kenanga balanced fund · 2015. 4. 29. · kenanga balanced fund annual report for the financial...

KENANGA BALANCED FUND

ANNUAL REPORT

For the Financial Year Ended 28 February 2015

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 Investors Berhad (353563-P)


Contents Page

Corporate Directory iiDirectory of Manager’s Offices iiiFund Information 1Manager’s Report 2-10Fund Performance 11-13Trustee’s Report 14Independent Auditor’s Report 15-16Statement by the Manager 17Financial Statement 18-48

ii Kenanga Balanced Fund Annual Report

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 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)Bruce Kho Yaw HuatIsmitz Matthew De Alwis

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

Member)Peter John Rayner (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: CIMB Commerce Trustee Berhad (Company No. 313031-A)Registered Office

Level 13, Menara CIMBJalan Stesen Sentral 2Kuala Lumpur Sentral50490 Kuala Lumpur.Tel: 03-2261 8888Fax: 03-2261 0099Website: www.cimb.com

Business Office Level 21, Menara CIMBJalan Stesen Sentral 2Kuala Lumpur Sentral50490 Kuala Lumpur.Tel: 03-2261 8888Fax: 03-2261 9889

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 Balanced Fund Annual Report iii

DIRECTORY OF MANAGER’S OFFICES

REGIONAL BRANCH OFFICES:

Kuala LumpurSuite 12.02, 12th Floor, Kenanga InternationalJalan Sultan Ismail,50250 Kuala Lumpur, MalaysiaTel: 03-2057 3688Fax: 03-2161 8807

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

MelakaNo. 25-1 Jalan Kota Laksamana 2/17Taman Kota Laksamana Seksyen 275200 MelakaTel: 06-281 8913, 282 0518 Fax: 06-281 4286

Kuching1st Floor, No 71, Lot 7Lot 10900, Jalan Tun Jugah93350 Kuching, SarawakTel: 082-572 228 Fax: 082-572 229

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

Kota KinabaluA-03-11, 3rd FloorBlock A Warisan SquareJalan Tun Fuad Stephens88000 Kota Kinabalu, SabahTel: 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 Fax : 04 210 6644

IpohSuite 1, 2nd Floor,63 Persiaran Greenhill,30450 Ipoh, Perak, MalaysiaTel: 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 2242

Miri2nd Floor, Lot 1264,Centre Point Commercial Centre,Jalan Melayu, 98000 Miri, SarawakTel: 085-416 866Fax: 085-416 866

Kenanga Balanced Fund Annual Report 1

1. FUND INFORMATION

1.1 Fund Name

Kenanga Balanced Fund (KBF or the Fund)

1.2 Fund Category / Type

Balanced / Growth & Income

1.3 Investment Objective

The Fund aims to provide a portfolio of investments with lower risk and lower volatility for investors.

1.4 Investment Strategy

The Fund seeks to maximise total returns by providing investors with a combination of capital appreciation and income distribution, if any, while reducing risk through diversified investments in equities and fixed income securities.

1.5 Duration

The Fund was launched on 23 May 2001 and 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

60% FTSE-Bursa Malaysia 100 Index and 40% Maybank 12-month 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 KBF as at 28 February 2015

Size of holdings No. of unitholders No. of units held5,000 and below 21 67,7185,001 - 10,000 49 357,55710,001-50,000 166 4,234,30450,001-500,000 77 8,293,269500,001 and above 16 57,773,789Total 329 70,726,637

2 Kenanga Balanced Fund Annual Report

2. MANAGER’S REPORT

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

Since inception date, the Fund has appreciated by 194.57% in Net Asset Value terms while its benchmark rose 172.98%. In terms of risk and volatility, as at 28 February 2015, the Fund attained a 3-year annualised standard deviation of 5.5, classified as low under the Lipper Fund Volatility Classification, thus achieving the Fund’s stated objective of providing investments with lower risk and lower volatility for investors.

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

Performance Chart Since Launch (23/05/2001– 28/02/2015)Kenanga Balanced Fund vs Benchmark

% Growth, Cum, TR, ExD, MYR, Launch to 28/2/2015

-50.00

-100.00

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

31/1

2/20

08

31/1

2/20

09

31/1

2/20

10

31/1

2/20

11

31/1

2/20

12

31/1

2/20

13

31/1

2/20

14

31/1

2/20

01

31/1

2/20

02

31/1

2/20

03

31/1

2/20

04

31/1

2/20

05

31/1

2/19

96

31/1

2/19

97

31/1

2/19

98

31/1

2/19

99

31/1

2/20

00

31/1

2/20

06

31/1

2/20

07

Kenanga Premier : 324.81 FTSE Bursa Malaysia Top 100 CR : 53.28

Source: Lipper

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

During the financial year under review, the Fund invested mainly in the Malaysian equities ranging from 48% to 55% of the Fund’s NAV. Fixed income securities constitute around 35% of the fund’s NAV mainly due to the limited size of the fund. Cash was kept between the levels of around 12% to 15% of NAV.

Towards the end of the reporting financial year, we engaged in bigger profit taking in order to capture a higher realised return in order to distribute income for the financial year. This was done at a time when stock market was perceived to be trading in a high valuation environment. We are encouraged to redeploy the cash into the stocks that we favoured strongly. We maintained our barbell strategy of holding a good balance of high yielding/defensive stocks and beta stocks. The former allows us to reduce the portfolio volatility during the uncertain period, whilst the latter captures extra performance when risk appetite return. We liked companies in the banking, oil and gas, consumer, and property/REITs.


2.3 Investment strategies and policies employed during the financial year under review (Contd.)

For the financial year under review, besides equity, the Fund had invested in a diversified portfolio of high grade corporate bonds and money market instruments. Given the small fund size however, it remained a challenge to fully undertake meaningful bond strategy to improve the performance of the Fund.

2.4 The Fund’s asset allocation as at 28 February 2015 and comparison with the previous financial period

Asset 28 Feb 2015 28 Feb 2014Quoted investment securities 47.9 55.6Unquoted bonds 37.7 37.5Short term deposits and cash 14.4 6.9

Reason for the differences in asset allocation

Cash positions were increased due to locking of profits (on certain stocks and also fixed income securities) and rebalancing of the portfolio. The manager took opportunity to lock profits while bonds exposure is reduced in view of increasing interest rate environment. Even the equity components were reshuffled so as to position it to be more defensive in view of higher volatility market in the coming months.

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

Period under reviewKenanga Balanced Fund 3.88%FTSE-Bursa Malaysia 100 / Maybank 12 mths FD Rate (60:40) -0.44%

Source: Lipper

For the 1 year financial year under review, the Fund has appreciated 3.88%, outperforming the slight drop of -0.04% Benchmark (60% FBM100 Index + 40% Maybank 12-month Fixed Deposit rate). The out-performance was mainly due to increase in strength in stock picking strategy.

2.6 Review of the market

Market Review

The FBM KLCI Index closed slightly negative by -0.79% during this financial year (1 March 2014 to 28 February 2015) at 1821 points. Comparatively, the FBM Small Cap Index didn’t change that much either as it only moved up slightly by 0.60% during the same time period.

During the March to May period, stock market sentiment was initially swayed by concerns over the Russia-Ukraine military tension and the slowdown fear in China. Later on, construction and oil & gas stocks got a boost when Petronas announced its final investment decision (FID) on the Pengerang Integrated Complex in Johor. Suddenly, foreign institutions appeared to be net buyers of the local market in May 2014, the largest since a year ago. However, domestic institutions were net sellers of RM2.2 bil. We believe that some of the net foreign inflow into Malaysia was a result of investors moving out of Thailand due to the political unrest.


2.6 Review of the market (Contd.)

Market Review (Contd.)

Petronas announced that they will spend RM700-800 mil in contract to build 88km water pipeline to Pengerang by 2016. It also intends to build a 1300MW of power plant mainly for supply in RAPID area. This positive news had enhanced confidence in construction and infrastructure related companies. It was also reported during this 2Q14 (calendar) that 1Q14 GDP grew 6.2% y-o-y as against the expectation of 5.8% by many economists. Economy was driven by electrical & electronics sector which showed improvement in exports. Domestic demand increased strongly by 7.4% from 6.7% the previous quarter. On top of this, corporate results came in within expectations with very few downgrades and upside surprises.

Coming from the US, the QE tapering is set to proceed at the stipulated pace, as the economy did not show drastic improvements. The EU continued its accommodative policy as inflation was feared to drop below the 2% target even though economic recovery is taking hold. China came out with its 60 reform measures to support the economic growth and create jobs. 6,600 kilometres of railway will be built while enhancing the MRT system. Japan however, imposed an increase in sales tax after a series of stimulation program of which the government was hoping to see some rise in inflation.

During the June to August period, equity market staged a rather mundane performance despite many of its benchmark recorded an all-time high levels especially June and July months. Currencies and long bond yields ended flat for the period when the market is all buzzing about a hike on Malaysia interest rate. The FBM KLCI was then became erratic in August as it saw heavy selling pressure early at beginning of the month but slowly clawed back much of the losses on the back of Wall Street’s strength. Among key negative factors dragging the market was the rather significant number of companies reporting below expectations for their 2Q14 financial results, news on Petronas planning to cut back its 2015 capex and disturbing news on plantation sector which saw CPO prices drop by 14.5% in August on top of the threat that Indonesia would limit foreign ownership of plantation companies.

Economic news during the period saw the April Industrial Production Index (IPI) rose 4.2% y-o-y from 4.3% in March mainly in manufacturing and mining, while electricity output was flat. Malaysian trade surplus continue to improve with exports rising 7.2% m-o-m and imports up 5.4% m-o-m. The government has also proposed a fuel subsidy reform expected to roll out in 3Q 2014 which could save the government as much as MYR9.8b or 1.0% of GDP. In order to curb potential rise in inflation and household debt, Bank Negara Malaysia had increased the OPR by 25 bps to 3.25%.

Other than that, Malaysia was shocked by news on the shot down of flight MH17, just a few months after MH370 got lost. To a certain extent it was a setback to market sentiment.

Asia Region markets sentiments were entirely positive as many economic data coming from China were showing marked improvements. This was also supported by encouraging economic data from US where home sales showed a turnaround, increased manufacturing activities, reduction in trade deficit, increase in consumer credits, slowing down of unemployment rate and assurance of low interest rate condition for an extended time.

Europe was a mix bag when UK reported a healthy 3.2% GDP growth in 2Q 2014 driven by services sector while Eurozone was about to face the risk of deflation and a drop in productivity; Eurozone 2Q 2014 GDP growth was 0%. France GDP was 0%, Germany was -0.2% q-o-q and Italy had return to recession.




Moving on to the second half of the financial period, equity market is best described as volatile and erratic (September 2014 – February 2015). Market was on a slight downward momentum during September to October months but recovered again in November (basically the FBM KLCI was trading on a 1880-1780 range) before the market collapse altogether in December. The FBM KLCI reached 1671 (8.2% correction) at its lowest point and later rebounded back to 1821 points (8.97% rebound).

Among key negative factors dragging the market in the earlier part of this second half period was the rather significant number of companies reporting below expectations for their 2Q14 financial results and news on Petronas planning to cut back its 2015 capex. Positive headlines from the strong 2Q14 GDP growth rate of 6.4% failed to lift the market while being dragged much more by disturbing news on plantation sector. CPO prices drop by 14.5% in August on top of the threat that Indonesia would limit foreign ownership of plantation companies.

Aftermath from the weak 2Q14 results season has led to downgrades across the board on top of several external issues such as stalled growth in developed economies, middle-east socio-fear and China dismal growth. As a result, investors with their confidence bashed are finding it hard to stay positive on the FBM KLCI while foreign selling gathered traction. Weaker ringgit and the lack of buying catalysts are main reasons for the prevailing lack of buying interests as many are expecting further weaknesses. In addition, looming higher interest rate have had affected sentiments as investors are becoming more risk averse by then.

Malaysia economic figures (July) that was released in September showed that it is on low gear as it just passed a slow Ramadhan season. Exports grew by only 0.1%, Imports drop by 2.3%, IPI grew only by 0.5% driven by manufacturing (+3.1%) and housing loans approval drop 13% YoY. Commodity showed mixed performance as Crude oil price lost another 5% reaching USD 91.16 pb when Crude Palm Oil price instead gained 14.93% reaching RM2,217 pmt.

Later on in October, equity markets were spooked by series of weak data coming from US, Europe and even China. This had led to reduction of global growth rate by the International Monetary Fund (IMF) which had indicated that global economic recovery is brittle, uneven and beset by risks. China is experiencing declining in inflation rate while investment activity slowed when banks have curtailed its loan approvals. On top of these scenarios, Malaysia market is marked by extended stretched valuation waiting for “proper correction”.

The oil & gas sector was severed after taking the cue of Petronas future spending. There was also fear on further capital flight back to the US when the US Federal Reserve ends its Quantitative Easing Program in October.

Continued downtrend of commodity prices also exacerbated the sell-down certain equity sectors, with crude oil falling -17.9% m-o-m to USD66/barrell (WTI) and CPO falling -5.8% m-o-m to RM2,172. Crude oil broke significantly lower after the OPEC (Organization for Petroleum Exporting Countries) refused to respond to lower prices and left production quotas unchanged. There was also news that Petroliam Nasional Bhd (Petronas) will be reviewing its dividend to the government and also its capital expenditure allocation in view of the declining global crude oil prices.




Meanwhile GDP grew by 5.6% in the third quarter from 6.5% in the second quarter. It was supported by the private sector demand and the positive growth in next exports of goods and services. In its effort to reduce fiscal deficit, the government announced the removal of fuel subsidies for RON95 and diesel following the implementation of a managed float system similar to that used on RON97 in early December.

Malaysian equities fell sharply in December as oil prices continue to thread lower which sparked a selloff in oil and gas names. The sell-off spread to the small-mid cap space and investors were quick to take profits on outperforming small-mid cap names, causing the FBM Small Cap index to plunge by 8.7% in December. Foreign investors turned bearish on oil producing economies and markets with significant exposure to the oil and gas sector like Malaysia. As a result, the Malaysian Ringgit weakened from RM3.4/US$ to RM3.5/US$, whilst the central bank reserves fell to US$120.7b in December from US$125.7b in November.

The market rebounded in January and flat in February, driven by bargain hunting activities while oil price appeared to have stabilized, at least temporarily. Buying was driven mainly by local institutions, while foreigners remained net sellers to a tune of RM2.4bn in January. The government has lowered its 2015 GDP growth forecast to 4.5-5.5% and assumed a wider fiscal deficit of 3.2%. It also outlined several measures to promote growth. Meanwhile, markets were buoyed by a larger than expected QE programme by the ECB. This was partially offset by uncertainty regarding Greece’s position in the Eurozone post Syriza’s win in the Greek election. 4Q14 results which will be released throughout the month are expected to be weak. This could lead to downgrades to EPS growth for 2015 and dampen sentiment on the market.

In terms of market valuations, we are cognisant that the market is trapped between reasonable valuations but having lack of upside catalyst. On a Price to book basis, the market is trading at below -1 standard deviation of its 5 year average level but the Price to Earnings ratio is trading at +1 Standard deviation of its 5 year average level mainly due to lack of earnings potential. Hence the market could be caught in a range bound trend unless earnings growth pick up.

Fixed Income Market Review

Divergence in economic conditions and policy stance globally was the theme for the period under review. Global bond markets benefited strongly at the start of 2014, as weaker economic data from the US and China in January combined with the implementation of the US Federal Reserve’s (Fed) tapering of its bond purchases (which ended in October 2014) led to a sharp sell-off in global equity markets and other risky assets. However, US economic data showed further improvement and led markets to bring forward the timing of the first rate rise by the Fed. US’ third quarter GDP was revised upwards to 5.0% from 3.9%. However, its fourth quarter GDP missed market expectation of 3% and instead grew by 2.6%. Despite the miss, private consumption rose strongly as the decline in energy prices boosted real household income and spending. Much of the disappointment was generated by net exports, which have struggled against the twin headwinds of a stronger US dollar and a slightly weaker global economy. At the January 2015 US Federal Reserve meeting, Fed officials remain optimistic on the growth outlook for the US economy, but are watching “international developments” closely. At the February 2015 meeting, Fed officials reiterated that policy rate hikes will be data dependent, rather than date dependent, thus pushing market expectations of a first rate hike to sometime in H2 2015.




Fixed Income Market Review (Contd)

In contrast to the US, economic data elsewhere was less positive, particularly in the eurozone and in Japan. The European Central Bank (ECB) surprised markets at the 4th September meeting, by cutting its policy rate by 15bps, and announced a purchase programme for asset-backed securities (ABS) and covered bonds. Eurozone was pulled further into deflation as its January 2015 flash estimate of headline inflation declined to -0.6% (y/y) amid falling fuel and food prices. In response, the ECB embarked on a new chapter in its history by announcing a quantitative easing (QE) programme to the tune of €60 billion a month, largely comprised of purchases of eurozone sovereign debt. The asset purchase programme is scheduled to begin in March 2015 and last until at least September 2016, and add approximately €1.1 trillion to the ECB’s balance sheet. Markets responded well to the open-ended nature of the programme and the ECB’s commitment to reversing the region’s deflationary cycle. Since the announcement, the euro has depreciated against all major currencies, with the euro falling by 6.7% against the US dollar by end-January.

Similarly, the BoJ unexpectedly boosted its easing measures at the end of October (the first policy change since April 2013), by targeting an 80 trillion yen ($726 billion) annual expansion in the monetary base, up from 60-70 trillion yen previously. Elsewhere, economic data also showed that the rate of economic growth in China slowed further in October. This prompted the People’s Bank of China (PBOC) to cut the benchmark lending and deposit rates in November by 40bps and 25bps respectively (the first time since 2012), which was unexpected by market participants. In early February, the PBoC again unexpectedly announced a 50 basis point reduction in the reserve requirement ratio for a broad range of banks – the first industry-wide cut since May 2012. Then in late February, the PBoC lowered its benchmark policy rates, with the one-year benchmark deposit and lending rates reduced by 25 basis points to 2.50% and 5.35%, respectively. Meanwhile, the Reserve Bank of India and Bank of Canada surprised markets with 25 bps rate cuts, whilst the Monetary Authority of Singapore unexpectedly eased policy by reducing the slope of its policy band for the Singapore dollar. Another notable central bank policy announcement was by the Swiss National Bank (SNB) which surprised markets by abandoning the Swiss franc’s peg against the euro, which had been in place for three years.

The move was seen as being in anticipation of a QE announcement by the ECB, as it would become too expensive for the SNB to maintain the peg in the face of heavy monetary stimulus and downward pressure on the euro. The unexpected change in policy saw the Swiss franc appreciate against the euro by 13% over the month. The SNB also announced that it would move its benchmark interest rate 50 bps deeper into negative territory in a bid to stem mounting deflationary pressures. Similarly, the Danish central bank cut interest rates a remarkable three times in just two weeks, and intervened regularly in the currency market to keep the crown within its narrow range against the euro.




Fixed Income Market Review (Contd)

Locally, BNM raised the OPR by 25bps to 3.25%, as widely expected at the July MPC meeting. The accompanying statement reiterated that the basis of any further adjustment on the OPR will be the outlook on growth and inflation. However, in the subsequent MPC meetings for the rest of the year, BNM left the OPR unchanged as central bank turned more cautious on the external outlook amid higher downside risks to global growth and as exports have shown signs of moderation. Furthermore, the domestic inflation outlook is now more subdued following the protracted decline in global oil prices. As a result, MGS yields traded towards the year’s lows in October and November, taking the cue from offshore bond yields. In December, MGS curve sold off with yields up by 7-27bps across the curve on concerns that the weaker ringgit and the falling global crude oil prices would impact Malaysia’s fiscal health in 2015. In January 2015, MGS started off weak in the first week of the month as the MGS curve sold off with yields up by 3-20bps. The early sell-off was due to weak crude oil prices and the weak Ringgit as USD/MYR rose to a peak of 3.6375. Fitch’s reaffirmation of a negative outlook on Malaysia’s sovereign rating further added pressure on investor sentiment. However, subsequently, the market rallied and MGS yields ended lower than the beginning of the month. The rally was partly due to ECB’s announcement of its QE program to spur the Eurozone economy from deflationary threats, as well as the strengthening US Treasuries. In February 2015, the Malaysian MGS closed mixed at month-end. The belly and long-end of the curve pared losses with yields up by 1-8bps; while the shorter-end posted gains with yields down by 3-10bps as players partially priced in an OPR cut by Bank Negara in the upcoming MPC meeting. Meanwhile, Malaysia’s economic data was positive with stronger-than-expected 4Q2014 GDP growth of 5.8% yoy, while the full-year GDP growth was healthy at 6.0% yoy; driven by household consumption, total investment and exports. In addition, headline inflation moderated to 1.0% in January (+2.7% in December 2014) amid the drop in petrol prices.

Meanwhile, the Malaysian Prime Minister presented the 2015 budget revision in January, with the 2015 real GDP revised down to 4.5-5.5% (from 5.0-6.0% previously), given the weak crude oil prices. The fiscal deficit target was also revised to 3.2% from 3%.

Market Outlook

We believe the prevailing uncertainties such as undulating commodity prices, GST impact on consumer spending, US interest rate direction, sovereign rating review and local political risk may make room for further headwinds, hence putting pressure on the local equity market. On the other hand, there are positives such as the upcoming 11th Malaysia Plan (11MP), supportive domestic liquidity and forthcoming construction awards. As such we think the equity market could remain range-bound.

Fixed Income Outlook

In the US, following the end of the QE3 program in October, markets will continue to focus on emerging economic data, as well as any Fed communications to gauge the likely timing of the first rate rise. Fed officials will likely continue reiterating that policy rate hikes will be data dependent, rather than date dependent. Markets currently expect that the Fed will start raising interest rates sometime in H2 2015, although a June rate hike is possible. Elsewhere, other major central banks have either delivered further policy easing, and/or are expected to consider further easing measures over the year ahead.



Market Outlook (Contd.)

Fixed Income Outlook (Contd)

On the local front, given the moderation in domestic and global growth expectations as well as BNM’s guidance for a steady growth path and modest inflation outlook, we now expect OPR to be on hold for the year ahead, although there is some possibility of a rate cut later in the year.

Over the medium- to long-term, bond yields are likely to eventually move upward, unless a new crisis surfaces. However, in the short- to intermediate-term, yields are likely to continue range trading as the global economic growth remains uneven and volatile, coupled with geopolitical tensions and other potential tail-risk events.

Strategy

Our fund strategy remains to be defensively positioned but active in good stock picking as it is key to outperformance. We continue to adopt a barbell strategy of holding a good balance of defensive stocks and beta/cyclical exposure. Sector and stock selection wise, we continue to like the exporters, construction, utility and selective small and mid-cap stocks with superior earnings prospects.

Given our views that yields are likely to range trade, we maintain our strategy to opportunistically extend duration and seek to maintain a positive tilt towards corporate bonds, particularly in selective AAA and AA, for yield enhancement to the portfolios.

2.7 Income Distribution

For the financial year under review, the Fund has declared the following income distribution:

Distribution Date

Gross/Net distribution per unit

(sen)

Cum-NAV per unit

(RM)

Ex-NAV per unit

(RM)

26 February 2015 3.71 0.4243 0.3872

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 has received soft commissions from stockbrokers.


3. FUND PERFORMANCE

3.1 Details of portfolio composition of Kenanga Balanced Fund (“the Fund”) for the last 3 financial years/period as at 28 February/31 December, respectively, are as follows:

a. Distribution among industry sectors and category of investments:

As at As at As at28.2.2015 28.2.2014 31.12.2012

% % %

Trading/Services 16.3 23.0 23.0Finance 5.6 11.2 11.7Properties 3.6 1.5 -Technology 3.1 1.2 -Plantation 2.9 2.1 -Industrial products 2.6 2.6 1.7Construction 2.5 1.0 3.8Consumer products 2.4 3.2 8.3Infrastructure 1.1 2.3 4.1REITs 7.7 7.5 5.3Warrants 0.1 - 0.1Unquoted corporate bonds 33.8 37.5 25.3Unquoted government guaranteed bonds 3.9 - -Short term deposits and cash 14.4 6.9 16.7

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 invests in local quoted investment securities, unquoted bonds and cash instruments only.


3.2 Performance details of the Fund for the last 3 financial years/period ended 28 February/31 December, respectively, are as follows:

FY1.3.2014 to

28.2.2015

Period from1.1.2013 to

28.2.2014

FY1.1.2012 to 31.12.2012

Net asset value (“NAV”) (RM Million) 27.45* 24.62 23.94Units in circulation (Million) 70.73 60.15 59.32NAV per unit (RM) 0.3881* 0.4094 0.4035Highest NAV per unit (RM) 0.4300 0.4389 0.4364Lowest NAV per unit (RM) 0.3872 0.3931 0.3827Total return (%) 3.88 9.26 4.60- Capital growth (%) -5.20 1.74 -3.10- Income growth (%) 9.08 7.52 7.70Gross distribution per unit (sen) 3.71# 3.00 3.21Net distribution per unit (sen) 3.71# 3.00 2.48Management expense ratio (“MER”) (%) 1 1.64 1.96 1.69Portfolio turnover ratio (“PTR”) (times) 2 0.76 1.06 0.48

Note:TotalreturnistheactualreturnoftheFundfortherespectivefinancialyears/period,computedbased on NAV per unit and net of all fees.

MERiscomputedbasedonthetotalfeesandexpensesincurredbytheFunddividedbytheaveragefundsizecalculatedonadailybasis.PTRiscomputedbasedontheaverageofthetotalacquisitionsandtotaldisposalsofinvestmentsecuritiesoftheFunddividedbytheaveragefundsizecalculatedonadailybasis.

1MERisloweragainstlastfinancialperiodmainlyduetoshorterperiodunderreview.

2PTRislowercomparedtothepreviousyearduetoreducedtradingactivitiesforbothequityandfixedincomesecurities.

*Basedonbidprice fair valuationmethodonall investmentsheldby theFundasat28February 2015, the NAV and NAV per unit would be RM27.40 million and RM0.3875respectively.(AsdisclosedunderNote13ofthefinancialstatements)

#Dateofdistributionisshowninpart2.7-IncomeDistribution


3.3 Average total return of the Fund

1 Year28 Feb 14 – 28 Feb 15

3 Years28 Feb 12 – 28 Feb 15

5 Years28 Feb 10 – 28 Feb 15

Kenanga Balanced Fund 3.88% 5.80% 8.50%FTSE Bursa Malaysia 100/Maybank 12 months FD Rate (60:40)

-0.04% 4.56% 7.69%

Source: Lipper

3.4 Annual total return of the Fund

Period under review

28 Feb 14 - 28 Feb 15

Period31 Dec 12- 28 Feb 14

1 Year31 Dec 11 - 31 Dec 12

1 Year31 Dec 10 - 31 Dec 11

1 Year31 Dec 09 - 31 Dec 10

1 Year31 Dec 08 - 31 Dec09

Kenanga Balanced Fund

3.88% 9.26% 6.20% 4.60% 13.84% 29.28%

FTSE Bursa Malaysia 100/Maybank 12 months FD Rate (60:40)

-0.04% 7.99% 8.01% 2.20% 16.48% 31.84%

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 BALANCED FUND

We, CIMB COMMERCE TRUSTEE BERHAD (“the Trustee”), being the Trustee of KENANGA BALANCED 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 28 February 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, the Securities Commission Malaysia’s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws for the financial year ended 28 February 2015;

b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements;

c) Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements; and

d) The distribution of return by the Fund is relevant and reflects the investment objectives of the Fund.

For and on behalf of CIMB COMMERCE TRUSTEE BERHAD (313031-A)

LEE KOOI YOKE Chief Operating Officer

Kuala Lumpur, Malaysia

27 April 2015


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

Report on the financial statements

We have audited the financial statements of Kenanga Balanced Fund (“the Fund”), which comprise the statement of financial position as at 28 February 2015 and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial period then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 18 to 48.

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 BALANCED FUND (CONTD.)

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 28 February 2014 and of its financial performance, changes in net asset value and the cash flows of the Fund for the financial period 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, in accordance with the requirements of Securities Commission’s Guidelines on Unit Trust Funds, and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Chan Hooi LamAF: 0039 No. 2844/02/16(J)Chartered Accountants Chartered Accountant


27 April 2015


6. STATEMENT BY THE MANAGER

I, Ismitz Matthew De Alwis, 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 28 February 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 28 February 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 Balanced Fund as at 28 February 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 ManagerKenanga Investors Berhad

Ismitz Matthew De Alwis


27 April 2015


7. FINANCIAL STATEMENT

7.1 STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 28 FEBRUARY 2015

Note1.3.2014 to

28.2.20151.1.2013 to

28.2.2014RM RM

INVESTMENT INCOMEDividend income 456,070 552,220Interest income 524,560 550,434Net gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 4 516,830 1,622,700

1,497,460 2,725,354

EXPENSESManager’s fee 5 396,417 428,225Trustee’s fee 6 13,214 22,034Auditors’ remuneration - 20,000Tax agent’s fee 4,800 3,117Administration expenses 19,254 8,377Brokerage and other transaction costs 95,102 143,990

528,787 625,743

NET INCOME BEFORE TAX 968,673 2,099,611

Income tax 7 3,923 8,104

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR/PERIOD 972,596 2,107,715

Net income after tax is made up as follows:Realised gain 1,295,142 2,405,588Unrealised loss 4 (322,546) (297,873)

972,596 2,107,715

Distribution for the year/period:Net distribution (RM) 8 2,519,037 1,759,427

Gross/Net distribution (sen) 8 3.7100 3.0000

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


7.2 STATEMENT OF FINANCIAL POSITIONAS AT 28 FEBRUARY 2015

Note 2015 2014RM RM

INVESTMENTSFinancial assets at FVTPL 4 24,414,799 23,349,372Short term deposits 9 4,021,058 1,717,555

28,435,857 25,066,927

OTHER ASSETSOther receivables 10 1,679,287 684,723Tax recoverable 85,788 102,736Cash at bank 94,631 21,471

1,859,706 808,930

TOTAL ASSETS 30,295,563 25,875,857

LIABILITIESAmount due to Manager 29,900 28,672Amount due to Trustee 1,059 976Other payables 11 1,437,497 145,135Distribution payable 1,424,015 1,147,668TOTAL LIABILITIES 2,892,471 1,322,451

EQUITYUnitholders’ contribution 20,582,865 16,285,424Retained earnings 6,820,227 8,267,982NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO

UNITHOLDERS 12 27,403,092 24,553,406

TOTAL EQUITY AND LIABILITIES 30,295,563 25,875,857

NUMBER OF UNITS IN CIRCULATION 12(a) 70,726,636 60,150,648

NET ASSET VALUE PER UNIT (RM) 13 0.3875 0.4082



7.3 STATEMENT OF CHANGES IN NET ASSET VALUEFOR THE FINANCIAL YEAR ENDED 28 FEBRUARY 2015

NoteUnitholders’ contribution

Retained earnings Total NAV

RM RM RM

1.3.2014 to 28.2.2015At beginning of the year 16,285,424 8,267,982 24,553,406Total comprehensive income - 972,596 972,596Creation of units 12(a) 4,841,571 - 4,841,571Cancellation of units 12(a) (1,639,152) - (1,639,152)Distribution equalisation 12(a) 98,686 - 98,686Income distribution 8 (98,686) (2,420,351) (2,519,037)Reinvestment of income distributed 12(a) 1,095,022 - 1,095,022At end of the year 20,582,865 6,820,227 27,403,092

1.1.2013 to 28.2.2014At beginning of the period 15,518,590 7,915,520 23,434,110Total comprehensive income - 2,107,715 2,107,715Creation of units 12(a) 1,243,770 - 1,243,770Cancellation of units 12(a) (1,094,434) - (1,094,434)Distribution equalisation 12(a) 9,913 - 9,913Income distribution 8 (4,174) (1,755,253) (1,759,427)Reinvestment of income distributed 12(a) 611,759 - 611,759At end of the period 16,285,424 8,267,982 24,553,406



7.4 STATEMENT OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 28 FEBRUARY 2015

1.3.2014 to 28.2.2015

1.1.2013 to 28.2.2014

RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIESProceeds from sale of financial assets at FVTPL 18,746,616 25,107,867Purchase of financial assets at FVTPL (19,106,161) (26,598,402)Dividends received 434,155 503,674Interest received 560,159 488,949Manager’s fee paid (393,908) (430,184)Trustee’s fee paid (13,131) (22,724)Auditors’ remuneration paid (9,000) (20,000)Tax agent’s fee paid (3,400) (3,619)Payment for other fees and expenses (11,694) (8,777)Cash generated from/(used in) operating and investing activities 203,636 (983,216)Income tax refund 20,871 20,519Net cash generated from/(used in) operating and investing activities 224,507 (962,697)

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 4,980,194 1,340,315Cash paid on units cancelled (1,680,370) (1,199,675)Distribution paid (1,147,668) (1,520,064)Net cash generated from/(used in) financing activities 2,152,156 (1,379,424)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,376,663 (2,342,121)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD 1,739,026 4,081,147

CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD 4,115,689 1,739,026

Cash and cash equivalents comprise:Cash at bank 94,631 21,471Short term deposits 4,021,058 1,717,555

4,115,689 1,739,026



7.5 NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 28 FEBRUARY 2015

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Balanced Fund (“the Fund”) was constituted pursuant to the executed Master Deed dated 30 April 2001 (collectively, together with deeds supplemental thereto, referred to as “the Deed”) between the Manager, Kenanga Investors Berhad, and HSBC (Malaysia) Trustee Berhad (“the Trustee” prior to 3 December 2013). The Fund has changed its trustee to CIMB Commerce Trustee Berhad (“the Trustee” with effect from 3 December 2013). The aforesaid change was effected on 3 December 2013 via a Fourth Master Supplemental Deed dated 19 November 2013. The Fund commenced operations on 23 May 2001 and will continue to be in operation until terminated in accordance to Part 12 of the Deed.

Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad, which in turn is a wholly-owned subsidiary of K & N Kenanga Holdings Berhad, 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 a portfolio of investments with lower risk and lower volatility for investors.

The Fund changed its financial year end from 31 December to 28 February in the previous financial period pursuant to the Fourth Master Supplemental Deed dated 19 November 2013.

The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 27 April 2015.

2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks including market risk (which includes interest rate risk and price risk), credit risk and liquidity risk. Whilst these are the most important types of 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 and price risk.


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

a. Market Risk (Contd.)

Market risk arises when the value of the investments fluctuates 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’ valuation caused by uncertainties in the economic, political and social environment will affect the fair value of the Fund.

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

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 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 year to a reasonably possible change in rate of return, with all other variables held constant.

Changes in rateEffects on profit for

the year/periodIncrease/(Decrease) Increase/(Decrease)

Basis points RM

2015Financial assets at FVTPL 5/(5) 5,336/(5,336)


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




i. Interest rate 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 to 1 year

Above 1 year - 5 years

Above 5 years

Non-exposure

to interest rate

movement Total

Weighted average effective interest

rate*RM RM RM RM RM %

2015AssetsFinancial assets

at FVTPL 599,537 5,925,686 4,146,198 13,743,378 24,414,799 4.50Short term

deposits 4,021,058 - - - 4,021,058 3.20Other assets 353 - - 1,773,565 1,773,918

4,620,948 5,925,686 4,146,198 15,516,943 30,209,775

LiabilitiesOther liabilities - - - 2,892,471 2,892,471

Total interest rate sensitivity gap 4,620,948 5,925,686 4,146,198 12,624,472 27,317,304

2014AssetsFinancial assets

at FVTPL 1,000,725 4,973,096 3,302,882 14,072,669 23,349,372 4.49Short term

deposits 1,717,555 - - - 1,717,555 2.95Other assets 139 - - 706,055 706,194

2,718,419 4,973,096 3,302,882 14,778,724 25,773,121

LiabilitiesOther liabilities - - - 1,322,451 1,322,451

Total interest rate sensitivity gap 2,718,419 4,973,096 3,302,882 13,456,273 24,450,670

* Computed based on interest-bearing assets only.




ii. Price risk

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

Price risk sensitivity

The Manager’s best estimate of the effect on the profit for the year due to a reasonably possible change in investments in quoted equity securities, quoted collective investment schemes and quoted warrants with all other variables held constant is indicated in the table below:

Changes in priceEffects on profit for

the year/periodIncrease/(Decrease) Increase/(Decrease)

Basis points RM



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 Percentage of NAV2015 2014 2015 2014

RM RM % %

Financial assets at FVTPL 13,655,286 13,948,764 49.8 56.8




ii. Price risk (Contd.)

Price risk concentration (Contd.)

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

Fair value Percentage of NAV2015 2014 2015 2014

RM RM % %

Trading/Services 4,639,414 5,764,089 16.9 23.5Finance 1,586,346 2,804,474 5.8 11.4Properties 1,030,096 382,500 3.8 1.5Technology 889,307 305,970 3.2 1.2Plantation 825,930 530,710 3.0 2.2Industrial products 740,410 647,700 2.7 2.6Construction 708,281 248,110 2.6 1.0Consumer products 700,870 802,403 2.6 3.3Infrastructure 311,150 579,690 1.1 2.4REITs 2,194,261 1,883,118 8.0 7.7Warrants 29,221 - 0.1 -

13,655,286 13,948,764 49.8 56.8

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

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.



b. Credit Risk (Contd.)

iii. Credit quality of financial assets

The Fund invests only in unquoted corporate bonds with at least investment grade credit rating by a credit rating agency and unquoted government guaranteed bonds. 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% % % %

RatingAA2 34.2 42.6 13.4 16.3AAA 23.8 13.6 9.3 5.2AA3 22.0 22.2 8.7 8.5Not rated 10.2 - 4.0 -AA+ 5.1 10.9 2.0 4.2AA- 4.7 10.7 1.9 4.1

100.0 100.0 39.3 38.3

The Fund invests in deposits only with reputable licensed financial institutions. The following table analyses the licensed financial institutions by rating category:

Short term deposits

Percentage of total short term deposits Percentage of NAV

2015 2014 2015 2014% % % %

RatingP1 100.0 100.0 14.7 7.0



b. Credit Risk (Contd.)

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% % % %

Plantation and agriculture 37.3 53.3 14.6 20.4Finance 28.5 10.9 11.2 4.2Infrastructures and

utilities 10.3 - 4.1 -Transportation 10.2 - 4.0 -Diversified holdings 8.0 - 3.2 -Property and real estate 5.7 - 2.2 -Energy - 22.2 - 8.5Gaming - 13.6 - 5.2

100.0 100.0 39.3 38.3

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, 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.



c. Liquidity Risk (Contd.)

NoteUp to

1 year

Above 1 year - 5 years

Above 5 years Total

RM RM RM RM

2015AssetsFinancial assets at FVTPL 14,342,915 5,925,686 4,146,198 24,414,799Short term deposits 4,021,058 - - 4,021,058Other assets 1,773,918 - - 1,773,918

(i) 20,137,891 5,925,686 4,146,198 30,209,775

LiabilitiesOther liabilities (ii) 2,892,471 - - 2,892,471

Equity (iii) 27,403,092 - - 27,403,092

Liquidity gap (10,157,672) 5,925,686 4,146,198 (85,788)

2014AssetsFinancial assets at FVTPL 15,073,394 4,973,096 3,302,882 23,349,372Short term deposits 1,717,555 - - 1,717,555Other assets 706,194 - - 706,194

(i) 17,497,143 4,973,096 3,302,882 25,773,121

LiabilitiesOther liabilities (ii) 1,322,451 - - 1,322,451

Equity (iii) 24,553,406 - - 24,553,406

Liquidity gap (8,378,714) 4,973,096 3,302,882 (102,736)



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

(ii) Financial liabilities

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

(iii) Equity

As unitholders can request for redemption of their units, they have been categorised as having a maturity of “up to 1 year”. 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 Malaysian Accounting Standards Board (“MASB”) and International Financial Reporting Standards (“IFRS”) issued by International Accounting Standards Board (“IASB”).

The accounting policies adopted are consistent with those of the previous financial period except for the adoption of the new and amended MFRS and IC Interpretations which became effective for the Fund on 1 March 2014. The adoption of the new and amended MFRS and IC Interpretations 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.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

b. Standards, Amendments and Interpretations Issued But Not Yet Effective

As at the date of authorisation of these financial statements, the following Standards, Amendments and Interpretations that have been issued by MASB will be effective for the Fund in future years. The Fund intends to adopt the relevant standards when they become effective.

Description

Effective for financial period

beginning on or after

Amendments to MFRS contained in the documents entitled “Annual Improvements 2010 - 2012 cycle” 1 July 2014

Amendments to MFRS contained in the documents entitled “Annual Improvements 2011 - 2013 cycle” 1 July 2014

Amendments to MFRS 119: Defined Benefit Plans: Employee Contributions 1 July 2014

Amendments to MFRS contained in the documents entitled “Annual Improvements to MFRS 2012 - 2014 cycle” 1 January 2016

MFRS 14: Regulatory Deferral Accounts 1 January 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 1 January 2016Amendments to MFRS 101: Disclosure Initiatives 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 2017MFRS 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 period. 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 classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition.

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.

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 equity securities, quoted collective investment schemes, quoted warrants, 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 and dividend revenue elements of such instruments are recorded separately in “interest 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 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.



d. Impairment of Financial Assets (Contd.)

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.

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.

Interest income is recognised using the effective interest method.

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

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

f. Cash and Cash Equivalents

For the purposes of the statement of cash 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 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 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.

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.

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 2014 RM RM

Financial assets held for trading, at FVTPL:Quoted equity securities 11,431,804 12,065,646Quoted collective investment schemes 2,194,261 1,883,118Quoted warrants 29,221 -Unquoted corporate bonds 9,658,376 9,400,608Unquoted government guaranteed bonds 1,101,137 -

24,414,799 23,349,372

1.3.2014 to 28.2.2015

1.1.2013 to 28.2.2014

RM RM

Net gain on financial assets at FVTPL comprised:Realised gain on disposals 839,376 1,920,573Unrealised changes in fair values (322,546) (297,873)

516,830 1,622,700

Details of financial assets at FVTPL as at 28 February 2015:

Quantity

Aggregate/Amortised

cost Fair valuePercentage

of NAV RM RM %

Quoted equity securities

Trading/ServicesAmway (M) Holdings Berhad 30,000 348,364 334,200 1.2Axiata Group Berhad 63,000 434,712 450,450 1.6Barakah Offshore Petroleum Berhad 112,000 195,612 113,120 0.4Bumi Armada Berhad 166,600 321,972 188,258 0.7Datasonic Group Berhad 58,700 105,918 63,983 0.2Dayang Enterprise Holdings Bhd. 124,600 432,546 351,372 1.3Deleum Berhad 84,000 115,059 146,160 0.5Dialog Group Berhad 280,000 419,558 450,800 1.6Maxis Berhad 49,000 340,031 343,980 1.3PETRONAS Dagangan Berhad 24,300 622,458 468,990 1.7SapuraKencana Petroleum Berhad 188,324 669,502 534,840 2.0Telekom Malaysia Berhad 52,188 306,797 370,535 1.4Tenaga Nasional Berhad 40,700 440,524 593,406 2.2TIME dotCom Berhad 42,000 166,676 229,320 0.8

1,315,412 4,919,729 4,639,414 16.9


4. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 28 February 2015: (Contd.)

Quantity

Aggregate/Amortised


of NAV RM RM %

Quoted equity securities (Contd.)

FinanceCIMB Group Holdings Berhad 45,271 328,734 267,552 1.0Hong Leong Financial Group Berhad 19,000 268,943 319,580 1.1Malayan Banking Berhad 34,970 319,124 321,374 1.2Public Bank Berhad 37,000 619,124 677,840 2.5

136,241 1,535,925 1,586,346 5.8

PropertiesEastern & Oriental Berhad 111,100 267,964 249,975 0.9Matrix Concepts Holdings Berhad 67,500 156,694 195,075 0.7Sunway Berhad 106,700 342,989 360,646 1.3Tambun Indah Land Berhad 120,000 242,812 224,400 0.9

405,300 1,010,459 1,030,096 3.8

TechnologyGlobetronics Technology Bhd. 80,000 255,814 388,000 1.4Inari Amertron Berhad 120,375 330,018 370,755 1.3K-One Technology Berhad 253,500 93,795 130,552 0.5

453,875 679,627 889,307 3.2

PlantationBatu Kawan Berhad 14,500 275,633 264,480 1.0Kuala Lumpur Kepong Berhad 13,500 273,867 306,450 1.1United Plantations Berhad 10,000 261,800 255,000 0.9

38,000 811,300 825,930 3.0

Industrial productsCoastal Contracts Bhd. 94,200 350,788 292,962 1.1Press Metal Berhad 52,800 120,549 158,928 0.6Reach Energy Berhad 200,000 150,000 125,000 0.4V. S. Industry Berhad 36,500 75,108 163,520 0.6

383,500 696,445 740,410 2.7




Quantity

Aggregate/Amortised


of NAV RM RM %

Quoted equity securities (Contd.)

ConstructionIJM Corporation Berhad 43,000 241,974 305,730 1.1Mitrajaya Holdings Berhad 175,500 169,136 282,555 1.0Muhibbah Engineering (M) Berhad 52,400 119,718 119,996 0.5

270,900 530,828 708,281 2.6

Consumer productsDutch Lady Milk Industries Berhad 5,000 236,180 233,800 0.9Karex Berhad 51,000 165,317 202,470 0.7Nestlé (M) Berhad 3,600 226,748 264,600 1.0

59,600 628,245 700,870 2.6

InfrastructureDiGi.Com Berhad 49,000 216,318 311,150 1.1

Total quoted equity securities 3,111,828 11,028,876 11,431,804 41.7 Quoted collective investment

schemes

Axis Real Estate Investment Trust 106,247 338,264 382,489 1.4CapitaMalls Malaysia Trust 200,000 353,330 300,000 1.1IGB Real Estate Investment Trust 95,800 129,612 128,372 0.5KLCC Property Holdings Berhad 80,000 573,344 554,400 2.0Pavilion Real Estate Investment Trust 281,000 399,992 421,500 1.5Sunway Real Estate Investment Trust 250,000 367,700 407,500 1.5Total quoted collective investment

schemes 1,013,047 2,162,242 2,194,261 8.0

Quoted warrants

Eastern & Oriental Berhad - WB 20,200 - 9,292 - Inari Amertron Berhad - WB 13,375 - 19,929 0.1Total quoted warrants 33,575 - 29,221 0.1




Quantity

Aggregate/Amortised


of NAV RM RM %

Unquoted corporate bonds

Aquasar Capital Sdn Bhd maturing on 16/07/2021 2,500,000 2,544,692 2,554,663 9.3

Bahrain Mumtalakat Holding Company B.S.C maturing on 30/04/2018 350,000 356,127 357,983 1.3

Bright Focus Berhad maturing on 22/01/2016 600,000 601,775 601,815 2.2

DRB-Hicom Berhad maturing on 30/11/2018 500,000 503,746 504,142 1.8

First Resources Limited maturing on 08/12/2017 2,000,000 2,025,574 2,014,095 7.4

First Resources Limited maturing on 31/07/2017 700,000 704,043 703,541 2.6

Golden Assets International Finance Limited maturing on 17/11/2017 1,300,000 1,292,323 1,294,695 4.7

Jati Cakerawala Sdn Bhd maturing on 31/07/2023 475,000 463,992 467,472 1.7

Maybank Islamic Berhad maturing on 31/03/2016 500,000 510,428 509,947 1.9

Perbadanan Kemajuan Negeri Selangor maturing on 28/10/2016 600,000 609,035 608,445 2.2

Westports Malaysia Sdn Bhd maturing on 03/05/2021 40,000 41,440 41,578 0.2

Total unquoted corporate bonds 9,565,000 9,653,175 9,658,376 35.3

Unquoted government guaranteed bonds

Syarikat Prasarana Negara Berhad maturing on 04/08/2021 1,100,000 1,086,577 1,101,137 4.0

Total unquoted government guaranteed bonds 1,100,000 1,086,577 1,101,137 4.0

Total financial assets at FVTPL 23,930,870 24,414,799 89.1

Unrealised gain on financial assets at FVTPL 483,929


5. MANAGER’S FEE

The Manager’s fee is computed on a daily basis at a rate not exceeding 2.0% 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 1.50% per annum of the NAV of the Fund.

6. TRUSTEE’S FEE

Pursuant to the Fifth Master Supplemental Deed dated 25 July 2014, the Trustee’s fee is computed at a rate not exceeding 0.05% per annum of the NAV of the Fund effective from 1 August 2014. Prior to 1 August 2014, the Trustee’s fee was computed at a rate not exceeding 0.5% per annum of the NAV of the Fund subject to a minimum of RM35,000 per annum.

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

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 year of assessment 2016.

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:

1.3.2014 to 28.2.2015

1.1.2013 to 28.2.2014

RM RM

Net income before tax 968,673 2,099,611

Tax at Malaysian statutory tax rate of 25% (financial period from 1 January 2013 to 28 February 2014: 25%) 242,168 524,903

Tax effect of:Income not subject to tax (455,002) (746,246)Loss not deductible for tax purposes 80,637 74,468Expenses not deductible for tax purposes 28,951 43,628Restriction on tax deductible expenses for unit trust fund 103,246 103,247Over provision of tax in prior years (3,923) (8,104)

Income tax for the year/period (3,923) (8,104)


8. INCOME DISTRIBUTION

Distributions to unitholders is from the following sources:

2015 2014RM RM

Tax exempt income 1,746,053 1,146,884Distribution out of distribution equalisation (Note 12(a)) 98,686 4,174Undistributed income b/f 1,106,750 810,532

2,951,489 1,961,590Less: Expenses (432,452) (202,163)Less: Income tax - -Distribution for the year/period 2,519,037 1,759,427

Gross/Net distribution per unit (sen) 3.7100 3.0000

Date of distribution 26.2.2015 26.2.2014

Current year’s income distribution included an amount of RM1,106,750 (2014: RM810,532) which is made from previous financial period’s realised gain.

The income distribution above has been proposed before taking into account the unrealised loss for the financial year of RM322,546 (unrealised gain for the previous financial period of RM297,873) which is carried forward to the next financial year.

9. SHORT TERM DEPOSITS

Short term deposits are held with licensed financial institutions in Malaysia, on a daily renewal basis at the prevailing interest rate.

10. OTHER RECEIVABLES

2015 2014RM RM

Amount due from stockbrokers and licensed financial institutions 1,607,932 635,497

Dividend receivable 71,002 49,087Interest receivable from short term deposits 353 139

1,679,287 684,723


11. OTHER PAYABLES

2015 2014RM RM

Amount due to stockbrokers and licensed financial institutions 1,412,437 120,035Accrual for auditors’ remuneration 9,000 18,000Accrual for tax agent’s fees 3,900 2,500Provision for printing and other expenses 12,160 4,600

1,437,497 145,135

12. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 2015 2014RM RM

Unitholders’ contribution (a) 20,582,865 16,285,424Retained earnings:

Realised reserves 6,336,298 7,461,507Unrealised reserves 483,929 806,475

6,820,227 8,267,982

27,403,092 24,553,406

(a) Unitholders’ contribution

1.3.2014 to 28.2.2015 1.1.2013 to 28.2.2014No. of units RM No. of units RM

At beginning of the year/period 60,150,648 16,285,424 58,240,017 15,518,590Add: Creation of units 11,765,207 4,841,571 3,249,560 1,243,770Less: Cancellation of units (4,017,272) (1,639,152) (2,840,546) (1,094,434)Distribution equalisation - 98,686 - 9,913Income distribution (Note 8) - (98,686) - (4,174)Reinvestment of income

distributed 2,828,053 1,095,022 1,501,617 611,759At end of the year/period 70,726,636 20,582,865 60,150,648 16,285,424

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 28 February 2015 were nil (2014: nil).


13. 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.

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 27,448,152 0.3881 24,624,809 0.4094

Effects of adopting bid prices as fair value (45,060) (0.0006) (71,403) (0.0012)

NAV attributable to unitholders per statement of financial position 27,403,092 0.3875 24,553,406 0.4082

14. PORTFOLIO TURNOVER RATIO

The portfolio turnover ratio (“PTR”) for the current financial year is 0.76 times (financial period from 1 January 2013 to 28 February 2014: 1.06 times).

PTR is the ratio of the average 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

The management expense ratio (“MER”) for the current financial year is 1.64% (financial period from 1 January 2013 to 28 February 2014: 1.96%).

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 STOCKBROKING COMPANIES/FINANCIALINSTITUTIONS

Transaction value

Percentage of total

Brokerage, stamp duty

and clearing fee

Percentage of total

RM % RM %

Kenanga Investment Bank Berhad* 10,192,803 26.0 10,707 19.8Hong Leong Investment Bank Berhad 5,538,320 14.1 5,840 10.8CIMB Bank Berhad 4,797,838 12.3 - -RHB Bank Berhad 3,845,059 9.8 - -RHB Investment Bank Berhad 3,177,843 8.1 8,349 15.4Malayan Banking Berhad 2,789,766 7.1 - -CIMB Investment Bank Berhad 1,813,944 4.6 7,869 14.6Maybank Investment Bank Berhad 1,390,525 3.6 4,615 8.5MIDF Amanah Investment Bank

Berhad 1,236,675 3.2 3,811 7.0Affin Hwang Investment Bank Berhad

(formerly known as Affin Investment Bank Berhad) 1,174,353 3.0 3,765 7.0

Others 3,225,628 8.2 9,141 16.9 39,182,754 100.0 54,097 100.0

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

The above transaction values are in respect of quoted equity securities, quoted collective investment schemes, quoted warrants, unquoted corporate bonds and unquoted government bonds. Transactions in unquoted corporate bonds and unquoted government guaranteed bonds do not involve any commission or brokerage fees.

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


17. SEGMENTAL REPORTING

a. Business Segments

In accordance with the objective of the Fund, the Fund can invest up to 60% in quoted Malaysian investment securities and up to 40% in fixed income instruments. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:

Quoted investment

securities

Unquoted fixed income instruments

Other investments Total

RM RM RM RM

1.3.2014 to 28.2.2015RevenueSegment income 945,800 452,065 99,595Segment expenses (95,102) - -Net segment income

representing segment results 850,698 452,065 99,595 1,402,358

Unallocated expenditure (433,685)Income before tax 968,673Income tax 3,923Net income after tax 972,596

2015AssetsFinancial assets at FVTPL 13,655,286 10,759,513 -Short term deposits - - 4,021,058Other segment assets 396,751 1,282,183 353Total segment assets 14,052,037 12,041,696 4,021,411 30,115,144Unallocated assets 180,419

30,295,563 LiabilitiesTotal segment liabilities 120,114 1,292,323 - 1,412,437Unallocated liabilities 1,480,034

2,892,471


17. SEGMENTAL REPORTING (CONTD.)

a. Business Segments (Contd.)

Quoted investment

securities

Unquoted fixed income instruments

Other investments Total

RM RM RM RM

1.1.2013 to 28.2.2014RevenueSegment income 2,456,553 146,127 122,674Segment expenses (143,990) - -Net segment income

representing segment results 2,312,563 146,127 122,674 2,581,364

Unallocated expenditure (481,753)Income before tax 2,099,611Income tax 8,104Net income after tax 2,107,715

2014AssetsFinancial assets at FVTPL 13,948,764 9,400,608 -Short term deposits - - 1,717,555Other segment assets 684,584 - 139Total segment assets 14,633,348 9,400,608 1,717,694 25,751,650Unallocated assets 124,207

25,875,857

LiabilitiesTotal segment liabilities 120,035 - - 120,035Unallocated liabilities 1,202,416

1,322,451

b. Geographical Segments

As all of the Fund’s investments are located in Malaysia, disclosure by geographical segment 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.

Financial assets at

FVTPL ReceivablesFinancial liabilities Total

RM RM RM RM

2015AssetsQuoted equity securities 11,431,804 - - 11,431,804Quoted collective investment

schemes 2,194,261 - - 2,194,261Quoted warrants 29,221 - - 29,221Unquoted corporate bonds 9,658,376 - - 9,658,376Unquoted government

guaranteed bonds 1,101,137 - - 1,101,137Short term deposits - 4,021,058 - 4,021,058Other receivables - 1,679,287 - 1,679,287Cash at bank - 94,631 - 94,631

24,414,799 5,794,976 - 30,209,775

LiabilitiesAmount due to Manager - - 29,900 29,900Amount due to Trustee - - 1,059 1,059Other payables - - 1,437,497 1,437,497Distribution payable - - 1,424,015 1,424,015

- - 2,892,471 2,892,471


18. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (Contd.)

Financial assets at

FVTPL ReceivablesFinancial liabilities Total

RM RM RM RM

2014AssetsQuoted equity securities 12,065,646 - - 12,065,646Quoted collective investment

schemes 1,883,118 - - 1,883,118Unquoted corporate bonds 9,400,608 - - 9,400,608Short term deposits - 1,717,555 - 1,717,555Other receivables - 684,723 - 684,723Cash at bank - 21,471 - 21,471

23,349,372 2,423,749 - 25,773,121

LiabilitiesAmount due to Manager - - 28,672 28,672Amount due to Trustee - - 976 976Other payables - - 145,135 145,135Distribution payable - - 1,147,668 1,147,668

- - 1,322,451 1,322,451

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.

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- Quoted equity securities 11,431,804 - - 11,431,804- Quoted collective investment

schemes 2,194,261 - - 2,194,261- Quoted warrants 29,221 - - 29,221- Unquoted corporate bonds - 9,658,376 - 9,658,376- Unquoted government

guaranteed bonds - 1,101,137 - 1,101,137


18. FINANCIAL INSTRUMENTS (CONTD.)

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

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments: (Contd.)2014- Quoted equity securities 12,065,646 - - 12,065,646- Quoted collective investment

schemes 1,883,118 - - 1,883,118- Unquoted corporate bonds - 9,400,608 - 9,400,608

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 quoted equity securities, quoted collective investment schemes and quoted warrants are determined by reference to Bursa Malaysia Securities Berhad’s bid prices at reporting date. The fair value of unquoted corporate bonds and unquoted government guaranteed bonds are based on average of bid prices quoted by respective bankers at reporting date.

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

The carrying amounts of the Fund’s other financial assets and liabilities that are not carried at fair value 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 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/period.

20. COMPARATIVES

During the previous financial period, the Fund changed its financial year end from 31 December to 28 February. Hence, the financial statements for the previous financial period was from 1 January 2013 to 28 February 2014 and are not comparable to the current financial year.


ANNUAL REPORT

For the Financial Year Ended 28 February 2015

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 Investors Berhad (353563-P)

kenanga balanced fund · 2015. 4. 29. · kenanga balanced fund annual report for the financial...

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