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Annual Report Mar 2019For the Year Ended 31 March 2019

Areca Situational Income Fund

A NN UA L REPORT MA RCH 2019

ARECA SITUATIONAL INCOME 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 9

AUDITED FINANCIAL STATEMENTS FOR


Auditor’s Report

10

26

ANNUAL REPORT MARCH 2019


2

C O R P O R A T E D I R E C T O R Y

MANAGER

Areca Capital Sdn Bhd (740840-D)

107, Blok B, Pusat Dagangan Phileo Damansara 1

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

46350 Petaling Jaya, Selangor

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

website: www.arecacapital.com

e-mail: [email protected]

BOARD OF DIRECTORS

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

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Independent)

Dr. Junid Saham (Independent)

INVESTMENT COMMITTEE MEMBERS

Dato’ Seri Lee Kah Choon (Independent)

Raja Datuk Zaharaton Bt Raja Dato’ Zainal Abidin

(Independent)

Dr. Junid Saham (Independent)

TRUSTEE

Maybank Trustees Berhad (5004-P)

8th Floor, Menara Maybank

100 Jalan Tun Perak

50050 Kuala Lumpur

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

AUDITOR

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

1 Jalan Wan Kadir, Taman Tun Dr. Ismail

60000 Kuala Lumpur

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

TAX ADVISER

Deloitte Tax Services Sdn Bhd (36421-T) Level 16, Menara LGB

1 Jalan Wan Kadir, Taman Tun Dr. Ismail

60000 Kuala Lumpur

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

M A N A G E R ’ S O F F I C E A N D B R A N C H E S

HEAD OFFICE

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

46350 Petaling Jaya, Selangor.

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

website: www.arecacapital.com

e-mail: [email protected]

PENANG 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



3

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

Name of the Fund Areca Situational Income Fund

Fund Category/

Type

Wholesale Fixed Income Fund/ Income and Growth

Objective of the

Fund

Seek to offer investors regular income* and incidental capital appreciation

based on current market investment opportunities

* income could be in the form of Units or Cash

Performance

Benchmark

Maybank’s 12-month fixed deposit rate

Distribution

Policy of the Fund

Subject to the availability of income, the Fund will distribute income at least

once a year. In the absence of any instructions, we will, at our discretion, pay

any income distributed by the Fund to you, or reinvest the income in

additional units at the NAV per unit of the distribution day without any entry

fee.

Profile of

unitholdings

* excluding units held

by the Manager (please

refer to Notes to

Financial Statement –

Note 17)

As at 31 March 2019

Size of Holding

(Units)

No. of

accounts %

No. of unit

held

(million)

%

Up to 5,000 - - - -

5,001 to 10,000 - - - -

10,001 to 50,000 45 40.18 2.21 7.59

50,001 to 500,000 61 54.46 10.67 36.59

500,001 and above 6 5.36 16.29 55.82

Total* 112 100.00 29.17 100.00

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 01 March 2016

Initial Offer Price RM1.0000 per unit during the initial offer period of 15 days ended 15 March

2016

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

Value per unit

Financial Year

End

31 March



4

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

2019 2018 2017

Total Net Asset Value (“NAV”)

Total Net Asset Value (RM million) 32.65 32.69 25.15

Units in circulation (million units) 29.95 29.95 22.98

NAV per unit (RM) 1.0902 1.0918 1.0944

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

Highest NAV per unit (RM) 1.0972 1.0995 1.0944

Lowest NAV per unit (RM) 1.0024 1.0048 1.0000

ASSET ALLOCATION % of NAV

Fixed Income Securities

Corporate bonds 91.88 91.73 91.42 Cash & cash equivalent including

placements & repo 8.12 8.27 8.58

DISTRIBUTION

Please refer to Note 2 for further information

Distribution date 20 April 2018 20 Apr 2017 -

Gross distribution (sen per unit) 9.50 11.77 -

Net distribution (RM per unit) 9.50 9.50 -

NAV before distribution (RM per unit) 1.0972 (19 Apr) 1.0995 (19 Apr) -

NAV after distribution (RM per unit) 1.0024 (20 Apr) 1.0048 (20 Apr) -

UNIT SPLITS

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

EXPENSE/ TURNOVER

Management expense ratio (MER) (%) 1.59 1.68 1.26


Portfolio turnover ratio (PTR) (times) - 0.11 0.52 Please refer to Note 4 for further information

TOTAL RETURN


Total Return (%) 9.33 9.19 9.44

- Capital Return (%) -0.14 -0.24 9.44

- Income Return (%) 9.47 9.43 -

Performance Benchmark: Average Maybank’s

12-month fixed deposit rate (%) 3.35* 3.14* 3.17*

*Annualised for comparison purpose only



5

Total Return since launch (%) 30.65 9.19 9.44

1-yr 3-yrs 5-yrs

Average Total Return per annum (%) 9.33 10.18 N/A

NOTES:

Note 1: Selling of units by the Management Company (i.e. when you purchase units and invests in the Fund)

and redemption of units by the Management Company (i.e. when you redeem your units and liquidate your

investments) will be carried out at NAV per unit (the actual value of a unit). The entry/ exit fee (if any) would

be computed separately based on your net investment/ liquidation amount.

Note 2: Net distribution of 9.50 sen per unit was declared on 20 April 2018 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.

Note 4: PTR is computed based on the average of the total acquisitions and total disposals of the investment

securities of the Fund, divided by the average net asset value calculated on a daily basis.

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

distributions (if any) at NAV. The total return and the performance benchmark are sourced from Lipper.

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

Fund is not an indication of its future performance.



6

F U N D R E V I E W

For the period in review (01/04/2018-31/03/2019), the Fund posted a return of 9.33% against the

benchmark Maybank 12 mths FD of 3.35%. The portfolio is highly concentrated with limited liquidity

and is solely invested in one bond issue. At the time of this report, security coverage is deemed superior

as it has a cash backing in excess of 100%. Together with the properties charged, coverage stands at

148%. To date the issuer has fulfilled all its financial obligations in a timely and complete manner. We

are confident of the issuer’s continued ability to meet them for the duration of the bond. We remain

vigilant to their credit quality.

The Fund has achieved its objective to offer investor regular income and incidental capital appreciation

based on current market investment opportunities for the period under review.

The Fund has invested as the sole investor in Iconic Vacation Club Berhad’s (IVCB) Medium Term Note

(MTN) programme. Areca Capital Sdn Bhd, the Manager of the Fund, was appointed by IVCB as the fund

manager to manage the redemption account under the IVCB MTN programme. As at the date of the

report, the Manager was not aware of any conflict of interest arising from the above.

Investment Policy and Strategy

The Fund invests wholly in a single fixed income investment.

NAV per unit as at 31 March 2019 RM1.0902

Asset Allocation / Portfolio Composition 2019 2018 2017

Fixed income securities 91.88% 91.73% 91.42%

Cash & cash equivalents 8.12% 8.27% 8.58%

Performance of Areca Situational Income Fund for the financial period since inception to 31 March 2019

91.88%

8.12%


Maybank 12 Months Fixed Deposit


MANAGER’S REPORT

7

MARKET REVIEW & OUTLOOK

ECONOMIC REVIEW&OUTLOOK

The wheels of US economic growth gained momentum in the 2nd half of 2018 and into the 1st quarter

of 2019. Labour data remain strong with unemployment at 3.8% in March against a 49 year low of

3.7% in September. Wage growth was encouraging with hourly wages rising 3.3% from a year ago.

Inflation however tapered down from a 6½ year high of 2.9% in June and July to 1.9% in January

due to declining gasoline prices. Significantly, core inflation was sustained above 2% throughout the

year in review with 12-mth moving average rising to 2.18%. Meanwhile US 1QGDP grew at 3.2% y-o-

y, highest since 2Q2015. The Federal Reserve as expected and justifiably raised Fed Funds rates

three times in the last 12 months from 1.75 to 2.50%. However, the Federal Reserve turned dovish

this year as if in compliance with US President Trump’s wish with an about turn in interest rates

outlook from last year’s bullish stance as trade war with China ramped up. The US yield curve

inverted at the end of March further cementing doubts of global economy.

The US-China trade war materially took effect in the 3rd quarter with an initial US$34 bil of China

imports imposed with tariffs. A 10% tax was then put on another US$200 bill worth of China imports

in September. China retaliated with their list of equivalent value initially but they have a shorter stick

to match. However, interestingly, trade imbalance has not improved and has in fact widened to -

US$419.2 bil for the year 2018; 11.6% higher than the previous year; which explains the

unconventional public rebuke of Federal Reserve Chairman by President Trump for predictably raising

rates thus increasing attractiveness of US$ through favourable interest rates differential. This partially

negates the effect of tariffs.

Meantime growth in China continue to decline registering 6.7%, 6.5%, 6.4% and 6.4% in the last

four quarters. For the year 2018, their economy expanded 6.6%, the lowest level since 1990.

Focused on domestic issues, China introduced fiscal tools by widening tax deductions and increasing

infrastructure spending. It was further supported with a 1% cut to Reserve Ratio in October (the 4th

cut this year), releasing almost US$110 billion into their system, while directing banks to grow SME

loans as they steer their economy towards a larger proportion of domestic consumption amidst rising

concerns with higher off-balance sheet borrowings and the imposing US-China trade rift.

With the US economy growing under healthy environment of full employment and manageable

inflation, it is believed that Trump assumes the US has the upper hand in trade negotiations.

Extrapolated charts show a path of sustained growth but pitfalls come in the form of failed trade talks

as they attempt to stem the advancing Chinese economic juggernaut. Meanwhile their trump card last

year; tax cut benefit; begin to wear off as many are discovering the benefits weigh in favour of the

upper earning brackets.

Malaysia’s economy

Malaysia’s economy expanded 4.5%, 4.4%, 4.7% and 4.5% in this same year in review. For the year

2018 the economy grew 4.7% vs 5.9% in previous year. Inflation dipped into deflation for the first

two months of 2019 but picked up to record 0.2% in March while registering 1% for the whole year

due to lower petrol prices and effect of 3 months ‘tax holiday’ when phasing out GST for SST between

July till August. Foreign Reserves declined to USD103.0 billion (or RM420.2 billion) at the end of

March against last year March’s USD107.8 billion (or RM416.4 bil).

Challenges are aplenty, as goodwill towards the new government begin to thin. True character and

policies will have to surface to show their ability to resuscitate our economy that has been weighed

down by the ignominy of 1MDB debts. The bigger picture is how to reposition our economy to face the

challenges of a new world and move up the value chain. A paradigm shift is necessary.

FIXED INCOME MARKET REVIEW & OUTLOOK

The 10-year US Treasury benchmark hit a more than 7-years high at 3.22% at the start of October

2018 as outlook in the US economy was bullish supported by the 4 rate hikes in 2018. However, the

imposition of trade tariffs on Chinese imports began to disrupt global economy. Concerns with slowing


MANAGER’S REPORT

8

aggregate global growth began to spread guiding investors to turn dovish at year end pushing

benchmark yield to close lower at 2.69% and even lower at end March to 2.42%. Market was

confounded when 2/10 spreads (difference between 10 and 2 years US Treasury yields) narrowed to

just 11 basis points in December, a level last seen in mid-2007. For a week at the end of March, 10

years over 3 months spread dipped into negative territory. In the last cycle, the 10yr/3mth spread

registered negative in early 2006, almost 2 years before recession hit. Yields inversions have

preceded all except one US recession in the last 50 years. The last 3 US recessions were preceded by

inverted yield curve by an average of 17 months.

In Malaysia, Overnight Policy Rates were left unchanged at 3.25% throughout this 12 months in

review. A gradual increase in concern over the impact of trade rift on external demand was noted

while acknowledging robustness in Malaysia’s fundamentals in weathering the challenges ahead.

Meantime MYR weakened considerably against USD from 3.86 to 4.20 before finding strength in later

months to close this period at 4.08. There was a net outflow of offshore funds from our sovereign

debt markets of RM17.7bil compared to a net inflow of RM31.9 bil in the same period a year ago. This

is largely due to ‘risk off’ mode towards emerging markets as well as risk premium attached to

uncertainty on new government’s policies. Foreign debt holdings stand at RM176.5 bil at end March

2019 or 23.1% of outstanding. Yield curve flattened this period with short end (up to 5 years) rising

between 3 and 20 bps while longer end fell as much as 25 basis points.

For the second half of 2018, the government raised RM44.8 bil through 15 MGS/GII issues with

tenures ranging from 3 to 30 years. In addition, a total of RM6.5 bil was raised through private

placements bringing the total issued for the year to RM112.8 bil.

Constant Maturity Conventional Yield-To-Maturity: March 2019 vs March 2018

Tenure 1Y 3Y 5Y 7Y 10Y

Mar’18 Mar’19 Mar’18 Mar’19 Mar’18 Mar’19 Mar’18 Mar’19 Mar’18 Mar’19

MGS 3.184 3.348 3.365 3.388 3.603 3.586 3.837 3.711 3.979 3.763

AAA 4.080 3.970 4.330 4.130 4.510 4.220 4.640 4.290 4.820 4.370

AA2 4.290 4.150 4.530 4.340 4.700 4.440 4.840 4.510 5.030 4.590

A2 5.470 5.380 6.140 6.000 6.730 6.540 7.160 6.920 7.800 7.450

Source: Bond Pricing Agency Malaysia Sdn Bhd (BPA)

The Federal Reserve has switched turned dovish this year. The uncertainties of the developing trade

negotiations have cast an overbearing gloom on global economy prompting the World Bank to

downgrade growth. Event risk is high. A positive outcome will help both China and US project an

optimistic position towards long term sustained growth and in turn global growth. A negative outcome

can trigger a recession as their economies constitute a substantial 40% of the world’s GDP. It is likely

that the Fed ‘plays ball’ and stand pat until a positive resolution is found. Latest indicators suggest

the market does not expect any hikes in 2019 with the next move a potential cut instead.

An open economy like Malaysia that depend on trade will definitely be impacted by the rift. However,

there are opportunities in some industries which can benefit. That said, there is a strong likelihood

that domestic interest rates will not rise this year as broad numbers are downwardly affected, In

addition, the low inflation environment allows for a possibility of a rate cut if the authorities find it

necessary to stimulate the economy. Hence, fixed income markets will benefit from the stable and

easy interest rates outlook.



9

T R U S T E E ’ S R E P O R T

For The Financial Year Ended 31 March 2019

To the Unitholders of Areca Situational Income Fund

We have acted as Trustee for Areca Situational Income Fund ("the Fund") for the financial year ended

31 March 2019. To the best of our knowledge, Areca Capital Sdn Bhd ("the Manager") has managed

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

1. Limitations imposed on the investment powers of the Manager and the Trustee under the

Deeds, securities laws and the Securities Commission Malaysia’s Guidelines on Unlisted Capital

Market Products under the Lodge and Launch Framework;

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

regulatory requirement; and

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

regulatory requirement.

An income distribution of 9.50 sen per unit (gross) was declared to the unitholders of the Fund for the

financial year under review.

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

policy of the Fund.

For Maybank Trustees Berhad

(Company No: 5004-P)

BERNICE K M LAU

Head, Operations

Kuala Lumpur, Malaysia

21 May 2019

STATEMENT BY THE MANAGER

To the Unitholders of Areca Situational Income Fund

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

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

statements give a true and fair view of the financial position of the Fund as of 31 March 2019, and of

its financial performance and cash flows for the year then ended in accordance with Malaysian

Financial Reporting Standards, International Financial Reporting Standards and the relevant Securities

Commission Malaysia’s Guidelines in Malaysia.

For and on behalf of the Manager

Areca Capital Sdn Bhd

WONG TECK MENG

EDWARD ISKANDAR TOH BIN ABDULLAH

CEO/ EXECUTIVE DIRECTOR

Kuala Lumpur

21 May 2019

CIO/ EXECUTIVE DIRECTOR



10

AUDITED STATEMENT OF FINANCIAL POSITION

As Of 31 March 2019

2019 2018

Note RM RM

Assets

Investment

Unquoted fixed income securities 5 30,000,000 29,990,520

Other Assets Other receivables 6 3,110,137 3,119,178

Cash at bank 28,634 17,740

3,138,771 3,136,918

Total Assets 33,138,771 33,127,438

Unitholders’Fund and Liability

Liability

Accrued expenses 7 491,744 432,668

Unitholders’ Fund

Unitholders’ capital 8 29,998,160 29,998,160

Unrealised reserve 9 - (9,480)

Realised reserve 10 2,648,867 (2,706,090)

Net Asset Value Attributable to Unitholders 32,647,027 32,694,770

Total Unitholders’ Fund and Liability 33,138,771 33,127,438

Number of Units in Circulation 8 29,947,106 29,947,106

Net Asset Value Per Unit (Ex-Distribution) 11 1.0902 1.0918

The accompanying Notes form an integral part of the Financial Statements



11

AUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For The Year Ended 31 March 2019

2019 2018

Note RM RM

Investment Income

Interest income 3,291,036 3,251,060

Net gain/ (loss) on investments at fair value

through profit or loss (“FVTPL”) 5 9,480 (2,534)

Total Investment Income 3,300,516 3,248,526

Expenditure

Management fee 12 471,328 465,586

Trustee’s fee 13 12,569 12,416

Audit Fee 11,000 8,500

Tax agent’s fee 3,650 3,650

Other expenses 4,737 31,437

Total Expenditure 503,284 521,589

Profit Before Tax 2,797,232 2,726,937

Income Tax Expense 14 - -

Profit After Tax And Total Comprehensive Income

For The Year 2,797,232 2,726,937

Profit After Tax Is Made Up Of:

Realised gain 2,787,752 2,729,471

Unrealised gain/ (loss) 9,480 (2,534)

2,797,232 2,726,937

Distribution for the year:

Net distribution 15 2,844,975 2,183,152

Gross distribution per unit (sen) 15 9.50 11.76

Net distribution per unit (sen) 15 9.50 9.50




12

AUDITED STATEMENT OF CHANGES IN NET ASSET VALUE

For The Year Ended 31 March 2019

Unitholders’

capital

Realised

reserve

Unrealised

reserve

Total net asset

value

RM RM RM RM

As of 31 March 2017/ 1 April 2017 22,998,160 2,159,771

(6,946)

25,150,985

Amount received from units

created

7,000,000 - - 7,000,000

Total comprehensive income for

the year 2,726,937

-

2,726,937

Net unrealised loss transferred to

unrealised reserve 2,534

(2,534)

-

Distribution to unitholders for the

year (Note 15) (2,183,152)

-

(2,183,152)

As of 31 March 2018/ 1 April 2018 22,998,160 2,706,090

(9,480)

32,694,770

Total comprehensive income for

the year 2,797,232

-

2,797,232

Net unrealised gain transferred

to unrealised reserve (9,480)

9,480

-

Distribution to unitholders for the

year (Note 15) (2,844,975)

-

(2,844,975)

As of 31 March 2019 29,998,160 2,648,867 - 32,647,027




13

AUDITED STATEMENT OF CASH FLOWS For The Year Ended 31 March 2019

2019 2018

RM RM

Cash Flows From/(Used In) Operating Activities

Interest received 3,300,077 2,530,183

Purchase of investment - (7,000,000)

Management fee paid (393,995) (293,504)

Trustee’s fee paid (12,570) (12,160)

Payment for other fees and expenses (37,643) (32,697)

Net Cash From/ (Used In) Operating Activities 2,855,869 (4,808,178)

Cash Flows (Used In)/ From Financing Activities

Cash proceeds from units created - 7,000,000

Distribution to unitholders (2,844,975) (2,183,152)

Net Cash (Used In)/ From Financing Activities (2,844,975) 4,816,848

Net Increase In Cash And Cash Equivalents 10,894 8,670

Cash And Cash Equivalents At Beginning Of Year 17,740 9,070

Cash And Cash Equivalents At End Of Year 28,634 17,740




14

NOTES TO THE FINANCIAL STATEMENTS

1 GENERAL INFORMATION

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

the Trust Deed dated 25 February 2016 between Areca Capital Sdn. Bhd. as the Manager,

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

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

Deed, which include unquoted fixed income securities and deposits with financial institutions. The

Fund commenced operations on 1 March 2016 and will continue its operations until terminated by

the Trustee in accordance with Part 11 of the Deed.

The objective of the Fund is to offer investors regular income and incidental capital appreciation

based on current market investment opportunities.

The Manager of the Fund is Areca Capital Sdn Bhd, a company incorporated in Malaysia. Its

principal activities are managing private and unit trust funds.

The financial statements were authorized for issue by the Board of Directors of the Manager in

accordance with a resolution on directors on 21 May 2019.

2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

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

Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards Board (“MASB”),

International Financial Reporting Standards and the Securities Commission Malaysia Guidelines on

Unit Trust Funds in Malaysia.

The financial statements of the Fund have been prepared under the historical cost convention,

unless otherwise stated in the accounting policies. Historical cost is generally based on the fair

value of the consideration given in exchange for assets.

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 April 2018:

MFRS 9 Financial Instruments

MFRS 9 ‘Financial Instruments’ became effective for annual periods beginning on or after 1

January 2018. It addresses the classification, measurement and derecognition of financial assets

and liabilities and replaces the multiple classification and measurement models in MFRS 139.

Classification and measurement of debt assets is driven by the entity’s business model for

managing the financial assets and the contractual cash flow characteristics of the financial assets.

A debt instrument is measured at amortised cost if the objective of the business model is to hold

the financial asset for the collection of the contractual cash flows and the contractual cash flows

under the instrument solely represent payments of principal and interest (SPPI).

A debt instrument is measured at fair value through other comprehensive income if the objective

of the business model is to hold the financial asset both to collect contractual cash flows from

SPPI and to sell. All other debt instruments must be recognised at fair value through profit or loss.

An entity may however, at initial recognition, irrevocably designate a financial asset as measured

at fair value through profit or loss if doing so eliminates or significantly reduces a measurement

or recognition inconsistency. Derivative and equity instruments are measured at fair value

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



15

through profit or loss unless, for equity instruments not held for trading, an irrevocable option is

taken to measure at fair value through other comprehensive income. MFRS 9 also introduces a

new expected credit loss (ECL) impairment model.

MFRS 9 has been applied retrospectively by the Fund and did not result in a change to the

classification or measurement of financial instruments.

The Fund’s investment portfolio continues to be classified as fair value through profit or loss and

other financial assets which are held for collection continue to be measured at amortised cost.

There was no material impact on adoption from the application of the new impairment model.

There are no other standards, amendments to standards or interpretations that are effective for

annual periods beginning on 1 January 2018 that have a material effect on the financial

statements of the Fund.

Standards, Issue Committee (“IC”) Interpretations 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 Interpretations and Amendments which were in issue but not yet effective and not

early adopted by the Fund are listed below:

Description Effective for

annual periods

beginning on or

after

MFRS 16: Leases 1 January 2019

Amendments to MFRS 9: Prepayment Features with Negative

Compensation

1 January 2019

Amendments to MFRS 119: Plan Amendment, Curtailment or Settlement 1 January 2019

Amendments to MFRS 128: Long – term Interests in Associates and

Joint Ventures

1 January 2019

IC Interpretation 23: Uncertainty over Income Tax Treatments 1 January 2019

Amendments to MFRSs Annual Improvements to MFRSs 2015-2017

Cycle

1 January 2019

Amendments to MFRS 3: Definition of a Business 1 January 2020

Amendments to MFRS 101 and MFRS 108: Definition of Material 1 January 2020

Amendments to References to the Conceptual Framework in MFRS

Standards

1 January 2020

MFRS 17: Insurance Contracts 1 January 2021

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 become

effective and 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.



16

3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND JUDGEMENTS

SIGNIFICANT ACCOUNTING POLICIES

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 based on net sales proceeds less

carrying value 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

period.

Income Tax

Income tax comprises Malaysian corporate tax for the current financial period, which is measured

using the tax rates that have been enacted or substantively enacted at the end of each reporting

period.

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

Statement of Cash Flows

The Fund adopts the direct method in the preparation of the 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 (“RM”), which is also the Fund’s functional currency.

Distribution

Distributions are made 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.

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 asset value. The outstanding units are carried at the

redemption amount that is payable at the net asset value if the holder exercises the right to put

the units 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.

Unitholders’ Capital

The unitholders’ contributions to the Fund meet the definition of puttable instruments classified as

equity instruments.

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.



17

Financial Instruments

MFRS 9 replaces the provisions of MFRS 139 that relate 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 from 1 January 2018

resulted in changes in accounting policies.

Financial assets and financial liabilities are recognised in the statement of financial position when,

and only when, the Fund becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that

are directly attributable to the acquisition or issue of financial assets and financial liabilities (other

than financial assets and financial liabilities at fair value through profit or loss) are added to or

deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial

recognition. Transaction costs directly attributable to the acquisition of financial assets and

financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial Assets

Classification of financial assets

The Fund determines the classification of its financial assets at initial recognition, and the

categories include:

Accounting policies applied from 1 April 2018

Amortisation cost and effective interest method

The amortised cost of a financial asset is the amount at which the financial asset is measured at

initial recognition minus the principal repayments, plus the cumulative amortisation using the

effective interest method of any difference between that initial amount and the maturity amount,

adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised

cost of a financial asset before adjusting for any loss allowance.

Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are

measured at FVTPL.

Financial assets 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 to the extent they are not part of a

designated hedging relationship.

Accounting policies applied until 31 March 2017

Loans and receivables

The Fund does not have any loans throughout the financial year. Financial assets with fixed or

determinable payments that are not quoted in an active market are classified as receivables.

Such receivables include cash at bank and profit income receivable. Subsequent to initial

recognition, receivables are measured at amortised cost.


The Fund classified financial assets at fair value through profit or loss if they are acquired

principally for the purpose of selling in the short term, i.e. are held for trading. They are

presented as current assets if they are expected to be sold within 12 months after the end of the

reporting period; otherwise they are presented as non-current assets.

Investments

The Fund’s investments which are classified under FVTPL include investment in unquoted fixed

income securities.

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

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



18

Impairment of financial assets

Credit losses are recognised based on the 'Expected Credit Loss' ("ECL") model. The Fund

recognises loss allowances for ECL on financial instruments that are not measured at FVTPL

(financial assets that are debt instruments). The impairment model does not apply to equity

investments. ECL are a probability-weighted estimate of credit losses. They are measured as

follows:

• Financial assets that are not credit – impaired at the end of the reporting period:

As the present value of all cash shortfalls (i.e. the difference between the cash flows due

to the entity in accordance with the contract and the cash flows that the Fund expects to

receive);

• Financial assets that are credit – impaired at the end of the reporting period:

As the difference between the gross carrying amount and the present value of estimated

future cash flows.

At the end of each reporting period, the Fund assesses whether financial assets carried at

amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events

that have a detrimental impact on the estimated future cash flows of the financial asset have

occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• Significant financial difficulty of the issuer or counterparty;

• Significant downgrade in credit rating of the instrument by a rating agency;

• A breach of contract such as a default or past due event; or

• The disappearance of an active market for a security because of financial difficulties.

For balances with short-term nature, full impairment will be recognised on uncollected balances

after the grace period.

Derecognition of financial assets

Financial assets are derecognised on the trade date when the rights to receive cash flows from

the asset have expired or the Fund has transferred substantially all risks and rewards of

ownership.

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.

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, within the scope of MFRS 9, are recognised in the statement of financial

position when, and only when, the Fund becomes a party to the contractual provisions of the

financial instrument. The Fund’s financial liabilities are recognised initially at fair value plus

directly attributable transaction costs and subsequently measured at amortised cost using the

effective interest rate method.

The Fund includes in this category amounts due to the Manager and the Trustee and other

payables. A financial liability is derecognised when it is settled



19

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

(i) Critical judgements in applying accounting policies

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

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

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

statements.

(ii) Key sources of estimation uncertainty

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

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

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

liabilities within the next financial year.

5 INVESTMENT

Investment designated as FVTPL is as follows:

2019 2018

RM RM

At aggregate cost Unquoted fixed income securities 30,000,000 30,000,000

At fair value

Unquoted fixed income securities 30,000,000 29,990,520

Net gain/(loss) on investments at FVTPL comprised:

Net unrealised gain/(loss) on changes in fair value 9,480 (2,534)

Details of unquoted fixed income securities are as follows:

31.3.2019

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 Iconic Vacation Club

Berhad (NR)

2021/11.00 30,000,000 100.00 30,000,000 30,000,000 30,000,000 91.88

31.3.2018 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 Iconic Vacation Club

Berhad (NR)

2021/11.00 30,000,000 99.9684 30,000,000 30,000,000 22,990,520 91.73

6 OTHER RECEIVABLE

Other receivable consist of interest receivable from unquoted fixed income securities.



20

7 ACCRUED EXPENSES

2019 2018

RM RM

Accrued expenses consist of:

Management fee 471,328 393,995

Trustee’s fee 1,106 1,107

Audit fee 11,000 8,500

Tax agent’s fee 3,650 3,650

Others 4,660 25,416

491,744 432,668

8 UNITHOLDERS’ CAPITAL

------- 2019 -------- ------- 2018 -------

No. of units RM No. of units RM

At beginning of year 29,947,106 22,998,160 22,980,545 22,998,160

Created during the year - - 6,966,561 7,000,000

At end of year 29,947,106 29,998,160 29,947,106 29,998,160

9 UNREALISED RESERVE

2019 2018

RM RM

At beginning of year (9,480) (6,946)

Net unrealised gain/ (loss) attributable to investment held at

fair value through profit or loss 9,480 (2,534)

At end of year - (9,480)

Investment:

At fair value 30,000,000 29,990,520

At aggregate cost (30,000,000) (30,000,000)

Unrealised reserve - (9,480)

10 REALISED RESERVE

2019 2018

RM RM

At beginning of year 2,706,090 2,159,771

Total comprehensive income for the year 2,797,232 2,726,937

Net unrealised (gain)/ loss transferred to unrealised reserve (9,480) 2,534

Distribution for the year (2,844,975) (2,183,152)

At end of year 2,648,867 2,706,090

11 NET ASSET VALUE PER UNIT

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

unitholders as of 31 March 2019 of RM32,649,527 (2018: RM32,694,770) by units in issue as as

of 31 March 2019 of 29,947,106 units (2018: 29,947,106 units).

12 MANAGEMENT FEE

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

at a rate not exceeding 2.00% of the net asset value of the Fund. The management fee provided

for in the financial statements amounted to 1.50% (2018: 1.50%) per annum for the year.

The management fee is subject to 6% goods and services tax (“GST”) effective 1 April 2015 to

31 May 2018. The management fee is not subject to any taxes from 1 June 2018 until 31 March

2019.



21

13 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 0.04% of the net asset value of the Fund, subject to a minimum fee of

RM6,000 per annum. The Trustee’s fee provided for in the financial statements amounted to

0.04% (2018: 0.04%) per annum for the year.

The Trustee’s fee is subject to 6% goods and services tax (“GST”) effective 1 April 2015 to 31

May 2018. The trustee fee is not subject to any taxes from 1 June 2018 to 31 March 2019.

14 INCOME TAX EXPENSE

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

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

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

1967.

15 NET DISTRIBUTION

2019 2018

RM RM

Distribution to unitholders is from the following sources:

Interest income 3,291,036 3,251,060

Net realised gain:

Previous year’s realised gains 2,706,090 2,159,771

Current year’s realised gains (2,648,867) (2,706,090)

3,348,259 2,704,741

Less: Expenses (503,284) (521,589)

Net distribution 2,844,975 2,183,152

The distributions above have been made as follow:-

2019 2018

Distribution on 20 April 2018

Gross distribution per unit (sen) 9.50 - Net distribution per unit (sen) 9.50 -

Distribution on 20 April 2017

Gross distribution per unit (sen) - 11.76

Net distribution per unit (sen) - 9.50

Total Distribution

Gross distribution per unit (sen) 9.50 11.76

Net distribution per unit (sen) 9.50 9.50

16 MANAGEMENT EXPENSE RATIO AND PORTFOLIO TURNOVER

Management Expense Ratio (MER)

Management expense ratio for the Fund is 1.59% (2018: 1.68%) for the year ended 31 March

2019. The management expense ratio which includes management fee, Trustee’s fee, audit fee,

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

MER = (A + B + C + D + E) ÷ F x 100

A = Management fee D = Tax agent’s fee

B = Trustee’s fee E = Other expenses

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

The average net asset value of the Fund for the year is RM31,420,518 (2018: RM31,037,684).



22

Portfolio Turnover Ratio (PTR)

The portfolio turnover ratio for the Fund is NIL times (2018: 0.11 times) for the year ended 31

March 2019. The portfolio turnover ratio is derived from the following calculation:

(Total acquisition for the year + total disposal for the year) ÷ 2

Average net asset value of the Fund for the year calculated on a daily basis

Where: total acquisition for the year = NIL (2018: RM7,000,000)

total disposal for the year = NIL (2018: NIL)

17 UNITS HELD BY MANAGER AND RELATED PARTY

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

parties are as follows:

2019 No. of units RM

The Manager 775,349 845,286 Wong Teck Meng, an Executive Director of the Manager 289,015 315,084

Edward Iskandar Toh Bin Abdullah 90,967 99,172

1,155,331 1,259,542

2018

No. of units RM

The Manager 1,041,196 1,136,778 Wong Teck Meng, an Executive Director of the Manager 192,200 209,844

1,233,396 1,346,622

18 TRADE WITH BROKERS/DEALERS

Details of transactions with brokers/dealers are as follows:

Brokers/Dealers

Value of

Trades

% of

Total

Trades

2019

RM %

CIMB Bank Berhad 470,000 100.00

2018

Public Investment Bank Berhad 7,000,000 98.45

CIMB Bank Berhad 110,000 1.55

7,110,000 100.00

Included in transactions with brokers/dealers are trades conducted on normal terms in relation

to investment in unquoted fixed income securities and money market instruments.

19 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.



23

Categories of Financial Instruments 2019 2018

RM RM

Financial assets

Carried at FVTPL:

Unquoted fixed income securities 30,000,000 29,990,520

Amortised costs:

Other receivables 3,110,137 3,119,178

Cash at bank 28,635 17,740

Financial liability

Amortised cost: Accrued expenses 491,744 432,668

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 of 31 March 2019.

The Fund invests only in unquoted investments of at least investment grade as rated by a credit

rating agency. The following table set out the Fund’s portfolio of unquoted investments by rating

categories:

Fair Value

RM

As a % of

unquoted

investments

As a % of

NAV 2019

Credit rating

Bonds

No Rating 30,000,000 100.00 91.88

2018

Credit rating

Bonds

No Rating 29,990,520 100.00 91.73

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

2019

Unquoted

fixed income

securities

Industry RM

Hospitality 30,000,000

2018

Industry

Hospitality 29,990,520



24

Liquidity risk management

This risk is defined as the ease with which a security can be sold at or near its fair value

depending on the volume traded on the market. The Fund manages its liquidity risk by investing

predominantly in securities that it expects to be able of being converted into cash within 7 days.

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

Cash and fixed income securities are particularly sensitive to movements in interest rates.

When interest rates rise, the returns on cash will rise while the value of fixed income securities

will fall and vice versa, thus affecting the NAV of the Fund. When the interest rate trend is

anticipated to rise, the exposure to fixed income securities will be reduced to an acceptable

level.

The Fund does not have any significant interest rate risk exposure as at the end of the financial

reporting period.

Price risk management

Price risk is the risk of unfavourable changes in the fair value of unquoted fixed income

securities as the result of changes in the levels of the equity indices and the value of individual

securities. The price risk exposure arises from the Fund’s investment in unquoted securities.

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:

Investments

Changes in price

Effect on profit or loss

Increase/(Decrease)

% RM

2019

Investment +5/-5% 1,500,000/(1,500,000)

2018

Investment +5/-5% 1,499,526/(1,499,526)

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



25

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.

20 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction in the principal (or most advantageous) market at the measurement date

under current market conditions.

The carrying amounts of other financial assets and financial liabilities approximate their fair

values due to short maturity of these instruments.

The following table provides an analysis of financial instruments that are measured subsequent

to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the

fair value is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in

active markets for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices

included within Level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices).

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

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

inputs).

Level 1 Level 2 Level 3 Total

RM RM RM RM

2019


Unquoted fixed income securities 30,000,000 - 30,000,000

2018


Unquoted fixed income securities 29,990,520 - 29,990,520

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



26

INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF


(Established under Trust Deed dated 25 February 2016)

Report on the Audit of the Financial Statements

Opinion

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

the statement of financial position as of 31 March 2019, and the statement of profit or loss and other

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

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

policies, as set out on pages 11 to 26.

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

as of 31 March 2019, and of its financial performance and cash flows for the year then ended in

accordance with Malaysian Financial Reporting Standards and International Financial Reporting

Standards.

Basis for Opinion

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

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

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

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

our opinion.

Independence and Other Ethical Responsibilities

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

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

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

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

Information Other than the Financial Statements and Auditors’ Report Thereon

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

Manager’s and Trustee’s reports, but does not include the financial statements of the Fund and our

auditors’ report thereon.

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

not express any form of assurance conclusion thereon.

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

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

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

to be materially misstated.

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

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



27

Responsibilities of the Manager and Trustee for the Financial Statements

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

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

International Financial Reporting Standards and the relevant Securities Commission Malaysia’s

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

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

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

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

presentation of these financial statements.

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

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

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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

on the basis of these financial statements.

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

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

throughout the audit. We also:

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

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

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

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

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

misrepresentations, or the override of internal control.

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

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

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

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

estimates and related disclosures made by the Manager.

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

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

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

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

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

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

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

the Fund to cease to continue as a going concern.

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

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

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

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

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

we identify during our audit.



28

Other Matter

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

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

DELOITTE PLT (LLP0010145-LCA)

Chartered Accountants (AF 0080)

WONG YEW CHOONG

Partner - 03195/06/2019 J

Chartered Accountant

21 May 2019

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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