KeNaNGa yield enhancement fund quarterly report 30 NOvember 2017

Transcription

1 KENANGA yield enhancement fund quarterly REPORT 30 November 2017

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3 KENANGA YIELD ENHANCEMENT FUND Contents Page Corporate Directory ii Directory of Manager s Offices iii Fund Information 1 Manager s Report 2-3 Fund Performance 4-5 Financial Statements 6-12 Kenanga Yield Enhancement Fund Quarterly Report i

4 CORPORATE DIRECTORY Manager: Kenanga Investors Berhad (Company No P) Registered Office Level 17, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia. Tel: Fax: Board Of Directors Datuk Syed Ahmad Alwee Alsree (Chairman) Syed Zafilen Syed Alwee (Independent Director) Peter John Rayner (Independent Director) Imran Devindran bin Abdullah (Independent Director) Dato Bruce Kho Yaw Huat Ismitz Matthew De Alwis Business Office Level 14, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia. Tel: Fax: Website: Investment Committee Dato Bruce Kho Yaw Huat (Chairman) Syed Zafilen 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 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) , 6th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur, Malaysia. Tel: Fax: Website: ii Kenanga Yield Enhancement Fund Quarterly Report

5 DIRECTORY OF MANAGER S OFFICES Regional Branch Offices : Kuala Lumpur Level 13, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur, Malaysia. Tel: Fax: Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen Melaka Tel: / Fax: Klang No. 12, Jalan Batai Laut 3, Taman Intan Klang, Selangor Darul Ehsan Tel: / Fax: Penang 5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah Penang. Tel : Fax : Miri 2nd Floor, Lot 1264, Centre Point Commercial Centre, Jalan Melayu, Miri, Sarawak Tel: Fax: Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir Seremban, Negeri Sembilan Tel: Fax: Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum Johor Bahru, Johor Tel: / 4798 Fax: Kuching 1st Floor, No 71 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel: Fax: Kuantan No. B8, Ground Floor, Jalan Tun Ismail Kuantan Pahang. Tel : Fax : Ipoh Suite 1, 2nd Floor, No. 63, Persiaran Greenhill, Ipoh, Perak, Malaysia Tel: / 7570 / 7575 Fax: Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel: / Fax: Petaling Jaya 44B, Jalan SS21/35 Damansara Utama Petaling Jaya, Selangor Tel: Fax: Kenanga Yield Enhancement Fund Quarterly Report iii

6 1. FUND INFORMATION 1.1 Fund Name Kenanga Yield Enhancement Fund (KYEF or the Fund) 1.2 Fund Type / Category Income & Growth / Fixed Income 1.3 Investment Objective The Fund seeks to provide Investors with income and capital growth by investing into short to medium-term money market instruments and fixed income securities. 1.4 Investment Strategy The Fund seeks to achieve its objective by investing a minimum of 60% of its NAV and a maximum of 100% of its NAV in fixed income securities. The Fund will invest up to 40% of its NAV in placements of fixed deposits with financial institutions and development financial institutions, money market instruments and fixed income securities with a maturity period of 2 years and below. 1.5 Asset Allocation Minimum of 60% to a maximum of 100% of its NAV will be invested in fixed income securities; and up to 40% of its NAV will be invested in placements of fixed deposits, money market instruments and fixed income securities with a maturity period of 2 years and below. 1.6 Duration The Fund was launched on 18th January 2016 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. 1.7 Performance Benchmark 4.5% per annum. Please note that the benchmark herein is NOT a guaranteed rate of return of the Fund; instead it is a benchmark reference rate which is used to measure the performance of the Fund. 1.8 Distribution Policy Subject to the availability of income, income distribution (if any) will be incidental. 1 Kenanga Yield Enhancement Fund Quarterly Report

7 2. MANAGER S REPORT 2.1 Fund performance analysis based on NAV per unit (adjusted for income distribution) since last review period Period under review Kenanga Yield Enhancement Fund 1.25% 4.5% per annum. 1.13% Source: Lipper For the financial period under review, the Fund registered a return of 1.25% against its benchmark return of 1.13%, outperforming its benchmark by 12 basis points (bps). The outperformance was mainly due to the Fund s exposure in high yielding private debt securities. 2.2 The Fund s asset allocation as at 30 November 2017 and comparison with the previous financial period Asset 30 November November 2016 Unlisted fixed income securities 85.9% 48.8% Short term deposits and cash 14.1% 51.2% 2.3 Market Review and Strategy Yields on local government bonds soared at end-september, erasing earlier gains underpinned by a firmer Ringgit and a positive outlook on Malaysia s economy that had brought back foreign inflows. Buying sentiment was dampened by the US Federal Reserve s (Fed) hawkish tone and Trump s tax reform proposal. Meanwhile, the local government bonds performance in the primary market was also similar. Trading interest in local government bonds had fallen significantly in October amid heightened uncertainty surrounding major key risk events such as the global central bank meetings and the 2018 National Budget announcement. Yields on local government bonds were also broadly higher amid a risk rally in the US triggered by Trump s tax cut proposal and mounting fears of a more hawkish Fed in the future. The local government bonds market ended on a positive note in November, supported by renewed demand as the firmer Ringgit reignited foreign interest. Local government bonds were initially weakened by the Bank Negara Malaysia (BNM) shift to a more hawkish stance. However, the continuing weakness in the US Dollar, a renewed strength in the Ringgit, a lower-than-expected CPI reported in October, and a positive outlook on Malaysia s economy pushed yields downwards, negating earlier losses. 2.4 Market Outlook With more positive prospects going forward, the critical questions now are (1) the extent of which the US Fed would normalize its federal funds rate (FFR) in 2018 and; (2) the impact of FFR normalization on the US financial markets, especially on the bond market. On this, we are of the view that if the economy continues to register impressive growth rates at an annualized pace of more than 3%, the possibility of more rate increases than currently pricedin by the markets cannot be ruled out in Given this backdrop, we think that the markets are currently underpricing risk in the US bond market. Kenanga Yield Enhancement Fund Quarterly Report 2

8 2.4 Market Outlook (Contd.) While the global backdrop looks favourable, financial markets are slowly approaching the exuberant stage, in our view. This does not mean that a market implosion is imminent. It simply means that the markets fragility is rapidly increasing and that any minor reasons that could cause investors to pull back their assets from financial markets will have speedier knock-on effects globally. Of particular concern is the fragility of global bond markets. An important factor that could cause higher volatility in the financial markets in 2018 is none other than policy mishaps such as faster-than-expected monetary policy normalization, be it in the US or other parts of the world. Another possible factor could be the failure by the Chinese authorities to continue pursuing a delicate balancing act in reining in excess credit while preventing a sharp deceleration in growth and financial market chaos. The trend in capital flows holds the key for the performance of the Ringgit in The local bond market recorded net inflows of RM9.3 billion between July and November 2017, while the proportion of foreign holdings of MGS has rebounded to 44.3% of the total outstanding in November 2017 from a low of 38.5% of the total outstanding eight months earlier. Going forward, while Malaysia remains vulnerable to capital outflows due to the large holdings of government securities by foreign investors, several positive factors will likely be supportive of the Ringgit against the USD. They include (1) the expected weakness of the USD against major currencies in view of a synchronized recovery of the global economy; (2) Malaysia s commendable export performance; (3) a strong domestic economy, supported by consumer spending and investments; and (4) an expectation of an interest rate hike which will result in net capital inflows into Malaysian shores. Having said that however, any policy mishap that could derail the government s efforts to alleviate current economic imbalances such as fiscal deficits, government indebtedness and a high household leverage position will put the Ringgit at risk. While Malaysia can generally take advantage of the external sector s robustness in 2018, the delicate balancing act by the government is critical in strengthening its fundamentals in order to face future challenges. A failure to convince global investors that the government remains on a favourable policy path will likely result in unnecessary fear and this could lead to rapid capital outflows. With the economy likely to achieve a headline GDP growth of over 5% again in 2018, we anticipate that BNM will raise the OPR by 25 bps 50 bps in We believe that the driving force behind the possible rate hike in the near term is the stronger-than-expected headline growth in 2017, backed by the strength of the external sector and resilient consumer spending. In addition, with the increase in the US FFR following the strengthening of its economy, there are concerns that some capital may start to flow out from Asia, favouring dollar-denominated assets. Against such a backdrop, higher interest rates in the domestic economy will, to some extent, prevent significant outflows of capital from Malaysian shores in Rebates & Soft commission Any rebates received are channeled back to the Fund. On the other hand, 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 did not receive any rebates or commissions from stockbrokers. 3 Kenanga Yield Enhancement Fund Quarterly Report

9 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga Yield Enhancement Fund ( the Fund ) as at 30 November 2017 against last financial period as at 31 May 2017 are as follows: a. Distribution among industry sectors and category of investments: As at As at % % Unlisted fixed income securities 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 unlisted fixed income securities and cash instruments only. Kenanga Yield Enhancement Fund Quarterly Report 4

10 3.2 Performance details of the Fund for the financial period ended 30 November 2017 against last financial period as at 31 May 2017 are as follows: Financial period from to Financial period from (date of commencement) to Net asset value ( NAV ) (RM Million) Units in circulation (Million) NAV per unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income growth (%) - - Gross distribution per unit (sen) - - Net distribution per unit (sen) - - Management expense ratio ( MER ) (%) Portfolio turnover ratio ( PTR ) (times) Note: Total return is the actual return of the Fund for the respective financial periods, computed based on NAV per unit and net of all fees. MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. Above NAV and NAV per unit are not shown as ex-distribution as there were no distribution declared by the Fund in the financial period under review. 1. MER is lower against previous financial period mainly due to lower recovered expenses incurred during the financial period under review. 2. PTR is marginally lower for the financial period under review as compared to the previous financial period due to shorter period under review. 5 Kenanga Yield Enhancement Fund Quarterly Report

11 4. FINANCIAL STATEMENTS 4.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 1 JUNE 2017 TO 30 november 2017 (unaudited) Note to RM (date of commencement) to RM INVESTMENT INCOME Interest income 1,102, ,891 EXPENSES Manager s fee 2 94,753 69,319 Trustee s fee 3 3,790 2,773 Auditors remuneration 4,513 5,699 Tax agent s fee 2,006 3,291 Administration expenses 8,360 6, ,422 88,030 NET INCOME BEFORE TAX 989, ,861 Income tax - - NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 989, ,861 Net income after tax is made up as follows: Realised gain 989, ,861 Kenanga Yield Enhancement Fund Quarterly Report 6

12 4.2 STATEMENT OF FINANCIAL POSITION AS AT 30 NOVEMBER 2017 (unaudited) ASSETS Note RM RM INVESTMENTS Financial assets at fair value through profit or loss ( FVTPL ) 5 63,640,235 18,020,077 Short term deposits 6 10,413,000 18,915,000 74,053,235 36,935,077 OTHER ASSETS Other receivable 10,036 18,567 Cash at bank 20,925 3,749 30,961 22,316 TOTAL ASSETS 74,084,196 36,957,393 LIABILITIES Amount due to Manager 203,036 15,107 Amount due to Trustee Other payables 15,802 11,233 TOTAL LIABILITIES 219,762 26,944 EQUITY Unit holders contribution 71,281,241 36,244,588 Retained earnings 2,583, ,861 NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNIT HOLDERS 7 73,864,434 36,930,449 TOTAL LIABILITIES AND EQUITY 74,084,196 36,957,393 NUMBER OF UNITS IN CIRCULATION 7(a) 67,337,223 35,479,883 NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the financial statements. 7 Kenanga Yield Enhancement Fund Quarterly Report

13 4.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL PERIOD FROM 1 JUNE 2017 TO 30 NOVEMBER 2017 (unaudited) Note Unit holders contribution Retained earnings Total NAV RM RM RM to At beginning of the financial period 31,432,188 1,593,699 33,025,887 Total comprehensive income 989, ,494 Creation of units 7(a) 36,500,671-36,500,671 Cancellation of units 7(a) (78,628) (78,628) Distribution equalisation 7(a) 3,427,010-3,427,010 At end of the financial period 71,281,241 2,583,193 73,864, (date of commencement) to At date of commencement Total comprehensive income - 685, ,861 Creation of units 7(a) 55,356,475-55,356,475 Cancellation of units 7(a) (19,876,592) - (19,876,592) Distribution equalisation 7(a) 764, ,705 At end of the financial period 36,244, ,861 36,930,449 The accompanying notes form an integral part of the financial statements. Kenanga Yield Enhancement Fund Quarterly Report 8

14 4.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 JUNE 2017 TO 30 NOVEMBER 2017 (unaudited) to RM (date of commencement) to RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of financial assets at FVTPL 15,000,000 - Interest received 1,121, ,247 Trustee s fee paid (9,000) - Auditors remuneration paid (3,428) (2,169) Payment for other fees and expenses (7,554) (4,705) Manager s fee paid (85,696) (54,212) Purchase of financial assets at FVTPL (48,000,000) (17,800,000) Net cash used in operating and investing activities (31,984,592) (17,325,839) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 39,934,537 56,419,679 Cash paid on units cancelled (85,484) (20,175,091) Net cash generated from financing activities 39,849,053 36,244,588 NET INCREASE IN CASH AND CASH EQUIVALENTS 7,864,461 18,918,749 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD/DATE OF COMMENCEMENT 2,569,464 - CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 10,433,925 18,918,749 Cash and cash equivalents comprise: Cash at bank 20,925 3,749 Short term deposits 10,413,000 18,915,000 10,433,925 18,918,749 The accompanying notes form an integral part of the financial statements. 9 Kenanga Yield Enhancement Fund Quarterly Report

15 4.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 1 JUNE 2017 TO 30 NOVEMBER 2017 (unaudited) 1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Yield Enhancement Fund ( the Fund ) was constituted pursuant to the executed Deed dated 29 September 2015 ( the Deed ) between the Manager, Kenanga Investors Berhad, and CIMB Commerce Trustee Berhad ( the Trustee ). The Fund commenced operations on 18 January 2016 and will continue to be in operation until terminated in accordance with Part 11 of the Deed. Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad. Prior to 1 November 2016, Kenanga Investment Bank Berhad was a wholly-owned subsidiary of K & N Kenanga Holdings Berhad that was listed on the Main Market of Bursa Malaysia Securities Berhad. Pursuant to an internal reorganisation exercise completed on 1 November 2016, Kenanga Investment Bank Berhad has become the holding company of K & N Kenanga Holdings Berhad. On 2 November 2016, Kenanga Investment Bank Berhad has assumed the listing status of K & N Kenanga Holdings Berhad. All of these companies are incorporated in Malaysia. The principal place of business of the Manager is Level 14, Kenanga Tower, 237, Jalan Tun Razak, Kuala Lumpur. The Fund seeks to provide investors with income and capital growth by investing into short to medium term money market instruments and fixed income securities. 2. MANAGER S FEE The Manager s fee is calculated on a daily basis at a rate not exceeding 1.0% per annum of the NAV of the Fund as provided under Division 12.1 of the Deed. The Manager is currently charging management fee of 0.50% per annum of the NAV of the Fund for the current and previous financial periods. 3. TRUSTEE S FEE Trustee s fee is calculated on a daily basis at a rate not exceeding 0.02% per annum of the NAV of the Fund as provided under Division 12.2 of the Deed. The Trustee s fee is currently calculated at 0.02% per annum of the NAV of the Fund for the current and previous financial periods. 4. PERFORMANCE FEE The performance fee is calculated and readjusted on a daily basis at a rate of 20% on the appreciation in the NAV per unit over and above the hurdle value during a particular performance period. However, in the interest of investors, the Manager imposes a hurdle value, that is high water mark ( HWM ) plus 4.5%, in which the Fund s performance have to exceed before the Manager is eligible for a performance fee. Although calculation is on a daily basis, the performance fee is only payable to the Manager at the end of each performance period. Kenanga Yield Enhancement Fund Quarterly Report 10

16 4. PERFORMANCE FEE (Contd.) Performance period means a period of 12 months beginning from 1 June to 31 May every year to coincide with the start and the end of the Fund s financial year. However, the Fund s financial year may be more or less than 12 months in the first financial period, depending on when the Fund is launched. High water mark refers to the NAV per unit that forms the basis of calculating and determining the hurdle value for a particular performance period. At launch, the HWM will be the initial offer price and thereafter, will be the closing NAV per unit on the last business day of the preceding performance period or the previous HWM of the preceding performance period, whichever is higher. 5. FINANCIAL ASSETS AT FVTPL to RM (date of commencement) to RM Financial assets held for trading, at FVTPL: Unlisted fixed income securities 63,640,235 18,020,077 Details of financial assets at FVTPL as at 30 November 2017: Amortised Percentage Quantity cost Fair value of NAV RM RM RM % Unlisted fixed income securities Hektar Black Sdn Bhd maturing on 16/07/2018 5,000,000 5,053,699 5,053, Hektar Green Sdn Bhd maturing on 23/10/2018 3,000,000 3,024,986 3,024, KYS Assets Sdn Bhd Maturing on 09/12/ ,000,000 15,506,301 15,506, Radimax Group Sdn Bhd maturing on 22/05/ ,000,000 40,055,249 40,055, Total unlisted fixed income securities, representing total financial assets at FVTPL 63,640,235 63,640, Unrealised gain on financial assets at FVTPL - 11 Kenanga Yield Enhancement Fund Quarterly Report

17 6. SHORT TERM DEPOSITS Short term deposits are held with licensed financial institutions in Malaysia at the prevailing interest rates. 7. NET ASSET VALUE ATTRIBUTABLE TO UNIT HOLDERS NAV attributed to unit holders is represented by: Note to RM (date of commencement) to RM Unit holders contribution (a) 71,281,241 36,244,588 Retained earnings: Realised reserves 2,583, ,861 73,864,434 36,930,449 (a) Unit holders contribution (date of commencement) to to No. of units RM No. of units RM At beginning of the financial period/date of commencement 30,915,180 31,432, Add: Creation of units 36,500,671 36,500,671 55,356,475 55,356,475 Less: Cancellation of units (78,628) (78,628) (19,876,592) (19,876,592) Distribution equalisation - 3,427, ,705 At end of the financial period 67,337,223 71,281,241 35,479,883 36,244,588 The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 30 November 2017 were nil (30 November 2016: nil). Kenanga Yield Enhancement Fund Quarterly Report 12

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20 Investor Services Center Toll Free Line: Fax: investorservices@kenanga.com.my Head Office, Kuala Lumpur Level 14, Kenanga Tower, 237 Jalan Tun Razak, Kuala Lumpur, Malaysia. Tel: Fax: