Quarterly Report November 2018

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Quarterly Report

November 2018

For the Period Ended 30 November 2018

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Q U A R T E R L Y R E P O R T N O V E M B E R 2 0 1 8

ARECA PROGRESSIVE INCOME FUND

Contents

CORPORATE DIRECTORY 2

MANAGER’S REPORT

Areca Progressive Income Fund:

Fund Information, Performance & Review 3

Market Review & Outlook 7

TRUSTEE’S REPORT 9

STATEMENT BY THE MANAGER 9

UNAUDITED FINANCIAL STATEMENTS FOR Areca Progressive Income Fund

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QUARTERLY REPORT NOVEMBER 2018

ARECA PROGRESSIVE INCOME FUND

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: invest@arecacapital.com

BOARD OF DIRECTORS

Wong Teck Meng (Executive)

Edward Iskandar Toh Bin Abdullah (Executive) Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin (Independent)

Dr. Junid Saham (Independent)

INVESTMENT COMMITTEE MEMBERS

Dato’ Seri Lee Kah Choon (Independent) Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin (Independent)

Dr. Junid Saham (Independent)

TRUSTEE

RHB Trustees Berhad (573019-U) Level 10, Tower One, RHB Centre Jalan Tun Razak

50400 Kuala Lumpur

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

AUDITOR

Deloitte PLT (LLP 0010145-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: invest@arecacapital.com

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 Lot7998, Block 16 KCLD, Cha Yi Goldland Jalan Tun Jugah/ Stutong 93350 Kuching, Sarawak Tel: 6082-572 472

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

Name of the Fund Areca Progressive Income Fund

Fund Category/ Type

Wholesale Fund with flexible asset allocation/Income and Growth

Objective of the Fund

The Fund aims to provide Medium to Long Term combination of income and capital growth. Any material changes to the Fund’s objective would require Unit Holder’s approval.

Performance Benchmark

Maybank’s 12-month fixed deposit rate

Distribution Policy of the Fund

Subject to the availability of income, the Fund will distribute income at least once a year. Capital repayment in a form of cash may be made to the Unit Holders. The capital repayment is pursuant to the maturity of the investment, disposal by Manager or early redemption by issuer and without intention to reinvest the investment proceeds.In the absence of any instructions, at the Manager discretion to reinvest the income into another unit trust fund as determined by the Manager at the NAV per Unit of the distribution day without any entry fee.

Profile of unitholdings

* excluding units held by the Manager

As at 30 November 2018 Size of Holding (Units) No. of

accounts % No. of unit held (million) % Up to 5,000 - - - - 5,001 to 10,000 - - - - 10,001 to 50,000 7 20.60 0.47 2.55 50,001 to 500,000 20 58.82 4.71 25.50 500,001 and above 7 20.58 13.30 71.95 Total* 34 100.00 18.48 100.00

Rebates & Soft Commissions

The Manager will retain soft commissions received from stockbrokers, provided these are of demonstrable benefit to the Unit Holders. 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, will be directed to the account of the Fund. During the period under review, the Manager had not received any soft commissions.

Inception Date 28 February 2018

Initial Offer Price RM1.0000 per unit during the initial offer period of 30 days from the inception date ended 31 March 2018

Pricing Policy Single Pricing – Selling and repurchase of units by Manager are at Net Asset Value per unit

Financial Year End

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F U N D P E R F O R M A N C E 01.09.2018 to 30.11.2018 01.06.2018 to 31.08.2018 Total Net Asset Value (“NAV”)

Total Net Asset Value (RM million) 20.96 21.12* Units in circulation (million units) 20.76 20.76* NAV per unit (RM) 1.0095 1.0171*

* Ex-Distribution

HIGHEST & LOWEST NAV per unit

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

Highest NAV per unit (RM) 1.0344 1.0172 Lowest NAV per unit (RM) 1.0071 1.0041

* Ex-Distribution

ASSET ALLOCATION % of NAV

Fixed Income Securities

Unlisted preferences shares 100.17 99.43

Cash & cash equivalents including

placements & repo -0.17 0.57

DISTRIBUTION

Please refer to Note 2 for further information

Distribution date 19 Nov 2018 - Gross distribution (sen per unit) 2.80 - Net distribution (sen per unit) 2.80 - NAV before distribution (RM per unit) 1.0344 (16 Nov) - NAV after distribution (RM per unit) 1.0071 (19 Nov) -

UNIT SPLITS

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

EXPENSE/ TURNOVER

Management expense ratio (MER) (%) 0.50 0.35

Portfolio turnover ratio (PTR) (times) 0.01 0.87

TOTAL RETURN

Total Return (%) 2.00 1.33 - Capital Return (%) (0.76) 1.33 - Income Return (%) 2.76 - Annual Total Return (%) 8.28* 5.40* Benchmark: Average Maybank’s

12-month fixed deposit rate (%) 3.41* 1.69*

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1-yr 3-yrs 5-yrs

Average Total Return per annum (%) - - - NOTES:

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

and redemption of units by the Management Company (i.e. when you redeem your units and liquidate your investments) will be carried out at NAV per unit (the actual value of a unit). The entry/ exit fee (if any) would be computed separately based on your net investment/ liquidation amount.

Note 2: Net distribution of 2.80 sen per unit was declared on 19 November 2018 and was automatically

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

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

net asset value calculated on a daily basis.

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

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

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

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

Unit prices and distributions payable, if any, may go down as well as up. Past performance of the Fund is not an indication of its future performance.

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F U N D R E V I E W

The NAV per unit of the Fund was RM1.0095 as at 30 November 2018. For the quarter ending 30 November 2018, the Fund posted an annualised return of 8.28% against the benchmark Maybank’s 12 mths FD of 3.41%. This highly concentrated and focused fund outperformed the benchmark as domestic interest rates conditions remain low, stable and accommodative.

The Fund achieved its objective to offer investor to provide Medium to Long Term combination of income and capital growth.

Investment Policy and Strategy

The assigned properties as security for the funds have a gross sales value of at least 2x the amount raised. In addition, the fund is also supported by the personal guarantee of the principal and major shareholder the issuer. In our opinion, the credit quality of the assets in the portfolio remains strong and is sufficiently secured. The security coverage and pre-funded interim coupon payments provide comfort that all financial obligations can be fully met.

NAV per unit as at 30 November 2018 RM1.0095

Asset Allocation/ Portfolio Composition as at 30.11.2018 31.8.2018

Unlisted securities 100.17% 99.43%

Cash & cash equivalents -0.17% 0.57%

Performance of Progressive Income Fund

for the financial period since inception to 30 November 2018

Areca Progressive Income

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MANAGER’S REPORT

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M A R K E T R E V I E W & O U T L O O K E C O N O M I C R E V I E W & O U T L O O K

US 3Q2018 GDP grew at 3.0% y-o-y, highest since 2Q2015 and a strong 3.5% q-o-q; below last quarter’s 4.2% which was then the highest since 3Q 2014. Unemployment data continue to sparkle with November maintaining the 49-year low of 3.7% while participation rate was at a respectable 62.9%. Inflation slid to its lowest since February at 2.2%, declining from a six year high in July at 2.9%. Crucially, core inflation remains above 2% at 2.2% with 12-months moving average at 2.1%. The Federal Reserve raised Fed Funds rates once in September through 2 meetings this quarter as expected to 2.25%, the third hike this year with one more penned in by end of the year.

The US-China trade war ‘officially’ kicked-off in the 3rd quarter of the year with an initial US$34 bil of China imports imposed with tariffs. A 10% tax was then put on another US$200 bill worth of China imports in September which will rise to 25% at year’s end. China retaliated with their list of equivalent value initially but they have a shorter stick to match. However, trade imbalance for first ten months of the year has not improved and has ironically widened to -US$344.5 bil; 11.3% higher than the same period last year. Trump’s frustration has all but boiled over with him ranting against Federal Reserve Chairman who predictably raised rates and in effect the USD$ strength, which in part negates the intended impact of the tariffs.

Meantime growth in China continues to taper down with 3Q GDP recording 6.5%, the lowest since early 2009. They have defied the US by addressing their domestic issues with fiscal expansions of widening tax deductions and increased infrastructure spending. Aided by a 1% cut to Reserve Ratio in October (the 4th cut this year), releasing almost US$110 billion into their system, they have directed banks to grow SME loans while attempting to steer GDP towards increased domestic consumption. The RMB, together with most currencies, have weakened further this quarter to close at 6.96, almost 7.0% lower than a year ago. This is evident in the strengthening of the USD index by 5.8% up till the end of November.

Apart from the distractions of Brexit, the ECB has maintained their interest rates policy and continue to wind down their bond buying program. They remain confident that the supportive monetary policy will be necessary to sustain the momentum until at least the middle of next year.

Following the relatively strong 1Q growth of 5.4% for Malaysia, 2Q and 3Q disappointed with 4.5% and 4.4% respectively, the latter being the lowest since 3Q2016. The 2019 National Budget announced was gentler than they prepared us for. GDP was revised down from 5% to 4.8% while maintaining fiscal discipline of 3.7%. The concern is that the budget was built on the projection that Brent crude trades at US$70 per barrel. It closed this period 12% lower than at the end of 2017 at US$58.70. Foreign Reserves has remained quite steady at USD102.0 billion (or RM422.8 billion) at the end of November against end August’s USD104.4 billion (or RM422.5 bil). And finally, due the ‘tax holiday’ with ‘zero’ rating of GST and return of subsidised petrol prices, inflation remains a 3½-year low at 0.2% in November.

FIXED INCOME MARKET REVIEW & OUTLOOK

In this 3-month period from September to November, the 10-year US Treasury benchmark traded up from 2.86% to hit this year’s high at 3.23% in a bullish move reflecting the Fed Reserve’s hawkish stance but eased off swiftly below 3% at period’s close as global growth turned bearish. Interestingly, the 2-10 year spread stayed narrow at 21 basis points at end of November after it hit an 11-year low of 18 basis points in August, signaling doubt to sustainability of growth. Historically, most recessions have been preceded by yields inversions. As the spreads remain thin, it may indicate the impending end of rate hike cycle. Traders have priced in one more hike for 2018 and 2 in 2019.

There were 2 Overnight Policy rate meetings in Malaysia this period with the OPR left unchanged at 3.25%. Bank Negara Malaysia recognizes the increased downside risk to momentum of global growth due in part to ongoing US-China trade tensions and resulting weaker external demand. BNM remains confident that domestic consumption will continue to support our growth while wary of monetary policy normalisation of advanced economies which may lead to further capital outflows.

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MANAGER’S REPORT

With general weakness in global capital markets, emerging markets continue to see withdrawals. Although foreign outflows from domestic sovereign market has somewhat abated, in this 3 months, Malaysia still saw an outflow of RM1.35 bil. Year to date net outflow stands at –RM17.8. Currently, foreign investors hold RM172.8 bil of our domestic sovereign debt or 23.4% of total outstanding issues. The decline can largely be attributed to US rates normalisation and their strong growth outlook with some tentative consideration to our new government and rating agencies’ perception of their capability in facing challenging economic and financial times.

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T R U S T E E ’ S R E P O R T

For The Financial Period Ended 30 November 2018 To the Unitholder of Areca Progressive Income Fund

We have acted as Trustee of Areca Progressive Income Fund (“the Fund”) for the financial period ended 30 November 2018. In our opinion and to the best of our knowledge, Areca Capital Sdn Bhd (“the Manager”) has operated and managed the Fund in accordance with the following:-

(a) limitations imposed on the investment powers of the Manager and the Trustee under the Deed, the Securities Commission Malaysia’s Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework, the Capital Markets and Services Act 2007 and other applicable laws;

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

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

(d) the distribution of RM0.028 (net) per unit to the unitholders during the financial period ended 30 November 2018 is consistent with the objectives of the Fund.

For and on behalf of the Trustee RHB TRUSTEES BERHAD (Company No: 573019-U)

MOHD SOFIAN BIN KAMARUDDIN VICE PRESIDENT

LEE YIT CHENG

HEAD, GROUP INT’L OPS SUPPORT & TRUSTEES OPS

Kuala Lumpur, Malaysia

29 Jan 2019

STATEMENT BY THE MANAGER

To the Unitholders of Areca Progressive Income Fund

We, WONG TECK MENG and EDWARD ISKANDAR TOH BIN ABDULLAH, two of the Directors of the Manager, Areca Capital Sdn Bhd, do hereby state that in the opinion of the Manager, the unaudited financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Securities Commission Malaysia's Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework in Malaysia so as to give a true and fair view of the financial position of the Fund as of 30 November 2018 and the financial performance and the cash flows of the Fund for the financial period ended on that date.

For and on behalf of the Manager Areca Capital Sdn Bhd

WONG TECK MENG EDWARD ISKANDAR TOH BIN ABDULLAH CEO/ EXECUTIVE DIRECTOR

Kuala Lumpur

29 Jan 2019

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UNAUDITED STATEMENT OF FINANCIAL POSITION

As at 30 November 2018

Note 30.11.2018 31.8.2018

Assets RM RM

Investments

Unlisted fixed income securities 3 21,000,000 21,000,000

Other Assets

Interest receivables 143,836 143,836

Short-term deposits 406,366 531,232

Cash at bank 9,289 4,808

Total Other Assets 559,491 679,876

Total Assets 21,559,491 21,679,876

Unitholders’ Fund and Liabilities Liabilities

Advanced Interest 525,000 525,000 Accrued management fee 71,171 32,947

Accrued trustee fee - 487

Total liabilities 596,171 558,434

Unitholders’ Fund

Unitholders’ capital 20,824,381 20,824,381

Retained earnings 138,939 297,061

Net Asset Value Attributable to

Unitholders 20,963,320 21,121,442

Total Unitholders’ Fund and Liabilities 21,559,491 21,679,876

Number of Units in Circulation 20,765,682 20,765,682

Net Asset Value Per Unit (Ex-Distribution) 9 1.0095 1.0171

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UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

For The Financial Period Ended 30 November 2018

1.9.2018 to 30.11.2018 1.6.2018 to 31.8.2018 Note RM RM Investment Income Interest income 4,480 44,521 Dividend income 525,000 143,836 Other income - 1,142 Investment:

Net gain on investment at fair value through profit or loss (“FVTPL”) 3 - 115,127 529,480 304,626 Expenses Management fee 5 106,015 60,068 Trustee’s fee 6 - 2,386

Tax agent’s fee - 600

Other expenses 148 246

106,163 63,300

Net Income Before Taxation 423,317 241,326

Income Tax Expense 8 - -

Net Income After Tax/Total Comprehensive Income

For The Financial Period 423,317 241,326

Net Income After Tax Is Made Up Of:

Realised gain 423,317 241,326

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UNAUDITED STATEMENT OF CHANGES IN NET ASSET VALUE

Unit holders’ capital Retained earnings Total net asset value RM RM RM As at 1 June 2018 16,000,000 55,735 16,055,735

Movement in unit holders’ capital:

Amounts received from units created 6,824,381 - 6,824,381 Amounts paid from units cancelled (2,000,000) - (2,000,000) Total comprehensive income for the financial

period - 241,326 241,326

As at 31 August 2018 20,824,381 297,061 21,121,442

As at 1 September 2018 20,824,381 297,061 21,121,442

Total comprehensive income for the financial

period - 423,317 423,317

Distribution to unitholders for the financial period

(Note 10) - (581,439) (581,439)

As at 30 November 2018 20,824,381 138,939 20,963,320

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UNAUDITED STATEMENT OF CASH FLOWS

1.9.2018 to 30.11.2018 1.6.2018 to 31.8.2018 RM RM

Cash Flows From/(Used In) Operating Activities

Proceeds from disposal of investments - 10,132,922 Purchase of investments - (21,000,000) Interest received 4,480 44,521 Dividend received 525,000 525,000

Other income - 1,142

Management fee paid (67,790) (40,743) Trustee’s fee paid (488) (2,852) Payment for other expenses (148) (1,721) Net Cash Generated From/(Used In) Operating

Activities 461,054 (10,341,731)

Cash Flows (Used In)/From Financing Activities

Cash proceeds from units created - 6,824,381 Payment for cancellation of units - (2,000,000) Distribution to unitholders (581,439) - Net Cash (Used In)/Generated From Financing

Activities (581,439) 4,824,381

Net Decrease In Cash And Cash Equivalents (120,385) (5,517,350)

Cash And Cash Equivalents At Beginning Of

Financial Period 536,040 6,053,390

Cash And Cash Equivalents At End Of Financial

Period 415,655 536,040

Cash and cash equivalents consist of the following amounts:

Short-term deposits 406,366 531,232

415,655 536,040

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NOTES TO THE FINANCIAL STATEMENTS 1 GENERAL INFORMATION

Areca Progressive Income Fund (“Progressive Income” or “the Fund”) was established pursuant to the Trust Deed dated 12 February 2018.

The principal activity of the Fund is to invest in investments as defined under Schedule 7 of the Deed, which include unquoted fixed income securities and deposits with financial institutions. The Fund commenced operations on 28 February 2018 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 Medium to Long Term combination of income and capital growth. Any material changes to the Fund’s objective would require Unit Holder’s approval. 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 the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the Securities Commission Malaysia’s Guideline on Unlisted Capital Market Products under the Lodge and Launch Framework, the Capital Markets and Services Act 2007 and other applicable laws.

3 INVESTMENTS

30.11.2018 31.8.2018

At aggregate cost RM RM

Unlisted fixed income securities 21,000,000 21,000,000

30.11.2018 31.8.2018

At fair value RM RM

Unlisted fixed income securities 21,000,000 21,000,000

30.11.2018 31.8.2018 Net gain on investments at FVTPL comprised: RM RM

Realised gain on disposal of Collective Investment

Scheme - 115,127

Details of unlisted fixed income securities are as follows:

Issuer (rating) maturity/ coupon (%) Quantity Units Market Price Aggregate Cost Carrying Value Fair Value Fair Value as a % of Net Asset Value RM RM RM RM RM % 30.11.2018 Preferences Share

Nova Mulia Development Sdn Bhd

(NR)2020/10.00% 21,000,000 1.00 21,000,000 21,000,000 21,000,000 100.17

31. 8.2018 Preferences Share

Nova Mulia Development Sdn Bhd

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4 UNITS HELD BY THE MANAGER

As of end of the financial period, the total number and value of units held by the Manager is as follows: No. of units RM 30.11.2018 The Manager 2,285,985 2,307,702 2,285,985 2,307,702 31.8.2018 The Manager 2,998,569 3,049,845 2,998,569 3,049,845 5 MANAGEMENT FEE

The Schedule 8 of the Deed provides that the Manager is entitled to an annual management fee at a rate not exceeding 2.00% (31.8.2018: 2.00%) 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 is subject to 6% goods and services tax (“GST”) effective 1 April 2015 until 31 May 2018. The management fee is not subject to any taxes from 1 June 2018 until 30 November 2018.

6 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 0.07% (31.8.2018: 0.07%) 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 is subject to 6% goods and services tax (“GST”) effective 1 April 2015 until 31 May 2018. The Trustee’s fee is not subject to any taxes from 1 June 2018 until 30 November 2018. There is no Trustee’s fee provided for in the financial statements for the financial period as the fee was borne by the manager.

7 EXPENSES BORNE BY THE MANAGER

There are no audit fee and tax agent’s fee provided for in the financial statements for the financial period as the fees were borne by the Manager.

8 INCOME TAX EXPENSE

There is no income tax expense for the period as interest income and dividend income derived by the Fund are exempted income from tax pursuant to Paragraph 35 and 35A of Schedule 6; and 12B Schedule 6 of the Income Tax Act,1967. Gains arising from realisation of investments are not treated as income pursuant to Paragraph 61(1)(b) of the Income Tax Act, 1967.

9 NET ASSET VALUE PER UNIT

The net asset value per unit is calculated by dividing the net asset value attributable to unitholders of RM20,963,320 by 20,765,682 units in issue (31.8.2018: RM21,121,442 by

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10 NET DISTRIBUTION

30.11.2018 RM

31.08.2018 RM

Distribution to unitholders is from the following sources:

Interest income 4,480 Dividend income 525,000 Previous year’s realised gains 158,122

687,602

Less: Expenses (106,163)

Net distribution 581,439

-The distribution above has been made as follows:

Distribution on 19 November 2018

Gross distribution per unit (sen) 2.80 - Net distribution per unit (sen) 2.80 -

11 MANAGEMENT EXPENSE RATIO AND PORTFOLIO TURNOVER Management Expense Ratio (MER)

Management expense ratio for the Fund is 0.50% for the period ended 30 November 2018 (31.8.2018: 0.35%). The management expense ratio which includes management fee, Trustee’s fee, audit fee, tax agent’s fee and other expenses, is calculated as follows:

MER = (A + B + C + D + E) ÷ F x 100

A = Management fee D = Tax agent’s fee B = Trustee’s fee E = Other expenses

C = Audit fee F = Average net asset value of Fund The average net asset value of the Fund for the period is RM 21,259,990 (31.8.2018: RM17,876,579).

Portfolio Turnover Ratio (PTR)

The portfolio turnover ratio for the Fund is 0.01 times for the period ended 30 November 2018 (31.8.2018: 0.87 times). The portfolio turnover is derived from the following calculation: (Total acquisition for the period + total disposal for the period) ÷ 2

Average net asset value of the Fund for the period calculated on a daily basis Where: total acquisition for the period = NIL (31.8.2018: RM21,000,000)

total disposal for the period = RM525,000 (31.8.2018: RM10,132,922)

12 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 % 30.11.2018 Areca Capital Sdn Bhd 525,000 21.91

KAF Investment Bank Berhad 995,000 41.53 - - Maybank Berhad 876,000 36.56 - - 2,396,000 100.00 - -

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17 Brokers/ Dealers Value of Trades % of Total Trades Fees % of Total Brokerage Fee RM % RM % 31.8.2018 Areca Capital Sdn Bhd 10,867,078 28.25

KAF Investment Bank Berhad 6,047,000 15.72 - - Hong Leong Investment Bank Berhad 21,552,000 56.03 - - 38,466,078 100.00 - -

13 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 price risk) and capital risk.

Categories of Financial Instruments

30.11.2018 RM

31.8.2018 RM Financial assets

Loans and receivables:

Unlisted fixed income securities 21,000,000 21,000,000 Interest receivables 143,836 143,836

Short term deposits 406,366 531,232

Other Financial Liability

Advanced Interest 525,000 525,000

Accruals 71,171 33,434

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 30 November 2018.

The credit risk for cash at bank is considered negligible, since the counter parties are reputable banks with high quality external ratings.

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 maintaining a sufficient level of liquid assets to meet anticipated payments and cancellations by unitholders. The liquid assets comprise cash at bank and short-term deposits which are capable of being converted into cash within 7 days.

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The table below summaries the maturity profile of the Fund’s liabilities at the reporting date based on contractual undiscounted repayment obligations:

Up to 1 month 1 - 3 months 3 months to 1 year Total RM RM RM RM 30.11.2018 Financial Liability Non-interest bearing Accruals 71,171 - - 71,171 31.8.2018 Financial Liability Non-interest bearing Accruals 33,434 - - 33,434

Market risk management

This is a class of risk that inherently exists in an economy and cannot be avoided by any business or company. It is usually due to changes in the economic outlook and affects broad market confidence. This risk cannot be removed from an investment portfolio, which is solely invested within that particular market, by diversification.

During the current financial period, as the Fund presently invests only in Malaysian unlisted securities, the performance of the Fund might go up or down in accordance with the prevailing market risk of Malaysia.

Price risk management

Price risk is the risk of unfavourable changes in the fair value of unlisted fixed income securities as the result of changes in the level of the equity indices and the value of individual securities. The price is risk exposure arises from the Fund’s investment in unlisted securities. The Manager manages the risk of unfavourable changes in prices by continuousness monitoring of the performance and risk profile of the investment portfolio.

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.

14 QUARTERLY ACCOUNTS

(20)

Kuching Branch

1st Floor, Sublot 3 Lot 7998, Block16 KCLD, Cha Yi Goldland Jalan Tun Jugah / Stutong 93350 Kuching, Sarawak