KENANGA ANNUAL REPORT 2019

K E N A N G A I N V E S T M E N T B A N K B E R H A D A n n u a l R e p o r t 2 0 1 9 14 Segmental Review: Investment Management Kenanga Investors Group (“ KIG ”), which is comprised of Kenanga Investors Berhad (“ KIB ”), Kenanga Islamic Investors Berhad (“ KIIB ”) and Libra Invest Berhad (“ LIB ”), saw its PBT grow to RM6.2 million for the FYE2019, from RM2.24 million in 2018. KIG’s total AUM increased to RM13.49 billion from RM7.86 billion in 2018. The increase in both PBT and AUM can be attributed to our long-term strategy to build multiple distribution channels over the last few years. KIG’s burgeoning private wealth segment which was established in 2016 has surpassed its growth trajectory for this financial year, while other channels such as the retail, corporate and institutional segments continued to see growth despite a volatile year. The continued launch of new alternative strategies and products has also been imperative in carving out KIG’s presence in the market as a wealth manager with our foray into alternative investment space. The products saw us launching many first- in-the-market solutions for our clients ranging from high-yield to equity-linked structures. One of our conspicuous launches in 2019 which saw over RM150 million in funds raised was our Kenanga Global Unicorn 1 and 2. The funds aimed to provide medium- term capital appreciation by investing primarily in the securities of globally recognised, ‘near-term IPO’ ready, technology companies, valued at over USD1 billion. The Kenanga Global Unicorn series succeeded in bridging the gap between qualified investors and the international startup community with the first series oversubscribed. 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. GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION & ANALYSIS