Annual Report June 2017 For the Year Ended 30 June 2017 Areca incomeTRUST Fund
Annual Report June 2017
For the Year Ended 30 June 2017
Areca incomeTRUST Fund
A NN UA L REPORT J UN E 2017
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Contents
CORPORATE DIRECTORY 2
MANAGER’S REPORT
Fund Information, Performance & Review 3 Market Review & Outlook 8
TRUSTEE’S REPORT 11
AUDITED FINANCIAL STATEMENTS FOR
Areca incomeTRUST Fund
Statement by The Manager
Auditors’ Report
12
33
34
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
2
C O R P O R A T E D I R E C T O R Y
MANAGER
Areca Capital Sdn Bhd (740840-D)
107, Blok B, Pusat Dagangan Phileo Damansara 1
No. 9, Jalan 16/11, Off Jalan Damansara
46350 Petaling Jaya, Selangor
Tel: 603-7956 3111, Fax: 603-7955 4111
website: www.arecacapital.com
e-mail: [email protected]
BOARD OF DIRECTORS
Dato’ Wee Hoe Soon @ Gooi Hoe Soon
(Independent, Chairman)
Wong Teck Meng (Executive) Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin
(Non-Executive Non-Independent)
Dr. Junid Saham (Independent)
INVESTMENT COMMITTEE MEMBERS
Dato’ Wee Hoe Soon @ Gooi Hoe Soon
(Independent, Chairman)
Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin
(Non-Independent)
Dr. Junid Saham (Independent)
TRUSTEE
Maybank Trustees Berhad (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 – PULAU TIKUS PERAK - IPOH MALACCA
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 6697/6698 Fax: 606-283 9112
Fax: 605-249 6696
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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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 distributable 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 30 June 2017
Size of Holding
(Units)
No. of
accounts %
No. of
unit held
(million)
%
Up to 5,000 6 2.57 0.02 0.01
5,001 to 10,000 37 15.88 0.34 0.16
10,001 to 50,000 54 23.18 1.36 0.64
50,001 to 500,000 72 30.90 14.76 6.86
500,001 and above 64 27.47 198.52 92.33
Total* 233 100.00 215.00 100.00
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 year under review, the Manager had not received any soft
commissions.
Launch 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
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F U N D P E R F O R M A N C E
2017 2016 2015
Total Net Asset Value (“NAV”) as at 30 June
Total Net Asset Value (RM million) 108.07* 114.97* 119.07*
Units in circulation (million units) 216.19* 229.91* 233.32*
NAV per unit (RM) 0.4999* 0.5001* 0.5103*
* Ex-Distribution
2017 2016 2015
HIGHEST & LOWEST NAV per unit for the financial year ended 30 June Please refer to Note 1 for further information on NAV and pricing policy
Highest NAV per unit (RM) 0.5102* 0.5122* 0.5104*
Lowest NAV per unit (RM) 0.4997* 0.5000* 0.5000* * Ex-Distribution
2017 2016 2015
ASSET ALLOCATION % of NAV as at 30 June
Fixed Income Securities
Corporate bonds 87.43 83.36 78.87
Fixed Income Collective Investment
Scheme 3.26 4.48 2.95
Negotiable Instrument of Deposit - 3.04 5.84
Cash & cash equivalent including
placements & repo 9.31 9.12 12.34
2017 2016 2015
DISTRIBUTION Please refer to Note 2 for further information
Distribution dates 30 Dec 2016
30 Jun 2017
31 Dec 2015
29 Jun 2016
30 Dec 2014
Gross distribution (sen per unit) 0.91 (30 Dec)
1.00 (30 Jun)
0.50 (31 Dec)
1.22 (29 Jun)
0.96 (30 Dec)
Net distribution (sen per unit) 0.91 (30 Dec)
1.00 (30 Jun)
0.50 (31 Dec)
1.22 (29 Jun)
0.96 (30 Dec)
NAV before distribution (RM per unit) 0.5090 (29 Dec)
0.5097 (29 Jun)
0.5063 (30 Dec)
0.5120 (28 Jun)
0.5095(29
Dec)
NAV after distribution (RM per unit) 0.5000 (30 Dec)
0.4997 (30 Jun)
0.5014 (31 Dec)
0.5000 (29 Jun)
0.5000(30 Dec)
2017 2016 2015
UNIT SPLITS
Exercise date
-
30 Jul 2015
- Split ratio - 0.02:1 -
NAV before unit split (RM per unit) - 0.5122 (29 Jul) -
NAV after unit split (RM per unit) - 0.5023 (30 Jul) -
Market movement - 0.0002 (30 Jul) -
2017 2016 2015
EXPENSE/ TURNOVER for the financial year ended 30 June
Management expense ratio (MER) (%) 1.28 1.29 1.23
Please refer to Note 3 for further information
Portfolio turnover ratio (PTR) (times) 0.46 0.36 0.40 Please refer to Note 4 for further information
2017 2016 2015
TOTAL RETURN for the financial year ended 30 June Please refer to Note 5 for further information
Total Return (%) 3.77 3.42 3.58
- Capital Return (%) -0.08 -0.04 1.63
- Income Return (%) 3.85 3.46 1.95
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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2017 2016 2015 2014 2013
Annual Total Return (%) 3.77 3.42 3.58 2.54 3.18
Benchmark: Average
Maybank’s 6-month fixed
deposit rate (%)
3.09 3.28 3.25 3.12 3.12
1-yr 3-yrs 5-yrs
Average Total Return per annum (%) 3.77 3.72 3.52
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 0.91 sen per unit and 1.00 sen per unit were declared on 30 December 2016 and
30 Jun 2017 respectively, and were 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 and the benchmark data are sourced from Lipper.
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
6
Unit prices and distributions payable, if any, may go down as well as up. Past performance is not
necessarily indicative of future performance.
F U N D R E V I E W
The Fund’s NAV per unit decreased from RM0.5001 as at 30 June 2016 to RM0.4999 as at 30 June 2017,
after a total net distribution of 1.91 sen per unit during the year. For the financial year ended 30 June
2017, the Fund posted a return of 3.77% p.a. versus 3.09% p.a. of its benchmark, Maybank’s 6-month
fixed deposit rate. The Fund outpaced its benchmark for the period ended 30 June 2017 through a strategy
of conservative credit picking and careful interest rates risk management. Although there were months
that performance was adversely affected by yield curve movements, the overall strategy allowed for
recovery and outperformance.
The fund continues to be well diversified with exposure to 26 issues across various industries, the largest
being banking/finance constituting 32.5% of our holdings. From the credit angle, 72.4% of the fund is
invested in corporate bonds that are rated AA or better helping to provide short to medium term capital
preservation and a regular income. To further diversify the fund, we have added an allocation of 3.3%
into other collective investment schemes. The Fund achieved its objective in providing short to medium
term capital preservation and a regular income for the year under review.
Moving forward, we look to maintain the portfolio duration at current levels (currently at 34.1 mths yrs)
but looking to lighten up at the longer end in anticipation of better economic data in the year ahead.
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 30 June 2017 RM0.4999
Movement of asset allocation as a percentage of Net Asset Value
for the financial year ended 30 June 2017
Asset Allocation / Portfolio Composition as at 30 June 2017 2016 2015
Fixed income securities 87.43% 83.36% 78.87%
Fixed income collective
investment scheme 3.26% 4.48% 2.95%
Negotiable instrument of deposit - 3.04% 5.84%
Cash & cash equivalents 9.31% 9.12% 12.34%
83.54% 81.81% 78.80%87.43%
0%
20%
40%
60%
80%
100%
30-Sep-16 31-Dec-16 31-Mar-17 30-Jun-17
Bonds & other fixed income
instruments
Cash and cash equivalents
* as a % of net asset value
87.43%
9.31%3.26%
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F U N D R E V I E W
Top 5 Holdings by Issuers:
As at 30 Sep 2016 (%)
As at 31 Dec 2016 (%)
1) Public Bank Berhad (AA1 & AA2) 11.25
1) Public Bank Berhad (AA1 & AA2) 11.61
2) Hong Leong Bank Berhad (A3) 8.82
2) Hong Leong Bank Berhad (A3) 9.03
3) Alpha Circle Sdn Bhd (AA-IS) 7.67
3) Alpha Circle Sdn Bhd (AA-IS) 7.92
4) CIMB Bank Berhad (A1 & AA+) 6.34
4) CIMB Bank Berhad (A1 & AA+) 6.54
5) Malakoff Power Berhad (AA-IS) 4.29
5) Malakoff Power Berhad (AA-IS) 4.42
As at 31 Mar 2017 (%)
As at 30 Jun 2017 (%)
1) Public Bank Berhad (AA1 & AA2) 10.93
1) Hong Leong Bank Berhad (A3) 9.41
2) Hong Leong Bank Berhad (A3) 8.48
2) Alpha Circle Sdn Bhd (AA-IS) 5.56
3) Alpha Circle Sdn Bhd (AA-IS) 7.46
3) Malakoff Power Berhad (AA-) 4.66
4) Al-Dzahab Assets Berhad (AAA) 6.29
4) Eastern & Oriental Berhad (NR) 4.18
5) CIMB Bank Berhad (A1 & AA+) 6.14
5) Public Bank Berhad (AA1) 4.16
Performance of Areca incomeTRUST Fund for the financial period since inception to 30 June 2017
Areca incomeTRUST
Maybank 6 Months Fixed Deposit Rate
ANNUAL REPORT JUNE 2017
MANAGER’S REPORT
8
MARKET REVIEW & OUTLOOK
ECONOMIC REVIEW
Following the British referendum to exit the European Union, rating agencies downgraded the UK. The
GB£ plunged from 1.49 just before the referendum to a level last seen in the mid 80’s at 1.21 in October
before revisiting the level in January this year against the US$. Against the MYR, it fell from 5.9790 the
night before ‘Brexit’ to a low of 5.0580 in mid-October before recovering to 5.59 at end June 2017. The
UK then cut benchmark rates to a historic low of 0.25%, broaden bond buying program to include
corporate bonds and deepen the size of Quantitative Easing to £435 billion from £60 billion in a bid to
mitigate the impact. Meantime, the European Central Bank kept rates unchanged throughout this twelve
months while announcing the extension of Quantitative Easing program to beyond March 2017 (end of
2017) albeit a reduced size of €60 billion from €80 billion monthly.
With the inauguration of President Donald Trump in January a new era of uncertainty ensues.
Economically, the US have continued to show signs of repair. Unemployment rate dropped to a sixteen
years low of 4.3% in May while housing and consumption data have been encouraging. The Dow Jones
breached 20000 at the end of January and surged past 21000 mark early March hitting an all-time high
of 21528.99 on June 19. It continues to ride on the prospects of a Trump inspired expansionary fiscal
plan and anticipated tax reforms. Inflation hit a five years high of 2.7% in February but have since
eased into a downward trajectory. Inevitably, the hawks came out and the Federal Fund Rate was
raised in March and June by a ¼% each to 1.25%. This followed December’s much expected ¼% hike.
The Federal Reserve has since expressed their readiness to trim the Federal Reserve’s asset portfolio
of US$4.5 trillion in a gradual, non-disruptive and orderly manner.
Geopolitical risk has ratcheted up several notches since Trump’s ascension following the retaliatory
bombing of Syria for alleged usage of chemical weapons, dropping the ‘mother of all bombs’ in
Afghanistan targeting ISIS and their underground tunnels and ‘sabre-rattling’ with North Korea. By
pulling out of the Trans-Pacific Partnership (TPP) and Paris Climate Agreement, antagonising Mexico,
Australia, Canada and NATO, Trump is isolating the US expeditiously.
China’s 4 quarters of GDP grew 6.7%, 6.8% and 6.9% for the first two quarters this year but have kept
full year (2017) projection at 6.5% ahead of their National People’s Congress in October. For a moment,
China’s reserves fell below US$3 trillion mark (lowest since 2011) in January defending the Yuan from
sliding, as it lost the top US debt holder position to Japan since October 2016. It has since reclaimed
that top spot as of June 2017, following imposition of capital controls on outflows and a series of US
Treasuries’ buying sprees. Reserves have also turned around totaling slightly below USD3.06 trillion. It
is no surprise then that President Trump did not carry out his threat of branding China a currency
manipulator during their first four-eyed meeting in March.
Malaysia’s economy
In Malaysia, with little good news in the National Budget announced in October, the Malaysian Ringgit
suffered from the anticipated declining interest rates differential, the negative effect of the reduction of
the Morgan Stanley Capital International (MSCI) Emerging Market Index weight for Malaysia from 3.25%
to 2.92% in early June 2016 and bad press on issues surrounding 1MDB. The MYR depreciated to its
weakest close since the end of 1998 Asian Financial Crisis early January at 4.49 to USD. Fortunately,
trade data remained strong. Exports and imports data picked up since November providing support for
Q4’s 4.5% GDP growth, bringing the full calendar year 2016 to an expansion of 4.2%. It improved
further to 5.6% reading for 1Q 2017. Meantime, inflation surged to 5.1% in March, highest since
November 2008 mainly due to higher fuel and transport cost as RON95 at the pump stood at RM2.30
per liter compared to RM1.60 a year ago. It tapered off at the end of June to 3.6% as oil prices eased.
Foreign Reserves increased to USD99.8 billion (or RM424.9 bil from RM390.4 bil).
FIXED INCOME MARKET REVIEW
The period under review saw the issuance of RM84.2 bil MGS/GII through 29 tenders vs RM94.0 bil in
the previous period (July ’15 – June ’16). However there were also 9 issues privately placed raising
another RM8 bil. Due to negative vibes from 3Q 2016, capital flowed out of our system to the tune of
ANNUAL REPORT JUNE 2017
MANAGER’S REPORT
9
RM20.2 billion during the second half of 2016. This continued throughout the first three months of the
year for a further outflow of RM37.6 billion hitting the lowest level of debts held by foreigners since
January 2012 at RM162.3 billion in March. Sentiment turned for the better since 2Q 2017. The level of
our sovereign debt held by offshore investors stands at RM178.0 billion (26.6% of total issued) at the
end of June 2017 compared to RM162.3 billion last June.
During this period, there were 6 OPR meetings where the benchmark rate was reduced by 0.25% to
3.00% in July 2016 in an unexpected preemptive move by the then newly minted Bank Negara Governor.
Malaysian sovereign yield curve shifted up between 20 and 43 bps reflecting pressure from the 3 US
rate hikes in this period. Pressure also came in the form of rising domestic inflation although it has been
frequently debunked as cost push rather than demand driven. These are balanced by local factors like
narrowing disposable income as well as the impending general elections and the need to maintain a
‘feel good’ atmosphere. Investors were also observed to have gone the credit path to pick up yields as
evident in the narrowing spreads.
Constant Maturity Conventional Yield-To-Maturity: June 2017 vs June 2016
Tenure 1Y 3Y 5Y 7Y 10Y
Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17 Jun’16 Jun’17
MGS 2.774 3.188 3.173 3.482 3.317 3.678 3.593 3.891 3.726 3.923
AAA 3.930 4.060 4.100 4.240 4.230 4.330 4.380 4.470 4.580 4.680
AA2 4.200 4.280 4.470 4.490 4.620 4.610 4.620 4.740 4.950 4.930
A2 5.580 5.460 6.330 6.150 6.800 6.690 7.240 7.110 7.860 7.790
Source: Bond Pricing Agency Malaysia Sdn Bhd (BPA)
ECONOMIC OUTLOOK
Economically the US appear to have made milestones turnarounds with critical data like unemployment
and inflation on the right path while housing and consumption showing encouraging signs. The EU have
also in recent months appear to have put the worst behind them to emerge from economic doldrums.
Growth is on an uptrend while unemployment on a slow but favourable reverse. China is constantly
fixing their identified niggling problems of rising debt, property inflation and capital outflows. If they
can manoeuvre around these issues by altering her economy to be one that is consumption based and
continue on a watered down growth path of 6%; simple arithmetic will prove that they will surpass the
US to become the largest economy by 2032 even if the US grows at an optimistic 2.5% rate.
All these augur well for Malaysia and our fledgling economy. China is hungry to spread its influence and
trade while we need new capital inputs and have goods to export. If China grows, we benefit. We can
look forward to a favourable trade data. Our government’s swift response to China’s ‘one belt one road’
(now called Belt and Road Initiative) aspirations by opening up ‘high speed rail’ construction to the
Chinese and recent developments on the East Coast Rail Link and ports on both sides of our peninsula
amongst many others is seen as a masterful stroke by our leaders. Compared to lukewarm reception
of our southern neighbours, Malaysia appear to have seized the upper hand in being involved in the
next fifty years (at least) of Asian (China-India-Russia) upswing if not China itself. It is important thence
to pursue the appropriate funding structure for these long term mammoth projects to ensure an
advantageous future.
Crude oil price is expected to be range bound between US$50-60 as OPEC and non-OPEC producers
agree to an extension of the production cut in May till end 1Q 2018 in a continued effort to reduce
excess supply.
FIXED INCOME MARKET OUTLOOK
ANNUAL REPORT JUNE 2017
MANAGER’S REPORT
10
As the economies of major countries turn for the better, it is envisaged that ultra-easy interest rates
environment may be nearing its end. The process of rates normalisation in the US while the market
expects EU to scale back stimulus will point towards an increase in global yields. The notion of a new
norm of low interest rates may still mitigate as base effects have grown larger while new engine of
growths remain elusive.
For Malaysia, interest rates differential has narrowed over the year. Coupled with rising domestic cost,
there are substantial reasons for tightening rates. However, authorities have to balance with diminishing
disposable incomes and are correct in holding back any urgencies to raise rates as that will not be able
to address rising cost. It is therefore likely that interest rates remain very accommodative for the next
half of the year.
Fixed income markets is expected to remain buoyant and liquid for now.
ANNUAL REPORT JUNE 2017
TRUSTEE’S REPORT
11
T R U S T E E ’ S R E P O R T
For The Financial Year Ended 30 June 2017
To the Unitholder of Areca incomeTRUST Fund
We have acted as Trustee of Areca incomeTRUST Fund (“the Fund”) for the financial year ended 30
June 2017. To the best of our knowledge, Areca Capital Sdn Bhd (“the Manager”) has managed the
Fund in the financial year under review in accordance with the following:-
1. Limitations imposed on the investment powers of the Manager under the Deeds, securities laws
and these Guidelines,
2. Valuation and pricing of the Fund are carried out in accordance with the Deeds and any regulatory
requirements; and
3. Creation and cancellation of units are carried out in accordance with the Deeds and any regulatory
requirement.
A total income distribution of 1.91 sen per unit (gross) declared to the unitholders of the Fund for the
financial year ended 30 June 2017.
We are of the view that the distributions are consistent with the investment objectives and distribution
policy of the Fund.
For Maybank Trustees Berhad
(Company No: 5004-P)
CHONG KIN TUCK
Chief Executive Officer
Kuala Lumpur, Malaysia
21 August 2017
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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STATEMENT OF FINANCIAL POSITION
As Of 30th June, 2017
2017 2016
Note RM RM
Assets
Investments
Collective investment scheme 4 3,519,242 5,145,706
Unquoted fixed income securities 4 94,487,895 99,327,667
Total Investments 98,007,137 104,473,373
Other Assets
Amount due from Manager 5 48,561 9,233 Other receivables 6 1,255,963 1,025,187
Short-term deposits 7 8,792,406 9,549,266
Cash at bank 104,840 50,462
Total Other Assets 10,201,770 10,634,148
Total Assets 108,208,907 115,107,521
Unitholder’s Fund and Liability
Liabilities
Accruals 8 132,866 138,968
Unitholders’ Fund
Unitholders’ capital 9 98,914,226 106,019,450
Unrealised reserve 10 1,161,871 1,256,448
Realised reserve 11 7,999,944 7,692,655
Net Asset Value attributable to unitholders 108,076,041 114,968,553
Total Unitholders’ Fund and Liability 108,208,907 115,107,521
Number of Units in Circulation
9 216,185,404 229,906,138
Net Asset Value Per Unit (Ex-Distribution) 12 0.4999 0.5001
The accompanying Notes form an integral part of the Financial Statements.
ANNUAL REPORT JUNE 2017
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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For The Financial Year Ended 30th June, 2017
2017 2016
Note RM RM
Investment Income
Interest income 5,774,400 5,318,073
Net gain/ (loss) on investments:
Investments at fair value through profit or loss
(“FVTPL”) 4 114,811 (333,823)
Total Investment Income 5,889,211 4,984,250
Expenditure
Management fee 13 1,321,346 1,206,005
Trustee’s fee 14 95,028 86,659
Audit fee 16,280 14,800
Tax agent’s fee 3,500 3,500
Other expenses 90,024 82,610
Total Expenditure 1,526,178 1,393,574
Net Income Before Tax 4,363,033 3,590,676
Income Tax Expense 15 - -
Net Income After Tax/Total Comprehensive
Income For The Year 4,363,033 3,590,676
Net Income After Tax Is Made Up Of:
Realised gain 4,457,610 3,756,293
Unrealised loss (94,577) (165,617)
4,363,033 3,590,676
Distribution for the financial year:
Net distribution 16 4,150,321 3,780,733
Gross distribution per unit (sen) 16 1.91 1.72
Net distribution per unit (sen) 16 1.91 1.72
The accompanying Notes form an integral part of the Financial Statements.
ANNUAL REPORT JUNE 2017
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STATEMENT OF CHANGES IN NET ASSET VALUE
For The Financial Year Ended 30th June, 2017
Unitholders’
capital
Realised
reserve
Unrealised
reserve
Total net
asset value
RM RM RM RM
As of 1st July, 2015 109,929,410 7,717,095 1,422,065 119,068,570 Amounts received/receivable from
units created
41,886,858
-
41,886,858
Amounts paid/payable for units
cancelled
(45,796,818)
-
(45,796,818)
Total comprehensive income for the
financial year
- 3,590,676
-
3,590,676
Net unrealised loss transferred to
unrealised reserve
- 165,617
(165,617)
-
Distribution to unitholders for the financial year (Note 16)
- (3,780,733)
-
(3,780,733)
As of 30th June, 2016 106,019,450 7,692,655 1,256,448 114,968,553
As of 1st July, 2016
106,019,450 7,692,655
1,256,448
114,968,553
Amounts received/receivable from
units created
50,052,264
-
50,052,264
Amounts paid/payable for units cancelled
(57,157,488)
-
(57,157,488)
Total comprehensive income for the
financial year
- 4,363,033
-
4,363,033
Net unrealised loss transferred to
unrealised reserve
- 94,577
(94,577)
-
Distribution to unitholders for the
financial year (Note 16)
- (4,150,321)
-
(4,150,321)
As of 30th June, 2017 98,914,226 7,999,944 1,161,871 108,076,041
The accompanying Notes form an integral part of the Financial Statements.
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
15
STATEMENT OF CASH FLOWS
For The Financial Year Ended 30th June, 2017
2017 2016
RM RM
Cash Flows From/(Used In) Operating Activities
Proceeds from disposal of investments 61,867,218 47,194,037
Interest received 5,538,004 5,597,049
Dividend received 99,220 66,129
Purchase of investments (55,280,551) (47,617,256)
Management fee paid (1,328,783) (1,216,844)
Trustee’s fee paid (95,574) (87,397)
Payment for other fees and expenses (107,923) (93,294)
Reinvestment of dividend received (99,220) (66,129)
Net Cash From Operating Activities 10,592,391 3,776,295
Cash Flows From/(Used In) Financing Activities
Cash proceeds from units created
48,063,497
44,595,323
Payment for cancellation of units (55,208,049) (45,794,818)
Distribution to unitholders (4,150,321) (3,780,733)
Net Cash Used In Financing Activities (11,294,873) (4,980,228)
Net Decrease In Cash And Cash Equivalents (702,482) (1,203,933)
Cash And Cash Equivalents At Beginning Of Year 9,599,728 10,803,661
Cash And Cash Equivalents At End Of Year 8,897,246 9,599,728
Cash and cash equivalents consist of the following amounts: 2017 2016
RM RM
Short-term deposits 8,792,406 9,549,266
Cash at bank 104,840 50,462
8,897,246 9,599,728
The accompanying Notes form an integral part of the Financial Statements.
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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NOTES TO THE FINANCIAL STATEMENTS
1 GENERAL INFORMATION
Areca incomeTRUST Fund (“incomeTRUST” or “the Fund”) was established pursuant to the Trust
Deed dated 12th March, 2007 as modified by the First Supplemental Deed dated 27th June 2007,
Second Supplemental Deed dated 14th April 2008, Third Supplemental Deed dated 21st October
2008, Fourth Supplemental Master Deed dated 10th April 2009, Fifth Supplemental Master Deed
dated 12th March 2013 and Sixth Supplemental Master Deed dated 6th 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 quoted and unquoted fixed income securities and deposits with financial
institutions. The Fund commenced operations on 23rd 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 by investing 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.
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.
The financial statements were authorised for issue by the Board of Directors of the Manager in
accordance with a resolution of directors on 21st August 2017.
2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements of the Fund have been prepared in accordance with Malaysian Financial
Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the
Securities Commission Malaysia’s Guidelines on Unit Trust Funds in Malaysia.
Adoption of New and Revised Malaysian Financial Reporting Standards
In the current financial year, the Fund adopted all the new and revised MFRSs and Amendments to
MFRSs issued by Malaysian Accounting Standards Board (“MASB”) that are relevant to its operations
and effective for annual financial periods beginning on or after 1st July, 2016 as follows:
Amendments to MFRS 101 Disclosure Initiative
Amendments to MFRS 116
and MFRS 138
Clarification of Acceptable Methods of Depreciation and
Amortisation
Annual Improvements to MFRSs 2012 - 2014 cycle
The adoption of these new and revised MFRSs did not result in significant changes in the accounting
policies of the Fund and had no significant effect on the financial performance or position of the
Fund.
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:
Standards and Amendments in Issue But Not Yet Effective
At the date of authorisation for issue of these financial statements, the new and revised Standards
and Amendments which were in issue but not yet effective and not early adopted by the Fund are
as listed below:
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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MFRS 9 Financial Instruments3
MFRS 15 Revenue from Contracts with Customers (and the related
Clarifications)2
Amendments to MFRS 107 Disclosure Initiative1
Amendments to MRFS 112 Recognition of Deferred Tax Assets for Unrealised Losses1
IC Interpretation 22 Foreign Currency Transactions and Advance
Consideration2
Amendments to MFRSs Annual Improvement to MFRS 2014 - 2016 Cycle1or2
1 Effective for annual periods beginning on or after 1st January, 2017
2 Effective for annual periods beginning on or after 1st January, 2018
3 Effective for annual periods beginning on or after 1st January, 2018, with early
application permitted. In addition, an entity may elect to early apply only the
requirements for the presentation of gains and losses on financial liabilities designated
as at fair value through profit or loss for annual periods beginning before 1st January,
2018, as stated in paragraph 7.1.2 of MFRS 9
The Manager of the Fund anticipates that the abovementioned Standards, IC Interpretation and
Amendments will be adopted in the annual financial statements of the Fund when they become
effective and that the adoption of these Standards, IC Interpretation and Amendments will have
no material impact on the financial statements of the Fund in the period of initial application
except for MFRS 9 and MFRS 15. However, it is not practicable to provide a reasonable estimate
of the effect of MFRS 9 and MFRS 15 until the Manager undertakes a detail review.
3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND JUDGEMENTS
A. SIGINIFICANT ACCOUNTING POLICIES
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.
Dividend income from collective investment scheme is recognised based on the date, when the
right to receive the dividend has been established.
Realised gain and loss on disposal of investments is arrived based on net sales proceeds less
carrying value 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 year.
Income Tax
Income tax comprises Malaysian corporate tax for the current financial year, 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.
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.
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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.
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.
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 unitholder with the total number of outstanding units.
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.
Financial Instruments
Financial instruments are recognised in the statement of financial position when, and only when
the Fund has become a party to the contractual provisions of the financial instruments. Financial
assets and liabilities include cash at bank, short-term deposit, unquoted securities, collective
investment scheme, receivables and payables. The accounting policies on recognition and
measurement of these items are disclosed in their respective accounting policies.
Financial instruments are classified as assets or liabilities in accordance with the substance of the
contractual arrangements. Interest, dividends, gains and losses relating to financial instruments
classified as assets, are reported as investment income.
Financial Assets
Financial assets are classified into the following specified categories: financial assets at ‘fair value
through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets
and ‘loans and receivables’. The classification depends on the nature and purpose of the financial
assets and is determined at the time of initial recognition.
Effective Interest Method
The effective interest method is a method of calculating the amortised cost of a financial asset
and of allocating interest income over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts (including all transaction costs and other
premiums or discounts) through the expected life of the financial asset, or (where appropriate) a
shorter period, to the net carrying amount on initial recognition.
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is
designated as at FVTPL.
A financial asset is classified as held for trading if:
• it has been acquired principally for the purpose of selling it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Fund
manages together and has a recent actual pattern of short-term profit- taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon
initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
• the financial asset forms part of a group of financial assets or financial liabilities or both,
which is managed and its performance is evaluated on a fair value basis, in accordance
with the Fund’s documented risk management or investment strategy, and information
about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and MFRS 139
Financial Instruments: Recognition and Measurement permits the entire combined contract
(asset of liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognised in profit or loss under ‘Net gain or loss’ on financial assets at FVTPL.
Investments
The Fund’s investments which are classified under FVTPL include investment in unquoted fixed
income securities and unlisted collective investment scheme.
Unquoted fixed income securities are classified under 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 units in unlisted collective investment scheme is valued based on the net asset
value per unit of such collective investment scheme as at the end of reporting date.
Gains or losses arising from the changes in the fair value of the investments is recognised as
gains or losses from investment in profit or loss and transferred to unrealised reserve.
Loans and Receivables
Receivables that have fixed or determinable payments that are not quoted in an active market
are classified as ‘loan and receivables’. Loans and receivables are measured at amortised cost
using the effective interest method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition of
interest would be immaterial.
Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the financial asset have been affected.
Receivables assessed not to be impaired individually are, in addition, assessed for impairment on
a collective basis. Objective evidence of impairment for a portfolio of receivables could include
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
20
the Fund’s past experience of collecting payments, an increase in the number of delayed payments
in the portfolio past the average credit period, as well as observable changes in the national or
global economic conditions that correlate with default on receivables.
In respect of receivables carried at amortised cost, the amount of impairment loss recognised is
the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables, where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is considered uncollectible, it
is written off against the allowance account. Subsequent recoveries of amounts previously written
off are credited against the allowance account. Changes in the carrying amount of the allowance
account are recognised in profit or loss.
Classification of Realised and Unrealised Gains and Losses
Unrealised gains and losses comprise changes in the fair value of financial instruments for the
year and from reversal of prior year’s unrealised gains and losses for financial instruments which
were realised (sold, redeemed or matured) during the reporting period.
Realised gains and losses on disposals of financial instruments classified as FVTPL are accounted
for as the difference between the net disposal proceeds and the carrying amount of the financial
instruments.
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 transfers nor retains 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 continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
Financial Liabilities and Equity Instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangement.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Fund
after deducting all of its liabilities. Equity instruments issued by the Fund are recognised at the
proceeds received, net of direct issue costs.
Financial Liabilities
Financial liabilities are initially measured at fair value, net of transaction cost and subsequently
measured 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 through the expected life of the financial
liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of Financial Liabilities
The Fund derecognises financial liabilities when, and only when, the Fund’s obligations are
discharged, cancelled or expired. The difference between the carrying amount of the financial
liability derecognised and the consideration paid or payable is recognised in profit or loss.
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
21
B. ACCOUNTING ESTIMATES AND JUDGEMENTS
Critical judgements in applying accounting policies
(i) In the process of applying the Fund’s accounting policies, which are described in Note 3(A)
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 financial year.
4 INVESTMENTS
Investments designated as FVTPL are as follows:
2017 2016
RM RM At aggregate cost Note
Collective investment scheme 4(a) 3,502,991 5,135,000
Unquoted fixed income securities 4(b) 93,342,275 98,081,925
96,845,266 103,216,925
2017 2016
RM RM At fair value Note
Collective investment scheme 4(a) 3,519,242 5,145,706
Unquoted fixed income securities 4(b) 94,487,895 99,327,667
98,007,137 104,473,373
2017
RM
2016
RM
Net gain/ (loss) on investments at FVTPL comprised:
Realised gain/ (loss) on disposals 110,168 (234,335)
Dividend income from collective investment scheme 99,220 66,129
Net unrealised loss on changes in fair values (94,577) (165,617)
114,811 (333,823)
(a) Details of collective investments scheme as of 30th June, 2017 are as follows:
2017
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 Islamic Cash Fund 3,405,169 1.0335 3,502,991 3,510,088 3,519,242 3.26
2016
Areca Islamic Cash Fund 4,989,533 1.0313 5,135,000 5,135,000 5,145,706 4.48
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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(b) Details of unquoted fixed income securities as of 30th June, 2017 are as follows:
2017
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 %
Hong Leong Bank Berhad (AA3)
2039/8.25 9,500,000 107.010 9,405,000 10,422,640 10,165,950 9.41
Alpha Circle Sdn Berhad (AA-) 2017/4.85 6,000,000 100.165 6,000,000 6,021,960 6,009,900 5.56
Malakoff Power Berhad (AA-)
2018/4.90 5,000,000 100.774 5,011,000 5,052,400 5,038,700 4.66
Eastern & Oriental Berhad (NR)
2020/2.00 5,000,000 90.267 4,323,000 4,449,857 4,513,350 4.18 Public Bank Berhad (AA1)
2022/4.28 4,500,000 100.028 4,502,550 4,508,280 4,501,260 4.16
TRIplc Ventures Sdn Berhad
(AAA) 2021/5.46 4,000,000 104.584 4,000,000 4,229,360 4,183,360 3.87 Sports Toto Malaysia Sdn
Berhad (AA-) 2019/4.82 4,000,000 100.648 4,023,800 4,018,060 4,025,920 3.72
Al Dzahab Assets Berhad (AAA)
2020/4.75 4,000,000 100.458 4,000,000 4,000,000 4,018,320 3.72 UEM Sunrise Berhad (AA-)
2022/4.80 4,000,000 100.310 4,003,300 3,997,400 4,012,400 3.71
Golden Assets International
Finance Limited (A1) 2019/5.35 4,000,000 99.969 4,000,000 3,823,760 3,998,760 3.70
Lebuhraya DUKE Fasa 3 Sdn
Berhad (AA-) 2037/6.23 3,500,000 111.155 3,582,600 3,582,600 3,890,425 3.60
CIMB Bank Berhad (AA)
2038/6.70 3,750,000 102.626 3,904,875 3,901,125 3,848,475 3.56 PBFIN Berhad (AA2) 2059/7.50 3,500,000 104.990 4,048,100 3,758,720 3,674,650 3.40
Al Dzahab Assets Berhad (AAA)
2021/5.50 3,500,000 102.794 3,500,000 3,530,345 3,597,790 3.33
CIMB Group Holdings Berhad (A1) 2116/5.80 3,500,000 102.112 3,500,000 3,540,600 3,573,920 3.31
Sarawak Hidro Sdn Berhad
(AAA) 2024/4.34 3,500,000 99.266 3,521,000 3,521,000 3,474,310 3.21
AmBank (M) Berhad (A1) 2039/8.25 3,000,000 106.920 3,000,000 3,289,800 3,207,600 2.97
Alpha Circle Sdn Berhad (AA-)
2019/5.15 3,000,000 100.420 3,000,000 3,018,300 3,012,600 2.79
Sabah Development Bank
Berhad (AA1) 2022/5.30 3,000,000 100.315 3,002,700 3,002,700 3,009,450 2.78 Jati Cakerawala Sdn Berhad
(AA3) 2018/4.66 3,000,000 100.033 2,995,800 2,997,990 3,000,990 2.78
Lembaga Pembiayaan
Perumahan Sektor Awam (NR) 2036/4.62 3,000,000 95.312 3,000,000 3,000,000 2,859,360 2.65
AMMB Holdings Berhad (AA3)
2019/4.50 1,000,000 99.500 1,999,400 1,990,400 1,990,000 1.84
DRB-Hicom Berhad (A-) 2114/7.50 2,000,000 98.736 2,016,400 2,000,240 1,974,720 1.83
Lembaga Pembiayaan
Perumahan Sektor Awam
(NR) 2046/4.90 2,000,000 94.921 2,000,000 2,000,000 1,898,420 1.76 CIMB Thai Bank Public Company
Limited (AA3) 2024/5.60 500,000 101.290 500,000 506,285 506,450 0.47
Berjaya Land Berhad (AAA)
2017/4.75 500,000 100.163 502,750 502,335 500,815 0.46
Total unquoted fixed income securities 93,342,275 94,666,157 94,487,895
87.43
Total investments 96,845,266 98,176,245 98,007,137
90.69
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
23
2016
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 %
Hong Leong Bank Berhad (AA3)
2039/8.25 9,500,000 109.712 9,405,000 10,676,855 10,422,640 9.07
Public Bank Berhad (AA1) 2022/4.28 9,500,000 100.184 9,519,800 9,502,135 9,517,480 8.28
Alpha Circle Sdn Berhad (AA-)
2017/4.85 6,000,000 100.366 6,000,000 5,999,400 6,021,960 5.24
Malakoff Power Berhad (AA-) 2018/4.90 5,000,000 101.048 5,011,000 5,063,200 5,052,400 4.39
Malayan Banking Berhad (AA1)
2021/3.97 5,000,000 99.936 4,973,500 4,973,500 4,996,800 4.35
Benih Restu Berhad (AA2) 2025/4.62 4,500,000 99.621 4,500,000 4,471,200 4,482,945 3.90
TRIplc Ventures Sdn Berhad
(AAA) 2021/5.46 4,000,000 105.734 4,000,000 4,241,320 4,229,360 3.68
Public Bank Berhad (AA2)
2036/5.10 4,000,000 100.417 4,118,400 4,043,040 4,016,680 3.49 AmBank Islamic Berhad (AA3)
2021/4.40 4,000,000 100.116 4,000,000 4,019,280 4,004,640 3.48
CIMB Bank Berhad (AA)
2038/6.70 3,750,000 104.030 3,904,875 3,975,300 3,901,125 3.39 Golden Assets International
Finance Limited (A1)
2019/5.35 4,000,000 95.94 4,000,000 3,978,600 3,823,760 3.33
PBFIN Berhad (AA2) 2059/7.50 3,500,000 107.392 4,048,100 3,838,870 3,758,720 3.27 CIMB Group Holdings Berhad
(A1) 2116/5.80 3,500,000 101.160 3,500,000 3,500,000 3,540,600 3.08
Al Dzahab Assets Berhad (AAA)
2021/5.50 3,500,000 100.867 3,500,000 3,500,000 3,530,345 3.07
Pengurusan Air SPV Berhad (NR) 2026/4.40 3,500,000 100.729 3,500,000 3,500,000 3,525,515 3.07
AmBank (M) Berhad (A1)
2039/8.25 3,000,000 109.660 3,000,000 3,378,900 3,289,800 2.86
Alpha Circle Sdn Berhad (AA-) 2019/5.15 3,000,000 100.610 3,000,000 3,009,030 3,018,300 2.63
CIMB Bank Berhad (AA+)
2022/4.15 3,000,000 99.841 3,000,000 2,982,900 2,995,230 2.61
UEM Sunrise Berhad (AA-) 2022/4.80 2,500,000 99.764 2,500,000 2,516,200 2,494,100 2.17
Eastern & Oriental Berhad (NR)
2020/2.00 2,500,000 88.014 2,073,500 2,129,067 2,200,357 1.91
Sports Toto Malaysia Sdn Berhad (AA-) 2019/4.82 2,000,000 100.143 2,008,600 2,008,640 2,002,860 1.74
DRB-Hicom Berhad (A2)
2020/7.50 2,000,000 100.012 2,016,400 2,019,940 2,000,240 1.74
Jati Cakerawala Sdn Berhad
(AA3) 2018/4.66 1,000,000 100.219 1,000,000 999,590 1,002,190 0.87 AMMB Holdings Berhad (AA3)
2019/4.50 1,000,000 99.100 1,000,000 991,000 991,000 0.86
CIMB Thai Bank Public Company
Limited (AA3) 2024/5.60 500,000 101.257 500,000 511,190 506,285 0.44 Berjaya Land Berhad (AAA)
2017/4.75 500,000 100.467 502,750 501,185 502,335 0.44
Negotiable
Instrument of Deposit (“NID”)
AmBank Islamic 5-Year Islamic
Callable Range Accrual NID
2021/5.44 3,500,000 100.00 3,500,000 3,500,000 3,500,000 3.04
Total unquoted fixed income securities 98,081,925 99,830,432 99,327,667
86.40
Total investments 103,216,925 104,965,432 104,473,373
90.88
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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5 AMOUNT DUE FROM MANAGER
2017 2016
RM RM Amount due from Manager comprises:
Amount due from Manager 2,000,000 11,233
Amount due to Manager (1,951,439) (2,000)
48,561 9,233
Amount due from Manager consists of amounts receivable from/ (payable to) the Manager in
respect of creation/ (cancellation) of units. Amount receivable/ (payable) for units
created/(cancelled) is received/ (paid) within 10 days of the transaction dates.
6 OTHER RECEIVABLES
Other receivables consist of interest receivable from unquoted fixed income securities, negotiable
instrument of deposit (“NID”) and short-term deposits.
7 SHORT-TERM DEPOSITS
Short-term deposits represent deposits with local licensed financial institutions.
The effective average interest rate for short-term deposits is 3.18% (2016: 3.28%) per annum
and the average maturity period is 7 days (2016: 6 days).
8 ACCRUALS
2017 2016
RM RM
Accruals consist of:
Management fee 97,785 105,222
Trustee’s fee 7,034 7,580
Audit fee 16,280 14,800
Tax agent’s fee 3,500 3,500 Others 8,267 7,866
132,866 138,968
9 UNITHOLDERS’ CAPITAL
<---------- 2017 ---------���� <----------- 2016 ---------���� No. of units RM No. of units RM
At beginning of
year 229,906,138 106,019,450 233,321,086 109,929,410
Created during
the year
98,955,359 50,052,264 87,263,496 41,886,858
Cancelled during
the year
(112,676,093) (57,157,488) (90,678,444) (45,796,818)
At end of year 216,185,404 98,914,226 229,906,138 106,019,450
In accordance with Schedule 7 of Part 6.1 of the Deed and Securities Commission Malaysia’s
approval letter dated 3rd December, 2010, the maximum number of units that can be issued is
750,000,000 (2016: 750,000,000). As of 30th June, 2017, the number of units not yet issued is
533,814,596 units (2016: 520,093,862 units).
Included in the units created during the year are 8,303,139 units (2016: 7,555,642 units) from
reinvestment of distributions made on 30th December, 2016 and 30th June 2017 and NIL units
(2016: 4,434,621) from unit split exercise during the year.
10 UNREALISED RESERVE
2017 2016
RM RM At beginning of year 1,256,448 1,422,065
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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2017 2016
RM RM
Net unrealised loss attributable to investment held at fair
value through profit or loss
(94,577)
(165,617)
At end of year 1,161,871 1,256,448
Investments:
At fair value
98,007,137
104,473,373
At aggregate cost (96,845,266) (103,216,925)
Unrealised reserve 1,161,871 1,256,448
11 REALISED RESERVE
At beginning of year 7,692,655 7,717,095
Total comprehensive income for the year 4,363,033 3,590,66
Net unrealised loss transferred to unrealised reserve 94,577 165,617
Distribution for the year (4,150,321) (3,780,733)
At end of year 7,999,944 7,692,655
12 NET ASSET VALUE PER UNIT (EX-DISTRIBUTION)
The net asset value per unit is calculated by dividing the net asset value attributable to unitholders
as of 30th June, 2017 of RM108,076,041 (2016: RM114,968,553) by units in issue as of 30th
June, 2017 of 216,185,404 units (2016: 229,906,138 units).
13 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 1.11% (2016: 1.12%) per
annum for the year, net of management fee rebate on the collective investment scheme. The
management fee is subject to 6% goods and services tax (“GST”) effective 1st April, 2015.
14 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% (2016: 0.08%) per annum for the
year. The Trustee’s fee is subject to 6% goods and services tax (“GST”) effective 1st April, 2015.
15 INCOME TAX EXPENSE
There is no tax charge as interest income derived by the Fund is exempted pursuant to Paragraph
35 and 35A, 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.
16 NET DISTRIBUTION
2017 2016
RM RM
Distribution to unitholders is from the following sources:
Interest income 4,535,801 4,315,869
Realised gain on sales of investment 110,168 - Previous year’s realised gains 1,030,530 858,438
5,676,499 5,174,307
Less:
Expenses (1,526,178) (1,393,574)
Net distribution 4,150,321 3,780,733
The distributions above have been made as follows:
ANNUAL REPORT JUNE 2017
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2017 2016
RM RM
Distribution on 30th June, 2017
Gross distribution per unit (sen) 1.00 -
Net distribution per unit (sen) 1.00 -
Distribution on 30th December, 2016
Gross distribution per unit (sen) 0.91 -
Net distribution per unit (sen) 0.91 -
Distribution on 29th June, 2016
Gross distribution per unit (sen) - 1.22
Net distribution per unit (sen) - 1.22
Distribution on 31st December, 2015 Gross distribution per unit (sen) - 0.50
Net distribution per unit (sen) - 0.50
Total Distribution
Gross distribution per unit (sen) 1.91 1.72
Net distribution per unit (sen) 1.91 1.72
The distributions above have been made before taking into account unrealised loss for the year of
RM94,577 (2016: unrealised loss of RM165,617) which is carried forward to next year.
17 MANAGEMENT EXPENSE RATIO AND PORTFOLIO TURNOVER
Management Expense Ratio (MER)
Management expense ratio for the Fund is 1.28% (2016: 1.29%) for the financial year ended 30th
June, 2017. 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 financial year is RM118,780,729 (2016:
RM108,023,950).
Portfolio Turnover Ratio (PTR)
The portfolio turnover ratio for the Fund is 0.46 times (2016: 0.36 times) for the financial year
ended 30th June, 2017. The portfolio turnover is derived from the following calculation:
(Total acquisition for the financial year + total disposal for the financial year) ÷ 2
Average net asset value of the Fund for the year calculated on a daily basis
Where: total acquisition for the financial year = RM55,588,028 (2016: RM47,819,676)
total disposal for the financial year = RM52,867,218 (2016: RM30,289,237)
18 UNITS HELD BY THE MANAGER AND RELATED PARTIES
As of end of the financial year, the total number and value of units held by the Manager and related
parties are as follows:
2017
The Manager 1,180,435 589,864
Dato’ Wee Hoe Soon @ Gooi Hoe Soon, a director of the Manager 16,432,453 8,211,297
Kumpulan RZA Sdn Bhd * 1,333,073 666,136
18,945,961 9,467,297
ANNUAL REPORT JUNE 2017
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2016
The Manager 251 126
Dato’ Wee Hoe Soon @ Gooi Hoe Soon, a director of the Manager 15,822,096 7,912,630
Kumpulan RZA Sdn Bhd * 1,283,558 641,907
17,105,905 8,554,663
* shareholder of the Manager
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 %
2017
KAF Investment Bank Berhad 105,694,000 46.71 - -
CIMB Bank Berhad 39,028,485 17.25 - -
Hong Leong Investment Bank Bhd 36,308,335 16.04 - -
Hong Leong Bank 19,750,351 8.73 - -
RHB Investment Bank Berhad 14,837,362 6.56 - -
Malayan Banking Berhad 7,056,773 3.12 - -
AmIslamic Bank Berhad 3,594,417 1.59 - -
226,269,723 100.00 - -
2016
RHB Investment Bank Berhad 49,333,510 25.42 - -
KAF Investment Bank Berhad 44,235,000 22.79 - -
Hong Leong Bank Berhad 40,779,832 21.01 - -
Hong Leong Investment Bank Bhd 29,647,638 15.27 - -
CIMB Investment Bank Berhad 14,073,912 7.25 - -
Malayan Banking Berhad 6,046,384 3.12 - -
AmIslamic Bank Berhad 3,500,000 1.80 - -
CIMB Bank Berhad 2,466,000 1.27 - -
AmBank (M) Berhad 2,010,600 1.04 - -
Maybank Investment Bank Berhad 2,005,600 1.03 - -
194,098,476 100.00 - -
Included in transactions with brokers/dealers are trades conducted on normal terms in relation to
investment in collective investment scheme managed by the 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.
ANNUAL REPORT JUNE 2017
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Categories of Financial Instruments
2017 2016
Financial assets RM RM
Carried at FVTPL:
Collective investment scheme 3,519,242 5,145,706
Unquoted fixed income securities 94,487,895 99,327,667
Loans and receivables:
Amount due from Manager 48,561 9,233
Other receivables 1,255,963 1,025,187
Short-term deposits 8,792,406 9,549,266 Cash at bank 104,840 50,462
Financial liability
Other financial liability:
Accruals 132,866 138,968
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 30th June, 2017.
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 which are not rated
by credit rating agency. The following table set out the Fund’s portfolio of unquoted investments
by rating categories:
Fair Value
RM
As a % of
unquoted
investments
As a % of
NAV
Credit Rating
2017
Bonds
AAA 15,774,595 16.69 14.60
AA1 7,510,710 7.95 6.95
AA2 3,674,650 3.89 3.40
AA3 15,663,390 16.58 14.49
AA 3,848,475 4.07 3.56
AA- 25,989,945 27.51 24.05
A1 10,780,280 11.41 9.97
A- 1,974,720 2.09 1.83
NR 9,271,130 9.81 8.58
94,487,895 100.00 87.43
2016
Bonds
AAA 8,262,400 8.32 7.19
AA1 14,514,280 14.61 12.63
ANNUAL REPORT JUNE 2017
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Fair Value
RM
As a % of
unquoted
investments
As a % of
NAV
Credit Rating
2016
Bonds
AA2 12,258,345 12.34 10.66
AA3 16,926,755 17.04 14.72
AA+ 2,995,230 3.02 2.61
AA 3,901,125 3.93 3.39
AA- 18,589,620 18.72 16.17
A1 10,654,160 10.73 9.27
A 2,000,240 2.01 1.74
NR 5,725,872 5.76 4.98
Others
NID 3,500,000 3.52 3.04
99,327,667 100.00 86.40
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
RM RM RM
2017
Construction & engineering - - 4,183,360
Diversified holdings - - 1,974,720
Finance, insurance and business services 8,792,406 3,519,242 51,364,995
Infrastructure & utilities - - 15,404,425 Plantation & agriculture - - 3,998,760
2017
Property & real estate - - 4,513,215
Trading & services - - 13,048,420
8,792,406 3,519,242 94,487,895
2016 Construction & engineering - - 4,229,360
Diversified holdings - - 2,000,240
Finance, insurance and business services 9,549,266 5,145,706 61,171,702
Infrastructure & utilities - - 9,580,105
Plantation & agriculture - - 8,306,705
Property & real estate - - 2,996,435
Trading & services - - 11,043,120
9,549,266 5,145,706 99,327,667
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 with 7 days.
The table below summarises the maturity profile of the Fund’s liabilities at the reporting date based
on contractual undiscounted repayment obligations:
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Up to
1 month
1 - 3
months
3 months
to 1 year
Total
RM RM RM RM
2017
Financial Liability
Non-interest bearing
Accruals 111,108 21,758 - 132,866
2016
Financial Liability
Non-interest bearing
Accruals 119,570 19,398 - 138,968
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.
The following table demonstrates the sensitivity of the Fund’s income for the year 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
2017
Interest rate +50/-50 533,998/(533,998)
Changes in basis points Effect on profit or loss
Increase/(Decrease)
2016 RM
Interest rate +50/-50 570,113/(570,113)
ANNUAL REPORT JUNE 2017
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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:
Investments
Changes in price
Effect on profit or loss
Increase/(Decrease) % RM
2017
Investments +5/-5% 4,900,357/(4,900,357)
2016 Investments +5/-5% 5,223,669/(5,223,669)
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
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction in the principal (or most advantageous) market at the measurement date under
current market conditions.
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.
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 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
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• Level 3 fair value measurements are those derived from valuation techniques that include
inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
Level 1 Level 2 Level 3 Total
RM RM RM RM
2017
Financial assets at FVTPL
Unquoted fixed income
securities - 94,487,895 - 94,487,895
Collective investment scheme - 3,519,242 - 3,519,242
2016
Financial assets at FVTPL
Unquoted fixed income securities - 99,327,667 - 99,327,667
Collective investment
scheme - 5,145,706 - 5,145,706
There were no transfer between Levels 1 and 2 during the financial year.
ANNUAL REPORT JUNE 2017
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STATEMENT BY THE MANAGER
To the Unitholders of Areca incomeTRUST Fund
We, WONG TECK MENG and DATO’ WEE HOE SOON @ GOOI HOE SOON, two of the Directors of
the Manager, Areca Capital Sdn Bhd, do hereby state that in the opinion of the Manager, the
accompanying 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 30th June, 2017 and the financial performance
and the cash flows of the Fund for the financial year ended on that date.
For and on behalf of the Manager
Areca Capital Sdn Bhd
WONG TECK MENG
CEO/ EXECUTIVE DIRECTOR
DATO’ WEE HOE SOON @ GOOI HOE SOON INDEPENDENT DIRECTOR
Kuala Lumpur
21 August 2017
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
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INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF
ARECA INCOMETRUST FUND
(Established under Trust Deed dated 12th March, 2007)
Report on the Audit of the Financial statements Opinion
Opinion
We have audited the financial statements of ARECA INCOMETRUST FUND, which comprise
the statement of financial position as of 30th June, 2017, and the statement of profit or loss and other
comprehensive income, statement of changes in net asset value and statement of cash flows for the
financial year then ended, and notes to the financial statements including a summary of significant
accounting policies, as set out on pages 12 to 32.
In our opinion, the accompanying financial statements give a true and fair view of the financial position
of the Fund as of 30th June, 2017, and of its financial performance and cash flows for the financial year
then ended in accordance with Malaysian Financial Reporting Standards and International Financial
Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia and
International Standards on Auditing. Our responsibilities under those standards are further described
in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence and Other Ethical Responsibilities
We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and
Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards
Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled
our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.
Information Other than the Financial Statements and Auditors’ Report Thereon
The Manager of the Fund is responsible for the other information. The other information comprises the
information included in the Annual Report and Trustee reports, but does not include the financial
statements of the Fund and our auditors’ report thereon.
Our opinion on the financial statements of the Fund does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements of the Fund, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears
to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Manager’s and Trustee’s Responsibilities for the Financial Statements
The Manager of the Fund is responsible for the preparation of the financial statements of the Fund that
give a true and fair view in accordance with Malaysian Financial Reporting Standards and International
Financial Reporting Standards and Securities Commission Malaysia’s Guideline on Unit Trust Funds in
Malaysia. The Manager is also responsible for such internal control as the Manager determine is
necessary to enable the preparation of financial statements of the Fund that are free from material
misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager
maintains proper accounting and other records as are necessary to enable the fair presentation of these
financial statements.
In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
ANNUAL REPORT JUNE 2017
ARECA incomeTRUST FUND
35
using the going concern basis of accounting unless the Manager either intend to liquidate the Fund or
to cease operations, or have no realistic alternative but to do so.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and
International Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and International
Standards on Auditing, we exercise professional judgement and maintain professional scepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements of the Fund,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Manager’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Manager and Trustee.
• Conclude on the appropriateness of Manager’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Fund’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditors’
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date
of our auditors’ report. However, future events or conditions may cause the Fund to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements of the Fund,
including the disclosures, and whether the financial statements of the Fund represent the
underlying transactions and events in a manner that achieves fair presentation.
We communicate with the Manager regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal content that we
identify during our audit.
Other Matters
This report is made solely to the unitholders of the Fund, as a body, and for no other purpose. We do
not assume responsibility towards any other person for the contents of this report.
DELOITTE PLT (LLP0010145-LCA)
Chartered Accountants (AF 0080)
WONG YEW CHOONG
Partner - 03195/06/2019 J Chartered Accountant
21 August 2017