KENANGA CASH PLUS FUND

Transcription

1 Kenanga Investors Berhad ( P) KENANGA CASH PLUS FUND (FORMERLY KNOWN AS ING CASH PLUS) ANNUAL REPORT For the Financial Year Ended 31 October 2013

2 KENANGA CASH PLUS FUND (FORMERLY KNOWN AS ING CASH PLUS) Contents Page Corporate Directory ii Directory of Manager s Offices iii Fund Information 1 Manager s Report 2-4 Fund Performance 5-7 Trustee s Report 8 Independent Auditor s Report 9-10 Statement by the Manager 11 Financial Statement 12-41

3 CORPORATE DIRECTORY Manager: Kenanga Investors Berhad (Company No P) Registered office Kenanga Investors Berhad (KIB) 8 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: 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 ii Kenanga Cash Plus Fund Annual Report Business Office Suite 12.02, 12 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: InvestorServices@kenanga.com.my Website: 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 ) 9th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: Trustee: CIMB Commerce Trustee Berhad (Company No A) Registered Office Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur. Tel: Fax: Website: Business Office Level 21, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur. Tel: Fax: 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) , 7th Floor, PNB Damansara, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur, Malaysia. Tel: Fax: Website:

4 DIRECTORY OF MANAGER S OFFICES REGIONAL BRANCH OFFICES: Kuala Lumpur Suite 12.02, 12th 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 Blok A, Aras 3, Wisma Perkeso No. 269, Jalan Burma George Town, Penang Tel: Fax: Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport 5 Jalan Bukit Meldrum Johor Bahru, Johor Tel: /4798 Fax: Kuching 1st Floor, No 71, Lot 7 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel: Fax: Kota Kinabalu A-03-11, 3rd 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: Agency Office Miri (Sarawak) c/o Lot 1084, 2nd Floor, Jalan Merpati Miri Sarawak, Malaysia Tel: Kenanga Cash Plus Fund Annual Report iii

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6 1. FUND INFORMATION 1.1 Fund Name Kenanga Cash Plus Fund (KCPF or the Fund) (Formerly known as ING Cash Plus) 1.2 Fund Type / Category Fixed Income / Income 1.3 Investment Objective The Fund aims to provide investors a regular stream of income through investments in short to medium-term fixed income instruments with high level of liquidity. 1.4 Investment Strategy To achieve the objective of the Fund, it will invest in high quality short to medium-term fixed income instruments with minimum credit ratings of A3 or P2 (by RAM) or equivalent rating by other recognized rating agencies. 1.5 Duration The Fund was launched on 26 October 2006 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unit holders for it to continue. 1.6 Performance Benchmark Maybank 1-Month Fixed Deposit Rate 1.7 Distribution Policy Income (if any) will be distributed monthly on a best effort basis. 1.8 Breakdown of unit holdings of KCPF as at 31 October 2013 Size of holdings No. of unitholders No. of units held 5,000 and below 4,164 1,965,744 5,001-10, ,096 10,001-50, ,413 50, , ,502, ,001 and above ,977,862 Total 4, ,414,834 Kenanga Cash Plus Fund Annual Report 1

7 2. MANAGER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective. During the period under review, the Fund fulfilled its investment objective, having invested primarily in short to medium-term investment-grade fixed income instruments and had made distributions to provide a regular stream of income to investors. 2.2 Comparison between the Fund s performance during period under review and performance of the benchmark Performance Chart Since Launch (26/10/ /10/2013) Kenanga Cash Plus Fund vs Maybank 1-Month Fixed Deposit Rate /26/ /31/2006 3/31/2007 6/30/2007 9/30/2007 % Growth, Cum, TR, ExD, MYR, Launch to 31/10/ /31/2007 3/31/2008 6/30/2008 9/30/ /31/2008 3/31/2009 6/30/2009 9/30/ /31/2009 3/31/2010 6/30/2010 Kenanga Cash Plus* : Maybank 1 Month Fixed Deposit Rate : /30/ /31/2010 3/31/2011 6/30/2011 9/30/ /31/2011 3/31/2012 6/30/2012 9/30/ /31/2012 3/31/2013 6/30/2013 9/30/2013 * Contains estimated data. Source: Lipper 2.3 Investment strategies and policies employed during the period under review For the period under review, the Fund invested primarily in bank deposits for liquidity and short to medium-term investment-grade bonds for yield enhancement. 2.4 The Fund s asset allocation (% of NAV) as at 31 October 2013 and comparison with the previous financial year Asset 31 Oct Oct 2012 Unquoted Investments 51.2% 57.8% Cash and Others 48.8% 42.2% Reason for the differences in asset allocation The change in asset allocation was primarily due to fund flows. Fund outflows towards end of the period under review resulted in lower exposure in corporate bonds. 2 Kenanga Cash Plus Fund Annual Report

8 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any) since last review period Period under review Kenanga Cash Plus Fund 2.83% Maybank 1-Month Fixed Deposit Rate 3.04% Source: Lipper The Fund underperformed its benchmark for the period under review mainly due to cash drag given investors short-term investment horizon indication and the provision for liquidity for the ad-hoc T+1 redemption requirement. While selective short-term corporate bonds had not performed very well towards end of the period under review, investment in short-term corporate bonds as well as commercial papers generally continued to provide enhancement to the fund return over long term. 2.6 Review of the market Money Market Review Bank Negara Malaysia (BNM) retained the Overnight Policy Rate (OPR) at 3.00% during period under review. The central bank views that the growth are still modest and inflation remained low at 1.7%. Over the same, the official Gross Domestic Product (GDP) forecast for Malaysia was revised lower to from 5-6% earlier, giving less impetus for material changes in its currently accommodative monetary policy. 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. Overall, deposit rates have remained steady despite bond yields being subjected to selling pressure. Bond yields, particularly on the longer end of the yield curve, have moved higher after first half of 2013 (1H2013) in anticipation of tapering of the US quantitative easing programme by this year or early Money Market Outlook The downgrade of Malaysia s credit outlook to negative from stable has prompted the Federal government to promptly address the country s deficit. Measures taken and expected to be taken in the future include subsidy rationalisations and Good & Services Tax (GST) implementation which will directly induce inflationary pressure. We expect inflation in 2014 to see a short term surge. Meanwhile Inflation target for this year is around 2.2%. Nevertheless BNM still considers the current stance of monetary policy to be appropriate and will continue to carefully assess the global economic and financial developments and their implications on the overall outlook for inflation and growth of the Malaysian economy. BNM is expected to keep its policy rate at 3% until end As the increase in inflation rate from September 2013 was policy-induced, the Central Bank will unlikely use demand management policy and raise interest rates to address it. Furthermore, Malaysia is still facing downside risk on economic growth emanating from fragile global economic recovery. The central bank is committed to maintain orderly market conditions and believes that Malaysia is in a strong position to weather volatility in currency and stock markets. Kenanga Cash Plus Fund Annual Report 3

9 2.7 Income Distribution For the financial year under review, the Fund has declared following income distribution: Distribution date Net (sen) CUM NAV Px Ex NAV Px 27/11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ Note: Past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. 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 Pursuant to the acquisition of ING Funds Berhad by Kenanga Investors Berhad on 19th 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 8th June 2013, Kenanga Investors Berhad has become the Management Company of the Fund 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 as 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, financial 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. 4 Kenanga Cash Plus Fund Annual Report

10 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga Cash Plus Fund ( the Fund ) as at 31 October for the last 3 financial years are as follows: a. Distribution among industry sectors and category of investments: FY FY FY % % % Unquoted Corporate Bonds Commercial Papers Collective Investment Scheme Unquoted Government Guaranteed Bonds 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 local fixed income securities/money market instruments only. Kenanga Cash Plus Fund Annual Report 5

11 3.2 Performance details of the Fund for the last 3 financial years ended 31 October are as follows: FY FY FY Net asset value (RM Million) * Units in circulation (Million) Net asset value price (RM/unit) * 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 financial year, computed based on net asset value per unit and net of all fees MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. 1 For details of income distribution, kindly refer to note 17 in manager s report 2 The lower PTR was due to more stable fund size during the period resulting in fewer rebalancing trades. * Based on bid price fair valuation method on all investments held by the Fund as at 31 October 2013, the NAV and price would be RM million and RM respectively. (As disclosed under note 15 of the financial statements) 6 Kenanga Cash Plus Fund Annual Report

12 3.3 Average total return of the Fund 1 Year 3 Years 5 Years 31 Oct Oct Oct Oct Oct Oct 13 Kenanga Cash Plus Fund 2.83% 3.01% 2.97% Maybank 1-month Fixed Deposit Rate 3.04% 3.08% 2.88% Source: Lipper 3.4 Annual total return of the Fund Period under review 1 Year 1 Year 1 Year 1 Year 31 Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct 09 Kenanga Cash Plus Fund 2.83% 2.99% 2.96% 2.31% 2.94% Maybank 1-month Fixed Deposit Rate 3.04% 3.05% 2.89% 2.35% 2.31% Source: Lipper Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. Kenanga Cash Plus Fund Annual Report 7

13 4. TRUSTEE S REPORT TO THE UNITHOLDERS OF KENANGA CASH PLUS FUND We, CIMB COMMERCE TRUSTEE BERHAD, being the Trustee of KENANGA CASH PLUS FUND ( the Fund ) (formerly known as ING Cash Plus) are of the opinion that KENANGA INVESTORS BERHAD ( the Manager ), acting in the capacity of Manager of the Fund, have fulfilled their duties in the following manner for the financial year ended 31 October 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. d) The distribution of returns by the Fund is tied to and reflects the investment objective of the Fund. For and on behalf of CIMB COMMERCE TRUSTEE BERHAD LEE KOOI YOKE Chief Operating Officer Kuala Lumpur, Malaysia 24 December Kenanga Cash Plus Fund Annual Report

14 5. INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA CASH PLUS FUND (FORMERLY KNOWN AS ING CASH PLUS) Report on the financial statements We have audited the financial statements of Kenanga Cash Plus Fund (formerly known as ING Cash Plus) ( the Fund ), which comprise the statement of financial position as at 31 October 2013 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 12 to 41. Manager s and Trustee s responsibility for the financial statements The Manager of the Fund is responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Kenanga Cash Plus Fund Annual Report 9

15 5. INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA CASH PLUS FUND (FORMERLY KNOWN AS ING CASH PLUS) (CONTD.) Opinion In our opinion, the financial statements have been properly 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 financial position of the Fund as at 31 October 2013 and of its financial performance, the changes in equity and the cash flows of the Fund for the financial year then ended. Other matters 1. As stated in Note 3 to the financial statements, the Fund adopted Malaysian Financial Reporting Standards on 1 November 2012 with a transition date of 1 November These standards were applied retrospectively by the Manager of the Fund to the comparative information in these financial statements, including the statements of financial position as at 31 October 2012 and 1 November 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended 31 October 2012 and related disclosures. We were not engaged to report on the comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Fund for the year ended 31 October 2013 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 November 2012 do not contain misstatements that materially affect the financial position as of 31 November 2013 and financial performance and cash flows for the year then ended. 2. This report is made solely to the unit holders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Gloria Goh Ewe Gim No. 1685/04/15(J) Chartered Accountant Kuala Lumpur, Malaysia 24 December Kenanga Cash Plus Fund Annual Report

16 6. STATEMENT BY THE MANAGER I, Abdul Razak Bin Ahmad, being the director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial position as at 31 October 2013 and the related statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year ended 31 October 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 financial position of Kenanga Cash Plus Fund (Formerly known as ING Cash Plus) as at 31 October 2013 and of its financial performance and cash flows for the year then ended and comply with the requirements of the Deed. For and on behalf of the Manager Kenanga Investors Berhad Abdul Razak Bin Ahmad Kuala Lumpur 24 December 2013 Kenanga Cash Plus Fund Annual Report 11

17 7. FINANCIAL STATEMENT 7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 OCTOBER 2013 Note RM RM INVESTMENT INCOME Interest income 4,608,767 5,236,173 Net gain from investments: - Financial assets at fair value through profit or loss ( FVTPL ) 695,881 1,377,898 5,304,648 6,614,071 EXPENSES Manager s fee 4 772, ,810 Trustee s fee 5 108, ,364 Auditors remuneration 6,016 6,000 Tax agent s fee 2,262 2,300 Administration 73,237 82, ,673 1,151,460 NET INCOME BEFORE TAX 4,342,975 5,462,611 Income tax expense NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 4,342,975 5,462,611 Total comprehensive income is made up as follows: Realised gain 4,405,523 5,394,803 Unrealized (loss)/gain (62,548) 67,808 4,342,975 5,462,611 Distribution for the year: Net distribution 17 4,434,954 5,290,279 Net distribution per unit (sen) Gross distribution per unit (sen) The accompanying notes form an integral part of the financial statements. 12 Kenanga Cash Plus Fund Annual Report

18 7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2013 Note RM RM RM INVESTMENTS Investments 7 60,973,246 92,580, ,338,854 Short term deposits 12 58,190,373 67,747,174 84,357, ,163, ,328, ,695,973 OTHER ASSETS Other receivables 13 22,960 68, ,898 Cash at bank 11,453 6,200 4,469 34,413 74, ,367 TOTAL ASSETS 119,198, ,402, ,810,340 LIABILITIES Amount due to Manager 53,036 67,357 85,011 Amount due to Trustee 7,425 9,996 11,998 Other payables 26,500 26,100 19,400 Distribution payable ,419 TOTAL LIABILITIES 86, , ,828 Unitholder s contribution 118,379, ,475, ,012,736 Retained earnings 731, , ,776 NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS ,111, ,298, ,663,512 TOTAL EQUITY AND LIABILITIES 119,198, ,402, ,810,340 NUMBER OF UNITS IN CIRCULATION 14(a) 119,414, ,588, ,105,882 NET ASSET VALUE PER UNIT EX DISTRIBUTION (RM) The accompanying notes form an integral part of the financial statements. Kenanga Cash Plus Fund Annual Report 13

19 7.3 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 OCTOBER 2013 Note Unitholders contribution Retained earnings Total equity RM RM RM At beginning of the year 159,475, , ,298,820 Total comprehensive income - 4,342,975 4,342,975 Creation of units 14(a) 259,598, ,598,044 Cancellation of units 14(a) (300,681,909) - (300,681,909) Distribution equalisation 14(a) (11,905) - (11,905) Income distribution 17 - (4,434,954) (4,434,954) At end of the year 118,379, , ,111, At beginning of the year 193,012, , ,663,512 Total comprehensive income - 5,462,611 5,462,611 Creation of units 14(a) 281,312, ,312,277 Cancellation of units 14(a) (314,787,474) - (314,787,474) Distribution equalisation 14(a) (61,826) - (61,826) Income distribution 17 - (5,290,280) (5,290,280) At end of the year 159,475, , ,298,820 The accompanying notes form an integral part of the financial statements. 14 Kenanga Cash Plus Fund Annual Report

20 7.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 OCTOBER RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 288,857, ,026,632 Purchase of investments (256,619,230) (389,644,412) Profit received 4,720,155 5,030,979 Manager s fee paid (786,387) (949,513) Trustee s fee paid (110,662) (132,366) Auditors remuneration paid (6,000) (4,000) Tax agent s fee paid (4,862) - Payment for other fees and expenses (70,252) (80,586) Rebate from management fee - 2,049 Net cash generated from operating and investing activities 35,979,901 22,248,783 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 255,475, ,591,250 Cash paid on units cancelled (300,997,056) (315,184,420) Income distribution paid (9,417) (263,827) Net cash used in financing activities (45,531,449) (38,856,997) NET DECREASE IN CASH AND CASH EQUIVALENTS (9,551,548) (16,608,214) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 67,753,374 84,361,588 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 58,201,826 67,753,374 Cash and cash equivalents comprise: Cash at bank 11,453 6,200 Short term deposits 58,190,373 67,747,174 58,201,826 67,753,374 The accompanying notes form an integral part of the financial statements. Kenanga Cash Plus Fund Annual Report 15

21 7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 OCTOBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Cash Plus Fund (formerly known as ING Cash Plus) (herein after referred to as The Fund ) was constituted pursuant to the executed Deed dated 29 August 2006 between ING Funds Berhad (currently known as Kenanga Funds Berhad) and CIMB Commerce Trustee Berhad as the Trustee. The Fund commenced operations on 26 October 2006 and will continue to be in operation until terminated by the Trustee as provided under Clause 38 of the Deed. Pursuant to the executed 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 Cash Plus to Kenanga Cash Plus Fund. The principal activity of the Fund is to provide investors with a regular income stream through investments in short term fixed bonds and money market instruments. To achieve the objective of the Fund, it will invest primarily in high quality short to medium term fixed income instruments with minimum credit rating of A3 or P2 (by RAM or MARC equivalent). 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks including market risk (which includes profit rate risk and price risk), credit risk and liquidity risk. Whilst these are the most important types of financial risks inherent in each type of financial instruments, the Manager and the Trustee would like to highlight that this list does not purport to 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 unitholders, consistent with the long term objectives of the Fund. a. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes profit rate risk and price risk. Market risk arises when the value of the quoted investments fluctuate in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are economy-wide perils, which threaten all businesses. Hence, investors are, exposed to market uncertainties. Fluctuation in the investments prices caused by uncertainties in the economic, political and social environment will affect the 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 profiles. 16 Kenanga Cash Plus Fund Annual Report

22 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Profit rate risk The Fund is not exposed to significant profit rate risk as its placements with financial institutions are for periods less than a month. Profit rate risk sensitivity The following table demonstrates the sensitivity of the Fund s profit for the year to a reasonably possible change in rate of return, with all other variables held constant. Changes in rate Basis points Increase/(decrease) Effect on profit for the year Increase/(decrease) RM Effect on changes in fair value of financial assets Increase/(decrease) /(5) 59,582/( 59,582) 30,487/( 30,487) /(5) 80,164/(80,164) 46,290/(46,290) RM Profit rate risk exposure The following table analyses the Fund s profit rate risk exposure. The Fund s assets and liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Above Above Nonexposure to profit Weighted average effective Up to 1 year 5 years rate interest 1 year 5 years 15 years movement Total rate* RM RM RM RM RM % Assets Unquoted corporate bonds 16,535,191 33,928, ,463, Unquoted government guaranteed bonds - 509, , Commercial papers 10,000, ,000,000 - Short term deposits 58,190, ,190, Other assets ,413 34,413 84,725,564 34,438,055-34, ,198,032 Kenanga Cash Plus Fund Annual Report 17

23 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Profit rate risk (Contd.) Profit rate risk exposure (Contd.) Nonexposure to profit rate Weighted average effective interest rate* Above Above Up to 1 year 5 years 1 year 5 years 15 years movement Total RM RM RM RM RM % Liabilities Other liabilities ,961 86, ,961 86,961 Total interest sensitivity gap 84,725,564 34,438,055 - (52,548) 119,111, Assets Unquoted corporate bonds 30,593,041 22,098, ,691, Commercial papers 39,889, ,889,492 - Short term deposits 67,747, ,747, Other assets ,881 74, ,299,707 22,098,409-74, ,402,997 Liabilities Other liabilities , , , ,177 Total interest sensitivity gap 138,299,707 22,098,409 - (29,296) 160,298,820 b. Credit Risk * Computed based on profit-bearing assets only. Credit risk is the risk that the counterparty to a financial instrument will cause a financial 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 financial assets recognised in the statement of financial position. 18 Kenanga Cash Plus Fund Annual Report

24 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk (Contd.) 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 assets The Fund invests only in unquoted corporate bonds, unquoted government guaranteed bonds, commercial papers and collective investment scheme with at least investment grade credit rating by a credit rating agency. The following table analyses the Fund s portfolio of unquoted corporate bonds, unquoted government guaranteed bonds, commercial papers and collective investment scheme by rating category: Investments Percentage of total investments Percentage of NAV % % % % Rating AA AA AA P AA A AA NR A 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 AAA AA A Kenanga Cash Plus Fund Annual Report 19

25 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk (Contd.) iv. Credit risk concentration Concentration risk is monitored and managed based on sectorial distribution. The table below analyses the Fund s portfolio of unquoted corporate bonds, unquoted government guaranteed bonds, commercial papers and collective investment scheme by sectorial distribution: Percentage of total investments Percentage of NAV % % % % Banking and Finance Energy Infrastructure Plantation Construction & Engineering c. Liquidity Risk Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its 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 financial institutions and other instruments, which are capable of being converted into cash within 7 days. The following table analyses the maturity profile of the Fund s financial assets (undiscounted where appropriate) and financial liabilities in order to provide a complete view of the Fund s contractual commitments and liquidity. 20 Kenanga Cash Plus Fund Annual Report

26 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) Up to 1 year Above 1 year 5 years Above 5 years 15 years Total RM RM RM RM Assets Investments 26,535,191 34,438,055-60,973,246 Short term deposits 58,190, ,190,373 Other assets 34, ,413 84,759,977 34,438, ,198,032 Liabilities Other liabilities 86, ,961 86, ,961 Net asset value 84,673,016 34,438, ,111,071 Liquidity gap (34,438,055) 34,438, Assets Investments 70,482,533 22,098,409-92,580,942 Short term deposits 67,747, ,747,174 Other assets 74, , ,304,588 22,098, ,402,997 Liabilities Other liabilities 104, , , ,177 Net asset value 138,200,411 22,098, ,298,820 Liquidity gap (22,098,409) 22,098, Kenanga Cash Plus Fund Annual Report 21

27 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accounting The financial 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 financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. b. First-time Adoption of MFRS This is the Fund s first set of financial statements prepared in accordance with MFRS. For the periods up to and including the financial period ended 31 October 2012, the financial statements of the Fund were prepared in accordance with Financial Reporting Standards ( FRS ) in Malaysia. The accounting policies set out have been applied in preparing the financial statements of the Fund for the financial year ended 31 October 2013 and the comparative information presented in these financial statements for the financial year ended 31 October 2012 and in the preparation of the opening statement of financial position at 1 November 2011 (which is the Fund s date of transition to MFRS). The transition to MFRS did not give rise to any significant effects on the financial statements of the Fund. c. Standard and Interpretations Issued But Not Yet Effective As at the date of authorisation of these financial 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 financial periods beginning on or after 1 January 2013 MFRS 10 MFRS 11 MFRS 12 MFRS 13 MFRS 119 MFRS 127 MFRS 128 Amendments to MFRS 1 Amendments to MFRS 1 Amendments to MFRS 7 Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Employee Benefits (revised) Consolidated and Separate Financial Statements (revised) Investments in Associates and Joint Ventures (revised) First-time Adoption of MFRS - Government Loans First-time Adoption of MFRS (Annual Improvement ( cycle) Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities 22 Kenanga Cash Plus Fund Annual Report

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) c. Standard and Interpretations Issued But Not Yet Effective (Contd.) Effective for financial periods beginning on or after 1 January 2013 (Contd.) Amendments to MFRS 10 Amendments to MFRS 11 Amendments to MFRS 12 Amendments to MFRS 101 Amendments to MFRS 116 Amendments to MFRS 132 Amendments to MFRS 134 Consolidated Financial Statements: Transition Guidance Joint Arrangements: Transition Guidance Disclosure of Interests in Other Entities: Transition Guidance Presentation of Financial Statements (Annual improvement cycle) Property, Plant and Equipment (Annual Improvements cycle) Financial Instruments: Presentation (Annual improvements cycle) Interim Financial Reporting (Annual Improvements cycle) Effective for financial periods beginning on or after 1 January 2014 Amendments to MFRS 132 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities Effective for financial periods beginning on or after 1 January 2015 MFRS 9 Amendments to MFRS 7 Financial Instruments Financial Instruments: Disclosures - Mandatory Date of MFRS 9 and Transition Disclosures The Fund will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any significant impact to the financial statements of the Fund upon their initial application except as described below: i. MFRS 9 - Financial instruments MFRS 9, as issued, reflects the first phase of the IASB s work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement ( MFRS 139 ) and applies to classification and measurement of financial assets and financial liabilities as defined 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 financial assets. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Fund s financial assets but will not have an impact on the classification and measurement of financial liabilities. The Fund will quantify the effect in conjunction with the other phases when the final standard including all phases is issued. Kenanga Cash Plus Fund Annual Report 23

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) c. Standard and Interpretations Issued But Not Yet Effective (Contd.) 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 financial position and performance of the Fund but based on preliminary analyses, no material impact is expected. d. Financial Assets Financial assets are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition, which are receivables. i. Financial assets at FVTPL Financial assets are classified as financial assets at FVTPL if they are held for trading or are designed as such upon initial recognition. Financial assets held for trading include unquoted corporate bonds, unquoted government guaranteed bonds, commercial papers and collective investment scheme acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in profit or loss. Interest earned and dividend revenue elements of such instruments are recorded separately in interest income and dividend income respectively. ii. Receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process. A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. 24 Kenanga Cash Plus Fund Annual Report

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) e. Impairment of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective rate of return. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. f. Income Interest income is recognised to the extent that it is probable that the economic benefits will flow 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 rate method. Dividend income is recognized on a declared basis, when the right to receive the dividend is established. g. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term deposits with financial institutions. h. Income Tax Expenses Income tax on the profit or loss for the year comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year. i. Unrealise 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 in nature. Kenanga Cash Plus Fund Annual Report 25

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) j. Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities within the scope of MFRS 139 are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund s financial liabilities are classified as other financial liabilities. The Fund s financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective rate method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. k. Unitholders Capital NAV Attributable to Unitholders The unitholders contribution to the Fund is classified as equity instruments. l. Functional and Presentation Currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the functional currency ). The financial statements are presented in Ringgit Malaysia ( RM ), which is also the Fund s functional currency. m. Distribution Distributions are at the discretion of the Fund. A distribution to the Fund s Unit Holders is accounted for as a deduction from retained earnings. n. Significant Accounting Judgments and Estimates The preparation of financial 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 significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 26 Kenanga Cash Plus Fund Annual Report

32 4. MANAGER S FEE The Manager s fee is computed based on 0.50% per annum of the net asset value of the Fund, calculated on a daily basis, as provided under Clause 13(2) of the Deed. 5. TRUSTEE S FEE The trustee s fee is computed on a daily basis at 0.07% per annum of the net asset value of the Fund, as provided under Clause 13(8) and subject to a minimum fee of RM18,000 per annum as provided under Clause 13(7) of the Deed. 6. INCOME TAX EXPENSE Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial year. 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: RM RM Net income before tax 4,342,975 5,462,611 Tax at Malaysian statutory tax rate of 25% (2012: 25%) 1,085,744 1,365,653 Income not subject to tax (1,326,162) (1,653,518) Expenses not deductible for tax purposes (under Section 63B of the Income Tax Act, 1967) 240, ,865 Tax expense for the year INVESTMENTS Note RM RM RM Financial assets held for trading, at FVTPL: Unquoted corporate bonds 8 50,463,622 52,691,450 54,357,858 Unquoted government guaranteed bonds 9 509, Commercial paper 10 10,000,000 39,889,492 54,570,561 Collective investment scheme ,435 60,973,246 92,580, ,338,854 Kenanga Cash Plus Fund Annual Report 27

33 7. INVESTMENTS (CONTD.) Note RM RM Total gain on financial assets at FVTPL from: Unquoted corporate bonds 8 (468,671) (457,108) Unquoted government guaranteed bonds Commercial paper 10 1,164,078 1,829,129 Collective investment scheme 11-5, ,881 1,377, UNQUOTED CORPORATE BONDS RM RM RM Financial assets held for trading, at FVTPL: Unquoted corporate bonds 50,463,622 52,691,450 54,357,858 Net loss on financial assets at FVTPL comprised: Realised loss on disposals (403,948) (565,078) Unrealised changes in fair values (64,723) 107,970 (468,671) (457,108) Details of unquoted corporate bonds as at 31 October 2013: Nominal Carrying Fair Percentage value Cost amount value of NAV RM RM RM RM % Corporate Bonds - Premium Jati Cakerawala Sdn Berhad maturing on 29/01/ ,000,000 10,042,000 10,142,730 10,102, Weststar Capital Sdn Berhad maturing on 29/11/ ,000,000 10,010,000 10,172,270 10,173, Hong Leong Bank Berhad maturing on 27/02/2019 5,250,000 5,413,275 5,335,927 5,335, Hong Leong Bank Berhad maturing on 02/12/2019 5,000,000 5,213,500 5,215,247 5,209, Kenanga Cash Plus Fund Annual Report