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Annual Report June 2017

For the Year Ended 30 June 2017

Areca incomeTRUST Fund

A NN UA L REPORT J UN E 2017

�� ARECA incomeTRUST FUND

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



3

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

Name of the Fund Areca incomeTRUST Fund

Fund Category/

Type

Fixed Income/ Income

Objective of the

Fund

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

regular income

Benchmark Maybank’s 6-month fixed deposit rate

Distribution

Policy of the

Fund

Twice a year, subject to availability of 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



4

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



5

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.



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%



7

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


2) Hong Leong Bank Berhad (A3) 8.82


3) Alpha Circle Sdn Bhd (AA-IS) 7.67


4) CIMB Bank Berhad (A1 & AA+) 6.34


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 (%)






3) Malakoff Power Berhad (AA-) 4.66

4) Al-Dzahab Assets Berhad (AAA) 6.29

4) Eastern & Oriental Berhad (NR) 4.18


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


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


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


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.


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



12

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.



13

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




14

STATEMENT OF CHANGES IN NET ASSET VALUE


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




15

STATEMENT OF CASH FLOWS


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




16

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:



17

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.



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.



19

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



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.



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



22

(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


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



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


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



24

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



25

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:



26

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



27

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.



28

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



29

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:



30

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)



31

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).



32

• 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.



33

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



34

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



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

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