KENANGA BOND FUND · KENANGA BOND FUND Contents Page Corporate Directory ii Directory of...

KENANGA BOND FUND

ANNUAL REPORT

For the Financial Year Ended 31 December 2015

Kenanga Investors Berhad (353563-P)

KENANGA BOND FUND

Contents Page

Corporate Directory iiDirectory of Manager’s Offices iiiFund Information 1Manager’s Report 2-4Fund Performance 5-7Trustee’s Report 8Independent Auditor’s Report 9-10Statement by the Manager 11Financial Statement 12-37

ii Kenanga Bond Fund Annual Report

CORPORATE DIRECTORY

Manager: Kenanga Investors Berhad (Company No. 353563-P)Registered officeKenanga Investors Berhad (KIB)8th Floor, Kenanga International, Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax: 03-2161 4990

Business OfficeSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807E-mail: [email protected] Website: www.KenangaInvestors.com.my

Board Of DirectorsDatuk Syed Ahmad Alwee Alsree (Chairman)Syed Zafilen Syed Alwee (Independent

Director)Peter John Rayner (Independent Director)Imran Devindran bin Abdullah (Independent

Director)Dato’ Bruce Kho Yaw HuatIsmitz Matthew De Alwis

Investment Committee Dato’ Bruce Kho Yaw Huat (Chairman) Syed Zafilen Syed Alwee (Independent

Member)Peter John Rayner (Independent Member)Imran Devindran bin Abdullah (Independent

Member)Ismitz Matthew De Alwis

Company Secretary: Norliza Abd Samad (MAICSA 7011089)9th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax:03-2161 4990

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

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

Tax Adviser: Ernst & Young Tax Consultants Sdn Bhd (Company No. 179793-K)Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

Membership: Federation Of Investment Managers Malaysia (FIMM)19-06-1, 6th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia. Tel: 03-2093 2600 Fax: 03-2093 2700 Website: www.fimm.com.my

Kenanga Bond Fund Annual Report iii

DIRECTORY OF MANAGER’S OFFICES

REGIONAL BRANCH OFFICES:

Kuala LumpurSuite 12.02, 12th Floor, Kenanga International,Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688Fax: 03-2161 8807

Johor BahruLot 11.03, 11th Floor, Menara MSC Cyberport,5 Jalan Bukit Meldrum,80300 Johor Bahru, Johor.Tel: 07-223 7505 / 4798 Fax: 07-223 4802

MelakaNo. 25-1, Jalan Kota Laksamana 2/17,Taman Kota Laksamana, Seksyen 2,75200 Melaka.Tel: 06-281 8913Fax: 06-281 4286

Kuching1st Floor, No 71,Lot 10900, Jalan Tun Jugah,93350 Kuching, Sarawak.Tel: 082-572 228 Fax: 082-572 229

KlangNo. 12, Jalan Batai Laut 3, Taman Intan,41300 Klang, Selangor Darul Ehsan.Tel:03-3341 8818, 3348 7889 Fax:03-3341 8816

Kota KinabaluA-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

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

IpohSuite 1, 2nd Floor,63 Persiaran Greenhill,30450 Ipoh, Perak, Malaysia.Tel: 05-254 7573 / 7570 Fax: 05-254 7606

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

Miri2nd Floor, Lot 1264,Centre Point Commercial Centre,Jalan Melayu, 98000 Miri, Sarawak.Tel: 085-416 866Fax: 085-322 340

1 Kenanga Bond Fund Annual Report

1. FUND INFORMATION1.1 Fund Name

Kenanga Bond Fund (KBNF or the Fund)

1.2 Fund Category / Type

Fixed Income / Income

1.3 Investment Objective

The Fund aims to provide investors with a steady income stream over the medium to long-term period through investments primarily in fixed income instruments.

1.4 Investment Strategy

The Fund will invest in a diversified portfolio consisting principally of fixed income securities and other permissible investments.

1.5 Duration

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

Maybank 12-months fixed deposit rate

1.7 Distribution Policy

The Fund aims to pay a regular distribution annually, where possible.

1.8 Breakdown of unit holdings of KBNF as at 31 December 2015

Size of holdings No. of unitholders No. of units held5,000 and below 48 133,1045,001 - 10,000 25 181,71510,001-50,000 88 2,089,95850,001-500,000 28 3,496,475500,001 and above 3 11,338,900Total 192 17,240,152

Kenanga Bond Fund Annual Report 2

2. MANAGER’S REPORT2.1 Explanation on whether the Fund has achieved its investment objective.

During the financial year under review, the Fund has achieved its investment objective of providing investors with a steady income stream over the medium to long-term period through investments primarily in fixed income instruments.

2.2 Comparison between the Fund’s performance during the financial year under review and performance of the benchmark

Performance Chart Since Launch (15/08/2002– 31/12/2015) Kenanga Bond Fund vs Maybank 12-months fixed deposit rate

% Cumulative Return, Launch to 31/10/2015

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Kenanga Bond : 68.62 Maybank 12-month Fixed Deposit Rate : 55.82

Source: Novagni Analytics and Advisory Sdn Bhd

2.3 Investment strategies and policies employed during the financial year under review

The Fund aimed to optimize returns through active portfolio management and market positioning in the bond market. This included investments in both sovereign and corporate bonds.

Both strategic and tactical asset allocation were employed actively, based on the derived short and long-term bond market. Nevertheless, the Fund maintained a minimum 70% invested in fixed income instruments at all times.

Active risk management was employed through the pre-determined investment process that sought to mitigate credit risk, while active bond management strategies were employed to mitigate duration risk in relation to our prevailing market outlook.


2.4 The Fund’s asset allocation as at 31 December 2015 and comparison with the previous financial year

Asset 31 Dec 2015 31 Dec 2014Unquoted corporate bonds 54.2% 68.7%Unquoted government guaranteed bonds 14.4% 17.5%Cash and Other 31.4% 13.8%

Reason for the differences in asset allocation

As at 31 December 2015, the Fund was 68.6% invested in bonds and 31.4% invested in short term money market placements. The lower than 70.0% minimum investment in bonds was due to cancellation of units on the reporting date and was rectified soon after. The lower investment in bonds at the end of the financial year compared to previous year was due to our strategy to shorten duration at the end of the financial year in view of our prevailing market outlook that bond gains would be skewed toward the front end of the curve while medium- to longer-term papers would weaken amid thinner liquidity during year-end as well as cautious sentiment toward FOMC meeting on 17 December 2015.

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

Period under reviewKenanga Bond Fund 2.45%Maybank 12-months fixed deposit rate 3.30%

Source: Lipper

For the financial year under review, the Fund registered a return of 2.45%, underperforming its benchmark’s return of 3.30% by 85 bps. The underperformance was mainly due to the widening of corporate bond spreads despite positive movement seen in government bond space during the financial year.

2.6 Review of the market

Market Review

Markets were grappling with timing of first Fed hiking cycle, slowing Chinese growth and renewed plunge in commodity prices. The spectre of Fed normalization loomed even as the markets were heavily discounting timing of hikes and this kept 10-year US Treasury (UST) yields firmly at the bottom half of its 2.0-2.5% trading range for most part of 2015.

Market has been forced to contend with a curveball from People’s Bank of China (PBoC) as well. Concerns on the Chinese economy were unavoidable with early sign of warning on the back of one-off Chinese Yuan Renminbi (CNY)’s devaluation that stoked fears of competitive devaluation.

In Asia, implied short-term rates were generally higher. The performance of Asian government bonds have been mixed give the nature of being commodity or trade-dependent. Commodity producers such as Malaysia and Indonesia performed poorly while China, Korea and Taiwan government bonds performed well with disappointing macro sentiments.


2.6 Review of the market (Contd.)

Market Review (Contd.)

Malaysian sovereign bonds recovered partial losses posted towards year-end demand with net buying interest from offshore players and temporary spike in crude oil prices. Yield curve ended steeper as gains were skewed towards the front end of the curve.

Market Outlook

2016 will be a year of relative value rather than an outright directional gain and learning to react as liquidity begins to tighten and credit spreads to widen further as defaults are likely to rise moderately. Rate adjustments will likely to prove greater in the front end of the curve – a bear flattening formation.

In the case of Malaysia, we continue to expect Bank Negara Malaysia (BNM) to keep policy rate steady at 3.25% this year but weak commodity prices, high loan-to-deposit ratio and decline in excess liquidity in the system will push local bond yields higher in the process.

However, sovereign rating is expected to be stable due to fiscal sustainability, declining household debts, return of investment cycle and improving credit metrics as measured by 5-year credit default swap. Ringgit Malaysia’s risk premium is expected to recede, which will at least limit underperformance from here. Risk of twin deficits is easing as the focus is shifting to import compression and exports are benefitting from over-sold currency.

2.7 Distribution

For the financial 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 financial year under review.

2.9 Significant changes in the state of affair of the Fund during the financial year

There were no significant changes in the state of affair of the Fund during the financial year 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 financial year 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 financial year under review, the Manager did not receive any rebates or soft commissions from stockbrokers.


3. FUND PERFORMANCE3.1 Details of portfolio composition of Kenanga Bond Fund (“the Fund”) for last 3 financial

years as at 31 December are as follows:

a. Distribution among industry sectors and category of investments:

FY FY FY2015 2014 2013

% % %

Unquoted corporate bonds 54.2 76.9 68.7Unquoted government guaranteed bonds 14.4 5.0 17.5Short term deposits and cash 31.4 18.1 13.8

100.0 100.0 100.0

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

b. Distribution among markets

The Fund invested in local fixed income securities and cash instruments only.


3.2 Performance details of the Fund for the last 3 financial years ended 31 December are as follows:

FY FY FY2015 2014 2013

Net asset value (“NAV”) (RM Million) 12.13* 14.30 8.50Units in circulation (Million) 17.24 20.85 12.25NAV per unit (RM) 0.7034* 0.6864 0.6937Highest NAV per unit (RM) 0.7036 0.7119 0.7287Lowest NAV per unit (RM) 0.6861 0.6866 0.6937Total return (%) 2.45 2.57 0.46- Capital growth (%) 2.45 -1.04 -3.03- Income growth (%) - 3.60 3.49Gross distribution per unit (sen) - 2.50 2.50Net distribution per unit (sen) - 2.50 2.50Management expense ratio (“MER”) 1 1.41 1.56 1.46Portfolio turnover ratio (“PTR”) 2 0.78 1.96 1.85

Note: TotalreturnistheactualreturnoftheFundfortherespectivefinancialyears,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 were no distribution declaredbytheFundduringthecurrentfinancialyearunderreview.

1MERisloweragainstpreviousfinancialyearmainlyduetoincreaseinaveragefundsizeduringthefinancialyearunderreview.

2ThelowerPTRwasduetohighermarketvolatilityduringthefinancialyear.

* Based on bid price fair valuation method on all investments held by the Fund as at 31 December 2015, theNAVandNAVper unitwould beRM12.13million andRM0.7033respectively.

(AsdisclosedunderNote12ofthefinancialstatements)


3.3 Average total return of the Fund

1 Year 3 Years 5 Years31 Dec 14 -

31 Dec 1531 Dec 12 -

31 Dec 1531 Dec 10 -

31 Dec 15Kenanga Bond Fund 2.45% 1.86% 2.97%Maybank 12-month Fixed Deposit Rate 3.30% 3.32% 3.37%

Source: Lipper

3.4 Annual total return of the Fund

Period under

review 1 Year 1 Year 1 Year 1 Year31 Dec 14 –

31 Dec 1531 Dec 13 –

31 Dec 1431 Dec 12 -

31 Dec 1331 Dec 11 -

31 Dec 1231 Dec 10 -

31 Dec 11Kenanga Bond

Fund 2.45% 2.57% 0.46% 3.73% 4.86%Maybank

12-month Fixed Deposit Rate 3.30% 3.20% 3.15% 3.15% 3.03%

Source: Lipper

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


4. TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA BOND FUND

We, Universal Trustee (Malaysia) Berhad (“the Trustee”), being the Trustee of Kenanga Bond Fund (“the Fund”), are of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the capacity of Manager of the Fund, has fulfilled its duties in the following manner for the financial year ended 31 December 2015.

(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, the Securities Commission’s Act 1993, Capital Market and Services Act, 2007 and other applicable laws for the financial year ended 31 December 2015;

(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.

For and on behalf of the Trustee UNIVERSAL TRUSTEE (MALAYSIA) BERHAD

ONG TEE VANN Chief Executive Officer

Kuala Lumpur, Malaysia

22 February 2016


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

Report on the financial statements

We have audited the financial statements of Kenanga Bond Fund (“the Fund”), which comprise the statement of financial position as at 31 December 2015 and the statement of comprehensive income, statement of changes in net asset value 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 12 to 37.

Manager’sandTrustee’sresponsibilityforthefinancialstatementsandfairpresentation

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 about 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.


5. INDEPENDENT AUDITORS’ REPORT TO THE UNITHOLDERS OF KENANGA BOND 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 2015 and of its financial performance, changes in net asset value and cash flows 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 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


22 February 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 financial position as at 31 December 2015 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 2015 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 Bond Fund as at 31 December 2015 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

Ismitz Matthew De Alwis


22 February 2016


7. FINANCIAL STATEMENT7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Note 2015 2014RM RM

INVESTMENT INCOMEInterest income 450,288 307,961Net loss from investments:- Financial assets at fair value through profit or loss

(“FVTPL”) 4 (35,767) (19,092)414,521 288,869

EXPENSESManager’s fee 5 105,392 73,249Trustee’s fee 6 18,000 18,000Auditors’ remuneration 7,000 7,000Tax agent’s fee 3,500 4,300Administration expenses 14,752 11,626

148,644 114,175

NET INCOME BEFORE TAX 265,877 174,694

Income tax 7 - -

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 265,877 174,694

Net income after tax is made up as follows:Realised gain 292,221 133,750Unrealised (loss)/gain 4 (26,344) 40,944

265,877 174,694

Distribution for the year:Net distribution 13 - 502,942Gross/Net distribution per unit (sen) 13 - 2.50

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


7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015

Note 2015 2014RM RM

INVESTMENTSFinancial assets at FVTPL 4 8,361,621 11,477,076Short term deposits 8 3,814,155 2,518,000

12,175,776 13,995,076

OTHER ASSETSAmount due to Manager 491,247 325,625Other receivable 9 345 222Cash at bank 11,908 12,011

503,500 337,858

TOTAL ASSETS 12,679,276 14,332,934

LIABILITIESAmount due to Trustee 1,529 1,529Other payables 10 552,138 20,600TOTAL LIABILITIES 553,667 22,129

EQUITYUnitholders’ contribution 9,654,650 12,105,723Retained earnings 2,470,959 2,205,082NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO

UNITHOLDERS 11 12,125,609 14,310,805

TOTAL EQUITY AND LIABILITIES 12,679,276 14,332,934

NUMBER OF UNITS IN CIRCULATION 11(a) 17,240,152 20,850,306

NET ASSET VALUE PER UNIT (RM) 12 0.7033 0.6864



7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

NoteUnitholders’contribution

Retainedearnings Total NAV

RM RM RM

2015At beginning of the year 12,105,723 2,205,082 14,310,805Total comprehensive income - 265,877 265,877Creation of units 11(a) 10,770,526 - 10,770,526Cancellation of units 11(a) (13,263,210) - (13,263,210)Distribution equalisation 11(a) 41,611 - 41,611At end of the year 9,654,650 2,470,959 12,125,609

2014At beginning of the year 6,056,004 2,436,081 8,492,085Total comprehensive income - 174,694 174,694Creation of units 11(a) 27,521,606 - 27,521,606Cancellation of units 11(a) (21,974,829) - (21,974,829)Distribution equalisation 11(a) 97,249 - 97,249Distribution 13 (97,249) (405,693) (502,942)Reinvestment of income distributed 11(a) 502,942 - 502,942At end of the year 12,105,723 2,205,082 14,310,805



7.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

2015 2014RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES

Proceeds from sale of financial assets at FVTPL 9,744,027 12,313,491Purchase of financial assets at FVTPL (6,146,368) (16,421,106)Interest received 462,662 236,453Manager’s fee paid (106,117) (69,987)Trustee’s fee paid (18,000) (18,000)Auditors’ remuneration paid (7,000) (7,000)Tax agent’s fee paid (3,400) (3,400)Payment for other fees and expenses (13,782) (10,126)Net cash generated from/(used in) operating and investing

activities 3,912,022 (3,979,675)

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 10,811,187 27,534,307Cash paid on units cancelled (13,427,157) (22,242,917)Net cash (used in)/generated from financing activities (2,615,970) 5,291,390

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,296,052 1,311,715CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 2,530,011 1,218,296CASH AND CASH EQUIVALENTS AT END OF THE YEAR 3,826,063 2,530,011

Cash and cash equivalents comprise:Cash at bank 11,908 12,011Short term deposits 3,814,155 2,518,000

3,826,063 2,530,011



7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Bond Fund (“the Fund”) was constituted pursuant to the executed Deed dated 29 July 2002 (collectively, together with deeds supplemental thereto, referred to as “the Deed”) between the Manager, Kenanga Investors Berhad and Universal Trustee (Malaysia) Berhad (“the Trustee”). The Fund commenced operations on 15 August 2002 and will continue to be in operation until terminated as provided under 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 investors with a steady income stream over the medium to long term period through investments primarily in fixed income instruments. The principal activity of the Fund is to invest in “Authorised Investments” as defined under Part 7 of the Deed, which include primary fixed income securities and short term investments.

The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 22 February 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), credit risk and liquidity 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 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.

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.

Market risk arises when the value of the financial instrument 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 investments’ prices caused by uncertainties in the economic, political and social environment will affect the NAV of the Fund.


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

a. Market Risk (Contd.)

The Manager manages the risk of unfavorable changes in prices by cautious review of the investments and continuous monitoring of their performance and risk profiles.

i. Interest rate risk

Interest 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 unquoted corporate bonds, unquoted government guaranteed bonds and deposits.

The Fund’s exposure to the interest rate risk is mainly confined to unquoted corporate bonds and unquoted government guaranteed bonds.

Interest rate risk sensitivity

The following table demonstrates the sensitivity of the Fund’s profit for the financial year to a reasonably possible change in rate of return, with all other variables held constant.

Changesin rate

Increase/(Decrease)

Effect onprofit forthe year

Increase/(Decrease)

Basis points RM2015Financial assets at FVTPL 5/(5) 4,126/(4,126)

2014Financial assets at FVTPL 5/(5) 5,677/(5,677)

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



a. Market Risk (Contd.)

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.

Up to1 year

Above1 year -5 years

Above5 years

Non-exposure

to interest rate

movement Total

Weighted average effective interest

rate*RM RM RM RM RM %

2015AssetsFinancial assets at

FVTPL 601,342 5,005,909 2,643,988 110,382 8,361,621 4.69Short term

deposits 3,814,155 - - 3,814,155 3.30Other assets - - - 503,500 503,500

4,415,497 5,005,909 2,643,988 613,882 12,679,276

LiabilitiesOther liabilities - - - 553,667 553,667

Total interest rate sensitivity gap 4,415,497 5,005,909 2,643,988 60,215 12,125,609


FVTPL 1,410,448 8,040,738 1,903,009 122,881 11,477,076 4.60Short term

deposits 2,518,000 - - - 2,518,000 3.20Other assets - - - 337,858 337,858

3,928,448 8,040,738 1,903,009 460,739 14,332,934

LiabilitiesOther liabilities - - - 22,129 22,129

Total interest rate sensitivity gap 3,928,448 8,040,738 1,903,009 438,610 14,310,805

* Computed based on interest-bearing assets only.



b. Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial 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 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.

iii. Credit quality of financial assets

The Fund invests only in unquoted corporate bonds and unquoted government guaranteed bonds with at least investment grade credit rating by a credit rating agency. The following table analyses the Fund’s portfolio of unquoted corporate bonds and unquoted government guaranteed bonds by rating category:

Financial assets at FVTPL

Percentage of total unquoted bonds Percentage of NAV

2015 2014 2015 2014% % % %

RatingAAA 20.6 40.5 14.2 32.5AA3 26.3 13.1 18.1 10.5AA2 7.5 24.5 5.2 19.6AA1 11.2 3.5 7.7 2.8AA+ 5.2 3.6 3.6 2.9AA- 8.3 8.7 5.7 7.0Unquoted government

guaranteed bonds 20.9 6.1 14.5 4.9100.0 100.0 69.0 80.2

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



b. Credit Risk (Contd.)

iii. Credit quality of financial assets (contd.)

Short term deposits

Percentage of totalshort term deposits Percentage of NAV2015 2014 2015 2014

% % % %RatingP1 100.0 100.0 31.5 17.6

iv. Credit risk concentration

Concentration risk is monitored and managed based on sectoral distribution. The table below analyses the Fund’s portfolio of unquoted corporate bonds and unquoted government guaranteed bonds by sectoral distribution:

Percentage of total unquoted bonds Percentage of NAV

2015 2014 2015 2014% % % %

Utilities 29.3 19.1 20.2 15.4Finance 25.3 20.3 17.4 16.2Plantations 19.0 15.7 13.1 12.6Industrial products 14.2 13.1 9.9 10.5Transportations 9.7 9.9 6.7 8.0Construction 2.4 4.4 1.7 3.5Trading/Service - 11.3 - 9.1Properties - 6.2 - 4.9

100.0 100.0 69.0 80.2



c. Liquidity Risk

Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the 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, short term deposits with licensed financial institutions and other 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.

Up to 1 year

Above 1 year – 5 years

Above5 years Total

Note RM RM RM RM2015AssetsFinancial assets at

FVTPL 602,235 5,068,642 2,690,744 8,361,621Short term deposits 3,814,155 - - 3,814,155Other assets 503,500 - - 503,500

(i) 4,919,890 5,068,642 2,690,744 12,679,276LiabilitiesOther liabilities (ii) 553,667 - - 553,667

Equity (iii) 12,125,609 - - 12,125,609

Liquidity gap (7,759,386) 5,068,642 2,690,744 -


FVTPL 1,434,582 8,106,970 1,935,524 11,477,076Short term deposits 2,518,000 - - 2,518,000Other assets 337,858 - - 337,858

(i) 4,290,440 8,106,970 1,935,524 14,332,934LiabilitiesOther liabilities (ii) 22,129 - - 22,129

Equity (iii) 14,310,805 - - 14,310,805

Liquidity gap (10,042,494) 8,106,970 1,935,524 -



c. Liquidity Risk (Contd.)

(i) Financial assets

Analysis of financial assets at FVTPL into maturity groupings is based on the expected date on which these assets will be realised. 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 a 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”. As a result, it appears that the Fund has a liquidity gap within “up to 1 year”. However, the Fund believes that it would be able to liquidate its investments should the need arises to satisfy all the redemption requirements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Accounting

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

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

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

b. Standards and Amendments Issued But Not Yet Effective

As at the date of authorisation of these financial 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.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

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

Description

Effective for financial period beginning on or

afterAmendments to MFRS contained in the documents entitled

“Annual Improvements to MFRS 2012 - 2014 cycle” 1 January 2016MFRS 14: Regulatory Deferral Accounts 1 January 2016Amendments to MFRS 10, MFRS 12 and MFRS 128:

Investment Entities: Applying the Consolidation Exception 1 January 2016Amendments to MFRS 10 and MFRS 128: Sale or Contribution of

Assets between an Investor and its Associate or Joint Venture 1 January 2016Amendments to MFRS 11: Accounting for Acquisitions of

Interests in Joint Operations DeferredAmendments to MFRS 101: Disclosure Initiative 1 January 2016Amendments to MFRS 116 and MFRS 138: Clarification of

Acceptable Methods of Depreciation and Amortisation 1 January 2016Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January 2016Amendments to MFRS 127: Equity Method in Separate Financial

Statements 1 January 2016MFRS 15 Revenue from Contracts with Customers 1 January 2016MFRS 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 financial periods. These pronouncements are not expected to have any significant impact to the financial statements of the Fund upon their initial application, other than MFRS 9.

MFRS 9 replaces MFRS 139 on the following requirements: classification and measurement of financial assets and financial liabilities as defined in MFRS 139, impairment methodology and hedge accounting. The Fund is in the process of making an assessment of the impact of this Standard.

c. Financial Assets

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

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

The Fund determines the classification of its financial assets at initial recognition.



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 unquoted corporate bonds and unquoted government guaranteed bonds 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.

Interest earned element of such instruments are recorded in “interest income”.

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 interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process.

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

d. Impairment of Financial Assets

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

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

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



d. Impairment of Financial Assets (Contd.)

If in a subsequent 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 asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

e. Income

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

Interest income, which includes the accretion of discount and amortisation of premium on fixed income securities, is recognised using the effective interest method.

The realised gain or loss on the sales 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 flows, cash and cash equivalents include cash at bank and short term deposits with licensed financial institutions.

g. Income Tax

Income tax on the profit or loss for the financial year comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial year.

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

h. Unrealised Reserves

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

i. Financial Liabilities

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

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



i. Financial Liabilities (Contd.)

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 amortisation process.

j. Unitholders’ Contribution – NAV Attributable to Unitholders

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

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

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

economic environment in which the Fund operates (“the functional currency”). The financial statements are presented in 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. Significant Accounting Judgments and Estimates

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

i. Critical judgments made in applying accounting policies

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

ii. Key sources of estimation uncertainty

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


4. FINANCIAL ASSETS AT FVTPL

2015 2014RM RM

Financial assets held for trading, at FVTPL:Unquoted corporate bonds 6,609,920 10,772,693Unquoted government guaranteed bonds 1,751,701 704,383

8,361,621 11,477,076

Net loss on financial assets at FVTPL comprised:Realised loss on disposals (9,423) (60,036)Unrealised change in fair values (26,344) 40,944

(35,767) (19,092)


4. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 December 2015:

QuantityAmortised

costFair

valuePercentage

of NAVRM RM %

Unquoted corporate bonds

Aquasar Capital Sdn Bhd maturing on 16/07/2021 350,000 359,825 361,846 3.0

Bahrain Mumtalakat Holding Company B.S.C (c) maturing on 30/04/2018 500,000 504,478 505,391 4.2

DRB-Hicom Berhad maturing on 30/11/2018 700,000 700,217 692,300 5.7

First Resources Limited maturing on 31/07/2017 420,000 428,757 429,272 3.5

Golden Assets International Finance Limited maturing on 17/11/2017 190,000 189,506 184,532 1.5

Golden Assets International Finance Limited maturing on 03/08/2018 1,000,000 1,010,368 977,972 8.1

HSBC Amanah Malaysia Berhad maturing on 16/10/2019 800,000 808,552 805,218 6.6

Jati Cakerawala Sdn Bhd maturing on 31/07/2023 530,000 529,807 528,536 4.4

Malaysia Airports Capital Berhad maturing on 16/12/2022 25,000 25,019 25,151 0.2

Manjung Island Energy Berhad maturing on 23/11/2018 530,000 530,468 530,096 4.4

Sarawak Energy Berhad maturing on 23/06/2016 400,000 401,382 401,376 3.3

Sarawak Energy Berhad maturing on 19/01/2022 530,000 534,270 536,720 4.4

UniTapah Sdn Bhd maturing on 10/06/2016 200,000 200,449 200,859 1.7

Westports Malaysia Sdn Bhd maturing on 03/05/2021 420,000 436,091 430,651 3.5

Total unquoted corporate bonds 6,595,000 6,659,189 6,609,920 54.5


4. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 December 2015: (contd.)

QuantityAmortised

costFair

valuePercentage

of NAVRM RM %

Unquoted government guaranteed bonds

Cagamas Berhad maturing on 29/03/2019 260,000 272,756 271,676 2.2

Cagamas Berhad maturing on 17/07/2019 530,000 570,944 570,115 4.7

Cagamas MBS Berhad maturing on 08/08/2017 100,000 102,049 102,070 0.9

Prasarana Malaysia Berhad maturing on 04/08/2021 800,000 812,246 807,840 6.7

Total unquoted government guaranteed bonds 1,690,000 1,757,995 1,751,701 14.5

Total financial assets at FVTPL 8,417,184 8,361,621 69.0

Unrealised loss on financial assets at FVTPL (55,563)

5. 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 Division 13.1 of the Deed.

The Manager is currently charging Manager’s fee of 1.00% per annum (2014: 1.00% per annum) of the NAV of the Fund.

6. TRUSTEE’S FEE

The Trustee’s fee is computed on a daily basis at a rate not exceeding 0.10% per annum of the NAV of the Fund and subject to a minimum fee of RM18,000 per annum as provided under Division 13.2 of the Deed.

The Trustee’s fee is computed based on the minimum fee of RM18,000 per annum (2014: minimum fee of RM18,000 per annum).

7. INCOME TAX

Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial year. The statutory tax rate will be reduced to 24% effective from year of assessment 2016.


7. INCOME TAX (CONTD.)

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:

2015 2014RM RM

Net income before tax 265,877 174,694

Tax at Malaysian statutory tax rate of 25% (2014: 25%) 66,469 43,674Income not subject to tax (112,572) (87,227)Loss not deductible for tax purposes 8,942 15,009Expenses not deductible for tax purposes 7,458 6,744Restriction on tax deductible expenses for unit trust fund 29,703 21,800

Income tax for the year - -

8. SHORT TERM DEPOSITS

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

9. OTHER RECEIVABLE

2015 2014RM RM

Interest receivable from short term deposits 345 222

10. OTHER PAYABLES

2015 2014RM RM

Amount owing to licensed financial institution 530,468 -Accrual for auditors’ remuneration 7,000 7,000Accrual for tax agent’s fees 4,000 3,900Provision for printing and other expenses 10,670 9,700

552,138 20,600


11. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

Net asset value attributed to unitholders is represented by:

Note 2015 2014RM RM

Unitholders’ contribution (a) 9,654,650 12,105,723Retained earnings:

Realised reserves 2,526,522 2,234,301Unrealised reserves (55,563) (29,219)

2,470,959 2,205,082

12,125,609 14,310,805

a. Unitholders’ contribution

2015 2014No. of units RM No. of units RM

At beginning of the year 20,850,306 12,105,723 12,249,591 6,056,004Add: Creation of units 15,701,345 10,770,526 39,263,926 27,521,606Less: Cancellation of units (19,311,499) (13,263,210) (31,395,829) (21,974,829)Distribution equalisation - 41,611 - 97,249Distribution (Note 13) - - 732,618 (97,249)Reinvestment of income

distributed - - - 502,942At end of year 17,240,152 9,654,650 20,850,306 12,105,723

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad

and parties related to the Manager as at 31 December 2015 were nil (2014: nil).

12. NET ASSET VALUE PER UNIT

In line with the adoption of MFRS 139, financial 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 financial assets at FVTPL valued at the last done market price.


12. NET ASSET VALUE PER UNIT (CONTD.)

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

2015 2014RM RM/Unit RM RM/Unit

NAV attributable to unitholders for creation/cancellation of units 12,127,554 0.7034 14,315,620 0.6866

Effects of adopting bid prices as fair value (1,945) (0.0001) (4,815) (0.0002)

NAV attributable to unitholders per statement of financial position 12,125,609 0.7033 14,310,805 0.6864

13. DISTRIBUTION

Distribution to unitholders for the financial year ended 31 December 2015 are from the following sources:

2015 2014RM RM

Tax exempt income - 246,322Undistributed income brought forward - 273,013

- 519,335Less: Expenses - (113,642)Distribution out of distribution equalisation (Note 11(a)) - 97,249Distribution for the financial year - 502,942

Gross/Net Distribution per unit (sen - 2.5

14. PORTFOLIO TURNOVER RATIO (“PTR”)

PTR for the financial year is 0.78 times (2014: 1.96 times).

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

15. MANAGEMENT EXPENSE RATIO (“MER”)

MER for the financial year is 1.41% (2014: 1.56%).

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.


16. TRANSACTIONS WITH LICENSED FINANCIAL INSTITUTIONS

Transactionvalue

Percentageof total

RM %

CIMB Bank Berhad 12,327,239 33.0RHB Investment Bank Berhad 9,221,837 24.7Public Bank Berhad 4,566,353 12.2RHB Bank Berhad 3,416,024 9.2Alliance Bank Malaysia Berhad 2,391,000 6.4Hong Leong Investment Bank Berhad 1,698,011 4.6Malayan Banking Berhad 1,554,687 4.2Hong Leong Bank Berhad 1,164,000 3.1Standard Chartered Bank Berhad 980,208 2.6

37,319,359 100.0

The above transaction values were in respect of investments in unquoted corporate bonds, unquoted government guaranteed bonds and short term deposits. Transactions in unquoted corporate bonds, unquoted government guaranteed bonds and short term deposits do not involve any commission or brokerage fees.


17. SEGMENTAL REPORTING

a. Business Segments

In accordance with the objective of the Fund, the Fund can invest 70% - 98% in fixed income instruments. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:

Unquotedbonds

Other investments Total

RM RM RM2015RevenueSegment income 366,097 48,424 414,521Unallocated expenditure (148,644)Net income before tax 265,877Income tax -Net income after tax 265,877

AssetsFinancial assets at FVTPL 8,361,621 -Short term deposits - 3,814,155Other segment assets - 345Total segment assets 8,361,621 3,814,500 12,176,121Unallocated assets 503,155

12,679,276

LiabilitiesTotal segment liabilities 530,468 - 530,468Unallocated liabilities 23,199

553,667


17. SEGMENTAL REPORTING (CONTD.)

a. Business Segments (Contd.)

Unquotedbonds

Otherinvestments Total

RM RM RM2014RevenueSegment income 243,446 45,423 288,869Unallocated expenditure (114,175)Net income before tax 174,694Income tax -Net income after tax 174,694

AssetsFinancial assets at FVTPL 11,477,076 -Short term deposits - 2,518,000Other segment assets - 222Total segment assets 11,477,076 2,518,222 13,995,298Unallocated assets 337,636

14,332,934

LiabilitiesUnallocated liabilities 22,129

b. Geographical Segments

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

18. FINANCIAL INSTRUMENTS

a. Classification of financial instruments

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

The following table analyses the financial assets and 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.


18. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (Contd.)

Financial assets at

FVTPL ReceivablesFinancial liabilities Total

RM RM RM RM2015AssetsUnquoted corporate bonds 6,609,920 - - 6,609,920Unquoted government

guaranteed bonds 1,751,701 - - 1,751,701Short term deposits - 3,814,155 - 3,814,155Amount due from Manager - 491,247 - 491,247Other receivables - 345 - 345Cash at bank - 11,908 - 11,908

8,361,621 4,317,655 - 12,679,276

LiabilitiesAmount due to Trustee - - 1,529 1,529Other payables - - 552,138 552,138

- - 553,667 553,667

2014AssetsUnquoted corporate bonds 10,772,693 - - 10,772,693Unquoted government

guaranteed bonds 704,383 - 704,383Short term deposits - 2,518,000 - 2,518,000Amount due from Manager - 325,625 - 325,625Other receivables - 222 - 222Cash at bank - 12,011 - 12,011

11,477,076 2,855,858 - 14,332,934

LiabilitiesAmount due to Trustee - - 1,529 1,529Other payables - - 20,600 20,600

- - 22,129 22,129

b. Financial instruments that are carried at fair value

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


18. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value (Contd.)

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

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments:2015- Unquoted corporate bonds - 6,609,920 - 6,609,920- Unquoted government

guaranteed bond - 1,751,701 - 1,751,701

2014- Unquoted corporate bonds - 10,772,693 - 10,772,693- Unquoted government

guaranteed bond - 704,383 - 704,383

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

The fair value of unquoted corporate bonds and unquoted government guaranteed bonds are based on average of bid prices quoted by respective financial institutions 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 other financial assets and liabilities are not carried at fair value but approximate fair values due to the relatively short term maturity of these financial instruments.

19. 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 operations of the Fund cost-efficient.

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

Investor Services CenterToll Free Line: 1 800 88 3737Fax: +603 2057 3722Email: [email protected]

Head Office, Kuala LumpurSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807

KENANGA BOND FUND · KENANGA BOND FUND Contents Page Corporate Directory ii Directory of...

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Transcript of KENANGA BOND FUND · KENANGA BOND FUND Contents Page Corporate Directory ii Directory of...