kenanga malaysian inc fund - kenanga · pdf filejalan sultan ismail, 50250 kuala lumpur,...

KENANGA MALAYSIAN INC FUND

ANNUAL REpoRt

For the Financial Period Ended 31 January 2014

Investor Services CenterToll Free Line: 1 800 88 3737Fax: +603 2057 3722Email: [email protected]

Head Office, Kuala LumpurSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807

Kenanga Investors Berhad (353563-p)


Contents Page

Corporate Directory iiDirectory of Manager’s Offices iiiFund Information 1Manager’s Report 2-5Fund Performance 6-8Trustee’s Report 9-10Independent Auditor’s Report 11-12Statement by the Manager 13Financial Statement 14-39

ii Kenanga Malaysian Inc Fund Annual Report

CORPORATE DIRECTORY

Manager: Kenanga Investors Berhad (Company No. 353563-P)Registered office

Kenanga Investors Berhad (KIB)8th Floor, Kenanga International, Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax: 03-2161 4990

Business OfficeSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807E-mail: [email protected] Website: www.KenangaInvestors.com.my

Board Of DirectorsDatuk Syed Ahmad Alwee Alsree (Chairman)Syed Zafilen Syed Alwee (Independent Director)YM Raja Dato’ Seri Abdul Aziz bin Raja Salim (Independent Director)Vivek Sharma (Independent Director)Peter John Rayner (Independent Director)Bruce Kho Yaw HuatAbdul Razak bin Ahmad

Investment Committee Bruce Kho Yaw Huat (Chairman) Syed Zafilen Syed Alwee (Independent Member)Vivek Sharma (Independent Member)Peter John Rayner (Independent Member)Abdul Razak bin Ahmad

Company Secretary: Norliza Abd Samad (MAICSA 7011089)9th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax:03-2161 4990

Trustee: CIMB Commerce Trustee Berhad (Company No. 313031-A)Registered Office

Level 13, Menara CIMBJalan Stesen Sentral 2Kuala Lumpur Sentral50490 Kuala Lumpur.Tel: 03-2261 8888Fax: 03-2261 0099Website: www.cimb.com

Business Office Level 21, Menara CIMBJalan Stesen Sentral 2Kuala Lumpur Sentral50490 Kuala Lumpur.Tel: 03-2261 8888Fax: 03-2261 9889

Auditor: Ernst & Young (AF: 0039)Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

Tax Adviser: Ernst & Young Tax Consultants Sdn Bhd (Company No. 179793-K)Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

Membership: Federation Of Investment Managers Malaysia (FIMM)19-06-1, 6th Floor, PNB Damansara, 19, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia. Tel: 03-2093 2600 Fax: 03-2093 2700 Website: www.fimm.com.my

Kenanga Malaysian Inc Fund Annual Report iii

DIRECTORY OF MANAGER’S OFFICES

REGIONAL BRANCH OFFICES:

Kuala LumpurSuite 12.02, 12th Floor, Kenanga InternationalJalan Sultan Ismail,50250 Kuala Lumpur, MalaysiaTel: 03-2057 3688Fax: 03-2161 8807

Johor BahruLot 11.03, 11th Floor, Menara MSC Cyberport5 Jalan Bukit Meldrum80300 Johor Bahru, JohorTel: 07-223 7505/4798 Fax: 07-223 4802

MelakaNo. 25-1 Jalan Kota Laksamana 2/17Taman Kota Laksamana Seksyen 275200 MelakaTel: 06-281 8913, 282 0518 Fax: 06-281 4286

Kuching1st Floor, No 71, Lot 7Lot 10900, Jalan Tun Jugah93350 Kuching, SarawakTel: 082-572 228 Fax: 082-572 229

KlangNo. 12 Jalan Batai Laut 3, Taman Intan41300 Klang, Selangor Darul EhsanTel:03-3341 8818, 3348 7889 Fax:03-3341 8816

Kota KinabaluA-03-11, 3rd FloorBlock A Warisan SquareJalan Tun Fuad Stephens88000 Kota Kinabalu, SabahTel: 088-447 089/448 106 Fax: 088-447 039

PenangBlok A, Aras 3,Wisma PerkesoNo. 269, Jalan Burma10538 George Town, PenangTel: 04-226 4880 Fax: 04-226 5120

IpohNo. 5A, Persiaran Greentown 9Greentown Business Centre30450 Ipoh,Perak Darul RidzuanTel: 05-254 7573/7570 Fax: 05-254 7606

Agency OfficeMiri (Sarawak)c/o Lot 1084, 2nd Floor,Jalan Merpati98000 MiriSarawak, MalaysiaTel: 085-427 782

Kenanga Malaysian Inc Fund Annual Report 1

1. FUND INFORMATION

1.1 Fund Name

Kenanga Malaysian Inc Fund (KMIF or the Fund)

1.2 Fund Type / Category

Equity / Growth

1.3 Investment Objective

The Fund aims to provide consistent annual returns and medium to long-term capital appreciation by investing in Malaysian securities with global reach.

1.4 Investment Strategy

The Fund will invest principally in equities of companies with a global vision and proven track record that can potentially tap regional and global market base.

1.5 Duration

The Fund was launched on 9 November 2007 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unit holders for it to continue.

1.6 Performance Benchmark

FTSE-Bursa Malaysia 100 Index

1.7 Distribution Policy

The Fund intends to pay income by way of distribution or by the creation of additional units after the end of each Accrual Period or any specified period, where possible.

1.8 Breakdown of unit holdings of KMIF as at 31 January 2014

Size of holdings No. of unitholders No. of units held5,000 and below 41 128,3935,001 - 10,000 61 481,86310,001-50,000 138 3,349,38250,001-500,000 84 9,851,583500,001 and above 9 13,651,274Total 333 27,462,495

2 Kenanga Malaysian Inc Fund Annual Report

2. MANAGER’S REPORT

2.1 Explanation on whether the Fund has achieved its investment objective.

The Fund has appreciated by 14.13% in Net Asset Value terms for the period under review, thus achieving the Fund’s stated objective of medium to long term capital appreciation.

2.2 Comparison between the Fund’s performance and performance of the benchmark

Performance Chart Since Launch (9/11/2007– 31/01/2014)Kenanga Malaysian Inc Fund vs FTSE-Bursa Malaysia 100 Index

% Growth, Cum, TR, ExD, MYR, Launch to 31/1/2014

% G

row

th, C

um, T

R, E

xD, M

YR

-30.00-20.00

-50.00-40.00

-10.000.00

10.0020.0030.0040.00

31/1

2/20

08

31/3

/200

8

30/6

/200

8

30/9

/200

8

31/1

2/20

09

31/3

/200

9

30/6

/200

9

30/9

/200

9

31/1

2/20

10

31/3

/201

0

30/6

/201

0

30/9

/201

0

31/1

2/20

11

31/3

/201

1

30/6

/201

1

30/9

/201

1

31/1

2/20

12

31/3

/201

2

30/6

/201

2

30/9

/201

2

31/1

2/20

13

31/3

/201

3

30/6

/201

3

30/9

/201

3

31/1

2/20

079/

11/2

007

Kenanga Malaysian Inc* : 8.20 FTSE Bursa Malaysia Top 100 CR* : 33.54

* Contains estimated data.Source: Lipper

2.3 Investment strategies and policies employed during the period under review

For the period under review, the Fund continued with its strategy of investing in companies with sustainable business models and competent management. These companies also need to trade at a discount to their intrinsic/fair value.

Sectors that we favour include the oil & gas related companies, consumer staples, insurance, REITS and companies with exposure to ETP projects.


2.4 The Fund’s asset allocation (% of NAV) as at 31 January 2014 and comparison with the previous financial year

Asset 31 Jan 2014 31 Dec 2012Equity 87.90% 93.90%Cash / Other 12.10% 6.10%

Reason for the differences in asset allocation

As at 31 January 2014, the asset allocation of the Fund stood at around 88% in equities and the balance of around 12% in liquidity. The decrease in equities was because the Manager was realising some profit for the portfolio

2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any) since last review period

Period under reviewKenanga Malaysian Inc Fund 14.13%FTSE-Bursa Malaysia 100 Index (FMB-100) 8.11%

Source: Lipper

For the period under review, the Fund appreciated by 14.13%, outperforming the 8.11% increase in the FBM-100. The outperformance was mainly due to better stock selection. The top 5 performers during the period were (1) Nestle (Malaysia) Berhad (+58.40%); (2) Dutch Lady Milk Industry Berhad (+42.32%); (3) United Plantation Berhad (+25.90%); (4) Petronas Dagangan Berhad (+22.78%) and (5) Petronas Gas Berhad (+18.56%).

2.6 Review of the market

Market Review

Stock market performance in the region can be broken up into two parts for the period under review. The Nikkei had a fantastic year (+31.6% from January 2013 to June 2013) following the Japanese government’s surprise decision to inflate the long stagnant economy with a US-style quantitative easing programme, valued at US$1.5 trillion. The emerging countries of ASEAN were clear outperformers, led by Philippines and Thailand which rose by 11.6% and 11.2% for the same period, respectively as investors reacted positively to the underlying domestic economic growth of these economies. The strong inflow of funds into these countries was also helped by US’s QE3 programme. Governments around the world were generally adopting a loose monetary policy to help economic recovery.

Malaysia lagged regional markets especially in the 1Q2013 due to uncertainty over the 13th Malaysia General Election but caught up after Barisan National retained power albeit with a slightly lesser majority. The FMB-100 Index was up by 6.9% in the first half of 2013. This could be attributed to the removal of risk premium associated with the uncertainty over the general election. On the economic side, the 1Q2013 GDP growth of 4.1% fell short of expectation. This was attributed to weaker exports and slower growth in private investments due to uncertainty from the election outcome.


2.6 Review of the market (Contd.)

Market Review (Contd.)

The major downturn came in June when equity markets reacted strongly on the negative after the Fed’s chairman, Ben Bernanke commented that it would be appropriate to moderate the monthly purchase of assets backed securities later this year. It sparked investors’ fear that US’ QE3 will be tapering off earlier than expected. The situation was made worse when the PBoC initially refused to ease a liquidity squeeze in the interbank market which caused a sharp spike in SHIBOR rate to peak at 13.4%. The decline was led by China (SHCOMP -14%), Philippines (PCOMP -7.9%) and Hong Kong (HSI -7.1%) in June 2013. The FBMS Index held up relatively well as it was only down by 0.9% month-on-month In June 2013.

The developed markets in the region rebounded significantly in the final quarter of FYE 2013 sparked by the US Congress decision to pass a bill to reopen the government and raise the debt ceiling. This helped the US government to avoid a debt default as well as expectation that the US QE tapering being later as the recovery of the US economy is still uncertain.

The emphasis from the 2014 Budget is on further fiscal consolidation through a more prudent operating and development expenditure. It was generally viewed as stock market-neutral. The KLCI index remained relatively flat in November despite investors selling property and construction stocks after the introduction of real property gain tax.

Indonesia and Thailand were aggressively sold in November 2013, down 5.6% and 5.0% m-o-m respectively due to continued fear over the weakening currencies and political uncertainty in the latter. Thailand was hit by street demonstration after the Constitutional Court ruled that the Government effort to amend the constitution was illegal.

Market Outlook

Global economic growth will continue to gain strength in 2014 forged by a synchronized global growth as US and Europe lead the recovery with global economy growth of between 3-3.6%. Malaysia will benefit from the global growth especially our exports which have been fairly flatish for the past two years. Corporate earnings are expected to rebound to 8-9% YoY in 2014, from a flattish-to-negative in 2013.

We believe the major earnings drivers are the plantation sector and export driven manufacturers such as the electronic & electrical sector. The plantation sector has seen prolonged earning downgrades in 2013 due to lower CPO prices, which are likely to rebound in 2014 and underpin earnings recovery for the planters.

Malaysia is currently trading at valuation above its long term average and this is likely to cap its upside due to the premium valuation. Stock picking is going to be key this year for strong outperformance.

Our main concern going forward is a more aggressive tapering of QE by US Fed but this will be data dependent. We do not believe the Fed will adopt an aggressive tapering stance in the short term until there are firm signals that the US economy is recovering much better than expected


2.6 Review of the market (Contd.)

Strategy

We will adopt a barbell strategy where we will have a good mix of beta and defensive stocks to ride through the expected volatility in anticipation of more aggressive tapering US QE3. We aim to take advantage of the upcoming volatility where we will be more aggressive in adding beta and increase equity exposure.

Our stock selection continues to favour sectors that will benefit from being the main drivers of the economy such as the oil & gas, construction, manufacturers (glove, tech, IT etc) and plantation sector. Sectors that we favour include consumer staples, FMCG, and healthcare.

2.7 Income Distribution

For the financial period under review, the Fund did not declare any income distribution.

2.8 Details of any unit split exercise

The Fund did not carry out any unit split exercise during the financial period under review.

2.9 Significant changes in the state of affair of the Fund during the period

Pursuant to a supplemental deed dated 19 November 2013 between Kenanga Investors Berhad and CIMB Commerce Trustee Berhad, CIMB Commerce Trustee Berhad has agreed to act as the trustee for the fund and replaced HSBC (Malaysia) Trustee Berhad.

In addition to the above, the Financial year end for the Fund was changed to 31 January from 31 December.

2.10 Circumstances that materially affect any interests of the unitholders

During the period under review, there were no circumstances that materially affected any interests of the unitholders. However there was a change in the trustee of the Fund and financial year end as detailed in 2.9.

2.11 Rebates & Soft commissions

Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, financial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the period under review, the Manager has received soft commissions from stockbrokers.


3. FUND PERFORMANCE

3.1 Details of portfolio composition of Kenanga Malaysian Inc Fund (“the Fund”) for the financial period as at 31 January against last 2 financial years as at 31 December are as follows:

a. Distribution among industry sectors and category of investments:

As at31.1.2014 FY 2012 FY 2011

% % %

Trading/Services 30.5 31.8 32.5Finance 13.2 11.7 22.1Plantations 10.7 4.1 9.4REITs 10.6 19.1 -Consumer Product 9.6 9.5 -Infrastructure 4.8 4.9 -Construction 4.8 - 17.4Industrial product 1.9 6.6 5.6Properties 1.8 6.2 3.8Short term deposit and cash 12.1 6.1 9.2

100.0 100.0 100.0

Note: The above mentioned percentages are based on total investment market value plus cash.

b. Distribution among markets

The Fund invested in local equities and cash instruments only.


3.2 Performance details of the Fund for the financial period ended 31 January 2014 against last 2 financial years ended 31 December are as follows:

Period1.1.2013 to FY FY

31.1.2014 2012 2011

Net asset value (RM Million) 14.86* 16.96 23.24 Units in circulation (Million) 27.46 35.69 50.66 Net asset value per unit (RM) 0.5410* 0.4752 0.4587 Highest NAV per unit (RM) 0.5531 0.4802 0.4797 Lowest NAV per unit (RM) 0.4625 0.4505 0.3829 Total return (%) 14.13 3.60 3.71 - Capital growth (%) 14.13 3.60 3.71 - Income growth (%) - - - Gross distribution per unit (sen) - - - Net distribution per unit (sen) - - - Management expense ratio (“MER”) (%)1 2.24 3.19 1.97 Portfolio turnover ratio (“PTR”) (times) 2 1.29 1.58 0.66

Note:TotalreturnistheactualreturnoftheFundfortherespectivefinancialperiod/years,computedbased on net asset value per unit and net of all fees.

MERiscomputedbasedonthetotalfeesandexpensesincurredbytheFunddividedbytheaverage fundsizecalculatedonadailybasis.PTR iscomputedbasedon theaverageofthetotalacquisitionsandtotaldisposalsofinvestmentsecuritiesoftheFunddividedbytheaveragefundsizecalculatedonadailybasis.

Above NAV and NAV per unit are not shown as ex-distribution as there were no distribution declaredbytheFundinthecurrentfinancialperiodunderreview.

1MERisloweragainstlastfinancialyearmainlyduetoloweradministrationexpensesincurredbytheFundincurrentfinancialperiod.

2PTRisloweragainstpreviousyearsaslesstradingactivitiesfortheportfolio.

*BasedonbidpricefairvaluationmethodonallinvestmentsheldbytheFundasat31January2014,theNAVandNAVperunitwouldbeRM14.80millionandRM0.5391respectively.

(AsdisclosedunderNote11ofthefinancialstatements)


3.3 Average total return of the Fund

1 Year31 Jan 13 - 31 Jan 14

3 Years31 Jan 11 - 31 Jan 14

5 Years31 Jan 09 - 31 Jan 14

Kenanga Malaysian Inc Fund 16.27% 6.14% 13.61%FTSE-Bursa Malaysia 100 Index 11.49% 6.51% 22.85%

Source: Lipper

3.4 Annual total return of the Fund

Period under review

31 Dec 12 - 31 Jan 14

1 Year31 Dec 11 - 31 Dec 12

1 Year31 Dec 10 - 31 Dec 11

1 Year31 Dec 09 - 31 Dec 10

1 Year31 Dec 08 - 31 Dec 09

Kenanga Malaysian Inc Fund

14.13% 3.60% 3.71% 10.66% 26.25%

FTSE-Bursa Malaysia 100 Index

8.11% 9.60% 1.94% 21.76% 48.00%

Source: Lipper

Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate.


4.1 TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA MALAYSIAN INC FUND

We have acted as Trustee of KENANGA MALAYSIAN INC FUND (“the Fund”) for the financial period from 1 January 2013 to 2 December 2013. To the best of our knowledge, KENANGA INVESTORS BERHAD (“the Manager”), has operated and managed the Fund in accordance with the following:-

a) limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission’s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws;

b) valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and

c) creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements.

For HSBC (Malaysia) Trustee Berhad

Tan Bee Nie Head, Trustee Operations

Kuala Lumpur

26 March 2014


4.2 TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA MALAYSIAN INC FUND

We, CIMB COMMERCE TRUSTEE BERHAD (“the Trustee”), being the Trustee of KENANGA MALAYSIAN INC FUND (“the Fund”) are of the opinion that KENANGA INVESTORS BERHAD (“the Manager”), acting in the capacity of Manager of the Fund, has fulfilled its duties in the following manner for the financial period from 3 December 2013 to 31 January 2014.

a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, the Securities Commission Malaysia’s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws during financial period from 3 December 2013 to 31 January 2014;

b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and

c) Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements.

For and on behalf of CIMB COMMERCE TRUSTEE BERHAD (313031-A)

LEE KOOI YOKE Chief Operating Officer

Kuala Lumpur, Malaysia

26 March 2014


5. INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA MALAYSIAN INC FUND

Report on the financial statements

We have audited the financial statements of Kenanga Malaysia Inc Fund (“the Fund”), which comprise the statement of financial position as at 31 January 2014, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial period then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 14 to 39.

Manager’sandTrustee’sresponsibilityforthefinancialstatementsandfairpresentation

The Manager of the Fund is responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements 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 true and fair presentation of these financial statements.

Auditors’responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund’s preparation of financial statements that give a true and fair view 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. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements.

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


5. INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA MALAYSIAN INC FUND (CONTD.)

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 31 January 2014 and of its financial performance, changes in net asset value and the cash flows of the Fund for the financial period then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

Other matters

This report is made solely to the unitholders of the Fund, as a body, in accordance with the requirements of Securities Commission’s Guidlines on Unit Trust Funds and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Gloria Goh Ewe GimAF: 0039 No. 1685/04/15(J)Chartered Accountants Chartered Accountant


26 March 2014


6. STATEMENT BY THE MANAGER

I, Abdul Razak Bin Ahmad, being the director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial position as at 31 January 2014 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial period ended 31 January 2014 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga Malaysian Inc Fund as at 31 January 2014 and of its financial performance and cash flows for the period then ended and comply with the requirements of the Deed.

For and on behalf of the ManagerKenanga Investors Berhad

Abdul Razak Bin Ahmad


26 March 2014


7. FINANCIAL STATEMENT

7.1 STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL PERIOD 1 JANUARY 2013 TO 31 JANUARY 2014

Note1.1.2013 to

31.1.20141.1.2012 to

31.12.12RM RM

INVESTMENT INCOMEInterest income 49,334 69,328 Dividend income 550,575 478,475 Net gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 2,035,098 763,912

2,635,007 1,311,715

EXPENSESManager’s fee 4 304,161 358,016 Trustee’s fee 5 17,786 18,063 Auditors’ remuneration 16,500 16,500 Tax agent’s fee 3,063 5,501 Administration expenses 8,870 16,495 Brokerage and other transaction costs 182,116 219,798

532,496 634,373

NET INCOME BEFORE TAX 2,102,511 677,342

Income tax expense 6 (4,075) (7,900)

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD/YEAR 2,098,436 669,442

Net income after tax is made up as follows:Realised gain 2,042,220 2,233,404 Unrealised gain/(loss) 56,216 (1,563,962)

2,098,436 669,442

The accompanying notes form an integral part of the financial statements.


7.2 STATEMENT OF FINANCIAL POSITIONAS AT 31 JANUARY 2014

Note 31.1.14 31.12.12RM RM

INVESTMENTSFinancial assets at FVTPL 7 13,009,955 15,830,964 Short term deposits 8 1,500,000 897,000

14,509,955 16,727,964

OTHER ASSETSOther receivables 9 326,577 83,841 Tax recoverable 55,820 48,202 Cash at bank 32,559 157,045

414,956 289,088

TOTAL ASSETS 14,924,911 17,017,052

LIABILITIESAmount due to Manager 22,191 35,110 Amount due to Trustee 616 1,525 Other payables 97,375 121,907 TOTAL LIABILITIES 120,182 158,542

EQUITYUnitholder’s contribution 26,067,053 30,219,270 Accumulated losses (11,262,324) (13,360,760)NET ASSET VALUE (“NAV”) ATTRIBUTABLE

TO UNITHOLDERS 10 14,804,729 16,858,510 TOTAL EQUITY AND LIABILITIES 14,924,911 17,017,052

NUMBER OF UNITS IN CIRCULATION 10(a) 27,462,495 35,687,102

NET ASSET VALUE PER UNIT 11 0.5391 0.4724



7.3 STATEMENT OF CHANGES IN NET ASSET VALUEFOR THE FINANCIAL PERIOD 1 JANUARY 2013 TO 31 JANUARY 2014

NoteUnitholders’ contribution

Accumulatedlosses

Total net asset value

RM RM RM

31.1.2014At beginning of the period 30,219,270 (13,360,760) 16,858,510 Total comprehensive income - 2,098,436 2,098,436 Creation of units 10(a) 683 - 683 Cancellation of units 10(a) (4,537,698) - (4,537,698)Distribution equalisation 10(a) 384,798 - 384,798 At end of the period 26,067,053 (11,262,324) 14,804,729

31.12.2012At beginning of the period 37,269,984 (14,030,202) 23,239,782 Total comprehensive income - 669,442 669,442 Creation of units 10(a) 20,645 - 20,645 Cancellation of units 10(a) (9,251,092) - (9,251,092)Distribution equalisation 10(a) 2,179,733 - 2,179,733 At end of the period 30,219,270 (13,360,760) 16,858,510



7.4 STATEMENT OF CASH FLOWSFOR THE FINANCIAL PERIOD 1 JANUARY 2013 TO 31 JANUARY 2014

1.1.2013 to 31.1.2014

1.1.2012 to 31.12.12

RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES

Proceeds from sale of financial assets at FVTPL 22,210,953 34,379,791 Purchase of financial assets at FVTPL (17,784,869) (28,534,156)Net dividends received 519,072 467,145 Interest received 49,283 69,601 Amount paid to the Manager (307,556) (368,580)Trustee’s fee paid (18,695) (18,145)Auditors’ remuneration paid (16,000) (8,000)Tax agent’s fee paid (3,563) - Payment for other fees and expenses (8,370) (23,696)Net cash generated from operating and investing activities 4,640,255 5,963,960

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 724 16,260 Cash paid on units cancelled (4,162,465) (7,068,872)Net cash used in financing activities (4,161,741) (7,052,612)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 478,514 (1,088,652)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD/YEAR 1,054,045 2,142,697

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD/YEAR 1,532,559 1,054,045

Cash and cash equivalents comprise:Cash at bank 32,559 157,045 Short term deposits 1,500,000 897,000

1,532,559 1,054,045



7.5 NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD 1 JANUARY 2013 TO 31 JANUARY 2014

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Malaysian Inc Fund (herein after referred to as “the Fund”) was constituted pursuant to the executed Master Deed dated 29 August 2007 (collectively, together with deeds supplemental thereto, referred to as “the Deed”) between the Manager, Kenanga Investors Berhad, and HSBC (Malaysia) Trustee Berhad (“the Trustee” prior to 3 December 2013). The Fund has changed its trustee to CIMB Commerce Trustee Berhad (“the Trustee” with effect from 3 December 2013). The aforesaid change was effected on 3 December 2013 via a Fourth Master Supplemental Deed dated 19 November 2013. The Fund commenced operation on 9 November 2007 and will continue to be in operation until terminated in accordance to Part 12 of the Deed.

Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad, which in turn is a wholly-owned subsidiary of K & N Kenanga Holdings Berhad, listed on the mainboard of Bursa Malaysia Securities Berhad. All of these companies are incorporated in Malaysia.

The principal place of business of the Manager is Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur.

The Fund seeks to provide consistent annual returns and medium to long term capital appreciation by investing in Malaysia securities with global reach.

The Fund changed its financial year end from 31 December to 31 January pursuant to the Fourth Master Supplemental Deed dated 19 November 2013.

The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 26 March 2014.

2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks including market risk (which includes interest rate risk and price risk), credit risk and liquidity risk. Whilst these are the most important types of financial risks inherent in each type of financial assets at FVTPL, the Manager and the Trustee would like to highlight that this list does not purport to constitute an exhaustive list of all the risks inherent in a investment in the Fund.

The Fund has an approved set of investment guidelines and policies as well as internal controls which sets out its overall business strategies to manage these risks to optimise returns and preserve capital for the unitholders, consistent with the long term objectives of the Fund.

a. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial asset at FVTPL will fluctuate because of changes in market prices. Market risk includes interest rate risk and price risk.


2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)

a. Market Risk (Contd.)

Market risk arises when the value of the financial asset at FVTPL fluctuate in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the prices of financial asset at FVTPL caused by uncertainties in the economic, political and social environment will affect the fair value of the Fund.

The Manager manages the risk of unfavorable changes in prices by cautious review of the investments and continuous monitoring of their performance and risk profiles.

i. Interest rate risk

The risk refers to how the changes in the interest rate environment would affect the performance of the Fund’s investments. Rates offered by the financial institutions will fluctuate according to the Overnight Policy Rate determined by Bank Negara Malaysia and this has direct correlation with the Fund’s investments in deposits.

The Fund is not exposed to significant interest rate risk as its deposits are short term in nature and have fixed interest rates.

Interest rate risk exposure

The following table analyses the Fund’s interest rate risk exposure. The Fund’s assets and liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates.

Up to 1 year

Non-exposure

to interest rate

movement Total

Weighted average effective interest

rate*RM RM RM %

31.1.2014AssetsFinancial assets at FVTPL - 13,009,955 13,009,955 Short term deposits 1,500,000 - 1,500,000 2.98Other assets - 359,136 359,136

1,500,000 13,369,091 14,869,091

LiabilitiesOther liabilities - (120,182) (120,182)

- (120,182) (120,182)

Total interest sensitivity gap 1,500,000 13,248,909 14,748,909




i. Interest rate risk (Contd.)

Interest rate risk exposure (Contd.)

Up to 1 year

Non-exposure

to interest rate

movement Total

Weighted average effective interest

rate*RM RM RM %

31.12.2012AssetsFinancial assets at FVTPL - 15,830,964 15,830,964 Short term deposits 897,000 - 897,000 2.96Other assets - 240,886 240,886

897,000 16,071,850 16,968,850

LiabilitiesOther liabilities - (158,542) (158,542)

- (158,542) (158,542)

Total interest sensitivity gap 897,000 15,913,308 16,810,308

* Computed based on interest-bearing assets only.

ii. Price risk

Price risk is the risk of unfavorable changes in the fair values of financial assets at FVTPL. The Fund invests in financial assets at FVTPL which are exposed to price fluctuations. This may then affect the unit price of the Fund.

Price risk sensitivity

Manager’s best estimate of the effect on the profit for the period due to a reasonably possible change in financial assets at FVTPL with all other variables held constant is indicated in the table below:

Changes in priceIncrease/(Decrease)

Effect on profit for the period/year

Increase/(decrease)Basic points RM

31.1.2014Financial assets at FVTPL 5/(5) 6,505/(6,505)

31.12.2012Financial assets at FVTPL 5/(5) 7,915/(7,915)




ii. Price risk (Contd.)

Price risk sensitivity (Contd.)

In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material.

Price risk concentration

The following table sets out the Fund’s exposure and concentration to price risk based on its portfolio as at the reporting date.

Fair value Percentage of NAV31.1.2014 31.12.2012 31.1.2014 31.12.2012

RM RM % %

Financial assets at FVTPL 13,009,955 15,830,964 87.9 93.9

The Fund’s concentration of equity price risk analysed by the Fund’s equity securities and collective investment scheme by sector is as follows:

Fair value Percentage of NAV31.1.2014 31.12.2012 31.1.2014 31.12.2012

RM RM % %

Trading/Services 4,511,520 5,369,030 30.5 31.8 Finance 1,959,646 1,977,335 13.2 11.7 Plantations 1,589,235 685,520 10.7 4.1 Consumer Product 1,422,200 1,604,290 9.6 9.5 Infrastructure 711,360 834,750 4.8 5.0 Construction 703,430 - 4.8 - Industrial product 277,200 1,104,174 1.9 6.5 Properties 269,250 1,042,990 1.8 6.2 REITs 1,566,114 3,212,875 10.6 19.1

13,009,955 15,830,964 87.9 93.9

b. Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss to the Fund by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk.

i. Credit risk exposure

At the reporting date, 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.



b. Credit Risk (Contd.)

ii. Financial assets that are either past due or impaired

As at reporting date, there are no financial assets that are either past due or impaired.

iii. Credit quality of financial assets

The Fund deposits only with reputable financial institutions. The following table analyses the financial institutions by rating category:

Short term deposits

Percentage of total short term deposits Percentage of NAV

31.1.2014 31.12.2012 31.1.2014 31.12.2012% % % %

RatingA1 100.0 100.0 10.1 5.3

c. Liquidity Risk

Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholder’s option based on the Fund’s net asset value per unit at the time of cancellation calculated in accordance with the Fund’s Trust Deed.

The liquid assets comprise cash, deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days.

The following table analyses the maturity profile of the Fund’s financial assets and financial liabilities in order to provide a complete view of the Fund’s contractual commitments and liquidity.

Note Up to 1 yearRM

31.1.2014AssetsFinancial assets at FVTPL 13,009,955 Short term deposits 1,500,000 Other assets 359,136

(i) 14,869,091



c. Liquidity Risk (Contd.)

Note Up to 1 yearRM

31.1.2014 (Contd.)LiabilitiesOther liabilities (ii) 120,182

Net asset value 14,804,729

Liquidity gap (iii) 14,748,909

31.12.2012AssetsFinancial assets at FVTPL 15,830,964 Short term deposits 897,000 Other assets 240,886

(i) 16,968,850

LiabilitiesOther liabilities (ii) 158,542

Net asset value 16,858,510

Liquidity gap (iii) 16,810,308

(i) Financial assets

Analysis of financial assets at FVTPL into maturity groupings is based on the expected date on which these assets will be realised. The Fund’s investments have been included in the “less than 1 month” category on the assumption that these are highly liquid investments which can be realised should all of the Fund’s unitholders’ equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining year from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised.

(ii) Financial liabilities

The maturity grouping is based on the remaining year from the end of the reporting period to the contractual maturity dated. When counterparty has a choice of when the amount is paid, the liability is allocated to the earliest year in which the Fund can be required to pay.

(iii) Equity

As unitholders can request for redemption of their units, they have been categorised as having a maturity of “less than 1 month”.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of accounting

The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) as issued by Malaysian Accounting Standards Board (“MASB”) and International Financial Reporting Standards (“IFRS”) issued by International Accounting Standards Board (“IASB”).

The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

b. Standard and Interpretations Issued But Not Yet Effective

As at the date of authorisation of these financial statements, the following Standards and Amendments have been issued by MASB but are not yet effective and have not been adopted by the Fund.

Description

Effective for financial period

beginning on or after

Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014

Amendments to MFRS 10, MFRS 12, and MFRS 127: Investment Entities 1 January 2014

Amendments to MFRS 136: Recoverable Amount Disclosure for Non-Financial Assets 1 January 2014

IC Interpretation 21 Levies 1 January 2014Amendments to MFRSs contained in the documents entitled

Annual Improvements 2010 - 2012 cycle 1 July 2014Amendments to MFRSs contained in the documents entitled

Annual Improvements 2011 - 2013 cycle 1 July 2014MFRS 9: Financial Instruments (IFRS 9 Issued by IASB in

November 2009) To be announced MFRS 9: Financial Instruments (IFRS 9 Issued by IASB in

October 2010) To be announcedMFRS 9: Financial Instruments: Hedge Accounting and

amendments to MFRS 9, MFRS 7 and MFRS 139 To be announced

The Fund will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any significant impact to the financial statements of the Fund upon their initial application, other than MFRS 9.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

b. Standard and Interpretations Issued But Not Yet Effective (Contd.)

MFRS 9 reflects the first phase of work on the replacement of MFRS 139 and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to MFRS 9: Mandatory Effective Date of MFRS 9 and Transition Disclosures, issued in March 2012, moved the mandatory effective date to 1 January 2015. Subsequently, on 14 February 2014, it was announced that the new effective date will be decided when the project is closer to completion. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Fund financial assets, but will not have an impact on classification and measurements of the Fund financial liabilities. The Fund will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.

c. Financial Assets

Financial assets 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.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Fund determines the classification of its financial assets at initial recognition which are receivables.

i. Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition.

Financial assets held for trading include quoted equity securities and collective investment schemes acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in profit or loss.

Interest earned and dividend revenue elements of such instruments are recorded separately in ‘‘interest income’’ and ‘‘dividend income’’ respectively.

ii. Receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as receivables.

Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process.



c. Financial Assets (Contd.)

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss.

d. Impairment of Financial Assets

The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If any such evidence exists, the amount of impairment loss is measured as 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 rate of return. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

e. Income

Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable.

Interest income is recognised using the effective interest rate method.

Dividend income is recognised on a declared basis, when the right to receive the dividend is established.

f. Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term deposits with financial institutions.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

g. Income Tax Expense

Income tax on the profit or loss for the year comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the period.

h. Unrealised reserves

Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values at reporting date. This reserve is not distributable in nature.

i. Financial Liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

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 financial instrument. The Fund’s financial liabilities are classified as other financial liabilities. The Fund’s financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective rate method.

A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

j. Unitholders’ Contribution – NAV Attributable to Unitholders

The unitholders’ contribution to the Fund is classified as equity instruments.

Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee.

k. Functional and Presentation Currency

The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (“the functional currency”). The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Fund’s functional currency.

l. Distribution

Distributions are at the discretion of the Fund Manager. A distribution to the Fund’s unitholders is accounted for as a deduction from retained earnings.

m. Significant Accounting Judgments and Estimates

The preparation of financial statements requires the use of certain accounting estimates and exercise of judgment. Estimates and judgements are continually evaluated and are based on past experience, reasonable expectations of future events and other factors.



m. Significant Accounting Judgments and Estimates (Contd.)

i. Critical judgments made in applying accounting policies

There are no major judgments made by the Manager in applying the Fund’s accounting policies.

ii. Key sources of estimation uncertainty

There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

4. MANAGER’S FEE

The Manager’s fee is computed on a daily basis at a rate not exceeding 2% per annum of the NAV of the Fund as provided under Division 13.1 of the Deed. The Manager is curently charging Manager’s fee of 1.80% per annum of the NAV of the Fund.

5. TRUSTEE’S FEE

The Trustee’s fee is computed on a daily basis at a rate not exceeding 1% per annum of the NAV of the Fund and subject to a minimum fee of RM18,000 per annum as provided under Division 13.2 of the Deed.

The Trustee’s fee is computed at 0.05% per annum of the net asset value of the Fund with effect from 3 December 2013. Prior to 3 December 2013, the Trustee’s fee was computed at 0.08% per annum on the net asset value of the Fund.

6. INCOME TAX EXPENSE

31.1.2014 31.12.2012 RM RM

Malaysian income tax:Current year tax 3,700 7,900Underprovision for prior year 375 -

4,075 7,900

Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial period. The statutory tax rate will be reduced to 24% effective from year of assessment 2016.

Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, 1967.


6. INCOME TAX EXPENSE (CONTD.)

A reconciliation of income tax expense applicable to net income before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Fund is as follows:

31.1.2014 31.12.2012RM RM

Net income before tax 2,102,511 677,342

Tax at Malaysian statutory tax rate of 25% (financial year ended 31 December 2012: 25%) 525,600 169,336

Tax effect of:Income not subject to tax (647,000) (702,382)Loss not subject to tax - 390,991 Expenses not deductible for tax purposes 52,100 62,891 Restriction on tax deductible expenses for unit trust fund 73,000 87,064 Underprovision of tax in prior years 375 -

Tax expense for the period/year 4,075 7,900

7. FINANCIAL ASSETS AT FVTPL

31.1.2014 31.12.2012 RM RM

Financial assets held for trading, at FVTPL:Quoted equity securities 11,443,841 12,618,089 Quoted collective investment schemes 1,566,114 3,212,875

13,009,955 15,830,964

Net gain on financial assets at FVTPL comprised:Realised gain on disposals 1,978,882 2,327,874 Unrealised change in fair values 56,216 (1,563,962)

2,035,098 763,912


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 January 2014:

QuantityAggregate

CostFair

ValuePercentage

of NAVShares/Units RM RM %

Quoted equity securities

Trading/ServicesTenanga Nasional Berhad 60,000 500,535 700,800 4.7 Deleum Berhad 133,000 495,552 557,270 3.8 Dialog Group Berhad 160,000 396,878 520,000 3.5 SapuraKenanca Petroluem Berhad 80,000 194,612 351,200 2.4 Barakah Offshore Petroleum Berhad 200,000 314,020 350,000 2.4 Dayang Enterprise Holdings Bhd. 93,000 349,085 345,960 2.3 Perdana Petroluem Berhad 200,000 327,660 332,000 2.3 Datasonic Group Berhad 149,700 187,125 321,855 2.2 MBM Resources Berhad 86,000 327,286 287,240 1.9 Daya Materials Berhad 600,000 219,000 240,000 1.6 PESTECH International Berhad 52,700 170,075 181,815 1.2 Caring Pharmacy Group Berhad 82,000 153,430 165,640 1.1 Media Prima Berhad 66,000 193,133 157,740 1.1

1,962,400 3,828,391 4,511,520 30.5

FinanceMalayan Banking Berhad 64,039 612,468 615,415 4.1 Syarikat Takaful Malaysia Berhad 53,700 440,434 532,704 3.6 Hong Leong Financial Group Berhad 34,000 439,592 530,400 3.6 CIMB Group Holdings Berhad 40,743 343,167 281,127 1.9

192,482 1,835,661 1,959,646 13.2

PlantationBatu Kawan Berhad 30,600 574,865 599,760 4.0 IOI Corporation Berhad 100,000 418,900 416,000 2.8 Sarawak Oil Palms Berhad 45,500 296,847 293,475 2.0 TSH Resources Berhad 100,000 256,403 280,000 1.9

276,100 1,547,015 1,589,235 10.7

Consumer ProductUMW Holdings Berhad 40,000 516,237 472,000 3.2 Nestle (M) Berhad 5,000 311,458 337,800 2.3 NTPM Holdings Berhad 400,000 268,000 330,000 2.2 Guinness Anchor Berhad 20,000 305,824 282,400 1.9

465,000 1,401,519 1,422,200 9.6


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 January 2014: (Contd.)

QuantityAggregate

CostFair

ValuePercentage

of NAVShares/Units RM RM %

Quoted equity securities (Contd.)

InfrastructureDiGi.Com Berhad 152,000 710,778 711,360 4.8

ConstructionGamuda Berhad 96,000 454,974 422,400 2.9 Hock Seng Lee Berhad 157,000 327,927 281,030 1.9

253,000 782,901 703,430 4.8

Industrial ProductsPETRONAS Gas Berhad 12,000 235,185 277,200 1.9

PropertiesMatrix Concepts Holdings Berhad 75,000 243,750 269,250 1.8

Total quoted equity securities 3,387,982 10,585,200 11,443,841 77.3

Quoted collective investment schemes

Sunway Real Estate Investment Trust 353,000 533,726 451,840 3.1 Pavilion Real Estate Investment Trust 344,500 508,775 427,180 2.9 CapitaMalls Malaysia Trust 300,000 492,126 414,000 2.8 Axis Real Estate Investment Trust 96,160 290,658 273,094 1.8 Total quoted collective investment

schemes 1,093,660 1,825,285 1,566,114 10.6

Total quoted investments 12,410,485 13,009,955 87.9

Unrealised gain on financial assets at FVTPL 599,470

8. SHORT TERM DEPOSITS

Short term deposits are held with licensed commercial banks in Malaysia at the prevailing interest rate.


9. OTHER RECEIVABLES

31.1.2014 31.12.2012RM RM

Amount due from brokers 305,019 82,144 Dividend receivable 21,435 1,625 Interest income from short term deposits 123 72

326,577 83,841

10. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

Net asset value attributable to unitholders is represented by:

Note 31.1.2014 31.12.2012RM RM

Unitholders’ contribution (a) 26,067,053 30,219,270 Accumulated losses:

Realised reserves (11,861,794) (13,904,014)Unrealised reserves 599,470 543,254

(11,262,324) (13,360,760)14,804,729 16,858,510

(a) Unitholders’ contribution

1.1.2013 to 31.1.2014 1.1.2012 to 31.12.2012No. of units RM No. of units RM

At beginning of the period/year 35,687,102 30,219,270 50,664,681 37,269,984 Distribution equalisation - 384,798 - 2,179,733 Add: Creation of units 1,393 683 35,213 20,645 Less: Cancellation of

units (8,226,000) (4,537,698) (15,012,792) (9,251,092)At end of the period/year 27,462,495 26,067,053 35,687,102 30,219,270

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad and parties related to the Manager as at 31 January 2014 were nil (31 December 2012: nil).

11. NET ASSET VALUE PER UNIT

Net asset value attributable to unitholders is classified as equity in the statement of financial position.

In line with the adoption of MFRS 139, quoted financial assets have been valued at the bid prices at the close of business. In accordance with the Deed, the calculation of net asset value attributable to unitholders per unit for the creation and cancellation of units is computed based on quoted financial assets valued at the last done market price.


11. NET ASSET VALUE PER UNIT (CONTD.)

A reconciliation of net asset attributable to unitholders for creating/cancelling of units and the net asset value attributable to unitholders per the financial statements is as follows:

31.1.2014 31.12.2012RM RM/Unit RM RM/Unit

Net asset value attributable to unitholders for creation/cancellation of units 14,857,601 0.5410 16,959,191 0.4752

Effect from adopting bid prices as fair value (52,872) (0.0019) (100,681) (0.0028)

Net asset value attributable to unitholders per statement of financial position 14,804,729 0.5391 16,858,510 0.4724

12. DISTRIBUTION

No distribution was declared by the Fund for the financial period 1 January 2013 to 31 January 2014 (financial year ended 31 December 2012: nil).

13. PORTFOLIO TURNOVER RATIO

The portfolio turnover ratio (“PTR”) for the financial period 1 January 2013 to 31 January 2014 is 1.29 times (financial year ended 31 December 2012: 1.58 times).

PTR is the ratio of the average of the acquisitions and disposals of investments of the Fund for the financial period/year to the average net asset value of the Fund, calculated on a daily basis.

14. MANAGEMENT EXPENSE RATIO

The management expense ratio (“MER”) for the financial period 1 January 2013 to 31 January 2014 is 2.24 times (financial year ended 31 December 2012: 3.19 times).

MER is the ratio of total fees and recovered expenses of the Fund expressed as a percentage of the Fund’s average net asset value, calculated on a daily basis.


15. TRANSACTIONS WITH FINANCIAL INSTITUTIONS

Transaction value

Percentage of total

Brokerage, stamp duty

and clearing fee

Percentage of total

RM % RM %

Kenanga Investment Bank Berhad* 7,164,673 18.1 22,409 17.6 Hong Leong Investment Bank

Berhad 4,180,193 10.6 13,006 10.2 Public Investment Bank Berhad 3,865,367 9.8 12,214 9.6 KAF-Seagroatt & Campbell

Securities Sdn Bhd 3,601,970 9.1 11,526 9.0 Maybank Investment Bank Berhad 3,019,109 7.6 9,422 7.4 MIDF Amanah Investment Bank

Berhad 2,650,192 6.7 8,711 6.8 AmInvestment Bank Berhad 2,433,811 6.1 7,810 6.1 Credit Suisse Securities (Malaysia)

Sdn Bhd 2,409,793 6.1 7,594 6.0 HwangDBS Investment Bank

Berhad 2,080,927 5.2 6,765 5.3 RHB Investment Bank Berhad 1,930,662 4.9 6,263 4.9 Others 6,270,129 15.8 21,801 17.1

39,606,826 100.0 127,521 100.0

The above transaction values were in respect of quoted investment securities.

* Kenanga Investment Bank Berhad is a related party of Kenanga Investors Berhad.

The directors of the Manager are of the opinion that the transactions with the related party have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties. The Manager is of the opinion that the above dealings have been transacted on an arm’s length basis.

16. SEGMENTAL REPORTING

a. Business Segment

In accordance with the objective of the Fund, the Fund can invest up to 98% in quoted Malaysian investment securities and others. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segment (Contd.)

Quoted investment

securitiesOther

investments TotalRM RM RM

31.1.2014RevenueSegment income 2,585,673 49,334 Segment expenses (182,116) - Net segment income representing

segment results 2,403,557 49,334 2,452,891 Unallocated expenditure (350,380)Net income before tax 2,102,511 Income tax expense (4,075)Net income after tax 2,098,436

AssetsFinancial assets at FVTPL 13,009,955 1,500,000 Other segment assets 326,454 - Total segment assets 13,336,409 1,500,000 14,836,409 Unallocated assets 88,502

14,924,911

LiabilitiesOther segment liabilities represent

total segment liabilities 73,875 - 73,875 Unallocated liabilities 46,307Net asset value attributable to

unitholders 14,804,729 14,924,911

31.12.2012RevenueSegment income 1,242,387 69,328 Segment expenses (219,798) - Net segment income representing

segment results 1,022,589 69,328 1,091,917 Unallocated expenditure (414,575)Net income before tax 677,342Income tax expense (7,900)Net income after tax 669,442


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segment (Contd.)

Quoted investment

securitiesOther

investments TotalRM RM RM

31.12.2012 (Contd.)AssetsFinancial assets at FVTPL 15,830,964 897,000 Other segment assets 83,769 - Total segment assets 15,914,733 897,000 16,811,733 Unallocated assets 205,319

17,017,052

LiabilitiesOther segment liabilities represent

total segment liabilities 98,907 - 98,907 Unallocated liabilities 59,635 Net asset value attributable to

unitholders 16,858,510 17,017,052

b. Geographical Segments

As all of the Fund’s investments are located in Malaysia, the Fund does not have separate identifiable geographical segments.

17. FINANCIAL INSTRUMENTS

a. Classification of financial instruments

The Fund’s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classification. The significant accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gain and loss, are recognised.

The following table analyses the financial assets and liabilities of the Fund in the statement of financial position by the class of financial instrument to which they are assigned and therefore by the measurement basis.


17. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (Contd.)

Financial assets at

FVTPL ReceivablesFinancial liabilities Total

RM RM RM RM

31.1.2014AssetsQuoted equity securities 11,443,841 - - 11,443,841 Quoted collective investment

schemes 1,566,114 - - 1,566,114 Short term deposits - 1,500,000 - 1,500,000 Other receivables - 326,577 - 326,577 Cash at bank - 32,559 - 32,559

13,009,955 1,859,136 - 14,869,091

LiabilitiesAmount due to Manager - - 22,191 22,191 Amount due to Trustee - - 616 616 Other payables - - 97,375 97,375

- - 120,182 120,182

31.12.2012AssetsQuoted equity securities 12,618,089 - - 12,618,089 Quoted collective investment

schemes 3,212,875 - - 3,212,875 Short term deposits - 897,000 - 897,000 Other receivables - 83,841 - 83,841 Cash at bank - 157,045 - 157,045

15,830,964 1,137,886 - 16,968,850

LiabilitiesAmount due to Manager - - 35,110 35,110 Amount due to Trustee - - 1,525 1,525 Other payables - - 121,907 121,907

- - 158,542 158,542


17. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value

The Fund’s financial assets at FVTPL are carried at fair value. The fair values of these financial assets were determined using prices in active markets.

The following table shows the fair value measurements by level of the fair value measurement hierarchy:

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments:31.1.2014

- Quoted equity securities 11,443,841 - - 11,443,841- Quoted collective investment

schemes 1,566,114 - - 1,566,114

31.12.2012- Quoted equity securities 12,618,089 - - 12,618,089- Quoted collective investment

schemes 3,212,875 - - 3,212,875

Level 1: Quoted prices in active marketLevel 2: Model with all significant inputs which are observable market dataLevel 3: Model with inputs not based on observable market data

The fair value of quoted equity securities and quoted collective investment schemes are determined by reference to Bursa Malaysia Securities Berhad’s bid price at reporting date.

c. Financial instruments not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The carrying amounts of the Fund’s financial assets and liabilities that are not carried at fair value approximate their fair values due to the relatively short term maturity of these financial instruments.


18. CAPITAL MANAGEMENT

The capital of the Fund can vary depending on the demand for creation and cancellation of units to the Fund.

The Fund’s objectives for managing capital are:

a. To invest in investments meeting the description, risk exposure and expected return indicated in its prospectus;

b. To maintain sufficient liquidity to meet the expenses of the Fund, and to meet cancellation requests as they arise; and

c. To maintain sufficient fund size to make the operation of the Fund cost-efficient.

No changes were made to the capital management objectives, policies or processes during the financial period 1 January 2013 to 31 January 2014.

This page has been intentionally left blank


ANNUAL REpoRt

For the Financial Period Ended 31 January 2014

Investor Services CenterToll Free Line: 1 800 88 3737Fax: +603 2057 3722Email: [email protected]

Head Office, Kuala LumpurSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807

Kenanga Investors Berhad (353563-p)

kenanga malaysian inc fund - kenanga · pdf filejalan sultan ismail, 50250 kuala lumpur,...

Documents