KENANGA MANAGING DIRECTOR'S MANAGEMENT DISCUSSION AND ANALYSIS

In line with our strategy of multi segment, multi distribution and multi products, in 2019 KIB acquired LIB, an award-winning asset management company with good fixed income performance track record and established fixed income team. The acquisition exercise was pursued with the intention to complement KIG’s strong equity expertise and products offerings. We completed the acquisition in July and the subsequent business consolidation in November. The listing of OneETF by Kenanga (“ OneETF ”) on the Main Market of Bursa Malaysia on 13 January 2020, after over 14 months’ worth of development and preparation. This signaled our first foray into ETF by means of leveraged and inverse ETFs. The Kenanga KLCI Daily 2X Leveraged ETF (KLCI2XL) and the Kenanga KLCI Daily (-1X) Inverse ETF (KLCI1XI) are the first L&I ETFs to be benchmarked against the FTSE Bursa KLCI (“ KLCI ”), as well as the first ETF listing of the new decade on the local bourse. With the introduction of OneETF, both retail and institutional investors are able to diversify and capture market opportunities whichever way the markets may swing even in volatile environments. All this, adding the 12 retail and four wholesale funds from LIB has now brought the total number of funds managed by KIG to 38 retail funds, 28 wholesale funds and two private retirement schemes. With the above encouraging growth trajectory, all this will continue to broaden KIG’s footprint in the area of asset and wealth management in the country. Segmental Review: Listed Derivatives Impacted by the moderation of the overall volume in the Malaysian derivatives market, the effects of the US monetary policy stance, US-China trade tensions, volatile commodity prices and trade policies surrounding crude palm oil, our Listed Derivatives business, Kenanga Futures Sdn Bhd (“ KF ”) recorded a LBT of RM2.9 million from a LBT of RM2.8 million in FYE2018. Nonetheless, the division succeeded in increasing its overall market share and volume traded on Bursa Malaysia Derivatives Berhad (“ BMD ”). It also registered a two-fold increase in contracts executed on the US exchange - CME Group - in its second year since its launch. To further provide Malaysian investors with a wider selection of trading products, KF launched the access to a second global listed derivatives exchange, the Hong Kong Futures Exchange, in September 2019. As part of its continuous efforts to build a smart derivatives trading community in Malaysia among retail investors, marketing campaigns, webinars were introduced and a well-resourced new website www.kenangafutures.com.my was launched. Segmental Review: Structured Lending and Trade Financing The Structured Lending and Trade Financing division recorded a growth in PBT to RM833,000 in FYE2019 from RM539,000 in the previous year as a result of loan growth through equity financing. While this mitigated the lack of corporate exercises during the year, the division was also impacted by a contraction in its factoring business due to a slowdown in the small and medium-sized enterprises (“ SME ”) sector. RISK MANAGEMENT The Group continued to strengthen our risk resilience and risk mitigation, through constant reviews to tighten controls and enhance governance framework. As an investment bank, the primary risks are predicated on credit and market risks. These risks are managed via a risk management governance oversight, and a management process which encompasses the establishment and enforcement of policies and procedures, the conduct of comprehensive risk assessments, the establishment of the appropriate trading and facility limits for the respective exposures. During the year a Group Operational Risk Management workshop was conducted to promote a better understanding of risk governance and risk management amongst employees. It also served to instil the importance of employee participation in operational risk mitigation. GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION & ANALYSIS