Cover AnnualReport equityTRUST-FA - Areca Capitalarecacapital.com/file/Areca_AnnualReportJun17_Equity Trust.pdf · 107, Blok B, Pusat Dagangan Phileo Damansara 1 No. 9, Jalan 16/11,

Annual Report June 2017

For the Year Ended 30 June 2017

Areca equityTRUST Fund

ANNUAL REPORT JUNE 2017

�� ARECA equityTRUST FUND

Contents

CORPORATE DIRECTORY 2

MANAGER’S REPORT

Fund Information, Performance & Review 3

Market Review & Outlook 8

TRUSTEE’S REPORT 11

AUDITED FINANCIAL STATEMENTS FOR

Areca equityTRUST Fund

Statement by The Manager

Auditors’ Report

12

32

33


ARECA equityTRUST FUND

2

CORPORATE D IRECTORY

MANAGER

Areca Capital Sdn Bhd (740840-D)

107, Blok B, Pusat Dagangan Phileo Damansara 1

No. 9, Jalan 16/11, Off Jalan Damansara

46350 Petaling Jaya, Selangor

Tel: 603-7956 3111, Fax: 603-7955 4111

website: www.arecacapital.com

e-mail: [email protected]

BOARD OF DIRECTORS

Dato’ Wee Hoe Soon @ Gooi Hoe Soon (Independent, Chairman)

Wong Teck Meng (Executive) Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Non-Executive Non-Independent) Dr. Junid Saham (Independent)

INVESTMENT COMMITTEE MEMBERS

Dato’ Wee Hoe Soon @ Gooi Hoe Soon (Independent, Chairman)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin (Non-Independent)

Dr. Junid Saham (Independent)

TRUSTEE

Maybank Trustees Berhad (5004-P)

8th Floor, Menara Maybank

100 Jalan Tun Perak

50050 Kuala Lumpur

Tel: 03-2078 8363, Fax: 03-2070 9387

AUDITOR

Deloitte PLT (LLP0010145-LCA) Level 16, Menara LGB

1 Jalan Wan Kadir, Taman Tun Dr. Ismail 60000 Kuala Lumpur

Tel: 03-7610 8888, Fax: 03-7726 8986

TAX ADVISER

Deloitte Tax Services Sdn Bhd (36421-T)

Level 16, Menara LGB 1 Jalan Wan Kadir, Taman Tun Dr. Ismail

60000 Kuala Lumpur Tel: 03-7610 8888, Fax: 03-7726 8986

HEAD OFFICE

107, Blok B, Pusat Dagangan Phileo Damansara 1, No. 9, Jalan 16/11, Off Jalan Damansara,

46350 Petaling Jaya, Selangor.

Tel: 603-7956 3111, Fax: 603-7955 4111

website: www.arecacapital.com

e-mail: [email protected]

PENANG – PULAU TIKUS PERAK - IPOH MALACCA

368-2-02 Belissa Row 11A, (First Floor) 95A, Jalan Melaka Raya 24

Jalan Burma, Georgetown Persiaran Greentown 5 Taman Melaka Raya

10350 Pulau Pinang Greentown Business Centre 75000 Melaka

Tel : 604-210 2011 30450 Ipoh, Perak Tel : 606-282 9111

Fax: 604-210 2013 Tel : 605-249 6697/6698 Fax: 606-283 9112

Fax: 605-249 6696



3

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

Name of the Fund Areca equityTRUST Fund

Fund Category/

Type

Equity/Growth

Objective of the

Fund

To provide investors with medium to long term capital growth

Benchmark Average Returns of the funds under “Equity Malaysia” Non-Islamic category

Distribution Policy

of the Fund

Incidental. In the absence of written instructions from a Unit Holder, the Manager

is entitled to reinvest the income distributed from the Fund in additional units of

that Fund at the NAV per unit at the end of the distribution day with no entry fee.

Profile of

unitholdings

* excluding units held by

the Manager

As at 30 June 2017

Size of Holding (Units)

No. of

accounts %

No. of

units held

(million) %

Up to 5,000 3 1.35 0.01 0.01

5,001 to 10,000 3 1.35 0.02 0.02

10,001 to 50,000 56 25.23 1.64 1.66

50,001 to 500,000 109 49.10 17.87 18.08

500,001 and above 51 22.97 79.30 80.23

Total* 222 100.00 98.84 100.00

Rebates & Soft

Commissions

The Manager retains soft commissions received from stockbrokers, provided these

are of demonstrable benefit to unitholders. The soft commissions may take the

form of goods and services such as, data and quotation services, computer

software incidental to the management of the Fund and investment related

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

the year under review, the Manager had not received any soft commissions.

Launch Date

23 April 2007

Initial Offer Price

RM0.5000 per unit during the initial offer period of 21 days ended 13 May 2007

Pricing Policy

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

unit

Financial Year End 30 June



4

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

2017 2016 2015

Net Asset Value (“NAV”) as at 30 June

Total Net Asset Value (RM million) 57.46* 52.08* 35.34*

Units in circulation (million units) 109.26* 94.15* 65.22*

NAV per unit (RM) 0.5259* 0.5532* 0.5419*

* Ex-Distribution

2017 2016 2015

HIGHEST & LOWEST NAV per unit for the financial year ended 30 June Please refer to Note 1 for further information on NAV and pricing policy

Highest NAV per unit (RM) 0.6823* 0.5652* 0.6064*

Lowest NAV per unit (RM) 0.5217* 0.4875* 0.5067*

* Ex-Distribution

2017 2016 2015

ASSET ALLOCATION % of NAV as at 30 June

Main Board

ACE Market

Technology 2.80 2.40 -

Main Board

Construction 2.62 9.64 12.48

Consumer products 11.01 3.22 8.36

Finance 7.96 9.69 1.15

Industrial products 9.40 21.93 8.83

Infrastructure Project Co - 1.91 5.01

Plantations - 5.46 1.58

Properties 3.62 - -

Technology 14.68 1.93 1.12

Trading/Services 36.94 22.34 44.56

Cash & cash equivalents including placements & repo 10.97 21.48 16.91

DISTRIBUTION

Please refer to Note 2 for further information

2017 2016 2015

Distribution dates 5 Apr 2017 31 Dec 2015 29 Jun 2015

Gross distribution (sen per unit) 3.00 1.50 3.00

Net distribution (sen per unit) 3.00 1.50 3.00

NAV before distribution (RM per unit) 0.6626 (4 Apr) 0.5640 (30 Dec) 0.5769 (26 Jun)

NAV after distribution (RM per unit) 0.6340 (5 Apr) 0.5513 (31 Dec) 0.5381 (29 Jun)

UNIT SPLITS


2017 2016 2015 Exercise date 13 June 2017 - -

Split Ratio 0.25:1 - -

NAV before unit split (RM per unit) 0.6675(9 June) - -

NAV after unit split (RM per unit) 0.5296(13 June) - -

Market Movement -0.0055(13 June) - -

2017 2016 2015

EXPENSE/ TURNOVER for the financial year ended 30 June

Management expense ratio(MER)(%) 2.15 2.16 1.86


Portfolio turnover ratio(PTR)(times) 1.67 2.09 1.87




5

2017 2016 2015

TOTAL RETURN for the financial year ended 30 June


Total Return (%) 24.41 4.86 -0.14

- Capital Return (%) 18.79 2.09 -5.41

- Income Return (%) 5.62 2.77 5.27

2017 2016 2015 2014 2013

Annual Total Return (%) 24.41 4.86 -0.14 24.43 21.55

Benchmark: Average Returns of the funds

under “Equity Malaysia” Non-Islamic category 13.04 0.27 -4.78 11.53 15.44

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 24.41 10.09 19.41

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 3.00 sen per unit was declared on 5 April 2017 and was automatically reinvested

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

Note 3: Unit split of 25:100 (25 units for every 100 units held) was declared on 13 June 2017.

Note 4: 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 5: 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 6: Fund performance figures are calculated based on NAV to NAV and assume reinvestment of

distributions (if any) at NAV. The performance figures for the benchmark of Average Returns of the funds

under “Equity Malaysia” Non-Islamic category are calculated assuming investment in the index. The total

return and the benchmark data 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.



6

F U N D R E V I E W

During the year under review, the Fund outperformed its benchmark with gain of 24.4% as compared

to the benchmark’s gain of 13.0%. The Fund’s NAV per unit decreased from RM0.5532 as at 30 June

2016 to RM0.5259 as at 30 June 2017 after a total net distribution of 3.00 sen per unit during the

financial year. The outperformance of the Fund was mainly due to asset allocation and stock

selection. The fund increased its cash holdings during periods of high market volatility and this helped

in generating outperformance against the benchmark.

During the year under review, the manager focused on several investment themes. The manager

selected companies which provided goods and services that saw relatively resilient demand. The fund

also had exposure to stocks which benefitted from the recovery in the domestic economy, stronger

external demand and higher construction spending. The top performing stocks for the Fund were

Pentamaster and Press Metal while the laggards were United U-li and Bumi Armada.

The Fund is maintaining its exposure in Pentamaster and Press Metal. The Fund has cut its exposure

to United U-li and Bumi Armada due to the challenges faced by the respective businesses.

The Fund has achieved its objective of providing investors with medium to long term capital growth

for the year under review.

Investment Policy and Strategy

The Fund invests primarily (with at least two third of its assets) in equities and equity-related

securities under normal circumstances.

NAV per unit as at 30 June 2017 RM0.5259

Movement of asset allocation as a percentage of Net Asset Value

for the financial year ended 30 June 2017

Asset Allocation /Portfolio Composition as at 30 June 2017 2016 2015

Equities and equity- 89.03% 78.52% 83.09% related securities

Cash & cash equivalents 10.97% 21.48% 16.91%

83.98% 83.52%92.52% 89.03%

0%

20%

40%

60%

80%

100%

30-Sep-16 31-Dec-16 31-Mar-17 30-Jun-17

Equities & equity-related

securities

Cash and cash equivalents

* as a % of net asset value

89.03%

10.97%



7

F U N D R E V I E W

Top 5 Holdings by Issuers:

As at 30 Sep 2016 (%)

As at 31 Dec 2016 (%)

1) Berjaya Food Berhad 3.71

1) Cahya Mata Sarawak Berhad 3.70

2) Cahya Mata Sarawak Berhad 3.67

2) Berjaya Food Berhad 3.67

3) Sime Darby Berhad 3.37

3) Sime Darby Berhad 3.37

4) CIMB Bank Berhad 2.95

4) Genting Malaysia Berhad 3.23

5) Star Media Group Berhad 2.86

5) Press Metal Berhad 3.16

As at 31 Mar 2017 (%)

As at 30 Jun 2017 (%)

1) Alpha Circle Sdn Bhd (AA-IS) 19.89

1) Pentamaster Corporation Berhad 4.98

2) Golden Assets International Finance

Limited (AA2) 11.02

2) Oldtown Berhad 4.77

3) CIMB Thai Bank Public Company Limited (AA3)

7.81

3) Serba Dinamik Holdings Berhad 4.70

4) Eastern & Oriental Berhad (NR) 6.88

4) AMMB Holdings Berhad 4.16

5) Barakah 6.30

5) Genting Malaysia Berhad 3.70

Performance of Areca equityTRUST Fund

for the financial period since inception to 30 June 2017

Areca equityTRUST

Average Returns of the funds under “Equity

Malaysia” Non-Islamic category


MANAGER’S REPORT

8

MARKET REVIEW & OUTLOOK

ECONOMIC REVIEW

Following the British referendum to exit the European Union, rating agencies downgraded the UK. The

GB£ plunged from 1.49 just before the referendum to a level last seen in the mid 80’s at 1.21 in

October before revisiting the level in January this year against the US$. Against the MYR, it fell from

5.9790 the night before ‘Brexit’ to a low of 5.0580 in mid-October before recovering to 5.59 at end

June 2017. The UK then cut benchmark rates to a historic low of 0.25%, broaden bond buying

program to include corporate bonds and deepen the size of Quantitative Easing to £435 billion from

£60 billion in a bid to mitigate the impact. Meantime, the European Central Bank kept rates

unchanged throughout this twelve months while announcing the extension of Quantitative Easing

program to beyond March 2017 (end of 2017) albeit a reduced size of €60 billion from €80 billion

monthly.

With the inauguration of President Donald Trump in January a new era of uncertainty ensues.

Economically, the US have continued to show signs of repair. Unemployment rate dropped to a

sixteen year low of 4.3% in May while housing and consumption data have been encouraging. The

Dow Jones breached 20000 at the end of January and surged past 21000 mark early March hitting an

all-time high of 21528.99 on June 19. It continues to ride on the prospects of a Trump inspired

expansionary fiscal plan and anticipated tax reforms. Inflation hit a five years high of 2.7% in

February but have since eased into a downward trajectory. Inevitably, the hawks came out and the

Federal Fund Rate was raised in March and June by a ¼% each to 1.25%. This followed December’s

much expected ¼% hike. The Federal Reserve has since expressed their readiness to trim the Federal

Reserve’s asset portfolio of US$4.5 trillion in a gradual, non-disruptive and orderly manner.

Geopolitical risk has ratcheted up several notches since Trump’s ascension following the retaliatory

bombing of Syria for alleged usage of chemical weapons, dropping the ‘mother of all bombs’ in

Afghanistan targeting ISIS and their underground tunnels and ‘sabre-rattling’ with North Korea. By

pulling out of the Trans-Pacific Partnership (TPP) and Paris Climate Agreement, antagonising Mexico,

Australia, Canada and NATO, Trump is isolating the US expeditiously.

China’s 4 quarters of GDP grew 6.7%, 6.8% and 6.9% for the first two quarters this year but have

kept full year (2017) projection at 6.5% ahead of their National People’s Congress in October. For a

moment, China’s reserves fell below US$3 trillion mark (lowest since 2011) in January defending the

Yuan from sliding, as it lost the top US debt holder position to Japan since October 2016. It has since

reclaimed that top spot as of June 2017, following imposition of capital controls on outflows and a

series of US Treasuries’ buying sprees. Reserves have also turned around totaling slightly below

USD3.06 trillion. It is no surprise then that President Trump did not carry out his threat of branding

China a currency manipulator during their first four-eyed meeting in March.

Malaysia’s economy

In Malaysia, with little good news in the National Budget announced in October, the Malaysian Ringgit

suffered from the anticipated declining interest rates differential, the negative effect of the reduction

of the Morgan Stanley Capital International (MSCI) Emerging Market Index weight for Malaysia from

3.25% to 2.92% in early June 2016 and bad press on issues surrounding 1MDB. The MYR depreciated

to its weakest close since the end of 1998 Asian Financial Crisis early January at 4.49 to USD.

Fortunately, trade data remained strong. Exports and imports data picked up since November

providing support for Q4’s 4.5% GDP growth, bringing the full calendar year 2016 to an expansion of

4.2%. It improved further to 5.6% reading for 1Q 2017. Meantime, inflation surged to 5.1% in March,

highest since November 2008 mainly due to higher fuel and transport cost as RON95 at the pump

stood at RM2.30 per liter compared to RM1.60 a year ago. It tapered off at the end of June to 3.6%

as oil prices eased. Foreign Reserves increased to USD99.8 billion (or RM424.9 bil from RM390.4 bil).


MANAGER’S REPORT

9

EQUITY MARKET REVIEW

During the period under review, the small caps led the market and outperformed the Malaysian large

caps in general. Most regional markets closed higher led by Vietnam and Taiwan while the laggards

were India and Malaysia.

The domestic market experienced higher volatility in May/June 2016. This was initially caused by

increased expectations of a US interest rate hike. Subsequently, on 23 June 2016, the UK voted to

leave EU (Brexit). This was a negative surprise to the market, which had placed a higher probability

of UK voting to remain in the EU. Post Brexit, the UK’s GDP growth forecast was lowered by

economists and its credit rating was cut by some major rating agencies.

Asian markets shrugged off the impact of Brexit as investors focused on policy action and the region

benefited from foreign portfolio inflows that were leaving Europe. After extended gains post Brexit,

Asian markets experienced some volatility towards the end of the period due to uncertainty about the

upcoming US Presidential elections and on speculation of US Federal Reserve potentially moving on

interest rates in Sep.

The unexpected victory by Trump in the US Presidential Elections caused financial markets to have a

negative kneejerk reaction. Subsequently, the US market performed strongly as investors anticipated

Trump’s pro-business measures including fiscal stimulus and tax cuts. With the measures expected to

provide a kicker to the US economy, this triggered portfolio outflows especially from Emerging

Markets. In a widely anticipated move, the US Federal Reserve raised interest rates in Dec 2016.

Asian markets, including Malaysia, were off to a good start in 2017 as the US Dollar index lost some

steam. We believe that the possibility of tax reforms and fiscal spending in the US remains although

markets may have been too optimistic and quick to price in the expectations. This could cause the US

market to consolidate in the near term as expectations get recalibrated. On the flip side, this is likely

to continue to fuel investor interest in Emerging Markets.

Market sentiment was aided by the result of the French elections in May 2017 where a worst case

outcome was averted with the market friendly candidate, Emmanuel Macron, defeating the far-right

candidate, Marine Le Pen.

Further to the hike at end 2016, the US Federal Reserve raised interest rates by 25 bps each in March

2017 and June 2017. The moves were anticipated by the market and had a muted impact on equities.

Brent futures weakened by 3.5% during the period. Post the Trump presidency, the Ringgit weakened

to a high of 4.4975 against the US Dollar before recovering. During the period, the US$ strengthened

by 6.5% against the Ringgit to 4.2933.

ECONOMIC OUTLOOK

Economically the US appear to have made milestones turnarounds with critical data like

unemployment and inflation on the right path while housing and consumption showing encouraging

signs. The EU have also in recent months appear to have put the worst behind them to emerge from

economic doldrums. Growth is on an uptrend while unemployment on a slow but favourable reverse.

China is constantly fixing their identified niggling problems of rising debt, property inflation and

capital outflows. If they can manoeuvre around these issues by altering her economy to be one that is

consumption based and continue on a watered down growth path of 6%; simple arithmetic will prove

that they will surpass the US to become the largest economy by 2032 even if the US grows at an

optimistic 2.5% rate.

All these augur well for Malaysia and our fledgling economy. China is hungry to spread its influence

and trade while we need new capital inputs and have goods to export. If China grows, we benefit. We

can look forward to a favourable trade data. Our government’s swift response to China’s ‘one belt one

road’ (now called Belt and Road Initiative) aspirations by opening up ‘high speed rail’ construction to

the Chinese and recent developments on the East Coast Rail Link and ports on both sides of our

peninsula amongst many others is seen as a masterful stroke by our leaders. Compared to lukewarm

reception of our southern neighbours, Malaysia appear to have seized the upper hand in being

involved in the next fifty years (at least) of Asian (China-India-Russia) upswing if not China itself. It is


MANAGER’S REPORT

10

important thence to pursue the appropriate funding structure for these long term mammoth projects

to ensure an advantageous future.

Crude oil price is expected to be range bound between US$50-60 as OPEC and non-OPEC producers

agree to an extension of the production cut in May till end 1Q 2018 in a continued effort to reduce

excess supply.

EQUITY MARKET OUTLOOK

After 3 consecutive years of negative returns, we believe that the prospects for the domestic bourse

would improve in 2017. After the initial shock from the US Presidential election at end 2016, interest

has returned to Emerging Markets including Malaysia. Besides interest from foreign investors, we

believe that the performance in the local bourse would be underpinned by a better corporate earnings

outlook, pump priming activities, and Government Linked Companies (GLC) transformation.

We would employ a stockpicking strategy to focus on selected themes including increased

construction jobs and improving consumer sentiment.

Given the roll out of major projects especially in rail-related infrastructure, and Pan Borneo Highway,

we anticipate strong construction job flows and this is expected to sustain interest in the construction

sector. Identifiable contracts in the medium term include the balance packages for MRT2, Pan Borneo

Highway, LRT3, and packages in the East Coast Rail Link (ECRL) project. We would look for

opportunities in contractors who would be major beneficiaries of construction job awards.

While consumer sentiment has taken a setback from the depreciation of the Ringgit, we believe that

the MIER Consumer Sentiment Index is unlikely to revisit its recent low and would recover gradually.

We see investment opportunities in high quality consumer franchises.

Over the medium term, another theme that could gain traction is Government Linked Companies

(GLC) transformation. PNB has indicated that it would work closely with the management and board

of its strategic investments to enhance returns. An improvement in returns from GLCs would be

positive for the performance of the local bourse given that GLCs are a sizeable segment of the

Malaysian


TRUSTEE’S REPORT

11

T R U S T E E ’ S R E P O R T

For The Financial Year Ended 30 June 2017

To the Unitholders of Areca equityTRUST Fund

We have acted as Trustee of Areca equityTRUST Fund (“the Fund”) for the financial year ended 30 June 2017. To the best of our knowledge, Areca Capital Sdn Bhd (“the Manager”) has managed the

Fund in the financial year ended under review in accordance with the following:-

1. Limitations imposed on the investment powers of the Manager under the Deeds, securities laws and these Guidelines;

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

regulatory requirements; and

3. Creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirement.

An income distribution of 3.00 sen per unit (gross) declared to the unitholders of the Fund for the

financial year ended 30 June 2017.

We are of the view that the distribution is consistent with the investment objective and distribution policy of the Fund.

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

BERNICE KM LAU Head, Operations

Kuala Lumpur, Malaysia

21 August 2017

ANNUAL REPORT JUNE 2017 ARECA equityTRUST FUND

12

STATEMENT OF FINANCIAL POSITION

As Of 30th June, 2017

2017 2016

Note RM RM

Assets

Investment

Quoted securities Other Assets

4 51,160,796 40,893,469

Amount due from Manager 5 50,000 -

Other receivables 6 193,112 28,846

Short-term deposits 7 8,120,496 11,565,038

Cash at bank 1,052,457 23,027

Total Other Assets 9,416,065 11,616,911

Total Assets 60,576,861 52,510,380

Unitholders’ Fund and Liabilities

Liability

Other payables and accruals 8 3,114,160 427,751

Unitholders’ Fund

Unitholders’ capital 9 45,216,406 48,146,768

Unrealised reserve 10 8,782,432 3,673,961

Realised reserve 11 3,463,863 261,900

Net Asset Value attributable to unitholders 57,462,701 52,082,629

Total Unitholders’ Fund and Liability 60,576,861 52,510,380

Number of Units In Circulation 9 109,263,016 94,147,760

Net Asset Value Per Unit (Ex-Distribution) 12 0.5259 0.5532

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


13

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For The Financial Year Ended 30th June, 2017

2017 2016

Note RM RM

Investment Income

Gross dividend income 1,314,612 871,483

Interest income 215,666 185,949

Net gain on investments: Investment at fair value through profit or loss

(“FVTPL”) 4 11,016,293 2,146,908

Total Investment Income 12,546,571 3,204,340

Expenditure

Management fee 13 949,431 714,091

Trustee’s fee 14 39,981 30,212

Transaction cost 19 861,741 757,102

Audit fee 10,850 9,000

Tax agent’s fee 3,500 3,850

Other expenses 68,189 54,564

Total Expenditure 1,933,692 1,568,819

Net Income Before Tax 10,612,879 1,635,521

Income Tax Expenses 15 - -

Net Income After Tax/Total Comprehensive

Income For the Financial Year 10,612,879 1,635,521

Net Income After Tax Is Made Up Of:

Realised gain 5,504,408 916,766 Unrealised gain 5,108,471 718,755

10,612,879 1,635,521

Distribution for the financial year:

Net distribution 16 2,302,445 917,297

Gross distribution per unit (sen) 16 3.00 1.50

Net distribution per unit (sen) 16 3.00 1.50



14

STATEMENT OF CHANGES IN NET ASSET VALUE


Unitholders’ capital

Realised reserve

Unrealised reserve

Total net asset value

RM RM RM RM

As of 1st July, 2015 32,126,250 262,431 2,955,206 35,343,887Amounts received/receivable from units created 24,469,073

- -24,469,073

Amounts paid for units cancelled (8,448,555) - - (8,448,555)Total comprehensive income for the

financial year - 1,635,521 - 1,635,521Net unrealised gain transferred to

unrealised reserve -

(718,755) 718,755 -Distribution to unitholders for the

financial year (Note 16) -

(917,297) - (917,297)

As of 30th June, 2016 48,146,768 261,900 3,673,961 52,082,629

As of 1st July, 2016 48,146,768 261,900 3,673,961 52,082,629

Amounts received/receivable from units created

29,630,482 - - 29,630,482

Amounts paid for units cancelled (32,560,844) - - (32,560,844)Total comprehensive income for the financial year - 10,612,879 - 10,612,879

Net unrealised gain transferred to unrealised reserve -

(5,108,471) 5,108,471 -

Distribution to unitholders for the financial year (Note 16) -

(2,302,445) - (2,302,445)

As of 30th June, 2017 45,216,406 3,463,863 8,782,432 57,462,701



15

STATEMENT OF CASH FLOWS


2017 2016

RM RM

Cash Flows From/(Used In) Operating Activities

Proceeds from disposal of quoted securities 86,284,490 75,259,226

Gross dividend income received 1,252,554 885,921

Interest received 215,263 183,882

Purchase of quoted securities (82,976,907) (83,206,659)

Management fee paid (940,716) (690,298)

Trustee’s fee paid (39,614) (29,372)

Transaction costs (847,930) (761,604)

Payment for other fees and expenses (79,445) (62,738)

Net Cash From/(Used In) Operating Activities 2,867,695 (8,421,642)

Cash Flows From/ (Used In) Financing Activities

Cash proceeds from units created 29,580,482 24,470,073

Payment for cancellation of units (32,560,844) (9,970,253)

Distribution to unitholders (2,302,445) (917,297)

Net Cash (Used In)/ From Financing Activities (5,282,807) 13,582,523

Net (Decrease)/Increase In Cash And Cash Equivalents (2,415,112) 5,160,881

Cash And Cash Equivalents At Beginning Of Year 11,588,065 6,427,184

Cash And Cash Equivalents At End Of Year 9,172,953 11,588,065

Cash and cash equivalents consist of the following amounts: 2017 2016

RM RM

Short-term deposits 8,120,496 11,565,038

Cash at bank 1,052,457 23,027

9,172,953 11,588,065



16

NOTES TO THE FINANCIAL STATEMENTS

1 GENERAL INFORMATION

Areca equityTRUST Fund (“equityTRUST” or “the Fund”) was established pursuant to the Trust

Deed dated 12th March, 2007 as modified by the First Supplemental Deed dated 27 June 2007,

Second Supplemental Deed dated 14th April 2008, Third Supplemental Deed dated 21st October

2008, Fourth Supplemental Master Deed dated 10th April 2009, Fifth Supplemental Master Deed

dated 12th March 2013 and Sixth Supplemental Master Deed dated 6th September 2013 between

Areca Capital Sdn Bhd as the Manager, the Trustee and all the registered unitholders of the Fund

(“the Deed”).

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

the Deed, which include stocks and shares of companies quoted on any recognised Stock

Exchange(s) in Malaysia and deposits with financial institutions. The Fund commenced operations

on 23rd April, 2007 and will continue its operations until terminated by the Trustee in accordance

with Part 12 of the Deed.

The objective of the Fund is to provide investors with medium to long term capital growth 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 authorised for issue by the Board of Directors of the Manager in

accordance with a resolution of directors on 21st August, 2017.

2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

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

Reporting Standards (“MFRSs”), International Financial Reporting Standards and the Securities

Commission Malaysia’s Guidelines on Unit Trust Funds in Malaysia.

Adoption of New and Revised Malaysian Financial Reporting Standards

In the current financial year, the Fund adopted all the new and revised MFRSs and Amendments

to MFRSs issued by Malaysian Accounting Standards Boards (''MASB'') that are relevant to its

operations and effective for annual financial periods beginning on or after 1st July, 2016 as

follows:

Amendments to MFRS 101 Disclosure Initiative

Amendments to MFRS 116

and MFRS 138

Clarification of Acceptable Methods of Depreciation and

Amortisation

Annual Improvements to MFRSs 2012 - 2014 cycle

The adoption of these new and revised MFRSs did not result in significant changes in the

accounting policies of the Fund and had no significant effect on the financial performance or

position of the Fund.

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

Yet Effective

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

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

early adopted by the Fund are as listed below:

MFRS 9 Financial Instruments3

MFRS 15 Revenue from Contracts with Customers (and the related

Clarifications)2

Amendments to MFRS 107 Disclosure Initiative1

Amendments to MFRS 112 Recognition of Deferred Tax Assets for Unrealised Losses1

IC Interpretation 22 Foreign Currency Transactions and Advance Consideration2

Amendments to MFRSs Annual Improvement to MFRS 2014 - 2016 Cycle1or2 1 Effective for annual periods beginning on or after 1st January, 2017


17

2 Effective for annual periods beginning on or after 1st January, 2018

3 Effective for annual periods beginning on or after 1st January, 2018, with early

application permitted. In addition, an entity may elect to early apply only the

requirements for the presentation of gains and losses on financial liabilities designated as

at fair value through profit or loss for annual periods beginning before 1st January, 2018,

as stated in paragraph 7.1.2 of MFRS 9

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

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

effective and that the adoption of these Standards, IC Interpretation and Amendments will have

no material impact on the financial statements of the Fund in the period of initial application

except for MFRS 9 and MFRS 15. However, it is not practicable to provide a reasonable estimate

of the effect of MFRS 9 and MFRS 15 until the Manager undertakes a detail review.

3. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND JUDGEMENTS

A. SIGINIFICANT ACCOUNTING POLICIES

Income Recognition

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

period.

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, advisors, 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 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.

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.


18

Functional and Presentation Currency

The financial statements are measured using the currency of the primary economic environment

in which the Fund operates (“functional currency”). The financial statements are presented in

Ringgit Malaysia (“RM”), which is also its functional currency.

Distribution

Distributions are at the discretion of the Trustee. A distribution to the Fund’s Unitholders is

accounted for as a deduction from realised reserve. A proposed distribution is recognised as a

liability in the period in which it is approved by the Trustee.

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, receivables and

payables. The accounting policies on recognition and measurement of these items are disclosed in

their respective accounting policies.

Financial instruments are classified as assets or liabilities in accordance with the substance of the

contractual arrangements. Interest, dividends, gains and losses relating to financial instruments

classified as assets, are reported as investment income.

Financial Assets

Financial assets are classified into the following specified categories: financial assets at ‘fair value

through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets

and ‘loans and receivables’. The classification depends on the nature and purpose of the financial

assets and is determined at the time of initial recognition.

Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial asset

and of allocating interest income over the relevant period. The effective interest rate is the rate

that exactly discounts estimated future cash receipts (including all transaction costs and other

premiums or discounts) through the expected life of the financial asset, or (where appropriate) a

shorter period, to the net carrying amount on initial recognition.

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.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon

initial recognition if:


19

• 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 or loss’ on financial assets at FVTPL.

Investments

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

price quoted on Bursa Malaysia at the end of the reporting period.

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

gains or losses from investments in profit or loss and transferred to unrealised reserve.

Loans and Receivables

Receivables that have fixed or determinable payments that are not quoted in an active market

are classified as ‘loan and receivables’. Loans and receivables are measured at amortised cost

using the effective interest method, less any impairment. Interest income is recognised by

applying the effective interest rate, except for short-term receivables when the recognition of

interest would be immaterial.

Impairment of Financial Assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end

of each reporting period. Financial assets are considered to be impaired when there is objective

evidence that, as a result of one or more events that occurred after the initial recognition of the

financial asset, the estimated future cash flows of the financial asset have been affected.

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 period, as well as observable changes in the national or global

economic conditions that correlate with default on receivables.

In respect of receivables carried at amortised cost, the amount of impairment loss recognised is

the difference between the asset’s carrying amount and the present value of estimated future

cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all

financial assets with the exception of trade receivables, where the carrying amount is reduced

through the use of an allowance account. When a trade receivable is considered uncollectible, it

is written off against the allowance account. Subsequent recoveries of amounts previously written

off are credited against the allowance account. Changes in the carrying amount of the allowance

account are recognised in profit or loss.

Classification of Realised and Unrealised Gains and Losses

Unrealised gains and losses comprise changes in the fair value of financial instruments for the

year and from reversal of prior year’s unrealised gains and losses for financial instruments which

were realised (sold) during the reporting period.

Realised gains and losses on disposals of financial instruments classified as FVTPL are accounted

for as the difference between the net disposal proceeds and the carrying amount of the financial

instruments.


20

Derecognition of Financial Assets

The Fund derecognises a financial asset only when the contractual rights to the cash flows from

the asset expire, or when it transfers the financial asset and substantially all the risks and

rewards of ownership of the asset to another entity. If the Fund neither transfers nor retains

substantially all the risks and rewards of ownership and continues to control the transferred asset,

the Fund recognises its retained interest in the asset and an associated liability for amounts it

may have to pay. If the Fund retains substantially all the risks and rewards of ownership of a

transferred financial asset, the Fund continues to recognise the financial asset and also

recognises a collateralised borrowing for the proceeds received.

Financial Liabilities and Equity Instruments

Debt and equity instruments are classified as either financial liabilities or as equity in accordance

with the substance of the contractual arrangement.

Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Fund

after deducting all of its liabilities. Equity instruments issued by the Fund are recognised at the

proceeds received, net of direct issue costs.

Financial Liabilities

Financial liabilities are initially measured at fair value, net of transaction cost and subsequently

measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability

and of allocating interest expense over the relevant period. The effective interest rate is the rate

that exactly discounts estimated future cash payments through the expected life of the financial

liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Derecognition of Financial Liabilities

The Fund derecognises financial liabilities when, and only when, the Fund’s obligations are

discharged, cancelled or expired. The difference between the carrying amount of the financial

liability derecognised paid or payable is recognised in profit or loss.

B. 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(A) above, the Manager is of the opinion that there are no instances of application of judgement which are expected to have a significant effect on the Amounts recognised in the financial statements.

(ii) Key sources of estimation uncertainty The Manager believes that there are no key assumptions made concerning the future,

and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets

and liabilities within the next financial year.

4. QUOTED SECURITIES

Investments designated at FVTPL are as detailed below:

2017

2016 RM RM

At aggregate cost Shares quoted in Malaysia 42,378,364 37,219,508

At fair value Shares quoted in Malaysia 51,160,796 40,893,469


21

2017 2016

RM RM Net gain on investments at FVTPL comprised:

Realised gain on disposals 5,907,822 1,428,153 Unrealised gain on changes in fair values 5,108,471 718,755

11,016,293 2,146,908

Details of quoted securities as of 30th June, 2017 are as follows:

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

Technology

Mikro MSC Berhad 2,170,900 0.740 823,321 966,051 1,606,466 2.80

823,321 966,051 1,606,466 2.80

Main Market

Construction

Gamuda Bhd-WE 40,816 1.400 10,204 38,367 57,142 0.09

Fajar Baru Builder

GRPBhd 1,323,100 0.980 1,296,696 1,296,696 1,296,638 2.26

Gadang Holdings Bhd-

Warrants 145,600 0.645 - - 93,912 0.16

Mitrajaya Holdings

Berhad-Warrants

D15/20 115,780 0.530 - 56,153 61,364 0.11

Total 1,306,900 1,391,216 1,509,056 2.62

Consumer Products

Carlsberg Brewery

Malaysia Bhd 57,500 15.000 653,433 760,150 862,500 1.50

Malayan Flour Mills

Bhd 584,500 2.450 1,219,125 1,219,125 1,432,025 2.50

IOI Corporation Bhd 325,300 4.250 1,297,332 1,297,332 1,382,525 2.41

CCK Consolidated

Holdings Bhd 958,000 0.870 892,185 892,185 833,460 1.45

Johore Tin Bhd 1,137,300 1.590 1,886,063 1,886,063 1,808,307 3.15

Total 5,948,138 6,054,855 6,318,817 11.01

Finance

AMMB Holdings Bhd 490,400 4.880 2,405,376 2,405,376 2,393,152 4.16

Cimb Group Holdings

Berhad 164,394 6.580 767,125 767,125 1,081,713 1.88

MPHP Capital Berhad 678,000 4.630 1,137,753 1,137,753 1,105,140 1.92

Total 4,310,254 4,310,254 4,580,005 7.96

Industrial Products Lafarge Malaysia

Berhad 302,200 5.550 1,638,048 1,638,048 1,677,210 2.92

Taann Holdings Berhad 341,300 3.540 1,196,800 1,196,800 1,208,202 2.10

V.S Industry Bhd 153,000 20.700 230,170 230,170 316,710 0.55

Dufu Technology

Corp.Bhd 351,000 1.410 459,687 459,687 494,910 0.86

Press Metal Aluminium

Holdings Berhad 637,740 2.680 795,078 976,001 1,709,143 2.97

Total 4,319,783 4,500,706 5,406,175 9.40


22

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 %

Properties

Malton Bhd 1,396,900 1.380 1,756,643 1,756,643 1,927,722 3.35

SP Setia Berhad-

Islamic

Redeemable

Convertible

Preference Shares

(Rcps-I) 137,520 1.120 137,520 137,520 154,022 0.27

Total 1,894,163 1,894,163 2,081,744 3.62

Technology

Notion Vtec Bhd 1,654,800 1.140 1,245,196 1,245,196 1,886,472 3.28

Malayan Pacific

Industries 121,000 13.480 1,180,102 1,180,102 1,631,080 2.84

Unisem (M) Berhad 407,800 3.580 970,577 970,577 1,459,924 2.54

Pentamaster

Corporation Bhd 760,500 3.760 1,324,970 1,324,970 2,859,480 4.98

Total 4,720,845 4,720,845 7,836,956 13.64

Trading/Services

Hss Engineers Bhd 1,653,000 0.925 1,420,317 1,420,316 1,529,025 2.66

George Kent (M)Bhd 318,500 4.120 1,290,166 1,290,166 1,312,220 2.28

Sime Darby Bhd 125,484 9.500 1,024,404 1,024,404 1,192,098 2.07

Genting Malaysia

Berhad 385,500 5.500 1,839,501 1,839,501 2,120,250 3.70

Malaysia Airports

Holdings Berhad 220,300 8.560 1,651,488 1,651,488 1,885,768 3.28

Berjaya Food Berhad 1,216,900 1.600 1,965,348 1,965,348 1,947,040 3.40

Oldtown Berhad 952,100 2.880 2,019,929 2,019,929 2,742,048 4.77

Serba Dinamik

Holdings Berhad 1,356,700 1.990 2,730,320 2,730,320 2,699,833 4.70

Kub Malaysia Bhd 4,042,700 0.490 1,717,673 1,779,140 1,980,923 3.45

Yongtai Bhd 1,274,200 1.390 1,489,606 1,489,606 1,771,138 3.08

Hai-O Enterprise Bhd 499,200 4.090 1,295,976 1,295,976 2,041,728 3.55

Total 18,444,728 18,506,194 21,222,071 36.94

MESDAQ

Technology

Green Packet Bhd 1,737,700 0.345 610,232 610,232 599,506 1.04

Total 610,232 610,232 599,506 1.04

Total quoted securities 42,378,364 42,954,516 51,160,796 89.03

2016

ACE Market

Technology

Mikro MSC Berhad 2,811,800 0.445 1,066,384 1,066,384 1,251,251 2.40

Total 1,066,384 1,066,384 1,251,251 2.40

Main Market

Construction

Protasco Bhd 409,000 1.640 707,529 707,529 670,760 1.29

Sunway Construction

Group Berhad 803,000 1.600 1,131,606 1,131,606 1,284,800 2.47


23

2016

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 %

Construction

Gamuda Bhd-WE 40,816 0.940 10,204 10,204 38,367 0.07

Muhibbah Engineering

(M) Bhd 306,300 2.200 639,239 644,581 673,860 1.29

Kerjaya Prospek Group

Berhad 430,100 2.030 769,165 769,165 873,103 1.68

Gadang Holdings Bhd 333,100 2.040 642,203 642,203 679,524 1.30

Mitrajaya Holdings Bhd 570,650 1.300 503,573 652,748 741,845 1.43

Mitraya Holdings

Berhad-Warrants D

15/20 115,780 0.485 - - 56,153 0.11

Total 4,403,519 4,558,036 5,018,412 9.64

Consumer Products

Carlsberg Brewery

Malaysia Bhd 76,900 13.220 873,896 961,250 1,016,618 1.95

Cocoland Holdings Bhd 325,333 2.020 524,570 524,570 657,173 1.27

Total 1,398,466 1,485,820 1,673,791 3.22

Finance

CIMB Group Holdings

Berhad 332,134 4.370 1,520,059 1,520,059 1,451,426 2.79

RHB Bank Berhad 117,457 5.120 552,661 552,661 601,380 1.15

Hong Leong Financial

Group Bhd 38,200 14.680 533,318 533,318 560,776 1.08

Malayan Banking Bhd 299,000 8.140 2,501,332 2,501,332 2,433,860 4.67

Total 5,107.370 5,107,370 5,047,442 9.69

Infrastructure

Project Co

TIME dotcom Bhd 130,860 7.600 407,773 884,614 994,536 1.91

Total 407,773 884,614 994,536 1.91

Industrial Products

Cahya Mata Sarawak

Bhd 384,300 3.580 1,385,733 1,385,733 1,375,794 2.64

Pecca Group Berhad 336,000 1.600 477,120 477,120 537,600 1.03

P.I.E. Industrial Bhd 54,800 12.500 486,320 486,320 685,000 1.32

United U-Li

Corporation Bhd 143,100 6.600 433,337 579,023 944,460 1.81

SKP Resources Bhd 890,700 1.160 1,149,204 1,149,204 1,033,212 1.98

KNM Group Bhd 2,451,800 0.410 1,208,471 1,208,471 1,005,238 1.93

KNM Group Berhad-

Warrants

2016/2020 123,910 0.120 - 19,825 14,869 0.03

SCGM Bhd 400,000 3.430 1,044,000 1,044,000 1,372,000 2.63

Ajiya Bhd 446,100 3.730 1,696,777 1,696,777 1,663,953 3.20

Press Metal Bhd 407,600 3.680 1,110,772 1,110,772 1,499,968 2.88

SAM Engineering &

Equipment 165,000 7.820 891,000 891,000 1,290,300 2.48

Total 9,882,734 10,048,245 11,422,394 21.93


24

2016

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 %

Plantation

Genting Plantations

Berhad 78,400 10.620 796,151 796,151 832,608 1.60

Kuala Lumpur Kepong

Bhd 53,200 23.260 1,251,499 1,251,499 1,237,432 2.38

Sarawak Oil Palms Bhd 192,100 4.000 902,635 902,635 768,400 1.48

Total 2,950,285 2,950,285 2,838,440 5.46

Technology

Inari Amertron Berhad 338,200 2.970 971,991 971,991 1,004,454 1.93

Total 971,991 971,991 1,004,454 1.93

Trading/Services

Genting Bhd 68,000 8.200 540,728 540,729 557,600 1.07

Berjaya Food Berhad 1,161,500 1.820 2,247,493 2,247,493 2,113,930 4.06

Pestech International

Berhad 274,633 6.700 1,138,810 1,352,715 1,840,041 3.53

IHH Healthcare Berhad 82,400 6.600 540,239 540,239 543,840 1.04

7-Eleven Malaysia

Holdings Berhad 494,400 1.360 730,697 7730,697 672,384 1.29

Malakoff Corporation

Berhad 544,300 1.600 856,860 856,860 870,880 1.67

Tenaga Nasional Bhd 87,200 14.100 1,217,600 1,217,600 1,229,520 2.36

Star Media Group

Berhad 384,800 2.610 945,370 945,370 1,004,328 1.93

Uzma Bhd 475,400 1.920 1,011,901 999,525 912,768 1.75

Trading/ Services

Dialog Group Bhd 444,400 1.540 675,089 675,089 684,376 1.31

KUB Malaysia Bhd 3,278,600 0.370 1,126,199 1,126,199 1,213,082 2.33

Total 11,030,986 11,232,516 11,642,749 22.34

Total quoted securities 37,219,508 38,305,261 40,893,469 78.52

5. AMOUNT DUE FROM MANAGER

Amount due from Manager consists of amounts receivable from the Manager in respect of

creation of units. Amount receivable for units created is received within 10 days of the

transaction dates.

6. OTHER RECEIVABLES 2017 2016

RM RM Amount due from stockbroker 101,805 -Dividends receivable 86,542 24,484

Interest receivable 4,765 4,362

193,112 28,846

Amount due from stockbrokers represents receivables for securities sold that have been

contracted for but not yet settled at the end of the reporting period. 7. SHORT-TERM DEPOSITS

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


25

The effective average interest rate for short-term deposits is 3.07% (2016: 3.32%) per annum

and the average maturity period is 9 days (2016: 8 days).

8. OTHER PAYABLES AND ACCRUALS

2017 2016

RM RM Amount due to a stockbroker 2999,205 324,972 Accruals:

Management fee 89,428 80,713 Trustee’s fee 3,765 3,398

Audit fee 10,850 9,000 Tax agent’s fee 3,850 3,850

Others 7,062 5,818

3,114,160 427,751

9. UNITHOLDERS’ CAPITAL

��-------- 2017 ---------�� -------- 2016 ---------��

No. of units RM No. of units RM

At beginning of the year 94,147,760 48,146,768 65,218,412 32,126,250

Created during the year 70,499,394 29,630,482 44,805,023 24,469,073

Cancelled during the year (55,384,138) (32,560,844) (15,875,675) (8,448,555)

At end of the year 109,263,016 45,216,406 94,147,760 48,146,768

In accordance with Schedule 7 Part 6.1 of the Deed and Securities Commission Malaysia’s

approval letter dated 3rd April, 2007, the maximum number of units that can be issued is

200,000,000 units (2016: 200,000,000 units). As of 30th June, 2017, the number of units not

yet issued is 90,736,984 units (2016: 105,852,240 units).

Included in the units created during the year are 3,631,617 units (2016: 1,663,879 units) from

reinvestment of distributions made on 5rd April 2017 (2016: 29th June, 2016) and 21,574,612

units (2016:NIL) from unit split exercise on 13th June 2017.

10. UNREALISED RESERVE

2017 2016 RM RM

At beginning of year 3,673,961 2,955,206 Net unrealised gain attributable to investments held at fair value through profit or loss 5,108,471 718,755

At end of the year 8,782,432 3,673,961

Investments: At fair value 51,160,796 40,893,469

At aggregate cost (42,378,364) (37,219,508)

Unrealised reserve 8,782,432 3,673,961

11. REALISED RESERVE

2017 2016

RM RM

At beginning of year 261,900 262,431 Total comprehensive income for the year 10,612,879 1,635,521

Net unrealised gain transferred to unrealised reserve (5,108,471) (718,755)

Distribution for the year (2,302,445) (917,297)

At end of the year 3,463,863 261,900

12. NET ASSET VALUE PER UNIT (EX-DISTRIBUTION)

The net asset value per unit is calculated by dividing the net asset value attributable to

unitholders as of 30th June, 2017 of RM57,462,701 (2016: RM52,082,629) by units in issues as

of 30th June, 2017 of 109,263,016 units (2015: 94,147,760 units).


26

13. MANAGEMENT FEE

The Schedule 8 of the Deed provides that the Manager is entitled to an annual management fee

at a rate not exceeding 2.50% per annum computed daily on the net asset value of the Fund

before the deduction of the management fee and Trustee’s fee for the relevant day. The

management fee provided for in the financial statements amounted to 1.90% (2016: 1.90%) per

annum for the year. The management fee is subject to 6% goods and services tax (“GST”)

effective 1st April, 2015.

14. TRUSTEE’S FEE

The Schedule 9 of the Deed provides that the Trustee is entitled to an annual Trustee’s fee at

rate not exceeding 0.50% per annum computed daily on the net asset value of the Fund before

the deduction of the management fee and Trustee’s fee for the relevant day. The Trustee’s fee

provided for in the financial statements amounted to 0.08% (2016: 0.08%) per annum for the

year. The Trustee’s fee is subject to 6% goods and services tax (“GST”) effective 1st April, 2015.

15. INCOME TAX CREDIT

There is no tax charge as interest income derived by the Fund is exempted pursuant to

Paragraph 35 and 35A, Schedule 6 of the Income Tax Act, 1967. Gains arising from realisation of

investments are not treated as income pursuant to Paragraph 61(1)(b) of the Income Tax Act,

1967.

16. NET DISTRIBUTION

2017 2016

RM RM Distribution to unitholders is from the following sources:

Gross dividend income 1,228,071 846,999 Interest income 210,900 181,587

Realised gain on sale of investments 2,797,166 1,428,153 Previous year’s realised gains - 29,377

4,236,137 2,486,116 Less: Expenses (1,933,692) (1,568,819)

Net distribution 2,302,445 917,297

The distributions above have been made as follows:

Distribution on 5th April, 2017

Gross distribution per unit (sen) 3.00 -Net distribution per unit (sen) 3.00 -

Distribution on 31st December, 2015 Gross distribution per unit (sen) - 1.50

Net distribution per unit (sen) - 1.50

Total Distribution

Gross distribution per unit (sen) 3.00 1.50 Net distribution per unit (sen) 3.00 1.50

The distribution above has been made before taking into account unrealised gain for the year of

RM5,108,471 (2016: unrealised loss of RM718,755) 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 2.14% (2016: 2.16%) for the financial year ended

30th June, 2017. The management expense ratio which includes management fee, Trustee’s fee,

audit fee, tax agent’s fee and other expenses, is calculated as follows:

MER = (A + B + C + D + E) ÷ F x 100

A = Management fee D = Tax agent’s fee

B = Trustee’s fee E = Other expenses

C = Audit fee F = Average net asset value of Fund


27

The average net asset value of the Fund for the financial year is RM49,973,180 (2016:

RM37,659,974).

Portfolio Turnover Ratio (PTR)

The portfolio turnover ratio for the Fund is 1.72 times (2015: 2.09 times) for the year financial

ended 30th June, 2017. The portfolio turnover 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 year calculated on a daily basis

Where: total acquisition for the financial year = RM85,637,900 (2016: RM83,452,515)

total disposal for the financial year = RM86,386,866 (2016: RM74,072,631)

18. UNITS HELD BY THE MANAGER AND RELATED PARTIES

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

related parties are as follows:

2017 No of Units RM

The Manager 1,111,624 584,381 Kumpulan RZA Sdn Bhd, a corporate shareholder of the Manager 596,741 313,707

1,708,365 898,088

2016

The Manager 533 295 Kumpulan RZA Sdn Bhd, a corporate shareholder of the Manager 455,824 252,162

456,357 252,457

The directors of the Manager are of the opinion that the transactions with the related parties

have been entered into in the normal course of business and have been established on terms

and conditions that are not materially different from that obtainable in transactions with

unrelated parties.

19. TRADE WITH BROKERS/DEALERS

Details of transactions with brokers/dealers are as follows:

Brokers/Dealers Value of

Trades

% of Total

Trades Fees

% of

Total Brokerage

Fee

2017 RM % RM %

KAF Investment Bank Berhad 62,408,000 24.87 - -

CIMB Investment Bank

Berhad

38,622,361

15.39

191,474

22.86

Maybank Investment Bank

Berhad

34,292,122

13.66

172,295

20.57

Alliance Investment Bank

Berhad

26,178,020

10.43

134,497

16.05

Affin Hwang Investment

BankBerhad

24,210,608

9.65

123,140

14.70

Kenanga Investment Bank

Berhad

22,684,001

9.03

111,420

13.30

AmInvestment Bank Berhad 20,461,437 8.15 104,878 12.52

Hong Leong Investment Bank

Berhad

12,439,000

4.96

-

-

RHB Investment Bank Berhad 5,220,000 2.08 - -

CIMB Bank Berhad 4,460,000 1.78 - -

250,975,549 100.00 837,704 100.00


28

Brokers/Dealers

Value of Trades

% of

Total Trades

Fees

% of Total

Brokerage Fee

2016 RM % RM %

KAF Investment Bank Berhad 51,355,000 22.38 - -

Maybank Investment Bank

Berhad

29,815,231

12.99

150,802

20.62

CIMB Investment Bank

Berhad

26,928,347 11.74 132,554 18.13

Kenanga Investment Bank

Berhad

25,847,071

11.26

123,408

16.88

Alliance Investment Bank

Berhad

25,704,044

11.20

126,354

17.28

RHB Investment Bank Berhad 21,030,000 9.16 - -

AmInvestment Bank Berhad 19,911,317 8.68 101,612 13.90

Affin Hwang Investment Bank

Berhad

19,246,782

8.39

96,438

13.19

CIMB Bank Berhad 4,858,000 2.12 - -

Hong Leong Investment Bank

Berhad

4,774,000

2.08

-

-

229,469,792 100.00 731,168 100.00

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)

primarily on its investments.

Categories of Financial Instruments

2017 2016

Financial assets RM RMCarried at FVTPL:

Quoted securities 51,160,796 40,893,469Loans and receivables:

Amount due from Manager 50,000 -Other receivables 193,112 28,846Short-term deposits 8,120,496 11,565,038

Cash at bank 1,052,457 23,027

2017 2016Financial liabilities

Other financial liabilities:

RM RM

Other payable and accruals 3,114,160 427,751

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


29

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

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

realisation of investments.

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

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

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

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

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

assets were past due or impaired as at 30th June, 2017.

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

<---------- 2017 --------�� <---------- 2016 ----------��

Industry

Short-term deposits

Quoted securities

Short-term deposits

Quoted securities

RM RM RM RM

Construction - 1,509,056 - 5,018,412 Consumer products - 6,318,817 - 1,673,791

Finance 8,120,496 4,580,004 11,565,038 5,047,442 Infrastructure project company - - - 994,536

Industrial products - 5,406,175 - 11,422,394 Properties - 2,081,744 - -

Plantations - - - 2,838,440 Technology - 10,042,929 - 2,255,705 Trading/services - 21,222,071 - 11,642,749

8,120,496 51,160,796 11,565,038 40,893,469

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 within 7 days.

The table below summarises the maturity profile of the Fund’s liabilities at the reporting date

based on contractual undiscounted repayment obligations:

2017

Up to 1

month RM

1 - 3

months RM

3 months

to 1 year RM

Total RM

Financial Liability

Non-interest bearing:

Other payable & accruals 3,097,990 16,170 - 3,114,160

2016

Financial Liability:

Non-interest bearing:

Other payable & accruals 414,130 13,621 - 427,751

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.


30

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 2017

Investments +5/-5% 2,558,040/(2,558,040)

Changes in price

Effect on profit or loss Increase/(Decrease)

% RM 2016

Investments +5/-5% 2,044,673/(2,044,673)

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 period.

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).


31

• Level 3 fair value measurements are those derived from valuation techniques that include

inputs for the asset or liability that are not based on observable market data (unobservable

inputs).

Level 1 Level 2 Level 3 Total

RM RM RM RM

2017

Financial assets at FVTPL Quoted securities 51,160,796 - - 51,160,796

2016 Financial assets at FVTPL Quoted securities 40,893,469 - - 40,893,469

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


32

STATEMENT BY THE MANAGER

To the Unitholders of Areca equityTRUST Fund

We, WONG TECK MENG and DATO’ WEE HOE SOON @ GOOI HOE SOON, two of the Directors of

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

accompanying financial statements are drawn up in accordance with Financial Reporting Standards,

International Financial Reporting Standards and the Securities Commission Malaysia’s Guidelines on

Unit Trust Funds in Malaysia so as to give a true and fair view of the financial position of the Fund as

of 30th June, 2017 and the financial performance and the cash flows of the Fund for the financial year

ended on that date.

For and on behalf of the Manager Areca Capital Sdn Bhd WONG TECK MENG CEO/EXECUTIVE DIRECTOR

DATO’ WEE HOE SOON @ GOOI HOE SOON INDEPENDENT DIRECTOR

Kuala Lumpur,

21 August, 2017


33

INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF

ARECA EQUITYTRUST FUND (Established under the First Supplemental Deed dated 27th June, 2007)

Report on the Audit of the Financial statements Opinion

Opinion

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

the statement of financial position as of 30th June, 2017, and the statement of profit or loss and

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

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

significant accounting policies, as set out on pages 12 to 31.

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

position of the Fund as of 30th June, 2017, and of its financial performance and cash flows for the

financial year then ended in accordance with Malaysian Financial Reporting Standards and

International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and

International Standards on Auditing. Our responsibilities under those standards are further described

in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We

believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and

Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards

Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have

fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Information Other than the Financial Statements and Auditors’ Report Thereon

The Manager of the Fund is responsible for the other information. The other information comprises

the information included in Annual Report and Trustee reports, but does not include the financial

statements of the Fund and our auditors’ report thereon.

Our opinion on the financial statements of the Fund does not cover the other information and we do

not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Fund, our responsibility is to read the

other information and, in doing so, consider whether the other information is materially inconsistent

with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears

to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this

other information, we are required to report that fact. We have nothing to report in this regard.

Manager’s and Trustee’s Responsibilities for the Financial Statements

The Manager of the Fund is responsible for the preparation of the financial statements of the Fund

that give a true and fair view in accordance with Malaysian Financial Reporting Standards,

International Financial Reporting Standards and Securities Commission Malaysia’s Guidelines on Unit

Trust Funds in Malaysia. The Manager is also responsible for such internal control as the Manager

determine is necessary to enable the preparation of financial statements of the Fund that are free

from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring

that the Manager maintains proper accounting and other records as are necessary to enable the fair

presentation of these financial statements.

In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund’s

ability to continue as a going concern, disclosing, as applicable, matters related to going concern and


34

using the going concern basis of accounting unless the Manager either intend to liquidate the Fund or

to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund

as a whole are free from material misstatement, whether due to fraud or error, and to issue an

auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is

not a guarantee that an audit conducted in accordance with approved standards on auditing in

Malaysia and International Standards on Auditing will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are considered material if, individually or in

the aggregate, they could reasonably be expected to influence the economic decisions of users taken

on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International

Standards on Auditing, we exercise professional judgement and maintain professional scepticism

throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Fund,

whether due to fraud or error, design and perform audit procedures responsive to those risks,

and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Manager’s internal control.

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

estimates and related disclosures made by the Manager and Trustee.

• Conclude on the appropriateness of Manager’s use of the going concern basis of accounting and,

based on the audit evidence obtained, whether a material uncertainty exists related to events

or conditions that may cast significant doubt on the Fund’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in

our auditors’ report to the related disclosures in the financial statements or, if such disclosures

are inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our auditors’ report. However, future events or conditions may cause

the Fund to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Fund,

including the disclosures, and whether the financial statements of the Fund represent the

underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Manager regarding, among other matters, the planned scope and timing of

the audit and significant audit findings, including any significant deficiencies in internal content that

we identify during our audit.

Other Matters

This report is made solely to the unitholders of the Fund, as a body, and for no other purpose. We do

not assume responsibility towards any other person for the contents of this report.

DELOITTE PLT (LLP0010145-LCA)

Chartered Accountants (AF 0080)

WONG YEW CHOONG

Partner - 03195/06/2019 J Chartered Accountant

21 August 2017

Documents

Cover AnnualReport equityTRUST-FA - Areca Capitalarecacapital.com/file/Areca_AnnualReportJun17_Equity Trust.pdf · 107, Blok B, Pusat Dagangan Phileo Damansara 1 No. 9, Jalan 16/11,