KENANGA MANAGED GROWTH FUND INTERIM REPORT

Transcription

1 KENANGA MANAGED GROWTH FUND INTERIM REPORT For the Financial Period from 1 April 2017 to 30 September 2017

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3 KENANGA MANAGED GROWTH FUND Contents Page Corporate Directory ii Directory of Manager s Offices iii Fund Information 1 Manager s Report 2-6 Fund Performance 7-9 Trustee s Report 10 Statement by the Manager 11 Financial Statement 12-43

4 CORPORATE DIRECTORY Manager: Kenanga Investors Berhad (Company No P) Registered Office Business Office Level 17, Kenanga Tower Level 14, Kenanga Tower 237, Jalan Tun Razak 237, Jalan Tun Razak Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Tel: Tel: Fax: Tel: Website: Board Of Directors Datuk Syed Ahmad Alwee Alsree (Chairman) Syed Zafi len Syed Alwee (Independent Director) Peter John Rayner (Independent Director) Imran Devindran bin Abdullah (Independent Director) Dato Bruce Kho Yaw Huat Ismitz Matthew De Alwis Investment Committee Dato Bruce Kho Yaw Huat (Chairman) Syed Zafi len Syed Alwee (Independent Member) Peter John Rayner (Independent Member) Imran Devindran bin Abdullah (Independent Member) Ismitz Matthew De Alwis Company Secretary: Norliza Abd Samad (MAICSA ) Level 17, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia Trustee: CIMB Commerce Trustee Berhad (Company No A) Registered Office Business Office Level 13, Menara CIMB Level 21, Menara CIMB Jalan Stesen Sentral 2 Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur Sentral Kuala Lumpur Kuala Lumpur Tel: Tel: Fax: Fax: Website: Auditor: Ernst & Young (AF: 0039) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: Tax Adviser: Ernst & Young Tax Consultants Sdn Bhd (Company No K) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: Membership: Federation Of Investment Managers Malaysia (FIMM) , 6 th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur, Malaysia. Tel: Fax: Website: ii Kenanga Managed Growth Fund Interim Report

5 DIRECTORY OF MANAGER S OFFICES REGIONAL BRANCH OFFICES: Kuala Lumpur Level 13, Kenanga Tower 237, Jalan Tun Razak Kuala Lumpur, Malaysia Tel : Fax : Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen Melaka Tel : / Fax : Klang No. 12, Jalan Batai Laut 3 Taman Intan, Klang Selangor Darul Ehsan Tel : / Fax : Penang 5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah Penang Tel : Fax : Miri 2nd Floor, Lot 1264 Centre Point Commercial Centre Jalan Melayu Miri, Sarawak Tel : Fax : Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir Seremban, Negeri Sembilan Tel : Fax : Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum Johor Bahru, Johor Tel : / 4798 Fax : Kuching 1st Floor, No 71 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel : Fax : Kuantan No. B8, Ground Floor Jalan Tun Ismail Kuantan Pahang Tel : Fax : Ipoh Suite 1, 2nd Floor, No. 63, Persiaran Greenhill Ipoh, Perak, Malaysia Tel : / 7570 / 7575 Fax : Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel : / Fax : Petaling Jaya 44B, Jalan SS21/35, Damansara Utama Petaling Jaya, Selangor Tel : Fax : Kenanga Managed Growth Fund Interim Report iii

6 1. FUND INFORMATION 1.1 Fund Name Kenanga Managed Growth Fund (KMGF or the Fund) 1.2 Fund Category / Type Balanced / Income & Growth 1.3 Investment Objective The Fund aims to achieve long-term capital growth through diversifi ed investments in equities and bonds. 1.4 Investment Strategy The Fund invests in a mixture of equities, bonds and money market instruments. The Fund engages active tactical allocation between asset classes with emphasis on managed growth and selects securities based on current earnings, growth prospects and potential for capital appreciation as well as income distribution. Tactical asset allocation between assets and sectors is determined by analysing the economy, which infl uences the business cycle, and market factors. 1.5 Duration The Fund was launched on 23 April 2004 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 A composite of FTSE Bursa Malaysia 100 Index (FBM 100) (50%) and the All Malaysian Government Securities (MGS) Index (50%) obtainable from and Distribution Policy Income (if any) will be distributed annually on a best effort basis. 1.8 Breakdown of unit holdings of KMGF as at 30 September 2017 Size of holdings No. of members No. of units held 5,000 and below ,857 5,001-10, ,277 10,001-50, ,842,357 50, , ,562, ,001 and above 0 0 Total 583 5,935,194 1 Kenanga Managed Growth Fund Interim Report

7 2. MANAGER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective. For the fi nancial period under review, the Fund fulfi lled its investment objective, having invested in a mixture of equity securities, fi xed income securities and money market instrument. 2.2 Comparison between the Fund s performance and performance of the benchmark Performance Chart Since Launch (23/04/ /09/2017) Kenanga Managed Growth Fund vs Benchmark* Source: Novagni Analytics and Advisory Sdn Bhd * FTSE Bursa Malaysia Top 100 Index (50%) & All MGS Index by RAM Quant Shop (50%): Investment strategies and policies employed during the financial period under review For the fi nancial period under review, the Fund s investment strategy and policy were to invest primarily in a mixture of equity securities, fi xed income securities and money market instrument. The strategy employed was in line with that disclosed in the Master Prospectus. 2.4 The Fund s asset allocation as at 30 September 2017 and comparison with the previous financial period. Asset 30 Sep Sep 2016 Listed investment securities 54.4% 47.9% Unlisted bonds 36.3% 23.6% Short term deposits and cash 9.3% 27.3% Reason for the differences in asset allocation As at end 30 September 2017, the Fund s equity exposure has increased from 47.9% to 54.4%. The increase in equities exposure during the fi nancial period under review was mainly due to fund manager deploys more cash into stocks which provide better earnings outlook. Kenanga Managed Growth Fund Interim Report 2

8 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution) since last review period Period under review Kenanga Managed Growth Fund 6.76% Benchmark * 2.40% * FTSE Bursa Malaysia 100 Index (50%) and the All Malaysian Government Securities Index (50%) Source: Lipper The Fund recorded a positive return of 6.76%, outperforming the benchmark return of 2.40%. The Fund s outperformance as compared to the benchmark was attributed to good stock picking strategy. 2.6 Review of the market Equity Market Review Global markets generally rose in April, driven by US and European earnings results, fl uctuating oil prices, an outline on US President Trump s tax reform proposal and geopolitical issues in Syria and North Korea. Investors grew cautious on the meeting between US and Chinese leaders, and the fi rst round of the French presidential elections, which saw centrist candidate Emmanuel Macron making it through to the second round. The Dow Jones Industrial Index rallied 1.3% in April on the back of strong corporate earnings in spite of an underwhelming tax proposal, a lower than expected 1Q GDP and a bipartisan agreement deal narrowly avoiding a government shutdown, as investors poured in US$14bn into US equities. Global equities has remained subdued in May as markets had essentially priced in Macron s victory in the French election and attention shifting on Trump s administration ability to pass on its reform proposals. Apart from the political noise in US, the economy grew faster than initially reported with upward revision of 1Q GDP to 1.2%, easing some concerns on sluggish start to Europe economic data has shown continuous improvement but ECB reasserted their dovish policy stance. In an unexpected move, UK Prime Minister Theresa May announced snap election in June to allow her more fl exibility in Brexit negotiations. The Dow Jones Industrial Index and Euro Stoxx Index were relatively unchanged in May, while UK FTSE Index outperformed with 4.74% as UK exporters expected to benefi t from sterling weaknesses. Asian markets continued to perform well in June with key indices reaching all-time high. As a widely expected move, US Fed raised interest rates for the second time in 2017 by 25bps after upgrading GDP growth forecast to 2.2% and unemployment rate to 4.3% for Sector wise, Technology suffered a minor sell-down in June as investors rotate into fi nancial and energy stocks for value. The IMF kept its global GDP forecast at 3.5% for 2017 and 3.6% for 2018 unchanged from its April 2017 outlook in July 2017 update of World Economic Outlook (WEO). The latest Global Manufacturing PMI index edged up to 52.7 during the month, a tad higher than 52.6 in June Although the rate of output expansion eased slightly, stronger infl ows of new business and rising workforce numbers suggest that the current pace of increase should be broadly sustained going forward. 3 Kenanga Managed Growth Fund Interim Report

9 2.6 Review of the market (Contd.) Equity Market Review (Contd.) Major European and Asian Indexes fell early August with concerns over North Korea, Hurricane Harvey, Spain terror attacks and the US political environment. Stronger economic data and positive corporate earnings propped up August numbers. Volatility increased sharply mid-month in response to North Korea s missile launches before subsiding at month end. The Jackson Hole Economic Policy Symposium accentuates the challenges faced by central bankers to spur wage infl ation despite falling global unemployment, as speeches from Janet Yellen and Mario Draghi avoided monetary policy, focusing on regulatory reforms and market risks. US CPI disappointed by remaining below consensus at 1.7%, reducing the likelihood of a US Federal Reserve rate hike in December while the European central bank stated that current conditions do not warrant an end to quantitative easing in the near term, and expressed its concern that a strong euro could represent a drag to the economy. The regional markets were jittery in September as sabre rattling by North Korea sent investors into selling mode while heightened expectations of another US interest rate hike and balance sheet contraction this year following comments from a Federal Reserve official also added to the downbeat sentiment. Fed Reserve Chairwoman Janet Yellen reiterated that the regulator plans to raise interest rates one more time in the upcoming months. Meanwhile, the Asian Development Bank came out a report and remained confident that the global economic recovery is on a firmer footing this year as controlled growth moderation in China is balanced by expected healthy growth elsewhere. The region is forecast to expand by 5.7% in 2017 and 2018, nearly the 5.8% growth achieved in The ADB expects China to grow at 6.7% this year and 6.4% for next year, while India was downgraded to 7.0% for 2017 and 7.4% for 2018 from 7.4% and 7.6%, respectively. Growth in Southeast Asia, meanwhile, saw a brighter outlook at 5.0% for 2017 and 5.1% for 2018, from 4.8% and 5.0% respectively, led by rising exports from Singapore and Malaysia. Commodities posted strong performance in September with Brent crude oil hit a new 2017 high, topped US$52 a barrel for the fi rst time in four months, continuing a rally fueled by improving demand and expectations that producers will extend output cuts. CPO meanwhile was down 0.4% as inventory showed an increase in September. September ended with MSCI Asia Pacific ex-japan was marginally lower by 0.4%. In local currency, key outperformers were Thailand (+3.53%), the Philippines (+2.67%) and Korea (+1.32%). Laggard were Singapore (-1.75%), Hong Kong (-1.49%) and India (-1.41%). Fixed Income Market Review Local government bonds market experienced signifi cant gains in the secondary market in April, mainly driven by the strengthening Ringgit. The benchmark Malaysian Government Securities (MGS) yield curve had bull-steepened with yields 32 basis points (bps) lower on the short-end and 7 to 14 bps lower at the belly of the yield curve. The primary market was also positive, with higher issuances recorded and improving buying interest seen in the auction market from mid-april towards the end of the month. Kenanga Managed Growth Fund Interim Report 4

10 2.6 Review of the market (Contd.) Fixed Income Market Review (Contd.) Local government bonds continued to perform well in May. Gains were driven by the fi rmer Ringgit, bargain hunting activities and the agreement between Russia and Saudi Arabia to extend oil production cuts. The primary market was also buoyant, and bidding interest for local government bonds continued to gain traction, supported by the renewed strength in the Ringgit and Bank Negara Malaysia s (BNM) stay of accommodative monetary policy stance. Local government bonds halted their previous month s rally in June with yields broadly higher across all maturities. Losses were underpinned by the hawkish comments from the US Federal Reserve (Fed) as well as other central banks, the weaker Ringgit, and falling crude oil prices. Sentiment in the primary market was mixed with bidding interest skewed towards the Government Investment Issue (GII) paper as investors sought attractive returns amid the widening MGS/GII spread. The local government bonds market ended a tad higher after a quiet trading month in July amid an absence of supportive data releases and cautious trading sentiment in the first few weeks. Local government bonds started to gain in the final week of the month as concerns over hawkish shifts by major central banks dissipated. Meanwhile, the public auction market for local government bonds which started strongly in July began to moderate amid renewed strength in the US Dollar and cautious sentiment adopted by investors. Yields on local government bonds ended mostly lower in August on the back of improved buying interest primarily attributed to risk-off sentiment. Net foreign buying interest for MGS resurged, supported by renewed strength in Ringgit, mounting US political tensions, dovish central banks and rising geopolitical tensions surrounding the US and North Korea. Meanwhile, in the primary market, demand was weak for the fi rst two issues and subsequently improved in the fi nal week for the fi nal issue as the Ringgit continued to appreciate against the US Dollar. Yields on local government bonds soared at end-september, erasing earlier gains underpinned by a fi rmer Ringgit and a positive outlook on Malaysia s economy that had brought back foreign infl ows. Buying sentiment was dampened by the US Federal Reserve s (Fed) hawkish tone and Trump s tax reform proposal. Meanwhile, the local government bonds performance in the primary market was also similar. Equity Market Outlook Given that geopolitical tensions from North Korea has subdued, global equities is on track for a stronger close this year. Domestically, the local market strength is likely to persist up until election is called, driven by the feel good factor and as risk appetite for growth stocks have remained strong. Defensive stocks however, in recent months have started to play catch up as investor reposition and rebalance for next year, hence we are adopting a balanced portfolio comprise of a good mix of growth and defensive stocks for the remaining of the year. 5 Kenanga Managed Growth Fund Interim Report

11 2.6 Review of the market (Contd.) Equity Market Outlook (Contd.) 3Q17 interim earnings which is due in November is expected to be positive, driven by earnings recovery from the financial sector. Stronger earnings performance is likely to give domestic equities another shot in the arm in November. Hence we are keeping our cash position relatively low to take advantage any prospective gains for the rest of the year. We continue to favour companies driven by selective themes such as benefi ciaries of rising foreign direct investment, GLC reform/restructuring plays, infrastructure, construction, technology and tourism. Fixed Income Market Outlook We expect the Fed to stay on course, likely hiking rates again in December We expect foreign holdings of local government bonds to continue rising, albeit at a moderate pace. In Malaysia, the benchmark Overnight Policy Rate (OPR) is expected to remain status quo at 3.00% for the rest of In the secondary market for MGS and corporate bonds, we anticipate bond yields to trend higher in 2017, albeit at a moderate pace. 2.7 Distribution For the fi nancial 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 fi nancial period under review. 2.9 Significant changes in the state of affair of the Fund during the financial period There were no signifi cant changes in the state of affair of the Fund during the fi nancial period and up until the date of the manager s report, not otherwise disclosed in the fi nancial statements Circumstances that materially affect any interests of the unitholders During the fi nancial period under review, there were no circumstances that materially affected any interests of the unitholders 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, fi nancial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the fi nancial period under review, the Manager has received soft commissions from stockbrokers. Kenanga Managed Growth Fund Interim Report 6

12 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga Managed Growth Fund ( the Fund ) for the financial period as at 30 September 2017 against last three financial years as at 31 March are as follow: a. Distribution among industry sectors and category of investments: Period from to FY FY FY % % % % Industrial products Constructions Technology Trading/Services Properties Consumer products Finance Special Purpose Acquisition Company Plantations Infrastructure Real Estate Investment Trusts Warrants Unlisted corporate bonds Unlisted government guaranteed bonds Short term deposits and cash Note: The above mentioned percentages are based on total investment market value plus cash. b. Distribution among markets The Fund invested in local listed investment securities, unlisted bonds and cash instruments only. 7 Kenanga Managed Growth Fund Interim Report

13 3.2 Performance details of the Fund for the financial period ended 30 September 2017 against last three financial years ended 31 March are as follows: Period from to FY FY FY Net asset value ( NAV ) (RM Million) Units in circulation (Million) NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income growth (%) Gross distribution per unit (sen) Net distribution per unit (sen) Management expense ratio ( MER ) (%) Portfolio turnover ratio ( PTR ) (times) Note: Total return is the actual return of the Fund for the respective fi nancial period/years, computed based on NAV per unit and net of all fees. MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. 1 MER is lower against previous fi nancial year mainly due to lower recovered expenses incurred during the fi nancial period under review. 2 PTR is lower compared to the previous fi nancial year due to reduced trading activities for both equity and fi xed income securities. * Based on bid price fair valuation method on all investments held by the Fund as at 30 September 2017, the NAV and NAV per unit would be RM5.78 million and RM respectively. (As disclosed under Note 13 of the fi nancial statements) Kenanga Managed Growth Fund Interim Report 8

14 3.3 Average total return of the Fund 1 Year 3 Years 5 Years 30 Sep Sep Sep Sep Sep Sep 17 Kenanga Managed Growth Fund 16.53% 6.37% 6.98% Benchmark* 4.53% 1.76% 3.21% * FTSE Bursa Malaysia 100 Index (50%) and the All Malaysian Government Securities Index (50%) Source: Lipper; Novagni Analytics and Advisory Sdn Bhd 3.4 Annual total return of the Fund Period under review 1 Year 1 Year 1 Year 1 Year 1 Year 31 Mar Mar Mar Mar Mar Mar Sep Mar Mar Mar Mar Mar 13 Kenanga Managed Growth Fund 6.76% 14.84% 0.75% -1.21% 11.96% 2.51% Benchmark* 2.40% 2.85% -0.25% 1.81% 5.74% 4.74% * FTSE Bursa Malaysia 100 Index (50%) and the All Malaysian Government Securities Index (50%) Source: Lipper; Novagni Analytics and Advisory Sdn Bhd Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. 9 Kenanga Managed Growth Fund Interim Report

15 4 TRUSTEE S REPORT TO THE UNIT HOLDERS OF KENANGA MANAGED GROWTH FUND We, CIMB Commerce Trustee Berhad being the trustee of Kenanga Managed Growth Fund ( the Fund ), are of the opinion that Kenanga Investors Berhad ( the Manager ), acting in the capacity of Manager of the Fund, has fulfi lled its duties in the following manner for the fi nancial period ended 30 September a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager under the Deed, the Securities Commission Malaysia s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws; b) Valuation and pricing for 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 Lee Kooi Yoke Chief Operating Offi cer Kuala Lumpur, Malaysia 29 November 2017 Kenanga Managed Growth Fund Interim Report 10

16 5. STATEMENT BY THE MANAGER I, Ismitz Matthew De Alwis, being a director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of fi nancial position as at 30 September 2017 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the fi nancial period from 1 April 2017 to 30 September 2017 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 fi nancial position of Kenanga Managed Growth Fund as at 30 September 2017 and of its fi nancial performance and cash fl ows for the fi nancial period from 1 April 2017 to 30 September 2017 and comply with the requirements of the Deed. For and on behalf of the Manager Kenanga Investors Berhad Ismitz Matthew De Alwis Executive Director/Chief Executive Offi cer Kuala Lumpur, Malaysia 29 November Kenanga Managed Growth Fund Interim Report

17 6. FINANCIAL STATEMENT 6.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 1 APRIL 2017 TO 30 SEPTEMBER 2017 (unaudited) INVESTMENT INCOME to to Note RM RM Interest income 49,786 50,902 Dividend income 29,356 38,356 Net gain from investments: - Financial assets at fair value through profi t or loss ( FVTPL ) 4 327, , , ,801 EXPENSES Manager s fee 5 41,588 37,225 Trustee s fee 6 4,489 4,500 Auditors remuneration 4,283 4,011 Tax agent s fee 2,000 3,672 Administration expenses 9,373 10,707 61,733 60,115 NET INCOME BEFORE TAX 344, ,686 Income tax NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 344, ,686 Net income after tax is made up as follows: Realised gain 146, ,772 Unrealised gain 4 198,033 32, , ,686 Distribution for the financial period: Gross/Net distribution (RM) 8-429,471 Gross/Net distribution per unit (sen) The accompanying notes form an integral part of the financial statements. Kenanga Managed Growth Fund Interim Report 12

18 6.2 STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2017 (unaudited) Note RM RM ASSETS INVESTMENTS Financial assets at FVTPL 4 5,311,670 4,233,632 Short term deposits 9 365, ,148 5,676,700 4,832,780 OTHER ASSETS Amount due from Manager 3,769 - Other receivables 10 37,608 90,277 Tax recoverable 14,370 14,370 Cash at bank 176,262 64, , ,740 TOTAL ASSETS 5,908,709 5,001,520 LIABILITIES Amount due to Manager - 4,122 Amount due to Trustee Other payables , ,259 TOTAL LIABILITIES 129, ,143 EQUITY Unit holders contribution 2,394,615 2,336,230 Retained earnings 3,384,662 2,543,147 NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNIT HOLDERS 12 5,779,277 4,879,377 TOTAL LIABILITIES AND EQUITY 5,908,709 5,001,520 NUMBER OF UNITS IN CIRCULATION 12(a) 5,935,194 5,858,303 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the financial statements. 13 Kenanga Managed Growth Fund Interim Report

19 6.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL PERIOD FROM 1 APRIL 2017 TO 30 SEPTEMBER 2017 (unaudited) Unit holders Retained Total Note contribution earnings NAV RM RM RM to At beginning of the fi nancial period 2,428,955 3,040,219 5,469,174 Total comprehensive income - 344, ,443 Creation of units 12(a) 781, ,282 Cancellation of units 12(a) (824,712) - (824,712) Distribution equalisation 12(a) 9,090-9,090 At end of the fi nancial period 2,394,615 3,384,662 5,779, to At beginning of the fi nancial period 2,081,625 2,754,957 4,836,582 Total comprehensive income - 218, ,686 Creation of units 12(a) 127, ,915 Cancellation of units 12(a) (300,065) - (300,065) Distribution equalisation 12(a) (1,025) - (1,025) Distribution 8 1,025 (430,496) (429,471) Reinvestment of income distributed 12(a) 426, ,755 At end of the fi nancial period 2,336,230 2,543,147 4,879,377 The accompanying notes form an integral part of the financial statements. Kenanga Managed Growth Fund Interim Report 14

20 6.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 APRIL 2017 TO 30 SEPTEMBER 2017 (unaudited) CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES to to RM RM Proceeds from sale of fi nancial assets at FVTPL 1,876,624 2,953,013 Interest received 39,714 46,577 Dividends received 29,438 43,547 Tax agent s fee paid - (4,700) Trustee s fee paid (4,538) (4,500) Auditors remuneration paid (8,500) (8,000) Payment for other fees and expenses (11,158) (7,143) Manager s fee paid (41,844) (37,362) Purchase of fi nancial assets at FVTPL (2,073,097) (2,816,762) Net cash (used in)/generated from operating and investing activities (193,361) 164,670 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 791, ,123 Cash paid on units cancelled (836,805) (303,030) Distribution paid - (2,716) Net cash used in fi nancing activities (44,920) (179,623) NET DECREASE IN CASH AND CASH EQUIVALENTS (238,281) (14,953) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD 779, ,194 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 541, ,241 Cash and cash equivalents comprise: Cash at bank 176,262 64,093 Short term deposits 365, , , ,241 The accompanying notes form an integral part of the financial statements. 15 Kenanga Managed Growth Fund Interim Report

21 6.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 1 APRIL 2017 TO 30 SEPTEMBER 2017 (unaudited) 1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Managed Growth Fund ( the Fund ) was constituted pursuant to the executed Master Deed dated 16 April 2004 (collectively, together with deeds supplemental thereto, referred to as the Deed ) between the Manager, Kenanga Funds Berhad, and CIMB Commerce Trustee Berhad ( the Trustee ). The Fund commenced operations on 23 April 2004 and will continue to be in operation until terminated by the Trustee as provided under Clause 38 of the Deed. Pursuant to the executed Seventh Supplemental Deed dated 15 May 2013 between Kenanga Investors Berhad and CIMB Commerce Trustee Berhad, Kenanga Investors Berhad was appointed as the Manager of the Fund with effect from 8 June Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad. Prior to 1 November 2016, Kenanga Investment Bank Berhad was a whollyowned subsidiary of K & N Kenanga Holdings Berhad that was listed on the Main Market of Bursa Malaysia Securities Berhad. Pursuant to an internal reorganisation exercise completed on 1 November 2016, Kenanga Investment Bank Berhad has become the holding company of K & N Kenanga Holdings Berhad. On 2 November 2016, Kenanga Investment Bank Berhad has assumed the listing status of K & N Kenanga Holdings Berhad. All of these companies are incorporated in Malaysia. The principal place of business of the Manager is Level 14, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur. The Fund seeks to provide investors long term capital growth through diversifi ed investments in equities and bonds. 2. FINANCIAL RISK 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 fi nancial risks inherent in each type of fi nancial instruments, 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 an 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 unit holders, consistent with the long term objectives of the Fund. a. Market Risk Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market prices. Market risk includes interest rate risk and price risk. Kenanga Managed Growth Fund Interim Report 16

22 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) Market risk arises when the value of the investments fl uctuates 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 investments prices caused by uncertainties in the economic, political and social environment will affect the NAV of the Fund. The Manager manages the risk of unfavourable changes in prices by cautious review of the investments and continuous monitoring of their performance and risk profi les. i. Interest rate risk Interest rate risk refers to how the changes in the interest rate environment would affect the performance of Fund s investments. Rate offered by the fi nancial institutions will fl uctuate according to the Overnight Policy Rate determined by Bank Negara Malaysia and this has direct correlation with the Fund s investments in unlisted corporate bonds, unlisted government guaranteed bonds and short term deposits. The Fund s exposure to the interest rate risk is mainly confi ned to unlisted corporate bonds and unlisted government guaranteed bonds. Interest rate risk sensitivity The following table demonstrates the sensitivity of the Fund s profi t for the fi nancial period to a reasonably possible change in interest rate, with all other variables held constant. Effects on profit for Changes in rate the financial period Increase/(Decrease) Increase/(Decrease) Basis points RM Financial assets at FVTPL 5/(5) (4,071)/4, Financial assets at FVTPL 5/(5) (16,170)/10,101 In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material. 17 Kenanga Managed Growth Fund Interim Report

23 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s fi nancial assets and fi nancial liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Non- Weighted exposure average Above Above to interest effective Up to 1 year 5 years rate interest 1 year - 5 years - 15 years movement Total rate* RM RM RM RM RM % Assets Financial assets at FVTPL 369, , ,411 3,220,543 5,311, Short term deposits 365, , Other assets , , , , ,411 3,438,182 5,894,339 Liabilities Other liabilities , ,320 Total interest rate sensitivity gap 734, , ,411 3,321,862 5,778, Assets Financial assets at FVTPL 120,537 1,084, ,559 2,484,117 4,233, Short term deposits 599, , Other assets , , ,685 1,084, ,559 2,638,487 4,987,150 Liabilities Other liabilities , ,326 Total interest rate sensitivity gap 719,685 1,084, ,559 2,532,161 4,880,824 * Computed based on interest-bearing assets only. Kenanga Managed Growth Fund Interim Report 18

24 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk Price risk is the risk of unfavorable changes in the fair values of listed equity securities, listed collective investment scheme and listed warrants. The Fund invests in listed equity securities, listed collective investment scheme and listed warrants which are exposed to price fl uctuations. This may then affect the NAV of the Fund. Price risk sensitivity The Manager s best estimate of the effect on the profi t for the fi nancial period due to a reasonably possible change in investments in listed equity securities, listed collective investment scheme and listed warrants, with all other variables held constant is indicated in the table below: Effects on profit for Changes in price the financial period Increase/(Decrease) Increase/(Decrease) Basis points RM Financial assets at FVTPL 5/(5) 1,595/(1,595) Financial assets at FVTPL 5/(5) 1,231/(1,231) 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 of fi nancial instruments as at the reporting date. Fair Value Percentage of NAV RM RM % % Financial assets at FVTPL 3,189,087 2,461, Kenanga Managed Growth Fund Interim Report

25 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk (Contd.) Price risk concentration (Contd.) The Fund s concentration of investment security price risk from the Fund s listed equity securities, listed collective investment scheme and listed warrants analysed by sector is as follows: Fair Value Percentage of NAV RM RM % % Industrial products 783, , Constructions 676, , Technology 546, , Trading/Services 429, , Properties 390, , Consumer products 306, , Finance 54, , Plantations - 120, Special Purpose Acquisition Company - 5, Real Estate Investment Trusts - 24, Warrants 1,560 1, ,189,087 2,461, b. Credit Risk Credit risk is the risk that the counterparty to a fi nancial instrument will cause a fi nancial 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 As at the reporting date, the Fund s maximum exposure to credit risk is represented by the carrying amount of each class of fi nancial asset recognised in the statement of fi nancial position. ii. Financial assets that are either past due or impaired As at the reporting date, there are no fi nancial assets that are either past due or impaired. Kenanga Managed Growth Fund Interim Report 20

26 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk (Contd.) iii. Credit quality of financial assets The Fund invests only in unlisted corporate bonds and unlisted government guaranteed bonds with at least investment grade credit rating by a credit rating agency. The following table analyses the Fund s portfolio of unlisted corporate bonds and unlisted government guaranteed bonds by rating category: Financial assets at FVTPL Percentage of total unlisted bonds Percentage of NAV % % % % Rating AA AA AAA A A AA A AA AA AA Government guaranteed The Fund invests in deposits with fi nancial institutions licensed under the Financial Services Act 2013 and Islamic Financial Services Act The following table analyses the licensed fi nancial institutions by rating category: Short term deposits Percentage of total short term deposits Percentage of NAV % % % % Rating P Kenanga Managed Growth Fund Interim Report

27 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk (Contd.) iv. Credit risk concentration Concentration risk is monitored and managed based on sectoral distribution. The table below analyses the Fund s portfolio of unlisted corporate bonds and unlisted government guaranteed bonds by sectoral distribution: Percentage of total unlisted bonds Percentage of NAV % % % % Industrial products Utilities Finance Construction Plantations Properties Transportation c. Liquidity Risk Liquidity risk is defi ned as the risk that the Fund will encounter diffi culty in meeting obligations associated with fi nancial liabilities that are to be settled by delivering cash or another fi nancial 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 unit holders by the Manager are cancellable at the unit holders option based on the Fund s NAV per unit at the time of cancellation calculated in accordance with the Deed. The liquid assets comprise cash, short term deposits with licensed fi nancial institutions and other instruments, which are capable of being converted into cash within 7 days. The following table analyses the maturity profi le of the Fund s fi nancial assets and fi nancial liabilities in order to provide a complete view of the Fund s contractual commitments and liquidity. Kenanga Managed Growth Fund Interim Report 22

28 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) Above Above Up to 1 year 5 years Note 1 year - 5 years - 15 years Total RM RM RM RM Assets Financial assets at FVTPL 3,590, , ,411 5,311,670 Short term deposits 365, ,030 Other assets 217, ,639 i. 4,172, , ,411 5,894,339 Liabilities Other liabilities ii. 116, ,320 Equity iii. 5,779, ,779,277 Liquidity gap (1,722,910) 775, ,411 (1,258) Assets Financial assets at FVTPL 2,604,654 1,084, ,559 4,233,632 Short term deposits 599, ,148 Other assets 154, ,370 i. 3,358,172 1,084, ,559 4,987,150 Liabilities Other liabilities ii. 106, ,326 Equity iii. 4,879, ,879,377 Liquidity gap (1,627,531) 1,084, ,559 1,447 i. Financial assets Analysis of fi nancial assets at FVTPL into maturity groupings is based on the expected date on which these assets will be realised. The Fund s investments in listed equity securities and listed warrants have been included in the up to 1 year category on the assumption that these are highly liquid investments which can be realised should all of the Fund s unit holders equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining period 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. 23 Kenanga Managed Growth Fund Interim Report

29 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) ii. Financial liabilities The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the date on which liabilities will be settled. When the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Fund can be required to pay. iii. Equity As the unit holders can request for redemption of their units, they have been categorised as having a maturity of up to 1 year. As a result, it appears that the Fund has a liquidity gap within up to 1 year. However, the Fund believes that it would be able to liquidate its investments should the need arises to satisfy all the redemption requirements. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accounting The fi nancial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) as issued by the Malaysian Accounting Standards Board ( MASB ) and International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). The accounting policies adopted are consistent with those of the previous fi nancial period except for the adoption of the new and amended MFRS which became effective for the Fund on 1 April The adoption of the new and amended MFRS did not have any signifi cant impact on the fi nancial position or performance of the Fund. The fi nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. Kenanga Managed Growth Fund Interim Report 24

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) b. Standards, Amendments and Interpretation Issued But Not Yet Effective As at the reporting date, the following Standards, Amendments and Interpretations Committee s ( IC ) Interpretation that have been issued by MASB will be effective for the Fund in future periods. The Fund intends to adopt the relevant standards when they become effective. Description Effective for financial period beginning on or after Amendments to MFRS contained in the documents entitled Annual improvements to MFRS Standards Cycle 1 January 2017 Amendments to MFRS 107: Disclosure Initiative 1 January 2017 Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017 Amendments to MFRS contained in the documents entitled Annual improvements to MFRS Standards Cycle 1 January 2018 Amendments to MFRS 2: Classifi cation and Measurement of Shared-based Payment Transactions 1 January 2018 Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts 1 January 2018 Amendments to MFRS 140: Transfers of Investment Property 1 January 2018 MFRS 9: Financial Instruments 1 January 2018 MFRS 15: Revenue from Contracts with Customers 1 January 2018 MFRS 15: Clarifi cations to MFRS 15 1 January 2018 IC Interpretation 22: Foreign Currency Transactions and Advance Consideration 1 January 2018 MFRS 16: Leases 1 January 2019 MFRS 17: Insurance Contracts 1 January 2021 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate To be announced or Joint Venture by MASB The Fund will adopt the above pronouncements when they become effective in the respective fi nancial periods. These pronouncements are not expected to have any signifi cant impact to the fi nancial statements of the Fund upon their initial application, other than MFRS 9. MFRS 9 replaces MFRS 139 on the following requirements: classifi cation and measurement of fi nancial assets and fi nancial liabilities as defi ned in MFRS 139, impairment methodology and hedge accounting. The Fund is in the process of making an assessment of the impact of this Standard. 25 Kenanga Managed Growth Fund Interim Report

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) c. Financial Assets Financial assets are recognised in the statement of fi nancial position when, and only when, the Fund becomes a party to the contractual provisions of the fi nancial instruments. When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at FVTPL, directly attributable transaction costs. The Fund determines the classifi cation of its fi nancial assets at initial recognition. i. Financial assets at FVTPL Financial assets are classifi ed as fi nancial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading include listed equity securities, listed warrants, listed collective investment scheme, unlisted corporate bonds and unlisted government guaranteed bonds acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, fi nancial assets at FVTPL are measured at fair value. Changes in the fair value of those fi nancial instruments are recorded in profi t 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 fi xed or determinable payments that are not quoted in an active market are classifi ed as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profi t or loss when the receivable is derecognised or impaired, and through the amortisation process. A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. Kenanga Managed Growth Fund Interim Report 26

32 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) d. Impairment of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a fi nancial asset is impaired. To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Fund considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant 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 fl ows discounted at the fi nancial asset s original effective interest rate. The impairment loss is recognised in profi t or loss. The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial 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 period, 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 profi t or loss. e. Income Income is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Interest income which includes the accretion of discount and amortisation of premium on fi xed income securities, is recognised using the effective interest method. Dividend income is recognised on declared basis, when the right to receive the dividend is established. The realised gain or loss on sale of investments is measured as the difference between the net disposal proceeds and the carrying amount of the investment. f. Cash and Cash Equivalents For the purposes of the statement of cash fl ows, cash and cash equivalents include cash at bank and short term deposits with licensed fi nancial institutions with insignifi cant risk of changes in value. 27 Kenanga Managed Growth Fund Interim Report