KENANGA BLUE CHIP FUND INTERIM REPORT

Transcription

1 KENANGA BLUE CHIP FUND INTERIM REPORT For the Financial Period from 1 October 2016 to 31 March 2017

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3 KENANGA BLUE CHIP FUND 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 11-35

4 CORPORATE DIRECTORY MANAGER: KENANGA INVESTORS BERHAD (Company No P) REGISTERED OFFICE BUSINESS OFFICE Level 17, Kenanga Tower Level 14, Kenanga Tower 237, Jalan Tun Razak 237, Jalan Tun Razak Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Tel: Tel: Fax: Tel: Website: BOARD OF DIRECTORS Datuk Syed Ahmad Alwee Alsree (Chairman) Syed Zafi len Syed Alwee (Independent Director) Peter John Rayner (Independent Director) Imran Devindran bin Abdullah (Independent Director) Dato Bruce Kho Yaw Huat Ismitz Matthew De Alwis INVESTMENT COMMITTEE Dato Bruce Kho Yaw Huat (Chairman) Syed Zafi len Syed Alwee (Independent Member) Peter John Rayner (Independent Member) Imran Devindran bin Abdullah (Independent Member) Ismitz Matthew De Alwis COMPANY SECRETARY: NORLIZA ABD SAMAD (MAICSA ) Level 17, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia TRUSTEE: CIMB COMMERCE TRUSTEE BERHAD (COMPANY NO A) REGISTERED OFFICE BUSINESS OFFICE Level 13, Menara CIMB Level 21, Menara CIMB Jalan Stesen Sentral 2 Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur Sentral Kuala Lumpur Kuala Lumpur Tel: Tel: Fax: Fax: Website: AUDITOR: ERNST & YOUNG (AF: 0039) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: TAX ADVISER: ERNST & YOUNG TAX CONSULTANTS SDN BHD (Company No K) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: MEMBERSHIP: FEDERATION OF INVESTMENT MANAGERS MALAYSIA (FIMM) , 6 th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur, Malaysia. Tel: Fax: Website: ii Kenanga Blue Chip Fund Interim Report

5 DIRECTORY OF MANAGER S OFFICES REGIONAL BRANCH OFFICES: Kuala Lumpur Level 13, Kenanga Tower 237, Jalan Tun Razak Kuala Lumpur, Malaysia Tel : Fax : Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen Melaka Tel : / Fax : Klang No. 12, Jalan Batai Laut 3 Taman Intan, Klang Selangor Darul Ehsan Tel : / Fax : Penang 5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah Penang Tel : Fax : Miri 2nd Floor, Lot 1264 Centre Point Commercial Centre Jalan Melayu Miri, Sarawak Tel : Fax : Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum Johor Bahru, Johor Tel : / 4798 Fax : Kuching 1st Floor, No 71 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel : Fax : Kuantan No. B8, Ground Floor Jalan Tun Ismail Kuantan Pahang Tel : Fax : Ipoh Suite 1, 2nd Floor, No. 63, Persiaran Greenhill Ipoh, Perak, Malaysia Tel : / 7570 / 7575 Fax : Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel : / Fax : Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir Seremban, Negeri Sembilan Tel : Fax : Kenanga Blue Chip Fund Interim Report iii

6 1. FUND INFORMATION 1.1 Fund Name Kenanga Blue Chip Fund (KBCF or the Fund) 1.2 Fund Category / Type Equity / Income & Growth 1.3 Investment Objective The Fund aims to achieve long-term capital growth through investments in companies that have relatively larger market capitalisation. 1.4 Investment Strategy The Fund will construct a diversifi ed investment portfolio that consists of fundamentally sound companies that have large market capitalization and are dividends paying. The Fund may invest up to 98% of its Net Asset Value (NAV) in such companies. These companies are generally referred to as blue chip companies. 1.5 Duration The Fund was launched on 23 April 2004 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. 1.6 Performance Benchmark FTSE-Bursa Malaysia 100 Index (FBM 100) 1.7 Distribution Policy Income (if any) will be distributed annually on a best effort basis. 1.8 Breakdown of unit holdings of KBCF as at 31 March 2017 Size of holdings No. of members No. of units held 5,000 and below 915 2,147,064 5,001-10, ,770,492 10,001-50, ,195,100 50, , ,955, ,001 and above 1 4,728,407 Total 1,944 28,796,333 1 Kenanga Blue Chip Fund Interim Report

7 2. MANAGER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective. Since inception date, the Fund has appreciated by % in Net Asset Value terms, ahead of its benchmark increase of %. Thus the fund has achieved its objective of providing long term capital growth through investments in companies with larger market capitalisation. 2.2 Comparison between the Fund s performance and performance of the benchmark Performance Chart Since Launch (23/04/ /3/2017) Kenanga Blue Chip Fund vs FTSE Bursa Malaysia 100 Index Source: Lipper 2.3 Investment strategies and policies employed during the financial period review The Fund s main strategy involved investing in a dynamic mix of value and growth large cap stocks with reasonable valuation and consistent dividend payment. 2.4 The Fund s asset allocation as at 31 March 2017 and comparison with the previous financial period Asset 31 Mar Mar 2016 Listed investment securities 79.4% 73.5% Short term deposits and cash 20.6% 26.5% Reason for the differences in asset allocation As at end of 31 March 2017, the Fund s equity exposure was 79.4%. The equities exposure for the fi nancial period under review was higher as the Fund deployed cash for purchase of growth stocks. Kenanga Blue Chip Fund Interim Report 2

8 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution) since last review period Period under review Kenanga Blue Chip Fund 3.03% FTSE-Bursa Malaysia 100 Index 5.44% Source: Lipper The Fund registered a return of 3.03%, underperforming the benchmark FTSE Bursa Malaysia 100 Index return of 5.44%. The Fund s underperformance compared to the benchmark was mainly attributed to its stock selection and asset allocation. 2.6 Review of the market Market Review The period (October 2016 to March 2017) under review was a volatile period for the domestic equity market. The KLCI Index started October 2016 at points, plunged to the low of points in mid-november 2016 after Trump won the US Presidential election. The KLCI Index however made a swift recovery in the first quarter of 2017 and rose all the way to close at points as of end March There were no major surprises from the 2017 budget unveiled by the government in October The government projects higher GDP growth of 4%-5% in 2017 vs 4%- 4.5% in Stronger growth will be supported resilient domestic demand and exports recovery attributed to higher commodities price. Meanwhile, 2017 fiscal deficit is expected to narrow to 3.0% from 3.1% in Prime Minister Najib visited China in November 2016 and signed 14 MOUs worth RM144 billion. The key Chinese FDI from the visit is the RM55 billion East Coast Railway Link. The project will be on a fast-track basis where ground breaking is expected in Markets were caught off-guard by Donald Trump s victory in the US Presidential election. Asian markets were the first to react with a sharp-sell down as investors flocked towards safe havens such as bonds, gold and Japanese Yen. The dollar surged against Asian currencies as interest rate hike expectations jumped and markets continue to focus on Trump s pro-growth and inflationary economic policies. Ringgit fell to the low MYR on 18 November. To prevent further weakening of the MYR, Bank Negara curtailed activity on the non-deliverable forward (NDF) market for currency-hedging traders. Bank Negara later also introduced new forex rule where exporters are required to convert 75% of export proceeds into Ringgit. As expected, the Federal Reserve hiked rate by 25bps in the December 2016 FOMC meeting. Given the stronger underlying growth of the US economy, the Fed also raised interest rate expectations by guiding hikes in 2017 (vs previous expectation of 2 hikes). 3 Kenanga Blue Chip Fund Interim Report

9 2.6 Review of the market (Contd.) Market Review (Contd.) Global equity markets enjoyed a strong rally in first quarter of Global growth is on a stronger footing. While the developed markets had steady growth, emerging markets growth are lifted by rising commodity prices thanks to production discipline. The KLCI Index rose 6% to points in the first three months of year also saw more exciting news in the corporate front, led by PNB related companies including demerger of UMW Holdings from its oil & gas business and the proposed splitting of Sime Darby into 3 separate entities for its plantations, property and industrial divisions. In a widely expected move, the Federal Reserve increased interest rate by another 25bps in March The Fed statement was less hawkish and more neutral, still pointing towards gradual rate hike pace with two more hikes in Meanwhile, both ECB and BOJ kept monetary policy unchanged. Most Asian currencies rose against US dollar following Fed s less hawkish tone. The Ringgit rose 1.7% against US dollar in first quarter of Foreigners remain net seller of domestic equities for the third consecutive year in 2016 with an outflow of RM3.1 billion, bringing net outflow for the past 3 years to about RM30 billion. Foreigners however returned to the domestic market with net buying of RM5.7 billion for the first quarter of On the commodity space, crude oil made a come-back in year 2016 (+52% yoy). For the first time in eight years, OPEC agreed to cut oil production in December 2016 to reduce supply glut. Benchmark oil prices rose by 10% following deal strike and currencies of large exporters boosted alongside share prices of energy companies. Brent crude oil price ended year 2016 at $56.82/barrel and stayed above $50/barrel for the first three months of CPO also enjoyed a good year in 2016 (+25% yoy), surging to the high of RM3185/ ton in December 2016 from the low of RM2188/ton in July The rise of CPO price was in tandem with the lower production due to El-Nino weather impact. CPO price however has corrected to RM2646/ton as of end March 2017 on the expectation of production recovery in Market Outlook We have a positive outlook on the domestic equity market after 3 years of underperformance. The re-rating catalysts include: a) Stronger 2017 GDP growth to be underpinned by better oil and CPO price, sustained infrastructure spending and rising China FDI; b) Corporate earnings growth in 2017/18 expected at 7.6%/5.9% respectively after 3 years of earnings contraction; c) GLC (Government Linked Companies) reforms for PNB related and other companies for better value creation. d) Low foreign ownership after 3 years of foreign selling amounted to about RM30bil. Foreign holding of KLCI is only 22%, which is close to 2008 crisis trough of about 20%. e) Expectation of early general election in Historically markets rallied a few months before general election. Kenanga Blue Chip Fund Interim Report 4

10 2.6 Review of the market (Contd.) Market Outlook (Contd.) There are however uncertainties from the external front, especially from the US and Europe which may influence global markets direction. Donald Trump s victory has triggered a riskon risk-off trading approach among investors as his America First agenda has increased the level of uneasiness among trading nations on his potentially anti-trade approach. Other external risks include various elections in the EU countries which may see the rise of populism and protectionism and a slowdown in China s growth. Strategy We remain steadfast to our bottom up stock picking strategy favouring growth-oriented companies which should continue to outperform the general market. We continue to like consumer, construction and utility sectors. The award of various construction projects including Pan-Borneo, MRT2, LRT3, East Coast Railway Link will continue to drive construction spending. 2.7 Income Distribution For the financial period under review, the Fund did not declare any income distribution. 2.8 Details of any unit split exercise The Fund did not carry out any unit split exercise during the financial period under review. 2.9 Significant changes in the state of affair of the Fund during the financial period There were no significant changes in the state of affair of the Fund during the financial period and up until the date of the manager s report, not otherwise disclosed in the financial statements Circumstances that materially affect any interests of the unitholders During the financial period under review, there were no circumstances that materially affected any interests of the unitholders 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 financial period under review, the Manager has received soft commissions from stockbrokers. 5 Kenanga Blue Chip Fund Interim Report

11 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga Blue Chip Fund ( the Fund ) for the financial period as at 31 March 2017 against last 3 financial years as at 30 September are as follow: a. Distribution among industry sectors and category of investments: As at FY FY FY % % % % Trading/Services Finance Constructions Properties Industrial products Consumer products Infrastructure Plantations Real Estate Investment Trusts Short term deposits and cash Note: The above mentioned percentages are based on total investment market value plus cash. b. Distribution among markets The Fund invests in local listed investment securities and short term deposits and cash only. Kenanga Blue Chip Fund Interim Report 6

12 3.2 Performance details of the Fund for the financial period ended 31 March 2017 against last 3 financial years ended 30 September are as follows: Period from to FY FY FY Net asset value ( NAV ) (RM Million) Units in circulation (Million) NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income growth (%) Gross distribution per unit (sen) Net distribution per unit (sen) Management expense ratio ( MER ) (%) Portfolio turnover ratio ( PTR ) (times) Note: Total return is the actual return of the Fund for the respective fi nancial period/years, computed based on NAV per unit and net of all fees. MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. Above NAV and NAV per unit are not shown as ex-distribution as there were no distribution declared by the Fund in the fi nancial period under review. 1 MER is lower against previous fi nancial year mainly due to lower recovered expenses incurred during the fi nancial period under review. 2 PTR is slightly higher on a half-year basis against previous fi nancial year mainly due to increased trading activities and a higher equity exposure. * Based on bid price fair valuation method on all investments held by the Fund as at 31 March 2017, the NAV and NAV per unit would be RM20.22 million and RM respectively. (As disclosed under Note 12 of the fi nancial statements) 7 Kenanga Blue Chip Fund Interim Report

13 3.3 Average total return of the Fund 1 Year 3 Years 5 Years 31 Mar Mar Mar Mar Mar Mar 17 Kenanga Blue Chip Fund 3.40% -0.36% 2.60% FTSE-Bursa Malaysia 100 Index 3.34% -1.21% 2.35% Source: Lipper 3.4 Annual total return of the Fund Period under review 1 Year 1 Year 1 Year 1 Year 1 Year 30 Sep Sep Sep Sep Sep Sep Jan Sep Sep Sep Sep Sep 12 Kenanga Blue Chip Fund 3.03% 5.47% % 7.05% 12.67% 13.40% FTSE-Bursa Malaysia 100 Index 5.44% 4.27% % 3.98% 9.86% 18.31% Source: Lipper Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. Kenanga Blue Chip Fund Interim Report 8

14 4 TRUSTEE S REPORT TO THE UNITHOLDERS OF KENANGA BLUE CHIP FUND We, CIMB Commerce Trustee Berhad ( the Trustee ), being the Trustee of Kenanga Blue Chip Fund ( the Fund ), are of the opinion that Kenanga Investors Berhad ( the Manager ), acting in the capacity of Manager of the Fund, has fulfi lled its duties in the following manner for the financial period from 1 October 2016 to 31 March a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the management company under the Deed, the Securities Commission Malaysia s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws; b) Valuation and pricing 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 29 May Kenanga Blue Chip Fund Interim Report

15 5. STATEMENT BY THE MANAGER I, Ismitz Matthew De Alwis, being a director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of fi nancial position as at 31 March 2017 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows for the fi nancial period from 1 October 2016 to 31 March 2017 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the fi nancial position of Kenanga Blue Chip Fund as at 31 March 2017 and of its fi nancial performance and cash fl ows for the fi nancial period from1 October 2016 to 31 March 2017 and comply with the requirements of the Deed. For and on behalf of the Manager Kenanga Investors Berhad Ismitz Matthew De Alwis Executive Director/Chief Executive Offi cer Kuala Lumpur, Malaysia 29 May 2017 Kenanga Blue Chip Fund Interim Report 10

16 6. FINANCIAL STATEMENT 6.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2016 TO 31 MARCH 2017 (unaudited) Note to to RM RM INVESTMENT INCOME Interest income 56,553 63,171 Dividend income 226, ,636 Net gain from investments: - Financial assets at fair value through profi t or loss ( FVTPL ) 4 482, , ,578 1,103,487 EXPENSES Manager s fee 5 154, ,025 Trustee s fee 6 6,998 6,414 Auditors remuneration 4,250 4,250 Tax agent s fee 2,000 2,000 Administration expenses 16,926 20, , ,208 NET INCOME BEFORE TAX Income tax 7 580, ,279 NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 580, ,279 Net income after tax is made up as follows: Realised gain/(loss) 50,342 (384,018) Unrealised gain 4 530,096 1,312, , ,279 The accompanying notes form an integral part of the financial statements. 11 Kenanga Blue Chip Fund Interim Report

17 6.2 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017 (unaudited) Note RM RM INVESTMENTS Financial assets at FVTPL 4 15,940,409 16,257,473 Short term deposits 8 4,143,000 5,861,935 20,083,409 22,119,408 OTHER ASSETS Other receivables 9 485, ,557 Tax recoverable 96, ,391 Cash at bank 6,625 10, , ,325 TOTAL ASSETS 20,672,347 22,795,733 LIABILITIES Amount due to Manager 10,357 30,672 Amount due to Trustee 1,203 1,199 Other payables , ,422 TOTAL LIABILITIES 453, ,293 EQUITY Unitholders contribution 13,214,398 16,092,192 Retained earnings 7,003,958 6,323,248 NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNITHOLDERS 11 20,218,356 22,415,440 TOTAL EQUITY AND LIABILITIES 20,672,347 22,795,733 NUMBER OF UNITS IN CIRCULATION 11(a) 28,796,333 33,022,902 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the financial statements. Kenanga Blue Chip Fund Interim Report 12

18 6.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2016 TO 31 MARCH 2017 (unaudited) Unitholders Retained Total Note contribution earnings NAV RM RM RM to At beginning of the fi nancial period 14,252,025 6,423,520 20,675,545 Total comprehensive income - 580, ,438 Creation of units 11(a) 211, ,783 Cancellation of units 11(a) (1,248,221) - (1,248,221) Distribution equalisation 11(a) (1,189) - (1,189) At end of the fi nancial period 13,214,398 7,003,958 20,218, to At beginning of the fi nancial period 11,850,697 5,394,969 17,245,666 Total comprehensive income - 928, ,279 Creation of units 11(a) 6,596,493-6,596,493 Cancellation of units 11(a) (2,354,573) - (2,354,573) Distribution equalisation 11(a) (425) - (425) At end of the fi nancial period 16,092,192 6,323,248 22,415,440 The accompanying notes form an integral part of the financial statements. 13 Kenanga Blue Chip Fund Interim Report

19 6.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2016 TO 31 MARCH 2017 (unaudited) CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES to to RM RM Proceeds from sale of fi nancial assets at FVTPL 9,384,837 6,100,989 Dividends received 290, ,961 Interest from deposits received 56,492 62,847 Trustee s fee paid (7,040) (6,202) Auditors remuneration paid (8,500) (8,500) Payment for other fees and expenses (26,423) (20,270) Manager s fee paid (154,988) (137,340) Purchase of fi nancial assets at FVTPL (6,907,683) (7,084,759) Cash generated from/(used in) operating and investing activities 2,626,729 (830,274) Income tax refunded 8,914 - Net cash generated from/(used in) operating and investing activities 2,635,643 (830,274) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 192,775 6,768,474 Cash paid on units cancelled (1,344,429) (2,350,873) Net cash (used in)/generated from fi nancing activities (1,151,654) 4,417,601 NET INCREASE IN CASH AND CASH EQUIVALENTS 1,483,989 3,587,327 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD 2,665,636 2,284,985 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 4,149,625 5,872,312 Cash and cash equivalents comprise: Cash at bank 6,625 10,377 Short term deposits 4,143,000 5,861,935 4,149,625 5,872,312 The accompanying notes form an integral part of the financial statements. Kenanga Blue Chip Fund Interim Report 14

20 6.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2016 TO 31 MARCH THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Blue Chip Fund ( the Fund ) was constituted pursuant to the executed Deed dated 16 April 2004 (collectively, together with deeds supplemental thereto, referred to as the Deed ) between the Manager, Kenanga Funds Berhad, and CIMB Commerce Trustee Berhad ( the Trustee ). The Fund commenced operations on 23 April 2004 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 Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad. Prior to 1 November 2016, Kenanga Investment Bank Berhad was a whollyowned subsidiary of K & N Kenanga Holdings Berhad that was listed on the Main Market of Bursa Malaysia Securities Berhad. Pursuant to an internal reorganisation exercise completed on 1 November 2016, Kenanga Investment Bank Berhad has become the holding company of K & N Kenanga Holdings Berhad. On 2 November 2016, Kenanga Investment Bank Berhad has assumed the listing status of K & N Kenanga Holdings Berhad. All of these companies are incorporated in Malaysia. The principal place of business of the Manager is Level 14, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur. The Fund seeks to provide unitholders with long term capital growth through investments in companies that have relatively larger market capitalisation. Such companies are characterised by large-scale operations, strong fi nancial and business track records and are leaders in their respective fi elds that generally referred to as blue chip companies. 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks including market risk (which includes interest rate risk and price risk), credit risk and liquidity risk. Whilst these are the most important types of fi nancial risks inherent in each type of fi nancial instruments, the 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 fl ows of a fi nancial instrument will fl uctuate because of changes in market prices. Market risk includes interest rate risk and price risk. 15 Kenanga Blue Chip Fund Interim Report

21 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) Market risk arises when the value of the investments fl uctuates in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the investments prices caused by uncertainties in the economic, political and social environment will affect the NAV of the Fund. The Manager manages the risk of unfavourable changes in prices by cautious review of the investments and continuous monitoring of their performance and risk profi les. i. Interest rate risk Interest rate risk refers to how the changes in the interest rate environment would affect the performance of Fund s investments. Rate offered by the fi nancial institutions will fl uctuate according to the Overnight Policy Rate determined by Bank Negara Malaysia and this has direct correlation with the Fund s investments in short term deposits. The Fund is not exposed to signifi cant interest rate risk as its deposits are short term in nature and have fi xed interest rates. Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s fi nancial assets and fi nancial liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Weighted Non- average exposure to effective Up to interest rate interest 1 year movement Total rate* RM RM RM % Assets Financial assets at FVTPL - 15,940,409 15,940,409 Short term deposits 4,143,000-4,143, Other assets - 492, ,461 4,143,000 16,432,870 20,575,870 Liabilities Other liabilities - 435, ,882 Total interest rate sensitivity gap 4,143,000 15,996,988 20,139,988 Kenanga Blue Chip Fund Interim Report 16

22 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure (Contd.) 17 Kenanga Blue Chip Fund Interim Report Weighted Non- average exposure to effective Up to interest rate interest 1 year movement Total rate* RM RM RM % Assets Financial assets at FVTPL - 16,257,473 16,257,473 Short term deposits 5,861,935-5,861, Other assets - 570, ,934 5,861,935 16,828,407 22,690,342 Liabilities Other liabilities - 353, ,293 Total interest rate sensitivity gap 5,861,935 16,475,114 22,337,049 * Computed based on assets with exposure to interest rate movement only. ii. Price risk Price risk is the risk of unfavorable changes in the fair values of listed equity securities and listed collective investment schemes. The Fund invests in listed equity securities and listed collective investment schemes which are exposed to price fl uctuations. This may then affect the NAV of the Fund. Price risk sensitivity The Manager s best estimate of the effect on the profi t for the fi nancial period due to a reasonably possible change in investments in listed equity securities and listed collective investment schemes, with all other variables held constant is indicated in the table below: Effects on profit for Changes in price the financial period Increase/(Decrease) Increase/(Decrease) Basis points RM Financial assets at FVTPL 5/(5) 7,970/(7,970) Financial assets at FVTPL 5/(5) 8,129/(8,129) In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material.

23 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk (Contd.) Price risk concentration The following table sets out the Fund s exposure and concentration to price risk based on its portfolio of fi nancial instruments as at the reporting date: Fair Value Percentage of NAV RM RM % % Financial assets at FVTPL 15,940,409 16,257, The Fund s concentration of investment security price risk from the Fund s listed equity securities and listed collective investment schemes analysed by sector is as follows: Fair Value Percentage of NAV RM RM % % Trading/Services 4,428,735 5,308, Finance 3,222,425 3,738, Constructions 1,947,326 1,781, Properties 1,802,275 1,219, Industrial products 1,203,941 1,441, Consumer products 1,201, , Infrastructure 640, , Plantations 435, , Real Estate Investment Trusts 1,058, , ,940,409 16,257, b. Credit Risk Credit risk is the risk that the counterparty to a fi nancial instrument will cause a fi nancial loss to the Fund by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. i. Credit risk exposure As at the reporting date, the Fund s maximum exposure to credit risk is represented by the carrying amount of each class of fi nancial asset recognised in the statement of fi nancial position. ii. Financial assets that are either past due or impaired As at the reporting date, there are no fi nancial assets that are either past due or impaired. Kenanga Blue Chip Fund Interim Report 18

24 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk (Contd.) iii. Credit quality of financial assets The Fund invests in deposits with fi nancial institutions licensed under the Financial Services Act 2013 and Islamic Financial Services Act The following table analyses the licensed fi nancial institutions by rating category: Short term deposits Percentage of total short term deposits Percentage of NAV % % % % Rating P c. Liquidity Risk Liquidity risk is defi ned as the risk that the Fund will encounter diffi culty in meeting obligations associated with fi nancial liabilities that are to be settled by delivering cash or another fi nancial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholders option based on the Fund s NAV per unit at the time of cancellation calculated in accordance with the Deed. The liquid assets comprise cash, short term deposits with licensed fi nancial institutions and other instruments, which are capable of being converted into cash within 7 days. The following table analyses the maturity profi le of the Fund s fi nancial assets and fi nancial liabilities in order to provide a complete view of the Fund s contractual commitments and liquidity. 19 Kenanga Blue Chip Fund Interim Report

25 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) Up to 1 year Note RM RM Assets Financial assets at FVTPL 15,940,409 16,257,473 Short term deposits 4,143,000 5,861,935 Other assets 492, ,934 (i) 20,575,870 22,690,342 Liabilities Other liabilities (ii) 435, ,293 Equity (iii) 20,218,356 22,415,440 Liquidity gap (78,368) (78,391) (i) Financial assets Analysis of fi nancial assets at FVTPL into maturity groupings is based on the expected date on which these assets will be realised. The Fund s investments in listed equity securities and listed collective investment schemes have been included in the up to 1 year category on the assumption that these are highly liquid investments which can be realised should all of the Fund s unitholders equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised. (ii) Financial liabilities The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the date on which liabilities will be settled. When the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Fund can be required to pay. (iii) Equity As the unitholders can request for redemption of their units, they have been categorised as having a maturity of up to 1 year. Kenanga Blue Chip Fund Interim Report 20

26 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accounting The fi nancial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) as issued by the Malaysian Accounting Standards Board ( MASB ) and International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). The accounting policies adopted are consistent with those of the previous fi nancial period except for the adoption of the new and amended MFRS which became effective for the Fund on 1 October The adoption of the new and amended MFRS did not have any signifi cant impact on the fi nancial position or performance of the Fund. The fi nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. b. Standards and Amendments Issued But Not Yet Effective As at the reporting date, the following Standards and Amendments that have been issued by MASB will be effective for the Fund in future periods. The Fund intends to adopt the relevant standards when they become effective. Description Effective for financial period beginning on or after Amendments to MFRS contained in the documents entitled Annual improvements to MFRS Standards Cycle 1 January 2017 Amendments to MFRS 107: Disclosure Initiative 1 January 2017 Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017 Amendments to MFRS contained in the documents entitled Annual improvements to MFRS Standards Cycle 1 January 2018 Amendments to MFRS 2: Classifi cation and Measurement of Shared-based Payment Transactions 1 January 2018 Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts 1 January 2018 Amendments to MFRS 140: Transfers of Investment Property 1 January 2018 MFRS 9: Financial Instruments 1 January 2018 MFRS 15: Revenue from Contracts with Customers 1 January 2018 MFRS 15: Clarifi cations to MFRS 15 1 January 2018 MFRS 16: Leases 1 January 2019 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its To be announced Associate or Joint Venture by MASB The Fund will adopt the above pronouncements when they become effective in the respective fi nancial periods. These pronouncements are not expected to have any signifi cant impact to the fi nancial statements of the Fund upon their initial application, other than MFRS Kenanga Blue Chip Fund Interim Report

27 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) b. Standards and Amendments Issued But Not Yet Effective (Contd.) MFRS 9 replaces MFRS 139 on the following requirements: classifi cation and measurement of fi nancial assets and fi nancial liabilities as defi ned in MFRS 139, impairment methodology and hedge accounting. The Fund is in the process of making an assessment of the impact of this Standard. c. Financial Assets Financial assets are recognised in the statement of fi nancial position when, and only when, the Fund becomes a party to the contractual provisions of the fi nancial instruments. When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at FVTPL, directly attributable transaction costs. The Fund determines the classifi cation of its fi nancial assets at initial recognition. i. Financial assets at FVTPL Financial assets are classifi ed as fi nancial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading include listed equity securities and listed collective investment schemes acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, fi nancial assets at FVTPL are measured at fair value. Changes in the fair value of those fi nancial instruments are recorded in profi t or loss. Interest earned and dividend revenue elements of such instruments are recorded separately in interest income and dividend income, respectively. ii. Receivables Financial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profi t or loss when the receivable is derecognised or impaired, and through the amortisation process. A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On 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 Blue Chip Fund Interim Report 22

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) d. Impairment of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a fi nancial asset is impaired. To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Fund considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset s original effective interest rate. The impairment loss is recognised in profi t or loss. The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profi t or loss. e. Income Income is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Interest income is recognised using the effective interest method. Dividend income is recognised on declared basis, when the right to receive the dividend is established. The realised gain or loss on sale of investments is measured as the difference between the net disposal proceeds and the carrying amount of the investment. f. Cash and Cash Equivalents For the purposes of the statement of cash fl ows, cash and cash equivalents include cash at bank and short term deposits with licensed fi nancial institutions with insignifi cant risk of changes in value. 23 Kenanga Blue Chip Fund Interim Report

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) g. Income Tax Income tax on the profi t or loss for the fi nancial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the fi nancial period. As no temporary differences have been identifi ed, no deferred tax has been recognised. h. Unrealised Reserves Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values at reporting date. This reserve is not distributable. i. Financial Liabilities Financial liabilities are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability. Financial liabilities are recognised in the statement of fi nancial position when, and only when, the Fund becomes a party to the contractual provisions of the fi nancial instrument. The Fund s fi nancial liabilities are classifi ed as other fi nancial liabilities. The Fund s fi nancial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. A fi nancial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profi t or loss when the liabilities are derecognised, and through the amortisation process. j. Unitholders Contribution NAV Attributable to Unitholders The unitholders contribution to the Fund is classifi ed as equity instruments. Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee. k. Functional and Presentation Currency The fi nancial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the functional currency ). The fi nancial statements are presented in Ringgit Malaysia ( RM ), which is also the Fund s functional currency. l. Distribution Distributions are at the discretion of the Manager. A distribution to the Fund s unitholders is accounted for as a deduction from retained earnings. Kenanga Blue Chip Fund Interim Report 24

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) m. Significant Accounting Judgments and Estimates The preparation of fi nancial statements requires the use of certain accounting estimates and exercise of judgment. Estimates and judgments are continually evaluated and are based on past experience, reasonable expectations of future events and other factors. i. Critical judgments made in applying accounting policies There are no major judgments made by the Manager in applying the Fund s accounting policies. ii. Key sources of estimation uncertainty There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period. 4. FINANCIAL ASSETS AT FVTPL 25 Kenanga Blue Chip Fund Interim Report RM RM Financial assets held for trading, at FVTPL: Listed equity securities 14,881,968 15,485,483 Listed collective investment schemes 1,058, ,990 15,940,409 16,257,473 Net gain on financial assets at FVTPL comprised: Realised loss on disposals (47,212) (516,617) Unrealised changes in fair values 530,096 1,312, , ,680 Details of financial assets at FVTPL as at 31 March 2017: Listed equity securities Aggregate Percentage Quantity cost Fair value of NAV RM RM % Trading/Services AEON Co. (M) Berhad 52, , , Axiata Group Berhad 83, , , Dialog Group Berhad 212, , , Genting Berhad 29, , , Genting Malaysia Berhad 60, , , My E.G. Services Berhad 157, , , Sime Darby Berhad 18, , , Telekom Malaysia Berhad 75, , ,

31 4. FINANCIAL ASSETS AT FVTPL (CONTD.) Details of financial assets at FVTPL as at 31 March 2017 (Contd.): Listed equity securities (Contd.) Aggregate Percentage Quantity cost Fair value of NAV RM RM % Trading/Services (Contd.) Tenaga Nasional Berhad 84, ,134 1,155, TIME dotcom Berhad 92, , , ,802,980 4,428, Finance Alliance Financial Group Berhad 70, , , BIMB Holdings Berhad 150, , , CIMB Group Holdings Berhad 36, , , Hong Leong Bank Berhad 33, , , Hong Leong Financial Group Berhad 39, , , LPI Capital Berhad 17, , , Malayan Banking Berhad 39, , , Public Bank Berhad 16, , , ,078,663 3,222, Constructions Gamuda Berhad 92, , , IJM Corporation Berhad 267, , , YTL Corporation Berhad 377, , , ,936,974 1,947, Properties IOI Properties Group Berhad 185, , , S P Setia Berhad - ordinary shares 195, , , S P Setia Berhad - preference shares 15,270 15,270 17, Sunway Berhad 220, , , ,737,034 1,802, Industrial products PETRONAS Gas Berhad 27, , , Press Metal Berhad 85, , , Top Glove Corporation Berhad 88, , , ,283,991 1,203, Consumer products Carlsberg Brewery Malaysia Berhad 34, , , Fraser & Neave Holdings Bhd 16, , , Heineken Malaysia Berhad (formerly known as Guinness Anchor Berhad) 16, , , ,193,433 1,201, Kenanga Blue Chip Fund Interim Report 26

32 4. FINANCIAL ASSETS AT FVTPL (CONTD.) Details of financial assets at FVTPL as at 31 March 2017 (Contd.): Listed equity securities (Contd.) Aggregate Percentage Quantity cost Fair value of NAV RM RM % Infrastructure DiGi.Com Berhad 125, , , Plantations Genting Plantations Berhad 21, , , Kuala Lumpur Kepong Berhad 7, , , , , Total listed equity securities 14,052,173 14,881, Listed collective investment schemes IGB Real Estate Investment Trust 341, , , Pavilion Real Estate Investment Trust 82, , , Sunway Real Estate Investment Trust 199, , , Total listed collective investment schemes 999,875 1,058, Total financial assets at FVTPL 15,052,048 15,940, Unrealised gain on financial assets at FVTPL 888, MANAGER S FEE The Manager s fee is computed on a daily basis at a rate not less than 1.2% per annum and not exceeding 3.0% per annum of the NAV of the Fund as provided under Clause 13(2) of the Deed. The Manager is currently charging Manager s fee of 1.55% per annum of the NAV of the Fund (fi nancial period from 1 October 2015 to 31 March 2016: 1.55% per annum). 6. TRUSTEE S FEE Pursuant to the Eighth Supplemental Deed dated 25 July 2014, the Trustee s fee is computed on a daily basis at a rate not exceeding 0.07% per annum of the NAV of the Fund and subject to a minimum fee of RM9,000 per annum. The Trustee s fee is currently computed at 0.07% per annum of the NAV if the Fund (fi nancial period from 1 October 2015 to 31 March 2016: 0.07% per annum). 27 Kenanga Blue Chip Fund Interim Report