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Annual Report June 2016
For the Year Ended 30 June 2016
Areca Steady fixedINCOME Fund
A NN UA L REPORT J UN E 2016
ARECA Steady fixedINCOME FUND
Contents
CORPORATE DIRECTORY 2
MANAGER’S REPORT
Fund Information, Performance & Review 3
Market Review & Outlook 8
TRUSTEE’S REPORT 11
STATEMENT BY MANAGER 11
AUDITORS’ REPORT 12
AUDITED FINANCIAL STATEMENTS FOR
Areca Steady fixedINCOME Fund 13
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
2
C O R P O R A T E D I R E C T O R Y
MANAGER
Areca Capital Sdn Bhd (740840-D)
107, Blok B, Pusat Dagangan Phileo Damansara 1,
No. 9, Jalan 16/11, Off Jalan Damansara,
46350 Petaling Jaya, Selangor.
Tel: 603-7956 3111, Fax: 603-7955 4111
website: www.arecacapital.com
e-mail: invest@arecacapital.com
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
RHB Trustees Berhad (573019-U)
10th Floor, Plaza OSK,
Jalan Ampang,
50450 Kuala Lumpur
Tel: 03-9207 7778 Fax: 03-2175 3223
AUDITOR
PricewaterhouseCoopers (AF1146)
Level 10, 1 Sentral, Jalan Rakyat,
Kuala Lumpur, Sentral, P O Box 10192
Tel: 03-2173 1188, Fax: 03-2173 1288
TAX ADVISER
PricewaterhouseCoopers Taxation Services
Sdn Bhd (464731-M) Level 10, 1 Sentral, Jalan Rakyat, Kuala Lumpur, Sentral, P O Box 10192
Tel: 03-2173 1188, Fax: 03-2173 1288
M A N A G E R ’ S O F F I C E A N D B R A N C H E S
HEAD OFFICE
107, Blok B, Pusat Dagangan Phileo Damansara 1, No. 9, Jalan 16/11, Off Jalan Damansara,
46350 Petaling Jaya, Selangor
Tel: 603-7956 3111, Fax: 603-7955 4111
website: www.arecacapital.com
e-mail: invest@arecacapital.com
PENANG – PULAU TIKUS PERAK – IPOH MALACCA
368-2-02 Belissa Row
Jalan Burma, Georgetown
10350 Pulau Pinang
Tel : 604-210 2011
Fax: 604-210 2013
11A, (First Floor)
Persiaran Greentown 5
Greentown Business Centre
30450 Ipoh, Perak
Tel : 605-249 6697/6698
Fax: 605-249 6696
95A, Jalan Melaka Raya 24
Taman Melaka Raya
75000 Melaka
Tel : 606-282 9111
Fax: 606-283 9112
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
3
F U N D I N F O R M A T I O N
Name of the Fund Areca Steady fixedINCOME Fund
Fund Category/
Type
Fixed Income (Wholesale Fund)/Income
Objective of the
Fund
To provide sophisticated investors with a stable stream of consistent income
while maintaining capital stability by investing in fixed income investments
with medium to long term investment horizon.
Benchmark Maybank’s 12-month fixed deposit rate
Distribution Policy
of the Fund
Yearly or more frequent, subject to availability of the distributable income.
In the absence of instructions to the contrary from a Unit Holder, the
Manager is entitled to reinvest the income distributed from the Fund in
additional units of that Fund at the NAV per unit at the end of the
distribution day with no entry fee.
Profile of
unitholdings
* excluding units held
by the Manager
As at 30 June 2016
Size of Holding
(Units)
No. of
accounts %
No. of
units held
‘million
%
Up to 5,000 - - - -
5,001 to 10,000 - - - -
10,001 to 50,000 - - - -
50,001 to 500,000 21 51.22 4.34 14.95
500,001 and above 20 48.78 24.68 85.05
Total* 41 100.00 29.02 100.00
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.
Inception Date 11 May 2009
Initial Offer Price RM1.0000 per unit during the initial offer period of 21 days ended 31 May
2009
Pricing Policy
Single Pricing – Selling and repurchase of units by Manager are at Net Asset
Value per unit
Financial year end 30 June
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
4
F U N D P E R F O M A N C E
2016 2015 2014
Net Asset Value (“NAV”) as at 30 June
Total Net Asset Value (RM million) 34.19* 33.17* 37.69*
Units in circulation (million units) 32.48* 31.24* 34.96*
NAV per unit (RM) 1.0527* 1.0616* 1.0782*
* Ex-Distribution
HIGHEST & LOWEST NAV for the year ended 30 June Please refer to Note 1 for further information on NAV and
pricing policy
Highest NAV per unit (RM) 1.0826* 1.1116* 1.1003* Lowest NAV per unit (RM) 1.0525* 1.0616* 1.0781*
* Ex-Distribution
ASSET ALLOCATION % of NAV as at 30 June
Fixed Income Securities
Collective investment scheme 15.88 - -
Quoted securities-local 0.91 1.36 1.79
Unquoted bonds-local 81.48 83.61 78.97
Unquoted bonds-foreign - 8.50 10.38
Floating rate negotiable instrument of
deposit (FRIND) - 6.09 5.39
Cash & cash equivalents including placements
and repo 1.67
0.44 3.47
DISTRIBUTION Please refer to Note 2 for further information
Distribution dates 31 Dec 2015
29 Jun 2016
30 Dec 2014
29 Jun 2015
27 Dec 2013
27 Jun 2014
Gross distribution (sen per unit) 2.00 (31 Dec)
3.00 (29 Jun)
1.00 (30 Dec)
5.00 (29 Jun)
2.00 (27 Dec)
2.00 (27 Jun)
Net distribution (sen per unit) 2.00 (31 Dec)
3.00 (29 Jun)
1.00 (30 Dec)
5.00 (29 Jun)
2.00 (27 Dec)
2.00 (27 Jun)
NAV before distribution (RM per unit) 1.0816 (30 Dec)
1.0826 (28 Jun)
1.0887 (29 Dec)
1.0790 (26 Jun)
1.1003 (26 Dec)
1.0983 (26 Jun)
NAV after distribution (RM per unit) 1.0624 (31 Dec)
1.0525 (29 Jun)
1.1116 (30 Dec)
1.0621 (29 Jun)
1.0803 (27 Dec)
1.0781 (27 Jun)
UNIT SPLITS
There was no unit split exercise for the financial year under review.
EXPENSE/ TURNOVER for the year ended 30 June
Management expense ratio (MER) (%)
Please refer to Note 3 for further information
1.36 1.32 1.29
Portfolio turnover ratio (PTR) (times)
Please refer to Note 4 for further information
0.33 0.34 0.31
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
5
F U N D P E R F O M A N C E
2016 2015 2014
TOTAL RETURN for the year ended 30 June
Please refer to Note 5 for further information
Total Return (%) 3.91 4.05 2.78
- Capital Return (%) (0.84) (1.54) (0.93)
- Income Return (%) 4.75 5.59 3.71
2016 2015 2014 2013 2012
Annual Total Return (%) 3.91 4.05 2.78 3.91 5.40
Benchmark: Average Maybank's 12-month fixed deposit rate
3.30 3.27 3.17 3.17 3.17
1-yr 3-yrs 5-yrs
Average Total Return per annum (%) 3.91 3.71 4.34
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: Distribution of 2.00 sen per unit and 3.00 sen per unit were declared on 31 December 2015 and 29
June 2016 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 is sourced from Lipper. Benchmark data is sourced from
Malayan Banking Berhad.
Past performance is not necessarily indicative of future performance. Unit prices and investment
returns may go down, as well as up.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
6
F U N D R E V I E W
The Fund’s NAV per unit decreased from RM1.0616 as at 30 June 2015 to RM1.0527 as at 30 June
2016, after a total net distribution of 5 sen per unit during the year. For the year ended 30 June
2016, the Fund posted a return of 3.91% against the benchmark Maybank’s 12-month fixed
deposit rate of 3.30% p.a. The Fund outperformed its benchmark for the period under review as
the corporate bonds held enjoyed a stable and accommodative monetary policy despite a difficult
end of 3Q 2015 and an uncertain start of 2016.
The Fund is fully invested with exposure to 19 issues in a varied spread of sectors. The largest
sector exposure remains the banking / finance (31.0%). The average modified duration in 2.47
years. We are also invested in a high yield bond collective investment scheme since Q2 2016 as well as a small 0.9% exposure in loan stock.
The Fund achieved its objective in providing stable stream of consistent income while maintaining
capital stability for the year under review. We will remain highly invested with an intention to raise
the duration.
Investment Policy and Strategy
The Fund primarily invests in a diversified portfolio of fixed income investments with intention to
hold until maturity. The Fund focuses mainly on quality debentures with maturity of 3 to 7 years
with small exposure to other maturity periods.
NAV per unit as at 30 June 2016 RM1.0527
Movement of asset allocation as a percentage of Net Asset Value
for the year ended 30 June 2016
Asset Allocation / Portfolio Composition as at 30 June 2016 2015 2014
Collective investment scheme 15.88% - -
Quoted securities-local 0.91% 1.36% 1.79% 1.79% - -
Unquoted bonds-local 81.48% 83.61% 78.97% 78.97% 88.61% 88.61%
Unquoted bonds-foreign - 8.50% 10.38% 10.38% 8.84% 8.84%
Floating rate negotiable
instrument of deposit
-
6.09%
5.39%
5.39%
-
-
Cash & cash equivalents 1.67% 0.44% 3.47% 3.47% 2.55% 2.55%
For the year ending June 2016, the Manager invested in collective investment scheme to diversify
the portfolio. The Manager also took advantage of the strong SGD by taking profit in the foreign
bond while the FRNID structured product matured.
1.67%
96.25% 90.36%
81.87%
98.33%
0%
20%
40%
60%
80%
100%
30-Sep-15 31-Dec-15 31-Mar-16 30-Jun-16
Bonds & other fixed income instruments
Cash and cash equivalents
* as a % of net asset value
81.48%
15.88% 1.67%
0.91%
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
7
F U N D R E V I E W
Top 5 Holdings by Issuers:
As at 30 Sep 2015 (%)
As at 31 Dec 2015 (%)
1) Alpha Circle 19.50
1) Alpha Circle 20.55
2) Hong Leong Bank 13.75
2) Hong Leong Bank 12.00
3) Genting Singapore 8.91
3) CIMB Bank 7.15
4) CIMB Bank 6.78
4) Eastern & Oriental 6.81
5) Eastern & Oriental 6.45
5) Jati Cakerawala 6.28
As at 31 Mar 2016 (%)
As at 30 Jun 2016 (%)
1) Alpha Circle 19.65
1) Alpha Circle 17.76
2) Hong Leong Bank 9.95
2) Hong Leong Bank 9.85
3) CIMB Bank 6.88
3) Eastern & Oriental 6.48
4) Eastern & Oriental 6.56
4) Jati Cakerawala 5.98
5) Jati Cakerawala 6.02
5) AMMB Holdings 5.90
Performance of Areca Steady fixedINCOME Fund
for the financial period since inception to 30 June 2016
Areca Steady fixedINCOME
Maybank 12 Months Fixed Deposit Rate
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
8
MARKET REVIEW & OUTLOOK
ECONOMIC REVIEW
We highlight a few milestones of this period of July 2015 to June 2016 under review. Leading towards
the end of last year was the first United States (US) rate hike in more than 9 years (including 7 years
of zero interest rates policy). After waiting with bated breath what seemed like eternity it finally
happened in mid December 2015. Unemployment trended down and recorded 5% for the last three months of the year. It has continued to fall since then to stand at 4.90% at the end of June 2016.
Inflation at 1%, still a distance from long term objective, shows signs of a turnaround. Consumer
sentiment and housing data point to an upward trajectory as confidence in the economy grew,
justifying this quarter percent rise in Federal Fund rate.
However, following this upbeat global outlook set forth after the rate hike, markets took an
unexpected volatile turn at the start of 2016.
The now-suspended circuit breaker installed to help limit volatility in China’s stock market
inadvertently became the catalyst for the opposite. Lower manufacturing and growth data provided
further fuel. As the bell rang for the start of the year, a quick 5% drop tripped the first 15 minute suspension. Upon reopening, a surge of selling broke the -7% level and caused a trading halt for the
day within minutes. 3 days later, following Bank of China’s Yuan devaluation, their stock market
swiftly hit -7% suspension mark again. The downward spiral continued till the end of the month
culminating in a 22% decline at one point over 2015 close. The Dow Jones was not spared losing 11%
at one point but recovered to -5.5% for the month. Kuala Lumpur Stock Exchange (KLSE) tracked the
global stock markets slide losing 5.4% at its worst, hitting a four month low. Naturally, Brent crude
oil price’s corresponding fall from USD38 per barrel to USD28 in the same time frame in January was
attributed some blame for these indices decline.
Continued improvements in the US labour and housing data began to drag global sentiment upwards
in Q2 2016 although constant media focus on China’s declining growth, growing debt to Gross
Domestic Product (GDP) and worrying banking sector mitigated. Despite China’s growth of 6.9%,
6.8%, 6.7% and 6.7% y-o-y for the last 4 quarters surpasses that of the US’s 2.2%, 1.9%, 1.6% and
1.2%, it is; ironically; widely blamed for the commodities and global demand slowdown.
In Europe, inflation struggled to breach into positive last year only to slide back into negative most
of 2016. Unemployment optimistically trended down falling below 9% the first time in more than 6
years to close this period at 8.6%. The European Central Bank (ECB) had in March expanded its
quantitative easing policy by increasing the €60bil monthly bond buying program to €80bil a month. Moving towards the end of Q2, attention turned to the United Kingdom (UK). The ‘Brexit’ referendum
carried out in June brought about a surprising result. Economically the UK forms barely 4% of global
GDP. Trade with Malaysia is a mere 1.1%. Hence her exit’s (though may be long drawn; over 2 years)
impact may be minimal.
Amidst all these, global monetary policies have remained largely accommodative with several nations
adopting Zero Rates Policy or even Negative Rates Policy. Japan went deeper into negative while the
ECB dropped to zero. Australia, India, Taiwan and South Korea also cut rates in this period. Among
our neighbours; Philippines and Indonesia followed suit while Singapore abandoned ‘gradual appreciation’ from their foreign exchange policy. China reduced benchmark rates twice in 2H2016
from 4.85% to 4.35% placing the US as the only major economy to have raised rates in the last 12
months.
Malaysia’s economy
Malaysia’s GDP growth eased further with 4.7%, 4.5% and 4.2% for Q3 2015 till Q1 2016.
Noteworthy is our unspectacular year on year export data which apart from moderating, have fallen
into negative twice in this period in review. International Reserves however remains healthy falling slightly from RM398.1 bil to RM390.4 bil. At the same time, MYR depreciated 5.5% against USD from
3.78 to 3.99 due to a combination of factors ranging from diminishing positive yield carry as US rates
rose, falling oil prices (from USD64 per barrel to below USD30 before recovering to USD50 this year)
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
9
and the negative effects of 1 Malaysia Development Berhad (1MDB). The reserves are sufficient to
finance 8.1 months of retained imports and is equal to 1.2 times of short term external debt.
Inflation reached a peak of 4.2% in this period before falling to 1.6% in June 2016 as Goods and
Services Tax (GST) effect wears off.
Statutory Reserve Ratio was cut in January to ease liquidity tightness as Bank Negara saw some risks to growth developing. We also witnessed the changing of guard in Bank Negara Governor in May this
year. Datuk Muhammad Ibrahim, with a long standing career as a central banker, took over the helm
from the retiring Tan Sri Dr Zeti Akhtar Aziz, thus ensuring continuity of stable supportive policies.
Malaysia also revised her budget in January tracking the decline of oil price at that time which was
circa USD35 per barrel. Hence, it augurs well for Malaysia’s fiscal position with price trading 30%
higher currently.
FIXED INCOME MARKET REVIEW
The period under review saw the issuance of RM94.0 bil Malaysian Government Securities (MGS)/
Government Investment Issues (GII) through 30 tenders vs RM88.5 bil in the previous period
(July ’14 – June ’15). There was only one tender for Skim Perumahan Kerajaan bonds of RM0.5 bil.
Interestingly, foreigners who rushed out our shores last year began trickling back. Foreign holdings of
our sovereign debt stood at RM220.1 billion (34.2% of total issued) at the end of June 2016
compared to RM199.3 billion last June. The drop in holdings of discounted short term instruments
from RM22.7 bil to RM16.2 bil was more than made up by the spike in long term bonds held from
RM203.9 bil. Meanwhile, total Private Debt Securities (PDS) issued for this 12 mth period ending June 2016 amounted to RM99.7 bil. Foreign interest is only RM15.1 bil or 2.9% of total PDS outstanding
including quasi-government issues.
During this period, there were 6 Overnight Policy Rate (OPR) meetings where the benchmark rate
was left unchanged at 3.25% in an environment of deteriorating global growth environment with the
exception of the US.
Malaysian sovereign yield curve shifted up in 2H 2015 in line with tightness in liquidity before falling
between 16 and 28 bps in 1H 2016 as funds returned with slowing global economy and easy
monetary policies. PDS curves also shifted up before recovering to last year June’s level. Constant Maturity Conventional Yield-To-Maturity: June 2016 vs June 2015
Tenure 1Y 3Y 5Y 7Y 10Y
Jun’15 Jun’16 Jun’15 Jun’16 Jun’15 Jun'16 Jun’15 Jun’16 Jun’15 Jun’16
MGS 3.039 2.774 3.312 3.173 3.564 3.317 3.918 3.593 4.008 3.726
AAA 3.830 3.930 4.080 4.100 4.270 4.230 4.430 4.380 4.610 4.580
AA2 4.060 4.200 4.370 4.470 4.590 4.620 4.780 4.620 4.970 4.950
A2 5.760 5.580 6.450 6.330 6.930 6.800 7.340 7.240 7.940 7.860
Source: Bond Pricing Agency Malaysia Sdn Bhd (BPA)
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
10
ECONOMIC OUTLOOK
Tiptoeing into the second half of this year, mixed feelings engulf us. Fresh off ‘Brexit’, the Unied Kingdom (UK) will have to renegotiate trade deals and arrangements with the European Union (EU)
and the world at large. Bilateral trade’s agreements may come back in vogue and even benefit the
Brits in contrast to en bloc trade agreements. The US elections may throw up some surprises as well
or at least its build up may make for an interesting and scary script.
In the meantime, the US economy will likely continue along on its path to full recovery. However,
with the impact of ‘Brexit’ yet to be fully understood and realised and global growth still tripping over,
the resurgence will be mitigated.
Some concern may also arise from China’s banking sector in which her shadow banking run parallel and in stealth. Their aggregate asset quality may return to haunt. The need to shift to a more
consumption based economy has become greater.
Oil may have found a sweet range of USD40-50 per barrel for now as concerns of oversupply fade.
Some recovery of soft commodities’ prices have also been encouraging but overcapacity overhang
still lingers.
FIXED INCOME MARKET OUTLOOK
As for interest rates outlook, with the US the only major power to be relatively upbeat on its economy,
it is unlikely that an aggressive rate hike will ensue in an increasing connected and co- dependent
world of business. If any, there may just be one rate hike towards the latter half of the year. As for
(European Central Bank) ECB and Japan, their quantitative easing policies have ensured low to
negative rates to prevail into next year. China however has ample room to reduce rates.
As for Malaysia, interest rates differential over the US and Singapore yields provide for some rate
cuts opportunities. If need be, we may have up to 50 bps to cut this year for our Overnight Policy
Rates while our Statutory Reserve Rate have the potential of one more cut following the surprise move in January.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
11
T R U S T E E ’ S R E P O R T
For The Financial Year Ended 30 June 2016
To the Unit holders of Areca Steady fixedINCOME Fund
We have acted as Trustee of Areca Steady fixedINCOME Fund (the “Fund”) for the financial year
ended 30 June 2016. In our opinion and to the best of our knowledge, Areca Capital Sdn Bhd, the
Manager, has operated and managed the Fund in accordance with the following:-
(a) limitations imposed on the investment powers of the Manager and the Trustee under the
Deed, the Securities Commission Malaysia’s Guidelines on Unlisted Capital Market Products
under the Lodge and Launch Framework, the Capital Markets and Services Act 2007 and
other applicable laws;
(b) valuation/pricing is carried out in accordance with the Deed and any regulatory
requirements;
(c) creation and cancellation of units are carried out in accordance with the Deed and other
regulatory requirements; and
(d) the distributions of 5.00 sen (gross) per unit to the unitholders during the financial year
ended 30 June 2016 are consistent with the objectives of the Fund.
For and on behalf of the Trustee
RHB TRUSTEES BERHAD (Company No:573019-U)
TONY CHIENG SIONG UNG
DIRECTOR
Kuala Lumpur
23 August 2016
S T A T E M E N T B Y T H E M A N A G E R
To the Unit holders of Areca Steady fixedINCOME Fund
We, Wong Teck Meng and Dato’ Wee Hoe Soon @ Gooi Hoe Soon, two of the Directors of Areca
Capital Sdn Bhd, do hereby state that in our opinion as the Manager, the financial statements set
out on pages 13 to 38 are drawn up in accordance with the provisions of the Deed and give a true
and fair view of the financial position of the Fund as at 30 June 2016 and of its results, changes in
net assets attributable to unitholders and cash flows of the Fund for the financial year ended 30
June 2016 in accordance with the Malaysian Financial Reporting Standards and International
Financial Reporting Standards.
For and on behalf of the Manager,
ARECA CAPITAL SDN BHD
WONG TECK MENG
EXECUTIVE DIRECTOR
DATO’ WEE HOE SOON @ GOOI HOE SOON
INDEPENDENT DIRECTOR
Kuala Lumpur
23 August 2016
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
12
INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF ARECA STEADY FIXEDINCOME FUND
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of Areca Steady fixedINCOME Fund, which comprise the
statement of financial position as at 30 June 2016, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the financial year then ended, and
a summary of significant accounting policies and other explanatory notes, as set out on pages 13
to 38.
Manager’s and Trustee’s Responsibility for the Financial Statements
The Manager is responsible for the preparation of financial statements that gives a true and fair
view in accordance with Malaysian Financial Reporting Standards and International Financial
Reporting Standards. The Manager is also responsible for such internal control as the Manager
determines are necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with approved standards on auditing in Malaysia. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on our judgment,
including the assessment of risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to
the Fund’s preparation of financial statements that give a true and fair view 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. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the Manager as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the
Fund as of 30 June 2016 and of its financial performance and cash flows for the year then ended in
accordance with Malaysian Financial Reporting Standards and International Financial Reporting
Standards.
OTHER MATTERS
This report is made solely to the unit holders of the Fund and for no other purpose. We do not
assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS
(No. AF: 1146)
Chartered Accountants
Kuala Lumpur
23 August 2016
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
13
STATEMENT OF FINANCIAL POSITION
As At 30 June 2016
30.6.2016 30.6.2015
Note RM RM
Current Assets
Financial assets at fair value through
profit or loss 8 33,597,645 33,022,346
Cash & cash equivalents 9 638,454 190,828
Total Assets 34,236,099 33,213,174
Current Liabilities
Accrued management fee 29,469 36,016
Other payables and accruals 10 14,870 11,766
Total Liabilities 44,339 47,782
Net Asset Value of the Fund 34,191,760 33,165,392
Equity
Unitholders’ capital 32,935,583 31,630,862
Retained earnings 1,256,177 1,534,530
Total Net Assets Attributable to
UnitHolders 34,191,760 33,165,392
Number of Units in Circulation 11 32,480,447 31,239,485
Net Asset Value Per Unit (Ex-Distribution) 1.0527 1.0616
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
14
STATEMENT OF COMPREHENSIVE INCOME
For The Financial Year Ended 30 June 2016
30.6.2016 30.6.2015
Note RM RM
Investment Income
Interest income 3 1,638,394 1,667,019
Net gain on financial assets at fair value
through profit or loss 8 78,908 126,683
1,717,302 1,803,702
Expenses
Management fee 4 400,436 432,253
Trustee's fee 5 - -
Audit fee 8,760 7,738
Tax agent’s fee 3,600 4,696
Other expenses 33,939 4,787
446,735 449,474
Profit Before Taxation 1,270,567 1,354,228
Taxation 6 3,070 -
Net Profit After Taxation And Total Comprehensive Income For The Financial
Year
1,267,497 1,354,228
Net Profit After Taxation Is Made Up As Follows:
Realised amount 1,704,067 1,362,408
Unrealised amount (436,570) (8,180)
1,267,497 1,354,228
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
15
STATEMENT OF CHANGES IN EQUITY
For The Financial Year Ended 30 June 2016
Note
Unit
holders’
capital
Retained
earnings Total net
asset value
RM RM RM
Balance as at 1 July 2015 31,630,862 1,534,530 33,165,392
Movement in unit holders’ capital:
Creation of units arising from applications 1,889,669 - 1,889,669
Creation of units arising from distributions 1,545,850 - 1,545,850
Cancellation of units (2,140,798) - (2,140,798)
Distributions 7 - (1,545,850) (1,545,850)
Total comprehensive income for the
financial year - 1,267,497 1,267,497
Balance as at 30 June 2016 32,665,583 1,256,177 34,191,760
Balance as at 1 July 2014 35,726,030 1,970,633 37,696,663
Movement in unit holders’ capital:
Creation of units arising from applications - - -
Creation of units arising from distributions 1,790,331 - 1,790,331
Cancellation of units (5,885,499) - (5,885,499)
Distributions 7 - (1,790,331) (1,790,331)
Total comprehensive income for the
financial year - 1,354,228 1,354,228
Balance as at 30 June 2015 31,630,862 1,534,530 33,165,392
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
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STATEMENT OF CASH FLOWS For The Financial Year Ended 30 June 2016
30.6.2016 30.6.2015
Note RM RM
Cash Flows From Operating Activities
Proceeds from disposal of investments 10,745,032 13,552,384
Purchase of investments (11,332,479) (10,092,321)
Interest received from deposits with licensed
financial institutions 88,328 49,743
Interest received from unquoted fixed income
securities 1,641,124 1,661,112
Exit fee from cancellation of units - -
Management fee paid (406,984) (435,073)
Payment for other fees and expenses (43,196) (16,555)
Tax paid (3,070) -
Net cash flows generated from operating activities 688,755 4,719,290
Cash Flows From Financing Activities
Cash proceeds from creation of units 3,445,519 1,790,331
Payments for cancellation of units (2,140,798) (6,031,992)
Distribution paid (1,545,850) (1,790,331)
Net cash flows used in financing activities (241,129) (6,031,992)
Net increase in cash and cash equivalents 447,626 (1,312,702)
Cash and cash equivalents at the beginning of
the financial year
190,828
1,503,530
Cash and cash equivalents at the end of
the financial year 638,454 190,828
Cash and cash equivalents comprise:
Deposit with a licensed financial institution 9 613,660 181,362
Bank balance with a licensed bank 9 24,794 9,466
638,454 190,828
The accompanying notes form an integral part of these financial statements.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
The following accounting policies have been used consistently in dealing with items which are
considered material in relation to the financial statements.
A BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost convention in accordance
with the Malaysian Financial Reporting Standards (“MFRS”) and International Financial Reporting
Standards (“IFRS”).
The preparation of financial statements in conformity with the MFRS and IFRS requires the use of
certain critical accounting estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reported financial
year. It also requires the Manager to exercise their judgment in the process of applying the Fund’s accounting policies. Although these estimates and judgment are based on the Manager’s best
knowledge of current events and actions, actual results may differ.
The areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the financial statements are disclosed in Note M.
The new standards and amendments to published standards and interpretations to existing
standards that are applicable to the Fund but not yet effective and have not been early adopted
are as follows: (a) Financial year beginning on/after 1 July 2016
Amendments to MFRS 11 ‘Joint arrangements’ (effective from 1 January 2016)
requires an investor to apply the principles of MFRS 3 ‘Business Combination’
when it acquires an interest in a joint operation that constitutes a business. The
amendments are applicable to both the acquisition of the initial interest in a
joint operation and the acquisition of additional interest in the same joint
operation. However, a previously held interest is not re-measured when the
acquisition of an additional interest in the same joint operation results in
retaining joint control.
The Fund will apply these amendments when effective. These amendments are
not expected to have a significant impact on the Fund’s financial statements.
Amendments to MFRS 116 ‘Property, plant and equipment’ and MFRS 138
‘Intangible assets’ (effective from 1 January 2016) clarify that the use of
revenue-based methods to calculate the depreciation of an item of property,
plant and equipment is not appropriate. This is because revenue generated by
an activity that includes the use of an asset generally reflects factors other than
the consumption of the economic benefits embodied in the asset.
MFRS 138 also clarify that revenue is generally presumed to be an inappropriate
basis for measuring the consumption of the economic benefits embodied in an
intangible asset. This presumption can be overcome only in the limited
circumstances where the intangible asset is expressed as a measure of revenue
or where it can be demonstrated that revenue and the consumption of the
economic benefits of the intangible asset are highly correlated.
The Fund will apply these amendments when effective. These amendments are not expected to have a significant impact on the Fund’s financial statements.
(b) Financial year beginning on/after 1 July 2017
MFRS 107 ‘Statement of Cash Flows – Disclosure Initiative’ (effective from 1
January 2017) introduce an additional disclosure on changes in liabilities arising
from financing activities.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
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The Fund will apply these amendments when effective. These amendments are
not expected to have a significant impact on the Fund’s financial statements.
MFRS 112 ‘Income Taxes - Recognition of Deferred Tax Assets for Unrealised
Losses’ (effective from 1 January 2017) clarify the requirements for recognising
deferred tax assets on unrealised losses arising from deductible temporary
difference on asset carried at fair value.
In addition, in evaluating whether an entity will have sufficient taxable profits in
future periods against which deductible temporary differences can be utilised,
the amendments require an entity to compare the deductible temporary
differences with future taxable profits that excludes tax deductions resulting
from the reversal of those temporary differences.
The amendments shall be applied retrospectively.
The Fund will apply these amendments when effective. These amendments are not expected to have a significant impact on the Fund’s financial statements.
(c) Financial year beginning on/after 1 July 2018
MFRS 9 ‘Financial Instruments’ (effective from 1 January 2018) will replace
MFRS 139 ‘Financial Instruments: Recognition and Measurement’.
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and
establishes three primary measurement categories for financial assets:
amortised cost, fair value through profit or loss and fair value through other
comprehensive income ("OCI"). The basis of classification depends on the entity's business model and the cash flow characteristics of the financial asset.
Investments in equity instruments are always measured at fair value through
profit or loss with an irrevocable option at inception to present changes in fair
value in OCI (provided the instrument is not held for trading). A debt instrument
is measured at amortised cost only if the entity is holding it to collect
contractual cash flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the MFRS 139 requirements. These
include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value
option is taken for financial liabilities, the part of a fair value change due to an
entity’s own credit risk is recorded in other comprehensive income rather than
the income statement, unless this creates an accounting mismatch.
MFRS 9 introduces an expected credit loss model on impairment that replaces
the incurred loss impairment model used in MFRS 139. The expected credit loss
model is forward-looking and eliminates the need for a trigger event to have
occurred before credit losses are recognised.
The Fund will apply this standard when effective. This standard is not expected
to have a significant impact on the Fund’s financial statements.
• MFRS 15 ‘Revenue from contracts with customers’ (effective from 1 January
2018) replaces MFRS 118 ‘Revenue’ and MFRS 111 ‘Construction contracts’ and
related interpretations. The standard deals with revenue recognition and
establishes principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of revenue and
cash flows arising from an entity’s contracts with customers.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
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Revenue is recognised when a customer obtains control of a good or service and
thus has the ability to direct the use and obtain the benefits from the good or
service. The core principle in MFRS 15 is that an entity recognises revenue to
depict the transfer of promised goods or services to the customer in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
The Fund will apply this standard when effective. This standard is not expected
to have a significant impact on the Fund’s financial statements.
(d) Financial year beginning on/after 1 July 2019
MFRS 16 ‘Leases’ (effective from 1 January 2019) supersedes MFRS 117 ‘Leases’
and the related interpretations.
Under MFRS 16, a lease is a contract (or part of a contract) that conveys the
right to control the use of an identified asset for a period of time in exchange for
consideration.
MFRS 16 eliminates the classification of leases by the lessee as either finance
leases (on balance sheet) or operating leases (off balance sheet). MFRS 16
requires a lessee to recognise a “right-of-use” of the underlying asset and a
lease liability reflecting future lease payments for most leases.
The right-of-use asset is depreciated in accordance with the principle in MFRS
116 ‘Property, Plant and Equipment’ and the lease liability is accreted over time
with interest expense recognised in the income statement.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either operating leases or finance leases and
account for them differently.
The Fund will apply this standard when effective. This standard is not expected
to have a significant impact on the Fund’s financial statements.
B INCOME RECOGNITION
Interest income from short-term deposits and unquoted fixed income securities are recognised
on an accrual basis using the effective interest method.
For unquoted fixed income securities, realised gains and losses on sale of investments are
accounted for as the difference between the net disposal proceeds and the carrying amount of
investments, determined on cost adjusted for accretion of discount or amortisation of premium
on investments.
C TAXATION
Current tax expense is determined according to the Malaysian tax laws and includes all taxes
based upon the taxable profits earned during the financial year.
D PRESENTATION AND FUNCTIONAL CURRENCY
Items included in the financial statements of the Fund are measured using the currency of the
primary economic environment in which the Fund operates (the “functional currency”). The
financial statements are presented in Ringgit Malaysia, which is the Fund’s presentation and
functional currency.
E FOREIGN CURRENCY TRANSLATION
Foreign currency transactions in the Fund are accounted for at exchange rates prevailing at the
transaction dates. Foreign currency monetary assets and liabilities are translated at exchange
rates prevailing as at the date of the statement of financial position. Exchange differences
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
20
arising from the settlement of foreign currency transactions and from the translation of foreign
currency monetary assets and liabilities are included in the statement of comprehensive income.
Translation differences on non-monetary financial assets such as foreign collective investment
schemes classified as financial assets at fair value through profit and loss are included in the
statement of comprehensive income as part of the fair value gain or loss.
The principal closing rate used in the translation of foreign currency is as follows:
30.6.2016 30.6.2015
Foreign Currency
RM RM
1 Singapore Dollar - 2.8025
F FINANCIAL ASSETS AND FINANCIAL LIABILITIES
i) Classification
The Fund designates its investment in unquoted fixed income securities as financial assets
at fair value through profit or loss at inception.
Financial assets are designated at fair value through profit or loss when they are managed
and their performance evaluated on a fair value basis.
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and have been included in current assets.
The Fund’s loans and receivables comprise cash and cash equivalents and amount due from
Manager which are all due within 12 months.
Financial liabilities are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability.
The Fund’s financial liabilities which include amount due to Manager, accrued management
fee and other payables and accaccruals.
ii) Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date, the date
on which the Fund commits to purchase or sell the asset. Investments are initially
recognised at fair value. Transaction costs are expensed in the statement of comprehensive
income.
Financial assets are derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the Fund has transferred
substantially all risks and rewards of ownership.
Financial liabilities, within the scope of MFRS 139, are recognised in the statement of
financial position when, and only when, the Fund becomes a party to the contractual
provisions of the financial instrument.
Financial liability is derecognised when the obligation under the liability is extinguished. Gain
and losses are recognised in the statement of comprehensive income when the liabilities are
derecognised, and through the amortisation process.
Foreign exchange gains and losses on the derivative financial instrument are recognised in
statement of comprehensive income when settled or at date of the statement of financial
position at which time they are included in the measurement of the derivative financial
instrument.
Unrealised gains or losses arising from changes in the fair value of the ‘financial assets at
fair value through profit of loss’ are presented in the statement of comprehensive income
within ‘net gain/(loss) on financial assets at fair value through profit and loss’ in the period
in which they arise. Any unrealised gains however are not distributable.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
21
Unquoted fixed income securities are revalued on a daily basis based on fair value prices
quoted by a bond pricing agency (“BPA”) registered with the Securities Commission as per
the Securities Commission Guidelines on Unit Trust Funds. Refer to Note M for further
explanation.
Dividend income from financial assets at fair value through profit of loss is recognised in the
statement of comprehensive income as part of gross dividend income when the Fund’s right
to receive payments is established.
Quoted securities in Malaysia are valued at the last done market price quoted on the Bursa
Securities Berhad (“Bursa Securities”) at the date of the statement of financial position.
Deposits with licensed financial institutions are stated at cost plus accrued interest
calculated on the effective interest method over the period from the date of placement to
the date of maturity of the respective deposits. Loan and receivables and other financial liabilities are subsequently carried at amortised
cost using the effective interest method.
For assets carried at amortised cost, the Fund assesses at the end of the reporting period
whether there is objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more
events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss
event (or events) has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
The amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset’s original effective interest rate.
The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised
in statement of comprehensive income. If ‘loan and receivables’ or a ‘held-to-maturity
investment’ has a variable interest rate, the discount rate for measuring any impairment
loss is the current effective interest rate determined under the contract.
As a practical expedient, the Fund may measure impairment on the basis of an instrument’s
fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised (such
as an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in statement of comprehensive income.
When an asset is uncollectible, it is written off against the related allowance account. Such
assets are written off after all the necessary procedures have been completed and the
amount of the loss has been determined.
G CASH AND CASH EQUIVALENTS
For the purpose of statement of cash flows, cash and cash equivalents comprise cash and bank
balances and deposits held in highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
H 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 returned to the Fund at any time for cash equal to
a proportionate share of the Fund’s net asset value (“NAV”). The outstanding units are carried
at the redemption amount that is payable at the statement of financial position date if the
unitholder exercises the right to return the unit to the Fund.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
22
Units are created and cancelled at the unitholder’s option at prices based on the Fund’s NAV per
unit at the time of creation or cancellation. The Fund’s net asset value per unit is calculated by
dividing the net assets attributable to unitholders with the total number of outstanding units.
I UNITHOLDERS CAPITAL
The unitholders's contributors 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.
J DISTRIBUTION
A distribution to the Fund’s Unitholders is accounted for as a deduction from realised reserves.
A proposed distribution is recognised as a liability in the period in which it is approved.
K SEGMENTAL INFORMATION
A business segment is a group of assets and operations engaged in providing products or
services that are subject to risks and returns that are different from those of other business
segments. A geographic segment is engaged in providing products or services within a
particular economic environment that are subject to risks and return that are different from
those of segments operating in other economic environments.
Operating segments are reported in a manner consistent with the internal reporting used by the
chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified
as the Investment Committee of the Fund’s manager that undertakes strategic decisions for the
Fund.
L FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial liabilities. Fair value is the amount
at which a financial asset could be exchanged or a financial liability settled, between
knowledgeable and willing parties in an arm’s length transaction. The information presented
herein represents the estimates of fair values as at the statement of financial position date.
M CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The Fund makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, rarely equal the related actual results. To enhance the information
content of the estimates, certain key variables that are anticipated to have material impact to
the Funds’ results and financial position are tested for sensitivity to changes in the underlying
parameters.
Estimates and judgments are continually evaluated by the Manager and the Trustee and are
based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
Estimate of fair value of unquoted fixed income securities
The Fund uses significant judgment in determining whether an investment is impaired. The
Fund evaluates, among other factors, the duration and extent to which the fair value of the
investment is less than cost, and the financial health and near-term business outlook for the
investee, including factors such as industry and sector performance, macroeconomic factors and
speculation.
In undertaking any of the Fund’s investment, the Manager will ensure that all assets of the
Fund under management will be valued appropriately, that is at fair value and in compliance
with the Securities Commission valuation guidelines.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
23
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.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR 30 JUNE 2016
1 THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES
Areca Steady fixedINCOME Fund (“the Fund”) is a wholesale fund that was formed under a
custodian structure on 11 May 2009. A trustee was later appointed for the Fund with the
signing of a Trust Deed dated 24 July 2009 as modified by the First Supplemental Deed dated
15 August 2013 (“the Deed”) between Areca Capital Sdn Bhd as the Manager, RHB Trustees
Berhad as the Trustee and all the registered unitholders of the Fund.
The principal activity of the Fund is to invest in investments as defined under Schedule 6 of
the Deed, which include money market instruments, fixed income securities and deposits with
financial institutions. The Fund commenced operations on 11 May 2009 and will continue its
operations until terminated by the Trustee in accordance with Part 11 of the Deed.
The objective of the Fund is to provide sophisticated investors with a stable stream of
consistent income while maintaining capital stability by investing in fixed income investments
with medium to long term investment horizon.
The Manager of the Fund is Areca Capital Sdn Bhd, a company incorporated in Malaysia. Its
principal activities are managing private and unit trust funds.
2 FINANCIAL INSTRUMENT AND RISK MANAGEMENT OBJECTIVES AND POLICIES
The Fund seeks to provide sophisticated investors with a stable stream of consistent income
while maintaining capital stability by investing in fixed income investments with medium to
long term investment horizon. In order to meet its stated investment objectives, the Fund
utilises risk management for both defensive and proactive purposes. Rigorous analysis of
sources of risk in the portfolio is carried out and the following policies are implemented to
provide effective ways to reduce future risk and enhance future returns within the Fund’s
mandate.
The Fund is exposed to a variety of risks which include market risk (including price risk and
interest rate risk and foreign exchange/currency risk), credit risk, liquidity risk, business risk
and capital risk.
Financial risk management is carried out through internal control processes adopted by the
Manager and adherence to the investment restrictions as stipulated Deed.
Financial instruments of the Fund as follows:
Note
Loan and
receivables
RM
Financial
assets at fair
value through
profit or loss
RM
Total
RM
30 June 2016
Collective investment scheme 8 - 5,428,878 5,428,878
Quoted securities 8 - 312,500 312,500 Unquoted fixed income securities 8 - 27,856,267 27,856,267
Cash & cash equivalents 9 638,454 - 638,454
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
24
Note
Loan and
receivables
RM
Financial
assets at fair
value through
profit or loss
RM
Total
RM
638,454 33,597,645 33,597,645
30 June 2015
Quoted securities 8 - 452,500 452,500
Unquoted fixed income securities 8 - 32,569,846 32,569,846
Cash & cash equivalents 9 190,828 - 190,828
190,828 33,022,346 33,213,174
All current liabilities are financial liabilities which are carried at amortised cost.
Market risk
(a) Price risk
Price risk arises mainly for uncertainty about future prices of investments. It represents
the potential loss the Fund might suffer through holding market positions in the face of
price movements. The Manager manages the risk of unfavourable changes in prices by
continuous monitoring of the performance and risk profile of the investment portfolio.
The Fund's overall exposure to price risk was as follows:
30.6.2016 30.6.2015
RM RM
Financial assets at fair value through profit or loss* 33,597,645 33,022,346
*Include interest receivable RM362,863 (2015: RM458,440)
The table below summarises the sensitivity of the Fund’s net asset value to movements
in prices of unquoted fixed income securities at the end of the reporting period. The
analysis is based on the assumptions that the price of the unquoted fixed income
securities fluctuates by 5% with all other variables held constant. This represents
management’s best estimate of a reasonable possible shift in the fair value through
profit and loss, having regard to the historical volatility of the prices.
% Change in price of
financial assets at fair
value through profit &
loss
30.6.2016
Market Value
30.6.2015
RM RM
+5% 34,896,521 34,650,541
-5% 31,573,043 31,394,151
Impact on profit after taxation/
net asset value
30.6.2016 30.6.2015
RM RM
+5% 1,661,739 1,628,195
-5% (1,661,739) (1,628,195)
(b) Interest rate risk
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
25
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument
will fluctuate because of changes in market interest rates.
Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
In general, when interest rates rise, unquoted fixed income securities prices will tend to
fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest
rates rise or are expected to rise. However, investors should be aware that should the
Fund holds an unquoted fixed income securities till maturity, such price fluctuations
would dissipate as it approaches maturity, and thus the growth of the NAV shall not be
affected at maturity. In order to mitigate interest rates exposure of the Fund, the
Manager will manage the duration of the portfolio via shorter or longer tenured assets
depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis.
This risk is crucial in a bond fund since bond portfolio management depends on
forecasting interest rate movements. Prices of bonds move inversely to interest rate
movements, therefore as interest rates rise, the prices of bonds decrease and vice versa.
Furthermore, bonds with longer maturity and lower yield coupon rates are more
susceptible to interest rate movements.
Investors should note that fixed income securities (such as the bonds held by the Fund)
and money market instruments are subject to interest rate fluctuations. Such
investments may be subject to unanticipated rise in interest rates which may impair the
ability of the issuers to make payments of interest and principal, especially if the issuers
are highly leveraged. An increase in interest rates may therefore increase the potential
for default by an issuer.
The Fund’s investments in deposits with licensed financial institutions are short term in
nature. Therefore, exposure to interest rate fluctuations is minimal.
The table below summarises the sensitivity of the Fund’s net asset value and profit after
tax to movements in interest rate of unquoted fixed income securities held by the Fund
at the end of each reporting year as a result of movement in interest rate. The analysis
is based on the assumptions that the interest rate increased by 5% and decreased by 5%
with all other variables held constant. This represents management’s best estimate of a
reasonable possible shift in the interest rate, having regard to the historical volatility of
the interest rate.
% Change in interest rate of
unquoted fixed income securities
Impact on profit after
taxation/change in net asset value
30.6.2016 30.6.2015
RM RM
+5% (392,485) (258,916)
-5% 409,771 261,876
(c) Currency risk
As the Fund may invest its assets in securities denominated in a wide range of
currencies other than Ringgit Malaysia, the net asset value of the Fund expressed in
Ringgit Malaysia may be affected favourably or unfavourably by exchange control
regulations or changes in the exchange rates between Ringgit Malaysia and such other
currencies. The risk is minimised through investing in a wide range of foreign currencies
denominated assets and thus, diversifying the risk of single currency exposure.
In the normal course of investment, the Manager will usually not hedge foreign currency
exposure. The Manager may however depending on prevailing market circumstances at
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
26
a particular point in time, choose to use forward, option contracts or other derivatives
for hedging and risk reduction purposes.
The following table sets out the foreign currency risk concentrations and counterparties
of the Fund.
Financial assets at fair value
through profit or loss
2016 2015
RM RM
Singapore - 2,818,751
The table summarises the sensitivity of the Fund’s financial assets to changes in foreign
exchange movements at the end of the reporting period. The analysis is based on the
assumption that the foreign exchange rate changes by 5% with all variables remain
constants. This represents management’s best estimate of a reasonable possible shift in
the foreign exchange rate having regard to historical volatility of this rate. An
increase/(decrease) in foreign exchange rate will result in a corresponding
increase/(decrease) in net assets attributable to unitholders by approximately 5%.
Change in foreign
exchange rate
Impact on profit
after taxation
Impact on net
asset value
% RM RM
At 30 June 2016
Singapore Dollar - - -
At 30 June 2015
Singapore Dollar 5 140,938 140,938
Credit risk
Credit risk refers to the ability of an issuer or counterparty to make timely payments of
interest, principals and proceeds from realisation of investment. The Manager manages the
credit risk by undertaking credit evaluation to minimise such risk.
Credit risk arising from placements on deposits in licensed financial institutions is managed
by ensuring that the Fund will only place deposits in reputable licensed financial institutions.
The settlement terms of the proceeds from the creation of units' receivable from the Manager
and redemption of units payable to the Manager are governed by the SC's Guidelines on
Unlisted Capital Market Products under the Lodge and Launch Framework.
Credit risk is a concern for unquoted fixed income securities. The risk arises when an issuer is
unable to service any profit/contractual coupon or repay the principal amount upon
redemption. In such cases, investors may suffer significant losses with respect to their capital
invested and income foregone. Management of the credit risk is largely accounted for by the
Fund’s management of issue-specific risk. This refers to the emphasis on credit analysis
conducted to determine issuers’ or guarantors’ ability to service promised payments.
The maximum exposure to credit risk before any credit enhancements is the carrying amount
of the financial assets is set out below:
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
27
Financial assets at
fair value through
profit or loss
RM
Cash and
Cash
Equivalents
RM
Total
RM
As at June 2016
Finance
AAA - 24,794 24,794
AA- - 613,660 613,660
Quoted securities 5,428,878 - 5,428,878
Quoted securities 312,500 - 312,500
Unquoted fixed income securities:
AAA 3,100,397 - 3,100,397
AA2/AA 1,859,406 - 1,859,406
AA3/AA- 16,551,539 - 16,551,539
A1/A+ 2,104,375 - 2,104,375
A2/A 1,015,325 - 1,015,325
Non-rated 3,225,225 - 3,225,225
33,597,645 638,454 34,236,099
As 30 June 2015
Finance
AAA - 190,828 190,828
Quoted securities 452,500 - 452,500
Unquoted fixed income securities:
AAA 1,072,596 - 1,072,596
AA1/AA+ 509,596 - 509,596
AA2/AA 4,183,342 - 4,183,342
AA3/AA- 17,639,732 - 17,639,732 A1/A+ 1,156,362 - 1,156,362
A2/A 1,025,792 - 1,025,792
Non-rated 6,982,066 - 6,982,066
33,022,346 190,828 33,213,174
The Manager considers the risk of material loss in the event of non-performance by the
counterparties of the Fund to be unlikely. All financial assets of the Fund at the end of the
financial year are neither past due nor impaired.
Liquidity risk
Liquidity risk is the risk that investments cannot be readily sold at or near its actual value
without taking a significant discount. This will result in lower NAV of the Fund. The Manager
manages this risk by maintaining sufficient level of liquid assets to meet anticipated payment
and cancellations of unit by unit holders, liquid assets comprise bank balance, deposit with a
licensed financial institution and other instruments, which are capable of being converted into
cash within 7 days.
The table below analyses the Fund's financial liabilities into relevant maturity groupings
based on the remaining period at the statement of financial position date to the contractual
maturity date. The amounts in the table below are the contractual undiscounted cash flows.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
28
Less than
one
month
Between
one
month to
one year Total
RM RM RM
As at 30 June 2016
Accrued management fee 29,469 - 29,469
Other payables and accruals - 14,870 14,870
Contractual cash outflows 29,469 14,870 44,339
As at 30 June 2015
Accrued management fee 36,016 - 36,016
Other payables and accruals - 11,766 11,766
Contractual cash outflows 36,016 11,766 47,782
Business risk
Business risk of emerging companies with a short track record that tends to be higher than
matured and well-established companies. The Fund gives preference to invest in companies
with a reasonable track record compared to a new company.
The Manager can manage the market cycles and short-term fluctuations by virtue of its
experience, the analytical process adopted by its fund manager, and by constructing a
diversified investment portfolio.
Redemption and subscription of units are important in the day-to-day management of the
Fund. Liquidity is monitored everyday to ensure the Fund is not affected especially by
unexpected redemption.
The compliance unit is in place to ensure no breaches in investment limits. If there is any
breach, the compliance unit can quickly notify the Fund Manager to take corrective action.
In managing the Fund, the Manager has established policies and procedures outlining the
internal control mechanism, reporting responsibilities and internal audit and compliance
function.
The performance and investment activities of the Fund are regularly reviewed by the
Investment Committee and the Board of Directors of the Manager.
Country risk
When a Fund invests into foreign markets, the foreign investments portion may be affected
by risks specific to a country in which it invests in. Such risk includes changes in the
country’s economic fundamentals, social and political stability, currency movements and foreign investment policies. The factors may have impact on the prices of the Fund’s
investment in that country and consequently may also affect the Fund’s NAV and its growth.
For the Fund, country risk is managed through investing in securities in countries which are
well researched.
Capital risk
The capital of the Fund is represented by equity consisting of unit holders’ capital and
accumulated losses. The amount of equity can change significantly on a daily basis as the
Fund is subject to daily subscriptions and redemptions at the discretion of shareholders. The
Fund’s objective when managing capital is to safeguard the Fund’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain a strong capital base to support the development of the investment activities
of the Fund.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
29
Fair value estimation
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e.
an exit price).
The fair value of financial assets traded in active market (such as publicly traded derivatives
and trading securities) are based on quoted market prices at the close of trading on the year
end date. The Fund utilises the last traded market price for financial assets where the last
traded price falls within the bid-ask spread. In circumstances where the last traded price is not
within the bid-ask spread, the Fund Manager will determine the point within the bid-ask
spread that is representative of the fair value.
An active market is a market in which transactions for the asset take place with sufficient
frequency and volume to provide pricing information on an ongoing basis.
The fair value of financial assets that are not traded in an active market is determined by
using valuation techniques.
Fair value hierarchy
(i) The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices).
Level 3: Inputs for the asset and liability that are not based on observable market data
(that is, unobservable inputs)
The level in the fair value hierarchy within which the fair value measurement is categorised in
its entirety is determined on the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement in its entirety
requires judgment, considering factors specific to the asset or liability.
The determination of what constitutes ‘observable’ requires significant judgment by the Fund.
The Fund considers observable data to be that market data that is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary, and provided by independent
sources that are actively involved in the relevant market.
The following table analyses within the fair value hierarchy the Fund’s financial assets (by
class) measured at fair value:
Level 1 Level 2 Level 3 Total
RM RM RM RM
30 June 2016
Financial assets at fair value through profit or loss:
- collective investment scheme 5,428,878 - - 5,428,878
- quoted securities 312,500 - - 312,500
- unquoted fixed income securities - 27,856,267 - 27,856,267
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
30
Level 1 Level 2 Level 3 Total
RM RM RM RM
30 June 2015
Financial assets at fair value through
profit or loss:
- quoted securities 452,500 - - 452,500
- unquoted fixed income securities - 32,569,846 - 32,569,846
Investments whose values are based on quoted market prices in active markets, and are
therefore classified within Level 1, include active quoted securities. The Fund does not adjust
the quoted prices for these instruments. The Fund’s policies on valuation of these financial
assets are stated in Note F.
Financial instruments that trade in markets that are considered to be active but are valued
based on quoted market prices, dealer quotations or alternative pricing sources supported by
observable inputs are classified within Level 2 these include unquoted fixed income securities.
As Level 2 instruments include positions that are not traded in active markets and/or are
subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-
transferability, which are generally based on available market information. The Fund’s policies
on valuation of these financial assets are stated in Note F.
(ii) The carrying value of cash and cash equivalents and all current liabilities are a reasonable approximation of their fair values due to their short term nature.
3 INTEREST INCOME
2016 2015
RM RM
Interest income from:
- deposits with licensed financial institutions 88,328 49,743
- unquoted fixed income securities 1,550,066 1,627,276
1,638,394 1,677,019
4 MANAGEMENT FEE
The 7th Schedule 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 1.25% (2015:
1.25%) per annum for the year. The management fee is subjected to 6% Goods and Services
Tax ("GST") effective 1st April, 2015.
There will be no further liability to the Manager in respect of the management fee other than
the amounts recognised above.
5 TRUSTEE’S FEE
The 8th Schedule of the Deed provides that the Trustee is entitled to an annual Trustee’s fee
at a rate not exceeding 0.25% 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.
There is no Trustee’s fee provided for in the financial statements for the financial year as the
fee was borne by the Manager (2015: Nil). The trustee's fee is subjected to 6% Goods and
Services Tax ("GST") effective 1st April, 2015.
There will be no further liability to the Trustee in respect of the trustee fee other than the
amounts recognised above.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
31
6 TAXATION
(a) Tax charge for the financial year
2015 2016
RM RM
Current taxation 3,070 -
(b) Numerical reconciliation of income tax expense
The numerical reconciliation between the net income before taxation multiplied by the
Malaysian statutory income tax rate and the tax expense of the Fund is as follows:
2016 2015
RM RM
Profit before taxation 1,270,567 1,354,228
Tax calculated at a tax rate of 24% (2015:25%) 304,936 338,557
Tax effects of:
- Income not subject to tax (399,261) (450,926)
- Expenses not deductible for tax expenses 9,009 13,075
- Restriction on tax deductible expense 88,386 99,294
Tax expense 3,070 -
7 DISTRIBUTION
Distribution to unit holders is from the following sources:
30.6.2016
RM
30.6.2015
RM
Interest income from deposits with licensed financial
institutions
88,159 49,727
Interest income from unquoted fixed income securities 1,163,036 1,173,355
Net realised gains on sale of investments 517,478 113,284
Previous year’s realised gains 228,982 903,439
1,995,655 2,239,805
Less: Expenses (446,735) (449,474)
Taxation (3,070) -
Net distribution amount 1,545,850 1,790,331
Distribution on 29 June 2016
Gross distribution per unit (cents) 3.00 -
Net distribution per unit (cents) 3.00 -
Distribution on 31 December 2015
Gross distribution per unit (cents) 2.00 -
Net distribution per unit (cents) 2.00 -
Distribution on 29 June 2015
Gross distribution per unit (cents) - 5.00
Net distribution per unit (cents) - 5.00
Distribution on 30 December 2014
Gross distribution per unit (cents) - 1.00
Net distribution per unit (cents) - 1.00
Gross distribution is derived using total income less total expenses.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
32
Gross distribution per unit is derived from gross realised income less expenses divided by the
number of units in circulation, while net distribution per unit is derived from gross realised
income less expenses and taxation divided by the number of units in circulation.
8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30.6.2016 30.6.2015
RM RM
Designated at fair value through profit or loss
- Collective investment scheme 5,428,878 -
- Quoted investments 312,500 452,500
- Unquoted fixed income securities 27,856,267 32,569,846
33,597,645 33,022,346
Net gain on assets at fair value through profit or
loss:
-realised gain on disposals 515,478 134,863
-unrealised fair value loss (436,570) (8,180)
78,908 126,683
Financial assets at fair value through profit or loss as at 30 June 2016 are as follows:
Unquoted Fixed Income Securities
Nominal
value Name of Issuer Carrying
value
Fair value
as at
30.6.2016
Fair value
as at
30.6.2016
expressed as a
percentage of
value of the
Fund RM RM RM %
6,000,000 5.15% Alpha Circle Sdn Bhd
19/11/2019 AA- 6,036,403 6,073,003 17.76 3,000,000 8.25% Hong Leong Bank Berhad
09/09/2039 AA3 3,057,952 3,367,983 9.85
2,500,000 2.00% Eastern & Oriental
Berhad 06/03/2020 NR 2,089,390 2,216,248 6.48
2,000,000 4.66% Jati Cakerawala Sdn Bhd
31/07/2018 AA3 2,039,323 2,043,703 5.98
2,000,000 4.50% AMMB Holdings Berhad
08/08/2019 AA3 2,035,015 2,017,014 5.90
1,250,000 6.70% CIMB Bank Berhad
07/10/2038 AA 1,298,204 1,319,878 3.86 1,000,000 8.25% AmBank (M) Berhad
18/08/2039 A2
1,030,288 1,126,888 3.30
1,000,000 3.00% TRIplc Ventures Sdn Bhd
08/10/2021 AAA 1,012,117 1,069,457 3.13
1,000,000 5.60% CIMB Thai Bank Public
Company Limited 05/07/2024
AA3 1,027,003 1,039,573 3.04
1,000,000 4.90% Gulf Investment
Corporation G.S.C 03/08/2016 AAA 1,026,203 1,020,736 2.99
1,000,000 7.50% DRB-Hicom Berhad
28/12/2114 A 1,027,926 1,015,325 2.97
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
33
Nominal
value Name of Issuer Carrying
value
Fair value
as at
30.6.2016
Fair value
as at
30.6.2016
expressed as a
percentage of
value of the
Fund RM RM RM %
1,000,000 5.50% Al Dzahab Assets Berhad
21,06,2021 AAA 1,001,508 1,010,177 2.95
1,000,000 4.40% Pengurusan Air SPV
Berhad 17/06/2026 NR 1,001,687 1,008,977 2.95
1,000,000 Sports Toto Malaysia Sdn Berhad 28/06/2019 AA- 1,004,300 1,001,430 2.93
1,000,000 5.35% Golden Assets
International Finance Limited
05/08/2019 AA3 1,021,547 977,487 2.86
500,000 7.50% PBFin Berhad
05/06/2059 AA2 565,884 539,528 1.58
500,000 4.85% Alpha Circle Sdn Bhd
17/11/2017 AA- 502,857 504,687 1.48
500,000 4.80% UEM Sunrise Berhad 08/04/2022 AA- 505,326 504,146 1.47
Total bonds in Malaysia 27,282,933 27,856,267 81.48
Quoted Securities
TRADING/SERVICES
500,000 Barakah-Offshore-RCULS 13/18 679,000 312,500 0.91
679,000 312,500 0.91
Collective investment scheme
30,073 Areca Islamic Cash Fund 31,012 31,014 0.09
5,289,949 Areca Situational Income Fund 5,300,000 5,397,864 15.79
5,331,012 5,428,878 15.88
Total investments 33,292,945 33,597,645 98.27
Accumulated unrealised gain on
financial assets at fair value
through profit or loss 304,700
Total fair value of financial
assets at fair value through
profit or loss
33,597,645
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
34
Financial assets at fair value through profit or loss as at 30 June 2015 are as follows:
Nominal
value Name of Issuer Carrying
value
Fair value as at
30.6.2015
Fair value
as at 30.6.2015
expressed as a
percentage of
value of the
Fund
RM RM RM %
6,000,000 5.15% Alpha Circle Sdn Bhd
19/11/2019 AA- 6,036,403 6,054,463 18.26
3,000,000 8.25% Hong Leong Bank Berhad
09/09/2039 AA3 3,057,952 3,448,893 10.40
2,500,000 2.00% Eastern & Oriental
Berhad 06/03/2020 NR 2,089,527 2,145,095 6.48
2,000,000 4.66% Jati Cakerawala Sdn Bhd
31/07/2018 AA3 2,038,812 2,037,992 6.14
2,000,000 4.50% AMMB Holdings Berhad 08/08/2019 AA3 2,035,014 2,017,214 6.08
1,250,000 6.70% CIMB Bank Berhad
07/10/2038 AA 1,298,204 1,344,603 4.05
1,000,000 8.25% AmBank (M) Berhad
18/08/2039 A2
1,030,062
1,156,362
3.49
1,000,000 3.00% TRIplc Ventures Sdn Bhd
08/10/2021 AAA 1,012,266 1,072,596 3.23
1,000,000 5.60% CIMB Thai Bank Public
Company Limited 05/07/2024 AA3 1,026,849 1,049,229 3.16
1,000,000 7.50% DRB-Hicom Berhad
28/12/2114 A 1,024,022 1,025,792 3.09
1,000,000 4.30% Noble Group Limited
29/01/2016 AA2 1,012,907 1,018,357 3.07
1,000,000 5.35% Golden Assets
International Finance Limited
05/08/2019 AA3 1,021,400 1,016,050 3.06
1,000,000 Sports Toto Malaysia Sdn Berhad
28/06/2019 AA- 1,004,432 1,004,452 3.03 750,000 4.75% Hong Leong Bank Berhad
30/12/2020 AA2 766,987 770,336 2.32
500,000 7.50% PBFin Berhad
05/06/2059 AA2 565,987 551,081 1.66
500,000 4.70% YTL Power International
Berhad 13/10/2021 AA1 505,686 509,956 1.54
500,000 4.80% UEM Sunrise Berhad
08/04/2022 AA- 505,392 508,362 1.53
500,000 4.85% Alpha Circle Sdn Bhd 17/11/2017 AA- 502,857 502,807 1.52
500,000 4.50% Hong Leong Bank Berhad
21/06/2024 AA2 500,555 498,965 1.50
1,000,000 5.50% Hong Leong Bank Berhad
5-Year Callable KLIBOR Range
Accrual FRNID 02/08/2018 NR 1,021,397 1,021,397 3.08
1,000,000 5.90% CIMB 5-Year Callable
KLIBOR Range Accrual FRNID
17/10/2018 NR 1,012,123 996,823 3.01
Total bonds in Malaysia 29,073,636 29,751,095 89.70
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
35
Nominal
value Name of Issuer Carrying
value
Fair value
as at
30.6.2015
Fair value
as at 30.6.2015
expressed as a
percentage of
value of the
Fund
RM RM RM %
Bond in
Singapore
SGD
1,000,000 5.125% Genting Singapore Ltd
12/09/2017 NR 2,523,919 2,818,751 8.50
Total bonds in Singapore 2,523,919 2,818,751 8.50
Total unquoted fixed income
securities 31,597,555 32,569,846 98.20
Quoted Securities
TRADING/ SERVICES
500,000 Barakah-Offshore-RCULS 13/18 679,000 452,500 1.36
Total investments 32,276,555 33,022,346 99.56
Accumulated unrealised gain on
financial assets at fair value
through profit or loss 745,791
Total fair value of financial
assets at fair value through
profit or loss
33,022,346
9 CASH AND CASH EQUIVALENTS
30.6.2016 30.6.2015
RM RM
Bank balance with a licensed bank 24,794 9,466
Deposit with a licensed financial institution 613,660 181,362
638,454 190,828
The effective weighted average interest rate of short term deposit with a licensed financial
institutions per annum as at the date of statements of financial position as follows:
30.6.2016 30.6.2015
% %
Deposit with a licensed financial institution 3.35 3.15
The deposit have an average maturity of 6 days (30.6.2015: 7 days).
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
36
10 OTHER PAYABLES AND ACCRUALS
30.6.2016 30.6.2015
RM RM
Audit fee payable 8,760 7,738
Tax agent’s fee payable 3,600 4,028
Other payables 2,510 -
14,870 11,766
11 UNITS IN CIRCULATION
2016
Units
2015
Units
At beginning of the financial year 31,239,485 34,962,809
Creation arising from applications 1,770,552 -
Creation arising from distributions 1,463,442 1,681,262
Cancellation of units (1,993,032) (5,404,586)
At end of the financial year 32,480,447 31,239,485
Approved size of Fund 500,000,000 500,000,000
12 TRANSACTIONS BY THE FUND
Details of transactions with brokers and financial institutions by the Fund for the financial
year ended 30 June 2016 are as follows:
Brokers/Dealers
Value of
trades
% of
total
trades
Value
of
trades
% of
total
trades
RM % RM %
KAF Investment Bank Berhad 11,822,000 41.56 - -
Hong Leong Investment Bank Bhd 7,776,767 27.34 - -
CIMB Bank Bhd 7,035,492 24.72 - -
Areca Capital Sdn Bhd 750,000 2.64
RHB Investment Bank Berhad 560,000 1.97 - -
Ambank Berhad 502,650 1.77 - -
28,443,909 100.00 - -
Details of transactions with brokers and financial institutions by the Fund for the financial
period ended 30 June 2015 are as follows:
Brokers/Dealers
Value of
trades
% of
total
trades
Value
of
trades
% of
total
trades
RM % RM %
CIMB Bank Bhd 12,145,171 35.20 - -
KAF Investment Bank Berhad 7,350,000 21.31 - -
Hong Leong Investment Bank Bhd 6,183,500 17.92 - -
Ambank (M) Bhd 3,505,800 10.16 - - Malayan Banking Berhad 3,004,300 8.71 - -
HwangDBS Investment Bank Berhad 2,310,000 6.70 - -
34,498,771 100.00 - -
There is no brokerage fee charged by brokers/dealers.
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
37
13 UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER
The related parties and their relationship with the Fund is as follows:
Related party Relationship
Areca Capital Sdn Bhd The Manager
Dato’ Wee Hoe Soon @ Gooi Hoe Soon A Director of The Manager
The number of units held by the Manager is as follows:
--------- 2016 --------- --------- 2015 --------
No. of units RM No. of units RM
Areca Capital Sdn Bhd 3,464,720 3,647,311 506,395 537,589 Dato’ Wee Hoe Soon @
Gooi Hoe Soon
612,550
644,831
584,569
620,578
Other than the above, there were no units held by the Manager and other Directors or parties
related to the Manager.
14 MANAGEMENT EXPENSE RATIO (“MER”)
2016 2015
% %
MER 1.36 1.32
Management expense ratio includes management fee, audit fee, tax agent's fee and other
administrative expenses which is calculated as follows:
MER = (A + B + C + D) x 100
E
A = Management fee
B = Audit fee
C = Tax agent's fee
D = Other expenses
E = Average net asset value of the Fund, calculated on a daily basis
The average net asset value of the Fund for the financial year is RM33,104,351 (2015:
RM34,085,545).
15 PORTFOLIO TURNOVER
2016 2015
The portfolio turnover for the financial year 0.33 0.34
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 financial year calculated on a daily basis
where:
total acquisition for the financial year = RM11,332,479 (2015: RM10,087,800)
total disposal for the financial year = RM10,229,554 (2015: RM11,203,450)
ANNUAL REPORT JUNE 2016
ARECA Steady fixedINCOME FUND
38
16 SEGMENT INFORMATION
The internal reporting provided to the CEO for the Fund’s assets, liabilities and performance
is prepared on a consistent basis with the measurement and recognition principles of MFRS.
The CEO is responsible for the performance of the Fund and considers the business to have a
single operating segment.
The reportable operating segments derive their income by seeking investments to achieve
targeted returns consummate with an acceptable level of risk with each portfolio. These
returns consist of interest and gains on the appreciation in the value of investments.
There were no changes in the reportable operating segment during the financial year.
17 AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS
The Financial Statements have been authorised for issue by the Manager on 23 August 2016.
Management Company
(740840-D)
Areca AUD Savings Fund
Annual ReportSept 2015
For the Year Ended 30 September 2015
ARECA CAPITAL SDN BHD (740840-D)
107, Blok B, Pusat Dagangan Phileo Damansara I
No.9, Jalan 16/11, Off Jalan Damansara
46350 Petaling Jaya
Selangor, Malaysia
T 603·7956 3111 F 603·7955 4111
E invest@arecacapital.com W www.arecacapital.com
Penang Branch368-2-02 Belissa Row, Jalan Burma
Georgetown, 10350 Pulau Pinang
T 604·210 2011 F 604·210 2013
Ipoh Branch11A, (First Floor) Persiaran Greentown 5
Greentown Business Centre, 30450 Ipoh, Perak
T 605·249 6697 / 6698 F 605·249 6696
Melaka Branch95-A, Jalan Melaka Raya 24
Taman Melaka Raya, 75000 Melaka
T 606·282 9111 F 606·283 9112
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