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Interim Report Dec 2019
For the Period Ended 31 December 2019
Areca incomeTRUST Fund
I NTERIM REPORT DECEM BER 2019
ARECA incomeTRUST FUND
Contents
CORPORATE DIRECTORY
2
MANAGER’S REPORT
Fund Information, Performance & Review 3 Market Review & Outlook 7
TRUSTEE’S REPORT 9
STATEMENT BY THE MANAGER 10
UNAUDITED FINANCIAL STATEMENTS FOR ARECA incomeTRUST FUND
11
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
2
C O R P O R A T E D I R E C T O R Y
MANAGER
Areca Capital Sdn Bhd
Company No: 200601021087 (740840-D)
107, Blok B, Pusat Dagangan Phileo Damansara 1
No. 9, Jalan 16/11, Off Jalan Damansara
46350 Petaling Jaya, Selangor
Tel: 603-7956 3111, Fax: 603-7955 4111
website: www.arecacapital.com
e-mail: invest@arecacapital.com
BOARD OF DIRECTORS Wong Teck Meng
(Chief Executive Officer Non-Independent)
Edward Iskandar Toh Bin Abdullah
(Executive Non-Independent)
Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin
(Independent Non-Executive Chairman)
Dr. Junid Saham
(Independent Non-Executive)
INVESTMENT COMMITTEE MEMBERS
Dato’ Seri Lee Kah Choon (Independent Non-Executive)
Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin
(Independent Non-Executive Chairman)
Dr. Junid Saham
(Independent Non-Executive)
TRUSTEE
Maybank Trustees Berhad
[Co No.: 1963001000109 (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: invest@arecacapital.com
PENANG BRANCH IPOH BRANCH MALACCA BRANCH
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
KUCHING BRANCH
1st Floor, Sublot 3
Lot 7998, Block16
KCLD, Cha Yi Goldland
Jalan Tun Jugah / Stutong
93350 Kuching, Sarawak
Tel : 6082-572 472
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
3
F U N D I N F O R M A T I O N
Name of the Fund Areca incomeTRUST Fund
Fund Category/
Type
Fixed Income/ Income
Objective of the
Fund
To provide investors with short to medium term capital preservation and a regular
income
Benchmark Maybank’s 6-month fixed deposit rate
Distribution
Policy of the
Fund
Twice a year, subject to availability of distribution income. In the absence of
written instructions from a Unit Holder, the Manager is entitled to reinvest the
income distributed from the Fund in additional units of that Fund at the NAV per
unit at the end of the distribution day with no entry fee.
Profile of
unitholdings
* excluding units held
by the Manager
As at 31 December 2019
Size of Holding (Units) No. of
accounts %
No. of unit
held
(million)
%
Up to 5,000 36 9.94 0.10 0.02
5,001 to 10,000 16 4.42 0.12 0.03
10,001 to 50,000 90 24.86 2.41 0.56
50,001 to 500,000 145 40.06 21.80 5.07
500,001 and above 75 20.72 405.30 94.32
Total* 362 100.00 429.73 100.00
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 23 April 2007
Initial Offer Price RM0.5000 per unit during the initial offer period of 21 days ended 13 May 2007
Pricing Policy Single Pricing – Selling and repurchase of units by Manager are at Net Asset Value
per unit
Financial Year
End
30 June
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
4
F U N D P E R F O R M A N C E
2019 2018 2017
NET ASSET VALUE (“NAV”) as at 31 December
Total Net Asset Value (RM million) 232.12 127.12 119.35
Units in circulation (million units) 429.74 240.63 234.76
NAV per unit (RM) 0.5401 0.5283 0.5084
2019 2018 2017
HIGHEST & LOWEST NAV PER UNIT for the period ended 31 December Please refer to Note 1 for further information on NAV and pricing policy
Highest NAV per unit (RM) 0.5404 0.5283 0.5084
Lowest NAV per unit (RM)
0.5287 0.5162 0.4996
2019 2018 2017
ASSET ALLOCATION % of NAV as at 31 December
Fixed Income Securities
Corporate bonds 74.06 71.26 80.41
Fixed Income Collective Investment Scheme 8.95 - 2.99
Preference shares 7.57 3.93 -
Cash & cash equivalent including placements & repo 9.42 24.81 16.60
DISTRIBUTION
There was no distribution for the financial period under review.
UNIT SPLITS
There was no unit split exercise for the financial period under review.
2019 2018 2017
EXPENSE/ TURNOVER for the period ended 31 December
Management expense ratio (MER) (%)
Please refer to Note 2 for further information
Portfolio turnover ratio (PTR) (times)
Please refer to Note 3 for further information
0.52 0.60 0.64
0.94 0.18 0.17
2019 2018 2017
TOTAL RETURN for the period ended 31 December
Please refer to Note 4 for further information
Total Return (%) 2.18 2.34 1.74
- Capital Return (%) 2.18 2.34 1.74
- Income Return (%) - - -
2019 2018 2017 2016 2015
Annual Total Return (%) 4.36 4.70 3.48 3.60 2.44
Benchmark: Average Maybank’s 6-month fixed
deposit rate (%) 3.06 3.33 3.07 3.10 3.27
1-yr 3-yrs 5-yrs
Average Total Return (%) 6.10 4.79 4.57
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
5
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: 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 3: 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 4: Fund performance figures are calculated based on NAV to NAV and assume reinvestment of
distributions (if any) at NAV. The total return and the benchmark data are sourced Lipper.
Unit prices and distributions payable, if any, may go down as well as up. Past performance is not
necessarily indicative of future performance.
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
6
F U N D R E V I E W
The Fund posted an annualised return of 4.36% p.a. versus 3.06% p.a. by its benchmark, Maybank’s
6-month fixed deposit rate. Over this 6 months period, despite some uncertainties to Malaysia as an
investment destination, the accommodative interest rates environment and the continued inflows into
our fixed income markets allowed the portfolio to reap the benefits of our lengthening duration
strategy and hence its outperformance.
The Fund enjoys a good spread of corporate credit diversification with about 29 issues across various
industries, the largest being property constituting 11.8% of our holdings. However, the largest
exposure is to the Malaysian Government (34.9%) through their issuances and guarantees. From
rating perspective, 69.2% of the portfolio is in bonds (Government and Corporate) that are rated AA
or better. For further diversification, there is 9.0% held in other Collective Investment Schemes. The
Fund has achieved its objective in providing short to medium term capital preservation and a regular
income for the period under review.
Looking ahead, we will maintain the portfolio duration with an eye to take profit in the months ahead.
We believe the economic environment continue to need an accommodative monetary policy, which in
turn remains favourable for the fixed income market.
Performance of Areca incomeTRUST Fund
for the financial period since inception to 31 December 2019
Investment Policy and Strategy
The Fund invests primarily (at least two third of its assets) in fixed income securities and money
market instruments predominantly with a minimum credit rating of ‘A3’ by RAM or such equivalent
rating by other rating agencies.
NAV per unit as at 31 December 2019 RM0.5401
Asset Allocation / Portfolio Composition as at 31 December 2019 2018 2017
Fixed income securities 74.06% 71.26% 80.41%
Fixed income collective investment scheme 8.95% - 2.99%
Preference shares 7.57% 3.93% -
Cash & cash equivalents 9.42% 24.81% 16.60%
74.06%
7.57%
8.95%
9.42%
Areca incomeTRUST
Maybank 6 Months Fixed Deposit
INTERIM REPORT DECEMBER 2019
MANAGER’S REPORT
7
MARKET REVIEW & OUTLOOK
The weakening United States (US) economy turned-around in the fourth quarter of the year by
registering a Gross Domestic Product (GDP) expansion of 2.3% over the same quarter of the previous
year. The first three quarters had registered a weakening trend of 2.7%, 2.3% and 2.1% respectively
which resulted in US Treasuries (UST) yields easing sharply across the curve and the 10y2y curve
inverting during the period amid growing recessionary fears. The US Federal Reserve (Fed) had cut
the federal funds rate (FFR) by 25 basis points (bps) each in July, September and October to support
the slowing economic growth amid weak global developments and muted inflation. However at its
October meeting, the central bank hinted at a pause in its easing cycle as it considered the current
stance of monetary policy appropriate to support sustained growth, strong labour market conditions
and inflation near the 2% target. In December, US President Donald Trump was impeached by the
House of Representatives on charges of abuse of power and obstruction of justice and the trial will
begin in early 2020 on whether to acquit or to remove him from office.
The European Central Bank (ECB), by contrast, maintained their key rates but hinted at possible rate
cuts and monetary easing whilst revising down its GDP and inflation forecasts for the year. It
resumed its monthly 20 billion Euro asset purchase program in November whilst Its new president
Christine Lagarde has called for more public investments by European governments to respond to the
challenges presented by trade tensions and technological disruptions amidst continuing weak trade
growth in the region.
Meanwhile, the UK held its general election in December 2019 and the ruling Conservative Party led
by the Prime Minister Boris Johnson gained a “historic” win and promised to deliver Brexit by 31
January. However, this resulted in continued losses for the local currency.
In China, trade surplus widened amid higher exports to ASEAN, South Korea and Japan. The People’s
Bank of China (PBoC) had devalued the Yuan in response to US tariffs and reformed its interest rate
to stimulate the economy. Credit growth rebounded by 10.7% although the central bank said it is not
looking to add any massive monetary stimulus. The economy slowed to its lowest level in nearly three
decades amid trade tensions, poor global economic growth and high off-balance sheet borrowings. The PBoC entered a rate-cutting cycle to prop up a slowing economy. Meanwhile, the US and China
reached an agreement on a phase one trade deal that involves a rollback of some tariffs and
increased agricultural purchases.
Malaysia’s economy grew by 4.4% and 3.6% year-on-year (yoy) in the third and fourth quarter of
2019, easing from a 4.9% expansion in the second quarter. This was the weakest GDP growth rate
since the third quarter of 2009 due mainly to a contraction in palm oil, crude oil and natural gas
output, and a 3.1% fall in exports amid global trade tensions. Considering 2019 full year, the
economy grew by 4.3%, the softest pace since 2016 and below the government’s forecast of 4.7%.
Bank Negara Malaysia (BNM) held its overnight policy rate (OPR) at 3% during its November meeting
stating that growth will continue to be supported by resilient private spending.
FIXED INCOME MARKET REVIEW & OUTLOOK
In third quarter, demand for government bonds (govvies) at public auctions remained robust,
supported by lower global rates and a benign inflation outlook. However, fourth quarter saw demand
for local govvies at public auctions suffering as the bid-to-cover (BTC) ratio declined. The total
combined outstanding MGS/GII declined to RM759.7 billion in December (June 2019: RM762.4 billion)
as the volume of matured MGS rose. Meanwhile, MGS outperformed in the secondary market with
both the 3y and 10y yields reaching multi-year lows. MGS yields fell as expectations that the Fed
would start its easing cycle and foreign demand gained traction. However, secondary market
performance turned weaker in September, mainly by nervous sentiment ahead of FTSE Russell’s
review announcement. MGS yields surged, with its yield curve steepening amid numerous external
headwinds, especially long-running issues of the US-China trade war and Brexit. At end-2019, MGS
yields settled at their multi-year lows with the 10y MGS shedding 33 bps to 3.30% (June: 3.63%).
Secondary market performance of MGS was supported by the significant decrease in US-China trade
tensions throughout the month.
INTERIM REPORT DECEMBER 2019
MANAGER’S REPORT
8
In the second half of 2019, foreign investors continued to flock into the local bond market, raising
their holdings of local bonds by RM22.1 billion (1H2019: RM2.2 billion). This brought the total foreign
holdings of local bonds by end-2019 to RM204.7 billion, the highest since April 2018. Foreign demand
for local bonds was fueled by the de-escalation of US-China trade tensions as both parties made
significant progress towards a phase one trade deal. Strong foreign demand for MGS was the main
contributor to the improvement in foreign holdings of local bonds in 2H2019 (41.58% of total MGS
outstanding).
Going forward, the prospects for the global economy look increasingly uncertain with the outbreak of
the novel coronavirus in China. This is not surprising given that the Chinese economy accounts for an
estimated one-third of global growth. Hence, we do not discount the possibility of another pre-
emptive rate cut by BNM within the first half of 2020, if the outbreak continues to worsen and a
vaccine is not yet found. We continue to be cautiously optimistic on fixed income in the medium term
and continue to be fully invested in good quality credits of mid duration bonds for our fixed income
funds.
INTERIM REPORT DECEMBER 2019
TRUSTEE’S REPORT
9
T R U S T E E ’ S R E P O R T
For The Financial Period Ended 31 December 2019
To the Unitholders of Areca incomeTRUST Fund
We have acted as Trustee for Areca incomeTRUST Fund (“the Fund”) for the financial period ended 31
December 2019. To the best of our knowledge, Areca Capital Sdn Bhd (“the Manager”) has managed
the Fund in the financial period 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.
For Maybank Trustees Berhad
[Company No.: 196301000109 (5004-P)]
JULIA BINTI MUSTAFA
Chief Executive Officer
Kuala Lumpur
27 February 2020
INTERIM REPORT DECEMBER 2019 STATEMENT BY THE MANAGER
10
STATEMENT BY THE MANAGER
To the Unitholders of Areca incomeTRUST Fund
We, Wong Teck Meng and EDWARD ISKANDAR TOH BIN ABDULAH, two of the Directors of the
Manager, Areca Capital Sdn Bhd, do hereby state that in the opinion of the Manager, the
accompanying unaudited financial statements are drawn up in accordance with Financial Reporting
Standards and the Securities Commission Malaysia’s Guidelines on Unit Trust Funds in Malaysia so as
to give a true and fair view of the financial position of the Fund as of 31 December 2019 and the
financial performance and the cash flow of the Fund for the period ended on that date.
For and on behalf of the Manager,
Areca Capital Sdn Bhd
WONG TECK MENG
CEO/ EXECUTIVE DIRECTOR
EDWARD ISKANDAR TOH BIN ABDULLAH
CIO/ EXECUTIVE DIRECTOR
Kuala Lumpur
27 February 2020
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
11
UNAUDITED STATEMENT OF FINANCIAL POSITION
As Of 31 December 2019 31.12.2019 31.12.2018
Note RM RM
Assets Investments
Collective investment scheme 5 20,778,323 -
Unquoted fixed income securities 5 171,904,031 90,581,535
Preference shares 5 17,581,151 5,000,000
Total Investments 210,263,505 95,581,535
Other Assets
Amount due from Manager 6 1,754,135 27,909
Other receivables 7 1,869,126 1,489,731
Short-term deposits 8 18,533,227 30,250,994
Cash at bank 7,313 3,900
Total Other Assets 22,163,801 31,772,534
Total Assets 232,427,306 127,354,069
Unitholder’s Fund and Liabilities
Unitholders’ Fund
Unitholders’ capital 9 213,621,538 111,431,740
Unrealised reserve 10 4,957,650 1,605,465
Realised reserve 11 13,536,340 14,082,098
Net Asset Value Attributable to Unitholders 232,115,528 127,119,303
Liabilities
Other payables and accrued expenses 12 311,778 234,766
Total Liabilities 311,778 234,766
Total Unitholders’ Fund and Liabilities 232,427,306 127,354,069
Number of Units in Circulation 9 429,739,929 240,631,940
Net Asset Value Per Unit 13 0.5401 0.5283
The accompanying Notes form an integral part of the Financial Statements
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
12
UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For 6-month Period Ended 31 December 2019
1.7.2019 to 1.7.2018 to
31.12.2019 31.12.2018
Note RM RM
Investment Income
Interest income 3,923,274 2,999,712
Investment income from preference shares 242,705 -
Other income 52,931 5,000
Net gain from investments:
Investments at fair value through profit or loss
(“FVTPL”) 5 1,595,208 380,998
Total Investment Income 5,814,118 3,385,710
Expenditure
Management fee 14 1,072,453 673,844
Trustee’s fee 15 91,274 48,728
Audit fee 977 -
Other expenses 1,481 530
Total Expenditure 1,166,185 723,102
Net Income Before Tax 4,647,933 2,662,608
Income Tax Expense 16 - -
Net Income After Tax/Total Comprehensive Income
For The Period 4,647,933 2,662,608
Net Income After Tax Is Made Up Of:
Realised gain 3,905,474 1,669,602
Unrealised gain 742,459 993,006
4,647,933 2,662,608
The accompanying Notes form an integral part of the Financial Statements
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
13
UNAUDITED STATEMENT OF CHANGES IN NET ASSET VALUE
For 6-month Period Ended 31 December 2019
Unitholders’
capital
Realised
reserve
Unrealised
reserve
Total net
asset value
RM RM RM RM
As of 1 July 2018 104,110,943 12,412,496 612,459 117,135,898
Amounts received/receivable from units created 81,029,243 81,029,243
Amounts paid for units cancelled (73,708,446) (73,708,446)
Total comprehensive income for the
period 2,662,608 2,662,608
Net unrealised gain transferred to
unrealised reserve (993,006) 993,006
As of 31 December 2018 111,431,740 14,082,098 1,605,465 127,119,303
As of 1 July 2019 184,141,595 9,630,866 4,215,191 197,987,652
Amounts received/receivable from
units created 124,637,203 124,637,203
Amounts paid/payables for units
cancelled
(95,157,260) (95,157,260)
Total comprehensive income for the
period 4,647,933 4,647,933
Net unrealised gain transferred to unrealised reserve (742,459) 742,459
As of 31 December 2019 213,621,538 13,536,340 4,957,650 232,115,528
The accompanying Notes form an integral part of the Financial Statements
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
14
UNAUDITED STATEMENT OF CASH FLOWS
For 6-month Period Ended 31 December 2019
1.7.2019 to
31.12.2019
1.7.2018 to
31.12.2018
RM RM
Cash Flows (Used In)/ From Operating Activities
Proceeds from disposal of investments 87,463,338 36,003,916
Interest received 3,750,011 3,008,161
Investment income from preference shares 237,500 -
Other income 52,931 5,000
Purchase of investments (170,238,035) (26,993,655)
Management fee paid (888,788) (678,847)
Trustee’s fee paid (228,638) (48,247)
Payment for other fees and expenses (18,738) (17,800)
Net Cash (Used In)/ From Operating Activities (79,870,419) 11,278,528
Cash Flows From Financing Activities
Cash proceeds from units created 123,644,068 81,099,334
Payment for cancellation of units (95,068,260) (73,708,446)
Net Cash From Financing Activities 28,575,808 7,390,888
Net (Decrease)/Increase In Cash And Cash Equivalents (51,294,611) 18,669,416
Cash And Cash Equivalents At Beginning Of Period 69,835,151 11,585,478
Cash And Cash Equivalents At End Of Period 18,540,540 30,254,894
Cash and cash equivalents consist of the following amounts: 2019 2018
RM RM
Short-term deposits 18,533,227 30,250,994
Cash at bank 7,313 3,900
18,540,540 30,254,894
The accompanying Notes form an integral part of the Financial Statements
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
15
NOTES TO THE FINANCIAL STATEMENTS
1 GENERAL INFORMATION
Areca incomeTRUST Fund (“the Fund”) was established pursuant to the Trust Deed dated 12
March 2007 as modified by the First Supplemental Deed dated 27 June 2007, Second
Supplemental Deed dated 14 April 2008, Third Supplemental Deed dated 21 October 2008,
Fourth Supplemental Master Deed dated 10 April 2009, Fifth Supplemental Master Deed dated 12
March 2013 and Sixth Supplemental Master Deed dated 6 September 2013 between Areca Capital
Sdn Bhd as the Manager, the Trustee and all the registered unitholders of the Fund (“the Deed”).
The principal activity of the Fund is to invest in investments as defined under Schedule 7 of the
Deed, which include fixed income securities issued by the Malaysian government or BNM or any
other government related bodies, issues guaranteed by the government of Malaysia or BNM or
any state government in Malaysia, deposit and issues by financial institution, corporate bonds,
foreign currency, units and shares in other collective investment schemes, derivatives such as
future contract, structured products and any other form of investment as may be permitted by
the relevant authorities from time to time. The Fund commenced operations on 23 April 2007 and
will continue its operations until terminated by the Trustee in accordance with Part 12 of the Deed.
The objective of the Fund is to provide investors with short to medium term capital preservation
and a regular income could be in the form of units or cash.
The Manager of the Fund is Areca Capital Sdn Bhd, a company incorporated in Malaysia. Its
principal activities are managing private and unit trust funds.
2 BASIS OF PREPARATION OF 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 and
Amendments
The Fund has applied the following Standards and Amendments for the first time for the financial
period beginning on 1 July 2018:
The adoption of these relevant new MFRSs, Amendments to MFRSs and IC Interpretation did not result in significant changes in the accounting policies of the Fund and has no significant effect on
the financial performance or position of the Fund except for the adoption of MFRS 9 as stated
below.
MFRS 9 Financial Instruments
MFRS 9 replaces MFRS 139, Financial Instruments: Recognition and Measurement (“MFRS 139”)
and introduces new requirements for classification and measurement of financial instruments,
impairment and disclosure requirements. Retrospective application is required, but restatement of comparative information is not compulsory.
(i) Classification and measurement of financial instruments:
From 1 July 2018, the Fund applied the following MFRS 9 classification approach to all types
of financial assets:
• Investments in debt instruments: There are 3 subsequent measurement categories:
amortised cost, fair value with changes either recognised through other
comprehensive income (“FVTOCI”) or through profit or loss (“FVTPL”).
MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)
MFRS 15 Revenue from Contracts with Customers
Amendments to MFRSs Annual Improvements to MFRSs 2014-2016 Cycle
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
16
• Investments in equity instruments: These instruments are always measured at fair
value with changes in fair value presented in profit or loss unless the Fund has made
an irrevocable choice to present changes in fair value in other comprehensive income
for investments that are not held for trading.
• The new accounting policies for classification and measurement of financial
instruments under MFRS 9 are set out in Note 3.
The table below illustrates the classification and measurement of financial assets and
financial liabilities under MFRS 139 and MFRS 9 at the date of initial application, 1
July 2018.
Original measurement
category under MFRS
139
New measurement
category under MFRS 9
Finance assets
Amount due from Manager Loan and receivables At amortised cost
Other receivables Loan and receivables At amortised cost
Short-term deposits Loan and receivables At amortised cost
Cash at bank Loan and receivables At amortised cost
Financial liabilities
Other payables and accrued
expenses
Other financial liabilities At amortised cost
(ii) Impairment of financial assets
From 1 July 2018, the Fund applied the expected credit losses (“ECL”) model to determine
impairment on financial assets at amortised cost. The new accounting policies for
impairment under MFRS 9 are set out in Note 3.
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 16 Leases1
Amendments to:
MFRS 3 Business Combinations – Definition of Business2 MFRS 9 Prepayment Features with Negative Compensation1
MFRS 17 Insurance Contracts3
MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture4
MFRS 101 and MFRS 108 Definition of Material2
MFRS 128 Long-term Interests in Associates and Joint Ventures1
MFRS 119 Plan Amendment, Curtailment or Settlement1
IC interpretation 23 Uncertainty over Income Tax Treatments1
References to the Conceptual Framework in MFRS Standards2
Annual Improvements to MFRSs 2015 - 2017 Cycle 1 1 Effective for annual periods beginning on or after 1st January 2019 2 Effective for annual periods beginning on or after 1st January 2020 3 Effective for annual periods beginning on or after 1st January 2021 4 Effective date deferred to a date to be announced by MASB
The Manager of the Fund anticipates that the abovementioned Standards, IC Interpretations
and Amendments will be adopted in the annual financial statements of the Fund when they
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
17
become effective and that the adoption of these Standards, IC Interpretations and Amendments
will have no material impact on the financial statements of the Fund in the period of initial
application.
3 SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Fund have been prepared under the historical cost convention.
Historical cost is generally based on the fair value of the consideration given in exchange for
assets.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another valuation technique. In estimating the
fair value of an asset or a liability, the Fund takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset
or liability at the measurement date. Fair value for measurement and/or disclosure purposes in
these financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of MFRS 2, leasing transactions that are within the scope of
MFRS 117, and measurements that have some similarities to fair value but are not fair value,
such as net realisable value in MFRS 102 or value in use in MFRS 136.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,
2 or 3 based on the degree to which the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies adopted are set out below.
Income Recognition
Interest income from unquoted fixed income securities and short-term deposits is recognised on a
time proportion basis that reflects the effective yield on the asset.
Realised gain and loss on disposal of investments is arrived at based on net sales proceeds less
carrying value and from reversal of prior year’s unrealised gains and losses for financial
instruments which were realised (i.e. sold, redeemed or matured) during the reporting period.
Unrealised gains and losses comprise changes in the fair value of financial instruments for the
reporting period.
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.
Income Tax
Income tax comprises Malaysian corporate tax for the reporting period, 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.
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.
INTERIM REPORT DECEMBER 2019
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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.
Unitholders’ Capital
The unitholders’ contributions to the Fund meet the definition of puttable instruments classified as
equity instruments under the revised MFRS 132 “Financial Instruments: Presentation”.
The units in the Fund are puttable instruments which entitle the unitholders to a pro-rata share of
the net asset value of the Fund. The units are subordinated and have identical features. There is
no contractual obligation to deliver cash or another financial asset other than the obligation on
the Fund to repurchase the units. The total expected cash flows from the units in the Fund over
the life of the units are based on the change in the net asset value of the Fund.
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 unitholders with the total number of
outstanding units.
Financial Instruments
MFRS 9 replaces the provisions of MFRS 139 that relates to the recognition, classification and
measurement of the financial assets and financial liabilities, derecognition of the financial
instruments and impairment of financial assets. The adoption of MFRS 9 ‘Financial Instruments’
from 1st July 2018 resulted in changes in accounting policies and adjustments to the amounts
recognised in the financial statements. The Fund has elected to apply the limited exemption in
MFRS 9 relating to transition for classification and measurement and impairment, and accordingly
has not restated comparative periods in the year of initial application.
As a consequence:
(a) any adjustments to carrying amounts of financial assets or liabilities are recognised at
the beginning of the current reporting period, with the difference recognised in opening
retained earnings;
(b) financial assets are not reclassified in the statements of financial position for the
comparative period; and
(c) provisions for impairment have not been restated in the comparative period.
Financial Assets
Accounting policies applied from 1 July 2018
(i) Classification
From 1 July 2018, the Fund classified its financial assets in the following measurement
categories:
• those to be measured subsequently at fair value (either through other
comprehensive income or through profit or loss), and
• those to be measured at amortised cost
The classification depends on the entity’s business model for managing the financial
assets and the contractual terms of the cash flows.
INTERIM REPORT DECEMBER 2019
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For assets measured at fair value, gains and losses will either be recorded in profit or
loss or other comprehensive income. For investments in equity instruments that are not
held for trading, the Fund can make an irrevocable election at the time of initial
recognition to account for the equity investment either at fair value through other
comprehensive income (“FVTOCI”) or fair value through profit or loss (“FVTPL”).
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the
date on which the Fund commits to purchase or sell the asset. Financial assets are
derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Fund has transferred substantially all the risks
and rewards of ownership.
(iii) Measurement
At initial recognition, the Fund measures a financial asset at its fair value plus, in the
case of a financial asset not at FVTPL, transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial assets carried at
FVTPL are expenses in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when
determining whether their cash flows are solely payments of principal and interest
(“SPPI”).
Impairment of financial assets
Accounting policies applied from 1 July 2018
The Fund assesses at the end of each reporting period whether there is any objective evidence
that a financial asset is impaired.
The measurement of expected credit losses (“ECL”) is a function of the probability of default, loss
given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The
assessment of the probability of default and loss given default is based on historical data adjusted
by forward-looking information. As for the exposure at default, for financial assets, this is
represented by the financial assets’ gross carrying amount at the end of each reporting period.
The impairment methodology applied depends on whether there has been a significant increase in
credit risk.
The Fund applies the simplified approach under MFRS 9 which requires expected lifetime loss to
be recognised from initial recognition. The expected loss allowance is based on provisional matrix.
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 transfer nor retain 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 continue to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
Equity instruments
The Fund subsequently measure all equity investments at fair value. Where the the Fund’s
management have elected to present fair value gains and losses on equity investments in other
comprehensive income, there is no subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment. Dividends from such investments
continue to be recognised in profit or loss as other income when the Fund’s right to receive
payments is established.
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Changes in the fair value of financial assets at FVTPL are recognised in other income/(losses) in
profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity
investments measured at FVTOCI are not reported separately from other changes in fair value.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is any liability with contractual obligation to deliver cash or another financial
asset to another enterprise, or to exchange financial instruments with another enterprise under
conditions that are potentially unfavourable.
(a) Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when financial liabilities are either
held for trading or it is designated as at FVTPL. Financial liabilities at FVTPL are
measured at fair value at the end of each reporting period, with any fair value
gains or losses recognised in profit or loss.
For financial liabilities where it is designated as fair value through profit or loss
upon initial recognition, the Company recognises the amount of change in fair
value of the financial liability that is attributable to change in credit risk in the
other comprehensive income and remaining amount of the change in fair value in
the profit or loss, unless the treatment of the effects of changes in the liability’s
credit risk would create or enlarge an accounting mismatch.
(b) Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not held for trading, or designated as at FVTPL, are
measured subsequently 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 (including all fees and points paid or received that form an integral
part of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial liability, or (where
appropriate) a shorter period, to the amortised cost of a financial liability.
A financial liability is derecognised when the obligation under the liability is extinguished. When
an existing financial liability is replaced by another from the same lender on substantially
difference terms, or the terms of an existing liability are substantially modified, such an exchange
or modification is treated as derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognised in profit or loss.
Investments
Investments in quoted securities are classified as at FVTPL and valued at the last market price
quoted on Bursa Malaysia at the end of the reporting period.
Unquoted fixed income securities are classified as FVTPL and are generally valued on a daily basis
with the appropriate prices by reference to quotes published by an approved bond pricing agency
(“BPA”). When no market prices are available or during abnormal market or when the Manager is
of the view that the quotes by the BPA differ from the ‘market price’ by 20 basis points, such
securities will be valued at ‘fair values’ in accordance with the requirements stipulated in the
Guidance Note issued by the Securities Commission Malaysia.
Investment in unlisted collective investment schemes are classified as FVTPL and are valued at
the last published repurchase price per unit of such collective investment scheme.
Investment in preference shares are classified as FVTPL and are valued at the latest market price
per unit of such preference shares.
INTERIM REPORT DECEMBER 2019
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Gains or losses arising from the changes in the fair value of the investments is recognised as
gains or losses from investments in profit or loss and transferred to unrealised reserve.
Classification of Realised and Unrealised Gains and Losses
Unrealised gains and losses comprise changes in the fair value of financial instruments for the
period and from reversal of prior period’s unrealised gains and losses for financial instruments
which were realised (i.e. sold, redeemed or matured) during the reporting period.
Provisions
The Fund recognises a liability as a provision if the outflows required to settle the liability are
uncertain in timing or amount.
A provision for onerous contracts is recognised when the Fund has a present legal or constructive
obligation as a result of a past event, and of which the outflows of resources on settlement are
probable and a reliable estimate of the amount can be made. No provision is recognised if these
conditions are not met.
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.
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 reporting period.
5 INVESTMENTS
Investments designated as FTVL are as follows:
2019 2018
At aggregate cost Note RM RM
Collective investment scheme 5(a) 20,839,730 -
Unquoted fixed income securities 5(b) 166,884,975 88,976,070
Preference shares 5(c) 17,220,000 5,000,000
204,944,705 93,976,070
2019 2018
At fair value RM RM
Collective investment scheme 5(a) 20,778,323 -
Unquoted fixed income securities 5(b) 171,904,031 90,581,535
Preference shares 5(c) 17,581,151 5,000,000
210,263,505 95,581,535
INTERIM REPORT DECEMBER 2019
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2019 2018
Net gain on investments at FVTPL comprised: RM RM
Realised loss on disposals (174,437) (612,008)
Accretion of discount of preference shares 666,035 -
Accreation of discount of preference shares 361,151 -
Net unrealised gain on changes in fair value 742,459 993,006
1,595,208 380,998
5(a) Details of collective investment scheme are as follows:
2019
Collective
Investment
Scheme Quantity
Market
Price
Aggregate
Cost
Carrying
Value Fair Value
Fair
Value
as a %
of Net
Asset
Value
Units RM RM RM RM %
Areca MoneyTrust Fund
41,556,646
0.500
20,839,730
20,826,949
20,778,323
8.95
5(b) Details of unquoted fixed income securities are as follows:
2019 Issuer (rating) maturity/
coupon (%)
Nominal
Value
Valuation
Price
Aggregate
Cost
Carrying
Value
Fair
Value
Fair Value
as a % of Net Asset
Value
RM RM RM RM RM %
Bonds GII Murabahah (NR) 2026/3.726 10,000,000 102.4000 10,083,000 10,083,000 10,240,000 4.41 Malaysian Government
Securities (NR) 2030/4.498 9,000,000 108.6840 9,171,900 9,590,670 9,781,560 4.21
Malaysian Government
Securities (NR) 2048/4.921 8,500,000 113.8000 8,943,105 9,324,500 9,673,000 4.17 GII Murabahah (NR) 2027/4.755 8,500,000 111.5740 8,559,500 9,235,250 9,483,790 4.09
GII Murabahah (NR) 2047/4.895 8,000,000 114.4990 9,720,000 9,720,000 9,159,920 3.95
Malaysian Government Services
(NR) 2043/4.935 8,000,000 114.1140 9,468,000 9,468,000 9,129,120 3.93 GII Murabahah (NR) 2024/3.655 8,000,000 102.0500 8,111,680 8,111,680 8,164,000 3.52
GENM Malaysia Berhad
(AAA)2028/5.300 7,000,000 108.7060 7,000,000 7,568,190 7,609,420 3.28
KMCOB Capital Berhad (AAA)
2020/4.900 7,000,000 100.7600 6,997,200 7,041,160 7,053,200 3.04 GII Murabahah (NR) 2049/4.638 6,000,000 109.9000 5,978,640 6,294,600 6,594,000 2.84
Al Dzahab Assets Berhad (AAA)
2023/5.700 5,000,000 105.9660 5,332,000 5,332,000 5,298,300 2.28
CIMB Group Holdings Berhad (A1) 2116/5.800 5,000,000 102.4810 5,032,400 5,126,750 5,124,050 2.21
Malayan Banking (AAA)
2117/4.080 5,000,000 100.7190 5,000,000 5,000,000 5,035,950 2.17
Genting Capital Berhad (AAA) 2029/4.180 5,000,000 100.3970 5,000,000 5,000,000 5,019,850 2.16
Press Metal Aluminium Holdings
Berhad (AA3) 2024/4.100 5,000,000 100.008 5,000,000 5,000,000 5,000,400 2.16
Eastern & Oriental Berhad (NR)
2020/2.000 5,000,000 99.3590 4,323,000 4,872,300 4,967,950 2.14 UEM Sunrise Berhad (AA-)
2022/4.800 4,500,000 102.8980 4,505,050 4,591,800 4,630,410 2.00
Alpha Circle Sdn Bhd (AA-)
2020/5.300 4,301,000 100.9390 4,301,000 4,301,000 4,341,386 1.87 Sabah Development Bank
Berhad (AA1) 2022/5.300 4,000,000 103.4800 4,018,900 4,101,920 4,139,200 1.78
TRIplc Ventures Sdn Bhd (AAA)
2021/5.460 4,000,000 103.4050 4,000,000 4,143,880 4,136,200 1.78 Syarikat Prasarana Negara
Berhad (NR) 2039/4.090 4,000,000 101.4840 4,000,000 4,000,000 4,059,360 1.75
INTERIM REPORT DECEMBER 2019
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2019
Issuer (rating) maturity/
coupon (%)
Nominal
Value
Valuation
Price
Aggregate
Cost
Carrying
Value
Fair
Value
Fair Value
as a % of
Net Asset
Value
RM RM RM RM RM % Bonds
Lebuhraya Duke Fasa 3 Sdn Bhd
(AA-) 2037/6.230 3,500,000 115.9250 3,582,600 4,014,290 4,057,375 1.75
Telekosang Hydro One Sdn Bhd (AA3) 2032/5.300 4,000,000 101.2060 4,037,600 4,037,600 4,048,240 1.74
CIMB Thai Bank Public Company
Limited (AA3) 2029/4.150 4,000,000 100.6830 4,000,000 4,000,000 4,027,320 1.74
DRB-Hicom Berhad (A+) 2024/4.550 4,000,000 100.3580 4,000,000 4,000,000 4,014,320 1.73
AZRB Capital Sdn Bhd (AA-)
2022/4.700 4,000,000 99.9990 4,000,000 4,000,000 3,999,960 1.72
Lembaga Pembiayaan Perumahan Sektor Awam
(NR) 2036/4.620 3,000,000 108.6590 3,000,000 3,195,330 3,259,770 1.40
Premier Auto Asets Berhad
(AAA) 2021/4.650 3,000,000 100.1010 3,000,000 3,000,000 3,003,030 1.29
CIMB Group Holdings Berhad (A1) 2116/5.400 2,000,000 104.1970 2,000,000 2,061,840 2,083,940 0.90
DRB Hicom Berhad (A)
2020/7.500 2,000,000 101.0100 2,016,400 2,040,440 2,020,200 0.87
Alpha Circle Sdn Berhad (AA-) 2021/5.450 1,825,000 101.9540 1,825,000 1,825,000 1,860,660 0.80
Alpha Circle Sdn Berhad (AA-)
2021/5.300 878,000 101.1560 878,000 878,000 888,150 0.38
Total bonds 166,884,975 170,959,200 171,904,031 74.06
2018
Issuer (rating) maturity/ coupon (%)
Nominal Value
Valuation Price
Aggregate Cost
Carrying Value
Market Value
Fair Value
as a % of
Net Asset Value
RM RM RM RM RM %
Bonds
Hong Leong Bank Berhad (AA2) 2039/8.25 9,500,000 102.5820 9,405,000 9,892,350 9,745,290 7.67
GENM Capital Berhad (AAA)
2028/5.30 7,000,000 103.1440 7,000,000 7,000,000 7,220,080 5.68
KMCOB Capital Berhad (AAA)
2020/4.90 7,000,000 100.0630 6,997,200 6,997,200 7,004,410 5.51 Golden Assets International
Finance Limited (A1)
2019/5.35 6,500,000 100.3350 6,508,000 6,518,070 6,521,775 5.13
CIMB Group Holdings Berhad (A1) 2116/5.80 5,000,000 102.3000 5,032,400 5,092,850 5,115,000 4.02
Sports Toto Malaysia Sdn
Berhad (AA-) 2019/4.82 5,000,000 100.1550 5,030,600 5,010,850 5,007,750 3.94
Eastern & Oriental Berhad (NR) 2020/2.00 5,000,000 95.6054 4,323,000 4,691,380 4,780,270 3.76
TRIplc Ventures Sdn Bhd (AAA)
2021/5.46 4,000,000 103.1730 4,000,000 4,118,600 4,126,920 3.25
CIMB Thai Bank Public Company Limited (AA3) 2024/5.60 4,000,000 100.5940 4,036,750 4,032,280 4,023,760 3.16
UEM Sunrise Berhad (AA-)
2022/4.80 4,000,000 100.3400 4,003,300 3,994,000 4,013,600 3.16
Lebuhraya DUKE Fasa 3 Sdn
Berhad (AA-) 2037/6.23 3,500,000 109.2950 3,582,600 3,787,665 3,825,325 3.01 Al Dzahab Assets Berhad (AAA)
2021/5.50 3,500,000 102.7770 3,500,000 3,595,935 3,597,195 2.83
Sarawak Hidro Sdn Berhad
(AAA) 2024/4.34 3,500,000 99.8240 3,521,000 3,464,720 3,493,840 2.75 AmBank (M) Berhad (A1)
2039/8.25 3,000,000 102.3750 3,000,000 3,115,470 3,071,250 2.42
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
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2018
Issuer (rating) maturity/
coupon (%)
Nominal
Value
Valuation
Price
Aggregate
Cost
Carrying
Value
Market
Value
Fair Value
as a % of
Net Asset
Value RM RM RM RM RM %
Bonds
Sabah Development Bank
Berhad (AA1) 2022/5.30 3,000,000 100.7600 3,002,700 3,041,640 3,022,800 2.38 Alpha Circle Sdn Berhad (AA-)
2019/5.15 3,000,000 100.1680 3,000,000 2,996,400 3,005,040 2.36
Lembaga Pembiayaan
Perumahan Sektor Awam
(NR) 2036/4.62 3,000,000 98.2010 3,000,000 2,848,710 2,946,030 2.32 CIMB Group Holdings Berhad
(A1) 2116/5.40 2,000,000 101.9780 2,000,000 2,000,000 2,039,560 1.60
Al Dzahab Assets Berhad (AAA)
2020/4.93 2,000,000 100.7350 2,015,200 2,015,200 2,014,700 1.58 DRB-Hicom Berhad (A+)
2019/5.90 2,000,000 100.1760 2,001,920 2,002,460 2,003,520 1.58
DRB-Hicom Berhad (A-)
2114/7.50 2,000,000 100.1310 2,016,400 1,995,120 2,002,620 1.58 Alpha Circle Sdn Berhad (AA-)
2019/5.00 2,000,000 100.0400 2,000,000 2,000,000 2,000,800 1.57
Total unquoted fixed income
securities 88,976,070 90,210,900 90,581,535 71.26
5(c) Details of preference shares are as follows:
2019
Preference shares
Quantity Units
Valuation Price
Aggregate Cost
Carrying Value
Fair Value
Fair
Value as
a % of
Net
Asset Value
RM RM RM RM RM %
PNS Group Sdn Bhd (NR)
2019/0.00 13,000,000 0.9678 12,220,000 12,220,000 12,581,151 5.42 Utuh Sejagat Sdn Bhd (NR)
2019/9.50 5,000,000 1.00 5,000,000 5,000,000 5,000,000 2.15
Total preference shares 17,220,000 17,220,000 17,581,151 7.57
Total 2019 investments 204,944,705 209,006,149 210,263,505 90.58
2018
Preference shares
Quantity Units
Valuation Price
Aggregate Cost
Carrying Value
Fair Value
Fair Value as
a % of
Net
Asset Value
RM RM RM RM RM %
Utuh-Sejagat Sdn Bhd (NR)
2019/9.50 5,000,000 1.00 5,000,000 5,000,000 5,000,000 3.93
Total 2018 investments 93,976,070 95,210,900 95,581,535 75.19
6 AMOUNT DUE FROM/(TO) MANAGER
2019 2018 RM RM
Amount due from/(to) Manager comprises:
Amount due from Manager 2,043,135 27,909
Amount due to Manager (289,000) -
1,754,135 27,909
INTERIM REPORT DECEMBER 2019
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Amount due from/(to) Manager consists of amounts receivable from/(payable to) the Manager in
respect of creation/(cancellation) of units. Amount receivable for units created/(cancelled) is
received/(paid) within 10 days of the transaction dates.
7 OTHER RECEIVABLES
2019 2018
RM RM
Interest receivables from:
Unquoted fixed income securities 1,833,576 1,456,898
Preference shares 33,835 -
Short-term deposits 1,715 32,833
1,869,126 1,489,731
8 SHORT-TERM DEPOSITS
Short-term deposits represent deposits with local licensed financial institutions.
The effective average interest rate for short-term deposits is 3.06% per annum (2018: 3.59%
per annum) and the average maturity period is 9 days (2018: 23 days).
9 UNITHOLDERS’ CAPITAL
--------2019--------- -------2018-------
No. of units RM No. of units RM
At beginning of period 374,564,230 184,141,595 226,681,995 104,110,943
Created during the period 232,764,900 124,637,203 154,695,755 81,029,243
Cancelled during the period (177,589,201) (95,157,260) (140,745,810) (73,708,446)
At end of period 429,739,929 213,621,538 240,631,940 111,431,740
10 UNREALISED RESERVE
2019 2018
RM RM
Balance at beginning of period 4,215,191 612,459
Net unrealised gain attributable to investment held at fair
value through profit or loss
742,459
993,006
Balance at end of period 4,957,650 1,605,465
Investments:
At fair value 210,263,505 95,581,535
At cost (204,944,705) (93,976,070)
Accretion of discount (361,151) -
Unrealised reserve 4,957,560 1,605,465
11 REALISED RESERVE 2019 2018
RM RM
Balance at beginning of period 9,630,866 12,412,496
Total comprehensive income for the period 4,647,933 2,662,608
Net unrealised gain transferred to unrealised reserve (742,459) (993,006)
Balance at end of period 13,536,340 14,082,098
12 OTHER PAYABLES AND ACCRUED EXPENSES
2019 2018
RM RM
Management fee 173,902 103,030
Trustee’s fee 15,326 8,167
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
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2019 2018
RM RM
Tax agent’s fee 3,800 3,800
Advance coupon 118,750 -
Others - 1,019
311,778 116,016
13 NET ASSET VALUE PER UNIT
The net asset value per unit is calculated by dividing the net asset value attributable to
unitholders of RM232,115,528 (2018: RM127,119,303) as of 31 December 2019 by 429,739,929
units in issue as of 31 December 2019 (2018: 240,631,940 units).
14 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 0.94% (2018: 1.11%) per
annum for the period, net of management fee rebate on the collective investment scheme.
15 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% (2018: 0.08%) per annum for the
period.
16 INCOME TAX EXPENSE
There is no tax charge as interest income derived by the Fund is exempted pursuant to Schedule
6 of the Income Tax Act, 1967. Gains arising from realisation of investments and investment
from preference shares are not treated as income pursuant to Paragraph 61(1)(b) of the Income
Tax Act, 1967.
17 MANAGEMENT EXPENSE RATIO & PORTFOLIO TURNOVER
Management Expense Ratio (MER)
Management expense ratio for the Fund is 0.52% (2018: 0.60%) for the financial period ended
31 December 2019. The management expense ratio which includes management fee, Trustee’s
fee and other expenses, is calculated as follows:
MER = (A + B + C ) ÷ D x 100
A = Management fee C = Other expenses
B = Trustee’s fee D = Average net asset value of Fund
The average net asset value of the Fund for the financial period is RM226,319,077 (2018:
RM120,824,232).
Portfolio Turnover Ratio (PTR)
The portfolio turnover ratio for the Fund is 0.94 times (2018: 0.18 times) for the period ended
31 December 2019. The portfolio turnover is derived from the following calculation:
(Total acquisition for the financial period + total disposal for the financial period) ÷ 2
Average net asset value of the Fund for the period calculated on a daily basis
Where: total acquisition for the financial period = RM368,716,832 (2018: RM27,179,154)
total disposal for the financial period = RM55,963,338 (2018: RM16,215,208)
INTERIM REPORT DECEMBER 2019
ARECA incomeTRUST FUND
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18 UNITS HELD BY THE MANAGER AND RELATED PARTIES
As of end of the financial period, the total number and value of units held by the Manager and
related parties are as follows:
2019 No. of units
The Manager 14,555
2018 No. of units RM
The Manager -
Danny Wong Teck Meng 55,540 29,342
Edward Iskandar Toh Bin Abdullah 34,246 18,092
89,786 47,434
The directors of the Manager are of the opinion that the transactions with the related parties
have been entered into in the normal course of business and have been established on terms
and conditions that are not materially different from that obtainable in transactions with
unrelated parties.
19 TRADE WITH BROKERS/ DEALERS
Details of transactions with brokers/dealers are as follows:
Brokers/ Dealers
Value of
Trades
% of
Total
Trades Fees
% of Total
Brokerage
Fee
RM % RM %
2019
UOB Asset Management (Malaysia)
Berhad
235,735,021 44.17 - -
Hong Leong Investment Bank Bhd 67,378,411 12.63 - -
Affin Hwang Investment Bank 66,451,000 12.45 - -
KAF Investment Bank Berhad 44,680,000 8.37 - -
Malayan Banking Berhad 33,192,959 6.22 - -
CIMB Bank Berhad 25,192,765 4.72 - -
Hong Leong Asset Management
Berhad
12,895,996
2.42
-
-
KAF Asset Management Berhad 12,886,833 2.41 - -
CIMB Bank Islamic Berhad 8,208,348 1.54 - -
AmFunds Management Berhad 7,979,890 1.50 - -
RHB Investment Bank Berhad 7,004,000 1.31 - -
Bank Islam Malaysia Berhad 4,037,600 0.76 - -
Kenanga Investment Bank Berhad 4,000,000 0.75 - -
RHB Asset Management Berhad 2,000,555 0.38 - -
Manulife Asset Management Sdn
Bhd
2,000,042
0.37
-
-
533,643,420 100.00 - -
2018
KAF Investment Bank Berhad 81,859,000 48.45 - -
Hong Leong Investment Bank
Berhad
60,236,004 35.65 - -
CIMB Bank Berhad 16,684,800 9.87 - -
Affin Hwang Investment Bank 4,013,000 2.38 - -
CIMB Bank Islamic Berhad 4,000,120 2.37 - -
RHB Investment Bank Berhad 2,000,000 1.18 - -
CIMB Investment Bank Berhad 170,000 0.10 - -
168,962,924 100.00 - -
INTERIM REPORT DECEMBER 2019
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28
Included in transactions with broker/dealers are trades conducted on normal term in relation to
investment in collective investment scheme managed by Manager.
20 RISK MANAGEMENT POLICIES
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Fund seeks to preserve capital as well as to provide regular income over the short to
medium term period by investing in fixed income instruments. In order to meet its stated
investment objectives, the Fund utilises risk management for both defensive and proactive
purposes. Rigorous analysis of sources of risk in the portfolio is carried out and the following
policies are implemented to provide effective ways to reduce future risk and enhance future
returns within the Fund’s mandate.
The key risks faced by the Fund are credit risk, liquidity risk, market risk (including interest rate
risk and price risk) on its investments and capital risk.
Categories of Financial Instruments 2019 2018
RM RM
Financial assets
Carried at FVTPL:
Collective investment scheme 20,778,323 -
Unquoted fixed income securities 171,904,031 90,581,535
Preference shares 17,581,151 5,000,000
Amortised cost:
Amount due from Manager 1,754,135 27,909
Other receivables 1,869,126 1,489,731 Short-term deposits 18,533,227 30,250,994
Cash at bank 7,313 3,900
Financial liabilities
Amortised cost: Other payables and accrued expenses 311,778 234,766
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 31 December 2019.
The Fund invests only in unquoted investments of at least investment grade as rated by a credit
rating agency. The Fund also invests in government backed/related securities and preference
shares which are not rated by credit rating agency. The following table set out the Fund’s
portfolio of unquoted investments by rating categories:
INTERIM REPORT DECEMBER 2019
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29
Credit rating
Market Value
RM
As a % of
unquoted
investments
As a % of
NAV
2019
Bonds
AAA 32,120,000 16.95 13.84
AA1 4,139,200 2.18 1.78
AA3 18,111,910 9.56 7.80
AA- 19,777,941 10.44 8.52
A1 7,207,990 3.80 3.11
A+ 4,014,320 2.12 1.73
A 2,020,200 1.07 0.87
NR (LT) 102,093,621 53.88 43.98
189,485,182 100.00 81.63
2018
Bonds
AAA 27,457,145 28.73 21.60
AA1 3,022,800 3.16 2.38
AA2 9,745,290 10.20 7.67
AA3 4,023,760 4.21 3.16
AA- 17,852,515 18.68 14.04
A1 16,747,585 17.52 13.17
A+ 2,003,520 2.10 1.58
A- 2,002,620 2.09 1.58
NR (LT) 12,726,300 13.31 10.01
95,581,535 100.00 75.19
The following table set out the Fund’s portfolio of unquoted investments by industry:
Industry
Short-term
deposits
Collective investment
scheme
Unquoted fixed income
securities
Preference
shares
RM RM RM RM
2019
Commercial - - 5,035,950 -
Construction & property
development - - 21,824,345 17,581,151
Diversified holdings - - 11,054,370 -
Finance, insurance and business services 18,533,227 20,778,323 90,207,890 -
Power & electricity - - 4,048,240 -
State government - - 28,583,680 -
Trading & servces - - 7,090,196 -
Transportion - - 4,059,360 -
18,533,227 20,778,323 171,904,031 17,581,151
2018 Construction & engineering - - 11,131,330 -
Construction & property
development - - 5,000,000
Diversified holdings - - 4,006,140 -
Finance, insurance and
business services 30,250,994 - 40,355,855 -
Infrastructure & utilities - - 7,319,165 -
Plantation & agriculture - - 6,521,775 -
Property & real estate - - 4,013,600 -
INTERIM REPORT DECEMBER 2019
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Industry
Short-term
deposits
Collective
investment
scheme
Unquoted
fixed income
securities
Preference
shares
RM RM RM RM
2018
Trading & services - - 17,233,670 -
30,250,994 - 90,581,535 5,000,000
Liquidity risk management
Liquidity risk is defined as the ease with which a security can be sold at or near its fair value
depending on the volume traded on the market. The Fund manages its liquidity risk by investing
predominantly is securities that it expects to be able of being converted into cash 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:
Up to 1 month
1 -3 month
3 months to 1 years
Total
RM RM RM RM
2019
Financial Liabilities Non-interest bearing:
Other payables and accrued expenses 189,228 122,550 - 311,778
2018
Financial Liability
Non-Interest bearing: Other payables and accrued expenses 111,197 123,569 - 234,766
Market risk management
This is a class of risk that inherently exists in an economy and cannot be avoided by any business
or fund. It is usually due to changes in market variables such as interest rates and markets prices.
This risk cannot be removed from an investment portfolio, which is solely invested within that
particular market, by diversification.
Therefore, as the Fund presently invests only in Malaysian fixed income securities, the
performance of the Fund might go up or down in accordance with the prevailing market risk of
Malaysia.
Interest rate risk management
This risk related to movements in the direction of the interest rates that will cause the value of
the securities to fluctuate. The Fund seeks to manage this risk by constructing a fixed income
portfolio with sufficient diverse range of maturities in accordance to the interest rate strategies
developed after thorough evaluation of macroeconomic variables.
As interest rates and yield curves change over time, the Fund may be exposed to a loss in
earnings due to the effects of interest rates on the structure of the statement of financial position.
Interest rate risk sensitivity
Sensitivity to interest rate arises from mismatches in the repricing dates, cash flows and other
characteristics of the assets and their corresponding liability funding. A 50 basis point increase or
decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in interest rates.
The sensitivity is the effect of the assumed changes in interest rates on changes in fair value of
investments for the year, based on revaluing fixed rate financial assets at the end of the reporting
period.
INTERIM REPORT DECEMBER 2019
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31
The following table demonstrates the sensitivity of the Fund’s income for the period to a
reasonably possible change if interest rates had been 50 basis points higher/lower and all other
variables were held constant.
Changes in basis points Effect on profit or loss
Increase/(Decrease)
RM 2019
Interest rate +50/-50 1,040,092/(1,040,092)
Changes in basis points Effect on profit or loss
Increase/(Decrease) 2018 RM
Interest rate +50/-50 629,163/(629,163)
Price Risk management
Price risk is the risk of unfavourable changes in the fair value of unquoted fixed income securities
and collective investment scheme as the result of changes in the levels of the equity indices and
the value of individual securities. The price risk exposure arises from the Fund’s investment in
unquoted securities and collective investment scheme.
Price risk sensitivity
Management’s best estimate of the effect on the income for the year due to a reasonably possible
change in price, with all other variables held constant is indicated in the table below:
Changes in price
Effect on profit or loss
Increase/(Decrease)
% RM
2019
Investments +5/-5% 10,513,175/(10,513,175)
Changes in price
Effect on profit or loss
Increase/(Decrease)
% RM
2018
Investments +5/-5% 4,779,077/(4,779,077)
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
The fair value of the collective investment scheme is determined based on the net asset value
per unit of such collective investment scheme as at the end of the reporting period.
Unquoted fixed income securities are valued using fair value prices quoted by a bond pricing
agency (“BPA”). Where the Manager is of the view that the price quoted by BPA for a specific
bond differs from the market price by more than 20 basis points, The Manager may use the
market price, provided that the Manager records its basis for using a non-BPA price, obtains
necessary internal approvals to use the non-BPA price, and keeps an audit trail of all decisions
and basis for adopting the use of non- BPA price.
For deposits and placements with financial institutions with maturities of less than twelve
months, the carrying value is a reasonable estimate of fair value.
INTERIM REPORT DECEMBER 2019
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32
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 Level 2 Level 3 Total
RM RM RM RM
2019
Financial assets at
FVTPL
Unquoted fixed income
securities - 171,904,031 - 171,904,031
Collective investment
scheme - 20,778,323 - 20,778,323
Preference shares - 17,581,151 - 17,581,151
2018
Financial assets at
FVTPL
Unquoted fixed income securities - 90,581,535 - 90,581,535
Preference shares - 5,000,000 - 5,000,000
There were no transfers between Levels 1 and 2 during the financial period.
22 INTERIM ACCOUNTS
The interim accounts for the 6-month period ended 31 December 2019 have not been audited.
Kuching Branch1st Floor, Sublot 3, Lot 7998, Block16 KCLD, Cha Yi Goldland, Jalan Tun Jugah / Stutong93350 Kuching, SarawakT 082 572 472
Pulau Pinang Branch368-2-02 Belisa Row, Jalan Burma Georgetown, 10350 Pulau PinangT 604 210 2011 F 604 210 2013· ·
Ipoh Branch11A, (First Floor), Persiaran Greentown 5Greentown Business Centre, 30450 Ipoh, PerakT 605 249 6697 F 605 249 6696·
Melaka Branch95-A, Jalan Melaka Raya 24Taman Melaka Raya, 75000 MelakaT 606 282 9111 F 606 283 9112· ·
·
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