kenanga balanced fund€¦ · for the financial period from 1 march 2015 to 31 august 2015 investor...

KENANGA BALANCED FUND

INTERIM REPORT

For the Financial Period from 1 March 2015 to 31 August 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 2-6Fund Performance 7-9Trustee’s Report 10Statement by the Manager 11Financial Statement 12-41

ii Kenanga Balanced Fund Interim Report

CORPORATE DIRECTORY

Private Retirement Scheme (PRS) Provider: 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)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: 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, 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 Balanced Fund Interim 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 Interim 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 31 August 2015

Size of holdings No. of unitholders No. of units held5,000 and below 26 86,7315,001 - 10,000 56 410,22810,001-50,000 162 4,274,27050,001-500,000 85 8,999,132500,001 and above 15 48,508,438Total 344 62,278,799

2 Kenanga Balanced Fund Interim 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 179.77% in net asset value terms, outperforming its benchmark increase of 148.38%. In terms of risk and volatility, as at 28 August 2015, the Fund achieved a 3-year annualised standard deviation of 6.5, classified as moderate under the Lipper Fund Volatility Classification. The Fund’s performance has therefore satisfied the objective of investors with moderate risk appetite looking for reasonable return over the medium to long term.

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

Performance Chart Since Launch (23/05/2001 – 31/08/2015)Kenanga Balanced Fund vs Benchmark

% Growth, Cum, TR, ExD, MYR, Launch to 31/8/2015

100.00

-20.000.00

120.00140.00160.00180.00

20.0040.0060.0080.00

200.00220.00

23/5

/200

1

31/5

/200

2

31/5

/200

3

31/5

/200

4

31/5

/200

5

31/5

/200

6

31/5

/200

7

31/5

/200

8

31/5

/200

9

31/5

/201

0

31/5

/201

1

31/5

/201

2

31/5

/201

3

31/5

/201

4

31/8

/201

5

Kenanga Balanced: 179.77 FTSE BM Top/Maybank 12 mth FD (60:40): 148.38

Source: Lipper

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

During the interim period under review, the Fund invested mainly in the Malaysian equities ranging from 50% to 56% of the Fund’s NAV. Fixed income securities constituted around 39% of the fund’s NAV mainly due to the limited size of the fund. Cash was kept between the levels of around 5% to 11% of NAV.

For the interim period under review, besides equity, the Fund also invested in a diversified portfolio of high grade corporate bonds and money market deposits. 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 31 August 2015 and comparison with the previous financial period

Asset 31 Aug 2015 31 Aug 2014Quoted investment securities 52.5% 49.4%Unquoted bonds 40.4% 35.6%Short term deposits and cash 7.1% 15.0%

Reason for the differences in asset allocation

Following market corrections, the Fund increased exposure to both equities and bonds for rebalancing purpose. Despite the increased investment exposure, the Fund continues to be defensively positioned in view of the volatile market conditions.

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

Period under reviewKenanga Balanced Fund -5.02%FTSE-Bursa Malaysia 100 / Maybank 12 mths FD Rate (60:40) -9.01%

Source: Lipper

For the interim period under review, the Fund declined by 5.02%, outperforming the 9.01% drop of the Benchmark (60% FBM100 Index + 40% Maybank 12-month Fixed Deposit rate). The out-performance was mainly due to good stock picking strategy.

2.6 Review of the market

Market Review

The interim period (March to August 2015) under review witnessed a turbulent period for the equity markets. In tandem with the crude oil price recovery, the FBM KLCI Index climbed steadily from March onwards to peak at the year’s high of 1,862.80 points on 21 April 2015. Thereafter, a confluence of negative factors from both the domestic and global scene hammered the FBM KLCI Index all the way down to an intra-day low of 1,503.68 points on 25 August 2015 before recovering to 1,612.74 points by end August 2015.

The FBM KLCI market correction started from end April and was initially driven by selloff ahead of a potential downgrade of Malaysia’s sovereign credit rating by Fitch Ratings. Fitch had earlier downgraded Malaysia’s outlook to “Negative” in July 2013. This was further exacerbated by: a) the allegations relating to a strategic development company wholly-owned by the Ministry of Finance; b) the weak corporate results report for first quarter of 2015; and c) drag from Tenaga (which is an index heavyweight) share price correction on concerns that it might overpay for Edra Energy’s power assets. Contrasting the weak economic and market performance of ASEAN from April to June, China and Hong Kong markets appreciated sharply on increased retail participation and high hopes for the state owned enterprises reforms. As a result, global investors rotated out from the underperforming ASEAN markets into the China and Hong Kong markets.


2.6 Review of the market (Contd.)

Market Review (Contd.)

Global markets were later rattled by Greece by end June as the country shut its banking system for 6 days and imposed capital controls to stem fund outflows. In an unexpected move, Fitch announced on 30 June that it had affirmed Malaysia’s sovereign credit rating at “A-” while the outlook was upgraded to “Stable” from “Negative” on the back of the country’s improving fiscal position from GST implementation and fuel subsidy reforms. Unfortunately the surprise upgrade did not provide any cheer to the market which continued to drop along with the weakening Ringgit.

July was a relatively calmer month but equity markets tumbled in August again. In the commodities space, crude oil and palm oil plunged in July and August on the back of oversupply concerns. The Brent crude oil and palm oil dipped 33% and 16% respectively to US$42.7/barrel and RM1867/tonne in a short span of two months before recovering some gains by end August.

In the domestic front, the cabinet reshuffling by end July raised worries on political uncertainties. Malaysia’s forex reserve also fell to a low of US$94.5 billion in mid-August mainly attributed to capital outflows and possible Bank Negara’s intervention in the forex market to defend Ringgit. Not helping was another set of poor corporate earnings for the second quarter, with about 50% companies reporting results below expectation and only 10% surprising on the upside, bringing the weakest hit/miss earnings ratio in the last 16 quarters. In the global front, China shocked the world in its sudden move of devaluing RMB by 2% in August. This is the first devaluation since 1994 and the largest RMB devaluation in two decades. The devaluation sparked concerns of a decelerating Chinese economy and potential competitive currency devaluation amongst emerging countries to fight for exports. Both domestic and global markets fell sharply in August before chalking some recovery towards month end.

The cumulative net foreign selling in the domestic equities reached RM16 billion for the first eight months of 2015, way above RM6.9 billion total net selling in 2014. Foreign shareholdings have therefore declined to 22.6% as of end August 2015 from 23.6% as of end 2014.

Fixed Income Market Review

The timing of the Fed’s rate hike remained the main theme in the US government bond market. The FOMC meetings suggested that the path to rising rates will be even more gradual than previously predicted. A mixed bag of economic data also complicated investors’ prediction over the Fed’s data-dependent policy direction. Meanwhile, US Treasuries (UST) ended the financial period under review on a weaker note after volatile swings. We saw an upward shift in the UST curve with the 2- and 10-year yields climbing 12 and 22 bps respectively.

On the local front, government bonds closed the financial period under review on a weaker note. Selling pressure was seen heavy from the belly to the long end of the curve, with 3-, 5-, 7- and 10-year notes climbing 4, 36, 40 and 28 bps respectively. The broad selling occurred amid a bearish Ringgit performance, as well as a slump in oil and other commodity prices. Lingering uncertainties over domestic political developments also contributed to negative sentiments, and in turn intensified jitters among investors.

The Malaysian Ringgit (MYR) weakened by 16.32% against the US Dollar (USD), from 3.6042 to 4.1925. The downslide of the MYR can be attributed to a few factors, namely declining oil prices, the slowdown in China and concerns over the domestic political situation.



Market Outlook

While the outlook for Malaysia’s economy remains challenging, near term downside risk for the market could be limited after the massive equities selloff by foreigners. Market direction is expected to be closely tied to the Ringgit performance. Following the sharp depreciation of Ringgit in the past few months, the probability of another substantial drop for Ringgit is less likely. As we are entering into the fourth quarter, possibility of a window closing for the year end period cannot be discounted. We will therefore slowly increase exposure to laggards which may benefit from the year end closing.

Fixed Income Outlook

Into the second half of the financial period under review, volatility, which is the new norm, will be with us for a long while but we are expecting some degree of market stability into later part of the year once US Fed decidedly to raise rate and market focus will be shifting from broadly bearish to relative value play.

The September Fed FOMC minutes suggest a tactical delay to its rate hiking cycle and we expect that the first hike will happen in December 2015. A 2016 rate hike may prove tougher amid presidential election and likely slower GDP growth. The peak rate in this cycle however will likely to be lower than past experiences.

In Asia, trading direction will be guided by possibility of monetary easing against those of commodity-dependent economies. China, India, Taiwan and Singapore are expected to have the ability and room to ease and supported by domestic conditions. On the other hand, Indonesia and Malaysia, which have high commodity dependency and high foreign ownership of local currency bonds, will likely to be more vulnerable compared to its regional peers.

Malaysia is one of few Asian countries that has high correlation with US Treasury and likely to be most impacted as we approach Fed lift off. We expect upward pressure on local rates compared to what the history is suggesting if current depreciation path of Ringgit Malaysia continues and the loan-to-deposit ratio of banking system stays in excess of 85%.

Key watch – 2016 Budget which is to be tabled on 23 October. Risk of fiscal slippage will likely to cause spike in yields, elevate government debt service charges, constraint future policy options and reignite fear of sovereign ratings downgrade. We however take comfort of government’s commitment to fiscal consolidation this year and beyond.

Strategy

We remain steadfast to our bottom up stock picking strategy favouring growth-oriented mid-to-small caps which should continue to outperform the general market. We continue to like manufacturers focusing on export business, construction and utility sectors. The infrastructure development under the 11MP (11th Malaysian Plan) will continue to drive construction spending while exporters will benefit from the weak Ringgit environment. We also like large caps which had experienced sharp correction from the market selloff and will look to gradually increase exposure when value emerges.



Strategy (Contd.)

Given the policy divergence between the US Fed and BNM, we are changing our strategy from overweight to neutral duration to mitigate the volatility in the market. We also opine that by increasing our liquidity, we will be in a better position to re-invest once market has fully re-priced the bonds to reflect the higher yields environment. In terms of credit, we prefer to invest in good quality AAA and AA-rated bonds for liquidity and yield pick-up for the portfolio.

2.7 Income Distribution

For the financial period 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 period under review.

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

There were no significant changes in the state of affair of the Fund during the financial period and up until the date of the manager’s report, not otherwise disclosed in the financial statements.

2.10 Circumstances that materially affect any interests of the unitholders

During the financial period under review, there were no circumstances that materially affected any interests of the unitholders.

2.11 Rebates & Soft commissions

Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, financial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the financial period 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 financial period as at 31 August 2015 against 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 at As at31.8.2015 28.2.2015 28.2.2014 31.12.2012

% % % %

Trading/Services 15.8 16.3 23.0 23.0Finance 5.2 5.6 11.2 11.7Properties 4.9 3.6 1.5 -Consumer products 4.3 2.4 3.2 8.3Technology 4.2 3.1 1.2 -Construction 4.1 2.5 1.0 3.8Industrial products 3.5 2.6 2.6 1.7Plantations 1.7 2.9 2.1 -Infrastructure 1.1 1.1 2.3 4.1REITs 7.6 7.7 7.5 5.3Warrants 0.1 0.1 - 0.1Unquoted corporate bonds 35.6 33.8 37.5 25.3Unquoted government guaranteed

bonds 4.8 3.9 - -Short term deposits and cash 7.1 14.4 6.9 16.7

100.0 100.0 100.0 100.0

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:

Period from FY Period from FY1.3.2015 to

31.8.20151.3.2014 to

28.2.20151.1.2013 to

28.2.20141.1.2012 to 31.12.2012

Net asset value (“NAV”) (RM Million) 22.96* 27.45 24.62 24.95Units in circulation (Million) 62.28 70.73 60.15 58.24NAV per unit (RM) 0.3686* 0.3881 0.4094 0.4024Highest NAV per unit (RM) 0.3968 0.4300 0.4389 0.4284Lowest NAV per unit (RM) 0.3617 0.3872 0.3931 0.3996Total return (%) -5.02 3.88 9.26 6.20- Capital growth (%) -5.02 -5.20 1.74 -0.27- Income growth (%) - 9.08 7.52 6.47Gross distribution per unit (sen) - 3.71 3.00 2.62Net distribution per unit (sen) - 3.71 3.00 2.61Management expense ratio (“MER”) (%)1 0.87 1.64 1.96 2.23Portfolio turnover ratio (“PTR”) (times)2 0.24 0.76 1.06 0.77

Note:Total return is the actual return of the Fund for the respective financial periods/years,computed based on NAV per unit and net of all fees.

MERiscomputedbasedonthetotalfeesandexpensesincurredbytheFunddividedbytheaveragefundsizecalculatedonadailybasis.PTRiscomputedbasedontheaverageofthetotalacquisitionsandtotaldisposalsofinvestmentsecuritiesoftheFunddividedbytheaveragefundsizecalculatedonadailybasis.

Above NAV and NAV per unit are not shown as ex-distribution as there were no distribution declaredbytheFundduringthecurrentfinancialperiodunderreview.

1MERisloweragainstpreviousfinancialyearasthecomputationisinrespectof6monthsonly.

2PTRislowercomparedtothepreviousfinancialyearduetoreducedtradingactivitiesforbothequityandfixedincomesecurities.

*BasedonbidpricefairvaluationmethodonallinvestmentsheldbytheFundasat31August2015,theNAVandNAVperunitwouldbeRM22.92millionandRM0.3680respectively.(AsdisclosedunderNote12ofthefinancialstatements)


3.3 Average total return of the Fund

1 Year31 Aug 14 - 31 Aug 15

3 Years31 Aug 12 - 31 Aug 15

5 Years31 Aug 10 - 31 Aug 15

Kenanga Balanced Fund -5.67% 3.33% 5.82%FTSE Bursa Malaysia 100/Maybank 12 months FD Rate (60:40)

-10.64% 0.05% 3.19%

Source: Lipper

3.4 Annual total return of the Fund

Period under review

28 Feb 15 - 31 Aug 15

1 Year28 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

Kenanga Balanced Fund

-5.02 3.88% 9.26% 6.20% 4.60% 13.84%

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

-9.01 -0.04% 7.99% 8.01% 2.20% 16.48%

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, have fulfilled its duties in the following manner for the financial period ended 31 August 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;

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

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

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

LEE KOOI YOKE Chief Operating Officer

Kuala Lumpur, Malaysia

23 October 2015


5. STATEMENT BY THE MANAGER

We, Ismitz Matthew De Alwis and Dato’ Bruce Kho Yaw Huat, being the directors of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial position as at 31 August 2015 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial period from 1 March 2015 to 31 August 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 31 August 2015 and of its financial performance and cash flows for the period from 1 March 2015 to 31 August 2015 and comply with the requirements of the Deed.

For and on behalf of the Manager Kenanga Investors Berhad

Ismitz Matthew De Alwis Dato’ Bruce Kho Yaw Huat

Kuala Lumpur

23 October 2015


6. FINANCIAL STATEMENT

6.1 STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL PERIOD FROM 1 MARCH 2015 TO 31 AUGUST 2015(unaudited)

Note1.3.2015 to

31.8.20151.3.2014 to

31.8.2014RM RM

INVESTMENT INCOMEDividend income 243,743 233,118Interest income 242,745 238,514Net (loss)/gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 4 (1,446,066) 950,909

(959,578) 1,422,541

EXPENSESManager’s fee 5 183,173 187,934Trustee’s fee 6 6,106 6,264Auditors’ remuneration 4,488 4,628Tax agent’s fee 3,782 2,000Administration expenses 14,691 5,511Brokerage and other transaction costs 59,762 63,843

272,002 270,180

NET (LOSS)/INCOME BEFORE TAX (1,231,580) 1,152,361

Income tax 7 (8,313) -

NET (LOSS)/INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD (1,239,893) 1,152,361

Net (loss)/income after tax is made up as follows:Realised gain 41,117 724,612Unrealised (loss)/gain 4 (1,281,010) 427,749

(1,239,893) 1,152,361

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


6.2 STATEMENT OF FINANCIAL POSITIONAS AT 31 AUGUST 2015 (unaudited)

Note 31.8.2015 31.8.2014RM RM

INVESTMENTSFinancial assets at FVTPL 4 21,222,514 23,028,930Short term deposits 8 1,626,143 3,990,699

22,848,657 27,019,629

OTHER ASSETSOther receivables 9 50,297 95,868Tax recoverable 67,914 102,736Cash at bank 7,061 62,795

125,272 261,399

TOTAL ASSETS 22,973,929 27,281,028

LIABILITIESAmount due to Manager 29,037 31,052Amount due to Trustee 907 1,066Other payables 10 25,899 264,832TOTAL LIABILITIES 55,843 296,950

EQUITYUnitholders’ contribution 17,337,752 17,563,735Retained earnings 5,580,334 9,420,343NET ASSET VALUE (“NAV”) ATTRIBUTABLE

TO UNITHOLDERS 11 22,918,086 26,984,078

TOTAL EQUITY AND LIABILITIES 22,973,929 27,281,028

NUMBER OF UNITS IN CIRCULATION 11(a) 62,278,800 63,120,148

NET ASSET VALUE PER UNIT (RM) 12 0.3680 0.4275



6.3 STATEMENT OF CHANGES IN NET ASSET VALUEFOR THE FINANCIAL PERIOD FROM 1 MARCH 2015 TO 31 AUGUST 2015(unaudited)

NoteUnitholders’ contribution

Retained earnings Total NAV

RM RM RM1.3.2015 to 31.8.2015At beginning of the period 20,582,865 6,820,227 27,403,092Total comprehensive loss - (1,239,893) (1,239,893)Creation of units 11(a) 703,269 - 703,269Cancellation of units 11(a) (3,947,702) - (3,947,702)Distribution equalisation 11(a) (680) - (680)At end of the period 17,337,752 5,580,334 22,918,086

1.3.2014 to 31.8.2014At beginning of the period 16,285,424 8,267,982 24,553,406Total comprehensive income - 1,152,361 1,152,361Creation of units 11(a) 2,261,954 - 2,261,954Cancellation of units 11(a) (1,019,061) - (1,019,061)Distribution equalisation 11(a) 35,418 - 35,418At end of the period 17,563,735 9,420,343 26,984,078



6.4 STATEMENT OF CASH FLOWSFOR THE FINANCIAL PERIOD FROM 1 MARCH 2015 TO 31 AUGUST 2015(unaudited)

1.3.2015 to 31.8.2015

1.3.2014 to 31.8.2014

RM RMCASH FLOWS FROM OPERATING AND INVESTING ACTIVITIESProceeds from sale of financial assets at FVTPL 8,413,910 9,023,348Purchase of financial assets at FVTPL (6,553,042) (7,133,099)Dividend received 264,591 232,596Interest received 263,869 267,723Manager’s fee paid (187,737) (185,217)Trustee’s fee paid (6,258) (6,174)Auditors’ remuneration paid (9,000) (9,000)Payment for other fees and expenses (12,952) (6,015)Cash generated from operating and investing activities 2,173,381 2,184,162Income tax refund 9,561 -Net cash generated from operating and investing activities 2,182,942 2,184,162

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 705,310 2,314,572Cash paid on units cancelled (3,946,722) (1,036,598)Distribution paid (1,424,015) (1,147,668)Net cash (used in)/generated from financing activities (4,665,427) 130,306

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,482,485) 2,314,468

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 4,115,689 1,739,026

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 1,633,204 4,053,494

Cash and cash equivalents comprise:Cash at bank 7,061 62,795Short term deposits 1,626,143 3,990,699

1,633,204 4,053,494



6.5 NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD FROM 1 MARCH 2015 TO 31 AUGUST 2015(unaudited)

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) as the Trustee. 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 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 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 unaudited financial statements were authorised for issue by the Chief Executive Officer of the Manager on 23 October 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.


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

a. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial asset at FVTPL will fluctuate because of changes in market prices. Market risk includes interest rate risk and price risk.

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

The Manager manages the risk of unfavourable 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 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 period to a reasonably possible change in rate of return, with all other variables held constant.

Changes in rateEffects on profit

for the periodIncrease/(Decrease) Increase/(Decrease)

Basis points RM31.8.2015Financial assets at FVTPL 5/(5) 4,578/(4,578)

31.8.2014Financial assets at FVTPL 5/(5) 4,774/(4,774)

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



a. Market Risk (Contd.)

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 - 15 years

Non-exposure to interest rate

movement Total

Weighted average effective interest

rate*RM RM RM RM RM %

31.8.2015AssetsFinancial assets at

FVTPL 1,701,428 4,207,015 3,246,730 12,067,341 21,222,514 4.59Short term deposits 1,626,143 - - - 1,626,143 3.22Other assets 143 - - 57,215 57,358

3,327,714 4,207,015 3,246,730 12,124,556 22,906,015

LiabilitiesOther liabilities - - - 55,843 55,843

Total interest rate sensitivity gap 3,327,714 4,207,015 3,246,730 12,068,713 22,850,172

31.8.2014AssetsFinancial assets at

FVTPL - 5,968,161 3,580,080 13,480,689 23,028,930 4.36Short term deposits 3,990,699 - - - 3,990,699 3.22Other assets 352 - - 158,311 158,663

3,991,051 5,968,161 3,580,080 13,639,000 27,178,292

LiabilitiesOther liabilities - - - 296,950 296,950

Total interest rate sensitivity gap 3,991,051 5,968,161 3,580,080 13,342,050 26,881,342

* Computed based on interest-bearing assets only.




ii. Price risk

Price risk is the risk of unfavorable changes in the fair values 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 financial period 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 periodIncrease/(Decrease) Increase/(Decrease)

Basis points RM31.8.2015Financial assets at FVTPL 5/(5) 6,000/(6,000)

31.8.2014Financial assets at FVTPL 5/(5) 6,693/(6,693)

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 NAV31.8.2015 31.8.2014 31.8.2015 31.8.2014

RM RM % %

Financial assets at FVTPL 12,000,163 13,386,206 52.4 49.6




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 NAV31.8.2015 31.8.2014 31.8.2015 31.8.2014

RM RM % %

Trading/Services 3,613,064 5,395,948 15.8 20.0Finance 1,198,156 1,567,140 5.2 5.8Properties 1,116,999 570,771 4.9 2.1Consumer products 974,380 627,792 4.3 2.4Technology 947,841 538,004 4.1 2.0Construction 936,770 279,500 4.1 1.0Industrial products 802,376 1,352,993 3.5 5.0Plantations 395,730 557,750 1.7 2.0Infrastructure 255,780 509,970 1.1 1.9REITs 1,735,101 1,986,338 7.6 7.4Warrants 23,966 - 0.1 -

12,000,163 13,386,206 52.4 49.6

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.



b. Credit Risk (Contd.)

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

31.8.2015 31.8.2014 31.8.2015 31.8.2014% % % %

RatingAA3 37.9 25.8 15.2 9.2AAA 18.1 20.4 7.3 7.3AA+ 13.6 11.1 5.5 3.9AA2 13.1 31.3 5.3 11.2AA- 5.5 - 2.2 -Not rated 11.8 11.4 4.7 4.1

100.0 100.0 40.2 35.7

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

Short term deposits

Percentage of total short term deposits Percentage of NAV

31.8.2015 31.8.2014 31.8.2015 31.8.2014% % % %

RatingP1 100.0 100.0 7.1 14.8



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 bondsby sectoral distribution:

Percentage of total unquoted bonds Percentage of NAV

31.8.2015 31.8.2014 31.8.2015 31.8.2014% % % %

Finance 36.7 10.6 14.8 3.8Plantations 36.7 20.9 14.8 7.4Transportation 11.8 11.4 4.7 4.1Industrial products 9.3 - 3.7 -Utilities 5.5 57.1 2.2 20.4

100.0 100.0 40.2 35.7

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 year -

15 years TotalRM RM RM RM

31.8.2015AssetsFinancial assets at FVTPL 13,768,769 4,207,015 3,246,730 21,222,514Short term deposits 1,626,143 - - 1,626,143Other assets 57,358 - - 57,358

(i) 15,452,270 4,207,015 3,246,730 22,906,015

LiabilitiesOther liabilities (ii) 55,843 - - 55,843

Equity (iii) 22,918,086 - - 22,918,086

Liquidity gap (7,521,659) 4,207,015 3,246,730 (67,914)

31.8.2014AssetsFinancial assets at FVTPL 13,480,689 5,968,161 3,580,080 23,028,930Short term deposits 3,990,699 - - 3,990,699Other assets 158,663 - - 158,663

(i) 17,630,051 5,968,161 3,580,080 27,178,292

LiabilitiesOther liabilities (ii) 296,950 - - 296,950

Equity (iii) 26,984,078 - - 26,984,078

Liquidity gap (9,650,977) 5,968,161 3,580,080 (102,736)

(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.



c. Liquidity Risk (Contd.)

(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 Interpretation Committee (“IC”) Interpretations which became effective for the Fund on 1 March 2015. 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.

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 periods. The Fund intends to adopt the relevant standards when they become effective.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

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

Description

Effective for financial period

beginning on or after

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

ofAssets between an Investor and its Associate or Joint Venture 1 January 2016

Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations 1 January 2016

Amendments to MFRS 101: Disclosure Initiatives 1 January 2016Amendments to MFRS 116 and MFRS 138: Clarification of

AcceptableMethods 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 2018MFRS 9: Financial Instruments (IFRS 9 Financial Instruments

asissued 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 instruments.

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

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

d. Impairment of Financial Assets

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

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

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



d. Impairment of Financial Assets (Contd.)

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 period, 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, which includes the accretion of discount and amortisation of premium on fixed income securities, 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 financial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial period.

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.

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 period.


4. FINANCIAL ASSETS AT FVTPL

31.8.2015 31.8.2014 RM RMFinancial assets held for trading, at FVTPL:

Quoted equity securities 10,241,096 11,399,868Quoted collective investment schemes 1,735,101 1,986,338Quoted warrants 23,966 -Unquoted corporate bonds 8,133,906 8,540,510Unquoted government guaranteed bonds 1,088,445 1,102,214

21,222,514 23,028,930

1.3.2015 to 31.8.2015

1.3.2014 to 31.8.2014

RM RMNet (loss)/gain on financial assets at FVTPL comprised:

Realised (loss)/gain on disposals (165,056) 523,160Unrealised changes in fair values (1,281,010) 427,749

(1,446,066) 950,909

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

Quantity

Aggregate/Amortised

cost Fair valuePercentage

of NAV RM RM %

Quoted equity securities

Trading/ServicesAmway (M) Holdings Berhad 30,000 348,364 300,000 1.3Axiata Group Berhad 64,450 443,528 395,078 1.7Bumi Armada Berhad 166,600 321,972 140,777 0.6Deleum Berhad 168,000 255,758 181,440 0.8Dialog Group Berhad 201,600 302,082 314,496 1.4Maxis Berhad 49,000 340,031 321,440 1.4PETRONAS Dagangan Berhad 25,000 605,468 528,500 2.3SapuraKencana Petroleum Berhad 222,324 752,833 380,174 1.7Telekom Malaysia Berhad 53,189 313,784 344,133 1.5Tenaga Nasional Berhad 40,700 440,524 455,026 2.0TIME dotCom Berhad 42,000 166,676 252,000 1.1

1,062,863 4,291,020 3,613,064 15.8


4. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 August 2015 (Contd.):

Quantity

Aggregate/Amortised


of NAV RM RM %

Quoted equity securities (Contd.)

FinanceCIMB Group Holdings Berhad 4,981 36,091 24,756 0.1Hong Leong Financial Group Berhad 23,500 344,482 327,120 1.4Malayan Banking Berhad 35,894 327,163 314,072 1.4Public Bank Berhad 29,600 495,299 532,208 2.3

93,975 1,203,035 1,198,156 5.2

PropertiesEastern & Oriental Berhad 221,100 505,960 331,650 1.4Matrix Concepts Holdings Berhad 78,750 156,694 180,338 0.8MCT Berhad 155,800 199,424 174,496 0.8Sunway Berhad 78,500 252,449 266,115 1.2Tambun Indah Land Berhad 120,000 242,812 164,400 0.7

654,150 1,357,339 1,116,999 4.9

Consumer productsDutch Lady Milk Industries Berhad 5,000 236,180 233,500 1.0Karex Berhad 153,000 364,217 483,480 2.1Nestlé (M) Berhad 3,600 226,748 257,400 1.2

161,600 827,145 974,380 4.3

TechnologyGlobetronics Technology Bhd. 80,000 255,814 460,000 2.0Inari Amertron Berhad 120,375 330,018 373,163 1.6SMRT Holdings Berhad 637,100 312,179 114,678 0.5

837,475 898,011 947,841 4.1

ConstructionIJM Corporation Berhad 43,000 241,974 270,040 1.2Ikhmas Jaya Group Berhad 302,400 203,489 178,416 0.8Mitrajaya Holdings Berhad 263,250 169,135 242,190 1.1Muhibbah Engineering (M) Berhad 128,500 298,868 237,725 1.0Sunway Construction Group Berhad 7,850 8,635 8,399 -

745,000 922,101 936,770 4.1




Quantity

Aggregate/Amortised


of NAV RM RM %

Quoted equity securities (Contd.)

Industrial productsCoastal Contracts Bhd. 94,200 350,788 180,864 0.8Reach Energy Berhad 200,000 150,000 119,000 0.5United U-LI Corporation Berhad 39,800 139,300 149,250 0.7V. S. Industry Berhad 64,700 183,114 353,262 1.5

398,700 823,202 802,376 3.5

PlantationsBatu Kawan Berhad 14,500 275,633 250,270 1.1Kuala Lumpur Kepong Berhad 7,000 142,005 145,460 0.6

21,500 417,638 395,730 1.7

InfrastructureDiGi.Com Berhad 49,000 216,317 255,780 1.1

Total quoted equity securities 4,024,263 10,955,808 10,241,096 44.7

Quoted collective investment schemes

Axis Real Estate Investment Trust 106,247 338,264 347,428 1.5CapitaMalls Malaysia Trust 200,000 353,330 264,000 1.2IGB Real Estate Investment Trust 95,800 129,612 125,498 0.5MRCB-Quill REIT 195,500 234,600 201,365 0.9Pavilion Real Estate Investment Trust 281,000 399,992 424,310 1.9Sunway Real Estate Investment Trust 250,000 367,700 372,500 1.6Total quoted collective investment

schemes 1,128,547 1,823,498 1,735,101 7.6 Quoted warrants

Eastern & Oriental Berhad - WB 20,200 - 4,141 -Inari Amertron Berhad - WB 13,375 - 15,381 0.1Matrix Concepts Holdings Berhad - WA 11,250 - 4,444 -Mitrajaya Holdings Berhad - WD 35,100 - - -Total quoted warrants 79,925 - 23,966 0.1




Quantity

Aggregate/Amortised


of NAV RM RM %

Unquoted corporate bonds

Aquasar Capital Sdn Bhd maturing on 16/07/2021 1,650,000 1,677,852 1,666,886 7.3

Bahrain Mumtalakat Holding Company B.S.C maturing on 30/04/2018 350,000 356,129 354,612 1.5

CIMB Bank Berhad maturing on 23/12/2015 700,000 706,042 705,565 3.1

DRB-Hicom Berhad maturing on 30/11/2018 500,000 504,024 502,865 2.2

First Resources Limited maturing on 31/07/2017 700,000 703,725 704,568 3.1

Golden Assets International Finance Limited maturing on 17/11/2017 1,300,000 1,296,018 1,295,375 5.7

Golden Assets International Finance Limited maturing on 03/08/2018 1,400,000 1,388,257 1,384,566 6.0

Hong Leong Bank Berhad maturing on 30/12/2015 500,000 504,871 504,729 2.2

Jati Cakerawala Sdn Bhd maturing on 31/07/2023 475,000 464,601 464,258 2.0

Maybank Islamic Berhad maturing on 31/03/2016 500,000 509,616 509,269 2.2

Westports Malaysia Sdn Bhd maturing on 03/05/2021 40,000 41,379 41,213 0.2

Total unquoted corporate bonds 8,115,000 8,152,514 8,133,906 35.5

Unquoted government guaranteed bonds

Prasarana Malaysia Berhad [fka Syarikat Prasarana Negara Berhad] maturing on 04/08/2021 1,100,000 1,087,775 1,088,445 4.7

Total unquoted government guaranteed bonds 1,100,000 1,087,775 1,088,445 4.7

Total financial assets at FVTPL 22,019,595 21,222,514 92.6

Unrealised loss on financial assets at FVTPL (797,081)


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 (financial period from 1 March 2014 to 31 August 2015: 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 RM18,000 per annum.

The Trustee’s fee is currently computed at 0.05% per annum (financial period from 1 March 2014 to 31 August 2015: 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 period. 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 (loss)/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:

1.3.2015 to 31.8.2015

1.3.2014 to 31.8.2014

RM RM

Net (loss)/income before tax (1,231,580) 1,152,361

Tax at Malaysian statutory tax rate of 25% (financial period from 1 March 2014 to 31 August 2014: 25%) (307,895) 288,090Tax effect of:Income not subject to tax (121,622) (355,635)Loss not deductible for tax purposes 361,517 -Expenses not deductible for tax purposes 20,103 18,405Restriction on tax deductible expenses for unit trust fund 47,897 49,140Under provision in prior year 8,313 -

Income tax for the period 8,313 -


8. SHORT TERM DEPOSITS

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

9. OTHER RECEIVABLES

31.8.2015 31.8.2014RM RM

Amount due from stockbrokers - 45,907Dividend receivable 50,154 49,609Interest receivable from short term deposits 143 352

50,297 95,868

10. OTHER PAYABLES

31.8.2015 31.8.2014RM RM

Amount due to stockbrokers - 242,608Accrual for auditors’ remuneration 4,488 14,368Accrual for tax agent’s fees 7,682 4,500Provision for printing and other expenses 13,729 3,356

25,899 264,832

11. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 31.8.2015 31.8.2014RM RM

Unitholders’ contribution (a) 17,337,752 17,563,735Retained earnings:

Realised reserves 6,377,415 8,186,119Unrealised reserves (797,081) 1,234,224

5,580,334 9,420,343

22,918,086 26,984,078


11. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS (CONTD.)

(a) Unitholders’ contribution

1.3.2015 to 31.8.2015 1.3.2014 to 31.8.2014No. of units RM No. of units RM

At beginning of the period 70,726,636 20,582,865 60,150,648 16,285,424Add: Creation of units 1,825,650 703,269 5,439,369 2,261,954Less: Cancellation of units (10,273,486) (3,947,702) (2,469,869) (1,019,061)Distribution equalisation - (680) - 35,418

At end of the period 62,278,800 17,337,752 63,120,148 17,563,735

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 31 August 2015 were nil (31 August 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.

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:

31.8.2015 31.8.2014RM RM/Unit RM RM/Unit

NAV attributable to unitholders for creation/cancellation of units 22,958,404 0.3686 27,030,515 0.4282

Effects of adopting bid prices as fair value (40,318) (0.0006) (46,437) (0.0007)

NAV attributable to unitholders per statement of financial position 22,918,086 0.3680 26,984,078 0.4275

13. PORTFOLIO TURNOVER RATIO (“PTR”)

PTR for the financial period from 1 March 2015 to 31 August 2015 is 0.24 times (financial period from 1 March 2014 to 31 August 2014: 0.31 times).

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


14. MANAGEMENT EXPENSE RATIO (“MER”)

MER for the financial period from 1 March 2015 to 31 August 2015 is 0.87% (financial period from 1 March 2014 to 31 August 2014: 1.08%).

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.

15. TRANSACTIONS WITH STOCKBROKING COMPANIES/LICENSED FINANCIAL INSTITUTIONS

Transaction value

Percentage of total

Brokerage, stamp duty

and clearing fee

Percentage of total

RM % RM %

RHB Investment Bank Berhad 6,062,398 50.5 1,821 10.5Kenanga Investment Bank Berhad 2,786,686 23.2 4,220 24.4Maybank Investment Bank Berhad 1,167,809 9.7 5,540 32.1CIMB Investment Bank Berhad 674,961 5.6 2,082 12.1Hong Leong Investment Bank

Berhad 570,657 4.7 1,097 6.4KAF-Seagroatt & Campbell

Securities Sdn Bhd 242,686 2.0 804 4.7Affin Hwang Investment Bank

Berhad 237,725 2.0 787 4.6AmInvestment Bank Berhad 204,164 1.7 676 3.9UOB Kay Hian Securities (M)

Sdn Bhd 66,770 0.6 230 1.3 12,013,856 100.0 17,257 100.0

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

The above transactions values are in respect of quoted investment securities and unquoted bonds. Transactions in unquoted 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.


16. 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 RM1.3.2015 to 31.8.2015RevenueSegment income (1,163,779) 171,995 32,206Segment expense (59,762) - -Net segment income

representing segment results (1,223,541) 171,995 32,206 (1,019,340)

Unallocated expenditure (212,240)Loss before tax (1,231,580)Income tax (8,313)Net loss after tax (1,239,893)

31.8.2015AssetsFinancial assets at FVTPL 12,000,163 9,222,351 -Short term deposits - - 1,626,143Other segment assets 50,154 - 143Total segment assets 12,050,317 9,222,351 1,626,286 22,898,954Unallocated assets 74,975

22,973,929LiabilitiesUnallocated liabilities 55,843 1.3.2014 to 31.8.2014RevenueSegment income 1,163,760 220,691 38,090Segment expense (63,843) - -Net segment income

representing segment results 1,099,917 220,691 38,090 1,358,698

Unallocated expenditure (206,337)Income before tax 1,152,361Income tax -Net income after tax 1,152,361


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segments (Contd.)

Quoted investment

securities

Unquoted fixed income instruments

Other investments Total

RM RM RM RM31.8.2014AssetsFinancial assets at FVTPL 13,386,206 9,642,724 -Short term deposits - - 3,990,699Other segment assets 95,516 - 352Total segment assets 13,481,722 9,642,724 3,991,051 27,115,497Unallocated assets 165,531

27,281,028

LiabilitiesTotal segment liabilities 242,608 - - 242,608Unallocated liabilities 54,342

296,950

b. Geographical Segments

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

17. 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.


17. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (Contd.)

Financial assets at

FVTPL ReceivablesFinancial liabilities Total

RM RM RM RM31.8.2015AssetsQuoted equity securities 10,241,096 - - 10,241,096Quoted collective investment

schemes 1,735,101 - - 1,735,101Quoted warrants 23,966 - - 23,966Unquoted corporate bonds 8,133,906 - - 8,133,906Unquoted government

guaranteed bonds 1,088,445 - - 1,088,445Short term deposits - 1,626,143 - 1,626,143Other receivables - 50,297 - 50,297Cash at bank - 7,061 - 7,061

21,222,514 1,683,501 - 22,906,015

LiabilitiesAmount due to Manager - - 29,037 29,037Amount due to Trustee - - 907 907Other payables - - 25,899 25,899

- - 55,843 55,843 31.8.2014AssetsQuoted equity securities 11,399,868 - - 11,399,868Quoted collective investment

schemes 1,986,338 - - 1,986,338Unquoted corporate bonds 8,540,510 - - 8,540,510Unquoted government

guaranteed bonds 1,102,214 - - 1,102,214Short term deposits - 3,990,699 - 3,990,699Other receivables - 95,868 - 95,868Cash at bank - 62,795 - 62,795

23,028,930 4,149,362 - 27,178,292

LiabilitiesAmount due to Manager - - 31,052 31,052Amount due to Trustee - - 1,066 1,066Other payables - - 264,832 264,832

- - 296,950 296,950


17. FINANCIAL INSTRUMENTS (CONTD.)

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:31.8.2015- Quoted equity securities 10,241,096 - - 10,241,096- Quoted collective investment

schemes 1,735,101 - - 1,735,101- Quoted warrants 23,966 - - 23,966- Unquoted corporate bonds - 8,133,906 - 8,133,906- Unquoted government

guaranteed bonds - 1,088,445 - 1,088,445

31.8.2014- Quoted equity securities 11,399,868 - - 11,399,868- Quoted collective investment

schemes 1,986,338 - - 1,986,338- Unquoted corporate bonds - 8,540,510 - 8,540,510- Unquoted government

guaranteed bonds - 1,102,214 - 1,102,214

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 values 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 values 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 are not carried at fair value but approximate fair values due to the relatively short term maturity of these financial instruments.


18. 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 financial period.

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INTERIM REPORT

For the Financial Period from 1 March 2015 to 31 August 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€¦ · for the financial period from 1 march 2015 to 31 august 2015 investor...

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