KENANGA MALAYSIAN INC FUND...Kenanga Malaysian Inc Fund 7.46% FTSE-Bursa Malaysia 100 Index (FMB-100) -5.83% *Source: Lipper For the ﬁ nancial year under review, the Fund appreciated

ANNUAL REPORT

For the Financial Year Ended 31 January 2016

KENANGA MALAYSIAN INC FUND

Kenanga Investors Berhad (353563-P)

KENANGA MALAYSIAN INC FUND

Contents Page

Corporate Directory ii

Directory of Manager’s Offi ces iii

Fund Information 1

Manager’s Report 2 - 5

Fund Performance 6 - 8

Trustee’s Report 9

Independent Auditor’s Report 10 - 11

Statement by the Manager 12

Financial Statement 13 - 39

ii Kenanga Malaysian Inc Fund Annual Report

CORPORATE DIRECTORY

MANAGER: KENANGA INVESTORS BERHAD (Company No. 353563-P) REGISTERED OFFICE BUSINESS OFFICEKenanga Investors Berhad (KIB) Suite 12.02, 12th Floor, Kenanga International,8th Floor, Kenanga International, Jalan Sultan Ismail,Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.50250 Kuala Lumpur, Malaysia. Tel: 03-2057 3688Tel: 03-2162 1490 Fax: 03-2161 8807Fax: 03-2161 4990 E-mail: [email protected] Website: www.KenangaInvestors.com.my

BOARD OF DIRECTORS INVESTMENT COMMITTEEDatuk Syed Ahmad Alwee Alsree Dato’ Bruce Kho Yaw Huat (Chairman) (Chairman)Syed Zafi len Syed Alwee Syed Zafi len Syed Alwee (Independent Director) (Independent Member)Peter John Rayner Peter John Rayner (Independent Director) (Independent Member)Imran Devindran bin Abdullah Imran Devindran bin Abdullah (Independent Director) (Independent Member)Dato’ Bruce Kho Yaw Huat Ismitz Matthew De AlwisIsmitz Matthew De Alwis

COMPANY SECRETARY: NORLIZA ABD SAMAD (MAICSA 7011089)9th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax: 03-2161 4990

TRUSTEE: CIMB COMMERCE TRUSTEE BERHAD (COMPANY NO. 313031-A)

REGISTERED OFFICE BUSINESS OFFICELevel 13, Menara CIMB Level 21, Menara CIMBJalan Stesen Sentral 2 Jalan Stesen Sentral 2Kuala Lumpur Sentral Kuala Lumpur Sentral50490 Kuala Lumpur 50490 Kuala LumpurTel: 03-2261 8888 Tel: 03-2261 8888Fax: 03-2261 0099 Fax: 03-2261 9889Website: www.cimb.com

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

TAX ADVISER: ERNST & YOUNG TAX CONSULTANTS SDN BHD (Company No. 179793-K)Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

MEMBERSHIP: FEDERATION OF INVESTMENT MANAGERS MALAYSIA (FIMM)19-06-1, 6th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia. Tel: 03-2093 2600 Fax: 03-2093 2700 Website: www.fi mm.com.my

iiiKenanga Malaysian Inc Fund Annual Report

DIRECTORY OF MANAGER’S OFFICES

REGIONAL BRANCH OFFICES:

Kuala LumpurSuite 12.02, 12th FloorKenanga InternationalJalan Sultan Ismail50250 Kuala Lumpur, MalaysiaTel : 03-2057 3688 Fax : 03-2161 8807

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

KlangNo. 12, Jalan Batai Laut 3, Taman Intan41300 Klang, Selangor Darul EhsanTel : 03-3341 8818 / 03-3348 7889 Fax : 03-3341 8816

Penang16th Floor, Menara Boustead Penang 39, Jalan Sultan Ahmad Shah 10050 Penang. Tel : 04-227 3788 / 04-210 6644Fax : 04-226 5120

Seremban 2nd Floor, No. 1D-2 Jalan Tuanku Munawir 70000 Seremban, Negeri SembilanTel : 06-761 5678 Fax : 06-761 2243

Johor BahruLot 11.03, 11th FloorMenara MSC Cyberport5 Jalan Bukit Meldrum80300 Johor Bahru, JohorTel : 07-223 7505 / 4798 Fax : 07-223 4802

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

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

IpohSuite 1, 2nd Floor,63 Persiaran Greenhill,30450 Ipoh, Perak, MalaysiaTel : 05-254 7573 / 7570 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

DIRECTORY OF MANAGER’S OFFICES

1 Kenanga Malaysian Inc Fund Annual Report

1. FUND INFORMATION

1.1 Fund Name

Kenanga Malaysian Inc Fund (KMIF or the Fund)

1.2 Fund Category / Type

Equity / Growth

1.3 Investment Objective

The Fund aims to provide consistent annual returns and medium to long-term capital appreciation by investing in Malaysian securities with global reach.

1.4 Investment Strategy

The Fund seeks to maximise total returns by providing investors with capital appreciation and income (if any), while reducing risk through diversifi ed investments mainly in equities and short-term money market instruments.

1.5 Duration

The Fund was launched on 9 November 2007 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue.

1.6 Performance Benchmark

FTSE-Bursa Malaysia 100 Index

1.7 Distribution Policy

The Fund intends to pay income by way of distribution or by the creation of additional units after the end of each Accrual Period or any specifi ed period, where possible.

1.8 Breakdown of unit holdings of KMIF as at 28 January 2016

Size of holdings No. of members No. of units held 5,000 and below 36 115,675 5,001 - 10,000 51 399,183 10,001 - 50,000 113 2,748,807 50,001 - 500,000 63 8,680,542 500,001 and above 5 19,086,822 Total 268 31,031,029

2Kenanga Malaysian Inc Fund Annual Report

2. MANAGER’S REPORT

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

The Fund has appreciated by 7.46% in Net Asset Value terms for the fi nancial year under review, thus achieving the Fund’s stated objective of medium to long term capital appreciation.

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

Performance Chart Since Launch (9/11/2007– 31/01/2016)Kenanga Malaysian Inc Fund vs FTSE-Bursa Malaysia 100 Index

Source: Novagni Analytics and Advisory Sdn Bhd

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

For the fi nancial year under review, the Fund continued with its strategy of investing in companies with sustainable business models and competent management. These are also companies that trade at a discount to their intrinsic/fair value.

Sectors favoured for the period under review included the export and manufacturing sector and construction companies with exposure to ETP projects.


2.4 The Fund’s asset allocation as at 31 January 2016 and comparison with the previous fi nancial year

Asset 31 Jan 2016 31 Jan 2015 Quoted investment securities 72.9% 86.6% Short term deposits and cash 27.1% 13.4%

Reason for the differences in asset allocation

As at 31 January 2016, the asset allocation of the Fund stood at around 72.9% in equities and the balance of around 27.1% in liquidity. The investment level decreased as the fund adopted a more defensive strategy.

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

Period under review Kenanga Malaysian Inc Fund 7.46% FTSE-Bursa Malaysia 100 Index (FMB-100) -5.83%

*Source: Lipper

For the fi nancial year under review, the Fund appreciated by 7.46%, outperforming the 5.83% decline in the FBM100. The outperformance was mainly due to better stock selection.

2.6 Review of the market

Market Review

The FBM100 index fell 5.83% for the period under review (1st February 2015 – 31st Jan 2016). Although the market held up relatively well in the fi rst half of the year, it came under selling pressure in the 2nd half as concerns arose over the currency, prolonged slump in oil prices, political uncertainty and contingent liabilities. Bank Negara’s attempt to support the Ringgit resulted in a sharp decline in foreign reserves. At the end of August, Malaysia foreign reserves fell to RM94.5b (a 27% decline from a year ago), its lowest point since the 08’ crisis. Bank Negara’s statement that it will not peg the ringgit or institute capital controls, while comforting to foreign investors, failed to stem the Ringgit sell-off. In the global front, China shocked the world in its sudden move of devaluing RMB by 2% in August. This is the fi rst devaluation since 1994 and the largest RMB devaluation in two decades. The devaluation sparked concerns of a decelerating Chinese economy and potential competitive currency devaluation amongst emerging countries to fi ght for exports.

Both domestic and global markets fell sharply in August 2015 before chalking some recovery towards month end. September was another volatile month for Malaysia as the KLCI rebounded on the back of some stability returning to regional markets and Wall Street and news that the government was allocating RM20bn to ValueCap to support the market.


2.6 Review of the market (Contd.)

Market Review (Contd.)

Most markets bounced off the lows in the fourth quarter as investors turned risk-on, believing that the Federal Reserve will only hike in December. In Malaysia, sentiment improved marginally toward year-end with increasing Chinese investments into Malaysia. Firstly, China’s Premier Le Keqiang has pledged to purchase more Malaysia’s treasury bonds during the 27th Asean Summit in Kuala Lumpur. This was followed by the sales of 1MDB’s Edra power assets to China’s CGN Group for RM9.83bn in equity value. Another deal sealed was the RM7.41bn sales of 60%-stake in Bandar Malaysia to a consortium comprised of Iskandar Waterfront Holdings and China Railway Engineering Corporation (60%:40%).

Meanwhile, the Federal Reserve kept interest rates unchanged. For 2015, the key negative was the 22.9% sharp correction of Brent crude oil price which tumbled to 11-year low and ended the year at US$37.28 per barrel. Meanwhile, fourth quarter CPO price bucked the weaker commodities price trend and rose to the high of RM2485/tonne by end 2015 due to El-Nino weather which is expected to hurt palm production from 2H16 onwards. The Ringgit traded against USD at 4.2943 by end 2015.

The Malaysian market outperformed most regional markets in January. The month started with fi erce selling of equity markets following sharp correction in the Chinese markets and RMB depreciation against USD. Meanwhile, the European Central Bank (ECB) highlighted that it may deliver additional stimulus in the next meeting in March with the weakening infl ation outlook. In Malaysia, sentiment improved towards month end when Bank Negara reduced banks’ reserve requirement by 50bps to ease liquidity. In its budget recalibration in response to lower oil price, the government also cut expenditure and remains committed to fi scal defi cit of 3.1%. The Ringgit strengthened 3.5% to 4.1480 by end January 2016 from 4.2943 by end 2015 after tumbling 22.8% for the year of 2015.

Market Outlook

Heighted volatility for the markets is expected to remain in view of the sluggish global growth. US rate normalisation could be slower than initially expected with its slowing economic activity while ECB and BOJ remains steadfast on monetary easing to combat defl ation. China’s economic activity remains weak despite the monetary easing since end 2014 and this poses downside risk to the Asian economies. While there are still challenges for the Malaysian economy, we believe Malaysia market should perform better in 2016 after a poor 2015. The recent Ringgit strength showcased that the Malaysian market could be oversold. We continue to favour sectors like consumer, construction, infrastructure and technology. The rollout of mega projects including MRT2, LRT3, Pan Borneo highway and RAPID should provide a boost to the construction sector.

Strategy

We will continue to adopt a bar-bell strategy of investing in both beta and defensive stocks while adding on any market weakness. Defensive stocks include names such as utilities and high dividend yielding consumer names while we also look to add growth stocks on weakness.


2.7 Income Distribution

For the fi nancial year under review, the Fund did not declare any income distribution.

2.8 Details of any unit split exercise

The Fund did not carry out any unit split exercise during the fi nancial year under review.

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

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

2.10 Circumstances that materially affect any interests of the unitholders

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

2.11 Rebates & Soft commissions

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


3. FUND PERFORMANCE

3.1 Details of portfolio composition of Kenanga Malaysian Inc Fund (“the Fund”) for the last 3 fi nancial years/period as at 31 January are as follows:

a. Distribution among industry sectors and category of investments:

2016 2015 2014 % % %

Trading/Services 17.1 28.9 31.0 Industrial products 16.2 11.0 1.9 Finance 9.1 7.8 13.5 Construction 9.0 6.9 4.8 Consumer products 7.9 2.6 9.8 Technology 5.2 6.4 - Properties 5.0 11.9 1.9 Plantations 3.2 2.0 10.9 Special purpose acquisition company 0.2 - - Infrastructure - 5.4 4.9 Real Estate Investments Trusts - 3.6 10.8 Warrants - 0.1* - Short term deposits and cash 27.1 13.4 10.5 100.0 100.0 100.0

* Unquoted warrants that has been approved for listing by the relevant authority.

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

b. Distribution among markets

The Fund invests in local quoted investment securities and cash instruments only.


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

Period FY FY from 1.2.2015 to 1.2.2014 to 1.1.2013 to 31.1.2016 31.1.2015 31.1.2014

Net asset value (“NAV”) (RM Million) 19.53* 13.39 14.86 Units in circulation (Million) 31.03 22.86 27.46 NAV per unit (RM) 0.6294* 0.5857 0.5410 Highest NAV per unit (RM) 0.6515 0.6302 0.5531 Lowest NAV per unit (RM) 0.5592 0.5267 0.4625 Total return (%) 7.46 8.26 14.13 - Capital growth (%) 7.46 8.26 14.13 - Income growth (%) - - - Gross distribution per unit (sen) - - - Net distribution per unit (sen) - - - Management expense ratio (“MER”) (%) 1 2.13 2.03 2.24 Portfolio turnover ratio (“PTR”) (times) 2 1.59 1.38 1.29 Note: Total return is the actual return of the Fund for the respective fi nancial years/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 was no distribution declared by the Fund in the current fi nancial year under review.

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

2 PTR is higher against last fi nancial year mainly due to higher trading activities.

* Based on bid price fair valuation method on all investments held by the Fund as at 31 January 2016, the NAV and NAV per unit would be RM19.46 million and RM0.6271 respectively.

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


3.3 Average total return of the Fund

1 Year 3 Years 5 Years 31 Jan 2015 31 Jan 2013 31 Jan 2011 -31 Jan 2016 - 31 Jan 2016 - 31 Jan 2016

Kenanga Malaysian Inc Fund 7.46% 11.76% 7.55% FTSE-Bursa Malaysia 100 Index -5.83% 1.09% 2.15%

Source: Lipper

3.4 Annual total return of the Fund

Period under review 1 Year Period 1 Year 1 Year 31 Jan 15 31 Jan 14 31 Dec 12 31 Dec 11 31 Dec 10 -31 Jan 16 -31 Jan 15 -31 Jan 14 -31 Dec 12 -31 Dec 11

Kenanga Malaysian Inc Fund 7.46% 8.26% 14.13% 3.60% 3.71% FTSE-Bursa Malaysia 100 Index -5.83% -1.62% 8.11% 9.60% 1.94%

Source: Lipper

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


4 TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA MALAYSIAN INC FUND

We, CIMB COMMERCE TRUSTEE BERHAD, being the Trustee of KENANGA MALAYSIAN INC FUND (‘the Fund’) are of the opinion that KENANGA INVESTORS BERHAD (‘the Manager’), acting in the capacity of Manager of the Fund, have fulfi lled its duties in the following manner for the fi nancial year ended 31 January 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 Unit Trust Funds, 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 (313031-A) LEE KOOI YOKE Chief Operating Offi cer Kuala Lumpur, Malaysia 28 March 2016


5. INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF KENANGA MALAYSIAN INC FUND

Report on the fi nancial statements

We have audited the fi nancial statements of Kenanga Malaysian Inc Fund (“the Fund”), which comprise the statement of fi nancial position as at 31 January 2016 and the statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows for the fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory information, as set out on pages 13 to 39.

Manager’s and Trustee’s responsibility for the fi nancial statements and fair presentation

The Manager of the Fund is responsible for the preparation of fi nancial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these fi nancial statements.

Auditors’ responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund’s preparation of fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.


5. INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF KENANGA MALAYSIAN INC FUND (CONTD.)

Opinion

In our opinion, the fi nancial statements give a true and fair view of the fi nancial position of the Fund as at 31 January 2016 and of its fi nancial performance, changes in net asset value and cash fl ows for the fi nancial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

Other matters

This report is made solely to the unitholders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report.

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

Kuala Lumpur, Malaysia

28 March 2016


6. STATEMENT BY THE MANAGER

I, Ismitz Matthew De Alwis, being a director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of fi nancial position as at 31 January 2016 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash fl ows for the fi nancial year ended 31 January 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 fi nancial position of Kenanga Malaysian Inc Fund as at 31 January 2016 and of its fi nancial performance and cash fl ows for the year then ended and comply with the requirements of the Deed.

For and on behalf of the Manager Kenanga Investors Berhad

Ismitz Matthew De Alwis

Kuala Lumpur, Malaysia

28 March 2016

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

Kenanga Malaysian Inc Fund Annual Report13

7. FINANCIAL STATEMENT

7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016

Note 2016 2015 RM RM

INVESTMENT INCOMEDividend income 317,766 399,014Interest income 79,477 58,396Net gain from investments: - Financial assets at fair value through profi t or loss (“FVTPL”) 4 806,720 1,293,869 1,203,963 1,751,279

EXPENSESManager’s fee 5 244,143 262,165Trustee’s fee 6 6,782 7,283Auditors’ remuneration 4,980 -Tax agent’s fee 9,300 5,704Administration expenses 25,097 20,709Brokerage and other transaction costs 178,790 176,773 469,092 472,634

NET INCOME BEFORE TAX 734,871 1,278,645 Income tax 7 (5,945) - NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 728,926 1,278,645 Net income after tax is made up as follows: Realised gain 1,446,368 1,262,830 Unrealised (loss)/gain 4 (717,442) 15,815 728,926 1,278,645


Kenanga Malaysian Inc Fund Annual Report 14

7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 2016

Note 2016 2015 RM RM

INVESTMENTSFinancial assets at FVTPL 4 14,005,309 11,447,050Short term deposits 8 4,409,000 1,760,000 18,414,309 13,207,050

OTHER ASSETSOther receivables 9 905,641 424,578Tax recoverable 42,269 55,820Cash at bank 785,296 5,441 1,733,206 485,839

TOTAL ASSETS 20,147,515 13,692,889

LIABILITIESAmount due to Manager 23,225 101,957Amount due to Trustee 727 542Other payables 10 663,449 227,683TOTAL LIABILITIES 687,401 330,182

EQUITYUnitholders’ contribution 28,714,867 23,346,386Accumulated losses (9,254,753) (9,983,679)NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO UNITHOLDERS 11 19,460,114 13,362,707

TOTAL EQUITY AND LIABILITIES 20,147,515 13,692,889

NUMBER OF UNITS IN CIRCULATION 11(a) 31,031,029 22,859,387

NET ASSET VALUE PER UNIT (RM) 12 0.6271 0.5846


Kenanga Malaysian Inc Fund Annual Report15

7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016

Unitholders’ Accumulated Total Note contribution losses NAV

RM RM RM

2016At beginning of the year 23,346,386 (9,983,679) 13,362,707Total comprehensive income - 728,926 728,926Creation of units 11(a) 6,103,444 - 6,103,444Cancellation of units 11(a) (1,296,152) - (1,296,152)Distribution equalisation 11(a) 561,189 - 561,189At end of the year 28,714,867 (9,254,753) 19,460,114

2015At beginning of the year 26,067,053 (11,262,324) 14,804,729Total comprehensive income - 1,278,645 1,278,645Creation of units 11(a) 2,953 - 2,953Cancellation of units 11(a) (2,563,914) - (2,563,914)Distribution equalisation 11(a) (159,706) - (159,706)At end of the year 23,346,386 (9,983,679) 13,362,707


Kenanga Malaysian Inc Fund Annual Report 16

7.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016

2016 2015 RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES

Proceeds from sale of fi nancial assets at FVTPL 20,158,203 21,304,668Dividends received 321,867 405,356Interest from deposits received 79,085 58,363Trustee’s fee paid (6,597) (7,357)Tax agent’s fee paid (6,900) (3,400)Auditors’ remuneration paid (7,000) (7,000)Payment for other fees and expenses (21,746) (9,493)Manager’s fee paid (237,472) (264,849)Purchase of fi nancial assets at FVTPL (22,141,269) (18,605,189)Cash (used in)/generated from operating and investing activities (1,861,829) 2,871,099Income tax refund 7,606 -Net cash (used in)/generated from operating and investing activities (1,854,223) 2,871,099

CASH FLOWS FROM FINANCING ACTIVITIES

Cash received from units created 6,727,825 3,040Cash paid on units cancelled (1,444,747) (2,641,257)Net cash generated from/(used in) fi nancing activities 5,283,078 (2,638,217) NET INCREASE IN CASH AND CASH EQUIVALENTS 3,428,855 232,882CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,765,441 1,532,559CASH AND CASH EQUIVALENTS AT END OF THE YEAR 5,194,296 1,765,441

Cash and cash equivalents comprise: Cash at bank 785,296 5,441 Short term deposits 4,409,000 1,760,000 5,194,296 1,765,441


7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Malaysian Inc Fund (“the Fund”) was constituted pursuant to the executed Master Deed dated 29 August 2007 (collectively, together with deeds supplemental thereto, referred to as “the Deed”) between the Manager, Kenanga Investors Berhad, and HSBC (Malaysia) Trustee Berhad (“the Trustee” prior to 3 December 2013). The Fund has changed its trustee to CIMB Commerce Trustee Berhad (“the Trustee” with effect from 3 December 2013). The aforesaid change was effected on 3 December 2013 via a Fourth Master Supplemental Deed dated 1 October 2013. The Fund commenced operations on 9 November 2007 and will continue to be in operation until terminated in accordance to Part 12 of the Deed.

Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad, which in turn is a wholly-owned subsidiary of K & N Kenanga Holdings Berhad that is listed on the Main Board of Bursa Malaysia Securities Berhad. All of these companies are incorporated in Malaysia.

The principal place of business of the Manager is Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur.

The Fund seeks to provide consistent annual returns and medium to long term capital appreciation by investing in Malaysian securities with global reach.

The fi nancial statements were authorised for issue by the Chief Executive Offi cer of the Manager on 28 March 2016.

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks including market risk (which includes interest rate risk and price risk), credit risk and liquidity risk. Whilst these are the most important types of fi nancial risks inherent in each type of fi nancial instruments, the Manager and the Trustee would like to highlight that this list does not purport to constitute an exhaustive list of all the risks inherent in an investment in the Fund.

The Fund has an approved set of investment guidelines and policies as well as internal controls which sets out its overall business strategies to manage these risks to optimise returns and preserve capital for the unitholders, consistent with the long term objectives of the Fund.


2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument

will fl uctuate because of changes in market prices. Market risk includes interest rate risk and price risk.

Market risk arises when the value of the investments fl uctuates in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the price caused by uncertainties in the economic, political and social environment will affect the NAV of the Fund.

The Manager manages the risk of unfavourable changes in prices by cautious review of the investments and continuous monitoring of their performance and risk profi les.

i. Interest rate risk

Interest rate risk refers to how the changes in the interest rate environment would affect the valuation of the Fund’s investments. Rates offered by the fi nancial institutions will fl uctuate according to the Overnight Policy Rate determined by Bank Negara Malaysia and this has direct correlation with the Fund’s investments in deposits.

The Fund is not exposed to signifi cant interest rate risk as its deposits are short term in nature and have fi xed interest rates.

Interest rate risk exposure

The following table analyses the Fund’s interest rate risk exposure. The Fund’s assets and liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates.


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

i. Interest rate risk (Contd.)

Interest rate risk exposure (Contd.)

Non- Weighted exposure to average Up to interest rate effective rate 1 year movement Total of return* RM RM RM % 2016 Assets Financial assets at FVTPL - 14,005,309 14,005,309 Short term deposits 4,409,000 - 4,409,000 3.23 Other assets - 1,690,937 1,690,937 4,409,000 15,696,246 20,105,246 Liabilities Other liabilities - 687,401 687,401 Total interest rate sensitivity gap 4,409,000 15,008,845 19,417,845 2015 Assets Financial assets at FVTPL - 11,447,050 11,447,050 Short term deposits 1,760,000 - 1,760,000 3.23 Other assets - 430,019 430,019 1,760,000 11,877,069 13,637,069 Liabilities Other liabilities - 330,182 330,182 Total interest rate sensitivity gap 1,760,000 11,546,887 13,306,887

* Computed based on assets with exposure to interest rate movement only.


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

Price risk is the risk of unfavorable changes in the fair values of quoted equity securities, quoted collective investment schemes and unquoted warrants. The Fund invests in quoted equity securities, quoted collective investment schemes and unquoted warrants which are exposed to price fl uctuations. This may then affect the NAV per unit of the Fund.

Price risk sensitivity

The Manager’s best estimate of the effect on the profi t for the fi nancial year due to a reasonably possible change in investments in quoted equity securities, quoted collective investment schemes and unquoted warrants with all other variables held constant is indicated in the table below:

Effect on profi t Change in price the year Increase/(Decrease) Increase/(Decrease) Basis points RM

2016 Financial assets at FVTPL 5/(5) 7,003/(7,003) 2015 Financial assets at FVTPL 5/(5) 5,724/(5,724)

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

Price risk concentration

The following table sets out the Fund’s exposure and concentration to price risk based on its portfolio of fi nancial instruments as at the reporting date:

Fair Value Percentage of NAV 2016 2015 2016 2015 RM RM % %

Financial assets at FVTPL 14,005,309 11,447,050 72.0 85.7


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

ii. Price risk (Contd.)

Price risk concentration (Contd.)

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

Fair value Percentage of NAV 2016 2015 2016 2015 RM RM % %

Trading/Services 3,288,729 3,815,437 16.9 28.5 Industrial products 3,116,423 1,450,524 16.0 10.9 Finance 1,751,147 1,034,999 9.0 7.7 Construction 1,719,757 916,441 8.8 6.9 Consumer products 1,519,329 345,840 7.8 2.6 Technology 1,001,695 848,347 5.2 6.3 Properties 965,243 1,572,983 5.0 11.8 Plantations 617,184 268,818 3.2 2.0 Special Purpose Acquisition Company 25,802 - 0.1 - Infrastructure - 717,090 - 5.4 Real Estate Investments Trusts - 468,052 - 3.5 Warrants - 8,519 - 0.1 14,005,309 11,447,050 72.0 85.7

b. Credit Risk

Credit risk is the risk that the counterparty to a fi nancial instrument will cause a fi nancial loss to the Fund by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk.

i. Credit risk exposure

As at the reporting date, the Fund’s maximum exposure to credit risk is represented by the carrying amount of each class of fi nancial asset recognised in the statement of fi nancial position.

ii. Financial assets that are either past due or impaired

As at the reporting date, there are no fi nancial assets that are either past due or impaired.


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

iii. Credit quality of fi nancial assets

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

Short term deposits

Percentage of total short term deposits Percentage of NAV 2016 2015 2016 2015 % % % %

Rating P1 100.0 100.0 22.7 13.2

c. Liquidity Risk

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

The liquid assets comprise cash, deposits with licensed fi nancial institutions and other instruments, which are capable of being converted into cash within 7 days.

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


2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk

Up to 1 year Note 2016 2015 RM RM

Assets Financial assets at FVTPL 14,005,309 11,447,050 Short term deposits 4,409,000 1,760,000 Other assets 1,690,937 430,019 (i) 20,105,246 13,637,069 Liabilities Other liabilities (ii) 687,401 330,182 Equity (iii) 19,460,114 13,362,707 Liquidity gap (42,269) (55,820)

i) Financial assets

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

ii) Financial liabilities

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

iii) Equity

As unitholders can request for redemption of their units, they have been categorised as having a maturity of “up to 1 year”.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Accounting

The fi nancial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards Board (“MASB”) and International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).

The accounting policies adopted are consistent with those of the previous fi nancial year except for the adoption of the new and amended MFRS which became effective for the Fund on 1 February 2015. The adoption of the new and amended MFRS did not have any signifi cant impact on the fi nancial position or performance of the Fund.

The fi nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

b. Standards and Amendments Issued But Not Yet Effective

As at the date of authorisation of these fi nancial statements, 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.

Effective for fi nancial period beginning Description on or after

Amendments to MFRS contained in the documents entitled “Annual Improvements to MFRS 2012 - 2014 cycle” 1 January 2016 MFRS 14: Regulatory Deferral Accounts 1 January 2016 Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception 1 January 2016 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Deferred Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 101: Disclosure Initiative 1 January 2016 Amendments to MFRS 116 and MFRS 138: Clarifi cation of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 127: Equity Method in Separate Financial Statements 1 January 2016 MFRS 15: Revenue from Contracts with Customers 1 January 2018 MFRS 9: Financial Instruments (IFRS 9: Financial Instruments as issued by IASB in July 2014) 1 January 2018

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


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

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

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

c. Financial Assets

Financial assets are recognised in the statement of fi nancial position when, and only when, the Fund becomes a party to the contractual provisions of the fi nancial instruments.

When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at FVTPL, directly attributable transaction costs.

The Fund determines the classifi cation of its fi nancial assets at initial recognition.

i. Financial assets at FVTPL

Financial assets are classifi ed as fi nancial assets at FVTPL if they are held for trading or are designated as such upon initial recognition.

Financial assets held for trading include quoted equity securities, quoted collective investment schemes and unquoted warrants acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, fi nancial assets at FVTPL are measured at fair value. Changes in the fair value of those fi nancial instruments are recorded in profi t or loss.

Interest earned and dividend revenue elements of such instruments are recorded separately in “interest income” and “dividend income”, respectively.

ii. Receivables

Financial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as receivables.

Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profi t or loss when the receivable is derecognised or impaired, and through the amortisation process.

A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profi t or loss.



d. Impairment of Financial Assets

The Fund assesses at each reporting date whether there is any objective evidence that a fi nancial asset is impaired.

To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Fund considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate. The impairment loss is recognised in profi t or loss.

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account.

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

e. Income

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

Interest income is recognised using the effective interest method.

Dividend income is recognised on declared basis, when the right to receive the dividend is established.

The realised gain or loss on sale of investments is measured as the difference between the net disposal proceeds and the carrying amount of the investment.

f. Cash and Cash Equivalents

For the purposes of the statement of cash fl ows, cash and cash equivalents include cash at bank and short term deposits with licensed fi nancial institutions.



g. Income Tax

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

As no temporary differences have been identifi ed, no deferred tax has been recognised.

h. Unrealised Reserves

Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values at reporting date. This reserve is not distributable.

i. Financial Liabilities

Financial liabilities are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability.

Financial liabilities are recognised in the statement of fi nancial position when, and only when, the Fund becomes a party to the contractual provisions of the fi nancial instrument. The Fund’s fi nancial liabilities are classifi ed as other fi nancial liabilities. The Fund’s fi nancial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

A fi nancial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profi t or loss when the liabilities are derecognised, and through the amortisation process.

j. Unitholders’ Contribution – NAV Attributable to Unitholders

The unitholders’ contribution to the Fund is classifi ed as equity instruments. Distribution equalisation represents the average amount of undistributed net income

included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee.

k. Functional and Presentation Currency The fi nancial statements of the Fund are measured using the currency of the primary

economic environment in which the Fund operates (“the functional currency”). The fi nancial statements are presented in Ringgit Malaysia (“RM”), which is also the Fund’s functional currency.

l. Distribution

Distributions are at the discretion of the Manager. A distribution to the Fund’s unitholders is accounted for as a deduction from retained earnings.



m. Signifi cant Accounting Judgments and Estimates

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

i. Critical judgments made in applying accounting policies

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

ii. Key sources of estimation uncertainty

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

4. FINANCIAL ASSETS AT FVTPL

2016 2015 RM RM

Financial assets held for trading, at FVTPL: Quoted equity securities 14,005,309 10,970,479 Quoted collective investment schemes - 468,052 Unquoted warrants - 8,519 14,005,309 11,447,050 Net gain on fi nancial assets at FVTPL comprised: Realised gain on disposals 1,524,162 1,278,054 Unrealised changes in fair values (717,442) 15,815 806,720 1,293,869


4. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of fi nancial assets at FVTPL as at 31 January 2016:

Aggregate Percentage Quantity cost Fair value of NAV RM RM %

Quoted equity securities

Trading/Services Bumi Armada Berhad 297,000 288,074 305,910 1.6 Engtex Group Berhad 255,800 315,725 317,192 1.6 Genting Berhad 67,700 502,824 529,414 2.7 Media Prima Berhad 51,800 103,181 65,786 0.3 MISC Berhad 46,000 406,944 402,960 2.1 PESTECH International Berhad 28,700 140,899 187,698 1.0 SapuraKencana Petroleum Berhad 52,400 119,232 96,940 0.5 Scicom (MSC) Berhad 181,500 291,381 366,630 1.9 Telekom Malaysia Berhad 47,823 323,840 310,371 1.6 Tenaga Nasional Berhad 33,200 381,062 450,192 2.3 Uzma Berhad 89,400 183,197 156,450 0.8 Yinson Holdings Berhad 36,600 102,798 99,186 0.5 1,187,923 3,159,157 3,288,729 16.9

Industrial products BP Plastics Holding Berhad 129,800 246,903 216,766 1.1 Cahya Mata Sarawak Berhad 96,600 485,227 498,456 2.6 EG Industries Berhad 127,500 114,904 114,750 0.6 Evergreen Fibreboard Berhad 131,500 195,305 161,745 0.8 Pintaras Jaya Berhad 55,800 218,807 192,510 1.0 Reach Energy Berhad 449,600 303,325 283,248 1.4 SKP Resources Bhd 147,100 205,547 200,056 1.0 Success Transformer Corporation Berhad 196,800 421,784 440,832 2.3 Supermax Corporation Berhad 73,500 234,132 217,560 1.1 Ta Ann Holdings Berhad 29,800 134,301 149,596 0.8 Top Glove Corporation Berhad 27,600 104,118 149,592 0.8 United U-LI Corporation Berhad 21,400 74,900 107,000 0.5 V. S. Industry Berhad 286,800 394,209 384,312 2.0 1,773,800 3,133,462 3,116,423 16.0

Finance BIMB Holdings Berhad 63,500 253,115 221,615 1.1 CIMB Group Holdings Berhad 71,500 327,949 296,010 1.5 Hong Leong Financial Group Berhad 10,967 159,955 151,125 0.8 Malayan Banking Berhad 22,182 190,954 188,769 1.0 Public Bank Berhad 27,300 501,444 501,228 2.6 RHB Capital Berhad 72,000 388,505 392,400 2.0 267,449 1,821,922 1,751,147 9.0



Details of fi nancial assets at FVTPL as at 31 January 2016 (Contd.):


Quoted equity securities (Contd.)

Construction Econpile Holdings Berhad 148,700 141,101 147,957 0.8 Gamuda Berhad 56,000 263,110 254,800 1.3 IJM Corporation Berhad 97,300 324,701 333,739 1.7 JAKS Resources Berhad 159,900 155,348 166,296 0.9 Kimlun Corporation Berhad 133,000 196,641 198,170 1.0 Mitrajaya Holdings Berhad 155,250 144,569 175,432 0.9 Muhibbah Engineering (M) Berhad 124,200 282,399 278,208 1.4 Protasco Berhad 113,900 187,363 165,155 0.8 988,250 1,695,232 1,719,757 8.8

Consumer products Karex Berhad 45,350 133,176 185,482 0.9 NTPM Holdings Berhad 525,500 422,929 478,205 2.5 Oriental Food Industries Holdings Berhad 76,200 172,960 156,210 0.8 Panasonic Manufacturing Malaysia Berhad 16,500 396,110 396,000 2.0 Prolexus Berhad 96,100 207,925 213,342 1.1 SPRITZER Berhad 39,000 83,838 90,090 0.5 798,650 1,416,938 1,519,329 7.8

Technology D & O Green Technologies Berhad 828,200 320,532 289,870 1.5 Globetronics Technology Bhd. 49,600 269,549 271,312 1.4 Inari Amertron Berhad 84,158 239,486 271,830 1.4 ManagePay Systems Berhad 717,800 188,481 168,683 0.9 1,679,758 1,018,048 1,001,695 5.2

Properties KSL Holdings Berhad 106,507 206,133 134,199 0.7 Paramount Corporation Berhad 124,200 235,021 193,752 1.0 S P Setia Berhad 99,261 331,359 286,864 1.5 Sunway Berhad 61,000 184,281 179,950 0.9 Tambun Indah Land Berhad 135,300 228,790 170,478 0.9 526,268 1,185,584 965,243 5.0

Plantations Genting Plantations Berhad 43,400 458,194 484,344 2.5 Sarawak Oil Palms Berhad 32,400 184,979 132,840 0.7 75,800 643,173 617,184 3.2



Details of fi nancial assets at FVTPL as at 31 January 2016 (Contd.):


Quoted equity securities (Contd.)

Special Purpose Acquisition Company Red Sena Berhad 67,900 33,950 25,802 0.1 Total quoted equity securities 7,365,798 14,107,466 14,005,309 72.0

Total fi nancial assets at FVTPL 14,107,466 14,005,309 72.0

Unrealised loss on fi nancial assets at FVTPL (102,157)

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 13.1 of the Deed.

The Manager is currently charging Manager’s fee of 1.80% per annum of the NAV of the Fund (2015: 1.80% per annum).

6. TRUSTEE’S FEE

Pursuant to the Fifth Master Supplemental Deed dated 25 July 2014, the Trustee’s fee is computed at a rate not exceeding 0.05% per annum of the NAV of the Fund effective from 1 August 2014. Prior to 1 August 2014, the Trustee’s fee was computed at a rate not exceeding 1.0% per annum and subject to a minimum fee of RM18,000 per annum.

The Trustee is currently charging Trustee’s fee of 0.05% per annum of the NAV of the Fund (2015: 0.05% per annum).


7. INCOME TAX

Income tax is calculated at the Malaysian statutory tax rate of 24% (2015: 25%) of the estimated assessable income for the fi nancial year.

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

2016 2015 RM RM Net income before tax 734,871 1,278,645 Tax at Malaysian statutory tax rate of 24% (2015: 25%) 176,369 319,661 Tax effect of: Income not subject to tax (461,137) (437,820) Loss not deductible for tax purposes 172,186 - Expenses not deductible for tax purposes 51,884 48,551 Restriction on tax deductible expenses for unit trust fund 60,698 69,608 Under provision in prior year 5,945 - Income tax for the year 5,945 -

8. SHORT TERM DEPOSITS

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

9. OTHER RECEIVABLES

2016 2015 RM RM Amount due from licensed fi nancial institutions 894,101 409,329 Dividend receivable 10,992 15,093 Interest receivable from short term deposits 548 156 905,641 424,578

10. OTHER PAYABLES

2016 2015 RM RM Amount due to licensed fi nancial institutions 634,834 197,663 Accrual for auditors’ remuneration 7,000 9,020 Accrual for tax agent’s fees 7,000 4,600 Provision for printing and other expenses 14,615 16,400 663,449 227,683


11. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 2016 2015 RM RM Unitholders’ contribution (a) 28,714,867 23,346,386 Accumulated losses: Realised reserves (9,152,596) (10,598,964) Unrealised reserves (102,157) 615,285 (9,254,753) (9,983,679)

19,460,114 13,362,707

a) Unitholders’ contribution

2016 2015 No. of units RM No. of units RM

At beginning of the year 22,859,387 23,346,386 27,462,495 26,067,053 Add: Creation of units 10,379,978 6,103,444 5,292 2,953 Less: Cancellation of units (2,208,336) (1,296,152) (4,608,400) (2,563,914) Distribution equalisation - 561,189 - (159,706) At end of the year 31,031,029 28,714,867 22,859,387 23,346,386

The number of units legally or benefi cially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 31 January 2016 were nil (2015: nil).

12. NET ASSET VALUE PER UNIT

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

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

2016 2015 RM RM/Unit RM RM/Unit

NAV attributable to unitholders for creation/cancellation of units 19,530,364 0.6294 13,388,872 0.5857 Effects of adopting bid prices as fair value (70,250) (0.0023) (26,165) (0.0011) NAV attributable to unitholders per statement of fi nancial position 19,460,114 0.6271 13,362,707 0.5846


13. PORTFOLIO TURNOVER RATIO (“PTR”)

PTR for the fi nancial year is 1.59 times (2015: 1.38 times).

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

14. MANAGEMENT EXPENSE RATIO (“MER”)

MER for the fi nancial year is 2.13% (2015: 2.03%).

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

15. TRANSACTIONS WITH LICENSED FINANCIAL INSTITUTIONS

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

Affi n Bank Berhad 13,225,096 21.5 - - RHB Investment Bank Berhad 8,102,101 13.1 28,648 19.4 Kenanga Investment Bank Berhad* 7,728,566 12.5 26,426 17.9 CIMB Bank Berhad 6,024,409 9.8 - - Maybank Investment Bank Berhad 5,646,700 9.2 20,590 14.0 JPMorgan Securities (Malaysia) Sdn Bhd 5,590,799 9.1 19,243 13.1 UOB Kay Hian Securities (M) Sdn Bhd 4,782,491 7.7 15,977 10.8 CIMB Investment Bank Berhad 4,052,306 6.6 15,235 10.3 Affi n Hwang Investment Bank Berhad 2,775,435 4.5 9,420 6.4 Macquarie Capital Securities (Malaysia) Sdn Bhd 1,240,419 2.0 4,159 2.8 Others 2,444,183 4.0 7,807 5.3 61,612,505 100.0 147,505 100.0

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

The above transactions values are in respect of quoted equity securities, quoted collective investment schemes, unquoted warrant and short term deposits. Transactions in short term deposits do not involve any commission or brokerage fees.

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


16. SEGMENTAL REPORTING

a. Business Segments

In accordance with the objective of the Fund, the Fund can invest up to 98% in quoted investment securities. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:

Quoted investment Other securities investments Total RM RM RM

2016 Revenue Segment income 1,124,486 79,477 Segment expense (178,790) - Net segment income representing segment results 945,696 79,477 1,025,173 Unallocated expenditure (290,302) Income before tax 734,871 Income tax (5,945) Net income after tax 728,926

Assets Financial assets at FVTPL 14,005,309 - Short term deposits - 4,409,000 Other segment assets 905,093 548 Total segment assets 14,910,402 4,409,548 19,319,950 Unallocated assets 827,565 20,147,515

Liabilities Total segment liabilities 634,834 - 634,834 Unallocated liabilities 52,567 687,401


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segments (Contd.)

Quoted investment Other securities investments Total RM RM RM

1.2.2014 to 31.7.2014 Revenue Segment income 1,692,883 58,396 Segment expense (176,773) - Net segment income representing segment results 1,516,110 58,396 1,574,506 Unallocated expenditure (295,861) Income before tax 1,278,645 Income tax - Net income after tax 1,278,645 Assets Financial assets at FVTPL 11,438,531 8,519 Short term deposits - 1,760,000 Other segment assets 424,422 156 Total segment assets 11,862,953 1,768,675 13,631,628 Unallocated assets 61,261 13,692,889

Liabilities Total segment liabilities 197,663 - 197,663 Unallocated liabilities 132,519 330,182

b. Geographical Segments

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


17. FINANCIAL INSTRUMENTS

a. Classifi cation of fi nancial instruments

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

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

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

2016 Assets Quoted equity securities 14,005,309 - - 14,005,309 Short term deposits - 4,409,000 - 4,409,000 Other receivables - 905,641 - 905,641 Cash at bank - 785,296 - 785,296 14,005,309 6,099,937 - 20,105,246 Liabilities Amount due to Manager - - 23,225 23,225 Amount due to Trustee - - 727 727 Other payables - - 663,449 663,449 - - 687,401 687,401 2015 Assets Quoted equity securities 10,970,479 - - 10,970,479 Quoted collective investment schemes 468,052 - - 468,052 Unquoted warrants 8,519 - - 8,519 Short term deposits - 1,760,000 - 1,760,000 Other receivables - 424,578 - 424,578 Cash at bank - 5,441 - 5,441 11,447,050 2,190,019 - 13,637,069

Liabilities Amount due to Manager - - 101,957 101,957 Amount due to Trustee - - 542 542 Other payables - - 227,683 227,683 - - 330,182 330,182


17. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value

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

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

Level 1 Level 2 Level 3 Total RM RM RM RM

Investments 2016 - Quoted equity securities 14,005,309 - - 14,005,309

2015 - Quoted equity securities 10,970,479 - - 10,970,479 - Quoted collective investment schemes 468,052 - - 468,052 - Unquoted warrants - 8,519 - 8,519

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

The fair values of quoted equity securities and quoted collective investment schemes are determined by reference to Bursa Malaysia Securities Berhad’s bid prices at reporting date. The fair value of the unquoted warrants are based on reference price minus subscription price at reporting date.

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

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


18. CAPITAL MANAGEMENT

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

The Fund’s objectives for managing capital are:

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

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

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

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


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Investor Services Center Head Offi ce, Kuala LumpurToll Free Line: 1 800 88 3737 Suite 12.02, 12th Floor, Kenanga International,Fax: +603 2057 3722 Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Email: [email protected] Tel: 03-2057 3688 Fax: 03-2161 8807

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KENANGA MALAYSIAN INC FUND...Kenanga Malaysian Inc Fund 7.46% FTSE-Bursa Malaysia 100 Index (FMB-100) -5.83% *Source: Lipper For the ﬁ nancial year under review, the Fund appreciated