95

5(b) Details of unquoted fixed income securities are as follows:

2019 Issuer (rating) maturity/

coupon (%)

Nominal

Value

Valuation

Price

Aggregate

Cost

Carrying

Value

Fair

Value

Fair Value

as a % of Net Asset

Value

RM RM RM RM RM %

Bonds GII Murabahah (NR) 2026/3.726 10,000,000 102.4000 10,083,000 10,083,000 10,240,000 4.41 Malaysian Government

Securities (NR) 2030/4.498 9,000,000 108.6840 9,171,900 9,590,670 9,781,560 4.21

Malaysian Government

Securities (NR) 2048/4.921 8,500,000 113.8000 8,943,105 9,324,500 9,673,000 4.17 GII Murabahah (NR) 2027/4.755 8,500,000 111.5740 8,559,500 9,235,250 9,483,790 4.09

GII Murabahah (NR) 2047/4.895 8,000,000 114.4990 9,720,000 9,720,000 9,159,920 3.95

Malaysian Government Services

(NR) 2043/4.935 8,000,000 114.1140 9,468,000 9,468,000 9,129,120 3.93 GII Murabahah (NR) 2024/3.655 8,000,000 102.0500 8,111,680 8,111,680 8,164,000 3.52

GENM Malaysia Berhad

(AAA)2028/5.300 7,000,000 108.7060 7,000,000 7,568,190 7,609,420 3.28

KMCOB Capital Berhad (AAA)

2020/4.900 7,000,000 100.7600 6,997,200 7,041,160 7,053,200 3.04 GII Murabahah (NR) 2049/4.638 6,000,000 109.9000 5,978,640 6,294,600 6,594,000 2.84

Al Dzahab Assets Berhad (AAA)

2023/5.700 5,000,000 105.9660 5,332,000 5,332,000 5,298,300 2.28

CIMB Group Holdings Berhad (A1) 2116/5.800 5,000,000 102.4810 5,032,400 5,126,750 5,124,050 2.21

Malayan Banking (AAA)

2117/4.080 5,000,000 100.7190 5,000,000 5,000,000 5,035,950 2.17

Genting Capital Berhad (AAA) 2029/4.180 5,000,000 100.3970 5,000,000 5,000,000 5,019,850 2.16

Press Metal Aluminium Holdings

Berhad (AA3) 2024/4.100 5,000,000 100.008 5,000,000 5,000,000 5,000,400 2.16

Eastern & Oriental Berhad (NR)

2020/2.000 5,000,000 99.3590 4,323,000 4,872,300 4,967,950 2.14 UEM Sunrise Berhad (AA-)

2022/4.800 4,500,000 102.8980 4,505,050 4,591,800 4,630,410 2.00

Alpha Circle Sdn Bhd (AA-)

2020/5.300 4,301,000 100.9390 4,301,000 4,301,000 4,341,386 1.87 Sabah Development Bank

Berhad (AA1) 2022/5.300 4,000,000 103.4800 4,018,900 4,101,920 4,139,200 1.78

TRIplc Ventures Sdn Bhd (AAA)

2021/5.460 4,000,000 103.4050 4,000,000 4,143,880 4,136,200 1.78 Syarikat Prasarana Negara

Berhad (NR) 2039/4.090 4,000,000 101.4840 4,000,000 4,000,000 4,059,360 1.75



23

2019

Issuer (rating) maturity/

coupon (%)

Nominal

Value

Valuation

Price

Aggregate

Cost

Carrying

Value

Fair

Value

Fair Value

as a % of

Net Asset

Value

RM RM RM RM RM % Bonds

Lebuhraya Duke Fasa 3 Sdn Bhd

(AA-) 2037/6.230 3,500,000 115.9250 3,582,600 4,014,290 4,057,375 1.75

Telekosang Hydro One Sdn Bhd (AA3) 2032/5.300 4,000,000 101.2060 4,037,600 4,037,600 4,048,240 1.74

CIMB Thai Bank Public Company

Limited (AA3) 2029/4.150 4,000,000 100.6830 4,000,000 4,000,000 4,027,320 1.74

DRB-Hicom Berhad (A+) 2024/4.550 4,000,000 100.3580 4,000,000 4,000,000 4,014,320 1.73

AZRB Capital Sdn Bhd (AA-)

2022/4.700 4,000,000 99.9990 4,000,000 4,000,000 3,999,960 1.72

Lembaga Pembiayaan Perumahan Sektor Awam

(NR) 2036/4.620 3,000,000 108.6590 3,000,000 3,195,330 3,259,770 1.40

Premier Auto Asets Berhad

(AAA) 2021/4.650 3,000,000 100.1010 3,000,000 3,000,000 3,003,030 1.29


DRB Hicom Berhad (A)

2020/7.500 2,000,000 101.0100 2,016,400 2,040,440 2,020,200 0.87

Alpha Circle Sdn Berhad (AA-) 2021/5.450 1,825,000 101.9540 1,825,000 1,825,000 1,860,660 0.80

Alpha Circle Sdn Berhad (AA-)

2021/5.300 878,000 101.1560 878,000 878,000 888,150 0.38

Total bonds 166,884,975 170,959,200 171,904,031 74.06

2018

Issuer (rating) maturity/ coupon (%)

Nominal Value

Valuation Price

Aggregate Cost

Carrying Value

Market Value

Fair Value

as a % of

Net Asset Value

RM RM RM RM RM %

Bonds

Hong Leong Bank Berhad (AA2) 2039/8.25 9,500,000 102.5820 9,405,000 9,892,350 9,745,290 7.67

GENM Capital Berhad (AAA)

2028/5.30 7,000,000 103.1440 7,000,000 7,000,000 7,220,080 5.68

KMCOB Capital Berhad (AAA)

2020/4.90 7,000,000 100.0630 6,997,200 6,997,200 7,004,410 5.51 Golden Assets International

Finance Limited (A1)

2019/5.35 6,500,000 100.3350 6,508,000 6,518,070 6,521,775 5.13


Sports Toto Malaysia Sdn

Berhad (AA-) 2019/4.82 5,000,000 100.1550 5,030,600 5,010,850 5,007,750 3.94

Eastern & Oriental Berhad (NR) 2020/2.00 5,000,000 95.6054 4,323,000 4,691,380 4,780,270 3.76

TRIplc Ventures Sdn Bhd (AAA)

2021/5.46 4,000,000 103.1730 4,000,000 4,118,600 4,126,920 3.25

CIMB Thai Bank Public Company Limited (AA3) 2024/5.60 4,000,000 100.5940 4,036,750 4,032,280 4,023,760 3.16

UEM Sunrise Berhad (AA-)

2022/4.80 4,000,000 100.3400 4,003,300 3,994,000 4,013,600 3.16

Lebuhraya DUKE Fasa 3 Sdn

Berhad (AA-) 2037/6.23 3,500,000 109.2950 3,582,600 3,787,665 3,825,325 3.01 Al Dzahab Assets Berhad (AAA)

2021/5.50 3,500,000 102.7770 3,500,000 3,595,935 3,597,195 2.83

Sarawak Hidro Sdn Berhad

(AAA) 2024/4.34 3,500,000 99.8240 3,521,000 3,464,720 3,493,840 2.75 AmBank (M) Berhad (A1)

2039/8.25 3,000,000 102.3750 3,000,000 3,115,470 3,071,250 2.42



24

2018

Issuer (rating) maturity/

coupon (%)

Nominal

Value

Valuation

Price

Aggregate

Cost

Carrying

Value

Market

Value

Fair Value

as a % of

Net Asset

Value RM RM RM RM RM %

Bonds

Sabah Development Bank

Berhad (AA1) 2022/5.30 3,000,000 100.7600 3,002,700 3,041,640 3,022,800 2.38 Alpha Circle Sdn Berhad (AA-)

2019/5.15 3,000,000 100.1680 3,000,000 2,996,400 3,005,040 2.36

Lembaga Pembiayaan

Perumahan Sektor Awam

(NR) 2036/4.62 3,000,000 98.2010 3,000,000 2,848,710 2,946,030 2.32 CIMB Group Holdings Berhad

(A1) 2116/5.40 2,000,000 101.9780 2,000,000 2,000,000 2,039,560 1.60

Al Dzahab Assets Berhad (AAA)

2020/4.93 2,000,000 100.7350 2,015,200 2,015,200 2,014,700 1.58 DRB-Hicom Berhad (A+)

2019/5.90 2,000,000 100.1760 2,001,920 2,002,460 2,003,520 1.58

DRB-Hicom Berhad (A-)

2114/7.50 2,000,000 100.1310 2,016,400 1,995,120 2,002,620 1.58 Alpha Circle Sdn Berhad (AA-)

2019/5.00 2,000,000 100.0400 2,000,000 2,000,000 2,000,800 1.57

Total unquoted fixed income

securities 88,976,070 90,210,900 90,581,535 71.26

5(c) Details of preference shares are as follows:

2019

Preference shares

Quantity Units

Valuation Price

Aggregate Cost

Carrying Value

Fair Value

Fair

Value as

a % of

Net

Asset Value

RM RM RM RM RM %

PNS Group Sdn Bhd (NR)

2019/0.00 13,000,000 0.9678 12,220,000 12,220,000 12,581,151 5.42 Utuh Sejagat Sdn Bhd (NR)

2019/9.50 5,000,000 1.00 5,000,000 5,000,000 5,000,000 2.15

Total preference shares 17,220,000 17,220,000 17,581,151 7.57

Total 2019 investments 204,944,705 209,006,149 210,263,505 90.58

2018

Preference shares

Quantity Units

Valuation Price

Aggregate Cost

Carrying Value

Fair Value

Fair Value as

a % of

Net

Asset Value

RM RM RM RM RM %

Utuh-Sejagat Sdn Bhd (NR)

2019/9.50 5,000,000 1.00 5,000,000 5,000,000 5,000,000 3.93

Total 2018 investments 93,976,070 95,210,900 95,581,535 75.19

6 AMOUNT DUE FROM/(TO) MANAGER

2019 2018 RM RM

Amount due from/(to) Manager comprises:

Amount due from Manager 2,043,135 27,909

Amount due to Manager (289,000) -

1,754,135 27,909



25

Amount due from/(to) Manager consists of amounts receivable from/(payable to) the Manager in

respect of creation/(cancellation) of units. Amount receivable for units created/(cancelled) is

received/(paid) within 10 days of the transaction dates.

7 OTHER RECEIVABLES

2019 2018

RM RM

Interest receivables from:

Unquoted fixed income securities 1,833,576 1,456,898

Preference shares 33,835 -

Short-term deposits 1,715 32,833

1,869,126 1,489,731

8 SHORT-TERM DEPOSITS

Short-term deposits represent deposits with local licensed financial institutions.

The effective average interest rate for short-term deposits is 3.06% per annum (2018: 3.59%

per annum) and the average maturity period is 9 days (2018: 23 days).

9 UNITHOLDERS’ CAPITAL

--------2019--------- -------2018-------

No. of units RM No. of units RM

At beginning of period 374,564,230 184,141,595 226,681,995 104,110,943

Created during the period 232,764,900 124,637,203 154,695,755 81,029,243

Cancelled during the period (177,589,201) (95,157,260) (140,745,810) (73,708,446)

At end of period 429,739,929 213,621,538 240,631,940 111,431,740

10 UNREALISED RESERVE

2019 2018

RM RM

Balance at beginning of period 4,215,191 612,459

Net unrealised gain attributable to investment held at fair

value through profit or loss

742,459

993,006

Balance at end of period 4,957,650 1,605,465

Investments:

At fair value 210,263,505 95,581,535

At cost (204,944,705) (93,976,070)

Accretion of discount (361,151) -

Unrealised reserve 4,957,560 1,605,465

11 REALISED RESERVE 2019 2018

RM RM

Balance at beginning of period 9,630,866 12,412,496

Total comprehensive income for the period 4,647,933 2,662,608

Net unrealised gain transferred to unrealised reserve (742,459) (993,006)

Balance at end of period 13,536,340 14,082,098

12 OTHER PAYABLES AND ACCRUED EXPENSES

2019 2018

RM RM

Management fee 173,902 103,030

Trustee’s fee 15,326 8,167



26

2019 2018

RM RM

Tax agent’s fee 3,800 3,800

Advance coupon 118,750 -

Others - 1,019

311,778 116,016

13 NET ASSET VALUE PER UNIT

The net asset value per unit is calculated by dividing the net asset value attributable to

unitholders of RM232,115,528 (2018: RM127,119,303) as of 31 December 2019 by 429,739,929

units in issue as of 31 December 2019 (2018: 240,631,940 units).

14 MANAGEMENT FEE

The Schedule 8 of the Deed provides that the Manager is entitled to an annual management fee

at a rate not exceeding 2.50% per annum computed daily on the net asset value of the Fund

before the deduction of the management fee and Trustee’s fee for the relevant day. The

management fee provided for in the financial statements amounted to 0.94% (2018: 1.11%) per

annum for the period, net of management fee rebate on the collective investment scheme.

15 TRUSTEE’S FEE

The Schedule 9 of the Deed provides that the Trustee is entitled to an annual Trustee’s fee at

rate not exceeding 0.50% per annum computed daily on the net asset value of the Fund before

the deduction of the management fee and Trustee’s fee for the relevant day. The Trustee’s fee

provided for in the financial statements amounted to 0.08% (2018: 0.08%) per annum for the

period.

16 INCOME TAX EXPENSE

There is no tax charge as interest income derived by the Fund is exempted pursuant to Schedule

6 of the Income Tax Act, 1967. Gains arising from realisation of investments and investment

from preference shares are not treated as income pursuant to Paragraph 61(1)(b) of the Income

Tax Act, 1967.

17 MANAGEMENT EXPENSE RATIO & PORTFOLIO TURNOVER

Management Expense Ratio (MER)

Management expense ratio for the Fund is 0.52% (2018: 0.60%) for the financial period ended

31 December 2019. The management expense ratio which includes management fee, Trustee’s

fee and other expenses, is calculated as follows:

MER = (A + B + C ) ÷ D x 100

A = Management fee C = Other expenses

B = Trustee’s fee D = Average net asset value of Fund

The average net asset value of the Fund for the financial period is RM226,319,077 (2018:

RM120,824,232).

Portfolio Turnover Ratio (PTR)

The portfolio turnover ratio for the Fund is 0.94 times (2018: 0.18 times) for the period ended

31 December 2019. The portfolio turnover is derived from the following calculation:

(Total acquisition for the financial period + total disposal for the financial period) ÷ 2

Average net asset value of the Fund for the period calculated on a daily basis

Where: total acquisition for the financial period = RM368,716,832 (2018: RM27,179,154)

total disposal for the financial period = RM55,963,338 (2018: RM16,215,208)



27

18 UNITS HELD BY THE MANAGER AND RELATED PARTIES

As of end of the financial period, the total number and value of units held by the Manager and

related parties are as follows:

2019 No. of units

The Manager 14,555

2018 No. of units RM

The Manager -

Danny Wong Teck Meng 55,540 29,342

Edward Iskandar Toh Bin Abdullah 34,246 18,092

89,786 47,434

The directors of the Manager are of the opinion that the transactions with the related parties

have been entered into in the normal course of business and have been established on terms

and conditions that are not materially different from that obtainable in transactions with

unrelated parties.

19 TRADE WITH BROKERS/ DEALERS

Details of transactions with brokers/dealers are as follows:

Brokers/ Dealers

Value of

Trades

% of

Total

Trades Fees

% of Total

Brokerage

Fee

RM % RM %

2019

UOB Asset Management (Malaysia)

Berhad

235,735,021 44.17 - -

Hong Leong Investment Bank Bhd 67,378,411 12.63 - -

Affin Hwang Investment Bank 66,451,000 12.45 - -

KAF Investment Bank Berhad 44,680,000 8.37 - -

Malayan Banking Berhad 33,192,959 6.22 - -

CIMB Bank Berhad 25,192,765 4.72 - -

Hong Leong Asset Management

Berhad

12,895,996

2.42

-

-

KAF Asset Management Berhad 12,886,833 2.41 - -

CIMB Bank Islamic Berhad 8,208,348 1.54 - -

AmFunds Management Berhad 7,979,890 1.50 - -

RHB Investment Bank Berhad 7,004,000 1.31 - -

Bank Islam Malaysia Berhad 4,037,600 0.76 - -

Kenanga Investment Bank Berhad 4,000,000 0.75 - -

RHB Asset Management Berhad 2,000,555 0.38 - -

Manulife Asset Management Sdn

Bhd

2,000,042

0.37

-

-

533,643,420 100.00 - -

2018

KAF Investment Bank Berhad 81,859,000 48.45 - -

Hong Leong Investment Bank

Berhad

60,236,004 35.65 - -

CIMB Bank Berhad 16,684,800 9.87 - -

Affin Hwang Investment Bank 4,013,000 2.38 - -

CIMB Bank Islamic Berhad 4,000,120 2.37 - -

RHB Investment Bank Berhad 2,000,000 1.18 - -

CIMB Investment Bank Berhad 170,000 0.10 - -

168,962,924 100.00 - -



28

Included in transactions with broker/dealers are trades conducted on normal term in relation to

investment in collective investment scheme managed by Manager.

20 RISK MANAGEMENT POLICIES

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund seeks to preserve capital as well as to provide regular income over the short to

medium term period by investing in fixed income instruments. 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 key risks faced by the Fund are credit risk, liquidity risk, market risk (including interest rate

risk and price risk) on its investments and capital risk.

Categories of Financial Instruments 2019 2018

RM RM

Financial assets

Carried at FVTPL:

Collective investment scheme 20,778,323 -

Unquoted fixed income securities 171,904,031 90,581,535

Preference shares 17,581,151 5,000,000

Amortised cost:

Amount due from Manager 1,754,135 27,909

Other receivables 1,869,126 1,489,731 Short-term deposits 18,533,227 30,250,994



Amortised cost: Other payables and accrued expenses 311,778 234,766

Credit risk management

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for

the Fund by failing to discharge an obligation. The Fund is exposed to the risk of credit-related

losses that can occur as a result of a counterparty or issuer being unable or unwilling to honour

its contractual obligations to make timely repayments of interest, principal and proceeds from

realisation of investments.

The Manager manages the Fund’s credit risk by undertaking credit evaluation and close

monitoring of any changes to the issuer/counterparty’s credit profile to minimise such risk. It is

the Fund’s policy to enter into financial instruments with reputable counterparties.

The Fund’s maximum exposure to credit risk is represented by the carrying amount of each class

of financial assets recognised in the statement of financial position. None of the Fund’s financial

assets were past due or impaired as at 31 December 2019.

The Fund invests only in unquoted investments of at least investment grade as rated by a credit

rating agency. The Fund also invests in government backed/related securities and preference

shares which are not rated by credit rating agency. The following table set out the Fund’s

portfolio of unquoted investments by rating categories:



29

Credit rating

Market Value

RM

As a % of

unquoted

investments

As a % of

NAV

2019

Bonds

AAA 32,120,000 16.95 13.84

AA1 4,139,200 2.18 1.78

AA3 18,111,910 9.56 7.80

AA- 19,777,941 10.44 8.52

A1 7,207,990 3.80 3.11

A+ 4,014,320 2.12 1.73

A 2,020,200 1.07 0.87

NR (LT) 102,093,621 53.88 43.98

189,485,182 100.00 81.63

2018

Bonds

AAA 27,457,145 28.73 21.60

AA1 3,022,800 3.16 2.38

AA2 9,745,290 10.20 7.67

AA3 4,023,760 4.21 3.16

AA- 17,852,515 18.68 14.04

A1 16,747,585 17.52 13.17

A+ 2,003,520 2.10 1.58

A- 2,002,620 2.09 1.58

NR (LT) 12,726,300 13.31 10.01

95,581,535 100.00 75.19

The following table set out the Fund’s portfolio of unquoted investments by industry:

Industry

Short-term

deposits

Collective investment

scheme

Unquoted fixed income

securities

Preference

shares

RM RM RM RM

2019

Commercial - - 5,035,950 -

Construction & property

development - - 21,824,345 17,581,151

Diversified holdings - - 11,054,370 -

Finance, insurance and business services 18,533,227 20,778,323 90,207,890 -

Power & electricity - - 4,048,240 -

State government - - 28,583,680 -

Trading & servces - - 7,090,196 -

Transportion - - 4,059,360 -

18,533,227 20,778,323 171,904,031 17,581,151

2018 Construction & engineering - - 11,131,330 -

Construction & property

development - - 5,000,000

Diversified holdings - - 4,006,140 -

Finance, insurance and

business services 30,250,994 - 40,355,855 -

Infrastructure & utilities - - 7,319,165 -

Plantation & agriculture - - 6,521,775 -

Property & real estate - - 4,013,600 -



30

Industry

Short-term

deposits

Collective

investment

scheme

Unquoted

fixed income

securities

Preference

shares

RM RM RM RM

2018

Trading & services - - 17,233,670 -

30,250,994 - 90,581,535 5,000,000

Liquidity risk management

Liquidity risk is defined as the ease with which a security can be sold at or near its fair value

depending on the volume traded on the market. The Fund manages its liquidity risk by investing

predominantly is securities that it expects to be able of being converted into cash within 7 days.

The table below summarises the maturity profile of the Fund’s liabilities at the reporting date

based on contractual undiscounted repayment obligations:

Up to 1 month

1 -3 month

3 months to 1 years

Total

RM RM RM RM

2019

Financial Liabilities Non-interest bearing:

Other payables and accrued expenses 189,228 122,550 - 311,778

2018

Financial Liability

Non-Interest bearing: Other payables and accrued expenses 111,197 123,569 - 234,766

Market risk management

This is a class of risk that inherently exists in an economy and cannot be avoided by any business

or fund. It is usually due to changes in market variables such as interest rates and markets prices.

This risk cannot be removed from an investment portfolio, which is solely invested within that

particular market, by diversification.

Therefore, as the Fund presently invests only in Malaysian fixed income securities, the

performance of the Fund might go up or down in accordance with the prevailing market risk of

Malaysia.

Interest rate risk management

This risk related to movements in the direction of the interest rates that will cause the value of

the securities to fluctuate. The Fund seeks to manage this risk by constructing a fixed income

portfolio with sufficient diverse range of maturities in accordance to the interest rate strategies

developed after thorough evaluation of macroeconomic variables.

As interest rates and yield curves change over time, the Fund may be exposed to a loss in

earnings due to the effects of interest rates on the structure of the statement of financial position.

Interest rate risk sensitivity

Sensitivity to interest rate arises from mismatches in the repricing dates, cash flows and other

characteristics of the assets and their corresponding liability funding. A 50 basis point increase or

decrease is used when reporting interest rate risk internally to key management personnel and

represents management’s assessment of the reasonably possible change in interest rates.

The sensitivity is the effect of the assumed changes in interest rates on changes in fair value of

investments for the year, based on revaluing fixed rate financial assets at the end of the reporting

period.



31

The following table demonstrates the sensitivity of the Fund’s income for the period to a

reasonably possible change if interest rates had been 50 basis points higher/lower and all other

variables were held constant.

Changes in basis points Effect on profit or loss

Increase/(Decrease)

RM 2019

Interest rate +50/-50 1,040,092/(1,040,092)

Changes in basis points Effect on profit or loss

Increase/(Decrease) 2018 RM

Interest rate +50/-50 629,163/(629,163)

Price Risk management

Price risk is the risk of unfavourable changes in the fair value of unquoted fixed income securities

and collective investment scheme as the result of changes in the levels of the equity indices and

the value of individual securities. The price risk exposure arises from the Fund’s investment in

unquoted securities and collective investment scheme.

Price risk sensitivity

Management’s best estimate of the effect on the income for the year due to a reasonably possible

change in price, with all other variables held constant is indicated in the table below:

Changes in price

Effect on profit or loss

Increase/(Decrease)

% RM

2019

Investments +5/-5% 10,513,175/(10,513,175)

Changes in price

Effect on profit or loss

Increase/(Decrease)

% RM

2018

Investments +5/-5% 4,779,077/(4,779,077)

Capital Risk Management

The capital of the Fund is represented by equity consisting of unitholders’ 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 unitholders. 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 unitholders and benefits for other stakeholders and to maintain a strong

capital base to support the development of the investment activities of the Fund.

21 FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the collective investment scheme is determined based on the net asset value

per unit of such collective investment scheme as at the end of the reporting period.

Unquoted fixed income securities are valued using fair value prices quoted by a bond pricing

agency (“BPA”). Where the Manager is of the view that the price quoted by BPA for a specific

bond differs from the market price by more than 20 basis points, The Manager may use the

market price, provided that the Manager records its basis for using a non-BPA price, obtains

necessary internal approvals to use the non-BPA price, and keeps an audit trail of all decisions

and basis for adopting the use of non- BPA price.

For deposits and placements with financial institutions with maturities of less than twelve

months, the carrying value is a reasonable estimate of fair value.



32

The carrying amounts of other financial assets and financial liabilities approximate their fair

values due to short maturity of these instruments.

The following table provides an analysis of financial instruments that are measured subsequent

to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the

fair value is observable.

Level 1 Level 2 Level 3 Total

RM RM RM RM

2019

Financial assets at

FVTPL

Unquoted fixed income

securities - 171,904,031 - 171,904,031

Collective investment

scheme - 20,778,323 - 20,778,323

Preference shares - 17,581,151 - 17,581,151

2018

Financial assets at

FVTPL

Unquoted fixed income securities - 90,581,535 - 90,581,535

Preference shares - 5,000,000 - 5,000,000

There were no transfers between Levels 1 and 2 during the financial period.

22 INTERIM ACCOUNTS

The interim accounts for the 6-month period ended 31 December 2019 have not been audited.

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

Pulau Pinang Branch368-2-02 Belisa Row, Jalan Burma Georgetown, 10350 Pulau PinangT 604 210 2011 F 604 210 2013· ·

Ipoh Branch11A, (First Floor), Persiaran Greentown 5Greentown Business Centre, 30450 Ipoh, PerakT 605 249 6697 F 605 249 6696·

Melaka Branch95-A, Jalan Melaka Raya 24Taman Melaka Raya, 75000 MelakaT 606 282 9111 F 606 283 9112· ·

·

·

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