KENANGA CASH PLUS FUND ANNUAL REPORT

Transcription

1 KENANGA CASH PLUS FUND ANNUAL REPORT For the Financial Year Ended 31 October 2017

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3 KENANGA CASH PLUS FUND Contents Page Corporate Directory ii Directory of Manager s Offices iii Fund Information 1 Manager s Report 2-4 Fund Performance 5-7 Trustee s Report 8 Independent Auditors Report 9-11 Statement by the Manager 12 Financial Statement 13-36

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 Cash Plus Fund Annual 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 Cash Plus Fund Annual Report iii

6 1. FUND INFORMATION 1.1 Fund Name Kenanga Cash Plus Fund (KCPF or the Fund) 1.2 Fund Category / Type Fixed Income / Income 1.3 Investment Objective The Fund aims to provide investors a regular stream of income through investments in short to medium-term fi xed income instruments with high level of liquidity. 1.4 Investment Strategy To achieve the objective of the Fund, it will invest in high quality short to medium-term fi xed income instruments with minimum credit ratings of A3 or P2 (by RAM) or equivalent rating by other recognised rating agencies. 1.5 Duration The Fund was launched on 26 October 2006 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. 1.6 Performance Benchmark Maybank 1-month fi xed deposit rate 1.7 Distribution Policy The Fund seeks to distribute income on a monthly basis. 1.8 Breakdown of unit holdings of KCPF as at 31 October 2017 Size of holdings No. of unit holders No. of units held 5,000 and below ,248 5,001-10, ,612 10,001-50, ,620,207 50, , ,291, ,001 and above 4 25,114,987 Total 1,005 31,433,684 1 Kenanga Cash Plus Fund Annual Report

7 2. MANAGER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective. The Fund has achieved its investment objective of aiming to provide investors a regular stream of income through investments in short to medium term fi xed income instruments with high level of liquidity. 2.2 Comparison between the Fund s performance and performance of the benchmark Performance Chart Since Launch (26/10/ /10/2017) Kenanga Cash Plus Fund vs Maybank 1-Month Fixed Deposit Rate Source: Lipper 2.3 Investment strategies and policies employed during the financial year under review During the fi nancial year under review, the Fund invested in high quality short to medium term fi xed income instruments with minimum credit ratings of A3 or P2 (by RAM) or equivalent rating by other recognized rating agencies. 2.4 The Fund s asset allocation as at 31 October 2017 and comparison with the previous financial year Asset 31 Oct Oct 2016 Unlisted bonds 6.3% 18.3% Commercial papers 5.3% - Short term deposits and cash 88.4% 81.7% Reason for the differences in asset allocation The lower asset allocation into unlisted bonds and commercial papers as at 31 October 2017 compared to the previous fi nancial period was due to higher liquidity needed to meet redemptions. Kenanga Cash Plus Fund Annual Report 2

8 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any) since last review period Period under review Kenanga Cash Plus Fund 2.66% Maybank 1-Month Fixed Deposit Rate 2.99% Source: Lipper The Fund registered a return of 2.66% against its benchmark return of 2.99%, underperforming its benchmark by 33 bps. The underperformance was mainly due to penalties imposed on the Fund for upliftments of placements before their maturity dates, to provide liquidity for unplanned withdrawals. 2.6 Review of the market Money Market Review Bank Negara Malaysia (BNM) decided to maintain its key policy rate the Overnight Policy Rate (OPR) at 3% during its meeting on November 9, In its statement, BNM said that the current policy stance remains accommodative but added that it may reconsider reviewing the current degree of monetary accommodation. Money Market Outlook We think that the above statement by BNM may lead to an interest rate hike by 25 basis points (bps) as early as in the fi rst quarter of In elaborating on its decision, BNM viewed the global economy favourably, stressing that it foresees sustained growth in Another factor that supports the possible increase in the OPR in 2018 is the continuing rise in the United States (US) Fed Funds rate following the further strengthening of its economy. With rising interest rates in the US and possibly in Europe, some capital may start to fl ow out from Asia, favouring Dollar-denominated assets. In addition, further improvements in wages and a stable labour market as well as the increasing strength in consumer spending may prevent infl ation from moderating substantially in the near term. The consumer sentiment is now turning around, as refl ected by the Malaysian Institute of Economic Research (MIER) consumer sentiment index which has generally been trending upward since 4Q2015. Against such a backdrop, higher interest rates in the domestic economy will, to some extent, prevent signifi cant outfl ows of capital from Malaysian shores in 2018 and keep infl ation in check. It will also have a positive impact on the Ringgit. 3 Kenanga Cash Plus Fund Annual Report

9 2.7 Distribution For the fi nancial year under review, the Fund has declared the following distributions: Gross/Net Cum-NAV Ex-NAV distribution per unit per unit per unit Distribution Date (sen) (RM) (RM) 23 November December January February March April May June July August September October Details of any unit split exercise The Fund did not carry out any unit split exercise during the fi nancial year under review. 2.9 Significant changes in the state of affair of the Fund during the financial year There were no signifi cant changes in the state of affair of the Fund during the fi nancial year 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 year under review, there were no circumstances that materially affected any interests of the unitholders Rebates & Soft commissions Any rebates received are channelled 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 year under review, the Manager did not receive any rebates or soft commissions from stockbrokers. Kenanga Cash Plus Fund Annual Report 4

10 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga Cash Plus Fund ( the Fund ) for the last 3 financial years as at 31 October are as follows: a. Distribution among industry sectors and category of investments: FY FY FY % % % Unlisted corporate bonds Unlisted government guaranteed bonds Commercial papers 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 invests in local unlisted fi xed income securities and cash instruments only. 5 Kenanga Cash Plus Fund Annual Report

11 3.2 Performance details of the Fund for the last 3 financial years ended 31 October are as follows: FY FY FY Net asset value ( NAV ) (RM Million) 31.31* 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 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 year under review. 2 The lower PTR was due to lower trading activities during the fi nancial year under review. * Based on bid price fair valuation method on all investments held by the Fund as at 31 October 2017, the NAV and NAV per unit would be RM31.31 million and RM respectively. (As disclosed under Note 13 of the fi nancial statements) # Date of distribution is shown in part Distribution Kenanga Cash Plus Fund Annual Report 6

12 3.3 Average total return of the Fund 1 Year 3 Years 5 Years 31 Oct Oct Oct Oct Oct Oct 17 Kenanga Cash Plus Fund 2.66% 2.59% 2.68% Maybank 1-Month Fixed Deposit Rate 2.99% 3.07% 3.04% Source: Lipper 3.4 Annual total return of the Fund Period under review 1 Year 1 Year 1 Year 1 Year 31 Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct 13 Kenanga Cash Plus Fund 2.66% 2.79% 2.42% 2.85% 2.83% Maybank 1-Month Fixed Deposit Rate 2.99% 3.15% 3.19% 3.06% 3.04% Source: Lipper Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. 7 Kenanga Cash Plus Fund Annual Report

13 4 TRUSTEE S REPORT TO THE UNIT HOLDERS OF KENANGA CASH PLUS FUND We, CIMB Commerce Trustee Berhad being the trustee of Kenanga Cash Plus Fund ( the Fund ), are of the opinion that Kenanga Investors Berhad ( the Manager ), acting in the capacity as Manager of the Fund, has fulfi lled its duties in the following manner for the fi nancial year ended 31 October 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; c) Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements; and d) The distribution of returns by the Fund are relevant and refl ect the investment objective of the Fund. For and on behalf of CIMB Commerce Trustee Berhad Lee Kooi Yoke Chief Operating Offi cer Kuala Lumpur, Malaysia 28 December 2017 Kenanga Cash Plus Fund Annual Report 8

14 5 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA CASH PLUS FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the fi nancial statements of Kenanga Cash Plus Fund ( the Fund ), which comprise the statement of fi nancial position as at 31October 2017, and the statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows of the Fund for the fi nancial year then ended, and notes to the fi nancial statements, including a summary of signifi cant accounting policies and other explanatory information, as set out on pages 13 to 36. In our opinion, the accompanying fi nancial statements give a true and fair view of the fi nancial position of the Fund as at 31 October 2017 and of its fi nancial performance and cash fl ows for the fi nancial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Basis for opinion We conducted our audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the fi nancial statements section of our report. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfi lled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the fi nancial statements and auditors report thereon The Manager of the Fund ( the Manager ) is responsible for the other information. The other information comprises the information included in the annual report of the Fund, but does not include the fi nancial statements of the Fund and our auditors report thereon. Our opinion on the fi nancial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the fi nancial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the fi nancial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 9 Kenanga Cash Plus Fund Annual Report

15 5 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA CASH PLUS FUND (CONTD.) Responsibilities of the Manager and Trustee for the fi nancial statements The Manager is responsible for the preparation of fi nancial statements of the Fund that give a true and fair view in accordance with Malaysia Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of fi nancial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the fi nancial statements of the Fund, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so. The Trustee is responsible for overseeing the Fund s fi nancial reporting process. The Trustee is also responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these fi nancial statements. Auditors responsibility for the audit of the fi nancial statements Our objectives are to obtain reasonable assurance about whether the fi nancial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of these fi nancial statements. As part of an audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the fi nancial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suffi cient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Kenanga Cash Plus Fund Annual Report 10

16 5 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA CASH PLUS FUND (CONTD.) Auditors responsibility for the audit of the fi nancial statements (contd.) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signifi cant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the fi nancial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the fi nancial statements of the Fund, including the disclosures, and whether the fi nancial statements of the Fund represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit. Other matters This report is made solely to the unitholders of the Fund, as a body, in accordance with the Guidelines on Unit Trust Funds issued by the Securities Commission Malaysia 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 Chan Hooi Lam No. 2844/02/18(J) Chartered Accountant Kuala Lumpur, Malaysia 28 December Kenanga Cash Plus Fund Annual Report

17 6. 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 31 October 2017 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows for the fi nancial year ended 31 October 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 Cash Plus Fund as at 31 October 2017 and of its fi nancial performance and cash fl ows for the fi nancial year then ended 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 28 December 2017 Kenanga Cash Plus Fund Annual Report 12

18 7. FINANCIAL STATEMENT 7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 OCTOBER 2017 INVESTMENT INCOME Note RM RM Interest income 772, ,488 Net gain from investments: - Financial assets at fair value through profi t or loss ( FVTPL ) 4 17,923 35, , ,277 EXPENSES Manager s fee 5 114, ,646 Trustee s fee 6 9,003 9,029 Auditors remuneration 7,500 7,000 Tax agent s fee 4,000 3,500 Administration expenses 59,680 77, , ,903 NET INCOME BEFORE TAX 595, ,374 Income tax NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 595, ,374 Net income after tax is made up as follows: Realised gain 600, ,852 Unrealised (loss)/gain 4 (5,390) 135, , ,374 Distributions for the financial year: Net distribution (RM) 8 550, ,244 Gross/Net distribution per unit (sen) The accompanying notes form an integral part of the financial statements. 13 Kenanga Cash Plus Fund Annual Report

19 7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2017 Note RM RM ASSETS INVESTMENTS Financial assets at FVTPL 4 3,641,814 6,866,655 Short term deposits 9 27,688,565 30,583,167 31,330,379 37,449,822 OTHER ASSETS Other receivable 10 48,986 98,098 Cash at bank 10,663 8,396 59, ,494 TOTAL ASSETS 31,390,028 37,556,316 LIABILITIES Amount due to Manager 11,558 15,856 Amount due to Trustee Other payables 11 71,683 30,497 TOTAL LIABILITIES 84,005 47,116 EQUITY Unit holders contribution 29,949,345 36,707,852 Retained earnings 1,356, ,348 NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNIT HOLDERS 12 31,306,023 37,509,200 TOTAL LIABILITIES AND EQUITY 31,390,028 37,556,316 NUMBER OF UNITS IN CIRCULATION 12(a) 31,433,684 37,671,902 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the financial statements. Kenanga Cash Plus Fund Annual Report 14

20 7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR ENDED 31 OCTOBER 2017 Unit holders Retained Total Note contribution earnings NAV RM RM RM 2017 At beginning of the fi nancial year 36,707, ,348 37,509,200 Total comprehensive income - 595, ,340 Creation of units 12(a) 66,433,514-66,433,514 Cancellation of units 12(a) (73,189,813) - (73,189,813) Distribution equalisation 12(a) (42,218) - (42,218) Distribution 8 (510,323) (40,010) (550,333) Reinvestment of income distributed 12(a) 550, ,333 At end of the fi nancial year 29,949,345 1,356,678 31,306, At beginning of the fi nancial year 19,976, ,694 20,568,959 Total comprehensive income - 675, ,374 Creation of units 12(a) 44,425,405-44,425,405 Cancellation of units 12(a) (28,164,062) - (28,164,062) Distribution equalisation 12(a) 3,524-3,524 Distribution 8 (3,524) (466,720) (470,244) Reinvestment of income distributed 12(a) 470, ,244 At end of the fi nancial year 36,707, ,348 37,509,200 The accompanying notes form an integral part of the financial statements. 15 Kenanga Cash Plus Fund Annual Report

21 7.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 OCTOBER 2017 CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Note RM RM Proceeds from sale of fi nancial assets at FVTPL 8,140,000 12,508,729 Proceeds from the maturity of investments 6,728,411 - Interest received 872, ,838 Tax agent s fee paid (3,500) (3,500) Auditors remuneration paid (7,000) (14,000) Trustee s fee paid (9,002) (9,770) Payment for other fees and expenses (19,494) (68,611) Manager s fee paid (118,927) (113,044) Purchase of fi nancial assets at FVTPL (4,948,692) (11,964,566) Placement of investments (5,003,000) (5,028,411) Net cash generated from/(used in) operating and investing activities 5,631,593 (3,889,335) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 66,542,374 44,435,010 Cash paid on units cancelled (73,340,891) (28,170,143) Net cash (used in)/generated from fi nancing activities (6,798,517) 16,264,867 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,166,924) 12,375,532 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 25,563,152 13,187,620 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 24,396,228 25,563,152 Cash and cash equivalents comprise: Cash at bank 10,663 8,396 Short term deposits 9 24,385,565 25,554,756 24,396,228 25,563,152 The accompanying notes form an integral part of the financial statements. Kenanga Cash Plus Fund Annual Report 16

22 7.5 NOTES TO THE FINANCIAL STATEMENTS FOR FOR THE FINANCIAL YEAR ENDED 31 OCTOBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Cash Plus Fund ( the Fund ) was constituted pursuant to the executed Deed dated 29 August 2006 (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 26 October 2006 and will continue to be in operation until terminated by the Trustee as provided under Clause 38 of the Deed. 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 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 with a regular stream of income through investments in short to medium term fi xed income instruments with high level of liquidity. To achieve the objective of the Fund, it will invest in high quality short to medium term fi xed income instruments with minimum credit rating of A3 or P2 (by RAM) or equivalent rating by other recognised rating agencies. The fi nancial statements were authorised for issue by the Chief Executive Offi cer of the Manager on 28 December FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks including market risk (which includes interest rate 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. 17 Kenanga Cash Plus Fund Annual Report

23 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) 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. 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 and deposits. The Fund s exposure to the interest rate risk is mainly confi ned to unlisted corporate bonds. Interest rate risk sensitivity The following table demonstrates the sensitivity of the Fund s profi t for the fi nancial year to a reasonably possible change in rate of return, with all other variables held constant. Effects on profit for Changes in rate the financial year Increase/(Decrease) Increase/(Decrease) Basis points RM 2017 Financial assets at FVTPL 5/(5) (114)/ Financial assets at FVTPL 5/(5) (2,085)/2,033 In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material. Kenanga Cash Plus Fund Annual Report 18

24 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. Weighted Non- average Above exposure to effective Up to 1 year interest rate interest 1 year - 5 years movement Total rate* RM RM RM RM % 2017 Assets Financial assets at FVTPL 3,603,236-38,578 3,641, Short term deposits 27,688,565-27,688, Other assets ,649 59,649 31,291,801-98,227 31,390,028 Liabilities Other liabilities ,322 12,322 Total interest rate sensitivity gap 31,291,801-85,905 31,377, Assets Financial assets at FVTPL 6,349, ,086 90,034 6,866, Short term deposits 30,583, ,583, Other assets , ,494 36,932, , ,528 37,556,316 Liabilities Other liabilities ,619 16,619 Total interest rate sensitivity gap 36,932, , ,909 37,539,697 * Computed based on interest-bearing assets only. 19 Kenanga Cash Plus Fund Annual Report

25 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) 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. iii. Credit quality of financial assets The Fund invests only in unlisted corporate bonds and commercial papers 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 commercial papers by rating category: Unlisted bonds Percentage of total unlisted bonds Percentage of NAV % % % % Rating A AA AA AA Commercial papers Percentage of total commercial papers Percentage of NAV % % % % Rating P Kenanga Cash Plus Fund Annual Report 20

26 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit risk (contd.) iii. Credit quality of financial assets (contd.) 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 WR MARC iv. Credit risk concentration Concentration risk is monitored and managed based on sectorial distribution. The table below analyses the Fund s portfolio of unlisted corporate bonds and commercial papers by sectorial distribution: Unlisted bonds Percentage of total unlisted bonds Percentage of NAV % % % % Plantations Properties Finance Trading/Services Commercial papers Percentage of total commercial papers Percentage of NAV % % % % Finance Kenanga Cash Plus Fund Annual Report

27 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) 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. Above Up to 1 year Note 1 year - 5 years Total RM RM RM 2017 Assets Financial assets at FVTPL 3,641,814-3,641,814 Short term deposits 27,688,565-27,688,565 Other assets 59,649-59,649 i. 31,390,028-31,390,028 Liabilities Other liabilities ii. 12,322-12,322 Equity iii. 31,306,023-31,306,023 Liquidity gap 71,683-71, Assets Financial assets at FVTPL 6,439, ,086 6,866,655 Short term deposits 30,583,167-30,583,167 Other assets 106, ,494 i. 37,129, ,086 37,556,316 Liabilities Other liabilities ii. 16,619-16,619 Equity iii. 37,509,200-37,509,200 Liquidity gap (396,589) 427,086 30,497 Kenanga Cash Plus Fund Annual Report 22

28 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity risk (contd.) 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. 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. 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. d. Regulatory reportings It is the Manager s responsibility to ensure full compliance of all requirements under the Guidelines on Unit Trust Funds issued by Securities Commission Malaysia. Any breach of any such requirement will be reported in the mandatory reporting to Securities Commission Malaysia on a monthly basis. 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 year except for the adoption of the new and amended MFRS which became effective for the Fund on 1 November 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. 23 Kenanga Cash Plus Fund Annual Report

29 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. Kenanga Cash Plus Fund Annual Report 24

30 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 unlisted corporate bonds and commercial papers 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 elements of such instruments are recorded in interest income. 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 de-recognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. 25 Kenanga Cash Plus Fund Annual Report

31 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 year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in 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. 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 change in value. g. Income tax Income tax on the profi t or loss for the fi nancial year comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the fi nancial year. As no temporary differences have been identified, no deferred tax has been recognised. Kenanga Cash Plus Fund Annual Report 26

32 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) h. Unrealised reserves Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values at reporting date. This reserve is not distributable. i. Financial liabilities Financial liabilities are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability. Financial liabilities 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 instrument. The Fund s fi nancial liabilities are classifi ed as other fi nancial liabilities. The Fund s fi nancial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. A fi nancial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profi t or loss when the liabilities are derecognised, and through the amortisation process. j. Unit holders contribution NAV attributable to unit holders The unit holders contribution to the Fund is classifi ed as equity instruments. Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unit holders by way of distribution and/or adjusted accordingly when units are released back to the Trustee. k. Functional and presentation currency The fi nancial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the functional currency ). The fi nancial statements are presented in Ringgit Malaysia ( RM ), which is also the Fund s functional currency. l. Distribution Distributions are at the discretion of the Manager. A distribution to the Fund s unit holders is accounted for as a deduction from retained earnings. 27 Kenanga Cash Plus Fund Annual Report

33 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) m. Significant accounting judgments and estimates The preparation of fi nancial statements requires the use of certain accounting estimates and exercise of judgment. Estimates and judgments are continually evaluated and are based on past experience, reasonable expectations of future events and other factors. i. Critical judgments made in applying accounting policies There are no major judgments made by the Manager in applying the Fund s accounting policies. ii. Key sources of estimation uncertainty There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year. 4. FINANCIAL ASSETS AT FVTPL RM RM Financial assets held for trading, at FVTPL: Unlisted corporate bonds 1,988,157 6,866,655 Commercial papers 1,653,657-3,641,814 6,866,655 Net gain on financial assets at FVTPL comprised: Realised gain/(loss)on disposals 23,313 (99,733) Unrealised changes in fair values (5,390) 135,522 17,923 35,789 Details of financial assets at FVTPL as at 31 October 2017: Unlisted corporate bond Amortised Percentage Quantity cost Fair value of NAV RM RM % Golden Assets International Finance Limited maturing on 17/11/2017 1,950,000 1,987,707 1,988, Total unlisted corporate bond 1,987,707 1,988, Kenanga Cash Plus Fund Annual Report 28