KENANGA CHINA ACCESS FUND (FORMERLY KNOWN AS ING CHINA ACCESS)

Transcription

1 Kenanga Investors Berhad ( P) KENANGA CHINA ACCESS FUND (FORMERLY KNOWN AS ING CHINA ACCESS) INTERIM REPORT For the Financial Period Ended 30 November 2013

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3 KENANGA CHINA ACCESS FUND (FORMERLY KNOWN AS ING CHINA ACCESS) Contents Page Corporate Directory ii Directory of Manager s Offices iii Fund Information 1 Manager s Report 2-5 Fund Performance 6-8 Trustee s Report 9 Statement by the Manager 10 Financial Statement 11-33

4 CORPORATE DIRECTORY MANAGER: KENANGA INVESTORS BERHAD (Company No P) REGISTERED OFFICE BUSINESS OFFICE Kenanga Investors Berhad (KIB) Suite 12.02, 12 th Floor, Kenanga 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 Zafilen Syed Alwee (Independent Director) YM Raja Dato Seri Abdul Aziz bin Raja Salim (Independent Director) Vivek Sharma (Independent Director) Bruce Kho Yaw Huat Abdul Razak bin Ahmad Peter John Rayner INVESTMENT COMMITTEE Bruce Kho Yaw Huat (Chairman) Syed Zafilen Syed Alwee (Independent Member) Vivek Sharma (Independent Member) Abdul Razak bin Ahmad Peter John Rayner COMPANY SECRETARY: NORLIZA ABD SAMAD (MAICSA ) 9 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: 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, PNB Damansara, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur. Tel: Fax: Website: ii Kenanga China Access Fund Interim Report

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

6 1. FUND INFORMATION 1.1 Fund Name Kenanga China Access Fund (KCAF or the Fund) (Formerly known as ING China Access) 1.2 Fund Type / Category Feeder / Growth 1.3 Investment Objective The Fund aims to provide long-term capital appreciation by investing in a portfolio of companies whose securities are listed on international equity markets and whose businesses are exposed to the growth of the Chinese economy. 1.4 Investment Strategy The Fund will invest a minimum of 95% in the ING China Access Fund which is denominated in US Dollar and domiciled in the Cayman Islands and is registered in Hong Kong. The remaining will be invested in liquid assets including money market instruments and deposits with licensed fi nancial institutions. 1.5 Duration The Fund was launched on 11 January 2008 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unit holders for it to continue. 1.6 Performance Benchmark MSCI China 10/ Distribution Policy Income (if any) will be distributed annually on a best effort basis. 1.8 Breakdown of unit holdings of KCAF as at 30 November 2013 Size of holdings No. of unitholders No. of units held 5,000 and below 0 0 5,001-10, ,247 10,001-50, ,304,845 50, , ,076, ,001 and above 8 15,401,121 Total ,536,053 1 Kenanga China Access Fund Interim Report

7 2. MANAGER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective The Fund has not met its objective as the Fund has been suspended since 3 June 2013 due to the termination of the target fund, ING China Access Fund on 10 June The Fund s investments are currently held in money market instrument. 2.2 Comparison between the Fund s performance during period under review and performance of the benchmark Performance Chart Since Launch (11/01/ /11/2013) Kenanga China Access Fund vs MSCI China 10/40 Source: Lipper 2.3 Investment strategies and policies employed during the period under review Since the termination of the target fund, ING China Access Fund on 10 June 2013, the Fund has invested into money market instruments pending the unitholder s approval on the proposed transfer of the Fund s asset to Kenanga Asia Pacifi c Total Return Fund ( KAPTRF ). 2.4 The Fund s asset allocation (% of NAV) as at 30 November 2013 and comparison with the previous financial period Asset 30 Nov Nov 2012 Collective Investment Scheme - Foreign % Fixed income securities/cash 100.0% 4.3% Reason for the differences in asset allocation The Fund s asset has been invested in money market instruments pursuant to the termination of the target fund on 10 June Kenanga China Access Fund Interim 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 China Access Fund 2.41% MSCI China 10/ % Source: Lipper The Fund s asset has been invested in money market instruments pursuant to the termination of the target fund on 10 June As such, the returns of the Fund are in line with the returns of money market instruments. 2.6 Review of the market Money Market Review During the period under review Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 3.00 percent. BNM continues to believe that consumption and investment will expand, albeit at a moderate pace, supported by improvements in exports. Domestic demand will be underpinned by a stable labour market and the expansion of private-sector projects amid the public sector consolidation. The headline infl ation which had been on the rise recently, largely induced by subsidy rationalisation should continue to edge up. Headline infl ation perked up to 2.8% year-onyear in October 2013 from a 20-month high of 2.6% in September 2013 mainly due to the spillover effects from the hikes in fuel. Core infl ation increased to 1.4% in November from 1% in October, fanning concerns about a build-up of demand price pressure. Credit and monetary conditions remain supportive of economic activities, with banking system loan growth holding steady at 9.9% year-on-year in November Household loans also increased to 11.9% in November, largely supported by higher demand for the purchase of residential properties, credit cards and consumer durable goods. Business loans, which eased to 6.9% growth from 7.2% in October, were pulled down by slower demand from the wholesale & retail trade, transport, storage & communication as well as real estate sectors. In the Monetary Policy Committee s assessment, there continue to be uncertainties in the balance of risks surrounding the outlook for domestic growth and infl ation. 3 Kenanga China Access Fund Interim Report

9 2.6 Review of the market (Contd.) Money Market Outlook Although volatility in the global fi nancial markets has receded, markets remain vulnerable to setbacks and changes in sentiment. Looking ahead, there remain considerable risks that could affect the pace of the global recovery. Going forward, the economic growth momentum will benefi t from the expected improvement in the external sector amid some moderation in domestic demand. Domestic investment activity will however continue, led by private sector capital spending and the ongoing implementation of infrastructure projects. Domestic demand is expected to moderate, refl ecting the public sector consolidation and some moderation in private consumption. We anticipate consumer price infl ation to climb further in early 2014, led by; festive demand during Chinese New Year; a 10.6% hike in electricity tariffs for domestic users, which could add 0.3% points to headline infl ation; potential increases in public transport fares (student buses, LRT and monorail) and toll rates for 15 highways, which are still under a comprehensive feasibility study; and continued fuel-subsidy rationalisation. These forces are expected to lift inflation higher to average 3% in 2014 from an estimated 2.2% this year. The market of the opinion that, Bank Negara Malaysia (BNM) will wait a while before signalling any shift in its monetary stance. At this point, risks to growth and infl ation are roughly balanced, though BNM s biggest concern is likely to be the second-round effects of various price hikes or demand-pull pressure that could fan higher inflation expectations. We expect the overnight policy rate (OPR) will remain at the current level for the fi rst half of Income Distribution For the fi nancial year under review, the Fund did not declared any income distribution. 2.8 Details of any unit split exercise The Fund did not carry out any unit split exercise during the fi nancial period under review. Kenanga China Access Fund Interim Report 4

10 2.9 Significant changes in the state of affair of the Fund during the period Pursuant to the acquisition of ING Funds Berhad by Kenanga Investors Berhad on 19 th April 2013, Kenanga Investors Berhad had written to the Securities Commission to seek the Securities Commission s approval to become the Management Company of the Fund. The Securities Commission had approved the application. With effect from 8 th June 2013, Kenanga Investors Berhad has become the Management Company of the Fund. Following the unit holders meeting of the Fund held on 17 May 2013 where all the three (3) resolutions proposed i.e. (i) change in target fund, (ii) modifi cation of the deed to change the objective of the Fund and (iii) further or consequential modifi cations were passed, we have been working on master prospectus of the Fund. During this period, we noted that there are differences in terms of the investment limits and restrictions of the proposed target fund of the Fund with the SC s Guidelines on Unit Trust Funds ( SC Guidelines ). The proposed target fund of the Fund is domiciled and registered in Luxembourg, and is subject to the Undertakings for Collective Investment in Transferable Securities Directives ( UCITS ). The investment limits and restrictions of the proposed target fund were amended in accordance to the requirements of the UCITS. As a consequence, the changes to the investment limits and restrictions of UCITS may differ from the general principles of the SC Guidelines. Taking this into consideration, as well as the current economic environment, Kenanga Investors Berhad is proposing to terminate/wind up the Fund by transferring of Fund s assets into Kenanga Asia Pacifi c Total Return Fund ( KAPTRF ) ), subject to the unitholder s approval. The unitholders meeting has been set to be held on 24 January Circumstances that materially affect any interests of the unitholders During the period under review, there are no circumstances that materially affect any interests of the unitholders. However, there was a change in the Management Company of the Fund on 8th June 2013 on detailed in Rebates & Soft commissions Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, fi nancial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the period under review, the Manager did not receive any rebates or soft commissions from stockbrokers. 5 Kenanga China Access Fund Interim Report

11 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga China Access Fund ( the Fund ) as at 30 November 2013 against last 3 financial years ended 31 May are as follows: a. Distribution among industry sectors and category of investments: As at FY FY FY % % % % Collective Investment Scheme - Foreign Cash and others Note: The above mentioned percentages are based on total investment market value plus cash. b. Distribution among markets The Fund invested in collective investment scheme and fi xed securities/ cash instruments only. Kenanga China Access Fund Interim Report 6

12 3.2 Performance details of the Fund for the financial period ended 30 November 2013 against last 3 financial years ended 31 May are as follows: Period from to FY FY FY Net asset value (RM Million) 14.42* Units in circulation (Million) Net asset value per unit (RM) * Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income distribution (%) 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 fi nancial period, computed based on net asset value per unit and net of all fees. MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. Above prices and NAV are not shown as ex-distribution as there were no distribution declared by the Fund in the fi nancial period under review. 1 The computation is based on an average of 6 months fund size calculated on a daily basis. 2 The higher PTR was due to termination of the target fund. * The NAV and NAV price per unit are value based on bid price fair valuation method. 7 Kenanga China Access Fund Interim Report

13 3.3 Average total return of the Fund 1 Year 3 Years 5 Years 30 Nov Nov Nov Nov Nov Nov 13 Kenanga China Access Fund 3.01% -4.04% 8.63% MSCI China 10/40 CR USD 15.73% -0.03% 12.95% Source: Lipper 3.4 Annual total return of the Fund Period under review 1 Year 1 Year 1 Year 1 Year 1 Year 1 Jun May May May May May Nov May May May May May 09 Kenanga China Access Fund 2.41% 7.76% % 9.67% 4.56% % MSCI China 10/40 CR USD 13.60% 9.92% % 7.32% 4.83% % Source: Lipper Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. Kenanga China Access Fund Interim Report 8

14 4. TRUSTEE S REPORT TO THE UNITHOLDERS OF KENANGA CHINA ACCESS FUND We, CIMB COMMERCE TRUSTEE BERHAD, being the Trustee of KENANGA CHINA ACCESS FUND ( the Fund ) (formerly known as ING China Access) are of the opinion that KENANGA INVESTORS BERHAD ( the Manager ), acting in the capacity of Manager of the Fund, have fulfi lled their duties in the following manner for the fi nancial period ended 30 November a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and c) Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements. For and on behalf of CIMB COMMERCE TRUSTEE BERHAD LEE KOOI YOKE Chief Operating Offi cer Kuala Lumpur, Malaysia 28 January Kenanga China Access Fund Interim Report

15 5. STATEMENT BY THE MANAGER We, Abdul Razak Bin Ahmad and Bruce Kho Yaw Huat, being the directors of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of fi nancial position as at 30 November 2013 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 ended at 30 November 2013 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 China Access Fund (Formerly known as ING China Access) as at 30 November 2013 and of its fi nancial performance and cash fl ows for the period then ended and comply with the requirements of the Deed. For and on behalf of the Manager Kenanga Investors Berhad Abdul Razak Bin Ahmad Bruce Kho Yaw Huat Kuala Lumpur 28 January 2014 Kenanga China Access Fund Interim Report 10

16 6. FINANCIAL STATEMENT 6.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 30 NOVEMBER 2013 (unaudited) Note to to RM RM INVESTMENT INCOME Interest income 37,901 30,654 Net gain from investments: - Financial assets at fair value through profi t or loss ( FVTPL ) 1,486,750 3,582,170 1,524,651 3,612,824 EXPENSES Manager s fee 4 190, ,048 Trustee s fee 5 9,973 18,367 Auditors remuneration 2,843 5,008 Tax agent s fee 1,327 1,404 Administration 8,692 10, , ,911 NET INCOME BEFORE TAX 1,311,781 3,382,913 Income tax expense NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,311,781 3,382,913 Total comprehensive income is made up as follows: Realised gain/(loss) 1,024,086 (748,219) Unrealised gain 287,695 4,131,132 1,311,781 3,382,913 The accompanying notes form an integral part of the fi nancial statements. 11 Kenanga China Access Fund Interim Report

17 6.2 STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER 2013 (unaudited) Note RM RM INVESTMENTS Collective investment scheme - foreign 7-50,060,425 Short term deposits 8 14,780,899 2,403,000 14,780,899 52,463,425 OTHER ASSETS Other receivables ,600,194 Cash at bank 16,393 14,034 16,518 4,614,228 TOTAL ASSETS 14,797,417 57,077,653 LIABILITIES Amount due to Manager 361,773 4,769,432 Amount due to Trustee 1,430 3,684 Other payables 14,647 15,624 TOTAL LIABILITIES 377,850 4,788,740 EQUITY Unitholders contribution 13,309,991 53,509,569 Retained earnings/(accumulated loss) 1,109,576 (1,220,656) NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS 10 14,419,567 52,288,913 TOTAL EQUITY AND LIABILITIES 14,797,417 57,077,653 NUMBER OF UNITS IN CIRCULATION 10(a) 30,536, ,061,486 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the fi nancial statements. Kenanga China Access Fund Interim Report 12

18 6.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL PERIOD ENDED 30 NOVEMBER 2013 (unaudited) Retain earnings Total Unitholders /(Accumulated net asset Note contribution loss) value RM RM RM At beginning of the year 38,555,041 (202,205) 38,352,836 Total comprehensive income - 1,311,781 1,311,781 Creation of units 10(a) Cancellation of units 10(a) (24,847,327) - (24,847,327) Distribution equalisation 10(a) (397,723) - (397,723) At end of the period 13,309,991 1,109,576 14,419, At beginning of the year 46,690,533 (4,603,569) 42,086,964 Total comprehensive income - 3,382,913 3,382,913 Creation of units 10(a) 18,216,817-18,216,817 Cancellation of units 10(a) (11,397,781) - (11,397,781) Distribution equalisation 10(a) At end of the period 53,509,569 (1,220,656) 52,288,913 The accompanying notes form an integral part of the fi nancial statements. 13 Kenanga China Access Fund Interim Report

19 6.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 30 NOVEMBER 2013 (unaudited) CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES to to RM RM Proceeds from sale of investments 38,269,478 3,450,000 Purchase of investments - (14,400,000) Interest received 37,910 30,621 Manager s fee paid (196,246) (186,326) Trustee s fee paid (11,159) (17,582) Auditors remuneration paid (6,000) (6,000) Tax agent s fee paid (2,441) - Payment for other fees and expenses (9,474) (10,872) Net cash generated from/(used in) operating and investing activities 38,082,068 (11,140,159) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created - 18,218,907 Cash paid on units cancelled (24,950,772) (6,667,626) Net cash (used in)/generated from fi nancing activities (24,950,772) 11,551,281 NET INCREASE IN CASH AND CASH EQUIVALENTS 13,131, ,122 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 1,665,996 2,005,912 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 14,797,292 2,417,034 Cash and cash equivalents comprise: Cash at bank 16,393 14,034 Short term deposits 14,780,899 2,403,000 14,797,292 2,417,034 The accompanying notes form an integral part of the fi nancial statements. Kenanga China Access Fund Interim Report 14

20 6.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 30 NOVEMBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga China Access Fund (formerly known as ING China Access) (hereinafter referred to as The Fund ) was constituted pursuant to the executed Deed dated 23 October 2007 between ING Funds Berhad (currently known as Kenanga Funds Berhad) and CIMB Commerce Trustee Berhad as the Trustee. The Fund commenced operation on 11 January 2008 and will continue to be in operation until terminated by the Trustee as provided under Clause 37 of the Deed. Pursuant to the executed Seventh Supplemental Deed dated 15 May 2013 between Kenanga Investors Berhad and CIMB Commerce Trustee Berhad, Kenanga Investors Berhad was appointed as the Manager of the Fund with effect from 8 June 2013 and the name of the Fund was changed from ING China Access to Kenanga China Access Fund. Following the unit holders meeting of the Fund held on 17 May 2013 where all the three (3) resolutions proposed i.e. (i) change in target fund, (ii) modifi cation of the deed to change the objective of the Fund and (iii) further or consequential modifi cations were passed, we have been working on master prospectus of the Fund. During this period, we noted that there are differences in terms of the investment limits and restrictions of the target fund of the Fund with the SC s Guidelines on Unit Trust Funds ( SC Guidelines ). The target fund of the Fund is domiciled and registered in Luxembourg, and is subject to the Undertakings for Collective Investment in Transferable Securities Directives ( UCITS ). The investment limits and restrictions of the target fund were amended in accordance to the requirements of the UCITS. As a consequence, the changes to the investment limits and restrictions of UCITS may differ from the general principles of the SC Guidelines. In view of the above, we are planning to hold another unit holders meeting of the Fund to propose to terminate/wind up the Fund by transferring the Fund s assets into Kenanga Asia Pacifi c Total Return Fund, an internally managed fund. We are of the opinion that it would be more beneficial to the unit holders of the Fund as Kenanga Investors Berhad would have control of the fund especially in managing the differences in the investment limits and restrictions. 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks including market risk (which includes interest rate risk, price risk and currency 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 set out its overall business strategies to manage these risks to optimise returns and preserve capital for the unitholders, consistent with the long term objectives of the Fund. 15 Kenanga China Access Fund Interim Report

21 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market prices. Market risk includes interest rate risk, price risk and currency risk. Market risk arises when the value of the investments fl uctuate in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are other 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 fair value of the Fund. The Manager manages the risk of unfavorable changes in prices by cautious review of the investments and continuous monitoring of their performance and risk profi les. i. Interest rate risk The Fund is not exposed to signifi cant interest rate risk as its placements with fi nancial institutions are for periods less than a month. Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s assets and liabilities are included at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Non- Weighted exposure to average Up to interest rate effective 1 year movement Total interest rate* RM RM RM % Assets Collective investment scheme - foreign Short term deposits 14,780,899-14,780, Other assets - 16,518 16,518 14,780,899 16,518 14,797,417 Liabilities Other liabilities - 377, , , ,850 Total interest sensitivity gap 14,780,899 (361,332) 14,419,567 Kenanga China Access Fund Interim Report 16

22 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk sensitivity (Contd.) Non- Weighted exposure to average Up to interest rate effective 1 year movement Total interest rate* RM RM RM % Assets Collective investment scheme - foreign - 50,060,425 50,060,425 Short term deposits 2,403,000-2,403, Other assets 4,614,228-4,614,228 7,017,228 50,060,425 57,077,653 Liabilities Other liabilities - 4,788,740 4,788,740-4,788,740 4,788,740 Total interest sensitivity gap 7,017,228 45,271,685 52,288,913 * Computed based on interest-bearing assets only. ii. Price risk Price risk is the risk of unfavourable changes in the fair values of foreign collective investment scheme. The Funds invests in a foreign collective investment scheme which is exposed to price fl uctuations. This may then affect the unit price of Kenanga China Access Fund locally. Price risk sensitivity Manager s best estimate of the effect on the profi t for the period due to a reasonably possible change in investments in foreign collective investment scheme, with all other variables held constant is indicated in the table below: 17 Kenanga China Access Fund Interim Report

23 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk (Contd.) Price risk sensitivity (Contd.) Changes in price Increase/(decrease) Basis points Effect on profit for the period Increase/(decrease) RM Collective investment scheme - foreign 5/(5) Collective investment scheme - foreign 5/(5) 25,030/(25,030) In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material. There are no holding held for collective investment scheme - foreign at the reporting date. Price risk concentration The following table set out the Fund s exposure and concentration to price risk based on its portfolio of fi nancial instruments as at the reporting date. Fair value Percentage of NAV RM RM % % Collective investment scheme - foreign - 50,060, Kenanga China Access Fund Interim Report 18

24 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) iii. Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. When the foreign currencies fluctuate in an unfavorable movement against Ringgit, the investment face currency loss in addition to capital gain/(loss). This will lead to lower NAV ( net asset value ) of the Fund. The Fund invests a minimum 95% money market, denominated in US Dollar. The Manager may consider managing the currency risk using currency hedging. However, this would be subjected to the current market outlook on the currency exposure risk as well. Currency risk sensitivity The Fund did not have any financial liabilities denominated in foreign currencies as at the reporting date. The following table indicates the currencies to which the Fund had significant exposure at the reporting date on its financial assets. The analysis calculates the effect of a reasonably possible movement of the currency rate against Ringgit Malaysia on equity and on profit/(loss) with all other variables held constant. Change in Effect on profit Effect on equity currency rate for the period and NAV Increase/(decrease) Increase/(decrease) Increase/(decrease) Basis points RM RM USD/RM 5/(5) 7,096/(7,096) 7,096/(7,096) USD/RM 5/(5) 25,030/(25,030) 25,030/(25,030) An equivalent decrease in each of the currencies shown above would have resulted in an equivalent, but opposite, impact. Currency risk concentration The following table set out the Fund s exposure to foreign currency exchange rates on its financial assets as at the reporting date. Fair value Percentage of NAV RM RM % % USD 14,192,014 50,060, Kenanga China Access Fund Interim Report

25 2. FINANCIAL RISK AND 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 for the Fund by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. i. Credit risk exposure At the reporting date, the Fund s maximum exposure to credit risk is represented by the carrying amount of each class of 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 financial assets that are either past due or impaired. iii. Credit quality of financial institutions The Fund deposits only with reputable financial institutions. The following table analyses the financial institutions by rating category: Short term deposits Percentage of total short term deposits Percentage of NAV % % % % Rating P 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 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 unitholders by the Manager are cancellable at the unitholder s option based on the Fund s net asset value per unit at the time of cancellation calculated in accordance with the Fund s Trust Deed. The liquid assets comprise cash, deposits with licensed fi nancial institutions and other instruments, which are capable of being converted into cash within 7 days. The following table analyses the maturity profi le of the Fund s fi nancial assets and fi nancial liabilities in order to provide a complete view of the Fund s contractual commitments and liquidity. Kenanga China Access Fund Interim Report 20

26 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) Less than 1 month RM Assets Collective investment scheme - foreign - Short term deposits 14,780,899 Other assets 16,518 14,797,417 Liabilities Other liabilities 377, ,850 Net asset value 14,419,567 Liquidity gap 14,419, Assets Collective investment scheme - foreign 50,060,425 Short term deposits 2,403,000 Other assets 4,614,228 57,077,653 Liabilities Other liabilities 4,788,740 4,788,740 Net asset value 52,288,913 Liquidity gap 52,288, Kenanga China Access Fund Interim Report

27 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 fi nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. b. Standard and Interpretations Issued But Not Yet Effective As at the date of authorisation of these fi nancial statements, the following Standards and Amendments have been issued by MASB but are not yet effective and have not been adopted by the Fund. Effective for fi nancial periods beginning on or after 1 January 2013 MFRS 10 MFRS 11 MFRS 12 MFRS 13 MFRS 119 MFRS 127 MFRS 128 IC Interpretation 20 Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Employee Benefi ts (IAS 19 as amended by IASB in June 2011) Separate Financial Statement (IAS 27 as amended by IASB in May 2011) Investments in Associates and Joint Ventures (IAS 28 as amended by IASB in May 2011) Stripping Costs in the Production Phase of a Surface Mine (Annual improvement cycle) Effective for fi nancial periods beginning on or after 1 January 2014 IC Interpretation 21 Levies Effective for fi nancial periods beginning on or after 1 January 2015 MFRS 9 MFRS 9 Financial Instruments (IFR 9 issued by IASB in November 2009) Financial Instruments (IFR 9 issued by IASB in October 2010) Kenanga China Access Fund Interim Report 22

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) b. Standard and Interpretations Issued But Not Yet Effective (Contd.) 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 except as described below: i. MFRS 9 - Financial instruments MFRS 9, as issued, refl ects the fi rst phase of the IASB s work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement ( MFRS 139 ) and applies to classifi cation and measurement of fi nancial assets and fi nancial liabilities as defi ned in MFRS 139 and replaces the guidance in MFRS 139. In subsequent phases, the International Accounting Standard Board ( IASB ) will address hedge accounting and impairment of fi nancial assets. The adoption of the fi rst phase of MFRS 9 will have an effect on the classifi cation and measurement of the Fund s fi nancial assets but will not have an impact on the classifi cation and measurement of fi nancial liabilities. The Fund will quantify the effect in conjunction with the other phases when the fi nal standard including all phases is issued. ii. MFRS 13 - Fair value measurement MFRS 13 establishes a single source of guidance under MFRS for all fair value measurements. MFRS 13 does not change when an entity is required to use fair value but rather provides guidance on how to measure fair value under MFRS when fair value is required or permitted. The Fund is currently assesing the impact that this standard will have on the fi nancial position and performance of the Fund but based on preliminary analyses, no material impact is expected. 23 Kenanga China Access Fund Interim Report

29 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 fair value through profi t or loss, directly attributable transaction costs. The Fund determines the classifi cation of its fi nancial assets at initial recognition, which are receivables: 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 foreign collective investment scheme 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 of such instruments are recorded separately in interest income. Exchange differences on fi nancial assets at FVTPL are not recognised separately in profi t or loss but are included in net gain or net loss on changes in fair value of fi nancial assets at FVTPL. ii. Loans and receivables Financial assets with fi xed or determinable payment that are not quoted in an active market are classifi ed as loans and receivables. The fund includes deposits in fi nancial institutions and short term receivable in this classifi cation. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profi t or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. Kenanga China Access Fund Interim Report 24

30 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 assets is reduced by the impairment loss directly for all fi nancial assets. 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 Interest income is recognised using the effective interest rate 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, calculated on the pro-rata basis. The unrealised gain or loss on change in value of investments is measured as the difference between the fair value and the carrying amount of the investment, calculated on a daily basis. 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 fi nancial institution. g. Income Tax Expenses Income tax on the profi t or loss for the period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the period. 25 Kenanga China Access Fund Interim Report

31 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 and unrealised gain or loss from translating foreign currency monetary items at exchange rates prevailing at reporting date. This reserve is not distributable in nature. 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 within the scope of MFRS 139 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 rate method. A fi nancial liability is derecognised when the obligation under the liability is extinguished. Gain and loss are recognised in profi t or loss when the liabilities are derecognised, and through the amortisation process. j. Foreign Currency i. 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. ii. Foreign currency transactions In preparing the fi nancial statements of the Fund, transactions in currencies other than the Fund s functional currency (foreign currencies) are recorded in the functional currency using exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. All exchange gain or loss is recognised in the statement of comprehensive income. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in statement of comprehensive income for the period. The principal exchange rate for each respective units of foreign currency ruling at fi nancial position date is as follows: RM RM 1 USD Kenanga China Access Fund Interim Report 26

32 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) k. Unitholder s Contribution NAV Attributable to unitholders The unitholders contribution to the Fund is classifi ed as equity instruments. l. Significant Accounting Judgements 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. MANAGER S FEE The Manager s fee is computed based on 1.80% per annum of the net asset value of the Fund, calculated on a daily basis, as provided under Division 13.1 of the Deed. 5. TRUSTEE S FEE Trustee s fee is calculated on a daily basis at 0.08% per annum of the net asset value of the Fund, and subject to a minimum fee of RM18,000 per annum as provided under Division 13.2 of the Deed. 6. INCOME TAX EXPENSE Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the fi nancial period. 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: 27 Kenanga China Access Fund Interim Report

33 6. INCOME TAX EXPENSE (CONTD.) to to RM RM Net income before tax 1,311,781 3,382,912 Tax at Malaysian statutory tax rate of 25% 327, ,728 Income not subject to tax (381,163) (903,206) Expenses not deductible for tax purposes (under Section 63B of the Income Tax Act, 1967) 53,218 57,478 Tax expense for the period COLLECTIVE INVESTMENTS SCHEME-FOREIGN RM RM Financial assets held for trading, at FVTPL: Collective investment scheme - foreign - 50,060, SHORT TERM DEPOSITS Short term deposits were held with licenced commercial banks in Malaysia, on a daily renewal basis at the prevailing interest rate. Weighted average interest rate Remaining maturity % % Days Days Short term deposits OTHER RECEIVABLES RM RM Interest income from short term deposits Amount due from brokers - 4,600, ,600,194 Kenanga China Access Fund Interim Report 28

34 10. NET ASSETS VALUE ATTRIBUTABLE TO UNITHOLDERS Net asset value attributed to unitholders is represented by: Note RM RM Unitholders contribution (a) 13,309,991 53,509,569 Retained earnings: Realised reserves 1,109,576 (72,562) Unrealised reserves - (1,148,094) 14,419,567 52,288,913 a. Unitholders contribution No. of units RM No. of units RM At beginning of the year 83,182,822 38,555,041 98,357,359 46,690,533 Distribution equalisation - (397,723) - - Add: Creation of units ,425,304 18,216,817 Less: Cancellation of units (52,646,769) (24,847,327) (25,721,177) (11,397,781) At end of the period 30,536,053 13,309, ,061,486 53,509,569 The number of units legally or benefi cially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 30 November 2013 were nil (2012: nil). 11. NET ASSET VALUE PER UNIT Net asset value attributable to unitholders is classifi ed as equity in the statement of fi nancial position. The net asset value per unit is calculated by dividing the net assets of RM 14,419,567 (2012: RM52,288,913) by the 30,536,053 units (2012: 114,061,486) units in issue as of 30 November DISTRIBUTION EQUALISATION 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. 29 Kenanga China Access Fund Interim Report

35 13. INCOME DISTRIBUTION No income distribution was declared by the Fund for the fi nancial period ended 30 November 2013 (2012: nil). 14. PORTFOLIO TURNOVER RATIO The portfolio turnover ratio ( PTR ) for the current fi nancial period is 0.75 times (2012: 0.24 times). PTR is the ratio of the average of the acquisitions and disposals of investments of the Fund for the period to the average net asset value of the Fund, calculated on a daily basis. 15. MANAGEMENT EXPENSES RATIO The management expense ratio ( MER ) for the current fi nancial period is 0.84%. (2012: 0.50%). MER is the ratio of total fees and recovered expenses of the Fund expressed as a percentage of the Fund s average net asset value, calculated on a daily basis. 16. SEGMENTAL REPORTING Business and Geographical Segment The Fund invest 100% in short term deposits located in Malaysia, the Fund does not have separate identifi able business and geographical segment. 17. 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. Kenanga China Access Fund Interim Report 30