ANNUAL REPORT - Kenanga...ANNUAL REPORT For the Financial Year Ended 31 August 2017 KENANGA GROWTH ... Negara later also introduced new forex rule where exporters are required to convert

ANNUAL REPORT

For the Financial Year Ended 31 August 2017

KENANGA GROWTHOPPORTUNITIES FUND

KENANGA GROWTH OPPORTUNITIES FUND

Contents Page

Corporate Directory ii

Directory of Manager’s Offi ces iii

Fund Information 1

Manager’s Report 2 - 6

Fund Performance 7 - 9

Trustee’s Report 10

Independent Auditors’ Report 11 – 13

Statement by the Manager 14

Financial Statement 15 - 39

ii Kenanga Growth Opportunities Fund Annual Report

CORPORATE DIRECTORY

Manager: Kenanga Investors Berhad (Company No. 353563-P) Registered Offi ce Business Offi ceLevel 17, Kenanga Tower Level 14, Kenanga Tower237, Jalan Tun Razak 237, Jalan Tun Razak50400 Kuala Lumpur, Malaysia 50400 Kuala Lumpur, MalaysiaTel: 03-2172 2888 Tel: 03-2172 3000Fax: 03-2172 2999 Tel: 03-2172 3080 E-mail: [email protected] Website: www.KenangaInvestors.com.my

Board Of Directors Investment CommitteeDatuk Syed Ahmad Alwee Alsree (Chairman) Dato’ Bruce Kho Yaw Huat (Chairman)Syed Zafi len Syed Alwee (Independent Syed Zafi len Syed Alwee (Independent Director) Member)Peter John Rayner (Independent Peter John Rayner (Independent Director) Member)Imran Devindran bin Abdullah (Independent Imran Devindran bin Abdullah (Independent Director) Member)Dato’ Bruce Kho Yaw Huat Ismitz Matthew De AlwisIsmitz Matthew De Alwis

Company Secretary: Norliza Abd Samad (MAICSA 7011089)Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

Trustee: CIMB Commerce Trustee Berhad (Company No. 313031-A)Registered Offi ce Business Offi ceLevel 13, Menara CIMB Level 21, Menara CIMBJalan Stesen Sentral 2 Jalan Stesen Sentral 2Kuala Lumpur Sentral Kuala Lumpur Sentral50490 Kuala Lumpur 50490 Kuala LumpurTel: 03-2261 8888 Tel: 03-2261 8888Fax: 03-2261 0099 Fax: 03-2261 9889Website: www.cimb.com

Auditor: Ernst & Young (AF: 0039)Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

Tax Adviser: Ernst & Young Tax Consultants Sdn Bhd (Company No. 179793-K)Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

Membership: Federation Of Investment Managers Malaysia (FIMM)19-06-1, 6th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia.Tel: 03-2093 2600 Fax: 03-2093 2700 Website: www.fi mm.com.my

iiiKenanga Growth Opportunities Fund Annual Report

REGIONAL BRANCH OFFICES:

Kuala LumpurLevel 13, Kenanga Tower237, Jalan Tun Razak50400 Kuala Lumpur, MalaysiaTel : 03-2172 3123 Fax : 03-2172 3133

MelakaNo. 25-1, Jalan Kota Laksamana 2/17Taman Kota Laksamana, Seksyen 275200 MelakaTel : 06-281 8913 / 06-282 0518Fax : 06-281 4286

KlangNo. 12, Jalan Batai Laut 3Taman Intan, 41300 KlangSelangor Darul EhsanTel : 03-3341 8818 / 03-3348 7889 Fax : 03-3341 8816

Penang5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah 10050 PenangTel : 04-210 6628Fax : 04-210 6644

Miri 2nd Floor, Lot 1264Centre Point Commercial CentreJalan Melayu98000 Miri, Sarawak Tel : 085-416 866 Fax : 085-322 340

Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir 70000 Seremban, Negeri Sembilan Tel : 06-761 5678 Fax : 06-761 2242

Johor BahruLot 11.03, 11th Floor, Menara MSC CyberportNo. 5, Jalan Bukit Meldrum80300 Johor Bahru, JohorTel : 07-223 7505 / 4798 Fax : 07-223 4802

Kuching1st Floor, No 71Lot 10900, Jalan Tun Jugah93350 Kuching, SarawakTel : 082-572 228 Fax : 082-572 229

KuantanNo. B8, Ground FloorJalan Tun Ismail 125000 Kuantan PahangTel : 09-514 3688Fax : 09-514 3838

IpohSuite 1, 2nd Floor,No. 63, Persiaran Greenhill30450 Ipoh, Perak, MalaysiaTel : 05-254 7573 / 7570 / 7575Fax : 05-254 7606

Kota KinabaluA-03-11, 3rd FloorBlock A, Warisan SquareJalan Tun Fuad Stephens88000 Kota Kinabalu, SabahTel : 088-447 089 / 088-448 106 Fax : 088-447 039

Petaling Jaya44B, Jalan SS21/35, Damansara Utama47400 Petaling Jaya, Selangor Tel : 03-7710 8828 Fax : 03-7710 8830

DIRECTORY OF MANAGER’S OFFICES

1 Kenanga Growth Opportunities Fund Annual Report

1. FUND INFORMATION

1.1 Fund Name

Kenanga Growth Opportunities Fund (KGOF or the Fund)

1.2 Fund Category / Type

Equity / Growth

1.3 Investment Objective

The Fund aims to achieve consistent capital appreciation over the long-term by primarily investing in relatively smaller capitalized companies with good growth prospects.

1.4 Investment Strategy

The Fund is an equity growth fund that is actively managed based on both quantitative and qualitative disciplines. Its strategy is to invest in companies that are likely to yield higher earnings growth than the market average.

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 Emas Index

1.7 Distribution Policy

Income (if any) as secondary objective, is paid annually.

1.8 Breakdown of unit holdings of KGOF as at 31 August 2017

Size of holdings No. of members No. of units held 5,000 and below 2,932 4,403,717 5,001 - 10,000 395 2,812,087 10,001 - 50,000 294 5,754,349 50,001 - 500,000 30 3,771,142 500,001 and above 4 7,705,333 Total 3,655 24,446,628

2Kenanga Growth Opportunities Fund Annual Report

2. MANAGER’S REPORT

2.1 Explanation on whether the Fund has achieved its investment objective.

For the period under review, the Fund has appreciated by 1.5% vs the FBM Emas benchmark return of 7.0%. The underperformance was attributed to stock selection in small to mid cap equities.

2.2 Comparison between the Fund’s performance and performance of the benchmark

Performance Chart Since Launch (23/04/2004 - 31/08/2017)Kenanga Growth Opportunities Fund vs FTSE-Bursa Malaysia Emas Index

Source: Novagni Analytics and Advisory Sdn Bhd

2.3 Investment strategies and policies employed during the fi nancial year under review

For the period under review, the Fund’s investment strategy and policy were to invest in companies in the small to mid-cap category, i.e. companies below RM4b market capitalisation. The strategy employed was in line with that disclosed in the master prospectus.

2.4 The Fund’s asset allocation as at 31 August 2017 and comparison with the previous fi nancial year

Asset 31 Aug 2017 31 Aug 2016Listed investment securities 88.3% 69.6%Short term deposits and cash 11.7% 30.4%

Reason for the differences in asset allocation

During the fi nancial year under review, the Fund has increased its equity exposure on improved market conditions.


2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution) since last review period

Period under review Kenanga Growth Opportunities Fund 1.50% FTSE-Bursa Malaysia Emas Index 7.02%

Source: Lipper

During the fi nancial year under review, the Fund registered a positive return of 1.5%, underperforming the benchmark positive return of 7.0%. The underperformance was attributable to stock selection.

2.6 Review of the market

Market Review

The FBMKLCI increased 6.14% for the period under review (1st September 2016 – 31st August 2017). US Fed kept its policy rate unchanged on 21 September for the sixth consecutive meeting. The market was pretty fl attish in October, as investors remained on the side-lines ahead of the US Presidential election. There were no major surprises from the 2017 Malaysian budget unveiled by the government in October 2016. The government projects higher GDP growth of 4%-5% in 2017 vs 4%-4.5% in 2016. Stronger growth will be supported by resilient domestic demand and exports recovery attributed to higher commodities price. Meanwhile, 2017 fi scal defi cit is expected to narrow to 3.0% from 3.1% in 2016.

Prime Minister Najib visited China in November 2016 and signed 14 MOUs worth RM144 billion. The key Chinese FDI from the visit was the RM55 billion East Coast Railway Link. The project will be on a fast-track basis where ground breaking is expected in 2017.

Markets were caught off-guard by Trump’s victory in the US Presidential election. Asian markets were the fi rst to react with a sharp-sell down as investors fl ocked 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 infl ationary economic policies. Ringgit fell to the low MYR4.4183 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).

January and February 2017 were active months for the equity markets. The KLCI Index rose 3.2% to 1722.47 points in the fi rst two months of 2017. 2017 year also started with more exciting corporate news, 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.


2.6 Review of the market (Contd.)

Market Review (Contd.)

The KLCI Index continue to surge in March courtesy to persistent foreign buying after being absent in the domestic market for more than 3 years. March 2017 also recorded the foreign infl ow of RM4.4bil (Mar 16: RM6.1bil foreign net infl ow) after three consecutive years (2014-2016) of foreigners’ net selling totalling about RM30bil. Malaysia recorded 4Q2016 GDP growth of 4.5% yoy, above estimate of 4.4%, bringing 2016 growth to 4.2%. This was the lowest growth in the past 3 years (2015: +5%; 2014: +6%) but is poised to pick up in 2017 with the recovery of oil price and CPO price.

There was no surprise monetary actions from the central banks in 1Q2017, both ECB and BOJ stay pat but Fed hiked 25bps as widely expected. The Bank Negara’s annual report released by end March provided GDP growth forecast of 4.3%-4.8% and CPI projection of 3%-4%, which were well within market expectations.

The KLCI charted another positive month in April but took a breather in May which is always a seasonally slow month. There were also rising geopolitical tension and surprised political happenings in April and May. The US launched a military strike on a Syrian government airbase in response to a chemical weapons attack killing civilians and later dropped the largest conventional bomb on an ISIS area in eastern Afghanistan. North Korea also unveiled its new missile technology where US President Donald Trump was hoping on China to rein in North Korea’s military aggression. In EU, UK Prime Minister Theresa May called for snap UK general election to strengthen her political grips before Brexit negotiation. Meanwhile, Emmanuel Macron defeated Marine Le Pen in the French presidential election which removed the risk of France leaving EU. In a widely expected move, OPEC and non-members agreed to extend production cuts by another nine months to March 2018.

On the local front, Bank Negara announced liberalisation of MGS market where investors and issuers can short sell from May onwards. The market and corporates was however shocked by a surprised announcement from TRX City voiding the sales of 60%-stake in Bandar Malaysia to IWH-CREC consortium done in 2015. Mid-small caps started a price correction as investors took profi t following a strong rally since beginning of the year. Malaysia also reported 1Q2017 GDP of 5.6% yoy which was above the 4.8% forecast, which is the strongest growth rate since 1Q2015. In the March 2017 corporate result reporting, results were generally within expectations. 48% companies’ results were in line, 15% was above while 37% were below expectations. Result of big caps including banks, plantation and telcos were generally in line with expectations. Sectors with weaker earnings were automobile, gaming and logistics.

May and June 2017 were relatively fl attish months for KLCI Index with marginal negative return in (-0.12% month-on-month in both months). As expected by the market, the Fed raised rate by another 25bps leaving guidance unchanged of another hike in 2017. The Fed also plans to start trimming its $4.5trillion balance sheet later in 2017. Another geopolitical event was the alleged Qatar support of IS terrorism which resulted in Saudi, Bahrain, UAE and Egypt cutting diplomatic ties with Qatar. In UK, Prime Minister Theresa May lost her parliament majority in the early election but managed to form a government with the support of other smaller parties. July was generally quiet for the local market. IMF upgraded Malaysia 2017 GDP forecast to 4.8% from its earlier projection of 4.5%.


2.6 Review of the market (Contd.)

Market Review (Contd.)

Foreigners were net buyer of the equity market totalling RM10.3billion from January to August 2017. The Ringgit strengthened against US dollar for 4.8% for the fi rst eighth months of 2017 to end at RM4.2710 as of end August 2017.

Market Outlook

We have a positive outlook on the domestic equity market in 2017 after 3 years of underperformance from 2014 to 2016. 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. e) Expectation of general election in 2017/18. Historically markets rallied a few months

before general election.

Fund 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 Distribution

For the fi nancial year 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 fi nancial year under review.

2.9 Signifi cant changes in the state of affair of the Fund during the fi nancial year

There were no signifi cant changes in the state of affair of the Fund during the fi nancial year and up until the date of the manager’s report, not otherwise disclosed in the fi nancial statements.


2.10 Circumstances that materially affect any interests of the unitholders

During the fi nancial year under review, there were no circumstances that materially affected any interests of the unitholders.

2.11 Rebates & Soft commissions

Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, fi nancial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the fi nancial year under review, the Manager has received soft commissions from stockbrokers.


3. FUND PERFORMANCE

3.1 Details of portfolio composition of Kenanga Growth Opportunities Fund (“the Fund”) for the last three fi nancial years as at 31 August are as follow:

a. Distribution among industry sectors and category of investments:

FY FY FY 2017 2016 2015 % % %

Consumer products 18.9 13.8 6.7Industrial products 16.1 16.2 7.6Properties 12.9 3.6 7.0Trading/Services 12.4 9.0 14.3Constructions 11.0 10.0 15.9Technology 7.3 1.9 3.0Finance 5.1 4.6 1.7Special Purpose Acquisition Company 0.2 0.1 -Plantations - 4.5 0.6Infrastructure - 3.7 1.5Real Estate Investment Trusts 4.3 1.9 2.5Warrants 0.1 0.3 -Short term deposits and cash 11.7 30.4 39.2 100.0 100.0 100.0

Note: The above mentioned percentages are based on total investment market value plus cash.

b. Distribution among markets

The Fund invested in local listed investment securities and short term deposits and cash only.


3.2 Performance details of the Fund for the last 3 fi nancial years ended 31 August are as follows:

FY FY FY 2017 2016 2015

Net asset value (“NAV”) (RM Million) 24.62* 34.83 18.16Units in circulation (Million) 24.45 35.10 20.97NAV per unit (RM) 1.0071* 0.9922 0.8657Highest NAV per unit (RM) 1.0641 1.0131 0.9948Lowest NAV per unit (RM) 0.9599 0.8644 0.7802Total return (%) 1.50 14.61 -12.06- Capital growth (%) 1.50 14.61 -12.06- Income growth (%) - - -Gross distribution per unit (sen) - - -Net distribution per unit (sen) - - -Management expense ratio (“MER”) (%) 1 1.87 1.94 2.05Portfolio turnover ratio (“PTR”) (times) 2 1.13 1.44 1.55

Note: Total return is the actual return of the Fund for the respective fi nancial 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 year under review.

1 MER is lower against previous fi nancial year mainly due to increase in the average fund size during the fi nancial year under review.

2 The PTR is lower compared to the previous year due to reduced trading activities during the twelve months under review.

* Based on bid price fair valuation method on all investments held by the Fund as at 31 August 2017, the NAV and NAV per unit would be RM24.48 million and RM1.0015 respectively.

(As disclosed under Note 12 of the fi nancial statements)


3.3 Average total return of the Fund

1 Year 3 Years 5 Years 31 Aug 16 31 Aug 14 31 Aug 12 - 31 Aug 17 - 31 Aug 17 - 31 Aug 17

Kenanga Growth Opportunities Fund 1.50% 1.38% 7.94%

FTSE-Bursa Malaysia Emas Index 7.02% -0.66% 2.66%

Source: Lipper

3.4 Annual total return of the Fund

Period under review 1 Year 1 Year 1 Year 1 Year 1 Year 31 Aug 16 31 Aug 15 31 Aug 14 31 Aug 13 31 Aug 12 31 Aug 11 - 31 Aug 17 - 31 Aug 16 - 31 Aug 15 - 31 Aug 14 - 31 Aug 13 - 31 Aug 12 Kenanga Growth Opportunities Fund 1.50% 14.61% -12.06% 22.97% 14.50% 12.47% FTSE-Bursa Malaysia Emas Index 7.02% 7.36% -15.54% 8.58% 6.58% 13.33%

Source: Lipper

Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fl uctuate.


4 TRUSTEE’S REPORT TO THE UNIT HOLDERS OF KENANGA GROWTH OPPORTUNITIES FUND

We, CIMB Commerce Trustee Berhad being the trustee for Kenanga Growth Opportunities Fund (“the Fund”), of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the capacity as Manager of the Fund, has fulfi lled its duties in the following manner for the fi nancial year ended 31 August 2017.

a) The Fund has been managed in accordance with the limitations imposed on the

investment powers of the Manager 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 for 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 26 October 2017


5 INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA GROWTH OPPORTUNITIES FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the fi nancial statements of Kenanga Growth Opportunities Fund (“the Fund”), which comprise the statement of fi nancial position as at 31 August 2017, and the statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows of the Fund for the fi nancial year then ended, and notes to the fi nancial statements, including a summary of signifi cant accounting policies and other explanatory information, as set out on pages 15 to 39.

In our opinion, the accompanying fi nancial statements give a true and fair view of the fi nancial position of the Fund as at 31 August 2017 and of its fi nancial performance and cash fl ows for the fi nancial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

Basis for opinion We conducted our audit in accordance with approved standards of auditing in Malaysia

and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the fi nancial statements section of our report. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Independence and other ethical responsibilities

We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfi lled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Information other than the fi nancial statements and auditors’ report thereon

The Manager of the Fund (“the Manager”) is responsible for the other information. The other information comprises the information included in the annual report of the Fund, but does not include the fi nancial statements of the Fund and our auditors’ report thereon.

Our opinion on the fi nancial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the fi nancial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the fi nancial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.


5 INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA GROWTH OPPORTUNITIES FUND (CONTD.)

Responsibilities of the Manager and Trustee for the fi nancial statements

The Manager is responsible for the preparation of fi nancial statements of the Fund that give a true and fair view in accordance with Malaysia 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 fi nancial statements of the Fund that are free from material misstatement, whether due to fraud or error.

In preparing the fi nancial statements of the Fund, the Manager is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

The Trustee is responsible for overseeing the Fund’s fi nancial reporting process. The Trustee is also responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these fi nancial statements.

Auditors’ responsibility for the audit of the fi nancial statements

Our objectives are to obtain reasonable assurance about whether the fi nancial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of these fi nancial statements.

As part of an audit in accordance with approved standards of auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the fi nancial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suffi cient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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.


5 INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA GROWTH OPPORTUNITIES FUND (CONTD.)

Auditors’ responsibility for the audit of the fi nancial statements (Contd.)

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager.

• Conclude on the appropriateness of the Manager’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signifi cant doubt on the Fund’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the fi nancial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Fund to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the fi nancial statements of the Fund, including the disclosures, and whether the fi nancial statements of the Fund represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Manager regarding, among other matters, the planned scope

and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit.

Other matters

This report is made solely to the unit holders of the Fund, as a body, in accordance with the Guidelines on Unit Trust Funds issued by the Securities Commission Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Chan Hooi LamAF: 0039 No. 2844/02/18(J)Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

26 October 2017


6. 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 August 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 year ended 31 August 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 Growth Opportunities Fund as at 31 August 2017 and of its fi nancial performance and cash fl ows for the fi nancial year then ended 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

26 October 2017

The accompanying notes form an integral part of the fi nancial statements.

Kenanga Growth Opportunities Fund Annual Report15

7. FINANCIAL STATEMENT

7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2017

Note 2017 2016 RM RM

INVESTMENT INCOME

Interest income 194,960 253,199Dividend income 609,402 552,889Net gain from investments: - Financial assets at fair value through profi t or loss (“FVTPL”) 4 792,763 2,155,183 1,597,125 2,961,271

EXPENSES

Manager’s fee 5 520,931 379,113Trustee’s fee 6 23,526 17,144Auditors’ remuneration 6,500 6,000Tax agent’s fee 5,500 6,100Administration expenses 71,223 63,594 627,680 471,951

NET INCOME BEFORE TAX 969,445 2,489,320

Income tax 7 - (78)

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 969,445 2,489,242

Net income after tax is made up as follows: Realised (loss)/gain (91,277) 1,190,029 Unrealised gain 4 1,060,722 1,299,213 969,445 2,489,242


Kenanga Growth Opportunities Fund Annual Report 16

7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 2017


ASSETS

INVESTMENTS

Financial assets at FVTPL 4 21,668,814 24,259,012Short term deposits 8 2,517,000 10,542,000 24,185,814 34,801,012

OTHER ASSETS

Other receivables 9 330,392 163,380Tax recoverable - 1,587Cash at bank 360,072 52,346 690,464 217,313

TOTAL ASSETS 24,876,278 35,018,325

LIABILITIES

Amount due to Manager 129,438 46,545Amount due to Trustee 1,493 3,712Other payables 10 262,220 542,342TOTAL LIABILITIES 393,151 592,599

EQUITY

Unit holders’ contribution 21,221,067 32,133,111Retained earnings 3,262,060 2,292,615NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO UNIT HOLDERS 11 24,483,127 34,425,726

TOTAL LIABILITIES AND EQUITY 24,876,278 35,018,325

NUMBER OF UNITS IN CIRCULATION 11(a) 24,446,628 35,098,926

NET ASSET VALUE PER UNIT (RM) 12 1.0015 0.9808


Kenanga Growth Opportunities Fund Annual Report17

7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2017

Unit holders’ Retained Total Note contribution earnings NAV RM RM RM

2017At beginning of the fi nancial year 32,133,111 2,292,615 34,425,726Total comprehensive income - 969,445 969,445Creation of units 11(a) 4,567,825 - 4,567,825Cancellation of units 11(a) (15,322,746) - (15,322,746)Distribution equalisation 11(a) (157,123) - (157,123)At end of the fi nancial year 21,221,067 3,262,060 24,483,127

2016At beginning of the fi nancial year 18,286,523 (196,627) 18,089,896Total comprehensive income - 2,489,242 2,489,242Creation of units 11(a) 18,278,113 - 18,278,113Cancellation of units 11(a) (4,846,560) - (4,846,560)Distribution equalisation 11(a) 415,035 - 415,035At end of the fi nancial year 32,133,111 2,292,615 34,425,726


Kenanga Growth Opportunities Fund Annual Report 18

7.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2017

2017 2016 RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES

Proceeds from sale of fi nancial assets at FVTPL 39,717,642 29,549,062 Dividends received 590,338 524,136 Interest from deposits received 197,371 251,240 Tax agent’s fee paid (5,500) (5,500)Auditors’ remuneration paid (6,000) (6,000)Trustee’s fee paid (25,745) (14,398)Payment for other fees and expenses (68,319) (51,963)Manager’s fee paid (530,930) (357,459)Purchase of fi nancial assets at FVTPL (36,768,566) (40,489,156)Cash generated from/(used in) operating and investing activities 3,100,291 (10,600,038)Income tax refunded 1,587 -Net cash generated from/(used in) operating and investing activities 3,101,878 (10,600,038)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash received from units created 4,663,797 18,780,220 Cash paid on units cancelled (15,482,949) (4,917,838)Net cash (used in)/generated from fi nancing activities (10,819,152) 13,862,382 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (7,717,274) 3,262,344CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 10,594,346 7,332,002CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 2,877,072 10,594,346 Cash and cash equivalents comprise: Cash at bank 360,072 52,346 Short term deposits 2,517,000 10,542,000 2,877,072 10,594,346


7.5 NOTES TO THE FINANCIAL STATEMENTS FOR FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2017

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Growth Opportunities 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 2013.

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, 50400 Kuala Lumpur.

The objective of the Fund is to achieve consistent capital appreciation over long term by primarily investing in relatively smaller capitalised companies with good growth prospects based on equity securities corporations that practice good corporate governance.

The fi nancial statements were authorised for issue by the Chief Executive Offi cer of the Manager on 26 October 2017.

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 unit holders, 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.


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 %

2017 Assets Financial assets at FVTPL - 21,668,814 21,668,814Short term deposits 2,517,000 - 2,517,000 3.0Other assets - 690,464 690,464 2,517,000 22,359,278 24,876,278

Liabilities Other liabilities - 365,078 365,078

Total interest rate sensitivity gap 2,517,000 21,994,200 24,511,200


2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.)

Interest rate risk exposure (Contd.)

Weighted Non- average exposure to effective Up to interest rate interest 1 year movement Total rate* RM RM RM %

2016 Assets Financial assets at FVTPL - 24,259,012 24,259,012Short term deposits 10,542,000 - 10,542,000 3.0Other assets - 215,726 215,726 10,542,000 24,474,738 35,016,738

LiabilitiesOther liabilities - 557,593 557,593

Total interest rate sensitivity gap 10,542,000 23,917,145 34,459,145

* 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, listed collective investment schemes and listed warrants. The Fund invests in listed equity securities, listed collective investment schemes and listed warrants 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 year due to a reasonably possible change in investments in listed equity securities, listed collective investment schemes and listed warrants, with all other variables held constant is indicated in the table below:


2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk (Contd.)

Price risk sensitivity (Contd.)

Effects on profi t for Changes in price the fi nancial year Increase/(Decrease) Increase/(Decrease) Basis points RM

2017 Financial assets at FVTPL 5/(5) 10,834/(10,834)

2016 Financial assets at FVTPL 5/(5) 12,130/(12,130)

In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material.

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 2017 2016 2017 2016 RM RM % %

Financial assets at FVTPL 21,668,814 24,259,012 88.5 70.5

The Fund’s concentration of investment security price risk from the Fund’s listed equity securities, listed collective investment schemes and listed warrants analysed by sector is as follows:

Fair Value Percentage of NAV 2017 2016 2017 2016 RM RM % %

Consumer products 4,646,963 4,798,417 19.0 13.9 Industrial products 3,958,275 5,629,569 16.2 16.4 Properties 3,159,386 1,252,505 12.9 3.6 Trading/Services 3,050,897 3,141,055 12.5 9.1 Constructions 2,707,853 3,499,501 11.0 10.2 Technology 1,786,334 678,340 7.3 2.0 Finance 1,246,261 1,592,300 5.1 4.6 Special Purpose Acquisition Company 46,800 42,120 0.2 0.1 Plantations - 1,570,984 - 4.6 Infrastructure - 1,292,395 - 3.8 Real Estate Investment Trusts 1,056,729 674,629 4.3 2.0 Warrants 9,316 87,197 - 0.2 21,668,814 24,259,012 88.5 70.5


2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk

Credit risk is the risk that the counterparty to a fi nancial instrument will cause a fi nancial loss 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.

iii. Credit quality of fi nancial assets

The Fund invests in deposits with fi nancial institutions licensed under the Financial Services Act 2013 and Islamic Financial Services Act 2013. The following table analyses the licensed fi nancial institutions by rating category:

Short term deposits

Percentage of total short term deposits Percentage of NAV 2017 2016 2017 2016 % % % %

RatingP1 100.0 100.0 10.3 30.6

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 unit holders by the Manager are cancellable at the unit holders’ 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.


2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)

c. Liquidity Risk (Contd.)

The following table analyses the maturity profi le of the Fund’s fi nancial assets and fi nancial liabilities in order to provide a complete view of the Fund’s contractual commitments and liquidity.

Up to 1 year Note 2017 2016 RM RM

AssetsFinancial assets at FVTPL 21,668,814 24,259,012 Short term deposits 2,517,000 10,542,000 Other assets 690,464 215,726 i. 24,876,278 35,016,738

LiabilitiesOther liabilities ii. 365,078 557,593

Equity iii. 24,483,127 34,425,726

Liquidity gap 28,073 33,419

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, listed collective investment schemes and listed warrants 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 unit holders’ 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 unit holders can request for redemption of their units, they have been categorised as having a maturity of “up to 1 year”.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Accounting

The fi nancial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) as issued by 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 year except for the adoption of the new and amended MFRS which became effective for the Fund on 1 September 2016. 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, Amendments and Interpretations Issued But Not Yet Effective

As at the reporting date, the following Standards, Amendments and Interpretation Committee’s (“IC”) Interpretation 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.

Effective for fi nancial period beginning onDescription or after Amendments to MFRS contained in the documents entitled “Annual improvements to MFRS Standards 2014 - 2016 Cycle” 1 January 2017Amendments to MFRS 107: Disclosure Initiative 1 January 2017Amendments to MFRS 112: Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017Amendments to MFRS contained in the documents entitled “Annual improvements to MFRS Standards 2014 - 2016 Cycle” 1 January 2018Amendments to MFRS 2: Classifi cation and Measurement of Shared-based Payment Transactions 1 January 2018Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts 1 January 2018Amendments to MFRS 140: Transfers of Investment Property 1 January 2018MFRS 9: Financial Instruments 1 January 2018MFRS 15: Revenue from Contracts with Customers 1 January 2018MFRS 15: Clarifi cations to MFRS 15 1 January 2018IC Interpretation 22: Foreign Currency Transactions and Advance Consideration 1 January 2018MFRS 16: Leases 1 January 2019MFRS 17: Insurance Contracts 1 January 2021Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate To be announced or Joint Venture by MASB


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

b. Standards, Amendments and Interpretations Issued But Not Yet Effective (Contd.)

The Fund will adopt the above pronouncements when they become effective in the respective fi nancial periods. These pronouncements are not expected to have any signifi cant impact to the fi nancial statements of the Fund upon their initial application, other than MFRS 9.

MFRS 9 replaces MFRS 139 on the following requirements: classifi cation and measurement of fi nancial assets and fi nancial liabilities as defi ned in MFRS 139, impairment methodology and hedge accounting. The Fund is in the process of making an assessment of the impact of this Standard.

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, listed collective investment schemes and listed warrants 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 profi t or loss.


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 period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profi t or loss.

e. Income

Income is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable.

Interest income is recognised using the effective interest method.

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.



g. Income Tax

Income tax on the profi t or loss for the fi nancial year comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profi t for the fi nancial year.

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. Unit holders’ Contribution – NAV Attributable to Unit holders

The unit holders’ 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 unit holders 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 unit holders is accounted for as a deduction from retained earnings.



m. Signifi cant 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 accounting policies.

ii. Key sources of estimation uncertainty

There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year.

4. FINANCIAL ASSETS AT FVTPL

2017 2016 RM RM

Financial assets held for trading, at FVTPL: Listed equity securities 20,602,769 23,497,186 Listed collective investment schemes 1,056,729 674,629 Listed warrants 9,316 87,197 21,668,814 24,259,012

Net gain on fi nancial assets at FVTPL comprised: Realised(loss)/gain on disposals (267,959) 855,970 Unrealised changes in fair values 1,060,722 1,299,213 792,763 2,155,183

Details of fi nancial assets at FVTPL as at 31 August 2017:

Aggregate Percentage Quantity Cost Fair value of NAV RM RM %

Listed equity securities

Consumer productsA & M Realty Berhad 275,200 452,096 382,528 1.6 Ajinomoto (Malaysia) Berhad 8,400 204,381 178,080 0.7 Apex Healthcare Berhad 145,200 691,130 683,892 2.8 CCK Consolidated Holdings Berhad 726,900 740,510 708,728 2.9 Homeritz Corporation Berhad 648,700 592,922 606,534 2.5Hong Leong Industries Berhad 18,800 126,066 184,616 0.8Johore Tin Berhad 294,300 505,010 412,020 1.7


4. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of fi nancial assets at FVTPL as at 31 August 2017 (Contd.):


Listed equity securities (Contd.)

Consumer products (Contd.)NTPM Holdings Berhad 798,400 714,921 622,752 2.5 Padini Holdings Berhad 93,500 325,638 387,090 1.6 Power Root Berhad 78,300 195,245 151,902 0.6 Salutica Berhad 254,900 377,601 328,821 1.3 4,925,520 4,646,963 19.0

Industrial productsEvergreen Fibreboard Berhad 834,000 927,387 629,670 2.6 Ge-Shen Corporation Berhad 107,500 247,809 270,900 1.1 OKA Corporation Bhd 67,800 126,525 124,074 0.5 P.I.E Industrial Berhad 191,200 422,032 435,936 1.8 Pecca Group Berhad 39,300 55,806 57,378 0.2 Pintaras Jaya Berhad 83,500 337,657 325,650 1.3 Rohas Tecnic Berhad (formerly known as Tecnic Group Berhad) 88,100 103,392 116,292 0.5 SCGM Berhad 47,600 114,240 140,896 0.6 SKP Resources Bhd 672,700 869,388 995,596 4.1 SLP Resources Berhad 147,240 284,861 282,701 1.1 Techfast Holdings Berhad 317,800 241,905 293,965 1.2 Uchi Technologies Berhad 127,900 241,749 285,217 1.2 3,972,751 3,958,275 16.2

PropertiesLBS Bina Group Berhad - ordinary share 385,700 774,959 740,544 3.0 LBS Bina Group Berhad - preference share 39,140 43,054 41,097 0.2 Malton Berhad 276,400 398,628 281,928 1.1 Paramount Corporation Berhad 347,900 631,784 626,220 2.6 Sentoria Group Berhad 532,200 401,966 417,777 1.7 Sunsuria Berhad 612,400 873,588 863,484 3.5 Titijaya Land Berhad 126,400 223,740 188,336 0.8 Titijaya Land Berhad - Rights 189,600 - - - 3,347,719 3,159,386 12.9

Trading/ServicesCentury Logistics Holdings Berhad 389,600 444,808 405,184 1.7Chin Hin Group Berhad 282,900 368,199 370,599 1.5Cypark Resources Berhad 163,500 308,421 398,940 1.6EITA Resources Berhad 153,000 289,540 253,980 1.0George Kent (M) Berhad 201,250 553,648 557,462 2.3





Listed equity securities (Contd.)

Trading/Services (Contd.)Oldtown Berhad 37,500 100,279 100,500 0.4Petra Energy Bhd 186,700 217,260 182,033 0.8Serba Dinamik Holdings Berhad 162,800 319,223 341,880 1.4Yinson Holdings Berhad 121,300 382,835 440,319 1.8 2,984,213 3,050,897 12.5

ConstructionsAdvancecon Holdings Berhad 830,300 662,778 871,815 3.6 Ahmad Zaki Resources Berhad 124,200 134,480 139,104 0.6 Econpile Holdings Berhad 81,400 237,052 239,316 1.0 Gabungan AQRS Berhad 144,400 206,251 245,480 1.0 Inta Bina Group Berhad 835,200 252,643 250,560 1.0 Kerjaya Prospek Group Berhad 64,600 210,200 233,206 0.9 Kimlun Corporation Berhad 97,000 216,736 207,580 0.8 ML Global Berhad 301,000 339,198 379,260 1.5TRC Synergy Berhad 172,600 139,045 141,532 0.6 2,398,383 2,707,853 11.0

TechnologyGlobetronics Technology Bhd. 130,800 794,621 837,120 3.4 Inari Amertron Berhad 11,000 22,072 27,940 0.1 JF Technology Berhad 40,700 55,723 79,365 0.3 KESM Industries Berhad 20,600 298,341 309,000 1.3 Notion VTec Berhad 412,800 477,759 425,184 1.7 VisDynamics Holdings Berhad 77,500 84,673 107,725 0.5 1,733,189 1,786,334 7.3

FinanceBIMB Holdings Berhad 165,900 596,607 729,960 3.0 ELK-Desa Resources Berhad 131,760 160,974 152,841 0.6 RCE Capital Berhad 213,800 360,705 363,460 1.5 1,118,286 1,246,261 5.1

Special Purpose Acquisition CompanyRed Sena Berhad 104,000 52,520 46,800 0.2

Total listed equity securities 20,532,581 20,602,769 84.2





Listed collective investment schemesKIP Real Estate Investment Trust 339,200 339,878 315,456 1.3 MRCB-Quill REIT 126,600 152,300 164,580 0.7YTL Hospitality REIT 492,900 523,780 576,693 2.3 Total collective investment schemes 1,015,958 1,056,729 4.3

Listed warrantsRed Sena Berhad-WA 128,700 - 7,079 -SCGM Berhad-WA 4,760 - 2,237 -Total listed warrants - 9,316 -

Total fi nancial assets at FVTPL 21,548,539 21,668,814 88.5

Unrealised gain on fi nancial assets at FVTPL 120,275

5. MANAGER’S FEE

The Manager’s fee is calculated 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 (2016: 1.55% per annum).

6. TRUSTEE’S FEE

Pursuant to the eighth supplemental deed dated 25 July 2014, the Trustee’s fee is calculated 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.

The Trustee is currently charging Trustee’s fee of 0.07% per annum of the NAV of the Fund (The Trustee’s fee was charging 0.07% per annum of the NAV of the Fund, subject to a minimum fee of RM9,000 per annum for the fi nancial year 2016).


7. INCOME TAX

Income tax is calculated at the Malaysian statutory tax rate of 24% of the estimated assessable income for the current and previous fi nancial years.

Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, 1967.

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:

2017 2016 RM RM Net income before tax 969,445 2,489,320

Tax at Malaysian statutory tax rate of 24% (2016: 24%) 232,667 597,437 Tax effect of: Income not subject to tax (447,620) (710,705) Loss not deductible for tax purposes 64,310 - Expenses not deductible for tax purposes 18,377 14,852 Restriction on tax deductible expenses for unit trust fund 132,266 98,416 Under provision in prior fi nancial year - 78 Income tax for the fi nancial year - 78

8. SHORT TERM DEPOSITS

Short term deposits are held with licensed fi nancial institutions in Malaysia at the prevailing interest rates.

9. OTHER RECEIVABLES

2017 2016 RM RM

Amount due from licensed fi nancial institutions 275,644 125,285 Dividend receivables 54,541 35,477 Interest receivable from short term deposits 207 2,618 330,392 163,380

10. OTHER PAYABLES

2017 2016 RM RM

Amount due to licensed fi nancial institutions 234,147 507,336 Accrual for auditors’ remuneration 6,500 6,000 Accrual for tax agent’s fees 4,500 4,500 Provision for printing and other expenses 17,073 24,506 262,220 542,342


11. NET ASSET VALUE ATTRIBUTABLE TO UNIT HOLDERS

NAV attributed to unit holders is represented by:


Unit holders’ contribution (a) 21,221,067 32,133,111Retained earnings: Realised reserves 3,141,785 3,233,062 Unrealised reserves 120,275 (940,447) 3,262,060 2,292,615

24,483,127 34,425,726

(a) Unit holders’ contribution

2017 2016 No. of units RM No. of units RM

At beginning of the fi nancial year 35,098,926 32,133,111 20,972,015 18,286,523Add: Creation of units 4,595,654 4,567,825 19,193,888 18,278,113Less: Cancellation of units (15,247,952) (15,322,746) (5,066,977) (4,846,560)Distribution equalisation - (157,123) - 415,035At end of the fi nancial year 24,446,628 21,221,067 35,098,926 32,133,111

The number of units legally or benefi cially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 31 August 2017 were nil (2016: nil).

12. NET ASSET VALUE PER UNIT

In line with the adoption of MFRS 139, fi nancial assets at FVTPL have been valued at the prices at the close of business. In accordance with the Deed, the calculation of NAV attributable to unit holders per unit for the creation and cancellation of units is computed based on fi nancial assets at FVTPL valued at the last done market price.

A reconciliation of NAV attributable to unit holders for creation/cancellation of units and the NAV attributable to unit holders per the fi nancial statements is as follows:

2017 2016 RM RM/Unit RM RM/Unit

NAV attributable to unit holders for creation/ cancellation of units 24,619,511 1.0071 34,825,677 0.9922Effects of adopting bid prices as fair value (136,384) (0.0056) (399,951) (0.0114)NAV attributable to unit holders per statement of fi nancial position 24,483,127 1.0015 34,425,726 0.9808


13. PORTFOLIO TURNOVER RATIO (“PTR”)

PTR for the fi nancial year is 1.13 times (2016: 1.44 times).

PTR is the ratio of average sum of acquisitions and disposals of investments of the Fund for the fi nancial year to the average NAV of the Fund, calculated on a daily basis.

14. MANAGEMENT EXPENSE RATIO (“MER”)

MER for the fi nancial year is 1.87% (2016: 1.94%).

MER is the ratio of total fees and recovered expenses of the Fund expressed as a percentage of the Fund’s average NAV, calculated on a daily basis.

15. TRANSACTIONS WITH LICENSED FINANCIAL INSTITUTIONS

Brokerage, stamp duty Transaction Percentage and clearing Percentage value of total fee of total RM % RM %

Kenanga Investment Bank Berhad* 28,024,291 36.9 87,144 36.8 Public Investment Bank Berhad 10,739,854 14.1 32,527 13.7 RHB Investment Bank Berhad 9,233,465 12.1 30,724 13.0 Affi n Hwang Investment Bank Berhad 5,802,784 7.6 18,341 7.7 Maybank Investment Bank Berhad 5,564,791 7.3 17,060 7.2 CIMB Investment Bank Berhad 3,794,348 5.0 11,415 4.8 TA Securities Holdings Berhad 3,700,027 4.9 11,096 4.7 Hong Leong Investment Bank Berhad 3,334,830 4.4 10,340 4.4 Alliance Investment Bank Berhad 1,605,951 2.1 5,097 2.2 UOB Kay Hian Securities (M) Sdn Bhd 1,286,790 1.7 4,437 1.9 Others 2,952,649 3.9 8,521 3.6 76,039,780 100.0 236,702 100.0

* Kenanga Investment Bank Berhad is a related party of Kenanga Investors Berhad.

The above transaction values are in respect of listed equity securities, listed collective investment schemes and listed warrants.

The directors of the Manager are of the opinion that the transactions with the related party have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties. The Manager is of the opinion that the above dealings have been transacted on an arm’s length basis.


16. SEGMENTAL REPORTING

a. Business Segments

In accordance with the objective of the Fund, the Fund can invest 70% to 98% in listed equity securities and 2% to 30% others. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:

Listed investment Other securities investments Total RM RM RM

2017RevenueSegment income 1,402,165 194,960 1,597,125 Unallocated expenditure (627,680)Income before tax 969,445 Income tax -Net income after tax 969,445

AssetsFinancial assets at FVTPL 21,668,814 -Short term deposits - 2,517,000Other segment assets 330,185 207Total segment assets 21,998,999 2,517,207 24,516,206 Unallocated assets 360,072 24,876,278

LiabilitiesSegment liabilities 234,147 - 234,147 Unallocated liabilities 159,004 393,151


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segments (Contd.)

Listed investment Other securities investments Total RM RM RM

2016RevenueSegment income 2,708,072 253,199 2,961,271 Unallocated expenditure (471,951)Income before tax 2,489,320 Income tax (78)Net income after tax 2,489,242

AssetsFinancial assets at FVTPL 24,259,012 -Short term deposits - 10,542,000Other segment assets 160,762 2,618Total segment assets 24,419,774 10,544,618 34,964,392 Unallocated assets 53,933 35,018,325

LiabilitiesSegment liabilities 507,336 - 507,336 Unallocated liabilities 85,263 592,599

b. Geographical Segments

As all of the Fund’s investments are located in Malaysia, disclosure by geographical segments is not relevant.

17. FINANCIAL INSTRUMENTS

a. Classifi cation of fi nancial instruments

The Fund’s fi nancial assets and fi nancial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classifi cation. The signifi cant accounting policies in Note 3 describe how the classes of fi nancial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised.


17. FINANCIAL INSTRUMENTS (CONTD.)

a. Classifi cation of fi nancial instruments (Contd.)

The following table analyses the fi nancial assets and fi nancial liabilities of the Fund in the statement of fi nancial position by the class of fi nancial instruments to which they are assigned and therefore by the measurement basis.

Financial assets Financial at FVTPL Receivables liabilities Total RM RM RM RM

2017AssetsListed equity securities 20,602,769 - - 20,602,769 Listed collective investment schemes 1,056,729 - - 1,056,729 Listed warrants 9,316 - - 9,316 Short term deposits - 2,517,000 - 2,517,000 Other receivables - 330,392 - 330,392 Cash at bank - 360,072 - 360,072 21,668,814 3,207,464 - 24,876,278

Liabilities Amount due to Manager - - 129,438 129,438 Amount due to Trustee - - 1,493 1,493 Other payables - - 234,147 234,147 - - 365,078 365,078

2016 Assets Listed equity securities 23,497,186 - - 23,497,186 Listed collective investment schemes 674,629 - - 674,629 Listed warrants 87,197 - - 87,197 Short term deposits - 10,542,000 - 10,542,000 Other receivables - 163,380 - 163,380 Cash at bank - 52,346 - 52,346 24,259,012 10,757,726 - 35,016,738

Liabilities Amount due to Manager - - 46,545 46,545 Amount due to Trustee - - 3,712 3,712 Other payables - - 507,336 507,336 - - 557,593 557,593


17. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value

The Fund’s fi nancial assets at FVTPL are carried at fair value. The fair values of these fi nancial assets were determined using prices in active markets.

The following table shows the fair value measurements by level of the fair value measurement hierarchy:

Level 1 Level 2 Level 3 Total RM RM RM RMInvestments:2017Listed equity securities 20,602,769 - - 20,602,769 Listed collective investment schemes 1,056,729 - - 1,056,729 Listed warrants 9,316 - - 9,316 2016 Listed equity securities 23,497,186 - - 23,497,186Listed collective investment schemes 674,629 - - 674,629 Listed warrants 87,197 - - 87,197

Level 1: Listed prices in active market Level 2: Model with all signifi cant inputs which are observable market data Level 3: Model with inputs not based on observable market data

The fair values of listed equity securities, listed collective investment schemes and listed warrants are determined by reference to Bursa Malaysia Securities Berhad’s bid prices at reporting date.

c. Financial instruments not carried at fair value and which their carrying amounts are reasonable approximations of fair value

The carrying amounts of the Fund’s other fi nancial assets and fi nancial liabilities are not carried at fair value but approximate fair values due to the relatively short term maturity of these fi nancial instruments.

18. CAPITAL MANAGEMENT

The capital of the Fund can vary depending on the demand for creation and cancellation of units to the Fund.

The Fund’s objectives for managing capital are:

a. To invest in investments meeting the description, risk exposure and expected return indicated in its prospectus;

b. To maintain suffi cient liquidity to meet the expenses of the Fund, and to meet cancellation requests as they arise; and

c. To maintain suffi cient fund size to make the operations of the Fund cost-effi cient.

No changes were made to the capital management objectives, policies or processes during the current and previous fi nancial years.


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Investor Services Center Head Offi ce, Kuala LumpurToll Free Line: 1 800 88 3737 Level 14, Kenanga Tower, 237, Jalan Tun RazakFax: +603 2172 3133 50400 Kuala Lumpur, MalaysiaEmail: [email protected] Tel: 03-2172 3000 Fax: 03-2172 3080

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ANNUAL REPORT - Kenanga...ANNUAL REPORT For the Financial Year Ended 31 August 2017 KENANGA GROWTH ... Negara later also introduced new forex rule where exporters are required to convert