Cover AnnualReport Dividend Income-FAarecacapital.com/file/ADIF-Merged Annual Report.pdf · 2) Scicom (MSC) Bhd 7.19 2) Areca EquityTrust Fund 7.20 3) Malayan Banking Bhd 6.08 3)

Annual Report September 2018

For the Year Ended 30 September 2018

Areca Dividend Income Fund

A NN UA L REPORT SEPTEMBER 2018

ARECA DIVIDEND INCOME FUND

Contents

CORPORATE DIRECTORY 2

MANAGER’S REPORT

Fund Information, Performance & Review 3 Market Review & Outlook 9

TRUSTEE’S REPORT 11

STATEMENT BY THE MANAGER 11

AUDITED FINANCIAL STATEMENTS FOR

Areca Dividend Income Fund

Auditor’s Report

12

33

ANNUAL REPORT SEPTEMBER 2018

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

Wong Teck Meng (Executive) Edward Iskandar Toh Bin Abdullah (Executive)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Independent)

Dr. Junid Saham (Independent)

INVESTMENT COMMITTEE MEMBERS

Dato’ Seri Lee Kah Choon (Independent)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Independent)

Dr. Junid Saham (Independent)

TRUSTEE

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 Fax: 606-283 9112

Fax: 605-249 6696


MANAGER’S REPORT

3

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

Name of the Fund Areca Dividend Income Fund

Fund Category/

Type

Equity Fund / Income

Objective of the

Fund

Seek to provide regular income while providing long term capital appreciation

Performance

Benchmark

1-year Average Returns of the funds under “Equity Malaysia Income” Non-

Islamic category

Distribution

Policy of the Fund

The Fund will declare income distribution quarterly subject to the availability of

the realized income received. In the absence of any instructions from 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 (please

refer to Notes to

Financial Statement –

Note 18)

As at 30 September 2018

Size of Holding

(Units)

No. of

accounts %

No. of unit

held

(million)

%

Up to 5,000 - - - -

5,001 to 10,000 4 4.00 0.04 0.44

10,001 to 50,000 37 37.00 0.95 11.56

50,001 to 500,000 57 57.00 5.64 68.43

500,001 and above 2 2.00 1.61 19.57

Total* 100 100.00 8.24 100.00

Rebates & Soft

Commissions

The Manager retains soft commissions received from stockbrokers, provided

these are of demonstrable benefit to unitholders. The soft commissions may

take the form of goods and services such as, data and quotation services,

computer software incidental to the management of the Fund and investment

related publications. Cash rebates (if any) are directed to the account of the

Fund. During the period under review, the Manager had not received any soft

commissions.

Inception Date 15 February 2017

Initial Offer Price RM1.0000 per unit during the initial offer period of 21 days ended 07 March

2017

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

Value per unit

Financial Year

End

30 September


MANAGER’S REPORT

4

F U N D P E R F O R M A N C E

2018 2017

Total Net Asset Value (“NAV”) Total Net Asset Value (RM million) 8.38 6.45

Units in circulation (million units) 8.24 6.33

NAV per unit (RM) 1.0165 1.0193

HIGHEST & LOWEST NAV per unit Please refer to Note 1 for further information on NAV and pricing policy

Highest NAV per unit (RM) 1.0623 1.0275

Lowest NAV per unit (RM) 0.9836 0.9982

ASSET ALLOCATION % of NAV

Quoted Securities

Main Board

Consumer Products - 4.06

Finance 14.19 7.58

Industrial Products 4.90 15.71

Properties 4.47 3.10

Reits - 16.19

Technology - 0.48

Trading/Services 12.61 13.16

Collective Investment Scheme 7.20 11.26

Cash & cash equivalent including placements & repo 56.63 28.46

DISTRIBUTION Please refer to Note 2 for further information

Distribution dates 28 Dec 2017

29 Jun 2018 7 July 2017

Gross distribution (sen per unit) 3.50

3.00 1.00

Net distribution (sen per unit) 3.50

3.00 1.00

NAV before distribution (RM per unit) 1.0612 (27 Dec) 1.0311 (28 Jun)

1.0202 (4 Jul)

NAV after distribution (RM per unit) 1.0272 (28 Dec)

1.0038 (29 Jun) 1.0088 (7 Jul)

UNIT SPLITS

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

EXPENSE/ TURNOVER

Management expense ratio (MER) (%) 1.69 1.17

Please refer to Note 3 for further information

Portfolio turnover ratio (PTR) (times) 0.66 0.55 Please refer to Note 4 for further information

TOTAL RETURN Please refer to Note 5 for further information

Total Return (%) 6.21 2.94

- Capital Return (%) -0.27 1.93

- Income Return (%) 6.48 1.01


MANAGER’S REPORT

5

Annual Total Return (%) 6.21 4.77

Performance Benchmark: Average Returns of the funds under

“Equity Malaysia Income” Non-Islamic category (%) -0.88 2.79

Total Return since launch (%)

Performance Benchmark: Average Returns of the funds under

“Equity Malaysia Income” Non-Islamic category (%)

9.33

4.91 2.94

5.79

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 6.21 N/A N/A

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 3.50 sen per unit and 3.00 sen per unit were declared on 28 December 2017 and

29 June 2018 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 performance benchmark are sourced from Lipper.

Unit prices and distributions payable, if any, may go down as well as up. Past performance of the

Fund is not an indication of its future performance.


MANAGER’S REPORT

6

F U N D R E V I E W

During the year under review, the Fund outperformed its benchmark (1-year average returns of all the

funds under “Equity Malaysia Income” Non-Islamic category of the Malaysia Lipper Fund table, “peers

benchmarking”) with a gain of +6.21% compared with the benchmark’s -0.88%. The outperformance of

the Fund was mainly due to asset allocation and stock selection. As the Fund was launched in Feb 2017,

there is no relative and meaningful comparison for the same period under review for previous year (i.e.

12 months ended Sep 2017). Since launch in Feb 2017, the Fund recorded a total return of +9.33%

compared with the benchmark return of +4.91%.

Thus far within this relatively short period of less than 2 years, the Fund has achieved its objective to

provide regular income while providing long term capital appreciation. Investors shall consider longer

period to assess the performance of the Fund.

During the year, the Fund declared twice interim distributions of 3.5 Sen and 3.0 Sen on 28/12/2017

and 29/6/2018 respectively.

Investment Policy and Strategy

We would employ similar strategy going forward in selecting dividend and potential dividend paying

stocks to ride on the prospects of the domestic bourse. The Fund may gradually increase its equity

exposure in 4Q2018 for better market outlook in 2019. The Fund will increase its exposure to dividend

stocks which benefitted from the recovery in the domestic economy, stronger external demand and

higher private spending. The Fund will also invest in growth or recovery stocks which have the potential

to adopt a strong dividend payout policy.

NAV per unit as at 30 September 2018 RM1.0165

Movement of asset allocation as a percentage of Net Asset Value

for the financial year ended 30 September 2018

76.40%

51.53%38.69% 43.37%

0%

20%

40%

60%

80%

100%

31-Dec-17 31-Mar-18 30-Jun-18 30-Sep-18

Equities & equity-related

securities

Cash and cash equivalents

* as a % of net asset value


MANAGER’S REPORT

7

F U N D R E V I E W

Asset Allocation / Portfolio Composition 30.09.2018 30.09.2017

Equities and equity

-related securities 36.17% 60.28%

Collective investment scheme 7.20% 11.26%

Cash & cash equivalents 56.63% 28.46%

36.17%

56.63%

7.20%


MANAGER’S REPORT

8

F U N D R E V I E W

Top 5 Holdings by Issuers:

As at 31 Dec 2017 (%) As at 31 Mar 2018 (%)

1) Areca EquityTrust Fund 8.51 1) Areca EquityTrust Fund 7.62

2) Malayan Banking Bhd 7.24 2) Scicom (MSC) Bhd 7.41

3) LBS Bina Group Bhd 6.96 3) Malayan Banking Bhd 7.27

4) Scicom (MSC) Bhd 6.64 4) Cahya Mata Sarawak Bhd 7.25

5) Oldtown Berhad 6.54 5) LBS Bina Group Berhad 5.33

As at 30 June 2018 (%) As at 30 September 2018 (%)

1) Areca EquityTrust Fund 7.22 1) Malayan Banking Bhd 8.45

2) Scicom (MSC) Bhd 7.19 2) Areca EquityTrust Fund 7.20

3) Malayan Banking Bhd 6.08 3) Scicom (MSC) Bhd 6.18

4) LBS Bina Group Bhd 5.22 4) CIMB Group Holdings Berhad 5.74

5) CIMB Group Holdings Berhad 4.22 5) LBS Bina Group Bhd 4.47

Performance of Areca Dividend Income Fund

for the financial period since inception to 30 September 2018

Average returns of the funds under

“Equity Malaysia Income” Non-Islamic

category

Areca Dividend Income


MANAGER’S REPORT

9

MARKET REVIEW & OUTLOOK

The year ended September 2018 can be largely characterized by the upswing in the US economy with

the last four quarters’ quarterly year-on-year GDP growing 2.5%, 2.6%, 2.8% and Q3 2018 at 3.0%

respectively, forming a clear upward momentum. Operating at practically full employment, labour

data showed unemployment is at its lowest level in almost 50 years this September at 3.7%. Inflation

has also been on an uptrend with core inflation breaching 2% in the last 6 months. Significantly, 12

months moving average core inflation stands at 2.03% as at end September. Credit has to be given

for the successful passing of the tax reform bill towards the end of 2017 where top bracket corporate

tax rates were reduced from 35% to 21% to help energize the economy further. In this period,

Federal Fund’s rate was raised 4 times from 1.25% to 2.25% with the latest hike at the end of

September. The Federal Reserve also began to shrink their balance sheet in October 2017.

This period in review has been fraught with distractions and controversies. Apart from the ongoing

investigation into ‘Russian collusion’ with Trumps campaign, there were the multiple sackings of

government personnel and ongoing battle with the media. Geopolitics were mixed. Removing

themselves from Syria conflict, Trump seem to then add fuel to fire by relocating the US embassy in

Israel to Jerusalem from Tel-Aviv, a decision passed by congress several Presidents ago but never

carried out for obvious reasons. Relations with North Korea warmed- up culminating with a summit in

Singapore. He pulled out of the Iran nuclear deal and will re-impose economic sanctions. During the

course of the year, he ruffled the feathers of friends and foe alike by insulting NATO and imposed

wide ranging tariffs that affect Canada, Mexico, Europe, Japan and China.

The ongoing trade tariffs war began in January with introduction of tax on solar panels and washing

machines. Over the months, it gained momentum and tariffs were attached to steel and aluminum

imports. Then in targeting China directly, US$34 billion of Chinese goods were taxed beginning July.

He recently imposed a 10% tax on US$200 billion worth of China imports which will rise to 25% by

year end.

China has retaliated in kind. Meanwhile they remain focused on internal issues by devaluing their

currency, strengthening financial market and reducing borrowing cost. They recorded 6.7% 2Q GDP

and 6.5% for 3Q; a declining trend that have raised some concerns. In June, they surprised market

with reduction of Reserve Ratio Requirement, following a similar move earlier in the year, freeing up

liquidity, directing banks to repay high cost medium term facility with PBOC and to release loans to

SMEs.

As for Malaysia, the 14th General Election was carried out with unprecedented and unexpected results

leading to a change in government. There is a general mood of cautious optimism with a sense of

renewed hope and reborn ideals in this ‘new’ Malaysia. However, the current exercise of ‘kitchen

sinking’ especially from the financial standings of the nation does not sit well with foreign investors

and international rating agencies. In zero rating GST and replacing it with Sales and Services tax, a

massive shortfall in revenue is to be expected. The plan is to meet this with a combination of

deferring high cost projects and increased contribution from Petronas. In light of their perceived

uncertainties, foreign participants have withdrawn RM19.3 billion from the fixed income markets and

RM6 billion from the stock market (up till June) this year so far. Rating agencies have been patient

but alert to the need for concrete policies from this new government as they continue to unearth

further mismanagements by previous administration.

Economically, 3Q GDP 2018 came in below expectation at 4.4% following 5.9%, 5.4% and 4.5% in

the preceding quarters respectively. Foreign Reserves stands at USD103.0 billion (or RM427.0 billion)

at the end of September against last year’s USD101.2 billion (or RM427.7 bil). Inflation hit a 3½ year

low in August at 0.2% on ‘zero’ rating GST, easing from this reporting year’s high of 3.7% in October

2017.

EQUITY MARKET REVIEW

During the year, the Manager focused on companies which provided goods and services that saw

relatively resilient demand with potentially decent rate of dividend yield, alongside to consider the

valuation of the stocks. The Fund was also invested in growth or recovery stocks which have the


MANAGER’S REPORT

10

potential to adopt a strong dividend payout policy. The Fund had 7.2% exposure in CIS which

provides good track records of growth and income distribution.

The Fund increased equities exposure from 70% in October 2017 to about 76% in Jan 2018 and

focused mainly on dividend paying stocks. However, after Jan 2018 the exposure was cut to as low as

about 50% in March as the market conditions turned cautious due to uncertainty of the 14th

Malaysian General Election (GE14). Bank Negara Malaysia (BNM) raised the Overnight Policy Rate

(OPR) by 25 basis points to 3.25% in Jan 2018 and commented that the hike was needed to prevent

a build-up of risks that could arise from a prolonged low interest rate environment. The Fund reduced

its exposure to composition of equity by reducing / cutting holdings to stocks that were relatively not

resilient to the market conditions mentioned above, such as interest sensitive stocks and construction

/ industrial sectors.

Moving into 2Q2018, equity market became more volatile triggered by fears of a trade war between

US and China. Equity investors started to reallocate stocks and sectors post GE14 after new

government took place with new policies announced from time to time. Meanwhile, the US Federal

Reserve raised its benchmark rates 4 times since Dec 2017 to Sep 2018, each by 25 bps, and

maintained its forecast of a few more Dec 2018 and in year 2019.

The Fund maintained its exposure circa 40~50% in 3Q20108 in view of the uncertainties of new

Government policies, US rates hike as well as US-China trade war. This position was a temporary

defensive strategy whereby it will be normalised upon better market conditions.

EQUITY MARKET OUTLOOK

We are cautious on equity market in the near term in view of various external factors that could

contribute to market volatility. The factors include rising interest rates, fund outflow from Emerging

Markets, and US-China trade war. The recent US-China trade war has increased the risk premium for

equities. We believe that the US and China will have to resolve their differences but the timing of a

resolution remains difficult to predict. In the meantime, the uncertainty and noise would contribute to

gyrations in financial markets. We view that the US economy may continue to grow for a while before

the market feels that it no longer can tolerant a higher interest rates. US rate hike may peak then.

Back home, we expect a well balanced budget between growth and deficits from the new government.

The new government’s push for reforms including greater transparency, reducing corruption and

wastage, and strengthening government institutions is expected to be positive for Malaysia in the

medium to long term. We expect the reformed theme may attract some attention from foreign funds.



11

T R U S T E E ’ S R E P O R T

For The Financial Year Ended 30 September 2018

To the Unitholders of Areca Dividend Income Fund

We have acted as Trustee for Areca Dividend Income Fund (“the Fund”) for the financial year ended 30 September 2018. 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 Guidelines on Unit Trust Funds;

2. Valuation and pricing of the Fund are carried out in accordance with the deeds and any

regulatory requirement; and

3. Creation and cancellation of units are carried out in accordance with the deeds and any

regulatory requirement.

A total income distributions of 6.50 sen per unit (gross) was declared to the unitholders of the Fund

for the financial year under review.

We are of the view that the distributions are consistent with the investment objective and distribution

policy of the Fund.

For Maybank Trustees Berhad (Company No: 5004-P)

BERNICE K M LAU

Head, Operations

Kuala Lumpur, Malaysia

28 November 2018

STATEMENT BY THE MANAGER

To the Unitholders of Areca Dividend Income Fund

We, WONG TECK MENG and EDWARD ISKANDAR TOH BIN ABDULLAH, two of the Directors of

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

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

Standards and International Financial Reporting Standards so as to give a true and fair view of the

financial position of the Fund as of 30 September, 2018 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

EDWARD ISKANDAR TOH BIN ABDULLAH

CEO/ EXECUTIVE DIRECTOR

Kuala Lumpur

28 November 2018

CIO/EXECUTIVE DIRECTOR

Kuala Lumpur

28 November 2018



12

AUDITED STATEMENT OF FINANCIAL POSITION

As At 30 September 2018

2018 2017

Note RM RM

Assets

Investments

Quoted securities 5 (a) 3,030,914 3,888,203

Collective investment scheme 5 (b) 603,479 726,614

Total Investments 3,634,393 4,614,817

Other Assets

Other receivables 7 40,325 16,854

Short-term deposits 8 4,712,147 1,876,146 Cash at bank 16,342 5,515

Total Other Assets 4,768,814 1,898,515

Total Assets 8,403,207 6,513,332

Unitholders’Fund and Liabilities

Liabilities

Amount due to Manager 6 - 40,000 Accruals 9 24,266 22,481

Total Liabilities 24,266 62,481

Unitholders’ Fund

Unitholders’ capital 10 8,305,843 6,335,945

Retained earnings 11 73,098 114,906

Net Asset Value Attributable to Unitholders 8,378,941 6,450,851

Total Unitholders’ Fund and Liabilities 8,403,207 6,513,332

Number of Units in Circulation 10 8,242,778 6,328,960

Net Asset Value Per Unit (Ex-Distribution) 12 1.0165 1.0193

The accompanying Notes form an integral part of the Financial Statements.



13

AUDITED STATEMENT OF COMPREHENSIVE INCOME

For The Financial Year Ended to 30 September 2018

01.10.2017

to

30.09.2018

15.02.2017

to

30.09.2017

Note RM RM

Investment Income

Gross dividend income

213,731 76,346

Interest income 102,023 60,777

Other income 50 -

Net gain on investments:

Investment at fair value through profit or loss

(“FVTPL”) 5 269,074 133,011

Total Investment Income 584,878 270,134

Expenditure

Management fee 13 104,079 48,902

Trustee’s fee 14 3,796 1,780

Audit Fee 9,000 9,000

Tax agent’s fee 3,650 4,100

Transaction cost 34,065 20,689

Other expenses 7,700 4,953

Total Expenditure 162,290 89,424

Profit Before Tax 422,588 180,710

Income Tax Expense 15 (2,250) (480)

Profit After Tax, Representing Total Comprehensive

Income For The Financial Year/ Period 420,338 180,230

Total comprehensive income for the year/period is

made up as the following:

Realised gain 523,911 103,889

Unrealised (loss)/ gain (103,573) 76,341

420,338 180,230

Distribution for the financial year/period:

Net distribution 16 462,146 65,324

Gross distribution per unit (sen) 16 6.50 1.00

Net distribution per unit (sen) 16 6.50 1.00




14

AUDITED STATEMENT OF CHANGES IN NET ASSET VALUE

For The Financial Year Ended to 30 September, 2018

Unitholders’

capital

Retained

earnings

Unitholders’

capital

RM RM RM

As at 15 February, 2017

Amounts received from units created 7,028,898 7,028,898

Reinvestment of units 55,558 55,558 Amounts paid/ payable from units

cancelled (748,511)

(748,511)

Total comprehensive income for the

financial period 180,230

180,230

Distribution to unitholders for the

financial period (Note 16) (65,324)

(65,324)

As at 30 September 2017 6,335,945 114,906 6,450,851

As at 1 October, 2017 6,335,945 114,906 6,450,851Amounts received from units created 1,927,670 1,927,670

Reinvestment of units 408,206 408,206

Amounts paid from units cancelled (365,978) (365,978)

Total comprehensive income for the

financial year 420,338

420,338

Distribution to unitholders for the

financial year (Note 16) (462,146)

(462,146)

As at 30 September 2018 8,305,843 73,098 8,378,941




15

AUDITED STATEMENT OF CASH FLOWS For The Financial Year Ended to 30 September 2018

01.10.2017

to

30.09.2018

15.02.2017

to

30.09.2017

RM RM

Cash Flows From/(Used In) Operating Activities

Proceeds from disposal of investments 5,644,681 967,670

Gross dividend income received 191,847 60,740

Interest received 100,436 59,529

Other Income 50 -

Purchase of investments (4,345,184) (5,449,476)

Tax paid (2,250) (480)

Management fee paid (101,904) (41,562)

Trustee’s fee paid (3,728) (1,506)

Transaction cost paid (34,065) (20,689)

Payment for other fees and expenses (20,807) (3,186)

Reinvestment of dividend received (50,000) -

Net Cash From/ (Used In) Operating Activities 1,379,076 (4,428,960)

Cash Flows From Financing Activities

Cash proceeds from units created 1,927,670 7,028,898

Payment for cancellation of units (405,978) (708,511)

Distribution to unitholders (53,940) (9,766)

Net Cash From Financing Activities 1,467,752 6,310,621

Net Increase In Cash And Cash Equivalents 2,846,828 1,881,661

Cash And Cash Equivalents At Beginning Of Year/ Period 1,881,661 -

Cash And Cash Equivalents At End of Year/ Period 4,728,489 1,881,661

Cash and cash equivalents consist of the following amounts:

Short-term deposits 4,712,147 1,876,146

Cash at bank 16,342 5,515

4,728,489 1,881,661




16

NOTES TO THE FINANCIAL STATEMENTS

1 GENERAL INFORMATION

Areca Dividend Income Fund (“Dividend Income” or “the Fund”) was established pursuant to the

Trust Deed dated 20 January, 2017 between Areca Capital Sdn Bhd as the Manager, Maybank

Trustees Berhad as the Trustee and all the registered unit holders of the Fund.

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

Deed, which include stocks and shares of companies quoted on any recognized Stock Exchange(s)

in Malaysia, unquoted securities and deposits with financial institutions. The Fund commenced

operations on 15 February, 2017 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 investors with regular income while providing long term

capital appreciation by investing in equities and equity related securities.

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 authorized for issue by the Board of Directors of the Manager in

accordance with a resolution on directors on 28 November 2018.

2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

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

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

Adoption of New and Revised Malaysian Financial Reporting Standards

The Fund has adopted all applicable new MFRSs, Amendment to Standards and Issue Committee

Interpretation which have become effective during the financial year ended 30 September 2018.

The adoption of the new pronouncement did not result in any material impact to the financial

statements.

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

Yet Effective

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

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

early adopted by the Fund are as listed below:

MFRS 9 Financial Instruments2

MFRS 15 Revenue from Contracts with Customers (and the related Clarifications)1

MFRS 16 Leases4

MFRS 17 Insurance Contracts6

Amendments to MFRS 2

Classification and Measurement of Share-based Payment Transactions1

Amendments to MFRS 4 Applying MFRS 9 Financial Instruments with MFRS 4 Insurance

Contracts3

Amendments to MFRS 9 Prepayment Feature with Negative Compensation4

Amendments to MFRS 10

and MFRS 128

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture7

Amendments to MFRS 119 Plan Amendment, Curtailment or Settlement4



17

Amendments to MFRS 128 Long-term Interests in Associates and Joint Ventures4

Amendments to MFRS 140 Transfers of Investment Property1

IC Interpretation 22 Foreign Currency Transactions and Advance Consideration1

IC Interpretation 23 Uncertainty over Income Tax Payments4

Amendments to MFRSs Annual Improvements to MFRSs 2014 - 2016 Cycle1

Amendments to MFRSs Annual Improvements to MFRSs 2015 - 2017 Cycle4

Amendments to MFRSs Amendments to References to the Conceptual Framework in MFRS Standards5

1 Effective for annual periods beginning on or after 1 January 2018. 2 Effective for annual periods beginning on or after 1 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 1 January 2018, as stated in paragraph

7.1.2 of MFRS 9. 3 Overlay approach to be applied when MFRS 9 is first applied. Deferred approach effective

for annual periods beginning on or after 1 January 2018 and only available for three years

after that date. 4 Effective for annual periods beginning on or after 1 January 2019. 5 Effective for annual periods beginning on or after 1 January 2020. 6 Effective for annual periods beginning on or after 1 January 2021. 7 Effective date deferred to a date to be announced by Malaysian Accounting Standards

Board.

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

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

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

to MFRSs will have no material impact on the financial statements of the Fund in the year of initial

application except for MFRS 9 Financial Instruments.

MFRS 9 Financial Instruments (“MFRS 9”)

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 contractual cash flow characteristics of the

financial asset. Investment in equity instruments is 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 OCI rather than the income

statement, unless this creates an accounting mismatch.

MFRS 9 introduces an expected credit loss model (ECL) on impairment that replaces the incurred

loss impairment model used in MFRS 139. The ECL model is forward-looking and eliminates the

need for a trigger event to have occurred before credit losses are recognised.

The Fund has reviewed its financial assets and liabilities and has assessed the following impacts

from the adoption of the new standard as below:



18

There will be no impact on the Fund's accounting for financial assets as the Fund's equity

investments currently measured at fair value through profit or loss will continue to be measured

on the same basis under MFRS 9.

There will be no impact on the Fund's accounting for financial liabilities as the new requirements

only affect the accounting for financial liabilities that are designed at fair value through profit or

loss and the Fund does not have any such liabilities.

The new impairment model requires the recognition of impairment provisions based on ECL rather

than only incurred credit losses as is the case under MFRS 139. It applies to financial assets

classified at amortised cost. Based on the assessment undertaken to date, the Fund does not

expect any loss allowance to be recognised upon adoption of MFRS 9.

The Fund will adopt MFRS 9 on its effective date. Adoption of MFRS 9 is not expected to have a

significant impact on the Fund’s financial statements.

3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND JUDGEMENTS

SIGNIFICANT ACCOUNTING POLICIES

Income Recognition

Dividend income is recognised based on the ex-dividend date, when the right to receive the

dividend has been established.

Interest income from short-term deposits is recognised on a time proportion basis that reflects

the effective yield on the asset.

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

carrying value.

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

year.

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

Transaction Costs

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

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

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

expenses.

Statement of Cash Flows

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

Cash and 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.

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 year in which it is approved by the Trustee.



19

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 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 instruments. Financial assets

and liabilities include short-term deposits, cash at bank, quoted securities, investments in

collective investment scheme, other assets and other liabilities. 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 year. 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 year, to the net carrying amount on initial recognition.

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 assets are 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.



20

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 a 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: Recognitions 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/(loss) on investments’.

Recognition and measurement

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

price quoted on Bursa Malaysia as at the reporting date.

Investments 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 reporting date.

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

unrealised gains or losses from investments in profit or loss for the year.

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.

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 year. 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 the

Fund’s past experience of collecting payments, an increase in the number of delayed payments in

the portfolio past the average credit year, 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.



21

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.

On derecognition of a financial asset in its entirety, the difference between the carrying amount

and the sum of consideration received and any cumulative gain or loss that had been recognised

in other comprehensive income, if any, is recognised in profit or loss.

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 year. 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 year, 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.

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

(i) Critical judgements in applying accounting policies

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

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

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

statements.

(ii) Key sources of estimation uncertainty

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

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

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

liabilities within the next financial year.



22

5 INVESTMENTS

Investments designated as FVTPL is as follows:

2018 2017

At aggregate cost RM RM

Quoted securities 3,070,137 3,838,476

Collective investment scheme 591,488 700,000

3,661,625 4,538,476

At fair value



3,634,393 4,614,817

Net gain on investments at FVTPL comprised:

Realised gain on disposal 372,647 56,760

Net unrealised (loss)/ gain on changes in fair values (Note 11 (b)) (103,573) 76,341

269,074

133,011

(a) Details of quoted securities are as follows:

2018

Shares quoted in

Malaysia

No. of

Shares

Market

Price

Aggregate

Cost

Carrying

Value

Fair

Value

Fair

Value as a % of

Net

Asset

Value

Units RM RM RM RM %

Main Market

Finance

CIMB Group Holdings

Berhad 80,000 6.010 500,228 500,228 480,800 5.74

Malayan Banking Bhd 72,359 9.790 642,791 678,997 708,394 8.45

Total 1,143,019 1,179,225 1,189,194 14.19

Industrial Products

V.S Industry Bhd 50,000 1.730 84,035 84,035 86,500 1.03

Supermax Corporation

Bhd 100,000 3.240

331,190 331,190 324,000 3.87

Total 415,225 415,225 410,500 4.90

Properties

LBS Bina Group Bhd 462,000 0.810 436,760 425,000 374,220 4.47

Total 436,760 425,000 374,220 4.47

Trading/Services

Scicom (MSC) Bhd 280,000 1.850 502,433 502,433 518,000 6.18

Samchem Holdings

Berhad 100,000 0.950 96,800 96,800 95,000 1.13

Berjaya Food Berhad 200,000 1.430 288,500 296,000 286,000 3.41

Kumpulan Fima Bhd 100,000 1.580 187,400 169,000 158,000 1.89

Total 1,075,133 1,064,233 1,057,000 12.61

Total quoted securities 3,070,137 3,083,683 3,030,914 36.17

Unrealised loss on

quoted securities (39,223)



23

2017

Shares quoted in Malaysia

No. of Shares

Market Price

Aggregate Cost

Carrying Value

Fair Value

Fair

Value as

a % of

Net

Asset Value

Units RM RM RM RM %

ACE Market

Industrial Products

Eversafe Rubber Berhad 450,000 0.395 174,000 174,000 177,750 2.76

Total 174,000 174,000 177,750 2.76

Main Market

Consumer Prodcuts

Johore Tin Berhad 200,000 1.310 327,081 327,081 262,000 4.06

Total 327,081 327,081 262,000 4.06

Finance

Malayan Banking Berhad 51,333 9.530 452,997 452,997 489,203 7.58

Total 452,997 452,997 489,203 7.58

Industrial Products

Lotte Chemical Titan

Holding Berhad 80,000 5.260 431,400 431,400 420,800 6.52

Press Metal Aluminium

Holdings Berhad 110,000 3.770 289,500 289,500 414,700 6.43

Total 720,900 720,900 835,500 12.95

Properties

LBS Bina Group Berhad 100,000 1.790 190,760 190,760 179,000 2.77

LBS Bina Group Berhad-

Redeemable

Convertible Preference

Shares 20,000 1.050 22,000 22,000 21,000 0.33

Total 212,760 212,760 200,000 3.10

REITS

Sunway Real Estate

Investment Trust 200,000 1.720 346,000 346,000 344,000 5.33

Pavillion Real Estate


IGB Real Estate


Total 1,034,000 1,034,000 1,044,000 16.19

Technology

Globetronics Technology

Berhad 5,000 6.150 30,300 30,300 30,750 0.48

Total 30,300 30,300 30,750 0.48

Trading/ Services

Berjaya Food Berhad 200,000 1.480 288,500 288,500 296,000 4.59

Oldtown Berhad 150,000 2.560 410,538 410,538 384,000 5.95

Kumpulan Fima Berhad 100,000 1.690 187,400 187,400 169,000 2.62

Total 886,438 886,438 849,000 13.16

Total quoted securities 3,838,476 3,838,476 3,888,203 60.28

Unrealised gain on

quoted securities 49,727



24

(b) Details of collective investment scheme are as follows:

2018

Collective Investment

Scheme

Quantity

Units

Valuation

Price

Aggregate

Cost

Carrying

Value

Fair

Value

Fair

Value as

a % of

Net Asset

Value

RM RM RM RM %

Areca EquityTrust Fund 1,093,458 0.5519 591,488 606,658 603,479 7.20

Unrealised gain on collective

investment scheme 11,991

2017

Collective Investment

Scheme

Quantity

Units

Valuation

Price

Aggregate

Cost

Carrying

Value

Fair

Value

Fair

Value as a % of

Net

Asset

Value

RM RM RM RM % Areca EquityTrust Fund 1,320,396 0.5503 700,000 700,000 726,614 11.26

Unrealised gain on collective

investment scheme 26,614

6 AMOUNT DUE TO MANAGER

2018 2017

RM RM

Amount due to Manager - 40,000

Amount due to Manager consists of amounts payable to the Manager in respect of cancellation of

units. Amount payable for units cancelled is paid within 10 days of the transaction dates.

7 OTHER RECEIVABLES 2018 2017

RM RM

Dividend receivables 37,490 15,606

Interest receivable 2,835 1,248

40,325 16,854

8 SHORT-TERM DEPOSITS

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

The effective average interest rate for short-term deposits is 3.35% (2017: 3.12%) per annum

and the average maturity period is 19 days (2017: 9 days).

9 ACCRUALS

2018 2017

RM RM

Accrual consist of:

Management fee 9,514 7,340

Trustee’s fee 342 274

Audit fee 9,000 9,000

Tax agent’s fee 3,650 4,100

Others 1,760 1,767

24,266 22,481



25

10 UNITHOLDERS’ CAPITAL

------- 2018 -------- ------- 2017 -------

No. of units RM No. of units RM

At beginning of year/period 6,328,960 6,335,945 - -

Created during the

year/period 1,869,777 1,927,670 7,003,769 7,028,898

Reinvestment of units 395,947 408,206 55,359 55,558

Cancelled during the

year/period (351,906) (365,978) (730,168) (748,511)

At end of the financial

year/period 8,242,778 8,305,843 6,328,960 6,335,945

11 RETAINED EARNINGS

2018 2017

RM RM

At beginning of financial year/period 114,906 -

Profit after tax for the year/period 420,338 180,230

Distribution for the year/period (462,146) (65,324)

At end of financial year/period 73,098 114,906

(a) Realised retained earnings

2018 2017

RM RM

At beginning of financial year/peiod 38,565 -

Profit after tax for the year/period 523,911 103,889

Distribution for the year/period (462,146) (65,324)

At end of financial year/period 100,330 38,565

2018 2017

(b) Unrealised retained earnings RM RM

At beginning of financial year/ period 76,341 -

(Loss)/profit after tax for the year/period (103,573) 76,341

At end of financial year/period (27,232) 76,341

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 at 30 September 2018 of RM8,378,941 (2017: RM6,450,851) by units in issue as

at 30 September 2018 of 8,242,778 units (2017: 6,328,960 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 1.50% of the net asset value of the Fund for the net asset value of the

Fund for the first year and 1.90% of the net asset value of the Fund for the subsequent years.

The management fee provided for in the financial statements amounted to 1.37% (2017:13.4%)

per annum for the financial period. The management fee is subject to 6% goods and services tax

(“GST”) effective 1 April 2015 to 31 May 2018. The management fee is not subject to any taxes

from 1 June 2018 until 30 September 2018.

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 0.05% of the net asset value of the Fund. The Trustee’s fee provided for in

the financial statements amounted to 0.05% (2017: 0.05%) per annum for the financial period.

The Trustee’s fee is subject to 6% GST effective 1 April 2015 to 31 May 2018. The trustee’s fee

is not subject to any taxes from 1 June 2018 until 30 September 2018.



26

15 INCOME TAX EXPENSES

01.10.2017

to

30.09.2018

15.02.2017

to

30.09.2017

RM RM

current tax 2,250 480

The tax charge for the financial year ended 30 September 2018 and 30 September 2017 were

in relation to the gross dividend income earned after deducting tax allowable expenses. In

accordance with Paragraph 35 and 35A, Schedule 6 of the Income Tax Act, 1967, interest

income earned by the Fund is exempted from tax.

A reconciliation of income tax expense applicable to profit before tax at the applicable statutory

income tax rate to income tax expense at the effective income tax rate of the Fund is as follows:

01.10.2017 to

30.09.2018

15.02.2017 to

30.09.2017

RM RM

Profit before tax 422,588 180,710

Tax at statutory tax rate 101,421 43,370

Tax effects of:

Non-deductible expenses 34,962 20,790

Non-taxable income (134,133) (63,680)

Tax expenses for financial year/ period 2,250 480

The Fund’s income tax rate is at 24% for the period of assessment 2018 and 2017.

16 NET DISTRIBUTION

01.10.2017

to

30.09.2018

15.02.2017

to

30.09.2018

RM RM

Distribution to unitholders is from the following sources:

Gross dividend income 126,241 60,740

Interest income 99,189 59,529

Realised gain on sale of investments 372,647 34,959

Previous year’s realised gains 28,609 -

626,686 155,228

Less: Expenses (164,540) (89,904)

Net distribution 462,146 65,324

Analysed by:

Cash distribution 53,940 9,766

Reinvestment of units 408,206 55,558

462,146 65,324

The distributions above have been made as follows:-

Distribution on 29th June, 2018

Gross distribution per unit (sen) 3.00 -

Net distribution per unit (sen) 3.00 -

Distribution on 28th Dec, 2017

Gross distribution per unit (sen) 3.50 -

Net distribution per unit (sen) 3.50 -



27

01.10.2017

to

30.09.2018

15.02.2017

to

30.09.2018

RM RM

Distribution on 7th July, 2017

Gross distribution per unit (sen) - 1.00

Net distribution per unit (sen) - 1.00

Total Distribution

Gross distribution per unit (sen) 6.50 1.00

Net distribution per unit (sen) 6.50 1.00

The distribution above has been made before taking into account unrealised loss for the financial

year of RM103,573 (2017: unrealised gain RM76,341) 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 1.69% (2017: 1.17%) for the financial year ended 30

September 2018. 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 RM7,590,920 (2017:

RM5,861,675).

Portfolio Turnover Ratio (PTR)

The portfolio turnover ratio for the Fund is 0.66 times (2017: 0.55 times) for the financial year

ended 30 September 2018. The portfolio turnover ratio is derived from the following calculation:

(Total acquisition for the financial year + total disposal for financial the 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 = RM4,345,184(2017: RM5,449,476)

total disposal for the financial year = RM5,644,681 (2017: RM967,670)

18 UNITS HELD BY MANAGER

As at end of the financial year, the total number and value of units held by the Manager is as

follows:

2018 No. of units RM

The Manager - -

2017 No. of units RM

The Manager 1,352 1,378

19 TRADE WITH BROKERS/DEALERS

Details of transactions with brokers/dealers are as follows:



28

2018

Brokers/Dealers Value of

Trades

% of

Total

Trades Fees

% of

Total

Brokerage

Fee

RM % RM %

RHB Bank Berhad 9,038,000 29.04 16,965 49.80

CIMB Bank Berhad 4,810,000 15.46 - -

RHB Investment Bank Berhad 4,546,115 14.61 - -

KAF Investment Bank Berhad 3,790,000 12.18 - -

Hong Leong Investment Bank

Berhad

3,491,000

11.66

-

-

Affin Hwang Investment Bank

Berhad

2,872,822

9.23

12,154

35.68

Maybank Investment Bank

Berhad

1,381,210

4.44

4,946

14.52

Areca Capital Sdn Bhd 1,189,718 3.82 - -

31,118,865 100.00 34,065 100.00

2017

Brokers/Dealers

Value of

Trades

% of

Total

Trades Fees

% of

Total

Brokerage

Fee

RM % RM %

RHB Bank Berhad 8,590,000 35.83 - -

KAF Investment Bank Berhad 3,886,000 16.21 - -

RHB Investment Bank Berhad 3,766,811 15.71 8,949 51.82

CIMB Bank Berhad 2,470,000 10.30 - -

Hong Leong Investment Bank

Berhad

2,070,000

8.63

-

-

Maybank Investment Bank

Berhad

1,804,643

7.53

7,249

41.98

United Overseas Bank 1,150,000 4.80 - -

Affin Hwang Investment Bank

Berhad

237,945

0.99

1,071

6.20

23,975,399 100.00 17,269 100.00

20 RISK MANAGEMENT POLICIES

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund seeks to provide medium to long term capital growth by investing principally in

equities and equity related securities. In order to meet its stated investment objectives, the

Fund utilises risk management for both defensive and proactive purposes. Rigorous analysis of

sources of risk in the portfolio is carried out and the following policies are implemented to

provide effective ways to reduce future risk and enhance future returns within the Fund’s

mandate.

The key risks faced by the Fund are credit risk, liquidity risk, market risk (including price risk

and interest rate risk) primarily on its investments.



29

Categories of Financial Instruments 2018 2017

RM RM

Financial assets

Carried at FVTPL:



Loans and receivables:

Other receivables 40,325 16,854

Short-term deposits 4,712,147 1,876,146

Cash at bank 16,342 5,515

Financial liabilities

Other financial liabilities:

Amount due to Manager - 40,000

Accruals 24,266 22,481

Credit risk management

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

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

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

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

realisation of investments.

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

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

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

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

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

assets were past due or impaired as at 30 September 2018.

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

2018

Short-term

deposits

Quoted

securities

Collective

investment

scheme

Industry RM RM RM

Finance, insurance and business

services 4,712,147

1,189,194

603,479

Industrial Products - 410,500 -

Properties - 374,220 -

Trading/Services - 1,057,000 -

4,712,147 3,030,914 603,479

2017

Short-term

deposits

Quoted

securities

Collective investment

scheme

Industry RM RM RM

Consumer products - 262,000 -

Finance, insurance and business

services 1,876,146

489,203

726,614

Industrial Products - 1,013,250 -

Properties - 200,000 - REITs - 1,044,000 -

Technology - 30,750 -

Trading/Services - 849,000 -

1,876,146 3,888,203 726,614



30

Liquidity risk management

This 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 in 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:

Up to

1 month

1 - 3

months

3 months

to 1 year

Total

2018 RM RM RM RM

Financial Liability

Non-interest bearing

Accruals 9,856 14,410 - 24,266

Total 9,856 14,410 - 24,266

Up to

1 month

1 - 3

months

3 months

to 1 year

Total

2017 RM RM RM RM

Financial Liabilities

Non-interest bearing

Amount due to Manager 40,000 - - 40,000

Accruals 8,071 14,410 - 22,481

Total 48,071 14,410 - 62,481

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 the economic outlook and affects broad market

confidence. This risk cannot be removed from an investment portfolio, which is solely invested

within that particular market, by diversification.

Therefore, as the Fund presently invests only in stocks and shares quoted on Stock Exchange in

Malaysia, the performance of the Fund might go up or down in accordance with the prevailing

market risk.

Price risk management

Price risk is the risk of unfavourable changes in the fair value of quoted securities 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 quoted securities.

Price risk sensitivity

The Manager's best estimate of the effect on the income for the year due to a reasonably

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

Changes in price

Effect on profit or loss

Increase/(Decrease) % RM

2018

Investments +5/-5% 181,720/(181,720)

2017 Investments +5/-5% 230,741/(230,741)

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



31

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 year.

The Fund’s investments in deposits with licensed financial institutions are short term in nature.

Therefore, exposure to interest rate fluctuations is minimal.

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.

For quoted securities in general, fair values have been estimated by reference to last done

market price quoted on Bursa Malaysia at end of the reporting date.

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).

• 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).



32

Level 1 Level 2 Level 3 Total

2018 RM RM RM RM

Financial assets at FVTPL Quoted securities 3,030,914 - 3,030,914


scheme 603,479 - 603,479

2017

Financial assets at FVTPL

Quoted securities 3,888,203 - 3,888,203


scheme 726,614 - 726,614

There were no transfer between Levels 1 and 2 during the financial year.

22 COMPARATIVES

The comparative figures of the Fund covered the period from the date of commencement on 15

February 2017 to 30 September 2017. Therefore, the comparative amounts for the statement of

comprehensive income, statement of changes in net asset values, statement of cash flows and

related notes to the financial statements are not comparable.



33

INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF


(Established under Trust Deed dated 20th January, 2017)

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of ARECA DIVIDEND INCOME FUND, which comprise the

statement of financial position of the Fund as at 30 September 2018, and the statement

comprehensive income, statement of changes in net asset value and statement of cash flows of the

Fund for the financial year then ended, and notes to the financial statements including a summary of

significant accounting policies, as set out on pages 5 to 32.

In our opinion, the accompanying financial statements give a true and fair view of the financial

position of the Fund as at 30 September 2018, 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

Manager’s and Trustee’s 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.

Responsibilities of the Manager 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. 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.

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

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.



34

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 Fund’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Manager.

• 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)

KHONG SIEW CHIN

Partner - 03049/03/2019 J

Chartered Accountants

28 November 2018

Documents

Cover AnnualReport Dividend Income-FAarecacapital.com/file/ADIF-Merged Annual Report.pdf · 2) Scicom (MSC) Bhd 7.19 2) Areca EquityTrust Fund 7.20 3) Malayan Banking Bhd 6.08 3)