Kenanga Investors Berhad (353563-P)
KENANGA ISLAMIC FUND
Annual Report
For the Financial Year Ended 31 December 2013
Investor Services Center
Toll Free Line: 1 800 88 3737
Fax: +603 2057 3722
Email: investorservices@kenanga.com.my
Head Office, Kuala Lumpur
Suite 12.02, 12th Floor, Kenanga International,
Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.
Tel: 03-2057 3688
Fax: 03-2161 8807
KENANGA ISLAMIC FUND
Contents
Corporate Directory
Directory of Manager’s Offices
Page
ii-iii
iv
Fund Information
1
Manager’s Report
2-5
Fund Performance
6-8
Trustee’s Report
Shariah Adviser’s Report
Independent Auditor’s Report
Statement by the Manager
Financial Statement
9
10
11-12
13
14-41
CORPORATE DIRECTORY
Manager: Kenanga Investors Berhad (Company No. 353563-P)
Registered office
Kenanga Investors Berhad (KIB)
8th Floor, Kenanga International,
Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia.
Tel: 03-2162 1490
Fax: 03-2161 4990
Business Office
Suite 12.02, 12th Floor, Kenanga International,
Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia.
Tel: 03-2057 3688
Fax: 03-2161 8807
E-mail: InvestorServices@kenanga.com.my
Website: www.KenangaInvestors.com.my
Board Of Directors
Datuk Syed Ahmad Alwee Alsree (Chairman)
Syed Zafilen Syed Alwee (Independent
Director)
YM Raja Dato’ Seri Abdul Aziz bin Raja Salim
(Independent Director)
Vivek Sharma (Independent Director)
Peter John Rayner (Independent Director)
Bruce Kho Yaw Huat
Abdul Razak bin Ahmad
Investment Committee
Bruce Kho Yaw Huat (Chairman)
Syed Zafilen Syed Alwee (Independent
Member)
Vivek Sharma (Independent Member)
Peter John Rayner (Independent Member)
Abdul Razak bin Ahmad
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
External Fund Manager: Kenanga Islamic Investors Berhad (Company No. 451957-D)
Registered Office
Kenanga Islamic Investors Berhad (KIIB)
8th Floor, Kenanga International,
Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia.
Tel: 03-2162 1490
Fax: 03-2161 4990
Business Office
Suite 12.03, 12th Floor, Kenanga International,
Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia.
Tel: 03-2057 3688
Fax: 03-2161 8805
Trustee: Universal Trustee (Malaysia) Berhad (Company No. 17540-D)
1 Jalan Ampang, 3rd Floor, 50450 Kuala Lumpur, Malaysia.
Tel: 03-2070 8050 Fax: 03-2031 8715, 2032 3194, 2070 1296
Shariah Adviser: IBFIM (Company No. 763075-W)
Registered Office
Level 149A, 149B, 151B
Persiaran Raja Muda Musa
42000 Port Klang
Selangor Darul Ehsan, Malaysia
ii Kenanga Islamic Fund Annual Report
Business Office
3rd Floor, Menara Takaful Malaysia
Jalan Sultan Sulaiman
50000 Kuala Lumpur, Malaysia.
Tel: 03-2031 1010
Fax: 03-2078 5250
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, PNB Damansara, 19, Lorong Dungun, Damansara Heights,
50490 Kuala Lumpur, Malaysia.
Tel: 03-2093 2600 Fax: 03-2093 2700 Website: www.fimm.com.my
Kenanga Islamic Fund Annual Report iii
DIRECTORY OF MANAGER’S OFFICES
REGIONAL BRANCH OFFICES:
Kuala Lumpur
Suite 12.02, 12th Floor, Kenanga International
Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia
Tel: 03-2057 3688
Fax: 03-2161 8807
Johor Bahru
Lot 11.03, 11th Floor, Menara MSC Cyberport
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, 282 0518
Fax: 06-281 4286
Kuching
1st Floor, No 71, Lot 7
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, 3348 7889
Fax:03-3341 8816
Kota Kinabalu
A-03-11, 3rd Floor
Block A Warisan Square
Jalan Tun Fuad Stephens
88000 Kota Kinabalu, Sabah
Tel: 088-447 089/448 106
Fax: 088-447 039
Penang
Blok A, Aras 3,
Wisma Perkeso
No. 269, Jalan Burma
10538 George Town, Penang
Tel: 04-226 4880
Fax: 04-226 5120
Ipoh
No. 5A, Persiaran Greentown 9
Greentown Business Centre
30450 Ipoh,
Perak Darul Ridzuan
Tel: 05-254 7573/7570
Fax: 05-254 7606
Agency Office
Miri (Sarawak)
c/o Lot 1084, 2nd Floor,
Jalan Merpati
98000 Miri
Sarawak, Malaysia
Tel: 085-427 782
iv Kenanga Islamic Fund Annual Report
1. FUND INFORMATION
1.1 Fund Name
Kenanga Islamic Fund (KIF or the Fund)
1.2 Fund Type / Category
Equity (Islamic) / Growth
1.3 Investment Objective
The Fund aims to achieve steady capital growth and income distribution (incidental) over the
medium to long-term period by investing in a diversified portfolio of authorised investments in
accordance with acceptable Shariah principles.
1.4 Investment Strategy
The Fund will invest in principally in a diversified portfolio of Shariah-compliant equity and equity
related securities.
1.5Duration
The Fund was launched on 15 August 2002 and it shall exist as long as it appears to the Manager
and the Trustee that it is in the interests of the unit holders for it to continue.
1.6 Performance Benchmark
FTSE Bursa Malaysia Emas Shariah Index (FBMS)
1.7 Distribution Policy
The Fund intends to pay income by way of distributions or by the creation of additional units after
the end of each Accrual Period or any specified period, where possible.
1.8 External Fund Manager
Kenanga Islamic Investors Berhad
1.9 Breakdown of unit holdings of KIF as at 31 December 2013
Size of holdings
5,000 and below
5,001 - 10,000
10,001-50,000
50,001-500,000
500,001 and above
Total
No. of unitholders
216
155
468
189
14
1,042
No. of units held
543,905
1,185,349
10,779,438
22,945,889
30,932,152
66,386,733
Kenanga Islamic Fund Annual Report 1
2. MANAGER’S REPORT
2.1 Explanation on whether the Fund has achieved its investment objective.
The Fund has appreciated by 19.8% in Net Asset Value terms in 2013, 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 (15/08/2002– 31/12/2013)
Kenanga Islamic Fund vs FBMS
% Growth, Cum, TR, ExD, MYR, Launch to 31/12/2013
300.00
250.00
200.00
150.00
100.00
50.00
0.00
Kenanga Islamic* : 294.72
12/31/2013
12/31/2012
12/31/2011
12/31/2010
12/31/2009
12/31/2008
12/31/2007
12/31/2006
12/31/2005
12/31/2004
12/31/2003
8/15/2002
12/31/2002
-50.00
FTSE Bursa Malaysia Emas Shariah CR* : 148.44
* Contains estimated data.
Source: Lipper
2.3 Investment strategies and policies employed during the period under review
For the period under review, the Fund continued with its strategy of investing in Shariah-compliant
securities of companies with sustainable business models and competent management. These
companies also need to trade at a discount to their intrinsic/fair value.
Sectors that we favour include the oil & gas related companies, consumer staples, takaful, Islamic
REITS and companies with exposure to ETP projects.
2 Kenanga Islamic Fund Annual Report
2.4 The Fund’s asset allocation (% of NAV) as at 31 December 2013 and comparison with the
previous financial year
Asset
Shariah-compliant equities
Shariah-compliant collective investment scheme
Cash / other
31 Dec 2013
81.4%
8.0%
10.6%
31 Dec 2012
74.1%
3.1%
22.8%
Reason for the differences in asset allocation
As at 31st December 2013, the invested level of the Fund was 89.4% in Shariah-compliant quoted
securities. The increase in the invested level was due to better outlook in the second half of 2013
compared to end 2012 as fears over the results of the Malaysia General Election subsided after
the incumbent government won another mandate.
2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any)
since last review period
Kenanga Islamic Fund
FTSE Bursa Malaysia Emas Shariah Index
Period under review
19.80%
13.29%
Source: Lipper
For the period under review to 31st December 2013, the Fund has appreciated by 19.8% to
outperform the FBMS benchmark return by 6.5%. The outperformance was mainly due to Shariahcompliant stock selection.
2.6 Review of the market
Market Review
Stock market performance in the region can be broken up into two parts for the period under
review. The Nikkei had a fantastic year (+31.6% from January 2013 to June 2013) following the
Japanese government’s surprise decision to inflate the long stagnant economy with a US-style
quantitative easing programme, valued at US$1.5 trillion. The emerging countries of ASEAN were
clear outperformers, led by Philippines and Thailand which rose by 11.6% and 11.2% for the same
period, respectively as investors reacted positively to the underlying domestic economic growth
of these economies. The strong inflow of funds into these countries was also helped by US’s QE3
programme. Governments around the world were generally adopting a loose monetary policy to
help economic recovery.
Malaysia lagged regional markets especially in the 1Q2013 due to uncertainty over the 13th
Malaysia General Election but caught up after Barisan National retained power albeit with a slightly
lesser majority. The FTSE Shariah (FBMS) Index was up by 6.7% in the first half of the financial
year, helped by May’s jump of 6.3% month-on-month. This could be attributed to the removal of
risk premium associated with the uncertainty over the general election. On the economic side, the
1Q’13 GDP growth of 4.1% fell short of expectation. This was attributed to weaker exports and
slower growth in private investments due to uncertainty from the election outcome.
Kenanga Islamic Fund Annual Report 3
2.6 Review of the market (Contd.)
Market Review (Contd.)
The major downturn came in June when equity markets reacted strongly on the negative after the
Fed’s chairman, Ben Bernanke commented that it would be appropriate to moderate the monthly
purchase of assets backed securities later this year. It sparked investors’ fear that US’ QE3 will be
tapering off earlier than expected. The situation was made worse when the PBoC initially refused
to ease a liquidity squeeze in the interbank market which caused a sharp spike in SHIBOR rate to
peak at 13.4%. The decline was led by China (SHCOMP -14%), Philippines (PCOMP -7.9%) and
Hong Kong (HSI -7.1%) in June 2013. The FBMS Index held up relatively well as it was only down
by 0.9% month-on-month In June 2013.
The developed markets in the region rebounded significantly in the final quarter of FYE 2013
sparked by the US Congress decision to pass a bill to reopen the government and raise the debt
ceiling. This helped the US government to avoid a debt default as well as expectation that the US
QE tapering being later as the recovery of the US economy is still uncertain.
The emphasis from the 2014 Budget is on further fiscal consolidation through a more prudent
operating and development expenditure. It was generally viewed as stock market-neutral. The
KLCI and the FBM Shariah indices remained relatively flat in November despite investors selling
property and construction stocks after the introduction of real property gain tax.
Indonesia and Thailand were aggressively sold in November 2013, down 5.6% and 5.0% mom
respectively due to continued fear over the weakening currencies and political uncertainty in
the latter. Thailand was hit by street demonstration after the Constitutional Court ruled that the
Government effort to amend the constitution was illegal.
Market Outlook
Global economic growth will continue to gain strength in 2014 forged by a synchronized global
growth as US and Europe lead the recovery with global economy growth of between 3-3.6%.
Malaysia will benefit from the global growth especially our exports which have been fairly flatish
for the past two years. Corporate earnings are expected to rebound to 8-9% YoY in 2014, from a
flattish-to-negative in 2013.
We believe the major earnings drivers are the plantation sector and export driven manufacturers
such as the electronic & electrical sector. The plantation sector has seen prolonged earning
downgrades in 2013 due to lower CPO prices, which are likely to rebound in 2014 and underpin
earnings recovery for the planters.
Malaysia is currently trading at valuation above its long term average and this is likely to cap
its upside due to the premium valuation. Stock picking is going to be key this year for strong
outperformance.
Our main concern going forward is a more aggressive tapering of QE by US Fed but this will be
data dependent. We do not believe the Fed will adopt an aggressive tapering stance in the short
term until there are firm signals that the US economy is recovering much better than expected.
4 Kenanga Islamic Fund Annual Report
2.6 Review of the market (Contd.)
Strategy
We will adopt a barbell strategy where we will have a good mix of beta and defensive Shariahcompliant stocks to ride through the expected volatility in anticipation of more aggressive tapering
US QE3. We aim to take advantage of the upcoming volatility where we will be more aggressive in
adding beta and increase Shariah-compliant equity exposure.
Our Shariah-compliant stock selection continues to favour sectors that will benefit from being the
main drivers of the economy such as the oil & gas, construction, manufacturers (glove, tech, IT etc)
and plantation sector. Sectors that we favour include consumer staples, FMCG, and healthcare.
2.7 Income Distribution
For the financial year under review, the Fund has declared the following income distribution:
Distribution Date
30/12/2013
Net distribution
per unit
(sen)
5.000
Cum NAV
Price
(RM)
0.6982
Ex NAV
Price
(RM)
0.6482
2.8 Details of any unit split exercise
The Fund did not carry out any unit split exercise during the financial year under review.
2.9 Significant changes in the state of affair of the Fund during the period
There were no significant changes in the state of affair of the Fund during the period and up until
the date of the manager’s report, not otherwise disclosed in the financial statements.
2.10 Circumstances that materially affect any interests of the unitholders
During the period under review, there were no circumstances that materially affected any interests
of the unitholders.
2.11 Rebates & Soft commissions
Any rebates received are channeled back to the Fund. On the other hand, soft commissions
received from the stockbrokers for goods and services such as technical analysis software,
fundamental database, financial wire services, stock quotation system and portfolio management
software incidental to investment management of the Fund shall be retained by the Manager. For
the period under review, the Manager has received soft commissions from stockbrokers.
Kenanga Islamic Fund Annual Report 5
3. FUND PERFORMANCE
3.1 Details of portfolio composition of Kenanga Islamic Fund (“the Fund”) as at 31 December
for the last 3 financial years are as follows:
a.
Distribution among industry sectors and category of investments:
Trading / Services
Industrial Products
Consumer Products
Islamic Real Estate Investment Trusts (REITS)
Plantation
Construction
Infrastructure
Finance
Properties
Technology
Islamic Deposits/Islamic Negotiable Instruments/Cash
FY
2013
%
FY
2012
%
FY
2011
%
37.0
10.8
10.1
8.0
5.3
5.3
4.8
3.8
3.3
1.0
10.6
100.0
47.5
7.7
6.8
3.1
3.8
8.3
22.8
100.0
46.1
5.7
2.5
12.0
14.1
7.2
3.5
8.9
100.0
Note: The above mentioned percentages are based on total investment market value plus
cash.
b. Distribution among markets
The Fund invested in local Shariah-compliant quoted securities and cash instruments only.
6 Kenanga Islamic Fund Annual Report
3.2 Performance details of the Fund for the last 3 financial years ended 31 December are as
follows:
Net asset value (RM Million)
Units in circulation (Million)
Net asset value per unit (RM)
Highest NAV price (RM/unit)
Lowest NAV price (RM/unit)
Total return (%)
- Capital growth (%)
- Income growth (%)
Gross distribution per unit (sen)
Net distribution per unit (sen)
Management expense ratio (%)1
Portfolio turnover ratio (times)2
FY
2013
FY
2012
FY
2011
43.04*
66.39
0.6483*
0.6982
0.5593
19.80
11.20
8.60
5.00#
5.00#
2.06
1.07
39.53
67.81
0.5805
0.6253
0.5655
8.69
1.34
7.35
4.23
4.21
2.53
0.80
32.48
56.46
0.5752
0.6156
0.5077
13.01
3.51
9.50
5.28
4.04
2.08
0.61
Note: Total return is the actual return of the Fund for the financial year, computed based on net
asset value 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 Shariah-compliant investment securities of the Fund
divided by the average fund size calculated on a daily basis.
1
MER decreased slightly in the current year under review.
2
TR is higher against previous year due to a more conservative approach in the first half 2013
P
before taking a more aggressive stance in the second half 2013.This change in stance caused
the turnover to be higher.
*B
ased on bid price fair valuation method on all Shariah-compliant investments held by the
Fund as at 31 December 2013, the NAV and price would be RM42.89 million and RM0.6460
respectively.
(As disclosed under note 13 of the financial statements)
#
Date of distribution is shown in part 2.7 – Income Distribution.
Kenanga Islamic Fund Annual Report 7
3.3 Average total return of the Fund
Kenanga Islamic Fund
FTSE Bursa Malaysia Emas Shariah Index
1 Year
31 Dec 12 31 Dec 13
19.80%
13.29%
3 Years
31 Dec 10 31 Dec 13
15.72%
9.92%
5 Years
31 Dec 08 31 Dec 13
26.59%
23.87%
Source: Lipper
3.4 Annual total return of the Fund
Kenanga Islamic Fund
FTSE Bursa Malaysia
Emas Shariah Index
Period
under
review
1 Year
1 Year
1 Year
1 Year
31 Dec 12 - 31 Dec 11 - 31 Dec 10 - 31 Dec 09 - 31 Dec 08 31 Dec 13 31 Dec 12 31 Dec 11 31 Dec 10 31 Dec 09
19.80%
8.69%
13.01%
18.50%
33.59%
13.29%
11.85%
2.41%
18.20%
43.03%
Source: Lipper
Investors are reminded that past performance is not necessarily indicative of future
performance. Unit prices and investment returns may fluctuate. 8 Kenanga Islamic Fund Annual Report
4. TRUSTEE’S REPORT
We, Universal Trustee (Malaysia) Berhad (“the Trustee”), being the Trustee of Kenanga Islamic
Fund (“the Fund”), are of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the
capacity of Manager of the Fund, have fulfilled their duties in the following manner for the financial
year ended 31 December 2013.
(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, other provisions of the Deed,
the Securities Commission’s Guidelines on Unit Trust Funds in Malaysia, the Securities
Commission’s Act 1993, Capital Market and Services Act 2007 and other applicable laws
during the financial year ended 31 December 2013;
(b) Valuation/pricing has been carried out in accordance with the Deed and any regulatory
requirements; and
(c) Creation and cancellation of units have been carried out in accordance with the Deed and
any relevant regulatory requirements.
(d) The distribution during the financial year of 5.00 sen per unit (net) is consistent with the
objectives of the Fund.
For and on behalf of the Trustee
UNIVERSAL TRUSTEE (MALAYSIA) BERHAD
LIEW KOK WAH
Chief Executive Officer
Kuala Lumpur, Malaysia
26 February 2014
Kenanga Islamic Fund Annual Report 9
5. SHARIAH ADVISER’S REPORT
To the Unitholders of Kenanga Islamic Fund
We have acted as the Shariah Adviser of Kenanga Islamic Fund. Our responsibility is to ensure
that the procedures and processes employed by Kenanga Investors Berhad are in accordance
with Shariah principles.
In our opinion, Kenanga Investors Berhad has managed and administered Kenanga Islamic
Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and
decisions issued by the Securities Commission pertaining to Shariah matters for the financial year
31 December 2013.
We wish to draw your attention to the following:
IOI Properties Group Bhd, a Shariah non-compliant security, was acquired on 19 December
2013 and subsequently disposed of on 15 January 2014. The original investment monies
from the Fund amounting to RM21,970.08 is to be returned to the Fund. Net gain amounting
to RM17,112.00 is to be channelled to baitulmal or any other charitable bodies as approved
by us.
In addition, we also confirm that the investment portfolio of Kenanga Islamic Fund comprises
securities which have been classified as Shariah-compliant by the Shariah Advisory Council of
the Securities Commission (“SACSC”). As for the securities which are not certified by the SACSC,
we have reviewed the said securities and opine that these securities are designated as Shariahcompliant.
For and on behalf of the Shariah Adviser
IBFIM
BUDEEMAN MANA
Senior Shariah Officer/
Designated Person Responsible for the Shariah Advisory
Kuala Lumpur
26 February 2014
10 Kenanga Islamic Fund Annual Report
6.INDEPENDENT AUDITORS’ REPORT TO THE
UNIT HOLDERS OF KENANGA ISLAMIC FUND
Report on the financial statements
We have audited the financial statements of Kenanga Islamic Fund (“the Fund”), which comprise
the statement of financial position as at 31 December 2013, and the statement of comprehensive
income, statement of changes in equity and statement of cash flows for the financial year then
ended, and a summary of significant accounting policies and other explanatory information, as set
out on pages 14 to 41.
Manager’s and Trustee’s responsibility for the financial statements and fair presentation
The Manager of the Fund is responsible for the preparation of financial 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 financial 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 financial statements.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial 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 whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on our judgment,
including the assessment of risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to
the Fund’s preparation of financial 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 financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Kenanga Islamic Fund Annual Report 11
6.INDEPENDENT AUDITORS’ REPORT TO THE
UNIT HOLDERS OF KENANGA ISLAMIC FUND (CONTD.)
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the
Fund as at 31 December 2013 and of its finanical performance, changes in net asset value and
cash flows of the Fund for the financial year then ended in accordance with Malaysian Financial
Reporting Standards and International Financial Reporting Standards.
Other matters
This report is made solely to the unit holders 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
AF: 0039
Chartered Accountants
Kuala Lumpur, Malaysia
26 February 2014
12 Kenanga Islamic Fund Annual Report
Gloria Goh Ewe Gim
No. 1685/04/15(J)
Chartered Accountant
7. STATEMENT BY THE MANAGER
I, Abdul Razak Bin Ahmad, being the 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 2013 and the related statement of comprehensive income, statement of changes in net
asset value and statement of cash flows for the financial year ended 31 December 2013 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 Islamic Fund as at 31 December 2013 and of its financial performance and
cash flows for the year then ended and comply with the requirements of the Deed.
For and on behalf of the Manager
Kenanga Investors Berhad
Abdul Razak Bin Ahmad
Kuala Lumpur, Malaysia
26 February 2014
Kenanga Islamic Fund Annual Report 13
8. FINANCIAL STATEMENT
8.1 STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013
Note
INVESTMENT INCOME
Profit income
Dividend income
Net gain from Shariah-compliant investments:
- Financial assets at fair value through profit or loss
(“FVTPL”)
EXPENSES
Manager’s fee
Trustee’s fee
Auditors’ remuneration
Tax agent’s fee
Administration
Brokerage and other transaction cost
4
5
NET INCOME BEFORE TAX
Income tax expense
NET INCOME AFTER TAX, REPRESENTING
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Total comprehensive income is made up as follows:
Realised gain
Unrealised gain/(loss)
Distribution for the year:
Net distributions
2013
RM
2012
RM
196,041
1,270,100
220,992
913,740
6,657,862
8,124,003
2,888,632
4,023,364
763,418
32,144
16,500
3,565
11,970
183,940
1,011,537
730,395
30,754
16,499
3,001
32,385
161,697
974,731
7,112,466
3,048,633
(3,730)
(14,000)
7,108,736
3,034,633
6,098,459
1,010,277
7,108,736
4,199,050
(1,164,417)
3,034,633
6
3,119,106
2,854,723
Net distribution per unit (sen)
5.00
4.21
Gross distribution per unit (sen)
5.00
4.23
The accompanying notes form an integral part of the financial statements.
14 Kenanga Islamic Fund Annual Report
8.2 STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013
2013
RM
2012
RM
7
8
9
34,925,289
3,419,089
3,168,000
41,512,378
30,392,069
11,736,867
42,128,936
11
1,965,736
35,946
11,645
2,013,327
7,004
95,714
103,599
206,317
43,525,705
42,335,253
61,699
2,925
523,323
50,296
638,243
87,454
2,803
2,854,723
25,500
2,970,480
20,304,395
22,583,067
42,887,462
20,571,568
18,793,205
39,364,773
43,525,705
42,335,253
66,386,733
67,808,155
0.6460
0.5805
Note
INVESTMENTS
Quoted Shariah-compliant equity securities
Shariah-compliant collective investment scheme
Short term Islamic deposits
OTHER ASSETS
Other receivables
Tax recoverable
Cash at bank
TOTAL ASSETS
LIABILITIES
Amount due to Manager
Amount due to Trustee
Distribution payables
Other payables
TOTAL LIABILITIES
EQUITY
Unitholder’s contribution
Retained earnings
NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS
12
TOTAL EQUITY AND LIABILITIES
12(a)
NUMBER OF UNITS IN CIRCULATION
NET ASSET VALUE PER UNIT – EX DISTRIBUTION (RM)
13
The accompanying notes form an integral part of the financial statements.
Kenanga Islamic Fund Annual Report 15
8.3 STATEMENT OF CHANGES IN NET ASSET VALUE
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013
Note
2013
At beginning of the year
Total comprehensive income
Creation of units
Cancellation of units
Distribution equalisation
Distribution
At end of the year
2012
At beginning of the year
Total comprehensive income
Creation of units
Cancellation of units
Distribution equalisation
Distribution
At end of the year
12(a)
12(a)
12(a)
14
12(a)
12(a)
12(a)
14
Unitholders’
contribution
RM
Retained
earnings
RM
Total net
asset value
RM
20,571,568
11,667,821
(11,109,368)
(1,025,394)
199,768
20,304,395
18,793,205
7,108,736
(3,318,874)
22,583,067
39,364,773
7,108,736
11,667,821
(11,109,368)
(1,025,394)
(3,119,106)
42,887,462
15,258,363
10,998,421
(5,685,216)
1,395,864
(1,395,864)
20,571,568
17,217,431
3,034,633
(1,458,859)
18,793,205
32,475,794
3,034,633
10,998,421
(5,685,216)
1,395,864
(2,854,723)
39,364,773
The accompanying notes form an integral part of the financial statements.
16 Kenanga Islamic Fund Annual Report
8.4 STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013
2013
RM
2012
RM
CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES
Proceeds from sale of Shariah-compliant investments
40,547,933 32,132,248
Purchase of Shariah-compliant investments
(43,759,530) (30,221,178)
Net dividends received
1,041,235
879,488
Profit received
198,760
218,871
Manager’s fee paid
(760,506)
(717,702)
Trustee’s fee paid
(32,022)
(30,218)
Auditors’ remuneration paid
(16,500)
(7,000)
Tax agent’s fee paid
(3,565)
Payment for other fees and expenses
(9,470)
(37,384)
78,956
35,720
Income tax refund
Net cash (used in) / generated from operating and
(2,714,709)
2,252,845
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from units created
Cash paid on units cancelled
Distribution paid
Net cash (used in)/generated from financing activities
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE YEAR
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
Cash and cash equivalents comprise:
Cash at bank
Short term Islamic deposits
10,617,330
(11,112,936)
(5,450,506)
(5,946,112)
14,855,182
(8,100,071)
(2,280,968)
4,474,143
(8,660,821)
6,726,988
11,840,466
3,179,645
5,113,478
11,840,466
11,645
3,168,000
3,179,645
103,599
11,736,867
11,840,466
The accompanying notes form an integral part of the financial statements.
Kenanga Islamic Fund Annual Report 17
8.5 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013
1.
THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES
Kenanga Islamic Fund (herein after referred to as “The Fund”) was constituted pursuant to
the executed Master Deed of Trust dated 29 July 2002, Master Supplemental Deed dated 1
June 2009 and Second Master Supplemental Deed dated 13 October 2010 made between
the Manager, Kenanga Investors Berhad, and Universal Trustee (Malaysia) Berhad. The
Fund commenced operation on 15 August 2002 and will continue to be in operation until
terminated by the Trustee as provided under Article 13 of the Deed of Trust.
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. 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 achieve steady capital growth and income distribution (incidental) over
the medium to long-term year by investing in a diversified portfolio of authorised investments
in accordance with accepted Shariah principles.
The financial statements were authorised for issue by the Chief Executive Officer of the
Manager on 26 February 2014.
2.
FINANCIAL RISK AND 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, liquidity risk and reclassification of Shariah status risk.
Whilst these are the most important types of financial risks inherent in each type of financial
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 a Shariah-compliant investment in
the Fund.
The Fund has an approved set of investment guidelines and policies as well as internal
controls which sets out its overall business strategies to manage these risks to optimise
returns and preserve capital for the unitholders, consistent with the long term objectives of
the Fund.
a.
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market prices. Market risk includes interest rate
risk and price risk.
Market risk arises when the value of the quoted Shariah-compliant investments fluctuate
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 Shariah-compliant investments’ prices caused by uncertainties in the economic,
political and social environment will affect the fair value of the Fund.
18 Kenanga Islamic Fund Annual Report
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
a.
Market Risk (Contd.)
The Manager manages the risk of unfavorable changes in prices by cautious review
of the Shariah-compliant investments and continuous monitoring of their performance
and risk profiles.
i.
Interest rate risk
The risk refers to how the changes in the interest rate environment would affect
the performance of the Fund’s investments. Rates offered by the financial
institutions will fluctuate according to the Overnight Policy Rate determined by
Bank Negara Malaysia and this has direct correlation with the Fund’s investments
in Islamic deposits. Interest rate is a general economic indicator that will have
an impact on the management of fund regardless of whether it is a Shariahcompliant fund or otherwise. It does not in any way suggest that the Fund will
invest in conventional financial instruments.
The Fund is not exposed to significant interest rate risk as its Islamic deposits are
short term in nature and have fixed profit rates.
Interest rate risk exposure
The following table analyses the Fund’s interest rate risk exposure. The Fund’s
assets and liabilities are included at fair value and categorised by the earlier of
contractual re-pricing or maturity dates.
Nonexposure
to interest
Up to
rate
1 year movement
RM
RM
2013
Assets
Quoted Shariah-compliant
equity securities
Shariah-compliant collective
investment scheme
Short term Islamic deposits
Other assets
Liabilities
Other liabilities
Total interest rate sensitivity
gap
Weighted
average
effective
rate of
Total
return*
RM
%
- 34,925,289 34,925,289
- 3,419,089 3,419,089
3,168,000
- 3,168,000
- 1,977,381 1,977,381
3,168,000 40,321,759 43,489,759
-
(638,243)
(638,243)
2.90
(638,243)
(638,243)
3,168,000 39,683,516 42,851,516
Kenanga Islamic Fund Annual Report 19
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
a.
Market Risk (Contd.)
i.
Interest rate risk (Contd.)
Interest rate risk exposure (Contd.)
Nonexposure
to interest
Up to
rate
1 year movement
RM
RM
2012
Assets
Quoted Shariah-compliant
equity securities
Short term Islamic deposits
Other assets
Liabilities
Other liabilities
Total interest rate sensitivity
gap
Weighted
average
effective
rate of
Total
return*
RM
%
- 30,392,069 30,392,069
11,736,867
- 11,736,867
110,603
110,603
11,736,867 30,502,672 42,239,539
2.89
- (2,970,480) (2,970,480)
- (2,970,480) (2,970,480)
11,736,867 27,532,192 39,269,059
* Computed based on assets with exposure to interest rate movement only.
ii.
Price risk
Price risk is the risk of unfavorable changes in the fair values of quoted Shariahcompliant equity securities and Shariah-compliant collective investment scheme.
The Fund invests in quoted Shariah-compliant equities and Shariah-compliant
collective investment scheme which are exposed to price fluctuations. This may
then affect the unit price of the Fund.
Price risk sensitivity
Manager’s best estimate of the effect on the profit for the year due to a reasonably
possible change in investments in quoted Shariah-compliant equity securities
and Shariah-compliant collective investment scheme with all other variables held
constant is indicated in the table below:
20 Kenanga Islamic Fund Annual Report
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
a.
Market Risk (Contd.)
ii.
Price risk (Contd.)
Price risk sensitivity (Contd.)
Changes in Effect on profit
price
for the year
Increase/
Increase/
(decrease)
(decrease)
basis point
RM
2013
Quoted Shariah-compliant equity securities
Shariah-compliant collective investment
scheme
5/(5) 17,463/(17,463)
5/(5)
2012
Quoted Shariah-compliant equity securities
Shariah-compliant collective investment
scheme
1,710/(1,710)
5/(5) 15,196/(15,196)
5/(5)
-
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 financial instruments as at the reporting date.
Fair value
2013
RM
2012
RM
Quoted Shariah-compliant
equity securities
34,925,289 30,392,069
Shariah-compliant collective
3,419,089
investment scheme
Percentage of NAV
2013
2012
%
%
81.4
77.2
8.0
-
Kenanga Islamic Fund Annual Report 21
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
a.
Market Risk (Contd.)
ii.
Price risk (Contd.)
Price risk concentration (Contd.)
The Fund’s concentration of Shariah-compliant equity price risk analysed by
the Fund’s Shariah-compliant equity securities and Shariah-compliant collective
investment scheme by sector is as follows:
Fair value
2013
RM
Trading/Services
Industrial Products
Consumer Products
Islamic REITs
Plantation
Construction
Infrastructure
Finance
Properties
Technology
Shariah-compliant Warrants
b.
2012
RM
15,870,945 18,708,458
4,651,946 3,016,240
4,321,013 2,674,744
3,419,089 1,203,200
2,286,570
2,267,106 1,514,193
2,057,220 3,256,500
1,614,010
1,415,479
441,000
18,734
38,344,378 30,392,069
Percentage of NAV
2013
2012
%
%
37.0
10.8
10.1
8.0
5.3
5.3
4.8
3.8
3.3
1.0
89.4
47.5
7.7
6.8
3.1
3.8
8.3
77.2
Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial
loss for 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
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.
22 Kenanga Islamic Fund Annual Report
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
b.
Credit Risk (Contd.)
iii.
Credit quality of financial institutions
The Fund deposits only with reputable financial institutions. The following table
analyses the financial institutions by rating category:
Short term Islamic deposits
Percentage of
total short term
Islamic deposits
2013
2012
%
%
Rating
AAA
A1
N/A
c.
82.7
17.3
100.0
33.6
26.9
39.5
100.0
Percentage of NAV
2013
2012
%
%
6.1
1.3
7.4
10.0
8.0
11.8
29.8
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 unitholder’s option based on
the Fund’s net asset value per unit at the time of cancellation calculated in accordance
with the Fund’s Trust Deed.
The Islamic liquid assets comprise cash, Islamic deposits with licensed financial
institutions and other Shariah-compliant instruments, which are capable of being
converted into cash within 7 days.
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.
Kenanga Islamic Fund Annual Report 23
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
c.
Liquidity Risk (Contd.)
Note
2013
Assets
Quoted Shariah-compliant equity securities
Shariah-compliant collective investment scheme
Short term Islamic deposits
Other assets
Liabilities
Other liabilities
(i)
34,925,289
3,419,089
3,168,000
1,977,381
43,489,759
(ii)
638,243
Net asset value
Liquidity gap
42,887,462
(iii)
42,851,516
(i)
30,392,069
11,736,867
110,603
42,239,539
(ii)
2,970,480
2012
Assets
Quoted Shariah-compliant equity securities
Short term Islamic deposits
Other assets
Liabilities
Other liabilities
Net asset value
Liquidity gap
(i)
Up to 1 year
RM
39,364,773
(iii)
39,269,059
Financial assets
Analysis of financial assets at FVTPL into maturity groupings is based on the
expected date on which these assets will be realised. The Fund’s investments
have been included in the “less than 1 month” 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 year from the end of the reporting
year to the contractual maturity date or if earlier, the expected date on which the
assets will be realised.
24 Kenanga Islamic Fund Annual Report
2.
FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
c.
Liquidity Risk (Contd.)
(ii) Financial liabilities
The maturity grouping is based on the remaining year from the end of the
reporting year to the contractual maturity dated. When counterparty has a choice
of when the amount is paid, the liability is allocated to the earliest year 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 “less than 1 month”.
d.
Reclassification of Shariah Status Risk
The risk that the currently held Shariah-compliant securities in the portfolio of Shariahbased funds may be reclassified to be Shariah non-compliant upon review of the
securities by the Shariah Advisory Council of the Securities Commission performed
twice yearly. If this occurs, the Manager will take the necessary steps to dispose of
such securities.
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 Malaysian Accounting Standards
Board (“MASB”) and International Financial Reporting Standards (“IFRS”) issued by
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.
Standard and Interpretations Issued But Not Yet Effective
As at the date of authorisation of these financial statements, the following Standards
and Amendments have been issued by MASB but are not yet effective and have not
been adopted by the Fund.
Effective for financial
period beginning
on or after
Description
Amendments to MFRS 132: Offsetting Financial Assets
and Financial Liabilities
Amendments to MFRS 10, MFRS 12, and MFRS 127:
Investment Entities
1 January 2014
1 January 2014
Kenanga Islamic Fund Annual Report 25
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
b.
Standard and Interpretations Issued But Not Yet Effective (Contd.)
Description
Effective for financial
period beginning
on or after
Amendments to MFRS 136: Recoverable Amount
1 January 2014
Disclosure for Non-Financial Assets
Amendments to MFRS 139: Novation of Derivatives and
1 January 2014
Continuation of Hedge Accounting
IC Interpretation 21 Levies
1 January 2014
Amendments to MFRSs contained in the documents
1 July 2014
entitled Annual Improvements 2010 - 2012 cycle
Amendments to MFRSs contained in the documents
1 July 2014
entitled Annual Improvements 2011 - 2013 cycle
MFRS 9: Financial Instruments (IFRS 9 Issued by IASB To be announced by MASB
in November 2009)
MFRS 9: Financial Instruments (IFRS 9 Issued by IASB To be announced by MASB
in October 2010)
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, as issued, reflects the first phase of the IASB’s work on the replacement of
MFRS 139 Financial Instruments: Recognition and Measurement (“MFRS 139”) and
applies to classification and measurement of financial assets and financial liabilities as
defined in MFRS 139 and replaces the guidance in MFRS 139.
In subsequent phases, the IASB will address hedge accounting and impairment of
financial assets. The adoption of the first phase of MFRS 9 will have an effect on
the classification and measurement of the Fund’s financial assets but will not have
an impact on the classification and measurement of financial liabilities. The Fund
will quantify the effect in conjunction with the other phases when the final standard
including all phases is issued.
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
instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in
the case of financial assets not at fair value through profit or loss, directly attributable
transaction costs.
The Fund determines the classification of its financial assets at initial recognition, which
are receivables.
26 Kenanga Islamic Fund Annual Report
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
c.
Financial Assets (Contd.)
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 quoted Shariah-compliant equity
securities, unquoted corporate sukuk, unquoted government guaranteed sukuk
and Shariah-compliant collective investment scheme acquired principally for the
purpose of selling in the near term.
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.
Profit earned and dividend revenue elements of such instruments are recorded
separately in ‘‘profit income’’ and ‘‘dividend income’’ respectively.
ii.Receivables
Financial assets with fixed or determinable payments that are not quoted in an
active market are classified as receivables.
Subsequent to initial recognition, receivables are measured at amortised cost
using the effective profit 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 rate of return. 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.
Kenanga Islamic Fund Annual Report 27
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
d.
Impairment of Financial Assets (Contd.)
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 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.
Profit income is recognised using the effective profit rate method.
Dividend income is recognised on declared basis, when the right to receive the dividend
is established.
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 Islamic deposits with financial institution.
g.
Income Tax Expenses
Income tax on the profit or loss for the year comprises current tax. Current tax is the
expected amount of income taxes payable in respect of the taxable profit for the year.
h.
Unrealised Reserved
Unrealised reserves represent the net gain or loss arising from carrying Shariahcompliant investments at their fair values at reporting date. This reserve is not
distributable in nature.
i.
Financial Liabilities
Financial liabilities are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability.
Financial liabilities are recognised in the statement of financial position when and only
when, the Fund became 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 rate 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.
28 Kenanga Islamic Fund Annual Report
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
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 Ringgit Malaysia (“RM”), which is also the Fund’s
functional currency.
l.Distribution
Distributions are at the discretion of the Fund Manager. A distribution to the Fund’s Unit
Holders is accounted for as a deduction from retained earnings.
m.
Significant Accounting Judgments and Estimates
The preparation of financial statements requires the use of certain accounting estimates
and exercise of judgment. Estimates and judgements 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 year.
4.
MANAGER’S FEE
The Manager’s fee is computed on a daily basis at a rate not exceeding 2.5% per annum of
the NAV of the Fund as provided under Clause 13.1 of the Deed. The Manager is currently
charging Manager’s fee of 1.90% per annum of the NAV of the Fund.
5.
TRUSTEE’S FEE
The trustee’s fee is computed on a daily basis at 0.08% per annum of the net asset value of
the Fund and subject to a minimum fee of RM18,000 per annum as provided under Clause
13.2 of the Deed.
Kenanga Islamic Fund Annual Report 29
6.
INCOME TAX EXPENSE
Malaysian income tax:
Current year tax
Over provision of tax in prior year
2013
RM
2012
RM
3,400
330
3,730
14,000
14,000
Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated
assessable income for the financial 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:
Net income before tax
Tax at Malaysian statutory tax rate of 25% (2012: 25%)
Income not subject to tax
Restriction on tax deductible expenses for unit trust fund
Expenses not deductible for tax purposes
(under Section 63B of the Income Tax Act, 1967)
Underprovision of tax in prior years
Tax expense for the year
7.
2013
RM
2012
RM
7,112,465
3,048,633
1,778,116
(1,962,096)
175,482
762,158
(1,266,519)
227,257
11,898
330
3,730
291,104
14,000
2013
RM
2012
RM
34,925,289
30,392,069
5,241,960
1,415,902
6,657,862
4,053,049
(1,164,417)
2,888,632
QUOTED SHARIAH-COMPLIANT EQUITY SECURITIES
Financial assets held for trading, at FVTPL:
Quoted Shariah-compliant equity securities
Net gain on financial assets at FVTPL comprised:
Realised gain on disposals
Unrealised change in fair values
30 Kenanga Islamic Fund Annual Report
7.
QUOTED SHARIAH-COMPLIANT EQUITY SECURITIES (CONTD.)
Details of quoted Shariah-compliant equity securities as at 31 December 2013:
Cost Fair Value
RM
RM
Percentage
of NAV
%
151,000 1,458,690 1,718,380
293,691
506,509 1,430,275
117,600 1,369,844 1,411,200
193,000
810,871 1,065,360
285,240
524,928 1,009,750
327,900
874,784
852,540
116,100
759,979
841,725
85,125
792,952
810,390
817,400
920,048
796,965
52,900
840,707
738,484
325,000
406,250
711,750
164,900
426,234
638,163
159,400
535,606
510,080
15,400
229,636
483,868
304,920
351,526
481,774
74,400
276,454
430,776
270,000
431,757
421,200
58,700
328,151
405,030
730,000
251,850
273,750
64,500
180,600
258,645
99,800
186,290
206,586
48,600
193,684
188,568
41,200
187,514
181,280
2,160
4,406
4,798,936 12,844,864 15,870,945
4.0
3.3
3.3
2.5
2.4
2.0
2.0
1.9
1.9
1.7
1.7
1.5
1.2
1.1
1.1
1.0
1.0
0.9
0.6
0.6
0.5
0.4
0.4
37.0
265,800
745,992 1,145,598
47,000
889,715 1,136,460
135,600
603,420
767,496
220,600
613,883
756,658
140,000
480,200
456,400
69,400
407,732
389,334
878,400 3,740,942 4,651,946
2.7
2.6
1.8
1.8
1.0
0.9
10.8
Unit
RM
Trading/Services
Tenanga Nasional Bhd
Sapura-Kencana Petroleum Bhd
Amway (M) Holdings Bhd *
Telekom Malaysia Bhd
Dialog Group Bhd
Oldtown Bhd
Maxis Bhd
Sime Darby Bhd
Media Chinese International Ltd *
Aeon Co (M) Bhd
Datasonic Group Bhd
Gas Malaysia Bhd
MBM Resources Bhd
Petronas Dagangan Bhd
Perdana Petroleum Bhd
Dayang Enterprise Holding Bhd
Alam Maritim Resources Bhd
Axiata Group Bhd
Daya Materials Bhd
UMW Oil & Gas Corporation Bhd
Intergrax Bhd
KPJ Healthcare Bhd
Deleum Bhd
KPJ Healthcare Bhd-Rights
Industrial Products
Kossan Rubber Industries Bhd
Petronas Gas Bhd
Scientex Bhd
Coastal Contracts Bhd
Can-One Bhd
Top Glove Corporation Bhd
Kenanga Islamic Fund Annual Report 31
7.
QUOTED SHARIAH-COMPLIANT EQUITY SECURITIES (CONTD.)
Details of quoted Shariah-compliant equity securities as at 31 December 2013: (Contd.)
Cost Fair Value
RM
RM
Percentage
of NAV
%
18,800 1,152,335 1,278,400
26,300 1,199,404 1,238,730
250,700
769,395 1,017,842
33,000
432,577
397,320
35,100
288,438
295,191
23,500
77,550
93,530
387,400 3,919,699 4,321,013
3.0
2.9
2.4
0.9
0.7
0.2
10.1
41,000 1,112,868 1,065,180
168,000
411,348
504,000
74,900
382,302
352,030
53,600
166,969
187,064
9,200
177,829
178,296
346,700 2,251,316 2,286,570
2.5
1.2
0.8
0.4
0.4
5.3
279,600 1,241,478 1,339,284
312,200
619,578
580,692
171,000
417,668
347,130
762,800 2,278,724 2,267,106
3.1
1.4
0.8
5.3
415,600 1,591,314 2,057,220
415,600 1,591,314 2,057,220
4.8
4.8
156,700
156,700
884,887 1,614,010
884,887 1,614,010
3.8
3.8
444,800
861,660
840,672
141,000
458,250
480,810
37,449
88,297
93,997
623,249 1,408,207 1,415,479
2.0
1.1
0.2
3.3
Unit
RM
Consumer Products
Nestle (M) Bhd
Dutch Lady Milk Industries Bhd *
QL Resources Bhd
UMW Holdings Bhd
Oriental Holdings Bhd *
Asia Brands Bhd *
Plantation
United Plantations Bhd
TSH Resources Bhd
IOI Corporation Bhd*
IJM Plantations Bhd
Batu Kawan Bhd
Construction
Gamuda Bhd
Hock Seng Lee Bhd
WCT Holdings Bhd
Infrastructure
Digi.Com Bhd
Finance
Syarikat Takaful Malaysia Bhd
Properties
Eastern & Oriental Bhd
Matrix Concepts Holdings Bhd
IOI Properties Group Bhd
32 Kenanga Islamic Fund Annual Report
7.
QUOTED SHARIAH-COMPLIANT EQUITY SECURITIES (CONTD.)
Details of quoted Shariah-compliant equity securities as at 31 December 2013: (Contd.)
Unit
RM
Technology
Globetronic Technology Bhd
140,000
140,000
Total quoted Shariah-compliant equity
securities
Excess of fair value over cost
Cost Fair Value
RM
RM
372,844
372,844
Percentage
of NAV
%
441,000
441,000
1.0
1.0
29,292,797 34,925,289
81.4
5,632,492
* Please refer to Note 10 a for further details.
8.
SHARIAH-COMPLIANT COLLECTIVE INVESTMENT SCHEME
Financial assets held for trading, at FVTPL:
Shariah-compliant collective investment scheme
Net gain on financial assets at FVTPL comprised:
Realised gain on disposals
Unrealised change in fair values
2013
RM
2012
RM
3,419,089
-
(405,625)
(405,625)
-
Details of quoted Shariah-compliant collective investment as at 31 December 2013:
Unit
RM
Cost
RM
Fair Value
RM
Percentage
of NAV
%
615,392
1,267,300
1,882,692
2,022,926
1,801,788
3,824,714
1,796,945
1,622,144
3,419,089
4.2
3.8
8.0
Total Shariah-compliant
collective investment
3,824,714
3,419,089
8.0
Excess of cost over fair value
(405,625)
Islamic REITs
Axis Real Estate Investment Trust
AL-’Aqar KPJ REIT
Kenanga Islamic Fund Annual Report 33
9.
SHORT TERM ISLAMIC DEPOSITS
Short term Islamic deposits are held with licensed commercial banks in Malaysia at the
prevailing profit rate.
The weighted average effective rate of return and average remaining maturity of the short
term Islamic deposits are disclosed in Note 2(a)(i).
10. SHARIAH INFORMATION OF THE FUND
The Shariah Adviser confirmed that the investment portfolio of the Fund is Shariah compliant,
which comprises:
a.
Equity securities listed on Bursa Malaysia which have been classified as Shariahcompliant by the Shariah Advisory Council of the Securities Commission (“SACSC”),
except for:
(i)
Amway (M) Holdings Bhd, Media Chinese International Limited, Dutch Lady
Milk Industries Bhd, Oriental Holdings Bhd and Asia Brands Bhd, which were
reclassified as Shariah non-compliant by the SACSC on 29 November 2013.
These securities will be disposed of soonest practical, within 6 months from the
reclassification date as permitted by the SACSC;
(ii) IOI Properties Group Bhd was designated as Shariah non-compliant by the
Shariah Adviser on 27 December 2013.
By virtue of the shares held in IOI Corporation Bhd, the Fund received shares in
IOI Properties Group Bhd on 19 December 2013 and subsequently disposed of the
shares on 15 January 2014. Net proceed amounting to RM78,164.15 is to be used
to offset the price difference of IOI Corporation Bhd on ex-date and before ex-date.
The Manager has also acquired additional shares in IOI Properties Group Bhd
on 19 December 2013 and subsequently disposed of the shares on 15 January
2014. The original amount invested in the shares by the Fund amounting to
RM21,970.08 is returned to the Fund. Net gain amounting to RM17,112.00 is
to be channelled to baitulmal or any other charitable bodies as approved by the
Shariah Adviser.
b.
Investment in collective investment scheme which have been verified as Shariahcompliant by the Shariah Adviser; and
c.
Cash placement and liquid assets in local market, which have been placed in Shariahcompliant investments and/or instruments.
11. OTHER RECEIVABLES
Amount due from brokers
Dividends receivable
Profit income from short term Islamic deposits
34 Kenanga Islamic Fund Annual Report
2013
RM
2012
RM
1,755,506
209,770
460
1,965,736
3,825
3,179
7,004
12. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS
Net asset value attributed to unitholders is represented by:
Note
Unitholders’ contribution
Retained earnings:
Realised reserves
Unrealised reserves
a.
(a)
2013
RM
2012
RM
20,304,395
20,571,568
17,356,200
5,226,867
22,583,067
42,887,462
14,576,615
4,216,590
18,793,205
39,364,773
Unitholders’ contribution
2013
No. of units
At beginning of the year
Distribution equalisation
Add: Creation of units
Less: Cancellation of
units
Distribution
At end of the year
67,808,155
21,606,165
2012
RM No. of units
20,571,568
(1,025,394)
11,667,821
RM
56,459,613
24,734,740
15,258,363
1,395,864
10,998,421
(23,027,587) (11,109,368) (13,386,198)
199,768
66,386,733 20,304,395 67,808,155
(5,685,216)
(1,395,864)
20,571,568
The number of units legally or beneficially held by the Manager, Kenanga Investors
Berhad and parties related to the Manager (if any), as at 31 December 2013 were nil
(2012: nil).
13. NET ASSET VALUE PER UNIT - EX DISTRIBUTION
Net asset value attributable to unitholders is classified as equity in the statement of financial
position.
In line with the adoption of MFRS 139, quoted financial assets have been valued at the bid
prices at the close of business. In accordance with the Deed, the calculation of net asset
value attributable to unitholders per unit for the creation and cancellation of units is computed
based on quoted financial assets valued at the last done market price.
Kenanga Islamic Fund Annual Report 35
13. NET ASSET VALUE PER UNIT - EX DISTRIBUTION (CONTD.)
A reconciliation of net asset attributable to unitholders for creating/cancelling of units and the
net asset value attributable to unitholders per the financial statements is as follows:
2013
RM
Net asset value attributable
to unitholders for creation/
cancellation of units
Effect from adopting bid prices as
fair value
Net asset value attributable to
unitholders per statement of
financial position
RM/Unit
2012
RM
RM/Unit
43,041,617
0.6483
39,527,550
0.5829
(154,155)
(0.0023)
(162,777)
(0.0024)
42,887,462
0.6460
39,364,773
0.5805
14.DISTRIBUTION
Distributions to unitholders for the financial year ended 31 December 2013 and its
comparatives are from following sources:
2013
RM
2012
RM
Taxable income
Tax exempt income
Undistribution income
2,638
1,324,206
2,138,131
3,464,975
121,707
1,007,079
1,154,603
2,283,389
Less: Expense
Less: Income tax expense
Distribution out of realised reserve
(Set-off)/Distribution out of dividend equialisation
(145,438)
(663)
3,318,874
(199,768)
(810,894)
(13,636)
1,458,859
1,395,864
Distribution for the year
3,119,106
2,854,723
Gross distribution per unit (sen)
5.00
4.23
Net distribution per unit (sen)
5.00
4.21
15. PORTFOLIO TURNOVER RATIO
The portfolio turnover ratio (“PTR”) for the current financial year is 1.07 times (2012: 0.8
times).
PTR is the ratio of the average of the acquisitions and disposals of Shariah-compliant
investments of the Fund for the year to the average net asset value of the Fund, calculated
on a daily basis.
36 Kenanga Islamic Fund Annual Report
16. MANAGEMENT EXPENSE RATIO
The management expense ratio (“MER”) for the current financial year is 2.06 times (2012:
2.53 times).
MER is the ratio of total fees and recovered expenses of the Fund expressed as a percentage
of the Fund’s average net asset value, calculated on a daily basis.
17. TRANSACTIONS WITH FINANCIAL INSTITUTIONS
Brokerage,
stamp duty
Transaction Percentage and clearing Percentage
value
of total
fee
of total
RM
%
RM
%
Kenanga Investment Bank Bhd*
RHB Investment Bank Bhd
Affin Investment Bank Bhd
CIMB Investment Bank Bhd
AmInvestment Bank Bhd
Public Investment Bank Bhd
HwangDBS Investment Bank Bhd
MIDF Amanah Investment Bank
Bhd
Credit Suisse Securities (Malaysia)
Sdn Bhd
Maybank Investment Bank Bhd
Others
19,204,624
9,158,115
8,475,733
8,159,410
7,494,945
7,301,503
5,855,009
24.3
11.6
10.7
10.3
9.5
9.3
7.4
52,213
26,064
24,830
22,578
20,946
20,023
16,492
24.0
12.0
11.4
10.4
9.6
9.2
7.6
5,406,039
6.9
14,671
6.7
3,950,827
3,582,321
364,710
78,953,236
5.0
4.5
0.5
100.0
11,588
7,899
372
217,676
5.3
3.6
0.2
100.0
The above transaction values were in respect of quoted Shariah-compliant securities.
* Kenanga Investment Bank Berhad is a related party of Kenanga Investors Berhad.
The directors of the Manager are of the opinion that the transactions with the related parties
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.
18. SEGMENTAL REPORTING
a.
Business Segment
In accordance with the objective of the Fund, the Fund can invest 70% to 98% in
quoted Shariah-compliant equity securities and minimum 2% in Islamic liquid assets.
The following table provides an analysis of the Fund’s revenue, results, assets and
liabilities by business segments:
Kenanga Islamic Fund Annual Report 37
18. SEGMENTAL REPORTING (CONTD.)
a.
Business Segment (Contd.)
Quoted
ShariahOther
compliant
Shariahequity
compliant
securities investments
RM
RM
2013
Revenue
Segment income representing segment
results
Unallocated expenditure
Income before tax
Income tax expense
Net income after tax
Assets
Quoted Shariah-compliant equity
securities
Amount due from brokers
Dividends receivable
Unallocated assets
7,927,962
196,041
8,124,003
(1,011,537)
7,112,466
(3,730)
7,108,736
38,344,378
1,755,506
209,770
3,168,000
-
41,512,378
1,755,506
209,770
48,051
43,525,705
Liabilities
Unallocated liabilities
Net asset value attributable to unitholders
2012
Revenue
Segment income representing segment
results
Unallocated expenditure
Income before tax
Income tax expense
Net income after tax
Assets
Quoted Shariah-compliant equity
securities
Dividends receivable
Unallocated assets
38 Kenanga Islamic Fund Annual Report
Total
RM
638,243
42,887,462
43,525,705
3,802,372
220,992
4,023,364
(974,731)
3,048,633
(14,000)
3,034,633
30,392,069
3,825
11,736,867
-
42,128,936
3,825
202,492
42,335,253
18. SEGMENTAL REPORTING (CONTD.)
a.
Business Segment (Contd.)
Quoted
ShariahOther
compliant
Shariahequity
compliant
securities investments
RM
RM
2012
Liabilities
Unallocated liabilities
Net asset value attributable to unitholders
b.
Total
RM
2,970,480
39,364,773
42,335,253
Geographical Segments
As all of the Fund’s investments are located in Malaysia, the Fund does not have
separate identifiable geographical segments.
19. 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 gain
and loss, are recognised.
The following table analyses the financial assets and liabilities of the Fund in the
statement of financial position by the class of financial instrument to which they are
assigned and therefore by the measurement basis.
Financial
assets at
FVTPL Receivables
RM
RM
2013
Assets
Quoted Shariah-compliant
equity securities
Shariah-compliant collective
investment scheme
Short term Islamic deposits
Other receivables
Cash at bank
Financial
liabilities
RM
Total
RM
34,925,289
-
-
34,925,289
3,419,089
38,344,378
3,168,000
1,965,736
11,645
5,145,381
-
3,419,089
3,168,000
1,965,736
11,645
43,489,759
Kenanga Islamic Fund Annual Report 39
19. FINANCIAL INSTRUMENTS (CONTD.)
a.
Classification of financial instruments (Contd.)
Financial
assets at
FVTPL Receivables
RM
RM
2013 (contd.)
Liabilities
Amount due to Manager
Amount due to Trustee
Distribution payable
Other payables
2012
Assets
Quoted Shariah-compliant
equity securities
Short term Islamic deposits
Other receivables
Cash at bank
Total
RM
61,699
2,925
523,323
50,296
638,243
-
-
-
-
61,699
2,925
523,323
50,296
638,243
30,392,069
30,392,069
11,736,867
1,965,736
11,645
13,714,248
-
30,392,069
11,736,867
1,965,736
11,645
44,106,317
-
-
87,454
2,854,723
28,303
2,970,480
87,454
2,854,723
28,303
2,970,480
Liabilities
Amount due to Manager
Distribution payable
Other payables
b.
Financial
liabilities
RM
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:
Investments:
2013
Quoted Shariah-compliant equity
securities
Shariah-compliant collective
investment scheme
40 Kenanga Islamic Fund Annual Report
Level 1
RM
Level 2
RM
Level 3
RM
Total
RM
34,925,289
-
- 34,925,289
3,419,089
-
-
3,419,089
19. FINANCIAL INSTRUMENTS (CONTD.)
b.
Financial instruments that are carried at fair value (Contd.)
Investments:
2012
Quoted Shariah-compliant equity
securities
Level 1
RM
Level 2
RM
30,392,069
-
Level 3
RM
Total
RM
- 30,392,069
Level 1: Quoted 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
The fair value of quoted Shariah-compliant equities securities and Shariah-compliant
collective investment scheme are determined by reference to Bursa Malaysia Securities
Berhad’s bid price at reporting date.
c.
Financial instruments not carried at fair value and whose carrying amounts are
reasonable approximation of fair value
The carrying amounts of the Fund’s financial assets and liabilities that are not carried
at fair value approximate their fair values due to the relatively short term maturity of
these financial instruments.
20. 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 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 operation of the Fund cost-efficient.
No changes were made to the capital management objectives, policies or processes during
the current and previous financial year.
Kenanga Islamic Fund Annual Report 41
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Kenanga Investors Berhad (353563-P)
KENANGA BON ISLAM FUND
(FORMERLY KNOWN AS ING BON ISLAM)
Interim Report
For the Financial Period Ended 31 December 2013
Investor Services Center
Toll Free Line: 1 800 88 3737
Fax: +603 2057 3722
Email: investorservices@kenanga.com.my
Head Office, Kuala Lumpur
Suite 12.02, 12th Floor, Kenanga International,
Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.
Tel: 03-2057 3688
Fax: 03-2161 8807