Annual Report June 2016

Transcription

1 Annual Report June 2016 For the Year Ended 30 June 2016 Areca equitytrust Fund

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3 A N N U A L R E P O R T J U N E 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

4 C O R P O R A T E D I R E C T O R Y MANAGER Areca Capital Sdn Bhd ( D) 107, Blok B, Pusat Dagangan Phileo Damansara 1 No. 9, Jalan 16/11, Off Jalan Damansara Petaling Jaya, Selangor Tel: , Fax: website: invest@arecacapital.com BOARD OF DIRECTORS Dato Wee Hoe 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 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 Kuala Lumpur Tel: , Fax: AUDITOR Deloitte (AF 0080) Level 16, Menara LGB 1 Jalan Wan Kadir, Taman Tun Dr. Ismail Kuala Lumpur Tel: , Fax: TAX ADVISER Deloitte Tax Services Sdn Bhd (36421-T) Level 16, Menara LGB 1 Jalan Wan Kadir, Taman Tun Dr. Ismail Kuala Lumpur Tel: , Fax: 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, Petaling Jaya, Selangor. Tel: , Fax: website: invest@arecacapital.com PENANG PULAU TIKUS PERAK - IPOH MALACCA Belissa Row 11A, (First Floor) 95A, Jalan Melaka Raya 24 Jalan Burma, Georgetown Persiaran Greentown 5 Taman Melaka Raya Pulau Pinang Greentown Business Centre Melaka Tel : Ipoh, Perak Tel : Fax: Tel : /6698 Fax: Fax:

5 F U N D I N F O R M A T I O N Name of the Fund Fund Category/ Type Areca equitytrust Fund Equity/Growth Objective of the Fund To provide investors with medium to long term capital growth Benchmark FTSE Bursa Malaysia 100 Index (FBM 100) 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 Rebates & Soft Commissions No. of As at 30 June 2016 No. of units held Size of Holding (Units) accounts % (million) % Up to 5, ,001 to 10, ,001 to 50, ,001 to 500, ,001 and above Total* 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 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 3

6 F U N D P E R F O R M A N C E Net Asset Value ( NAV ) as at 30 June Total Net Asset Value ( million) 52.08* 35.34* 35.71* Units in circulation (million units) 94.15* 65.22* 62.33* NAV per unit () * * * * Ex-Distribution 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 () * * * Lowest NAV per unit () * * * * Ex-Distribution ASSET ALLOCATION % of NAV as at 30 June Quoted equities & equity-related securities ACE Market Technology Main Board Construction Consumer products Finance Industrial products Infrastructure Project Co Plantations Properties Technology Trading/Services Cash & cash equivalents including placements & repo DISTRIBUTION Please refer to Note 2 for further information Distribution dates 31 Dec Jun Dec Jun 2014 Gross distribution (sen per unit) (05 Dec) 4.00 (27 Jun) Net distribution (sen per unit) 5.00 (05 Dec) (27 Jun) NAV before distribution ( per unit) (04 Dec) (30 Dec) (26 Jun) (26 Jun) NAV after distribution ( per unit) (05 Dec) (31 Dec) (29 Jun) (27 Jun) UNIT SPLITS There was no unit split exercise for the financial year under review. EXPENSE/ TURNOVER for the financial year ended 30 June Management expense ratio (MER) (%) Please refer to Note 3 for further information Portfolio turnover ratio (PTR) (times) Please refer to Note 4 for further information

7 TOTAL RETURN for the financial year ended 30 June Please refer to Note 5 for further information Total Return (%) Capital Return (%) Income Return (%) Annual Total Return (%) Benchmark: FBM100 (%) yr 3-yrs 5-yrs Average Total Return per annum (%) 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 1.50 sen per unit was declared on 31 Dec 2015 and was automatically reinvested into additional units on the same day at NAV per unit after distribution at no entry fee. Note 3: MER is calculated based on the total fees and expenses incurred by the Fund, divided by the average net asset value calculated on a daily basis. The ratio increased mainly due to increase in management fee from 1.70% to 1.90% with effective from 19 June Note 4: PTR is computed based on the average of the total acquisitions and total disposals of the investment securities of the Fund, divided by the average net asset value calculated on a daily basis. The ratio increased as the Fund embarked on acquiring selective stock that benefited from weakening Ringgit. Total acquisition increased 13mil as compared to Note 5: 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, FBM100, 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. 5

8 F U N D R E V I E W During the year under review, the Fund outperformed its benchmark with gain of 4.9% as compared to its benchmark return, the FBM100 of -1.9%. The Fund s NAV per unit increased from as at 30 June 2015 to as at 30 June 2016 after a total net distribution of 1.50 sen per unit during the financial year. The outperformance of the Fund was mainly due to asset allocation and stock selection. The manager selected companies which provided goods and services that saw relatively resilient demand. The fund also had exposure to beneficiaries of a higher construction spending, increase in Crude Palm Oil (CPO) prices, exporters and oil and gas companies.the top performing stocks for the Fund were Pestech, Kawan Food and Cocoaland while the laggards were Dayang, Pos Malaysia and KNM. 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 % Movement of asset allocation as a percentage of Net Asset Value for the financial year ended 30 June % 60% 40% 88.28% 88.02% 78.28% 78.52% Equities & equity-related investments Cash and cash equivalents 20% 0% 30-Sep Dec Mar Jun-16 * as a % of net asset value Asset Allocation /Portfolio Composition as at 30 June % Equities and equity % 83.09% 89.26% related securities Cash & cash equivalents 21.48% 16.91% 10.74% 78.52% Equity exposure decreased from 83% in 2015 to 78% in 2016 as the total net asset value of the Fund increased 16.7mil during the year and the Fund reduced its equity exposure due to increased market volatility. In fact, total quoted securities stood at 41 mil on 30 Jun 2016 (2015:29mil). 6

9 Top 5 Holdings by Issuers: F U N D R E V I E W As at 30 Sep 2015 (%) As at 31 Dec 2015 (%) 1) PESTECH ) PESTECH ) EDGENTA ) TENAGA ) MAYBANK ) AJIYA ) WPRTS ) MAYBANK ) GAMUDA ) SGM 3.68 As at 31 Mar 2016 (%) As at 30 Jun 2016 (%) 1) PESTECH ) MAYBANK ) TENAGA ) BJFOOD ) IOICORP ) PESTECH ) UZMA ) AJIYA ) KLK ) PMETAL 2.88 Performance of Areca equitytrust Fund for the financial period since inception to 30 June 2016 Areca equitytrust FTSE Bursa Malaysia Top 100 CR 7

10 MANAGER S REPORT MARKET REVIEW & OUTLOOK E C O N O M I C R E V I E W We highlight a few milestones of this period of July 2015 to June 2016 under review. Leading towards the end of last year was the first United States (US) rate hike in more than 9 years (including 7 years of zero interest rates policy). After waiting with bated breath what seemed like eternity it finally happened in mid December Unemployment trended down and recorded 5% for the last three months of the year. It has continued to fall since then to stand at 4.90% at the end of June Inflation at 1%, still a distance from long term objective, shows signs of a turnaround. Consumer sentiment and housing data point to an upward trajectory as confidence in the economy grew, justifying this quarter percent rise in Federal Fund rate. However, following this upbeat global outlook set forth after the rate hike, markets took an unexpected volatile turn at the start of The now-suspended circuit breaker installed to help limit volatility in China s stock market inadvertently became the catalyst for the opposite. Lower manufacturing and growth data provided further fuel. As the bell rang for the start of the year, a quick 5% drop tripped the first 15 minute suspension. Upon reopening, a surge of selling broke the -7% level and caused a trading halt for the day within minutes. 3 days later, following Bank of China s Yuan devaluation, their stock market swiftly hit -7% suspension mark again. The downward spiral continued till the end of the month culminating in a 22% decline at one point over 2015 close. The Dow Jones was not spared losing 11% at one point but recovered to -5.5% for the month. Kuala Lumpur Stock Exchange (KLSE) tracked the global stock markets slide losing 5.4% at its worst, hitting a four month low. Naturally, Brent crude oil price s corresponding fall from USD38 per barrel to USD28 in the same time frame in January was attributed some blame for these indices decline. Continued improvements in the US labour and housing data began to drag global sentiment upwards in Q although constant media focus on China s declining growth, growing debt to Gross Domestic Product (GDP) and worrying banking sector mitigated. Despite China s growth of 6.9%, 6.8%, 6.7% and 6.7% y-o-y for the last 4 quarters surpasses that of the US s 2.2%, 1.9%, 1.6% and 1.2%, it is; ironically; widely blamed for the commodities and global demand slowdown. In Europe, inflation struggled to breach into positive last year only to slide back into negative most of Unemployment optimistically trended down falling below 9% the first time in more than 6 years to close this period at 8.6%. The European Central Bank (ECB) had in March expanded its quantitative easing policy by increasing the 60bil monthly bond buying program to 80bil a month. Moving towards the end of Q2, attention turned to the United Kingdom (UK). The Brexit referendum carried out in June brought about a surprising result. Economically the UK forms barely 4% of global GDP. Trade with Malaysia is a mere 1.1%. Hence her exit s (though may be long drawn; over 2 years) impact may be minimal. Amidst all these, global monetary policies have remained largely accommodative with several nations adopting Zero Rates Policy or even Negative Rates Policy. Japan went deeper into negative while the ECB dropped to zero. Australia, India, Taiwan and South Korea also cut rates in this period. Among our neighbours; Philippines and Indonesia followed suit while Singapore abandoned gradual appreciation from their foreign exchange policy. China reduced benchmark rates twice in 2H2015 from 4.85% to 4.35% placing the US as the only major economy to have raised rates in the last 12 months. Malaysia s economy Malaysia s GDP growth eased further with 4.7%, 4.5% and 4.2% for Q till Q Noteworthy is our unspectacular year on year export data which apart from moderating, have fallen into negative twice in this period in review. International Reserves however remains healthy falling slightly from bil to bil. At the same time, MYR depreciated 5.5% against USD from 3.78 to 3.99 due to a combination of factors ranging from diminishing positive yield carry as US rates rose, falling oil prices (from USD64 per barrel to below USD30 before recovering to USD50 this year) 8

11 MANAGER S REPORT and the negative effects of 1 Malaysia Development Berhad (1MDB). The reserves are sufficient to finance 8.1 months of retained imports and is equal to 1.2 times of short term external debt. Inflation reached a peak of 4.2% in this period before falling to 1.6% in June 2016 as Goods and Services Tax (GST) effect wears off. Statutory Reserve Ratio was cut in January to ease liquidity tightness as Bank Negara saw some risks to growth developing. We also witnessed the changing of guard in Bank Negara Governor in May this year. Datuk Muhammad Ibrahim, with a long standing career as a central banker, took over the helm from the retiring Tan Sri Dr Zeti Akhtar Aziz, thus ensuring continuity of stable supportive policies. Malaysia also revised her budget in January tracking the decline of oil price at that time which was circa USD35 per barrel. Hence, it augurs well for Malaysia s fiscal position with price trading 30% higher currently. EQUITY MARKET REVIEW During the period under review, the FBM KLCI Index which is the barometer of the Malaysian equity market decreased by 3.1% while the FTSE Emas Index fared relatively better by declining 2.1%. Among regional markets, the top performers include New Zealand and Vietnam while the laggards were China and Hong Kong. Initially, the local bourse faced headwinds from a sharp drop in oil price, weak consumer sentiment with the implementation of Goods and Services Tax (GST), and weakness in Emerging Markets. The Ringgit came under pressure against the US Dollar due to weakness in oil price, expectations of rising interest rates in US, and negative sentiment from 1 Malaysia Development Berhad (1MDB). The Ringgit breached the psychological level of 3.80 against the US Dollar in July Consumer sentiment, which was already affected by the implementation of GST in April 2015, was further dented by the decline in the Ringgit. Emerging Markets including Malaysia were under selling pressure due to portfolio outflows in anticipation of US Federal Reserve raising interest rates and concerns about China s growth. The much anticipated Federal Reserve liftoff happened in December 2015 with the US Federal Reserve raising its benchmark interest rate by 25 bps, the first increase since As the event was largely anticipated, the market reaction was relatively muted. Markets were off to a bad start in Jan 2016 due to concerns about China including slowing economic growth and potential Renminbi depreciation. The Prime Minister announced revisions to the 2016 Budget based on an average oil price of US$30-35/bbl compared to the previous assumption of US$48/bbl. Under the revised budget, Gross Domestic Product (GDP) growth for 2016 is expected to be at % (vs % previously) while the fiscal deficit is expected to remain at 3.1% of GDP. Gradually, concerns about China dissipated while sentiment on Emerging Markets and commodities recovered. Oil rebounded to the US$50/bbl mark by the end of the period under review. The recovery in oil price is positive for Malaysia as it is a net oil and gas exporter. The strength in oil helped the Ringgit to recover some ground against the US Dollar in For the period under review, the Ringgit depreciated 6.4% against the US Dollar to close at The domestic market experienced higher volatility towards the end of the period. This was initially caused by increased expectations that of the possibility of the US Federal Reserve hiking interest rates by July Subsequently, on 23 June, 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 credit rating was cut by major rating agencies. While the direct impact from Brexit is not that significant for Malaysia, Brexit has caused uncertainty for financial markets and there are negative implications for risk appetite and funds flow which would affect Malaysia. 9

12 MANAGER S REPORT ECONOMIC OUTLOOK Tiptoeing into the second half of this year, mixed feelings engulf us. Fresh off Brexit, the Unied Kingdom (UK) will have to renegotiate trade deals and arrangements with the European Union (EU) and the world at large. Bilateral trade s agreements may come back in vogue and even benefit the Brits in contrast to en bloc trade agreements. The US elections may throw up some surprises as well or at least its build up may make for an interesting and scary script. In the meantime, the US economy will likely continue along on its path to full recovery. However, with the impact of Brexit yet to be fully understood and realised and global growth still tripping over, the resurgence will be mitigated. Some concern may also arise from China s banking sector in which her shadow banking run parallel and in stealth. Their aggregate asset quality may return to haunt. The need to shift to a more consumption based economy has become greater. Oil may have found a sweet range of USD40-50 per barrel for now as concerns of oversupply fade. Some recovery of soft commodities prices have also been encouraging but overcapacity overhang still lingers. EQUITY MARKET OUTLOOK As the markets digest the implications of Brexit, we would be cautious in the near term. While the direct impact from Brexit is not that significant for Malaysia, Brexit has caused uncertainty in financial markets and there are negative implications for risk appetite and funds flow which would affect Malaysia. We believe that the fallout from Brexit would negatively affect United Kingdom s (UK) economy in the near to medium term as the business environment becomes cautious. There is also caution on the contagion impact of Brexit on the European Union (EU). There is some mitigation for financial markets as investors anticipate potential policy action and Brexit has reduced the likelihood of a United States (US) interest rate in the short term. Beyond the impact from Brexit, we are seeing some signs of improvement for Malaysia. Oil prices have strengthened Year to Date (YTD) 2016 and this could sustain into 2H16 with improved demand supply dynamics. A stronger oil price would help the fiscal position of the government. We would continue to employ a stockpicking strategy to focus on selected themes including increased construction jobs, visible growth from capacity expansion and improving consumer sentiment. Given the expected roll out of major projects like MRT Line 2, LRT3, Pan Borneo Highway and Highways (SUKE & DASH) in 2016, we anticipate strong construction job flows and this is expected to sustain interest in the construction sector. We would look for opportunities in contractors who would be major beneficiaries of the pending awards. We would have a portion of the portfolio in high dividend yield names as they are expected to provide relative stability during volatile market conditions. The MIER Consumer Sentiment Index has shown tentative signs of bottoming. We are anticipating a modest and gradual recovery in consumer sentiment within the next 12 months and would position in strong consumer franchises that can benefit from this. 10

13 TRUSTEE S REPORT T R U S T E E S R E P O R T For The Financial Year Ended 30 June 2016 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 In our opinion, Areca Capital Sdn Bhd ( the Manager ) has managed the Fund in the financial year ended under review in accordance with the following:- (a) (b) (c) The limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission Malaysia s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; The valuation or pricing of the Fund is carried out in accordance with the Deeds and any regulatory requirements; and The creation and cancellation of units of the Fund are carried out in accordance with the Deeds and any regulatory requirements. An income distribution of 1.50 sen per unit (gross) has been declared to the unitholders of the Fund for the financial year ended 30 June We are of the view that the distribution is consistent with the investment objectives and distribution policy of the Fund. For Maybank Trustees Berhad (Company No: 5004-P) BERNICE KM LAU Head, Operations Kuala Lumpur 23 August

14 STATEMENT OF FINANCIAL POSITION As Of 30th June, Note Assets Investment Quoted securities 4 40,893,469 29,366,676 Other Assets Amount due from Manager 5-1,000 Other receivables 6 28,846 1,222,069 Short-term deposits 7 11,565,038 6,421,345 Cash at bank 23,027 5,839 Total Other Assets 11,616,911 7,650,253 Total Assets 52,510,380 37,016,929 Uniholders Fund and Liabilities Liabilities Amount due to Manager 5-1,521,698 Other payables and accruals 8 427, ,344 Total Liabilities 427,751 1,673,042 Unitholders Fund Unitholders capital 9 48,146,768 32,126,250 Unrealised reserve 10 3,673,961 2,955,206 Realised reserve , ,431 Net Asset Value attributable to unitholders 52,082,629 35,343,887 Total Unitholders Fund and Liabilities 52,510,380 37,016,929 Number of Units In Circulation 9 94,147,760 65,218,412 Net Asset Value Per Unit (Ex-Distribution) The accompanying Notes form an integral part of the Financial Statements. 12

15 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For The Financial Year Ended 30th June, Note Investment Income Gross dividend income 871, ,046 Interest income 185, ,593 Net gain on investments: Investment at fair value through profit or loss ( FVTPL ) 4 2,146, ,427 Total Investment Income 3,204,340 1,363,066 Expenditure Management fee , ,162 Trustee s fee 14 30,212 31,276 Transaction cost , ,089 Audit fee 9,000 9,000 Tax agent s fee 3,850 4,200 Other expenses 54,564 6,527 Total Expenditure 1,568,819 1,398,254 Net Income/ (Loss) Before Tax 1,635,521 (35,188) Income Tax Credit 15-12,339 Net Income/ (Loss) After Tax/Total Comprehensive Income/ (Loss) For the Year 1,635,521 (22,849) Net Income/ (Loss) After Tax Is Made Up Of: Realised gain 916,766 1,963,293 Unrealised gain/ (loss) 718,755 (1,986,142) 1,635,521 (22,849) Distribution for the year: Net distribution ,297 1,933,536 Gross distribution per unit (sen) Net distribution per unit (sen) The accompanying Notes form an integral part of the Financial Statements. 13

16 STATEMENT OF CHANGES IN NET ASSET VALUE For The Financial Year Ended 30th June, 2016 Unitholders capital Realised reserve Unrealised reserve Total net asset value As of 1st July, ,534, ,674 4,941,348 35,708,063 Amounts received/receivable from units created 18,629, ,629,756 Amounts paid for units cancelled (17,037,547) - - (17,037,547) Total comprehensive income for the year - (22,849) - (22,849) Net unrealised loss transferred to unrealised reserve - 1,986,142 (1,986,142) - Distribution to unitholders for the year (Note 16) - (1,933,536) - (1,933,536) As of 30th June, ,126, ,431 2,955,206 35,343,887 As of 1st July, ,126, ,431 2,955,206 35,343,887 Amounts received from units created 24,469, ,469,073 Amounts paid for units cancelled (8,448,555) - - (8,448,555) Total comprehensive loss for the year - 1,635,521-1,635,521 Net unrealised gain transferred to unrealised reserve - (718,755) 718,755 - Distribution to unitholders for the year (Note 16) - (917,297) - (917,297) As of 30th June, ,146, ,900 3,673,961 52,082,629 The accompanying Notes form an integral part of the Financial Statements. 14

17 STATEMENT OF CASH FLOWS For The Financial Year Ended 30th June, Cash Flows From/(Used In) Operating Activities Proceeds from disposal of quoted securities 75,259,226 72,424,289 Gross dividend income received 885, ,848 Interest received 183, ,104 Purchase of quoted securities (83,206,659) (70,439,341) Management fee paid (690,298) (657,898) Tax refund - 12,339 Trustee s fee paid (29,372) (30,961) Transaction cost paid (761,604) (673,913) Payment for other fees and expenses (62,738) (17,935) Net Cash (Used In)/From Operating And Investing Activities (8,421,642) 1,427,532 Cash Flows From/ (Used In) Financing Activities Cash proceeds from units created 24,470,073 18,976,044 Payment for cancellation of units (9,970,253) (15,515,849) Distribution to unitholders (917,297) (1,933,536) Net Cash From Financing Activities 13,582,523 1,526,659 Net Increase In Cash And Cash Equivalents 5,160,881 2,954,191 Cash And Cash Equivalents At Beginning Of Year 6,427,184 3,472,993 Cash And Cash Equivalents At End Of Year 11,588,065 6,427,184 Cash and cash equivalents consist of the following amounts: Short-term deposits 11,565,038 6,421,345 Cash at bank 23,027 5,839 11,588,065 6,427,184 The accompanying Notes form an integral part of the Financial Statements. 15

18 NOTES TO THE FINANCIAL STATEMENTS 1 GENERAL INFOATION 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 23rd August, 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 has applied a number of new and revised MFRSs and Amendments to MFRSs issued by MASB that are effective for annual financial periods beginning on or after 1st July, MFRS 119 Employees Benefits: Defined Benefit Plans (Amendments relating to Employee Contributions) Annual Improvements to MFRSs cycle Annual Improvements to MFRSs 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 and Amendments in Issue But Not Yet Effective At the date of authorisation for issue of these financial statements, the new and revised Standards and Amendments which were in issue but not yet effective and not early adopted by the Fund are as listed below: MFRS 9 Financial Instruments 3 MFRS 14 Regulatory Deferral Accounts 1 MFRS 15 Revenue from Contracts with Customers 3 Clarifications to MFRS 15 Revenue from Contracts with Customers 3 16

19 MFRS 16 Leases 5 Amendments to MFRS 10, MFRS 12 and MFRS 128 Amendments to MFRS 10 and MFRS 128 Investment Entities: Applying the Consolidation Exception 1 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 4 Amendments to MFRS 11 Accounting for Acquisitions of Interests in Joint Operations 1 Amendments to MFRS 101 Disclosure Initiative 1 Amendments to MFRS 107 Disclosure Initiative 2 Amendments to MFRS 112 Recognition of Deferred Tax Assets for Unrealised Losses 2 Amendments to MFRS 116 and MFRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation 1 Amendments to MFRS 127 Equity Method in Separate Financial Statements 1 Annual Improvements to MFRSs cycle Effective for annual periods beginning on or after 1st January, 2016, with earlier application permitted. Effective for annual periods beginning on or after 1st January, 2017, with earlier application permitted. Effective for annual periods beginning on or after 1st January, 2018, with earlier application permitted. Effective date deferred to a date to be determined and announced, with earlier application still permitted. Effective for annual periods beginning on or after 1st January, Earlier application is permitted provided MFRS 15 is also applied. The Manager of the Fund anticipates the abovementioned Standards and Amendments will be adopted in the annual financial statements of the Fund when they become effective and that the adoption of these Standards and Amendments will have no material impact on the financial statements of the Fund in the period of initial application except as disclosed below: MFRS 9 Financial Instruments In November, 2014, Malaysian Accounting Standards Board ( MASB ) issued the final version of MFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. MFRS 9 is effective for annual periods beginning on or after 1st January, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Key requirements of MFRS 9: (a) All recognised financial assets that are within the scope of MFRS 139 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual 17

20 terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under MFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. (b) (c) With regards to the measurement of financial liabilities designated as at fair value through profit or loss, MFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability be presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability s credit risk are not subsequently reclassified to profit or loss. Under MFRS 139, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss. In relation to the impairment of financial assets, MFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under MFRS 139. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. (d) The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in MFRS 139. Under MFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an economic relationship. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity s risk management activities have also been introduced. The Manager of the Fund anticipates that the application of MFRS 9 in the future may have an impact on the amounts reported and disclosures made in the Fund s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of MFRS 9 until the Manager completes a detailed review. MFRS 15 Revenue from Contracts with Customers In September, 2014, MFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Subsequently, amendments to MFRS 15 were issued in June, 2016 which provide clarifications on certain requirements of MFRS 15 and provide additional transitional relief upon implementing MFRS 15. MFRS 15 will supersede the current revenue recognition guidance including MFRS 118 Revenue, MFRS 111 Construction Contracts and the related Interpretations when it becomes effective. The core principle of MFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: (a) (b) Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract 18

21 (c) (d) (e) Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in MFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by MFRS 15. The Manager of the Fund anticipates that the application of MFRS 15 in the future may have an impact on the amounts reported and disclosures made in the Fund s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of MFRS 15 until the Manager completes a detailed 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. 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 ( ), 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. 19

22 Unitholders capital The unitholders contributions to the Fund meet the definition of puttable instruments classified as equity instruments under the revised MFRS 132 Financial Instruments: Presentation. The units in the Fund are puttable instruments which entitle the unitholders to a pro-rata share of the net asset value of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units in the Fund over the life of the units are based on the change in the net asset value of the Fund. Financial Instruments Financial instruments are recognised in the statement of financial position when, and only when the Fund has become a party to the contractual provisions of the 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. (a) 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. (i) (ii) 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: 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 20

23 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 accounts. (iii) (iv) (v) (vi) 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. 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 21

24 (b) (vii) 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. 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. (i) (ii) (iii) 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 they expire. B. ACCOUNTING ESTIMATES AND JUDGEMENTS (i) (ii) 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. 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 22

25 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: At aggregate cost Shares quoted in Malaysia 37,219,508 26,411,470 At fair value Shares quoted in Malaysia 40,893,469 29,366, Net gain on investments at FVTPL comprised: Realised gain on disposals 1,428,153 2,575,569 Unrealised gain/ (loss) on changes in fair values 718,755 (1,986,142) 2,146, ,427 Details of quoted securities as of 30th June, 2016 are as follows: 2016 Shares quoted in Malaysia ACE Market Technology No. of Shares Market Price Aggregate Cost Carrying Value Fair Value Fair Value as a % of Net Asset Value Units % Mikro MSC Berhad 2,811, ,066,384 1,066,384 1,251, Main Market Construction 1,066,384 1,066,384 1,251, Protasco Bhd 409, , , , Sunway Construction Group Berhad 803, ,131,606 1,131,606 1,284, Gamuda Bhd-WE 40, ,204 10,204 38, Muhibbah Engineering (M) Bhd 306, , , , Kerjaya Prospek Group Berhad 430, , , , Gadang Holdings Bhd 333, , , , Mitrajaya Holdings Bhd 570, , , , Mitraya Holdings Berhad- Warrants D 15/20 115, , Total 4,403,519 4,558,036 5,018, Consumer Products Carlsberg Brewery Malaysia Bhd 76, , ,250 1,016, Cocoland Holdings Bhd 325, , , , Total 1,398,466 1,485,820 1,673, Finance CIMB Group Holdings Berhad 332, ,520,059 1,520,059 1,451,