KENANgA-ICBC ChINA FOCUs INCOmE FUNd · 2017. 2. 27. · For the financial period from 1 October 2015 to 31 December 2016, the Fund registered a return of 0.81% 2.2 The Fund's asset

ANNUAL REPORT

For the First Financial Period from 1 October 2015 (date of commencement) to 31 December 2016

KENANgA-ICBC ChINAFOCUs INCOmE FUNd

Kenanga-ICBC China Focus Income Fund Contents Page

Corporate Directory ii

Directory of Manager’s Offices iii

Fund Information 1

Manager’s Report 2 - 3

Fund Performance 4 - 6

Trustee’s Report 7

Independent Auditor’s Report 8 - 11

Statement by the Manager 12

Financial Statements 13 - 31

Kenanga-ICBC China Focus Income Fund Contents Page

Corporate Directory ii

Directory of Manager’s Offices iii

Fund Information 1

Manager’s Report 2 - 3

Fund Performance 4 - 6

Trustee’s Report 7

Independent Auditor’s Report 8 - 11

Statement by the Manager 12

Financial Statements 13 - 31

ii Kenanga-ICBC China Focus Income Fund Annual Report

Kenanga-ICBC China Focus Income Fund Annual Report ii

CORPORATE DIRECTORY Manager: Kenanga Investors Berhad(Company No. 353563-P) Registered Office Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. Tel: 03-2172 2888 Fax: 03-2172 2999

Business Office Level 14, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. Tel: 03-2172 3000 Fax: 03-2172 3080 E-mail:[email protected] Website: www.KenangaInvestors.com.my

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

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 7011089) Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Trustee: CIMB Commerce Trustee Berhad (Company No. 313031-A) Registered Office Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50490 Kuala Lumpur. Tel: 03-2261 8888 Fax: 03-2261 0099 Website: www.cimb.com

Business Office Level 21, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50490 Kuala Lumpur. Tel: 03-2261 8888 Fax: 03-2261 9889

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.fimm.com.my

Kenanga-ICBC China Focus Income Fund Annual Report iii

DIRECTORY OF MANAGER’S OFFICES Regional Branch Offices : Kuala Lumpur Level 13, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. Tel: 03-2172 3123 Fax: 03-2172 3133

Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum 80300 Johor Bahru , Johor Tel: 07-223 7505 / 4798 Fax: 07-223 4802

Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen 2 75200 Melaka Tel: 06-281 8913 / 06-282 0518 Fax: 06-281 4286

Kuching 1st Floor, No 71, Lot 10900, Jalan Tun Jugah 93350 Kuching, Sarawak Tel: 082-572 228 Fax: 082-572 229

Klang No. 12, Jalan Batai Laut 3, Taman Intan 41300 Klang, Selangor Darul Ehsan Tel: 03-3341 8818 / 03-3348 7889 Fax: 03-3341 8816

Kuantan No. B8, Ground Floor, Jalan Tun Ismail 1 25000 Kuantan Pahang. Tel : 09-514 3688 Fax : 09-514 3838

Penang 5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah 10050 Penang. Tel : 04-210 6628 Fax : 04-210 6644

Ipoh Suite 1, 2nd Floor, No. 63, Persiaran Greenhill, 30450 Ipoh, Perak, Malaysia Tel: 05-254 7573 / 7570 / 7575 Fax: 05-254 7606

Miri 2nd Floor, Lot 1264, Centre Point Commercial Centre, Jalan Melayu, 98000 Miri, Sarawak Tel: 085-416 866 Fax: 085-322 340

Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens 88000 Kota Kinabalu, Sabah Tel: 088-447 089 / 088-448 106 Fax: 088-447 039

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

Kenanga-ICBC China Focus Income Fund Annual Report iii Kenanga-ICBC China Focus Income Fund Annual Report ii

CORPORATE DIRECTORY Manager: Kenanga Investors Berhad(Company No. 353563-P) Registered Office Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. Tel: 03-2172 2888 Fax: 03-2172 2999

Business Office Level 14, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. Tel: 03-2172 3000 Fax: 03-2172 3080 E-mail:[email protected] Website: www.KenangaInvestors.com.my

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

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 7011089) Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Trustee: CIMB Commerce Trustee Berhad (Company No. 313031-A) Registered Office Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50490 Kuala Lumpur. Tel: 03-2261 8888 Fax: 03-2261 0099 Website: www.cimb.com

Business Office Level 21, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50490 Kuala Lumpur. Tel: 03-2261 8888 Fax: 03-2261 9889

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.fimm.com.my

Kenanga-ICBC China Focus Income Fund Annual Report iii

DIRECTORY OF MANAGER’S OFFICES Regional Branch Offices : Kuala Lumpur Level 13, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. Tel: 03-2172 3123 Fax: 03-2172 3133

Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum 80300 Johor Bahru , Johor Tel: 07-223 7505 / 4798 Fax: 07-223 4802

Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen 2 75200 Melaka Tel: 06-281 8913 / 06-282 0518 Fax: 06-281 4286

Kuching 1st Floor, No 71, Lot 10900, Jalan Tun Jugah 93350 Kuching, Sarawak Tel: 082-572 228 Fax: 082-572 229

Klang No. 12, Jalan Batai Laut 3, Taman Intan 41300 Klang, Selangor Darul Ehsan Tel: 03-3341 8818 / 03-3348 7889 Fax: 03-3341 8816

Kuantan No. B8, Ground Floor, Jalan Tun Ismail 1 25000 Kuantan Pahang. Tel : 09-514 3688 Fax : 09-514 3838

Penang 5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah 10050 Penang. Tel : 04-210 6628 Fax : 04-210 6644

Ipoh Suite 1, 2nd Floor, No. 63, Persiaran Greenhill, 30450 Ipoh, Perak, Malaysia Tel: 05-254 7573 / 7570 / 7575 Fax: 05-254 7606

Miri 2nd Floor, Lot 1264, Centre Point Commercial Centre, Jalan Melayu, 98000 Miri, Sarawak Tel: 085-416 866 Fax: 085-322 340

Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens 88000 Kota Kinabalu, Sabah Tel: 088-447 089 / 088-448 106 Fax: 088-447 039

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

1 Kenanga-ICBC China Focus Income Fund Annual Report

Kenanga-ICBC China Focus Income Fund Annual Report 1

1. FUND INFORMATION 1.1 Fund Name

Kenanga-ICBC China Focus Income Fund (KICFIF or the Fund) 1.2 Fund Type / Category

Growth / Mixed Asset (feeder)

1.3 Investment Objective

The Fund seeks to provide long-term capital growth by investing in the Target Fund.

1.4 Investment Strategy

The Fund will invest at least 95% of the Fund’s NAV in Shares class A of the Target Fund, while the remaining of the Fund’s NAV will be invested in liquid assets.

1.5 Asset Allocation Minimum 95% of the NAV to be invested in the Target Fund and maximum 5% of the NAV to be invested in liquid assets comprising money market instruments and deposits with financial institutions.

1.6 Duration The Fund was launched on 1 October 2015 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 3.8% growth in NAV per annum.

1.8 Distribution Policy There will be no distribution of income.


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-ICBC China Focus Income Fund - RMB CLASS 0.81% - USD CLASS -

Source: Lipper

For the financial period from 1 October 2015 to 31 December 2016, the Fund registered a return of 0.81%

2.2 The Fund's asset allocation as at 31 December 2016 Asset 31 Dec 2016 Collective investment scheme - foreign 95.8%

Cash and others 4.2% 2.3 Market Review and Strategy

The onshore bond market had a vigorous correction in 4th quarter of 2016, bond yield lifted substantially. Accompanied with the regulating policies of the property market in China National Day holiday, bond yield in early to mid-October was in a downward trend, the 10-years China Government Bond broke through the year low point of August, which marked the lowest level since 2002. From late-October, monetary policy of the central bank kept steady, focusing on risk prevention. The expectation of Fed rate hike and strong US dollar created persisting pressure for the exchange rate of Renminbi (RMB), capital front remained tight in 4th quarter. At the same time, the regulator was enforcing the supervision of off-balance sheet business and leverage trading in the bond market. The anxiety of deleveraging, the entrustment event of Sealand Securities created panic in the market which lowered down the investment demand of the bond market. Overall, different kind of bonds weakened during the period, especially for long tenor bonds. In the short term, the tight liquidity in onshore market will be strongly correlated to the expected change of exchange rate, but the bond market overall was recovering to its normal status. Regarding the offshore RMB market, as accompanied with the rising yield of US treasury bonds and onshore RMB bonds, Dim Sum bond yield was in the upward trend near the end of 4th quarter. Technically, the downsizing offshore RMB deposit amount led to weaker demand of Dim Sum bond. On the other hand, weaker investment needs of the RQDII fund during year end was also a strong reason for the surging of Dim Sum bond yield. With the onshore and offshore pressure, Dim Sum bond yield and credit spread elevated. Nonetheless, the widened yield difference between onshore and offshore RMB bond enriched the investment value of Dim Sum bonds. Source: ICBC (Asia) Investment Management Company Limited



1. FUND INFORMATION 1.1 Fund Name

Kenanga-ICBC China Focus Income Fund (KICFIF or the Fund) 1.2 Fund Type / Category

Growth / Mixed Asset (feeder)

1.3 Investment Objective

The Fund seeks to provide long-term capital growth by investing in the Target Fund.

1.4 Investment Strategy

The Fund will invest at least 95% of the Fund’s NAV in Shares class A of the Target Fund, while the remaining of the Fund’s NAV will be invested in liquid assets.

1.5 Asset Allocation Minimum 95% of the NAV to be invested in the Target Fund and maximum 5% of the NAV to be invested in liquid assets comprising money market instruments and deposits with financial institutions.

1.6 Duration The Fund was launched on 1 October 2015 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 3.8% growth in NAV per annum.

1.8 Distribution Policy There will be no distribution of income.


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-ICBC China Focus Income Fund - RMB CLASS 0.81% - USD CLASS -

Source: Lipper

For the financial period from 1 October 2015 to 31 December 2016, the Fund registered a return of 0.81%

2.2 The Fund's asset allocation as at 31 December 2016 Asset 31 Dec 2016 Collective investment scheme - foreign 95.8%

Cash and others 4.2% 2.3 Market Review and Strategy

The onshore bond market had a vigorous correction in 4th quarter of 2016, bond yield lifted substantially. Accompanied with the regulating policies of the property market in China National Day holiday, bond yield in early to mid-October was in a downward trend, the 10-years China Government Bond broke through the year low point of August, which marked the lowest level since 2002. From late-October, monetary policy of the central bank kept steady, focusing on risk prevention. The expectation of Fed rate hike and strong US dollar created persisting pressure for the exchange rate of Renminbi (RMB), capital front remained tight in 4th quarter. At the same time, the regulator was enforcing the supervision of off-balance sheet business and leverage trading in the bond market. The anxiety of deleveraging, the entrustment event of Sealand Securities created panic in the market which lowered down the investment demand of the bond market. Overall, different kind of bonds weakened during the period, especially for long tenor bonds. In the short term, the tight liquidity in onshore market will be strongly correlated to the expected change of exchange rate, but the bond market overall was recovering to its normal status. Regarding the offshore RMB market, as accompanied with the rising yield of US treasury bonds and onshore RMB bonds, Dim Sum bond yield was in the upward trend near the end of 4th quarter. Technically, the downsizing offshore RMB deposit amount led to weaker demand of Dim Sum bond. On the other hand, weaker investment needs of the RQDII fund during year end was also a strong reason for the surging of Dim Sum bond yield. With the onshore and offshore pressure, Dim Sum bond yield and credit spread elevated. Nonetheless, the widened yield difference between onshore and offshore RMB bond enriched the investment value of Dim Sum bonds. Source: ICBC (Asia) Investment Management Company Limited



2.4 Income Distribution

As disclosed in the Information Memorandum of the Fund, there will be no distribution of income.

2.5 Rebates & Soft commission

The Manager from time to time may receive rebates which are then paid to the Fund. During the financial period under review, the Manager did not receive rebates or soft commission from bankers, or any other source pursuant to transactions conducted by the Fund.


3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga-ICBC China Focus Income Fund

(“the Fund”) for the financial period as at 31 December 2016 are as follows:

a. Distribution among industry sectors and category of investments:

As at 31.12.2016 %

Collective investment scheme - foreign 95.8Cash and others 4.2

100.0

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

b. Distribution among markets

The Fund invests in foreign collective investment scheme and cash only.



2.4 Income Distribution

As disclosed in the Information Memorandum of the Fund, there will be no distribution of income.

2.5 Rebates & Soft commission

The Manager from time to time may receive rebates which are then paid to the Fund. During the financial period under review, the Manager did not receive rebates or soft commission from bankers, or any other source pursuant to transactions conducted by the Fund.


3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga-ICBC China Focus Income Fund

(“the Fund”) for the financial period as at 31 December 2016 are as follows:

a. Distribution among industry sectors and category of investments:

As at 31.12.2016 %

Collective investment scheme - foreign 95.8Cash and others 4.2

100.0

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

b. Distribution among markets

The Fund invests in foreign collective investment scheme and cash only.



3.2 Performance details of the Fund for the financial period ended 31 December 2016 are as follows:

Period from

1.10.2015 (date of

commencement) to 31.12.2016

Net asset value ("NAV") (RMB Million)

- RMB CLASS 1.60 - USD CLASS -

Units in circulation (Million) - RMB CLASS 1.59 - USD CLASS -

NAV per unit in RMB - RMB CLASS 1.0081 - USD CLASS 6.9401

NAV per unit in respective currencies - RMB CLASS (RMB) 1.0081 - USD CLASS (USD) 1.0000

Highest NAV per unit in respective currencies - RMB CLASS (RMB) 1.0081 - USD CLASS (USD) 1.0000

Lowest NAV per unit in respective currencies - RMB CLASS (RMB) 1.0000 - USD CLASS (USD) 1.0000

Total return (%) - RMB CLASS 0.81 - USD CLASS -

- Capital growth (%) - RMB CLASS 0.81 - USD CLASS -

- Income growth (%) - RMB CLASS - - USD CLASS -

Gross distribution per unit (sen) - RMB CLASS (RMB) - - USD CLASS (USD) -

Net distribution per unit (sen) - RMB CLASS (RMB) - - USD CLASS (USD) -

Management expense ratio (“MER”) (%) - RMB CLASS 0.80 - USD CLASS -

Portfolio turnover ratio (“PTR”) (times) - RMB CLASS 0.99 - USD CLASS -


Note: Total return is the actual return of the Fund for the financial period, 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 will be no distribution of income by the Fund in accordance to the distribution policy of the Fund as disclosed in the Information Memorandum.



3.2 Performance details of the Fund for the financial period ended 31 December 2016 are as follows:

Period from

1.10.2015 (date of


Net asset value ("NAV") (RMB Million)

- RMB CLASS 1.60 - USD CLASS -

Units in circulation (Million) - RMB CLASS 1.59 - USD CLASS -

NAV per unit in RMB - RMB CLASS 1.0081 - USD CLASS 6.9401

NAV per unit in respective currencies - RMB CLASS (RMB) 1.0081 - USD CLASS (USD) 1.0000

Highest NAV per unit in respective currencies - RMB CLASS (RMB) 1.0081 - USD CLASS (USD) 1.0000

Lowest NAV per unit in respective currencies - RMB CLASS (RMB) 1.0000 - USD CLASS (USD) 1.0000

Total return (%) - RMB CLASS 0.81 - USD CLASS -

- Capital growth (%) - RMB CLASS 0.81 - USD CLASS -

- Income growth (%) - RMB CLASS - - USD CLASS -

Gross distribution per unit (sen) - RMB CLASS (RMB) - - USD CLASS (USD) -

Net distribution per unit (sen) - RMB CLASS (RMB) - - USD CLASS (USD) -

Management expense ratio (“MER”) (%) - RMB CLASS 0.80 - USD CLASS -

Portfolio turnover ratio (“PTR”) (times) - RMB CLASS 0.99 - USD CLASS -


Note: Total return is the actual return of the Fund for the financial period, 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 will be no distribution of income by the Fund in accordance to the distribution policy of the Fund as disclosed in the Information Memorandum.



4. TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA-ICBC CHINA FOCUS INCOME FUND We, CIMB Commerce Trustee Berhad (“the Trustee”), being the Trustee of Kenanga-ICBC China Focus Income Fund (“the Fund”), are of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the capacity of Manager of the Fund, has fulfilled its duties in the following manner for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016.

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

investment powers of the Manager and the Trustee under the Deed, the Securities Commission Malaysia’s Guidelines on Unlisted Capital Market Products Under The Lodge and Launch Framework, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws;

b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and

c) Creation and cancellation of units have been carried out in accordance with the

Deed and relevant regulatory requirements. For and on behalf of CIMB Commerce Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 24 February 2017


5. INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF KENANGA-ICBC CHINA FOCUS INCOME FUND

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion

We have audited the financial statements of Kenanga-ICBC China Focus Income Fund ("the Fund"), which comprise the statement of financial position as at 31 December 2016, and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows of the Fund for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, as set out on pages 13 to 31.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 December 2016 and of its financial performance and cash flows for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016 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 financial statements section of our report. We believe that the audit evidence we have obtained is sufficient 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 fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial 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 financial statements of the Fund and our auditors’ report thereon. Our opinion on the financial 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 financial 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 financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated.



4. TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA-ICBC CHINA FOCUS INCOME FUND We, CIMB Commerce Trustee Berhad (“the Trustee”), being the Trustee of Kenanga-ICBC China Focus Income Fund (“the Fund”), are of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the capacity of Manager of the Fund, has fulfilled its duties in the following manner for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016.

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

investment powers of the Manager and the Trustee under the Deed, the Securities Commission Malaysia’s Guidelines on Unlisted Capital Market Products Under The Lodge and Launch Framework, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws;

b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and

c) Creation and cancellation of units have been carried out in accordance with the

Deed and relevant regulatory requirements. For and on behalf of CIMB Commerce Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 24 February 2017



REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion

We have audited the financial statements of Kenanga-ICBC China Focus Income Fund ("the Fund"), which comprise the statement of financial position as at 31 December 2016, and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows of the Fund for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, as set out on pages 13 to 31.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 December 2016 and of its financial performance and cash flows for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016 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 financial statements section of our report. We believe that the audit evidence we have obtained is sufficient 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 fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial 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 financial statements of the Fund and our auditors’ report thereon. Our opinion on the financial 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 financial 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 financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated.




REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTD.) Information other than the financial statements and auditors’ report thereon

(Contd.) 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.

Responsibilities of the Manager and Trustee for the financial statements

The Manager is responsible for the preparation of financial 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 financial statements of the Fund that are free from material misstatement, whether due to fraud or error.

In preparing the financial 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 financial 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 financial statements.

Auditors’ responsibility for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic decisions of users taken on the basis of these financial 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 skepticism throughout the audit. We also:



REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTD.)

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

Identify and assess the risks of material misstatement of the financial 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 sufficient 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.

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 significant 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 financial 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 financial statements

of the Fund, including the disclosures, and whether the financial 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 significant audit findings, including any significant deficiencies in internal control that we identify during our audit.




REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTD.) Information other than the financial statements and auditors’ report thereon

(Contd.) 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.

Responsibilities of the Manager and Trustee for the financial statements

The Manager is responsible for the preparation of financial 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 financial statements of the Fund that are free from material misstatement, whether due to fraud or error.

In preparing the financial 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 financial 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 financial statements.

Auditors’ responsibility for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic decisions of users taken on the basis of these financial 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 skepticism throughout the audit. We also:



REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTD.)

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

Identify and assess the risks of material misstatement of the financial 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 sufficient 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.

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 significant 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 financial 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 financial statements

of the Fund, including the disclosures, and whether the financial 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 significant audit findings, including any significant deficiencies in internal control that we identify during our audit.




REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTD.) Other matters This report is made solely to the unitholders of the Fund, as a body, in accordance with the Guidelines on Unlisted Capital Market Product under the Lodge and Launch Framework 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 Lam AF: 0039 No. 2844/02/18(J) Chartered Accountants Chartered Accountant Kuala Lumpur, Malaysia

24 February 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 financial position as at 31 December 2016 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga-ICBC China Focus Income Fund as at 31 December 2016 and of its financial performance and cash flows for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016 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 Officer Kuala Lumpur, Malaysia 24 February 2017




REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTD.) Other matters This report is made solely to the unitholders of the Fund, as a body, in accordance with the Guidelines on Unlisted Capital Market Product under the Lodge and Launch Framework 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 Lam AF: 0039 No. 2844/02/18(J) Chartered Accountants Chartered Accountant Kuala Lumpur, Malaysia

24 February 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 financial position as at 31 December 2016 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga-ICBC China Focus Income Fund as at 31 December 2016 and of its financial performance and cash flows for the first financial period from 1 October 2015 (date of commencement) to 31 December 2016 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 Officer Kuala Lumpur, Malaysia 24 February 2017



7. FINANCIAL STATEMENTS 7.1 STATEMENT OF COMPREHENSIVE INCOME

FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016

Note

1.10.2015(date of


RMB INVESTMENT INCOME Interest income 3,824 Net gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 4 21,561

25,385 EXPENSES Manager's fee 5 12,543 Trustee's fee 6 931 Administration expenses 1,129 14,603 NET INCOME BEFORE TAX 10,782 Income tax 7 - NET INCOME AFTER TAX,

REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 10,782

Net income after tax is made up as follows:

Realised loss (6,914) Unrealised gain 4 17,696

10,782

The accompanying notes form an integral part of the financial statements.


7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

Note 31.12.2016 RMB INVESTMENT Financial assets at FVTPL 4 1,528,866 OTHER ASSETS Amount due from Manager 4,746 Other receivable 8 281 Cash at bank 66,976 72,003 TOTAL ASSETS 1,600,869 LIABILITIES Amount due to Trustee 65 TOTAL LIABILITIES 65 EQUITY Unitholders' contribution 1,590,022 Retained earning 10,782 TOTAL EQUITY 9 1,600,804 TOTAL EQUITY & LIABILITIES 1,600,869 NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO

UNITHOLDERS - RMB CLASS (RMB) 1,600,804 - USD CLASS (USD) - 1,600,804

NUMBER OF UNITS IN CIRCULATION

- RMB CLASS (RMB) 9(a) 1,587,880 - USD CLASS (USD) 9(b) -

NAV PER UNIT IN RMB

- RMB CLASS (RMB) 1.0081 - USD CLASS (RMB) 10 6.9401

NAV PER UNIT IN RESPECTIVE CURRENCIES

- RMB CLASS (RMB) 1.0081 - USD CLASS (USD) 10 1.0000




7. FINANCIAL STATEMENTS 7.1 STATEMENT OF COMPREHENSIVE INCOME

FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016

Note

1.10.2015(date of


RMB INVESTMENT INCOME Interest income 3,824 Net gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 4 21,561

25,385 EXPENSES Manager's fee 5 12,543 Trustee's fee 6 931 Administration expenses 1,129 14,603 NET INCOME BEFORE TAX 10,782 Income tax 7 - NET INCOME AFTER TAX,

REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 10,782

Net income after tax is made up as follows:

Realised loss (6,914) Unrealised gain 4 17,696

10,782



7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

Note 31.12.2016 RMB INVESTMENT Financial assets at FVTPL 4 1,528,866 OTHER ASSETS Amount due from Manager 4,746 Other receivable 8 281 Cash at bank 66,976 72,003 TOTAL ASSETS 1,600,869 LIABILITIES Amount due to Trustee 65 TOTAL LIABILITIES 65 EQUITY Unitholders' contribution 1,590,022 Retained earning 10,782 TOTAL EQUITY 9 1,600,804 TOTAL EQUITY & LIABILITIES 1,600,869 NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO

UNITHOLDERS - RMB CLASS (RMB) 1,600,804 - USD CLASS (USD) - 1,600,804

NUMBER OF UNITS IN CIRCULATION

- RMB CLASS (RMB) 9(a) 1,587,880 - USD CLASS (USD) 9(b) -

NAV PER UNIT IN RMB

- RMB CLASS (RMB) 1.0081 - USD CLASS (RMB) 10 6.9401

NAV PER UNIT IN RESPECTIVE CURRENCIES

- RMB CLASS (RMB) 1.0081 - USD CLASS (USD) 10 1.0000




7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016

Note Unitholders’ contribution

Retained earning

Total NAV

RMB RMB RMB 1.10.2015 (date of


Total comprehensive income - 10,782 10,782 Creation of units

- RMB CLASS 9(a) 2,329,733 - 2,329,733 - USD CLASS 9(b) - - -

Cancellation of units - RMB CLASS 9(a) (741,853) - (741,853) - USD CLASS 9(b) - - -

Distribution equalisation - RMB CLASS 9(a) 2,142 - 2,142 - USD CLASS 9(b) - - -

At end of the financial period 1,590,022 10,782 1,600,804



7.4 STATEMENT OF CASH FLOWS FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016 1.10.2015

(date of commencement) to

31.12.2016 RMB CASH FLOWS FROM OPERATING AND INVESTING

ACTIVITIES Proceeds from sale of financial assets at FVTPL 734,695 Interest from deposits received 3,824 Trustee’s fee paid (866) Payment for other fees and expenses (1,410) Manager’s fee paid (17,289) Purchase of financial assets at FVTPL (2,242,000) Net cash used in operating and investing activities (1,523,046) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 2,334,916 Cash paid on units cancelled (744,894) Net cash generated from financing activities 1,590,022 NET INCREASE IN CASH AND CASH EQUIVALENTS 66,976 CASH AND CASH EQUIVALENTS AT DATE OF

COMMENCEMENT - CASH AND CASH EQUIVALENTS AT END OF THE

FINANCIAL PERIOD 66,976 Cash and cash equivalents comprise:

Cash at bank 66,976 The accompanying notes form an integral part of the financial statements.



7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016

Note Unitholders’ contribution

Retained earning

Total NAV

RMB RMB RMB 1.10.2015 (date of


Total comprehensive income - 10,782 10,782 Creation of units

- RMB CLASS 9(a) 2,329,733 - 2,329,733 - USD CLASS 9(b) - - -

Cancellation of units - RMB CLASS 9(a) (741,853) - (741,853) - USD CLASS 9(b) - - -

Distribution equalisation - RMB CLASS 9(a) 2,142 - 2,142 - USD CLASS 9(b) - - -

At end of the financial period 1,590,022 10,782 1,600,804



7.4 STATEMENT OF CASH FLOWS FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016 1.10.2015

(date of commencement) to

31.12.2016 RMB CASH FLOWS FROM OPERATING AND INVESTING

ACTIVITIES Proceeds from sale of financial assets at FVTPL 734,695 Interest from deposits received 3,824 Trustee’s fee paid (866) Payment for other fees and expenses (1,410) Manager’s fee paid (17,289) Purchase of financial assets at FVTPL (2,242,000) Net cash used in operating and investing activities (1,523,046) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 2,334,916 Cash paid on units cancelled (744,894) Net cash generated from financing activities 1,590,022 NET INCREASE IN CASH AND CASH EQUIVALENTS 66,976 CASH AND CASH EQUIVALENTS AT DATE OF

COMMENCEMENT - CASH AND CASH EQUIVALENTS AT END OF THE

FINANCIAL PERIOD 66,976 Cash and cash equivalents comprise:

Cash at bank 66,976 The accompanying notes form an integral part of the financial statements.



7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga-ICBC China Focus Income Fund (“the Fund”) was constituted pursuant to the executed Deed dated 24 June 2015 between the Manager, Kenanga Investors Berhad, and CIMB Commerce Trustee Berhad (“the Trustee”). The Fund commenced operations on 1 October 2015 and will continue to be in operation until terminated as provided under Part 11 of the Deed. Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad. Prior to 2 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 on 2 November 2016, Kenanga Investment Bank Berhad has become the ultimate parent company for both Kenanga Investors Berhad and K & N Kenanga Holdings Berhad and 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 Fund seeks to provide unitholders long term capital growth by investing in the Target Fund. To achieve the objective of the Fund, it will invest a minimum 95% of the Fund's NAV in Share class A of the ICBC China Focus Stable Return Fund (“Target Fund”), a fund which is managed by RBS (Luxembourg) S.A. ("AIFM"), and domiciled in Luxembourg. The remaining of the Fund's NAV will be invested in liquid assets comprising money market instruments and deposits with licensed financial institutions. The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 24 February 2017.

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

To the extent the Fund invests in Target Fund, which has investment in debt securities, preference share and dividend paying equity securities, it is exposed to market risk (which includes interest risk, price risk and currency risk), credit risk and liquidity risk. The Manager monitors the portfolio of Target Fund to ensure that the underlying fund is positioned to meet its investment objectives. The Manager may seek alternative collective investment scheme or any permissible instruments that are consistent with the objective of the Fund.

a. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes interest rate risk, price risk and currency risk.


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

a. Market Risk (Contd.) Market risk arises when the value of the investments fluctuates in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are other economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the investments' prices caused by uncertainties in the economy, political and social environment will affect the NAV of the Fund. i. Interest rate risk

The Fund has minimal exposure to interest rate risk as placements with licensed financial institutions are short term in nature and have fixed interest rates. In addition, the Fund has indirect exposure to interest rate risk through Target Fund.

ii. Price risk Price risk is the risk of unfavourable changes in the fair value of foreign collective investment scheme. The Fund invests in a foreign collective investment scheme which is exposed to price fluctuations. This may then affect the NAV per unit of the Fund. Price risk sensitivity The Manager’s best estimate of the effect on the profit for the financial period due to a reasonably possible change in investments in foreign collective investment scheme with all other variables held constant is indicated in the table below:

Changes in price

Effects on profit for the financial

period Increase/

(Decrease) Increase/

(Decrease) Basis points RMB 31.12.2016 Collective investment scheme - foreign 5/(5) 764/(764)

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



7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FIRST FINANCIAL PERIOD FROM 1 OCTOBER 2015 (DATE OF COMMENCEMENT) TO 31 DECEMBER 2016

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga-ICBC China Focus Income Fund (“the Fund”) was constituted pursuant to the executed Deed dated 24 June 2015 between the Manager, Kenanga Investors Berhad, and CIMB Commerce Trustee Berhad (“the Trustee”). The Fund commenced operations on 1 October 2015 and will continue to be in operation until terminated as provided under Part 11 of the Deed. Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad. Prior to 2 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 on 2 November 2016, Kenanga Investment Bank Berhad has become the ultimate parent company for both Kenanga Investors Berhad and K & N Kenanga Holdings Berhad and 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 Fund seeks to provide unitholders long term capital growth by investing in the Target Fund. To achieve the objective of the Fund, it will invest a minimum 95% of the Fund's NAV in Share class A of the ICBC China Focus Stable Return Fund (“Target Fund”), a fund which is managed by RBS (Luxembourg) S.A. ("AIFM"), and domiciled in Luxembourg. The remaining of the Fund's NAV will be invested in liquid assets comprising money market instruments and deposits with licensed financial institutions. The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 24 February 2017.

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

To the extent the Fund invests in Target Fund, which has investment in debt securities, preference share and dividend paying equity securities, it is exposed to market risk (which includes interest risk, price risk and currency risk), credit risk and liquidity risk. The Manager monitors the portfolio of Target Fund to ensure that the underlying fund is positioned to meet its investment objectives. The Manager may seek alternative collective investment scheme or any permissible instruments that are consistent with the objective of the Fund.

a. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes interest rate risk, price risk and currency risk.



a. Market Risk (Contd.) Market risk arises when the value of the investments fluctuates in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are other economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the investments' prices caused by uncertainties in the economy, political and social environment will affect the NAV of the Fund. i. Interest rate risk

The Fund has minimal exposure to interest rate risk as placements with licensed financial institutions are short term in nature and have fixed interest rates. In addition, the Fund has indirect exposure to interest rate risk through Target Fund.

ii. Price risk Price risk is the risk of unfavourable changes in the fair value of foreign collective investment scheme. The Fund invests in a foreign collective investment scheme which is exposed to price fluctuations. This may then affect the NAV per unit of the Fund. Price risk sensitivity The Manager’s best estimate of the effect on the profit for the financial period due to a reasonably possible change in investments in foreign collective investment scheme with all other variables held constant is indicated in the table below:

Changes in price

Effects on profit for the financial

period Increase/

(Decrease) Increase/

(Decrease) Basis points RMB 31.12.2016 Collective investment scheme - foreign 5/(5) 764/(764)

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




a. Market Risk (Contd.)

ii. Price risk (Contd.) Price risk concentration The following table sets out the Fund’s exposure and concentration to price risk based on its portfolio of financial instruments as at the reporting date.

Fair Value 31.12.2016

Percentage of NAV

31.12.2016 RMB % Collective investment scheme - foreign 1,528,866 95.5

iii. Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. When the foreign currencies fluctuate in an unfavorable movement against Renminbi, currency of China, the investment face currency loss in addition to capital gain/(loss). This will lead to lower NAV of the Fund.

b. Credit Risk

Prior to investing in Target Fund, the Manager has performed an evaluation of the performance and track record of Target Fund, as well as the fund management team of Target Fund.

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 financial asset recognised in the statement of financial position.

ii. Financial assets that are either past due or impaired As at the reporting date, there are no financial assets that are either past due or impaired.



c. Liquidity Risk

Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholders’ option based on the Fund’s NAV per unit at the time of cancellation calculated in accordance with the Deed.

Unit trust funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risks. Target Fund’s investment manager manages the risk by adopting AIFM’s diversification policy that stipulates single and group issuer limits to confine over-exposure to a single company or group of companies. The following table analyses the maturity profile of the Fund's financial assets and financial liabilities in order to provide a complete view of the Fund's contractual commitments and liquidity.

Note Up to 1 year

31.12.2016 RMB Assets Financial assets at FVTPL 1,528,866 Short term deposits 72,003 (i) 1,600,869 Liabilities Other liabilities (ii) 65 Equity (iii) 1,600,804 Liquidity gap - (i) Financial assets

Analysis of financial asset at FVTPL into maturity groupings is based on the expected date on which this asset will be realised. The Fund’s investments in foreign collective investment scheme have been included in the “up to 1 year” category on the assumption that this is highly liquid investment which can be realised should all of the Fund’s unitholders’ equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised.




a. Market Risk (Contd.)

ii. Price risk (Contd.) Price risk concentration The following table sets out the Fund’s exposure and concentration to price risk based on its portfolio of financial instruments as at the reporting date.

Fair Value 31.12.2016

Percentage of NAV

31.12.2016 RMB % Collective investment scheme - foreign 1,528,866 95.5

iii. Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. When the foreign currencies fluctuate in an unfavorable movement against Renminbi, currency of China, the investment face currency loss in addition to capital gain/(loss). This will lead to lower NAV of the Fund.

b. Credit Risk

Prior to investing in Target Fund, the Manager has performed an evaluation of the performance and track record of Target Fund, as well as the fund management team of Target Fund.

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 financial asset recognised in the statement of financial position.

ii. Financial assets that are either past due or impaired As at the reporting date, there are no financial assets that are either past due or impaired.



c. Liquidity Risk

Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholders’ option based on the Fund’s NAV per unit at the time of cancellation calculated in accordance with the Deed.

Unit trust funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risks. Target Fund’s investment manager manages the risk by adopting AIFM’s diversification policy that stipulates single and group issuer limits to confine over-exposure to a single company or group of companies. The following table analyses the maturity profile of the Fund's financial assets and financial liabilities in order to provide a complete view of the Fund's contractual commitments and liquidity.

Note Up to 1 year

31.12.2016 RMB Assets Financial assets at FVTPL 1,528,866 Short term deposits 72,003 (i) 1,600,869 Liabilities Other liabilities (ii) 65 Equity (iii) 1,600,804 Liquidity gap - (i) Financial assets

Analysis of financial asset at FVTPL into maturity groupings is based on the expected date on which this asset will be realised. The Fund’s investments in foreign collective investment scheme have been included in the “up to 1 year” category on the assumption that this is highly liquid investment which can be realised should all of the Fund’s unitholders’ equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised.




c. Liquidity Risk (Contd.)

(ii) Financial liabilities The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the date on which liabilities will be settled. When the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Fund can be required to pay.

(iii) Equity

As the unitholders can request for redemption of its units, it has been categorised as having a maturity of “up to 1 year”.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Accounting

The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards Board (“MASB”) and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

b. Standards and Amendments Issued But Not Yet Effective As at the reporting date, the following Standards and Amendments that have been issued by MASB will be effective for the Fund in future periods. The Fund intends to adopt the relevant standards when they become effective. Description

Effective for financial

period beginning on

or after Amendments to MFRS contained in the documents entitled

"Annual improvements to MFRS Standards 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: Classification and Measurement of

Shared-based Payment Transactions 1 January 2018


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

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

Description


period beginning on

or after Amendments 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: Clarification to MFRS 15 1 January 2018MFRS 16: Leases 1 January 2019Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

To be announced

by MASB

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

MFRS 9 replaces MFRS 139 on the following requirements: classification and measurement of financial assets and financial liabilities as defined 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 financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instruments. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at FVTPL, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition.

i. Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading include foreign collective investment scheme acquired principally for the purpose of selling in the near term.




c. Liquidity Risk (Contd.)

(ii) Financial liabilities The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the date on which liabilities will be settled. When the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Fund can be required to pay.

(iii) Equity

As the unitholders can request for redemption of its units, it has been categorised as having a maturity of “up to 1 year”.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Accounting

The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards Board (“MASB”) and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

b. Standards and Amendments Issued But Not Yet Effective As at the reporting date, the following Standards and Amendments that have been issued by MASB will be effective for the Fund in future periods. The Fund intends to adopt the relevant standards when they become effective. Description


period beginning on

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: Classification and Measurement of

Shared-based Payment Transactions 1 January 2018



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

Description


period beginning on

or after Amendments 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: Clarification to MFRS 15 1 January 2018MFRS 16: Leases 1 January 2019Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

To be announced

by MASB

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

MFRS 9 replaces MFRS 139 on the following requirements: classification and measurement of financial assets and financial liabilities as defined 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 financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instruments. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at FVTPL, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition.

i. Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading include foreign collective investment scheme acquired principally for the purpose of selling in the near term.




c. Financial Assets (Contd.)

i. Financial assets at FVTPL (Contd.) Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in profit or loss. Distribution revenue element of such instruments is recorded separately in "distribution income".

ii. Receivables

Financial assets with fixed or determinable payments that are not listed in an active market are classified as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss.

d. Impairment of Financial Assets

The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account.



d. Impairment of Financial Assets (Contd.) 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 profit or loss.

e. Income

Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Interest income is recognised using the effective interest method. Distribution income is recognised on declared basis, when the right to receive the distribution is established. The realised gain or loss on sale of investments is measured as the difference between the net disposal proceeds and the cost of the investment.

f. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term deposits with licensed financial institutions with insignificant risk of change in value.

g. Income Tax Income tax on the profit or loss for the financial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial period. As no temporary differences have been identified, 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 and unrealised gain or loss from translating foreign currency monetary items at exchange rates prevailing at reporting date. This reserve is not distributable.

i. Financial Liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.




c. Financial Assets (Contd.)

i. Financial assets at FVTPL (Contd.) Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in profit or loss. Distribution revenue element of such instruments is recorded separately in "distribution income".

ii. Receivables

Financial assets with fixed or determinable payments that are not listed in an active market are classified as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss.

d. Impairment of Financial Assets

The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account.



d. Impairment of Financial Assets (Contd.) 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 profit or loss.

e. Income

Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Interest income is recognised using the effective interest method. Distribution income is recognised on declared basis, when the right to receive the distribution is established. The realised gain or loss on sale of investments is measured as the difference between the net disposal proceeds and the cost of the investment.

f. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term deposits with licensed financial institutions with insignificant risk of change in value.

g. Income Tax Income tax on the profit or loss for the financial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial period. As no temporary differences have been identified, 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 and unrealised gain or loss from translating foreign currency monetary items at exchange rates prevailing at reporting date. This reserve is not distributable.

i. Financial Liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.




i. Financial Liabilities (Contd.)

Financial liabilities are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund’s financial liabilities are classified as other financial liabilities. The Fund’s financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

j. Unitholders’ Contribution – NAV Attributable to Unitholders The unitholders’ contribution to the Fund is classified as equity instruments. Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee.

k. Functional and Presentation Currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (“the functional currency”). The financial statements are presented in Renminbi (“RMB”), which is also the Fund’s functional currency.

l. Significant Accounting Judgments and Estimates The preparation of financial statements requires the use of certain accounting estimates and exercise of judgment. Estimates and judgments are continually evaluated and are based on past experience, reasonable expectations of future events and other factors.

i. Critical judgments made in applying accounting policies

There are no major judgments made by the Manager in applying the Fund's accounting policies.

ii. Key sources of estimation uncertainty There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period.


4. FINANCIAL ASSETS AT FVTPL

31.12.2016 RMB Financial assets held for trading, at FVTPL:

Collective investment schemes - foreign 1,528,866 1.10.2015 (date of


RMB

Net gain on financial assets at FVTPL comprised: Realised gain on disposals 3,865 Unrealised changes in fair values 17,696

21,561

Details of financial assets at FVTPL as at 31 December 2016:

Quantity

Amortised cost Fair value

Percentage of NAV

RMB RMB % Collective investment

scheme - foreign ICBC China Focus

Stable Return Fund 219.181 1,511,170 1,528,866 95.5 Total financial assets

at FVTPL 1,511,170 1,528,866 95.5 Unrealised gain on

financial assets at FVTPL 17,696

5. MANAGER’S FEE

The Manager’s fee is computed on a daily basis at a rate not exceeding 2.00% per annum of the NAV of the Fund as provided under Division 12.1 of the Deed. The Manager is currently charging Manager’s fee of 1.50% per annum of the NAV of the Fund. As the Fund invests in unit of Target Fund, 1.00% of the Manager's fee is charged by the Target Fund's manager and the remaining 0.50% is charged by the Manager. Accordingly, there is no double charging of Manager's fee.




i. Financial Liabilities (Contd.)

Financial liabilities are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund’s financial liabilities are classified as other financial liabilities. The Fund’s financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

j. Unitholders’ Contribution – NAV Attributable to Unitholders The unitholders’ contribution to the Fund is classified as equity instruments. Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee.

k. Functional and Presentation Currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (“the functional currency”). The financial statements are presented in Renminbi (“RMB”), which is also the Fund’s functional currency.

l. Significant Accounting Judgments and Estimates The preparation of financial statements requires the use of certain accounting estimates and exercise of judgment. Estimates and judgments are continually evaluated and are based on past experience, reasonable expectations of future events and other factors.

i. Critical judgments made in applying accounting policies

There are no major judgments made by the Manager in applying the Fund's accounting policies.

ii. Key sources of estimation uncertainty There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period.


4. FINANCIAL ASSETS AT FVTPL

31.12.2016 RMB Financial assets held for trading, at FVTPL:

Collective investment schemes - foreign 1,528,866 1.10.2015 (date of


RMB

Net gain on financial assets at FVTPL comprised: Realised gain on disposals 3,865 Unrealised changes in fair values 17,696

21,561

Details of financial assets at FVTPL as at 31 December 2016:

Quantity

Amortised cost Fair value

Percentage of NAV

RMB RMB % Collective investment

scheme - foreign ICBC China Focus

Stable Return Fund 219.181 1,511,170 1,528,866 95.5 Total financial assets

at FVTPL 1,511,170 1,528,866 95.5 Unrealised gain on

financial assets at FVTPL 17,696

5. MANAGER’S FEE

The Manager’s fee is computed on a daily basis at a rate not exceeding 2.00% per annum of the NAV of the Fund as provided under Division 12.1 of the Deed. The Manager is currently charging Manager’s fee of 1.50% per annum of the NAV of the Fund. As the Fund invests in unit of Target Fund, 1.00% of the Manager's fee is charged by the Target Fund's manager and the remaining 0.50% is charged by the Manager. Accordingly, there is no double charging of Manager's fee.



6. TRUSTEE'S FEE, AUDITORS' REMUNERATION, TAX AGENT'S FEE AND OTHER ADMINISTRATION EXPENSES

Trustee’s fee is calculated on a daily basis at a rate not exceeding 0.05% per annum of the NAV of the Fund as provided under Division 12.2 of the Deed. The Trustee's fee is currently computed at 0.05% per annum of the NAV of the Fund. The auditors' remuneration, tax agent's fee and other administration expenses were absorbed by the Manager for the current financial period.

7. INCOME TAX

Income tax is calculated at the Malaysian statutory tax rate of 24% of the estimated assessable income for the financial period. Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, 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: 1.10.2015 (date of


RMB Net income before tax 10,782 Tax at Malaysian statutory tax rate of 24% 2,588 Tax effect of:

Income not subject to tax (6,092) Expenses not deductible for tax purposes 494 Restriction on tax deductible expenses for unit trust fund 3,010

Income tax for the financial period - 8. OTHER RECEIVABLE

31.12.2016 RMB Other receivable 281


9. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 31.12.2016 RMB Unitholders' contribution - RMB Class (a) 1,590,022 Retained earning:

Realised reserves (6,914) Unrealised reserves 17,696 10,782

1,600,804

(a) Unitholders' contribution - RMB CLASS

1.10.2015 (date of

commencement) to 31.12.2016 No. of units RMB Creation of units 2,329,733 2,329,733 Cancellation of units (741,853) (741,853) Distribution equalisation - 2,142 At end of the financial period 1,587,880 1,590,022

(b) Unitholders' contribution - USD CLASS

1.10.2015 (date of

commencement) to 31.12.2016 No. of units RMB At date of commencement/end of the

financial period - -

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 31 December 2016 were nil.

10. NET ASSET VALUE PER UNIT

The NAV per unit of the Fund, Class USD presented in the statement of financial position represented the initial offer price at the launch of the Fund and translated into presentation currency of the Fund based on the prevailing exchange rate at reporting date.



6. TRUSTEE'S FEE, AUDITORS' REMUNERATION, TAX AGENT'S FEE AND OTHER ADMINISTRATION EXPENSES

Trustee’s fee is calculated on a daily basis at a rate not exceeding 0.05% per annum of the NAV of the Fund as provided under Division 12.2 of the Deed. The Trustee's fee is currently computed at 0.05% per annum of the NAV of the Fund. The auditors' remuneration, tax agent's fee and other administration expenses were absorbed by the Manager for the current financial period.

7. INCOME TAX

Income tax is calculated at the Malaysian statutory tax rate of 24% of the estimated assessable income for the financial period. Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, 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: 1.10.2015 (date of


RMB Net income before tax 10,782 Tax at Malaysian statutory tax rate of 24% 2,588 Tax effect of:

Income not subject to tax (6,092) Expenses not deductible for tax purposes 494 Restriction on tax deductible expenses for unit trust fund 3,010

Income tax for the financial period - 8. OTHER RECEIVABLE

31.12.2016 RMB Other receivable 281


9. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 31.12.2016 RMB Unitholders' contribution - RMB Class (a) 1,590,022 Retained earning:

Realised reserves (6,914) Unrealised reserves 17,696 10,782

1,600,804

(a) Unitholders' contribution - RMB CLASS

1.10.2015 (date of

commencement) to 31.12.2016 No. of units RMB Creation of units 2,329,733 2,329,733 Cancellation of units (741,853) (741,853) Distribution equalisation - 2,142 At end of the financial period 1,587,880 1,590,022

(b) Unitholders' contribution - USD CLASS

1.10.2015 (date of

commencement) to 31.12.2016 No. of units RMB At date of commencement/end of the

financial period - -

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 31 December 2016 were nil.

10. NET ASSET VALUE PER UNIT

The NAV per unit of the Fund, Class USD presented in the statement of financial position represented the initial offer price at the launch of the Fund and translated into presentation currency of the Fund based on the prevailing exchange rate at reporting date.



11. PORTFOLIO TURNOVER RATIO (“PTR”)

PTR for the financial period from 1 October 2015 (date of commencement) to 31 December 2016 is 0.99 times.

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

12. MANAGEMENT EXPENSE RATIO (“MER”)

MER for the financial period from 1 October 2015 (date of commencement) to 31 December 2016 is 0.80%. 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.

13. TRANSACTIONS WITH FINANCIAL INSTITUTIONS

Transaction

value Percentage of

total RMB % Industrial and Commercial Bank of China

Limited* 2,976,694 78.0 Industrial and Commercial Bank of China

(Malaysia) Berhad 840,000 22.0 3,816,694 100.0

* As the Fund is by nature a feeder fund to the Target Fund, hence substantial

transactions were made with the investment adviser of the target fund. The above transaction values are in respect of investments in foreign collective investment scheme and short term deposits. Transactions in these investment securities do not involve any commission or brokerage fees.

14. SEGMENTAL REPORTING

As stated in Note 1 to the financial statements, the Fund is a feeder fund whereby at least 95% of the Funds’ NAV will be invested in Target Fund while maintaining up to a maximum of 5% of the Fund’s NAV in liquid assets. The Target Fund is an open ended unit trust fund in Luxembourg and is managed by AIFM. As the Fund is by nature a feeder fund to an underlying fund, it is not meaningful to disclose its investments by business or geographical segments.


15. FINANCIAL INSTRUMENTS

a. Classification of financial instruments The Fund’s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classification. The significant accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and financial liabilities of the Fund in the statement of financial position by the class of financial instruments to which they are assigned and therefore by the measurement basis.

Financial assets at

FVTPL Receivables Financial liabilities Total

RMB RMB RMB RMB 31.12.2016 Assets Collective investment scheme - foreign 1,528,866 - - 1,528,866

Amount due from Manager - 4,746 - 4,746 Other receivable - 281 - 281 Cash at bank - 66,976 - 66,976 1,528,866 72,003 - 1,600,869 Liabilities Amount due to Trustee - - 65 65 - - 65 65

b. Financial instruments that are carried at fair value The Fund’s financial assets at FVTPL are carried at fair value. The fair values of these financial 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 RMB RMB RMB RMB Investments: 31.12.2016 - Collective investment scheme -

foreign - 1,528,866 - 1,528,866 Level 1: Listed prices in active market Level 2: Model with all significant inputs which are observable market data Level 3: Model with inputs not based on observable market data



11. PORTFOLIO TURNOVER RATIO (“PTR”)

PTR for the financial period from 1 October 2015 (date of commencement) to 31 December 2016 is 0.99 times.

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

12. MANAGEMENT EXPENSE RATIO (“MER”)

MER for the financial period from 1 October 2015 (date of commencement) to 31 December 2016 is 0.80%. 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.

13. TRANSACTIONS WITH FINANCIAL INSTITUTIONS

Transaction

value Percentage of

total RMB % Industrial and Commercial Bank of China

Limited* 2,976,694 78.0 Industrial and Commercial Bank of China

(Malaysia) Berhad 840,000 22.0 3,816,694 100.0

* As the Fund is by nature a feeder fund to the Target Fund, hence substantial

transactions were made with the investment adviser of the target fund. The above transaction values are in respect of investments in foreign collective investment scheme and short term deposits. Transactions in these investment securities do not involve any commission or brokerage fees.

14. SEGMENTAL REPORTING

As stated in Note 1 to the financial statements, the Fund is a feeder fund whereby at least 95% of the Funds’ NAV will be invested in Target Fund while maintaining up to a maximum of 5% of the Fund’s NAV in liquid assets. The Target Fund is an open ended unit trust fund in Luxembourg and is managed by AIFM. As the Fund is by nature a feeder fund to an underlying fund, it is not meaningful to disclose its investments by business or geographical segments.


15. FINANCIAL INSTRUMENTS

a. Classification of financial instruments The Fund’s financial assets and financial liabilities are measured on an ongoing basis at either fair value or at amortised cost based on their respective classification. The significant accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and financial liabilities of the Fund in the statement of financial position by the class of financial instruments to which they are assigned and therefore by the measurement basis.

Financial assets at

FVTPL Receivables Financial liabilities Total

RMB RMB RMB RMB 31.12.2016 Assets Collective investment scheme - foreign 1,528,866 - - 1,528,866

Amount due from Manager - 4,746 - 4,746 Other receivable - 281 - 281 Cash at bank - 66,976 - 66,976 1,528,866 72,003 - 1,600,869 Liabilities Amount due to Trustee - - 65 65 - - 65 65

b. Financial instruments that are carried at fair value The Fund’s financial assets at FVTPL are carried at fair value. The fair values of these financial 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 RMB RMB RMB RMB Investments: 31.12.2016 - Collective investment scheme -

foreign - 1,528,866 - 1,528,866 Level 1: Listed prices in active market Level 2: Model with all significant inputs which are observable market data Level 3: Model with inputs not based on observable market data



15. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value (Contd.) The fair value of foreign collective investment scheme is stated based on the NAV of the Target Fund per unit at the reporting date.

c. Financial instruments not carried at fair value and which carrying amounts are reasonable approximations of fair value The carrying amounts of the Fund’s other financial assets and financial liabilities are not carried at fair value but approximate fair values due to the relatively short term maturity of these financial instruments.

16. 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 information memorandum;

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

c. To maintain sufficient fund size to make the operations of the Fund cost-efficient.

No changes were made to the capital management objectives, policies or processes during the current financial period.

17. COMPARATIVES

There are no comparative amounts presented as this is the Fund's first set of financial statements since its commencement date.


15. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value (Contd.) The fair value of foreign collective investment scheme is stated based on the NAV of the Target Fund per unit at the reporting date.

c. Financial instruments not carried at fair value and which carrying amounts are reasonable approximations of fair value The carrying amounts of the Fund’s other financial assets and financial liabilities are not carried at fair value but approximate fair values due to the relatively short term maturity of these financial instruments.

16. 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 information memorandum;

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

c. To maintain sufficient fund size to make the operations of the Fund cost-efficient.

No changes were made to the capital management objectives, policies or processes during the current financial period.

17. COMPARATIVES

There are no comparative amounts presented as this is the Fund's first set of financial statements since its commencement date.

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Documents

KENANgA-ICBC ChINA FOCUs INCOmE FUNd · 2017. 2. 27. · For the financial period from 1 October 2015 to 31 December 2016, the Fund registered a return of 0.81% 2.2 The Fund's asset