KENANGA GROWTH OPPORTUNITIES FUND (FORMERLY KNOWN AS ING GROWTH OPPORTUNITIES) ANNUAL REPORT

Transcription

1 KENANGA GROWTH OPPORTUNITIES FUND (FORMERLY KNOWN AS ING GROWTH OPPORTUNITIES) ANNUAL REPORT For the Financial Year Ended 31 August 2013

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3 Contents Page CORPORATE DIRECTORY i DIRECTORY OF MANAGER S OFFICES ii MANAGER S REPORT FUND INFORMATION FUND REVIEW MARKET REVIEW & OUTLOOK PERFORMANCE DATA 6 TRUSTEE S REPORT 9 STATEMENT BY MANAGER 10 INDEPENDENT AUDITORS REPORT 11 STATEMENT OF COMPREHENSIVE INCOME 13 STATEMENT OF FINANCIAL POSITION 14 STATEMENT OF CHANGES IN EQUITY 15 STATEMENT OF CASH FLOWS 16 NOTES TO THE FINANCIAL STATEMENTS 17-36

4 CORPORATE DIRECTORY MANAGER: KENANGA INVESTORS BERHAD (Company No P) REGISTERED OFFICE BUSINESS OFFICE Kenanga Investors Berhad (KIB) Suite 12.02, 12 th Floor, Kenanga Interna onal, 8 th Floor, Kenanga Interna onal, Jalan Sultan Ismail, Jalan Sultan Ismail, Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia. Tel: Tel: Fax: Fax: InvestorServices@kenanga.com.my Website: BOARD OF DIRECTORS Datuk 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) Bruce Kho Yaw Huat Abdul Razak bin Ahmad Peter John Rayner COMPANY SECRETARY: Norliza Abd Samad, (MAICSA ) 9 th Floor, Kenanga Interna onal, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. TRUSTEE: CIMB COMMERCE TRUSTEE BERHAD (Company No A) REGISTERED AND BUSINESS OFFICE 5 th Floor, Bangunan CIMB, Jalan Semantan, Damansara Heights, Kuala Lumpur. Tel: Fax: AUDITOR: ERNST & YOUNG Level 23A, Menara Millennium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: i

5 DIRECTORY OF MANAGER S OFFICES REGIONAL BRANCH OFFICES: Kuala Lumpur Suite 12.02, 12 th Floor Kenanga Interna onal Jalan Sultan Ismail Kuala Lumpur, Malaysia Tel: Fax: Klang No. 12 Jalan Batai Laut 3 Taman Intan, Klang Selangor Darul Ehsan Tel: / Fax: Penang Blok A, Aras 3, Wisma Perkeso No. 269, Jalan Burma George Town, Penang Tel: Fax: Melaka No Jalan Kota Laksamana 2/17 Taman Kota Laksamana Seksyen Melaka Tel: / Fax: Agency Office Miri (Sarawak) c/o Lot 1084, 2 nd Floor, Jalan Merpa Miri Sarawak, Malaysia Tel: Johor Bahru Lot 11.03, 11 th Floor Menara MSC Cyberport 5 Jalan Bukit Meldrum Johor Bahru, Johor Tel: / 4798 Fax: Kuching 1 st Floor, No 71, Lot 7 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel: Fax: Kota Kinabalu A-03-11, 3 rd Floor Block A Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel: / Fax: Ipoh No. 5A, Persiaran Greentown 9 Greentown Business Centre Ipoh Perak Darul Ridzuan Tel: / 7570 Fax: ii

6 MANAGER S REPORT Dear Unit Holders, We are pleased to present the Manager s annual report and the audited financial statements of the KENANGA GROWTH OPPORTUNITIES FUND (formerly known as ING Growth Opportuni es) for 12-month financial year ended 31 August FUND INFORMATION 1.1 Fund Name KENANGA GROWTH OPPORTUNITIES FUND (KGOF or the Fund) (formerly known as ING Growth Opportuni es) 1.2 Fund Category / Type Equity / Growth 1.3 Investment Objec ve The Fund aims to achieve consistent capital apprecia on over the long-term by primarily inves ng in rela vely smaller capitalized companies with good growth prospects. 1.4 Investment Strategy The Fund is an equity growth fund that is ac vely managed based on both quan ta ve and qualita ve disciplines. Its strategy is to invest in companies that are likely to yield higher earnings growth than the market average. 1.5 Asset Alloca on 70% to 98% in equi es and 2% to 30% in fixed income securi es / cash. 1.6 Dura on The Fund was launched on 23 April 2004 and 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 con nue. 1.7 Performance Benchmark FTSE Bursa Malaysia Emas Index. 1.8 Distribu on Policy Income (if any) as secondary objec ve, is paid annually. 1

7 2.0 FUND REVIEW 2.1 Fund performance analysis based on NAV per unit (adjusted for income distribu on, if any) since last review date Period under review Kenanga Growth Opportuni es Fund 14.50% FTSE Bursa Malaysia Emas Index 6.58% Source: Lipper During the period under review, the Fund registered a posi ve return of 14.50%, outperforming the benchmark return of 6.58%. The outperformance was a ributable to posi ve asset alloca on decision to underweight equity. In term of sector alloca on, the Fund had overrweighted in oil and gas, industrial product and construc on. 2.2 Has the Fund achieved its objec ve? For the period under review, the Fund fulfilled its investment objec ve, having invested in rela vely smaller capitalized companies with growth prospects to produce consistent capital apprecia on over the long term. 2.3 Strategies & policies employed For the period under review, the Fund s investment strategy and policy were to invest in companies that are likely yield higher earnings growth than the market average. The strategy employed was in line with that disclosed in the master prospectus. 2.4 The Fund s asset alloca on (% of NAV) as at 31 August 2013 and comparison with the previous financial year Asset 31 August August 2012 Unquoted Investments 74.9% 97.5% Cash and Others 25.1% 2.5% Reason for the differences in asset alloca on During the period under review, the Fund has reduced its equity exposure due to rising poli cal and market uncertainty. The Fund will maintain equity exposure of 75-80% to ride through the vola lity. 2.5 State of Affairs of the Fund Pursuant to the acquisi on of ING Funds Berhad by Kenanga Investors Berhad on 19 th April 2013, Kenanga Investors Berhad had wri en to the Securi es Commission to seek the Securi es Commission s approval to become the Management Company of the Fund. The Securi es Commission had approved the applica on. With effect from 8 th June 2013, Kenanga Investors Berhad has become the Management Company of the Fund. 2

8 2.6 Circumstances that materially affect any interests of the unitholders During the period under review, there are no circumstances that materially affect any interests of the unitholders. However, there was a change in the Management Company of the Fund on 8 th June 2013 as detailed in Unit Holders Profile As at 31 August 2013, the number of units of the Fund in circula on stood at 5,061,595 (include Manager Stock) units out of an approved fund size of 300 million units. Breakdown of Unit Holdings by Size Unit Holders Unit Holdings Size of holdings Number % Units % 5,000 and below 4, ,460, ,001-10, , ,001-50, ,393, , , , ,001 and above Total 4, ,061, Manager and Related Party Holdings Breakdown of holdings by the Manager and related par es as at 31 August 2013 is as follows:- No. of Units Held Manager# - Director of the Manager - Other related par es - Total - # excludes normal & EPF bookings 2.8 Rebates & So Commission Any rebates received are channeled back to the Fund. On the other hand, so commissions received from the stockbrokers for goods and services such as technical analysis so ware, fundamental database, financial wire services, stock quota on system and por olio management so ware incidental to investment management of the Fund shall be retained by the Manager. For the period under review, the Manager has received so commissions in the form of research and advisory services that assist in the decision-making process rela ng to the Fund s investments. 3

9 3.0 MARKET REVIEW & OUTLOOK 3.1 Market Review Stock market performance in the region can be broken up into two parts for the period under review. The Nikkei had a fantas c year (+30.3% year-on-year) following the Japanese government s surprise decision to inflate the long stagnant economy with a US-style quan ta ve easing programme, valued at US$1.5 trillion. The emerging countries of Associa on of South East Asian Na ons (ASEAN) were clear outperformers, led by Philippines and Thailand which rose by 25.7% and 18.7% year-on-year (YoY) respec vely as investors reacted posi vely to the underlying domes c economic growth of these economies. The strong inflow of funds into these countries was also helped by US s Quan ta ve Easing 3 (QE3) programme. Governments around the world were generally adop ng a loose monetary policy to help economic recovery. Malaysia lagged regional market especially in the first quarter of 2013 due to uncertainty over the 13 th Malaysia General Elec on. However, the market reacted posi vely a er Barisan Na onal retained power albeit with a slightly lesser majority. The Kuala Lumpur Composite Index (KLCI) index rose by 4.8% on the first day a er the announcement of the elec on result. This could be a ributed to the removal of risk premium associated with the uncertainty over the general elec on. On the economic side, the first quarter of 2013 Gross Domes c Product (GDP) growth of 4.1% fell short of expecta on. This was a ributed to weaker exports and slower growth in private investments due to uncertainty from the elec on outcome. The first quarter repor ng season in Malaysia came in within analysts expecta on with 60% of the results met consensus expecta on whilst around 17% was above expecta on. The disappointment came mostly from the oil & gas, planta on, and gaming related companies. The downturn came in June when equity markets reacted strongly on the nega ve a er the Fed s chairman, Ben Bernanke commented that it would be appropriate to moderate the monthly purchase of assets backed securi es later this year. It sparked investors fear that US QE3 will be tapering off earlier than expected. The situa on was made worse when the People s Bank of China (PBoC) ini ally refused to ease a liquidity squeeze in the interbank market which caused a sharp spike in Shanghai Interbank Offered Rate (SHIBOR) rate to peak at 13.4%. The decline was led by China Shanghai Stock Exchange Composite Index (SHComp) (-14%), Philippines (-7.9%) and Hong Kong (-7.1%). Malaysia was the only market that managed to stay flat as domes c funds managed to absorb the selling by foreign investors. The Ringgit weakened from RM2.96/US$ to RM3.22/US$ as a result of the ou low. The Thailand, Indonesia, Philippines & Singapore (TIPS) markets fell further in August, led by Indonesia and Thailand loss of 9% month-on-month (MoM) whilst Philippines fell by 8.5% MoM. The selldown was sparked by Indonesia s widening trade deficit and the Rupiah weakened by 10.6%. This was exacerbated by weaker than expected economic data. Foreign investors sold to reduce exposure to poten ally weaker currencies as well as slower Earnings per Share (EPS) growth in the TIPS countries. 4

10 3.2 Market Outlook The debate to raise US debt ceiling to above US$16.7 trillion by 17 th October should dominate market in the near term. A failure to do would cause the US government to default on its obliga ons. The impact could be extremely nega ve as it will derail and already fragile US economy and its repercussion on global markets will be long las ng. We expect the US congress to come to approve to raise the limit but only a er a round of showboa ng by the Republicans to try to gain some concessions. The Malaysian 2014 Budget will be tabled on 25 th October 2013, a week a er the UMNO general elec on. This 2014 Budget is viewed as cri cal to the equity market given the rise in twin deficit concern in emerging markets and poten al ra ng review by Moody s following the downgrade of the sovereign ra ng outlook by Fitch on July We believe the government is likely to come out with a more modest budget to help reduce Malaysia s budget deficit. We also opined that despite the need to reduce the budget deficit, the key Economic Transforma on Programme (ETP) and oil and gas (O&G) projects such as the Mass Rapid Transit (MRT) line 2 and 3, the development of marginal oil fileds and water sector will con nue to be implemented as per plan. As such, we remain posi ve on O&G companies and selected construc on companies. The Malaysia GDP growth is expected to grow by around 5% in This is posi ve for the stock market as it will help to drive earnings growth. The KLCI EPS growth had disappointed in the past few quarters due to falling Crude Palm Oil (CPO) prices and slower than expected industrial growth. Net EPS growth is projected to improve to 6.6% in This should provide the base for the KLCI to rerate further. 5

11 4.0 PERFORMANCE DATA 4.1 Performance Chart PERFORMANCE CHART SINCE LAUNCH 23/04/ /08/2013 KENANGA GROWTH OPPORTUNITIES FUND VS FTSE BURSA MALAYSIA EMAS INDEX Source: Lipper 4.2 Average Total Returns 1 Year 3 Years 5 Years 31 Aug Aug Aug Aug Aug Aug 13 Kenanga Growth Opportuni es Fund 14.50% 15.69% 11.80% FTSE Bursa Malaysia Emas Index 6.58% 8.74% 12.59% Source: Lipper 4.3 Annual Total Returns Period under review 1 Year 1 Year 1 Year 1 Year 1 Year 31 Aug Aug Aug Aug Aug Aug Aug Aug Aug Aug Aug Aug 08 Kenanga Growth Opportuni es Fund 14.50% 12.47% 14.20% 17.10% -7.67% % FTSE Bursa Malaysia Emas Index 6.58% 13.33% 4.49% 19.67% 7.89% % Source: Lipper Investors are reminded that past performance is not necessarily indica ve of future performance and that unit prices and investment returns may fluctuate. 6

12 4.4 Por olio Composi on Details of por olio composi on of Kenanga Growth Opportuni es Fund ( the Fund ) for the last 3 financial years ended as at 31 August are as follows: a. Distribu on among industry sectors and category of investments: FY 2013 FY 2012 FY 2011 % % % Trading /Services Industrial Product Construc on Proper es Consumer Product Finance Technology Planta on Infrastructure REITs Cash and others Note: The above men oned percentages are based on total investment market value plus cash. b. Distribu on among markets The Fund invested in local equi es and cash instruments only. 7

13 4.5 Performance Data Performance details of the Fund for the last 3 financial years ended 31 August are as follows: FY 2013 FY 2012 FY 2011 Net asset value (RM Million) 4.05* Units in circula on (Million) Net asset value per unit (RM) * Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Gross Income distribu on (%) Gross distribu on per unit (sen) Net distribu on per unit (sen) Management expense ra o (%) Por olio turnover ra o ( mes) Note: Total return is the actual return of the Fund for the financial year, computed based on net asset value 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 acquisi ons and total disposals of investment securi es of the Fund divided by the average fund size calculated on a daily basis. Above prices and NAV are not shown as ex-distribu on as there were no distribu on declared by the Fund in the current year under review. 1. The decrease in MER is due to decrease in average fund size during the year under review. 2. Lower PTR was mainly due to lower trading ac vity. * Based on bid price fair valua on method on all investments held by the Fund as at 31 August 2013, the NAV and price would be RM4.03 million and RM respec vely. (As disclosed under note 11 of the financial statements) 4.6 Distribu on / Unit Split for the Period under Review No distribu on / unit split was made during the period under review. Investors are reminded that past performance is not necessarily indica ve of future performance and that unit prices and investment returns may fluctuate. 8

14 TRUSTEE S REPORT To the Unit Holders of Kenanga Growth Opportuni es Fund We, CIMB COMMERCE TRUSTEE BERHAD, being the Trustee of KENANGA GROWTH OPPORTUNITIES FUND ( the Fund ) (formerly known as ING Growth Opportuni es) are of the opinion that KENANGA INVESTORS BERHAD ( the Manager ), ac ng in the capacity of Manager of the Fund, have fulfilled their du es in the following manner for the financial year ended 31 August a) The Fund has been managed in accordance with the limita ons imposed on the investment powers of the Manager and the Trustee under the Deed, the Securi es Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) Valua on/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and c) Crea on and cancella on of units have been carried out in accordance with the Deed and relevant regulatory requirements. For and on behalf of CIMB COMMERCE TRUSTEE BERHAD LIEW PIK YOONG Head/Director, Group Trustee Services Kuala Lumpur, Malaysia 28 October

15 STATEMENT BY THE MANAGER To the Unit Holders of Kenanga Growth Opportuni es Fund 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 posi on as at 31 August 2013 and the related statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year ended 31 August 2013 together with notes thereto, are drawn up in accordance with Malaysian Financial Repor ng Standards and Interna onal Financial Repor ng Standards so as to give a true and fair view of the financial posi on of KENANGA GROWTH OPPORTUNITIES FUND (formerly known as ING Growth Opportuni es) as at 31 August 2013 and of its financial performance and cash flows for the year then ended and comply with the requirements of the Deed. For and on behalf of the Manager, Kenanga Investors Berhad Abdul Razak Bin Ahmad Director Kuala Lumpur, Malaysia 28 October

16 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA GROWTH OPPORTUNITIES FUND FORMERLY KNOWN AS ING GROWTH OPPORTUNITIES Report on the financial statements We have audited the financial statements of Kenanga Growth Opportuni es Fund (formerly known as ING Growth Opportuni es) ( the Fund ), which comprise the statement of financial posi on as at 31 August 2013, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and a summary of significant accoun ng policies and other explanatory notes, as set out on pages 13 to 36. Manager s and Trustee s responsibility for the financial statements The Manager of the Fund is responsible for the prepara on of financial statements that give a true and fair view in accordance with Malaysian Financial Repor ng Standards and Interna onal Financial Repor ng Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the prepara on 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 accoun ng and other records as are necessary to enable true and fair presenta on 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 audi ng in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 prepara on 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 effec veness of the Fund s internal control. An audit also includes evalua ng the appropriateness of the accoun ng policies used and the reasonableness of accoun ng es mates made by the Manager, as well as evalua ng the overall presenta on 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. 11

17 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA GROWTH OPPORTUNITIES FUND FORMERLY KNOWN AS ING GROWTH OPPORTUNITIES (CONTD.) Report on the financial statements (Contd.) Opinion In our opinion, the financial statements have been properly drawn up in accordance with Malaysian Financial Repor ng Standards and Interna onal Financial Repor ng Standards so as to give a true and fair view of the financial posi on of the Fund as at 31 August 2013 and of its financial performance and the cash flows of the Fund for the financial year then ended. Other ma ers 1. As stated in Note 3 to the financial statements, the Fund adopted Malaysian Financial Repor ng Standards on 1 September 2012 with a transi on date of 1 September These standards were applied retrospec vely by directors to the compara ve informa on in these financial statements, including the statements of financial posi on as at 31 August 2012 and 1 September 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended 31 August 2012 and related disclosures. We were not engaged to report on the compara ve informa on and it is unaudited. Our responsibili es as part of our audit of the financial statements of the Fund for the year ended 31 August 2013 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 September 2012 do not contain misstatements that materially affect the financial posi on as of 31 August 2013 and financial performance and cash flows for the year then ended. 2. This report is made solely to the unit holders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Yeo Beng Yean No. 3013/10/14(J) Chartered Accountant Kuala Lumpur, Malaysia 28 October

18 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2013 Note RM RM INVESTMENT INCOME Interest income 13,973 5,925 Other Income - 94 Dividend income 110,575 63,228 Net gain from investments: - Financial assets at fair value through profit and loss ( FVTPL ) 7 450, , , ,053 EXPENSES Manager s fee 4 59,171 38,606 Trustee s fee 5 17,985 18,066 Auditors remunera on 4,000 3,978 Tax agent s fee 3,500 3,856 Administra on 17,533 13, ,189 77,824 NET INCOME BEFORE TAX 473, ,229 Income tax expense 6 (4,400) (3,200) NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 468, ,029 Total comprehensive income is made up as follows: Realised gain 460,541 59,917 Unrealised gain 8, , , ,029 The accompanying notes form an integral part of the financial statements. 13

19 STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 2013 Note RM RM RM ASSETS Quoted equity securi es 7 3,022,858 4,491,950 1,415,710 Short term deposits 8 1,004, , ,052 4,027,570 4,595,154 1,530,762 OTHER ASSETS Other receivables 9 3, ,196 24,725 Cash at bank 8,293 12,318 3,861 Tax recoverable 20,229 18,552 17,410 31, ,066 45,996 TOTAL ASSETS 4,059,350 4,765,220 1,576,758 LIABILITIES Amount due to Manager 6,109 9,082 2,113 Amount due to Trustee 1,480 1,475 1,529 Other payables 17, ,267 37,956 TOTAL LIABILITIES 25, ,824 41,598 EQUITY NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS 10 4,033,903 4,609,396 1,535,160 TOTAL LIABILITIES AND EQUITY 4,059,350 4,765,220 1,576,758 NUMBER OF UNITS IN CIRCULATION 10(a) 5,061,595 6,606,384 2,476,427 NET ASSET VALUE PER UNIT The accompanying notes form an integral part of the financial statements. 14

20 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2013 Unitholders Retained Note capital earnings Total equity RM RM RM 2013 At beginning of the year 4,505, ,062 4,609,396 Total comprehensive income - 468, ,948 Crea on of units 10(a) 1,978,175-1,978,175 Cancella on of units 10(a) (3,031,491) - (3,031,491) Distribu on equalisa on 12 8,875-8,875 At end of the year 3,460, ,010 4,033, At beginning of the year 1,640,127 (104,967) 1,535,160 Total comprehensive income - 209, ,029 Crea on of units 10(a) 4,884,324-4,884,324 Cancella on of units 10(a) (2,037,724) - (2,037,724) Distribu on equalisa on 12 18,607-18,607 At end of the year 4,505, ,062 4,609,396 The accompanying notes form an integral part of the financial statements. 15

21 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 AUGUST RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 20,182,286 17,575,952 Purchase of investments (18,246,284) (20,439,215) Net dividend received 101,321 61,280 Interest received 13,900 5,926 Manager s fee paid (59,507) (35,000) Trustee s fee paid (17,980) (18,120) Auditors remunera on paid (4,000) (8,000) Tax agent s fee paid (7,142) (875) Other income - 94 Payment for other fees and expenses (18,033) (14,003) Net cash generated from/(used in) opera ng and inves ng ac vi es 1,944,561 (2,871,961) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 2,042,320 4,911,906 Cash paid on units cancelled (3,089,398) (2,043,336) Net cash (used in)/generated from financing ac vi es (1,047,078) 2,868,570 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 897,483 (3,391) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 115, ,913 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 1,013, ,522 Cash and cash equivalent comprise: Cash at bank 8,293 12,318 Short term deposits 1,004, ,204 1,013, ,522 The accompanying notes form an integral part of the financial statements. 16

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 AUGUST THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Growth Opportuni es Fund (formerly known as ING Growth Opportuni es) (herein a er referred to as The Fund ) was cons tuted pursuant to the executed Deed dated 16 April 2004 between ING Funds Berhad and CIMB Commerce Trustee Berhad as the Trustee. The Fund commenced opera on on 23 April 2004 and will con nue to be in opera on un l terminated by the Trustee as provided under Clause 38 of the Deed. As provided in the Deed, the accrual period or financial year shall end on 31 August. Pursuant to the executed First 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 2013 and the name of the Fund was changed from ING Growth Opportuni es to Kenanga Growth Opportuni es Fund. The principal ac vity of the Fund is to achieve consistent capital apprecia on over long term by primarily inves ng in rela vely smaller capitalised companies with good growth prospects based on equity securi es corpora ons that prac ce good corporate governance. 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), liquidity risk and single issuer risk. Whilst these are the most important types of financial risks inherent in each type of financial instruments, the Manager and the Trustee would like to highlight that this list does not purport to cons tute an exhaus ve 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 set out its overall business strategies to manage these risks to op mise returns and preserve capital for the unitholders, consistent with the long term objec ves of the Fund. a. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes interest rate risk and price risk. Market risk arises when the value of the quoted investments fluctuate in response to the ac vi es of individual companies, general market or economic condi ons. It stems from the fact that there are other economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertain es. Fluctua on in the securi es prices caused by uncertain es in the economy, poli cal and social environment will affect the fair value of the Fund. The Manager manages the risk of unfavorable changes in prices by cau ous review of the investments and con nuous monitoring of their performance and risk profiles. 17

23 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) i. Interest rate risk The Fund s exposure to interest rate risk is mainly confined to short term placement with financial ins tu ons. The Manager overcomes this exposure by way of maintaining deposits on short term basis. The interest rate is general economic indicator that will have an impact on management of fund or otherwise. It does not in any way suggest that this Fund will invest in conven onal financing instruments. Interest rate risk sensi vity The following table demonstrates the sensi vity of the Fund s profit for the year to a reasonably possible change in interest rate, with all other variables held constant. Effect on changes in Changes in rate Effect on profit fair value of Basis points for the year financial assets Increase/(decrease) Increase/(decrease) Increase/(decrease) RM RM /(5) 502/(502) /(5) 52/(52) - Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s assets and liabili es are included at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Effec ve Up to Non-interest interest 1 year bearing Total rate* RM RM RM % 2013 Assets Quoted equity securi es - 3,022,858 3,022,858 - Short term deposits 1,004,712-1,004, Other assets - 31,780 31,780 1,004,712 3,054,638 4,059,350 18

24 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure (Contd.) Effec ve Up to Non-interest interest 1 year bearing Total rate* RM RM RM % 2013 Liabili es Other liabili es - 25,447 25,447-25,447 25,447 Total interest sensi vity gap 1,004,712 3,029,191 4,033, Assets Quoted equity securi es - 4,491,950 4,491,950 - Short term deposits 103, , Other assets - 170, , ,204 4,662,016 4,765,220 Liabili es Other liabili es - 155, , , ,824 Total interest sensi vity gap 103,204 4,506,192 4,609,396 * Computed based on interest bearing assets only. ii. Price Risk Price risk is the risk of unfavourable changes in the fair values of quoted equity securi es. The Fund invests in quoted equity securi es which are exposed to price fluctua ons. This may then affect the unit price of Kenanga Growth Opportuni es Fund. Price risk sensi vity 19 Manager s best es mate of the effect on the profit for the year and other comprehensive income due to a reasonably possible change in investments in quoted equity securi es, with all other variables held constant is indicated in the table below:

25 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) ii. Price Risk (Contd.) Price risk sensi vity (Contd.) Effects on other Effect on profit comprehensive Changes in price for the year income Increase/(decrease) Increase/(decrease) Increase/(decrease) Basis points RM RM 2013 Quoted equity securi es 5/(5) 1,511/(1,511) Quoted equity securi es 5/(5) 2,246/(2,246) - In prac ce, the actual trading results may differ from the sensi vity analysis above and the difference could be material. Price risk concentra on The following table sets out the Fund s exposure and concentra on to price risk based on its por olio of financial instruments as at the repor ng date. Fair value Percentage of NAV RM RM % % Quoted equity securi es 3,022,858 4,491, The Fund s concentra on of equity price risk analysed by the Fund s equity instruments by sector is as follows: Fair value Percentage of NAV RM RM % % Trading/Services 1,021,219 2,115, Industrial Product 789, , Construc on 718, , Proper es 264, Consumer Products 117, Finance 86, , Technology 26,100 25, Planta on - 914, ,022,858 4,491,

26 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. b. Liquidity Risk Liquidity risk is defined as the risk that the Fund will encounter difficulty in mee ng obliga ons associated with financial liabili es that are to be se led 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 liabili es or cancel its units earlier than expected. The Fund is exposed to cancella on of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholder s op on based on the Fund s net asset value per unit at the me of cancella on calculated in accordance with the Fund s Trust Deed. The liquid assets comprise cash, deposits with licensed financial ins tu ons 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 (undiscounted where appropriate) and financial liabili es in order to provide a complete view of the Fund s contractual commitments and liquidity. Up to 1 month RM 2013 Assets Quoted equity securi es 3,022,858 Short term deposits 1,004,712 Other assets 31,780 4,059,350 Liabili es Other liabili es 25,447 25,447 Net asset value 4,033,903 Liquidity gap 4,033, Assets Quoted equity securi es 4,491,950 Short term deposits 103,204 Other assets 170,066 4,765,220 Liabili es Other liabili es 155, ,824 Net asset value 4,609,396 Liquidity gap 4,609,396 21

27 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. c. Single Issuer Risk The Fund is restricted to invest in securi es issued by any issuer of not more than a certain percentage of its net asset value. Under such restric on, the exposure risk to the securi es of any issuer is minimised. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accoun ng The financial statements of the Fund have been prepared in accordance with Malaysian Financial Repor ng Standards ( MFRS ) as issued by Malaysian Accoun ng Standards Board ( MASB ) and Interna onal Financial Repor ng Standards ( IFRS ) issued by Interna onal Accoun ng Standards Board ( IASB ). The financial statements have been prepared on the historical cost basis except as disclosed in the accoun ng policies below. b. First- me adop on of MFRS These are the Fund s financial statements prepared in accordance with MFRS. For the periods up to and including the financial period ended 31 August 2012, the financial statements of the Fund were prepared in accordance with Financial Repor ng Standards ( FRS ) in Malaysia. The accoun ng policies set out in Note 3 have been applied in preparing the financial statements of the Fund for the financial period ended 31 August 2013, the compara ve informa on presented in these financial statements for the financial period ended 31 August 2012 and in the prepara on of the opening statement of financial posi on at 1 September 2011 (which is the Fund s date of transi on to MFRS). The transi on to MFRS did not give rise to any significant effects on the financial statements of the Fund. c. Standard and interpreta ons issued but not yet effec ve The Manager expect that the new MFRSs, Amendments to MFRSs and Interpreta ons which are issued but not yet effec ve for the financial period ended 31 August 2013 will not have a material impact on the financial statements of the Fund in the period of ini al applica on. 22

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. d. Financial Assets Financial assets are recognised in the statement of financial posi on when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised ini ally, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly a ributable transac on costs. 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 ini al recogni on. Financial assets held for trading includes quoted equity securi es acquired principally for the purpose of selling in the near term. Subsequent to ini al recogni on, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in Net gain or loss on financial assets at fair value through profit or loss. Interest earned and dividend revenue elements of such instruments are recorded separately in interest income and gross dividend income respec vely. ii. Loan and receivables Financial assets with fixed or determinable payment that are not quoted in an ac ve market are classified as loan and receivables. The Fund includes deposits in financial ins tu ons and short term receivable in this classifica on. Subsequent to ini al recogni on, loan and receivables are measured at amor sed cost using the effec ve interest method. Gain or loss is recognised in profit or loss when the loan and receivable are derecognised or impaired, and through the amor sa on process. A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecogni on of a financial asset, the difference between the carrying amount and the sum of the considera on received is recognised in profit or loss. 23

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. e. Impairment of Financial Assets The Fund assesses at each repor ng date whether there is any objec ve evidence that a financial assets is impaired. Trade and other receivables and other financial assets carried at amor sed cost To determine whether there is objec ve evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficul es 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 es mated future cash flows discounted at the financial asset s original effec ve interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial assets is reduced by the impairment loss directly for all financial assets. If in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objec vely to an event occurring a er 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 amor sed cost at the reversal date. The amount of reversal is recognised in profit or loss. f. Income Recogni on Interest income is recognised using effec ve interest method on an accrual basis. Dividend income is recognised on a 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, calculated on the daily basis. The unrealised gain or loss on change in value of investments is measured as the difference between the fair value and the carrying amount of the investment, calculated on a daily basis. 24

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. g. Cash and Cash Equivalents For the purposes of the statement of cash flow, cash and cash equivalents include cash at bank and short term deposits with financial ins tu on. h. 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 year. Income tax is calculated on investment income less par al deduc on for permi ed expenses as provided for under Sec on 63B of the Income Tax Act, i. Unrealised Reserves Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values at repor ng date. This reserve is not distributable in nature. j. Financial Liabili es Financial liabili es are classified according to the substance of the collateral arrangements entered into and the defini ons of a financial liability. Financial liabili es within the scope of MFRS 139, are recognised in the statement of financial posi on when and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund s liabili es which include amount due to Manager, amount due to Trustee and other payables are recognised ini ally at fair value plus directly a ributable transac on costs and subsequently measured at amor sed cost using the effec ve interest method. A financial liability is derecognised when the obliga on under the liability is ex nguished. Gain and loss is recognised in profit or loss when the liabili es are derecognised, and through amor sa on process. 25

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. k. Func onal and Presenta on Currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the func onal currency ). The financial statements are presented in Ringgit Malaysia (RM), which is also the Fund s func onal currency. l. Unitholders Capital NAV A ributable to Unitholders The unitholders contribu ons to the Fund meet the defini on of pu able instruments classified as equity instruments. Distribu on equalisa on represents the average distributable amount included in the crea on and cancella on prices of units. This amount is either refunded to unitholders by way of distribu on and/or adjusted accordingly when units are cancelled. m. Significant Accoun ng Judgments and Es mates The prepara on of financial statements requires the use of certain accoun ng es mates and exercise of judgment. Es mates and judgments are con nually evaluated and are based on past experience, reasonable expecta ons of future events and other factors. i. Cri cal judgments made in applying accoun ng policies There are no other major judgments made by Manager in applying the Fund s accoun ng policies. ii. Key sources of es ma on uncertainty There are no key assump ons concerning the future and other key sources of es ma on uncertainty at the financial posi on date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabili es within the next financial year. 4. MANAGER S FEE The Manager s fee is computed based on 1.55% per annum of the net asset value of the Fund, calculated on a daily basis, as provided under Clause 13(2) of the Deed. 26

32 5. TRUSTEE S FEE Trustee s fee is calculated on a daily basis at 0.07% per annum of the net asset value of the Fund, as provided under Clause 13(8) and subject to a minimum fee of RM18,000 per annum as provided under Clause 13(7) of the Deed. 6. INCOME TAX EXPENSE Income tax is calculated at the Malaysian statutory tax rate of 25% of the es mated assessable income for the financial year. Income tax is calculated on investment income less par al deduc on for permi ed expenses as provided for under Sec on 63B of the Income Tax Act, The effec ve rate does not approximate the statutory tax rate mainly due to interest income exempted from tax in accordance with Schedule 6 of the Income Tax Act, 1967 and gain on disposal of investments are treated as capital in nature for tax purposes. A reconcilia on of income tax expense applicable to net income before tax at the statutory income tax rate to income tax expense at the effec ve income tax rate of the Fund is as follows: RM RM Net income before tax 473, ,229 Tax at Malaysian statutory tax rate of 25% (2012: 25%) 118,337 53,057 Income not subject to tax (137,807) (68,171) Expenses not deduc ble for tax purposes (under Sec on 63B of the Income Tax Act, 1967) 23,870 18,314 Tax expense for the year 4,400 3, QUOTED EQUITY SECURITIES RM RM RM Financial assets held for trading, at FVTPL: Quoted equity securi es 3,022,858 4,491,950 1,415,710 Net gain on financial assets at FVTPL comprised: Realised gain on disposals 442,582 71,694 Unrealised changes in fair values 8, , , ,806 27

33 7. QUOTED EQUITY SECURITIES (CONTD.) Details of quoted equity securi es as at 31 August 2013: Fair Percentage Units Cost value of NAV RM RM % Trading/Services Perisai Petroleum Teknologi Bhd 136, , , Alam Mari m Resources Bhd 129, , , Media Prima Bhd 50, , , Ramunia Holdings Bhd 150, , , Time Dotcom Bhd 30, , , Perdana Petroleum Bhd 61,500 97, , Air Asia X Bhd 95, ,681 97, MBM Resources Bhd 19,700 72,311 69, Integrax Bhd 9,000 17,883 16, ,010,182 1,021, Industrial Product Kossan Rubber Industries Bhd 26, , , Can-One Bhd 49, , , Kian Joo Can Factory Bhd 48, , , Coastal Contracts Bhd 45, , , Sarawak Cable Bhd 50,000 85,813 92, Oldtown Bhd 35,000 91,051 89, Favelle Favco Bhd 7,000 21,897 19, , , Construc on Kimlun Corpora on Bhd 110, , , Muhibbah Engineering (M) Bhd 88, , , Protasco Bhd 130, , , Malaysian Resources Corpora on Bhd 109, , , , , Proper es Eastern & Oriental Bhd 70, , , Tambun Indah Land Bhd 80, , , Encorp Bhd 25,000 29,929 26, , ,

34 7. QUOTED EQUITY SECURITIES (CONTD.) Details of quoted equity securi es as at 31 August 2013 (Contd.): Fair Percentage Units Cost value of NAV RM RM % Consumer Product Padini Holdings Bhd 66, , , , , Finance Syarikat Takaful Malaysia Bhd 10,000 78,344 86, ,344 86, Technology Globetronics Technology Bhd 10,000 26,314 26, ,314 26, Total quoted equity securi es 2,970,306 3,022, Excess of fair value over cost 52, SHORT TERM DEPOSITS Short term deposits were held with licenced commercial banks in Malaysia, on a daily renewal basis at the prevailing interest rate. The weighted average interest rate and average remaining maturity of the short term deposits are as follows: Weighted average interest rate Remaining maturity % % % Days Days Days Short term deposits

35 9. OTHER RECEIVABLES RM RM RM Interest income from short term deposits Amount due from brokers - 139,188 18,526 Dividend receivable 3,177-6,190 3, ,196 24, NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS Net asset value a ributed to unitholders is represented by: Note RM RM RM Unitholders contribu on (a) 3,460,893 4,505,334 1,640,127 Retained earnings: Realised reserves (b) 520,458 59,917 - Unrealised reserves (c) 52,552 44,145 (104,967) 4,033,903 4,609,396 1,535,160 a. Unitholders contribu on No. of units RM No. of units RM At beginning of the year 6,606,384 4,505,334 2,476,427 1,640,127 Distribu on equalisa on - 8,875-18,607 Add: Crea on of units 2,772,101 1,978,175 7,149,861 4,884,324 Less: Cancella on of units (4,316,890) (3,031,491) (3,019,904) (2,037,724) At end of the year 5,061,595 3,460,893 6,606,384 4,505,334 b. Realised reserves RM RM At beginning of the year 59,917 - Net realised gain 460,541 59,917 At end of the year 520,458 59,917 30

36 10. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS (CONTD.) c. Unrealised reserves RM RM At beginning of the year 44,145 (104,967) Net unrealised gain 8, ,112 At end of the year 52,552 44,145 In accordance with the Deed, the maximum number of units that can be issued for circula on is 300,000,000 (2012: 300,000,000). The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and par es related to the Manager as at 31 August 2013 were nil (2012: nil). Pursuant to Clause 25(1) of the Deed dated 16 April 2004, the Manager is en tled to a sales charge of not more than 8% of the net asset value of the Fund. The sales charge was 6.5% of the net asset value for the financial year ended 31 August NET ASSET VALUE PER UNIT Net asset value a ributable to unitholders is classified as equity in the statement of financial posi on. In line with the adop on of MFRS 139, quoted financial assets have been valued at the bid prices at the close of business. In accordance with the Deed, the calcula on of net asset value a ributable to unitholders per unit for the crea on and cancella on of units is computed based on quoted financial assets valued at the last done market price. A reconcilia on of net asset a ributable to unitholders for crea ng/cancelling of units and the net asset value a ributable to unitholders per the financial statements is as follows: RM RM/Unit RM RM/Unit Net asset value a ributable to unitholders for crea ng/ cancelling of units 4,052, ,618, Effect from adop ng bid prices as fair value (18,115) (0.0035) (8,955) (0.0014) Net asset value a ributable to unitholders per statement of financial posi on 4,033, ,609,