KENANGA ONEPRS GROWTH FUND

Transcription

1 Kenanga Investors Berhad ( P) KENANGA ONEPRS GROWTH FUND INTERIM REPORT For the Financial Period from 1 August 2014 to 31 January 2015

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3 KENANGA ONEPRS GROWTH FUND Contents Page Corporate Directory ii Directory of PRS Provider s Offices iii Fund Information 1 PRS Provider s Report 2-5 Fund Performance 6-8 Trustee s Report 9 Statement by the PRS Provider 10 Financial Statement 11-30

4 CORPORATE DIRECTORY PRIVATE RETIREMENT SCHEME (PRS) PROVIDER: KENANGA INVESTORS BERHAD (Company No P) REGISTERED OFFICE BUSINESS OFFICE Kenanga Investors Berhad (KIB) Suite 12.02, 12 th Floor, Kenanga International, 8 th Floor, Kenanga International, 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 Zafi len Syed Alwee (Independent Director) Peter John Rayner (Independent Director) Bruce Kho Yaw Huat Ismitz Matthew De Alwis INVESTMENT COMMITTEE Bruce Kho Yaw Huat (Chairman) Syed Zafi len Syed Alwee (Independent Member) Peter John Rayner (Independent Member) Ismitz Matthew De Alwis COMPANY SECRETARY: NORLIZA ABD SAMAD (MAICSA ) 9 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: SCHEME TRUSTEE ( Trustee ): MAYBANK TRUSTEES BERHAD (5004-P) REGISTERED AND BUSINESS ADDRESS 8th Floor, Menara Maybank, 100, Jalan Tun Perak, Kuala Lumpur. Tel: / mtb@maybank.com.my 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: ADMINISTRATOR: PRIVATE PENSION ADMINISTRATOR MALAYSIA (PPA) Level 6, Menara Mudajaya, Jalan PJU 7/3, Mutiara Damansara, Kuala Lumpur. Tel: Fax: Website: askppa@ppa.my MEMBERSHIP: FEDERATION OF INVESTMENT MANAGERS MALAYSIA (FIMM) , 6 th Floor, PNB Damansara, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur. Tel: Fax: Website: mm.com.my ii Kenanga OnePRS Growth Fund Interim Report

5 DIRECTORY OF PRS PROVIDER S OFFICES REGIONAL BRANCH OFFICES: Kuala Lumpur Suite 12.02, 12 th Floor Kenanga International Jalan Sultan Ismail Kuala Lumpur, Malaysia Tel : Fax : Melaka No 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 16 th Floor, Menara Boustead Penang 39, Jalan Sultan Ahmad Shah Penang. Tel : Fax : Seremban 2 nd Floor, No. 1D-2 Jalan Tuanku Munawir Seremban, Negeri Sembilan Tel : Fax : 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 Suite 1, 2nd Floor, 63 Persiaran Greenhill, Ipoh, Perak, Malaysia Tel : / 7570 Fax : Kenanga OnePRS Growth Fund Interim Report iii

6 1. FUND INFORMATION 1.1 Fund Name Kenanga OnePRS Growth Fund (the Fund) 1.2 Fund Category Core (Growth) 1.3 Investment Objective The Fund seeks to provide capital growth. 1.4 Investment Strategy The Fund seeks to achieve its objective by investing a maximum of 70% of the Fund s NAV in equities and at least 30% of the Fund s NAV in fi xed income instruments and/or money market instruments. However, at the launch of the Fund, the Fund aims to meet its objective and asset allocation by investing up to 70% of the Fund s NAV in any one collective investment scheme managed by the PRS Provider that is in line with the Fund s asset allocation. Such investment shall be for a period of fi ve (5) years from the launch of the Fund or upon the Fund reaching RM200 million NAV (whichever is earlier). 1.5 Performance Benchmark A composite of All MGS Index (30%) and FBM 100 (70%). The risk profi le of the Fund is not the same as the risk profi le of the performance benchmark. 1.6 Distribution Policy Distribution (if any) will be declared annually and reinvested into the Fund. Members who have reached their retirement age can opt to have the distribution paid to them by cheque or to their bank account. 1.7 Breakdown of unit holdings of the Fund as at 31 January 2015 Size of holdings No. of members No. of units held 5,000 and below 1,925 3,063,547 5,001-10,000 1,237 7,048,371 10,001-50, ,895,984 50, , , ,001 and above 0 0 Total 3,474 14,792,624 1 Kenanga OnePRS Growth Fund Interim Report

7 2. PRS PROVIDER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective. The Fund fell by 0.99% in Net Asset Value terms for the period under review but has risen by 11.78% since inception (20 November 2013) thus achieving the Fund s stated objective to provide long-term capital growth. 2.2 Comparison between the Fund s performance and performance of the benchmark Performance Chart Since Launch (20/11/ /01/2015) Kenanga OnePRS Growth Fund vs Benchmark* Source: Novagni Analytics and Advisory Sdn Bhd 2.3 Investment strategies and policies employed during the period under review. Since the size of the fund is below RM200 mil, it is currently invested in a collective investment scheme managed by the PRS provider which is in line with the Fund s asset allocation. As at 31 January 2015, the Fund had invested about 69.1% of its NAV in Kenanga Growth Fund ( KGF ) and about 28.9% in the Kenanga Bond Fund ( KBF ). Such a mix provides investors with a lower risk and a lower volatility profi le as compared to a pure equity fund. It aims to provide unit holders with long term capital growth and income ranging from 3 to 5 years. During the period under review, the KGF invested mainly in the Malaysian equities and continued with its strategy of investing in companies with sustainable business models and competent management, whilst trading at a discount to their intrinsic / fair value. The Fund focused on companies who would benefi t from a recovery in developed markets or from increased capital spending at home. Sectors that we favour include: i) construction, ii) exporters, and, iii) manufacturers. Kenanga OnePRS Growth Fund Interim Report 2

8 2.4 The Fund s asset allocation as at 31 January 2015 and comparison with the previous financial period ended 31 July Asset 31 Jan Jul 2014 Unquoted collective investment schemes 97.8% 97.1% Short term deposits and cash 2.2% 2.9% Reason for the differences in asset allocation The Fund increased its allocation into collective investment schemes marginally in order to improve asset utilisation. 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any) since last review period. Period under review 1 aug14 31 Jan 15 Kenanga OnePRS Growth Fund -0.99% A composite of All MGS Index (30%) and FBM 100 (70%) -3.07% *Source: Lipper & Novagni Analytics and Advisory Sdn Bhd For the financial period under review, the Fund fell by 0.99%, outperforming the 3.07% fall in the composite benchmark of 30% MGS and 70% FBM100. The outperformance was mainly due to stock selection in Kenanga Growth Fund (KGF). 2.6 Review of the market Market Review The market turned negative in late 2014, mainly impacted by the sharp drop in oil price. WTI and Brent both corrected about 49% from their highs of USD105.37/barrel and USD112.36/barrel, to close at USD53.27/barrel and USD57.33/barrel respectively at end of The correction had particular negative impact on markets which are net oil exporters, particularly Malaysia. As such, local market saw heavy selling in the oil and gas sector which eventually spread to the broader market as concerns arose regarding the impact on government finances and the current account. News-flow remained bearish, with Petroliam Nasional Bhd (Petronas) announcing that they will be reviewing their contribution to the government and also its expenditure allocation in view of the declining global crude oil prices. The government also took the opportunity to remove fuel subsidies for RON95 and diesel following the implementation of a managed float system similar to that used on RON97. Additionally, corporate earnings continued to disappoint expectations, dampening sentiment on the market. Y-o-Y earnings growth for the market was revised down to sub 1% levels for 2014 from high single digit previously, the third consecutive year of similar downgrades. 3 Kenanga OnePRS Growth Fund Interim Report

9 2.6 Review of the market (Contd.) Market Review (Contd.) The market rebounded in January 2015, driven by bargain hunting activities while oil price appeared to have stabilized, at least temporarily. The FBM100 gained 1.4% while Brent crude oil recovered to USD53/barrel towards month-end from a low of USD48.7/barrel during the month. The government lowered its 2015 GDP growth forecast to % and assumed a wider fiscal deficit of 3.2%. It also outlined several measures to promote growth. With regards to the fixed income market, BNM raised the OPR by 25bps to 3.25%, as widely expected at the July MPC meeting. The accompanying statement reiterated that the basis of any further adjustment on the OPR will be the outlook on growth and inflation. However, in the subsequent MPC meetings for the rest of the year, BNM left the OPR unchanged as central bank turned more cautious on the external outlook amid higher downside risks to global growth and as exports have shown signs of moderation. Furthermore, the domestic inflation outlook is now more subdued following the protracted decline in global oil prices. As a result, MGS yields traded towards the year s lows in October and November, taking the cue from offshore bond yields. In December, MGS curve sold off with yields up by 7-27bps across the curve on concerns that the weaker ringgit and the falling global crude oil prices would impact Malaysia s fiscal health in In January 2015, MGS started off weak in the first week of the month as the MGS curve sold off with yields up by 3-20bps. The early sell-off was due to weak crude oil prices and the weak Ringgit as USD/MYR rose to a peak of Fitch s reaffirmation of a negative outlook on Malaysia s sovereign rating further added pressure on investor sentiment. However, subsequently, the market rallied and MGS yields ended lower than the beginning of the month. The rally was partly due to ECB s announcement of its QE program to spur the Eurozone economy from deflationary threats, as well as the strengthening US Treasuries. Meanwhile, the Malaysian Prime Minister presented the 2015 budget revision in January, with the 2015 real GDP revised down to % (from % previously), given the weak crude oil prices. The fiscal deficit target was also revised to 3.2% from 3%. Market Outlook We remain constructive on equities as global monetary policy remains accommodative, with European Central Bank (ECB) recently announcing a larger than expected quantitative easing (QE) in January 2015, as well as rates cuts by major economies like India and Australia. Should oil prices recover; the outlook for oil exporting counties such as Malaysia will brighten as investors refocus on fundamentals such as improvement from fiscal reform and infrastructure development. Nevertheless, the local market has rebounded in the first 2 months of 2015 and profit taking activities might cap near term upside given concerns regarding the impact on private consumption post implementation of the GST. Externally, the key risk to monitor is still the timing of potential US rate hikes. Kenanga OnePRS Growth Fund Interim Report 4

10 2.6 Review of the market (Contd.) Strategy We will position defensively going into the fiscal year of 2015/16 after the rebound in Jan- Feb 15 in light of the anticipated volatility, while selectively bargain hunting on any market weakness. We will adopt a barbell strategy of holding a good balance of defensive stocks and beta/cyclical exposure. Sector wise, we favour those with strong fundamentals such as the construction sector which will benefit from the continued rollout of infrastructure projects while the export sector will benefit from improved demand in the US together with MYR weakness. We also will opportunistically bargain hunt in beaten down sectors such as the mid-cap space and selected oil and gas names. 2.7 Income Distribution For the financial period under review, the Fund did not declare any income distribution. 2.8 Details of any unit split exercise The Fund did not carry out any unit split exercise during the financial period under review. 2.9 Significant changes in the state of affair of the Fund during the period There were no significant changes in the state of affair of the Fund during the period and up until the date of the PRS Provider s report, not otherwise disclosed in the financial statements Circumstances that materially affect any interests of the members During the financial period under review, there were no circumstances that materially affected any interests of the members Rebates & Soft commissions Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, financial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the PRS Provider. For the period under review, the PRS Provider did not receive any rebates or soft commissions from stockbrokers. 5 Kenanga OnePRS Growth Fund Interim Report

11 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga OnePRS Growth Fund ( the Fund ) for the financial period as at 31 January 2015 against previous financial period as at 31 July 2014 are as follows: a. Distribution among industry sectors and category of investments: As at As at % % Unquoted collective investment schemes Cash Note: The above mentioned percentages are based on total investment market value plus cash. b. Distribution among markets The Fund invested in unquoted collective investment scheme and cash instruments only. Kenanga OnePRS Growth Fund Interim Report 6

12 3.2 Performance details of the Fund for the financial period ended 31 January 2015 against previous financial period ended 31 July 2014 are as follows: Period from Period from to to Net asset value ( NAV ) (RM Million) Units in circulation (Million) NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income growth (%) - - Gross distribution per unit (sen) - - Net distribution per unit (sen) - - Management expense ratio ( MER ) (%) Portfolio turnover ratio ( PTR ) (times) Note: Total return is the actual return of the Fund for the respective fi nancial periods, 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. Above NAV and NAV per unit are not shown as ex-distribution as there were no distribution declared by the Fund in the current fi nancial period under review. 1 MER is lower against previous fi nancial period mainly due to shorter period under review. 2 PTR for the fi nancial period under review is lower mainly due to shorter period under review. 7 Kenanga OnePRS Growth Fund Interim Report

13 3.3 Average total return of the Fund 1 year 31 Jan Jan 15 Kenanga OnePRS Growth Fund 10.35% A composite of All MGS Index (30%) and FBM 100 (70%) 0.52% Source: Lipper & Novagni Analytics and Advisory Sdn Bhd 3.4 Annual total return of the Fund Period under review Period 31 Jul Nov Jan Jul 14 Kenanga OnePRS Growth Fund -0.99% 12.90% A composite of All MGS Index (30%) and FBM 100 (70%) % 3.22% Source: Lipper & Novagni Analytics and Advisory Sdn Bhd Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. Kenanga OnePRS Growth Fund Interim Report 8

14 4 TRUSTEE S REPORT FOR THE FINANCIAL PERIOD FROM 1 AUGUST 2014 TO 31 JANUARY 2015 We have acted as Trustee of Kenanga OnePRS Growth Fund ( the Fund ) for the fi nancial period from 1 August 2014 to 31 January In our opinion, Kenanga Investors Berhad, ( the PRS Provider ) has managed the Fund in the fi nancial period under review in accordance with the following: 1. The limitations imposed on the investment powers of the PRS Provider and the Trustee under the Deed, the Securities Commission Malaysia s Guidelines on Private Retirement Schemes, the Capital Markets and Services Act 2007 and other applicable laws; 2. The valuation or pricing of the Fund is carried out in accordance with the Deed and relevant regulatory requirement; and 3. The creation and cancellation of units of the Fund are carried out in accordance with the Deed and relevant regulatory requirement. For MAYBANK TRUSTEES BERHAD (Company No: 5004-P) BERNICE K M LAU Head, Operations Kuala Lumpur 23 March Kenanga OnePRS Growth Fund Interim Report

15 5. STATEMENT BY THE PRS PROVIDER We, Ismitz Matthew De Alwis and Bruce Kho Yaw Huat, being the directors of Kenanga Investors Berhad, do hereby state that, in the opinion of the PRS Provider, the accompanying statement of fi nancial position as at 31 January 2015 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows for the fi nancial period from 1 August 2014 to 31 January 2015 together with notes thereto, are drawn up in accordance with Financial Reporting Standards in Malaysia so as to give a true and fair view of the fi nancial position of Kenanga OnePRS Growth Fund as at 31 January 2015 and of it fi nancial performance and cash fl ows for the period from 1 August 2014 to 31 January 2015 and comply with the requirements of the Deed. For and on behalf of the PRS Provider Kenanga Investors Berhad Ismitz Matthew De Alwis Bruce Kho Yaw Huat Kuala Lumpur, Malaysia 23 March 2015 Kenanga OnePRS Growth Fund Interim Report 10

16 6. FINANCIAL STATEMENT 6.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 1 AUGUST 2014 TO 31 JANUARY 2015 (unaudited) (date of to commencement) Note to RM RM INVESTMENT INCOME Distribution income 78,098 87,917 Interest income Net gain from investments: - Financial assets at fair value through profi t or loss ( FVTPL ) 4 28, , , ,538 EXPENSES PRS Provider s remuneration 5 5,685 2,508 Trustee s fee Private Pension Administrator ( PPA ) administration fee Auditors remuneration 3,000 6,500 Tax agent s fee 1,486 3,000 Administration expenses 4,178 6,949 15,689 19,536 NET INCOME BEFORE TAX 90, ,002 Income tax NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 90, ,002 Net income after tax is made up as follows: Realised gain 63,781 69,553 Unrealised gain 4 26, ,449 90, ,002 The accompanying notes form an integral part of the fi nancial statements. 11 Kenanga OnePRS Growth Fund Interim Report

17 6.2 STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 2015 (unaudited) Note RM RM INVESTMENTS Financial assets at FVTPL 4 8,102,954 2,614,003 OTHER ASSETS Cash at bank 179,975 77,865 TOTAL ASSETS 8,282,929 2,691,868 LIABILITIES Amount due to PRS Provider 2,603 9,592 Amount due to Trustee Amount due to PPA Other payables 9 11,603 15,000 TOTAL LIABILITIES 14,991 24,833 EQUITY Members contribution 7,965,183 2,455,033 Retained earnings 302, ,002 NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO MEMBERS 10 8,267,938 2,667,035 TOTAL EQUITY AND LIABILITIES 8,282,929 2,691,868 NUMBER OF UNITS IN CIRCULATION 10(a) 14,792,624 4,724,656 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the fi nancial statements. Kenanga OnePRS Growth Fund Interim Report 12

18 6.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL PERIOD FROM 1 AUGUST 2014 TO 31 JANUARY 2015 (unaudited) Members Retained Total Note contribution earnings NAV RM RM RM to At beginning of the period 2,455, ,002 2,667,035 Total comprehensive income - 90,753 90,753 Creation of units 10(a) 5,516,599-5,516,599 Cancellation of units 10(a) (8,579) - (8,579) Distribution equalisation 10(a) 2,130-2,130 At end of the period 7,965, ,755 8,267, (date of commencement) to Total comprehensive income - 212, ,002 Creation of units 10(a) 2,443,542-2,443,542 Cancellation of units 10(a) (8,922) - (8,922) Distribution equalisation 10(a) 20,413-20,413 At end of the period 2,455, ,002 2,667,035 The accompanying notes form an integral part of the fi nancial statements. 13 Kenanga OnePRS Growth Fund Interim Report

19 6.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 AUGUST 2014 TO 31 JANUARY 2015 (unaudited) CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES (date of to commencement) to RM RM Proceeds from sale of fi nancial assets at FVTPL 200,149 46,275 Purchase of fi nancial assets at FVTPL (5,598,438) (2,348,100) Interest received PRS Provider s remuneration paid (4,692) (2,025) Trustee s fee paid (6) - PPA administrative fee paid (790) (338) Auditors remuneration paid (6,000) - Payment for other fees and expenses (6,061) (1,449) Net cash used in operating and investing activities (5,415,838) (2,305,439) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 5,526,599 2,392,324 Cash paid on units cancelled (8,651) (9,020) Net cash generated from fi nancing activities 5,517,948 2,383,304 NET INCREASE IN CASH AND CASH EQUIVALENTS 102,110 77,865 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD/COMMENCEMENT 77,865 - CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 179,975 77,865 Cash and cash equivalents comprise: Cash at bank 179,975 77,865 The accompanying notes form an integral part of the fi nancial statements. Kenanga OnePRS Growth Fund Interim Report 14

20 6.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 1 AUGUST 2014 TO 31 JANUARY 2015 (unaudited) 1. THE FUND, THE PROVIDER AND THEIR PRINCIPAL ACTIVITIES Kenanga OnePRS Growth Fund (the Fund ) was constituted pursuant to the executed Deed dated 29 August 2013 (collectively, together with the deeds supplemental thereto, reffered to as the Deed ) between the Private Retirement Scheme Provider ( PRS Provider ), Kenanga Investors Berhad and Maybank Trustees Berhad ( the Trustee ). The Fund commenced operations on 20 November 2013 and will continue to be in operation until terminated as provided under Part 16 of the Deed. Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad, which in turn is a wholly-owned subsidiary of K & N Kenanga Holdings Berhad, listed on the Main Board of Bursa Malaysia Securities Berhad. All of these companies are incorporated in Malaysia. The principal place of business of the PRS Provider is Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur. The Fund seeks to provide member capital growth. The Fund seeks to achieve its objective by investing a maximum of 70% of the Fund s NAV in equities and at least 30% of the Fund s NAV in fi xed income instruments and/or money market instruments. However, at the launch of the Fund, the Fund aims to meet its objective and asset allocation by investing up to 70% of the Fund s NAV in any one collective investment schemes managed by the PRS Provider that is in line with the Fund s asset allocation. Such investment shall be for a period of fi ve (5) years from the launch of the Fund or upon the Fund reaching RM200 million NAV (whichever is earlier). The fi nancial statements were authorised for issue by the Chief Executive Offi cer of the PRS Provider on 23 March FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks including market risk (which includes interest rate risk and price risk), credit risk and liquidity risk. Whilst these are the most important types of fi nancial risks inherent in each type of fi nancial instruments, the PRS Provider 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 members, consistent with the long term objectives of the Fund. 15 Kenanga OnePRS Growth Fund Interim Report

21 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk Market risk is the risk that the fair value of future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market prices. Market risk includes interest rate risk and price risk. Market risk arises when the value of the fi nancial instruments fl uctuate 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 investment s price caused by uncertainties in the economic, political and social environment will affect the fair value of the Fund. The PRS Provider manages the risk of unfavorable changes in prices by cautious review of the fi nancial instruments and continuous monitoring of their performance and risk profi les. i. Interest rate risk The Fund is not exposed to interest rate risk as it does not hold any interestbearing assets and liabilities. However, the Fund has indirect exposure to interest rate risk through its investments in the unquoted collective investment schemes. ii. Price risk Price risk is the risk of unfavorable changes in the fair values of unquoted collective investment schemes. The Fund invests in unquoted collective investment schemes which are exposed to price fl uctuations. This may then affect the NAV per unit of the Fund. Price risk sensitivity The PRS Provider s best estimate of the effect on the profi t for the period due to a reasonably possible change in investments in unquoted collective investment schemes with all other variables held constant is indicated in the table below: Effect on profit Change in price for the period Increase/(Decrease) Increase/(Decrease) Basis points RM Financial assets at FVTPL 5/(5) 4,051/(4,051) Financial assets at FVTPL 5/(5) 1,307/(1,307) In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material. Kenanga OnePRS Growth Fund Interim Report 16

22 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk (Contd.) Price risk concentration The following table sets out the Fund s exposure and concentration to price risk based on its portfolio as at the reporting date: Fair Value Percentage of NAV RM RM % % Financial assets at FVTPL 8,102,954 2,614, 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 PRS Provider manages the credit risk by undertaking credit evaluation to minimise such risk. i. Credit risk exposure At the reporting date, the Fund s maximum exposure to credit risk is represented by the carrying amount of each class of fi nancial assets recognised in the statement of fi nancial position. ii. Financial assets that are either past due or impaired As at reporting date, there are no fi nancial assets that are either past due or impaired. 17 Kenanga OnePRS Growth Fund Interim Report

23 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 members by the PRS Provider are cancellable at the member s 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, 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. Up to 1 year Note RM RM Assets Financial assets at FVTPL 8,102,954 2,614,003 Other assets 179,975 77,865 (i) 8,282,929 2,691,868 Liabilities Other liabilities (ii) 14,991 24,833 Equity (iii) 8,267,938 2,667,035 Liquidity gap - - Kenanga OnePRS Growth Fund Interim Report 18

24 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. The Fund s investments have been included in the up to 1 year category on the assumption that these are highly liquid investments which can be realised should all of the Fund s members equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised. 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 the liabilities will be settled. When 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 members can request for redemption of their units, they have been categorised as having a maturity of up to 1 year. 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 Malaysian Accounting Standards Board ( MASB ) and International Financial Reporting Standards ( IFRS ) issued by International Accounting Standards Board ( IASB ). The accounting policies adopted are consistent with those of the previous fi nancial period except for the adoption of the new and amended MFRS and IC Interpretations which became effective for the Fund on 1 August The adoption of the new and amended MFRS and IC Interpretations 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. 19 Kenanga OnePRS Growth Fund Interim Report

25 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) b. Standards, Amendments and Interpretations Issued But Not Yet Effective As at the date of authorisation of these fi nancial statements, the following Standards, Amendments and Interpretations have been issued by MASB but are not yet effective and have not been adopted by the Fund: Description Effective for financial period beginning on or after Amendments to MFRS contained in the documents entitled Annual Improvements cycle 1 July 2014 Amendments to MFRS contained in the documents entitled Annual Improvements cycle 1 July 2014 Amendments to MFRS 119: Defi ned Benefi t Plans: Employee Contributions 1 July 2014 MFRS 14: Regulatory Deferral Accounts 1 January 2016 Amendments to MFRS 116 and MFRS 138: Clarifi cation of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 127: Equity Method in Separate Financial Statements 1 January 2016 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 1 January 2016 Amendments to MFRS contained in the document entitled Annual Improvements to MFRS Cycle 1 January 2016 MFRS 15 Revenue from Contracts with Customers 1 January 2017 MFRS 9 Financial Instruments (IFRS 9 Financial Instruments as issued by IASB in July 014) 1 January 2018 The Fund will adopt the above pronouncements when they become effective in the respective fi nancial period. 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 OnePRS Growth Fund Interim Report 20

26 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 instrument. 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 unquoted collective investment schemes acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, fi nancial assets at FVTPL are measured at fair value. Changes in the fair value of those fi nancial instruments are recorded in profi t or loss. Interest earned and distribution revenue elements of such instruments are recorded separately in interest income and distribution income, respectively. ii. Receivables Financial assets with fi xed or determinable payment that are not quoted in an active market are classifi ed as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profi t or loss when the receivable is derecognised or impaired, and through the amortisation process. A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. 21 Kenanga OnePRS Growth Fund Interim Report

27 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 assets is impaired. To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred; the Fund considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset s original effective interest rate. The impairment loss is recognised in profi t or loss. The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profi t or loss. e. Income Income is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Interest income is recognised using the effective interest method. Distribution income is recognised on declared basis, when the right to receive the dividend is established. f. Cash and Cash Equivalents For the purposes of the statement of cash fl ows, cash and cash equivalent include cash at bank. g. Income Tax Income tax on the profi t or loss for the fi nancial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the fi nancial period. Kenanga OnePRS Growth Fund Interim Report 22

28 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 amortisation process. j. Members Contribution The members 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 unitholders 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 PRS Provider. A distribution to the Fund s members is accounted for as a deduction from retained earnings. 23 Kenanga OnePRS Growth Fund Interim Report

29 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 PRS Provider 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 period. 4. FINANCIAL ASSETS AT FVTPL RM RM Financial assets held for trading, at FVTPL: Unquoted collective investment schemes 8,102,954 2,614, (date of to commencement) to RM RM Net gain on fi nancial assets at FVTPL comprised: Realised gain on disposals 1, Unrealised changes in fair values 26, ,449 28, ,423 Details of financial assets at FVTPL as at 31 January 2015: Aggregate Percentage Quantity cost Fair Value of NAV RM RM % Unquoted collective investment schemes Kenanga Bond Fund 3,473,567 2,452,800 2,391, Kenanga Growth Fund 5,425,150 5,480,732 5,711, Total unquoted collective investment schemes, representing total financial assets at FVTPL 8,898,717 7,933,532 8,102, Unrealised gain on financial assets at FVTPL 169,421 Kenanga OnePRS Growth Fund Interim Report 24

30 5. PRS PROVIDER S REMUNERATION PRS Provider s remuneration is computed on a daily basis at a rate up to 5.00% per annum of the NAV of the Fund as provided under Division 17.1 of the Deed. The PRS Provider is currently charging 1.55% per annum of the NAV of the Fund. As the Fund invest in units of the Kenanga Bond Fund and Kenanga Growth Fund, any management fee charged to the unquoted collective investment schemes are fully refunded to the Fund. Accordingly, there is no double charging of management fee. 6. TRUSTEE S FEE Pursuant to the supplemental deed dated 2 October 2014, the Trustee s fee is computed on a daily basis at a rate not exceeding 0.015% per annum of the NAV of the Fund and subject to a minimum fee of RM6,000 per annum as provided under Division 17.2 of the Deed. The Trustee s fee is currently computed at 0.015% per annum of the NAV of the Fund. 7. PRIVATE PENSION ADMINISTRATOR (PPA) ADMINISTRATION FEE PPA administration fee is computed on a daily basis at a rate of 0.04% per annum of the NAV of the Fund. 8. INCOME TAX Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the fi nancial period. The statutory tax rate will be reduced to 24% effective from year of assessment Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, A reconciliation of income tax expense applicable to net income before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Fund is as follows: (date of to commencement) to RM RM Net income before tax 90, ,002 Tax at Malaysian statutory tax rate of 25% (for fi nancial period 20 November 2013 (date of commencement) to 31 July 2014: 25%) 22,688 53,001 Tax effect of: Income not subject to tax (26,611) (57,884) Expenses not deductible for tax purposes 967 1,119 Restriction on tax deductible expenses for unit trust fund 2,956 3,764 Income tax for the period Kenanga OnePRS Growth Fund Interim Report

31 9. OTHER PAYABLES RM RM Accruals for auditors remuneration 3,000 6,000 Accrual for tax agent s fees 4,486 3,000 Provision for printing and other expenses 4,117 6,000 11,603 15, NET ASSET VALUE ATTRIBUTABLE TO MEMBERS NAV attributed to members is represented by: Note RM RM Members contribution (a) 7,965,183 2,455,033 Retained earnings: Realised reserves 133,334 69,553 Unrealised reserves 169, , , ,002 (a) Members contribution 8,267,938 2,667, (date of commencement) to to No. of units RM No. of units RM At beginning of the period/ commencement 4,724,656 2,455, Add: Creation of units 10,083,970 5,516,599 4,742,183 2,443,542 Less: Cancellation of units (16,002) (8,579) (17,527) (8,922) Distribution equalisation - 2,130-20,413 At end of period 14,792,624 7,965,183 4,724,656 2,455,033 The number of units legally or benefi cially held by the PRS Provider, Kenanga Investors Berhad and parties related to the PRS Provider as at 31 January 2015 were nil (nil as at 31 July 2014). Kenanga OnePRS Growth Fund Interim Report 26

32 11. PORTFOLIO TURNOVER RATIO The portfolio turnover ratio ( PTR ) for the fi nancial period from 1 August 2014 to 31 January 2015 is 0.60 times (0.82 times for the fi nancial period from 20 November 2013 (date of commencement) to 31 July 2014). PTR is the ratio of the average acquisitions and disposals of investments of the Fund for the fi nancial period to the average NAV of the Fund, calculated on a daily basis. 12. MANAGEMENT EXPENSE RATIO The management expense ratio ( MER ) for the fi nancial period from 1 August 2014 to 31 January 2015 is 0.32% (1.26% for the fi nancial period from 20 November 2013 (date of commencement) to 31 July 2014). MER is the ratio of total fees and recovered expenses of the Fund expressed as a percentage of the Fund s average NAV, calculated on a daily basis. 13. TRANSACTIONS WITH UNIT TRUST FUND MANAGER Transaction Percentage value of total RM % Kenanga Investors Berhad* 5,814, * Kenanga Investors Berhad is the Manager of Kenanga Bond Fund and Kenanga Growth Fund, the unquoted collective investment schemes that the Fund invested in during the fi nancial period. The above transaction values were in respect of unquoted collective investment schemes. Transactions in these securities do not involve any commission or brokerage fees. The directors of the PRS Provider are of the opinion that the transactions with the Kenanga Investors Berhad have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties. The PRS Provider is of the opinion that the above dealings have been transacted on an arm s length basis. 14. SEGMENTAL REPORTING As the Fund invests primarily in the unquoted collective investment schemes, it is not possible or meaningful to classify its investments by separate business or geographical segments. A summary of the investments portfolio of the unquoted collective investment schemes are disclosed in Note Kenanga OnePRS Growth Fund Interim Report

33 15. FINANCIAL INSTRUMENTS a. Classification of financial instruments The Fund s fi nancial assets and fi nancial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classifi cation. The signifi cant accounting policies in Note 3 describe how the classes of fi nancial instruments are measured, and how income and expenses, including fair value gain and loss, are recognised. The following table analyses the fi nancial assets and liabilities of the Fund in the statement of fi nancial position by the class of fi nancial instrument to which they are assigned and therefore by the measurement basis. Financial assets at Financial FVTPL Receivables liabilities Total RM RM RM RM Assets Unquoted collective investment schemes 8,102, ,102,954 Cash at bank - 179, ,975 8,102, ,975-8,282,929 Liabilities Amount due to PRS Provider - - 2,603 2,603 Amount due to Trustee Amount due to PPA Other payables ,603 11, ,991 14, Assets Unquoted collective investment schemes 2,614, ,614,003 Cash at bank - 77,865-77,865 2,614,003 77,865-2,691,868 Liabilities Amount due to PRS Provider - - 9,592 9,592 Amount due to Trustee Amount due to PPA Other payables ,000 15, ,833 24,833 Kenanga OnePRS Growth Fund Interim Report 28

34 15. FINANCIAL INSTRUMENTS (CONTD.) b. Financial instruments that are carried at fair value The Fund s fi nancial assets at FVTPL are carried at fair value. The fair values of these fi nancial assets were determined using prices in active markets. The following table shows the fair value measurements by level of the fair value measurement hierarchy: Level 1 Level 2 Level 3 Total RM RM RM RM Investments: Unquoted collective investment schemes - 8,102,954-8,102, Unquoted collective investment schemes - 2,614,003-2,614,003 Level 1: Quoted prices in active market Level 2: Model with all signifi cant inputs which are observable market data Level 3: Model with inputs not based on observable market data The fair value of unquoted collective investment schemes is stated based on the NAV per unit of those unquoted collective investment schemes at reporting date. c. Financial instruments not carried at fair value and whose carrying amounts are reasonable approximations of fair value The carrying amounts of the Fund s other fi nancial assets and liabilities that are not carried at fair value approximate fair values due to the relatively short term maturity of these fi nancial instruments. 29 Kenanga OnePRS Growth Fund Interim Report