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KENANGA BOND FUND

INtErIm rEpOrt

For the Financial Period 1 January 2014 to 30 June 2014

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 BOND FUND

Contents Page

Corporate Directory iiDirectory of Manager’s Offices iiiiFund Information 1Manager’s Report 2-4Fund Performance 5-7Trustee’s Report 8Statement by the Manager 9Financial Statement 10-32

ii Kenanga Bond Fund Interim 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)YM Raja Dato’ Seri Abdul Aziz bin Raja Salim (Independent Director)Vivek Sharma (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)Vivek Sharma (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: Universal Trustee (Malaysia) Berhad (Company No. 17540-D)1 Jalan Ampang, 3rd Floor, 50450 Kuala Lumpur, Malaysia. Tel: 03-2070 8050 Fax: 03-2031 8715, 2032 3194, 2070 1296

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

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

Membership: Federation Of Investment Managers Malaysia (FIMM)19-06-1, 6th Floor, 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 Bond 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

Kenanga Bond Fund Interim Report 1

1. FUND INFORMATION

1.1 Fund Name

Kenanga Bond Fund (KBNF or the Fund)

1.2 Fund Category / Type

Fixed Income / Income

1.3 Investment Objective

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

1.4 Investment Strategy

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

1.5 Duration

The Fund was launched on 15 August 2002 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unit holders for it to continue.

1.6 Performance Benchmark

Maybank 12-months fixed deposit rate.

1.7 Distribution Policy

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

1.8 Breakdown of unit holdings of KBNF as at 30 June 2014

Size of holdings No. of unitholders No. of units held5,000 and below 52 142,8915,001 - 10,000 27 202,51910,001-50,000 93 2,157,44650,001-500,000 29 3,379,529500,001 and above 2 2,248,476Total 203 8,130,861

2 Kenanga Bond Fund Interim Report

2. MANAGER’S REPORT

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

During the period under review, the Fund fulfilled its investment objective, having invested in a diversified portfolio of fixed income instruments.

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

Performance Chart Since Launch (15/08/2002– 30/6/2014)Kenanga Bond Fund vs Maybank 12-months fixed deposit rate

% Growth, Cum, TR, ExD, MYR, Launch to 30/06/2014

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

31/1

2/20

07

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

30/6

/201

4

31/1

2/20

04

31/1

2/20

03

31/1

2/20

0215

/8/2

002

31/1

2/20

05

31/1

2/20

06

Kenanga Bond : 62.19 Maybank 12 Months Fixed Deposit Rate : 48.46

Source: Lipper

2.3 Investment strategies and policies employed during the period under review

For the financial period under review, the Fund invested primarily in local corporate bonds. The portfolio duration was actively managed pursuant to the manager’s view on the prevailing market outlook. Overall, during the period under review, the portfolio duration was managed on an under-to-neutral weight basis, on potential OPR hike concerns given inflationary pressure and global growth outlook.

The Manager adopts both “top-down” and “bottom up” investment techniques to determine the overall portfolio investment strategy and its appropriate credit selection. Asset allocations and stock selections constantly monitored and rebalanced to reflect the outlook over any given ensuing 1 year period.

The Fund is positioned to enhance capital gains from corporate bonds while constantly taking considerations to mitigate duration and credit risk.


2.4 The Fund’s asset allocation as at 30 June 2014 and comparison with the previous financial period

Asset 30 Jun 2014 30 Jun 2013Unquoted corporate bonds 69.5% 99.1%Unquoted government guaranteed bonds 8.8% -Short term deposits and cash 21.7% 0.9%

Reason for the differences in asset allocation

As at 30 June 2014, 78.3% of the Fund was invested in bonds, of which 8.8% comprises government guaranteed bonds, and 69.5% is in corporate bonds. This is lower compared to 99.1% as at 30 June 2013, as liquidity is taken into consideration to accommodate for redemptions.

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

Period under reviewKenanga Bond Fund 1.08%Maybank 12-months fixed deposit rate 1.56%

Source: Lipper

For the period under review, the Fund appreciated by 1.08%, underperforming the 1.56% returns of the Maybank 12-month fixed deposit rate. This is mainly due to the weak bond market performance as the market priced in a potential OPR hike.

2.6 Review of the market

Market 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 Fed’s tapering of its bond purchases led to a sharp sell-off in global equity markets and other risky assets. However, generally better US data in February and March reversed some of the negative sentiment caused by the weather-depressed January figures.

Locally, MGS market was range trading for much of the first half of 2014. Yields for MGS increased across the curve in May 2014 as BNM’s statement signaled the possibility of interest rate normalization to manage the risks posed by financial imbalances to Malaysia’s growth prospects. Over the period under review, the 3-year MGS rose by 11bps and 10-year MGS yields decreased by 14bps to close at 3.552% and 4.039% respectively. The selling pressure in 2013 saw foreign holdings of MGS declining to 42.7% in July and August from its peak of 49.5% in May, but foreign investors subsequently re-entered the MGS market with a 46.7% holding of total MGS as at end June 2014.


2.6 Review of the market (Contd.)

Market Outlook

Since January 2014, the US Fed had kept its pace of US$10 billion reduction per month at every policy meeting, reducing the total monthly bond buying programme to US$35 billion as at 30 June 2014. The QE program is expected to end in October. Meanwhile, the first rate rise by the Fed is expected by Q3 2015, as the Fed’s new Chairman Janet Yellen maintains her dovish stand that the policy rate will remain low after the conclusion of QE

On the local front, BNM reiterated that the basis of any adjustment on the OPR will be the outlook on growth and inflation. Local inflation is expected to increase to 3%-4% in 2014 due to cost-push factors. Meanwhile, 2014 GDP is forecasted to be 5.0-5.5% following the faster than expected 1Q2014 GDP growth at 6.2%. In order to manage domestic inflationary pressures and financial imbalances, market is expecting an OPR rate hike of between 25 to 50bps in 2H14, with the first 25bp hike in the MPC meeting on 10 July 2014. Market has already priced in the potential rate hike for the short-end of the yield curve. However, there is potential bearish steepening of the curve coming from adjustment on the long-end after confirmation of the OPR hike. Local investors may stay cautious, while foreign investors’ positions in MYR bonds are likely to be driven by MYR/USD expectations.

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 period

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


3. FUND PERFORMANCE

3.1 Details of portfolio composition of Kenanga Bond Fund (“the Fund”) as at 30 June 2014 and last 3 financial years as at 31 December are as follows:

a. Distribution among industry sectors and category of investments:

As at FY FY FY30.6.2014 2013 2012 2011

% % % %

Unquoted corporate bonds 69.5 68.7 75.8 73.9 Unquoted government guaranteed bonds 8.8 17.5 - - Commercial papers - - 3.6 - Short term deposits and cash 21.7 13.8 20.6 26.1

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 invested in local fixed income securities and cash instruments only.


3.2 Performance details of the Fund for the financial period ended 30 June 2014 and last 3 financial years ended 31 December are as follows:

Period from1.1.2014 to

30.6.2014FY

2013FY

2012FY

2011

Net asset value (“NAV”) (RM Million) 5.70* 8.50 8.29 5.55 Units in circulation (Million) 8.13 12.25 11.58 7.79 NAV per unit (RM) 0.7012* 0.6937 0.7155 0.7126 Highest NAV per unit (RM) 0.7012 0.7287 0.7390 0.7143 Lowest NAV per unit (RM) 0.6932 0.6937 0.7124 0.6787 Total return (%) 1.08 0.46 3.73 4.86- Capital growth (%) 1.08 -3.03 0.42 4.86- Income growth (%) - 3.49 3.31 -Gross distribution per unit (sen) - 2.50 2.36 -Net distribution per unit (sen) - 2.50 2.36 -Management expense ratio (“MER”) (%)1 0.77 1.46 1.68 1.98 Portfolio turnover ratio (“PTR”) (times)2 0.41 1.85 0.88 0.51

Note:TotalreturnistheactualreturnoftheFundfortherespectivefinancialperiod/years,computedbased 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 declaredbytheFundduringthefinancialperiodunderreview.

1MERisloweragainstlastfinancialyearasthecomputationisinrespectof6monthsonly.

2ThelowerPTRwasduetorelativelymorestablefundsizeresultinginfewerrebalancingtrades.

*BasedonbidpricefairvaluationmethodonallinvestmentsheldbytheFundasat30June2014,theNAVandNAVperunitwouldbeRM5.70millionandRM0.7014respectively.(AsdisclosedunderNote12ofthefinancialstatements)


3.3 Average total return of the Fund

1 Year30 Jun 13 - 30 Jun 14

3 Years30 Jun 11 - 30 Jun 14

5 Years30 Jun 09 - 30 Jun 14

Kenanga Bond Fund -0.09% 2.61% 4.72%Maybank 12-month Fixed Deposit Rate 3.17% 3.26% 3.16%

Source: Lipper

3.4 Annual total return of the Fund

Period under review

31 Dec 13 - 30 Jun 14

1 Year31 Dec 12 - 31 Dec 13

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 Dec 09

Kenanga Bond Fund

1.08% 0.46% 3.73% 4.86% 6.24% 6.32%

Maybank 12-month Fixed Deposit Rate

1.56% 3.15% 3.15% 3.03% 2.74% 2.62%

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

We, Universal Trustee (Malaysia) Berhad (“the Trustee”), being the Trustee of Kenanga Bond Fund (“the Fund”), are of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the capacity of Manager of the Fund, have fulfilled their duties in the following manner for the financial period ended 30 June 2014.

(a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, other provisions of the Deed, the Securities Commission’s Guidelines on Unit Trust Funds, the Securities Commission Act 1993, Capital Market and Services Act 2007 and other applicable laws during the financial period ended 30 June 2014;

(b) Valuation/pricing has been carried out in accordance with the Deed and any regulatory requirements; and

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

For and on behalf of the TrusteeUNIVERSAL TRUSTEE (MALAYSIA) BERHAD

LIEW KOK WAHChief Executive Officer

Kuala Lumpur, Malaysia

25 August 2014


5. STATEMENT BY THE MANAGER

We, Ismitz Matthew De Alwis and 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 30 June 2014 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial period ended 30 June 2014 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga Bond Fund as at 30 June 2014 and of its financial performance and cash flows for the period then ended and comply with the requirements of the Deed.

For and on behalf of the ManagerKenanga Investors Berhad

Ismitz Matthew De Alwis Bruce Kho Yaw Huat

Kuala Lumpur, Malaysia

25 August 2014


6. FINANCIAL STATEMENT

6.1 STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL PERIOD 1 JANUARY 2014 TO 30 JUNE 2014(unaudited)

Note1.1.2014 to

30.6.20141.1.2013 to

30.6.2013RM RM

INVESTMENT INCOMEInterest income 145,274 237,059 Net (loss)/gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 7 (13,657) 4,420

131,617 241,479

EXPENSESManager’s fee 4 33,746 49,347 Trustee’s fee 5 8,927 8,828 Auditors’ remuneration 3,967 6,621 Tax agent’s fee 1,488 1,471 Administration expenses 4,479 4,775

52,607 71,042

NET INCOME BEFORE TAX 79,010 170,437

Income tax expense 6 - -

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 79,010 170,437

Total comprehensive income is made up as follows:Realised gain 38,319 173,264 Unrealised gain/(loss) 40,691 (2,827)

79,010 170,437

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


6.2 STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2014(unaudited)

Note 30.6.2014 30.6.2013RM RM

INVESTMENTSFinancial assets at FVTPL 7 4,482,312 7,163,226Short term deposits 8 1,236,156 -

5,718,468 7,163,226

OTHER ASSETSOther receivables 9 101 - Cash at bank 11,725 61,503

11,826 61,503

TOTAL ASSETS 5,730,294 7,224,729

LIABILITIESAmount due to Manager 10,410 451,742 Amount due to Trustee 1,480 1,381Other payables 10 15,449 10,328TOTAL LIABILITIES 27,339 463,451

EQUITYUnitholder’s contribution 3,187,864 3,917,743Retained earnings 2,515,091 2,843,535NET ASSET VALUE (“NAV”) ATTRIBUTABLE

TO UNITHOLDERS 11 5,702,955 6,761,278

TOTAL EQUITY AND LIABILITIES 5,730,294 7,224,729

NUMBER OF UNITS IN CIRCULATION 11(a) 8,130,861 9,308,140

NET ASSET VALUE PER UNIT (RM) 12 0.7014 0.7264



6.3 STATEMENT OF CHANGES IN NET ASSET VALUEFOR THE FINANCIAL PERIOD 1 JANUARY 2014 TO 30 JUNE 2014(unaudited)

NoteUnitholders’ contribution

Retained earnings Total NAV

RM RM RM

30.6.2014At beginning of the period 6,056,004 2,436,081 8,492,085 Total comprehensive income - 79,010 79,010 Creation of units 11(a) 699,107 - 699,107 Cancellation of units 11(a) (3,551,585) - (3,551,585)Distribution equalisation 11(a) (15,662) - (15,662)At end of the period 3,187,864 2,515,091 5,702,955

30.6.2013At beginning of the period 5,615,650 2,673,098 8,288,748 Total comprehensive income - 170,437 170,437 Creation of units 11(a) 3,640,303 - 3,640,303 Cancellation of units 11(a) (5,159,585) - (5,159,585)Distribution equalisation 11(a) (178,625) - (178,625)At end of the period 3,917,743 2,843,535 6,761,278



6.4 STATEMENT OF CASH FLOWSFOR THE FINANCIAL PERIOD 1 JANUARY 2014 TO 30 JUNE 2014(unaudited)

1.1.2014 to 30.6.2014

1.1.2013 to 30.6.2013

RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIESProceeds from sale of financial assets at FVTPL 4,231,520 5,428,843 Purchase of financial assets at FVTPL (1,410,256) (5,925,165)Interest received 145,206 237,266 Manager’s fee paid (36,177) (49,693)Trustee’s fee paid (8,976) (9,564)Auditors’ remuneration paid (7,000) (13,500)Payment for other fees and expenses (5,684) (7,039)Net cash generated from/(used in) operating and investing activities 2,908,633 (338,852)

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 697,065 5,062,312 Cash paid on units cancelled (3,576,113) (6,265,079)Distribution paid - (273,392)Net cash used in financing activities (2,879,048) (1,476,159)

NET INCREASE/(DECREASE)IN CASH AND CASH EQUIVALENTS 29,585 (1,815,011)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 1,218,296 1,876,514

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 1,247,881 61,503

Cash and cash equivalents comprise:Cash at bank 11,725 61,503 Short term deposits 1,236,156 -

1,247,881 61,503



6.5 NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD 1 JANUARY 2014 TO 30 JUNE 2014(unaudited)

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Bond Fund (“the Fund”) was constituted pursuant to the executed Deed dated 29 July 2002 (collectively, together with deeds supplemental thereto, referred to as “the Deed”)between the Manager, Kenanga Investors Berhad and Universal Trustee (Malaysia) Berhad as the Trustee. The Fund commenced operations on 15 August 2002 and will continue to be in operation until terminated as provided under Part 12 of the Deed.

Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad, which in turn is a wholly-owned subsidiary of K & N Kenanga Holdings Berhad, listed on the main board of Bursa Malaysia Securities Berhad. All of these companies are incorporated in Malaysia.

The principal place of business of the Manager is Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur.

The Fund seeks to provide investors with a steady income stream over the medium to long-term period through investments primarily in fixed income instruments. The principal activity of the Fund is to invest in “Authorised Investments” as defined under Part 7 of the Deed, which include primary fixed income securities and short-term investments.

The financial statements were authorised for issue by the Interim Chief Executive Officer of the Manager on 25 August 2014.

2. FINANCIAL RISK, MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks including market risk (which includes interest rate risk), credit risk and liquidity risk. Whilst these are the most important types of financial risks inherent in each type of financial instruments, the Manager and the Trustee would like to highlight that this list does not purport to constitute an exhaustive list of all the risks inherent in an investment in the Fund.

The Fund has an approved set of investment guidelines and policies as well as internal controls which sets out its overall business strategies to manage these risks to optimise returns and preserve capital for the unitholders, consistent with the long term objectives of the Fund.

a. Market Risk

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

Market risk arises when the value of the financial instrument fluctuate in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the prices of financial instrument 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 financial instruments and continuous monitoring of their performance and risk profiles.


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

a. Market Risk (Contd.)

i. Interest rate risk

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

Interest rate risk sensitivity

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

Effect on profitChanges in rate for the period

Increase/(Decrease) Increase/(Decrease)Basis points RM

30.6.2014Financial assets at FVTPL 5/(5) 2,215/(2,215)

30.6.2013Financial assets at FVTPL 5/(5) 3,542/(3,542)

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

Interest rate risk exposure

The following table analyses the Fund’s interest rate risk exposure. The Fund’s assets and liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates.

Up to1 year

Above1 year -5 years

Above 5 years

Non-exposure

to interestrate

movement Total

Weightedaverageeffectiveinterest

rate*RM RM RM RM RM %

30.6.2014AssetsFinancial asset at

FVTPL - 3,216,895 1,213,856 51,561 4,482,312 4.55 Short term deposits 1,236,156 - - - 1,236,156 2.97 Other assets 101 - - 11,725 11,826

1,236,257 3,216,895 1,213,856 63,286 5,730,294



a. Market Risk (Contd.)

i. Interest rate risk (Contd.)

Interest rate risk exposure (Contd.)

Up to1 year

Above1 year -5 years

Above 5 years

Non-exposure

to interestrate

movement Total

Weightedaverageeffectiveinterest

rate*RM RM RM RM RM %

30.6.2014LiabilitiesOther liabilities - - - 27,339 27,339

Total interest rate sensitivity gap 1,236,257 3,216,895 1,213,856 35,947 5,702,955

30.6.2013AssetsFinancial asset at

FVTPL - 3,142,856 3,941,902 78,468 7,163,226 5.31 Other assets - - - 61,503 61,503

- 3,142,856 3,941,902 139,971 7,224,729

LiabilitiesOther liabilities - - - 463,451 463,451

Total interest rate sensitivity gap - 3,142,856 3,941,902 (323,480) 6,761,278

* Computed based on interest-bearing assets only.

b. Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss to the Fund by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk.

i. Credit risk exposure

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.



b. Credit Risk (Contd.)

ii. Financial assets that are either past due or impaired

As at the reporting date, there are no financial assets that are either past due or impaired.

iii. Credit quality of financial assets

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

Unquoted corporate bonds

Percentage of total unquoted corporate bonds

Percentage of NAV

30.6.2014 30.6.2013 30.6.2014 30.6.2013% % % %

RatingAA2 37.9 - 26.4 - AA1 33.2 - 23.1 - AA3 28.3 - 19.6 - AA- - - - - AA+ - 62.3 - 65.3 AAA 0.6 21.5 0.4 22.6 A - 16.2 - 16.9 100.0 100.0 69.5 104.8

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

Short term deposits

Percentage of total short term deposits

Percentage of NAV

30.6.2014 30.6.2013 30.6.2014 30.6.2013% % % %

P1 100.0 - 21.7 -



b. Credit Risk (Contd.)

iv. Credit risk concentration

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

Percentage of total unquoted corporate bonds

Percentage of NAV

30.6.2014 30.6.2013 30.6.2014 30.6.2013% % % %

Infrastructure 41.2 16.4 28.7 17.2 Asset-backed

securities - 6.5 - 6.8 Consumer products - 1.4 - 1.5 Plantation 35.4 7.1 24.6 7.4 Finance 23.4 45.0 16.2 47.1 Trading and service - 19.9 - 20.9 Properties - 3.7 - 3.9

100.0 100.0 69.5 104.8

c. Liquidity Risk

Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholder’s option based on the Fund’s NAV per unit at the time of cancellation calculated in accordance with the Deed.

The liquid assets comprise cash, short term deposits with licensed financial institutions and other instruments, which are capable of being converted into cash within 7 days.

The following table analyses the maturity profile of the Fund’s financial assets and financial liabilities in order to provide a complete view of the Fund’s contractual commitments and liquidity.



c. Liquidity Risk (Contd.)

NoteUp to

1 year

Above 1 year - 5 years

Above5 years Total

RM RM RM RM30.6.2014AssetsFinancial assets at FVTPL 51,561 3,216,895 1,213,856 4,482,312Short term deposits 1,236,156 - - 1,236,156Other assets 11,826 - - 11,826 (i) 1,299,543 3,216,895 1,213,856 5,730,294

LiabilitiesOther liabilities (ii) 27,339 - - 27,339

Equity (iii) 5,702,955 - - 5,702,955

Liquidity gap (4,430,751) 3,216,895 1,213,856 -

30.6.2013AssetsFinancial assets at FVTPL 78,469 3,142,856 3,941,901 7,163,226Other assets 61,503 - - 61,503

(i) 139,972 3,142,856 3,941,901 7,224,729

LiabilitiesOther liabilities (ii) 463,451 - - 463,451

Equity (iii) 6,761,278 - - 6,761,278

Liquidity gap (7,084,757) 3,142,856 3,941,901 -



c. Liquidity Risk (Contd.)

(i) Financial assets

Analysis of financial assets at FVTPL into maturity groupings is based on the expected date on which these assets will be realised. For short term deposits and 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 dated. When 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”.

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 year except for the adoption of the new and amended MFRS and IC interpretations which became effective for the Fund on 1 January 2013. 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 and Interpretations Issued But Not Yet Effective

As at the date of authorisation of these financial statements, the following Standards and Amendments have been issued by MASB but are not yet effective and have not been adopted by the Fund.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

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

Description

Effective for financial period

beginning on or after

Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014

Amendments to MFRS 10, MFRS 12, and MFRS 127: Investment Entities 1 January 2014

Amendments to MFRS 136: Recoverable Amount Disclosure for Non-Financial Assets 1 January 2014

IC Interpretation 21 Levies 1 January 2014Amendments to MFRSs contained in the documents entitled

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

Annual Improvements 2011 - 2013 cycle 1 July 2014MFRS 14: Regulatory Deferral Accounts 1 January 2016Amendments to MFRS 116 and MFRS 138: Property, Plant and

Equipment and Intangible Assets 1 January 2016Amendments to MFRS 11: Joint Arrangements 1 January 2016MFRS 9: Financial Instruments (IFRS 9 Issued by IASB in

November 2009) To be announcedMFRS 9: Financial Instruments (IFRS 9 Issued by IASB in

October 2010) To be announcedMFRS 9: Financial Instruments: Hedge Accounting and

amendments to MFRS 9, MFRS 7 and MFRS 139 To be announced

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 reflects the first phase of work on the replacement of MFRS 139 and applies to classification and measurement of financial assets and financial liabilities as defined in MFRS 139. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to MFRS 9: Mandatory Effective Date of MFRS 9 and Transition Disclosures, issued in March 2012, moved the mandatory effective date to 1 January 2015. Subsequently, on 14 February 2014, it was announced that the new effective date will be decided when the project is closer to completion. The adoption of the first phase of MFRS 9 will have an effect on the classification and measurement of the Fund’s financial assets, but will not have an impact on classification and measurements of the Fund’s financial liabilities. The Fund will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.



c. Financial Assets

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

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

The Fund determines the classification of its financial assets at initial recognition, which are receivables.

i. Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition.

Financial assets held for trading include unquoted corporate bonds and commercial papers 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 elements of such instruments are recorded separately in “interest income”.

ii. Receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as receivables.

Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process.

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

d. Impairment of Financial Assets

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

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



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

e. Income

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

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

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 financial institutions.

g. Income Tax Expense

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

h. Unrealised Reserves

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

i. Financial Liabilities

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

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



i. Financial Liabilities (Contd.)

A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through amortisation process.

j. Unitholders’ Contribution – NAV Attributable to Unitholders

The unitholders’ contribution to the Fund is classified as equity instruments.

Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee.

k. Functional and Presentation Currency

The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (“the functional currency”). The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Fund’s functional currency.

l. Distribution

Distributions are at the discretion of the Manager. A distribution to the Fund’s unitholders is accounted for as a deduction from retained earnings.

m. Significant Accounting Judgments and Estimates

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

i. Critical judgments made in applying accounting policies

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

ii. Key sources of estimation uncertainty

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

4. MANAGER’S FEE

The manager’s fee is computed on a daily basis at a rate not exceeding 2.5% per annum of the NAV of the Fund as provided under Division 13.1 of the Deed. The manager is currently changing manager’s fee of 1% per annum of NAV of the Fund


5. TRUSTEE’S FEE

The trustee’s fee is computed on a daily basis at 0.08% per annum of the NAV of the Fund and subject to a minimum fee of RM18,000 per annum as provided under Division 13.2 of the Deed.

6. INCOME TAX EXPENSE

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 from 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:

1.1.2014 to 1.1.2013 to30.6.2014 30.6.2013

RM RM

Net income before tax 79,010 170,437

Tax at Malaysian statutory tax rate of 25% (financial period 1 January 2013 to 30 June 2013: 25%) 19,753 42,609

Tax effect of:Income not subject to tax (46,492) (61,077)Loss not subject to tax 13,587 707Expenses not deductible for tax purposes 2,980 3,585 Restriction on tax deductible expenses for unit trust fund 10,172 14,176

Tax expense for the period - -

7. FINANCIAL ASSETS AT FVTPL

30.6.2014 30.6.2013RM RM

Financial assets held for trading, at FVTPL:Unquoted corporate bonds 3,980,344 7,163,226 Unquoted government guaranteed bonds 501,968 -

4,482,312 7,163,226

Net (loss)/gain on financial assets at FVTPL comprised:Realised (loss)/gain on disposals (54,348) 7,247Unrealised change in fair values 40,691 (2,827)

(13,657) 4,420


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 30 June 2014:

Aggregate PercentageQuantity cost Fair Value of NAV

RM RM %Unquoted corporate bondsCagamas Berhad maturing on

29/03/2019 400,000 428,678 424,042 7.4 Bright Focus Berhad maturing on

22/01/2016 500,000 508,981 508,480 8.9 First Resources Limited maturing

on31/07/2017 500,000 513,729 508,868 8.9 Golden Asset International Finance

Limited maturing on 17/11/2017 500,000 498,444 492,613 8.6 Jati Cakerawala Berhad on

31/07/2023 300,000 294,057 294,039 5.2 Malaysia Airports Capital Berhad

maturing on 16/12/2022 25,000 25,011 25,045 0.5 OCBC Bank (M) Berhad maturing on

04/11/2015 500,000 503,280 505,286 8.9 TSH Sukuk Ijarah Sdn Berhad

maturing on 21/10/2016 400,000 404,781 405,022 7.1 Sarawak Energy Berhad maturing

on 22/06/2018 400,000 408,049 406,052 7.1 Westports Malaysia Sdn Bhd on

03/05/2021 400,000 418,668 410,897 7.2 Total unquoted corporate bonds 3,925,000 4,003,678 3,980,344 69.8

Unquoted government guaranteed bonds

Syarikat Prasarana on 04/08/2021 500,000 508,106 501,968 8.8 Total unquoted government

guaranteed bonds 500,000 508,106 501,968 8.8

Total Financial asset at FVTPL 4,511,784 4,482,312 78.6

Unrealised loss on financial assets at FVTPL (29,472)

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

30.6.2014 30.6.2013RM RM

Interest income from short term deposits 101 -

10. OTHER PAYABLES

30.6.2014 30.6.2013RM RM

Provision for Audit Fee 9,487 6,621 Provision for Tax Agent Fee 4,488 1,471 Provision for Printing Cost 1,475 2,236

15,449 10,328

11. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

Net asset value attributed to unitholders is represented by:

Note 30.6.2014 30.6.2013RM RM

Unitholders’ contribution (a) 3,187,864 3,917,743Retained earnings

Realised reserves 2,544,563 2,750,421Unrealised reserves (29,472) 93,114

2,515,091 2,843,5355,702,955 6,761,278

(a) Unitholders’ contribution

1.1.2014 to 30.6.2014 1.1.2013 to 30.6.2013No. of units RM No. of units RM

At beginning of the peirod 12,249,591 6,056,004 11,584,435 5,615,650Add: Creation of units 1,007,258 699,107 6,951,847 3,640,303Less: Cancellation of

units (5,125,988) (3,551,585) (9,228,142) (5,159,585)Distribution equalisation - (15,662) - (178,625)

At end of period 8,130,861 3,187,864 9,308,140 3,917,743

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad and parties related to the Manager as at 30 June 2014 were nil (30 June 2013: 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 valued at FVTPL at the last done market price.

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

1.1.2014 to 30.6.2014 1.1.2013 to 30.6.2013RM RM/Unit RM RM/Unit

NAV attributable to unitholers for creating/cancelling of unit 5,701,084 0.7012 6,767,950 0.7271

Effects of adopting bid prices as fair value 1,871 0.0002 (6,672) (0.0007)

NAV attributable to unitholers per statement of financial position 5,702,955 0.7014 6,761,278 0.7264

13. PORFOLIO TURNOVER RATIO

The portfolio turnover ratio (“PTR”) for the the financial period 1 January 2014 to 30 June 2014 is 0.41 times (financial period 1 January 2013 to 30 June 2013: 0.56 times).

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

14. MANAGEMENT EXPENSE RATIO

The management expense ratio (“MER”) for the financial period 1 January 2014 to 30 June 2014 is 0.77% (financial period 1 January 2013 to 30 June 2013: 0.71%).

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 FINANCIAL INSTITUTIONS

Transaction Percentagevalue of total

RM %

Kenanga Investment Bank Berhad* 3,451,191 60.6 Malayan Banking Berhad 1,363,312 24.0 Standard Chartered Bank Malaysia Berhad 876,928 15.4

5,691,431 100.0


15. TRANSACTIONS WITH FINANCIAL INSTITUTIONS (CONTD.)

The transactions were in respect of investments in unquoted corporate bonds and unquoted government guaranteed bonds. Transactions in unquoted corporate bonds and commercial papers do not involve any commission or brokerage fees.

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

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 70% - 98% in fixed income instruments and minimum 2% in liquid assets. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:

Unquoted Otherbonds investments Total

RM RM RM30.6.2014RevenueSegment income representing segment

results 119,102 12,515 131,617Unallocated expenditure (52,607)Net income before tax 79,010Income tax expense - Net income after tax 79,010

AssetsFinancial assets at FVTPL 4,482,312 1,236,156Other segment assets - 101 Total segment assets 4,482,312 1,236,257 5,718,569Unallocated assets 11,725

5,730,294

LiabilitiesUnallocated liabilities 27,339


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segments (Contd.)

Financial assets at Other

FVTPL investments TotalRM RM RM

30.6.2013RevenueSegment income representing segment

results 226,311 15,168 241,479Unallocated expenditure (71,042)Net income before tax 170,437Income tax expense - Net income after tax 170,437

AssetsFinancial assets at FVTPL 7,163,226 - Other segment assets - - Total segment assets 7,163,226 - 7,163,226Unallocated assets 61,503

7,224,729

LiabilitiesUnallocated liabilities 463,451

b. Geographical Segments

As all of the Fund’s investments are located in Malaysia, the Fund does not have separate identifiable geographical segments.

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 gain and loss, 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 by the measurement basis.


17. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (Contd.)

Financial assets at Financial

FVTPL Receivables liabilities TotalRM RM RM RM

30.6.2014AssetsFinancial assets at FVTPL 4,482,312 - - 4,482,312 Short term deposits - 1,236,156 - 1,236,156 Other receivables - 101 - 101 Cash at bank - 11,725 - 11,725

4,482,312 1,247,982 - 5,730,294

LiabilitiesAmount due to Manager - - 10,410 10,410 Amount due to Trustee - - 1,480 1,480 Other payable - - 15,449 15,449

- - 27,339 27,339

30.6.2013AssetsFinancial assets at FVTPL 7,163,226 - - 7,163,226 Cash at bank - 61,503 - 61,503

7,163,226 61,503 - 7,224,729

LiabilitiesAmount due to Manager - - 451,742 451,742 Amount due to Trustee - - 1,381 1,381 Other payable - - 10,328 10,328 - - 463,451 463,451

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:


17. FINANCIAL INSTRUMENTS (CONTD.)

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

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments:30.6.2014

- Unquoted corporate bonds - 3,980,344 - 3,980,344 - Unquoted government

guaranteed bonds - 501,968 - 501,968

30.6.2013- Unquoted corporate bonds - 7,163,226 - 7,163,226

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

The fair value of unquoted corporate bonds and unquoted government guaranteed bonds are determined based on average of bid price 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.

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 operation of the Fund cost-efficient.

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

KENANGA BOND FUND

INtErIm rEpOrt

For the Financial Period 1 January 2014 to 30 June 2014

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)

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