KEnanGa bOnd fund · 2019. 2. 26. · Kenanga Bond Fund Annual Report 2 2. ManaGER’S REPORT 2.1...

annual REPORT

For the Financial Year Ended 31 December 2018

KEnanGa bOnd fund

KEnanGa bOnd fund

Contents Page

Corporate directory ii Directory of Manager’s Offices iiifund Information 1Manager’s Report 2 - 7fund Performance 8 - 10Trustee’s Report 11Independent auditors’ Report 12 -14 Statement by the Manager 15financial Statements 16 - 48

ii Kenanga Bond Fund Annual Report

CORPORaTE dIRECTORYManager: Kenanga Investors berhad (Company No. 353563-P)

Registered OfficeLevel 17, Kenanga Tower,237, Jalan Tun Razak,50400 Kuala Lumpur, Malaysia.Tel: 03-2172 2888Fax: 03-2172 2999

Business OfficeLevel 14, Kenanga Tower,237, Jalan Tun Razak,50400 Kuala Lumpur, Malaysia.Tel: 03-2172 3000Fax: 03-2172 3080E-mail:[email protected]: 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)Ismitz Matthew De Alwis

Investment Committee 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)

Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

Trustee: universal Trustee (Malaysia) berhad (Company No. 17540-D)

1, Jalan Ampang, 3rd Floor, 50450 Kuala Lumpur, Malaysia. Tel: 03-2070 8050 Fax: 03-2031 8715, 2032 3194, 2070 1296

auditor: Ernst & Young (AF: 0039)

Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

Tax adviser: Ernst & Young Tax Consultants Sdn bhd (Company No. 179793-K)

Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur.Tel: 03-7495 8000 Fax: 03-2095 5332

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

Kenanga Bond Fund Annual Report iii

dIRECTORY Of ManaGER’S OffICESRegional Branch Offices :

Kuala lumpurLevel 13, Kenanga Tower,237, Jalan Tun Razak,50400 Kuala Lumpur, Malaysia.Tel: 03-2172 3123 Fax: 03-2172 3133

Johor bahruLot 11.03, 11th Floor, Menara MSC CyberportNo. 5, 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 / 06-282 0518Fax: 06-281 4286

Kuching1st Floor, No 71Lot 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 / 03-3348 7889 Fax: 03-3341 8816

KuantanGround Floor Shop,No. B8, Jalan Tun Ismail 125000 Kuantan, Pahang.Tel : 09-514 3688Fax : 09-514 3838

Penang5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah 10050 Penang. Tel : 04-210 6628Fax : 04-210 6644

IpohSuite 1, 2nd Floor,No. 63, Persiaran Greenhill,30450 Ipoh, Perak, MalaysiaTel: 05-254 7573 / 7570 / 7575Fax: 05-254 7606

Miri 2nd Floor, Lot 1264, Centre Point Commercial Centre, Jalan Melayu, 98000 Miri, Sarawak Tel: 085-416 866 Fax: 085-322 340

Kota KinabaluLevel 8, Wisma Great EasternNo. 68, Jalan Gaya, 88000 Kota Kinabalu, SabahTel: 088-203 063 Fax: 088-203 062

Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir 70000 Seremban, Negeri Sembilan Tel: 06-761 5678 Fax: 06-761 2242

Petaling Jaya44B, Jalan SS21/35Damansara Utama47400 Petaling Jaya, SelangorTel: 03-7710 8828Fax: 03-7710 8830

1 Kenanga Bond Fund Annual Report

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 31 december 2018

Size of holdingsno. of

unit holdersno. of

units held5,000 and below 30 89,3225,001 - 10,000 17 121,08810,001 - 50,000 79 1,949,41350,001 - 500,000 21 3,271,896500,001 and above 4 40,328,761Total 151 45,760,480

Kenanga Bond Fund Annual Report 2

2. ManaGER’S REPORT

2.1 Explanation on whether the fund has achieved its investment objective

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

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

Performance Chart Since launch (15/8/2002 - 31/12/2018)Kenanga Bond Fund vs Maybank 12-months fixed deposit rate

Source: Novagni Analytics & Advisory

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

For the financial year under review, the Fund invested in a diversified portfolio consisting principally of fixed income securities and other permissible investments.

2.4 The fund’s asset allocation as at 31 december 2018 and comparison with the previous financial year

asset 31 dec 2018 31 dec 2017Unlisted corporate bonds 75.8% 82.4%Unlisted government guaranteed bonds 4.3% -Unlisted commercial papers 10.7% -Short term deposits and cash 9.2% 17.6%

Reason for the differences in asset allocation The Fund’s asset allocation in corporate and government guaranteed (GG) bonds was lower

at 80.1% as at 31 Dec 2018 versus 82.4% as at 31 Dec 2017 as we took profit on GG bonds in anticipation of more primary issuances in the GG space going into 2019 as mentioned during the Budget 2018. Meanwhile, investment in deposits has reduced from 17.6% as at 31 Dec 2017 to 9.2% as at 31 Dec 2018 as the Fund invested in commercial papers to provide ample liquidity to participate in primary issuances in the pipeline, while ensuring some enhancement to the portfolio.

Since Launch

5 years

11.77

17.46

88.48

NAV PER UNIT *

Since Inception Date

CALENDAR YEAR FUND PERFORMANCE (%) #

1.69

HISTORICAL FUND PRICE *

Fixed Income / Income

Launch Date

15 August 2002

Trustee

Universal Trustee (Malaysia) Berhad

Benchmark

Maybank 12-months Fixed Deposit Rate

Aims to provide investors with a steady income stream over the

medium to long-term period through investments primarily in

fixed income instruments.

Kenanga Bond Fund

Fund Category/Type

January 2019

71.34

Benchmark

3.33

3.09

3.21

3.30

3.20

Fund

3.76

3.76

FUND PERFORMANCE (%)

2016

2015

FUND OBJECTIVE

Nil

2.58

2018

1.00% p.a.

3 years

3.81

2.45

RM 0.7471RM 34.19 million

2014

Designated Fund Manager

Felicia Tai

Sales Charge

Period

Annual Trustee Fee

0.08% p.a.

3.33

9.96

17.22

FUND SIZE *

CUMULATIVE FUND PERFORMANCE (%)#

Fund

0.40

2.37

3.76

Benchmark

0.28

2017

1 month

6 months

1 year

Annual Management Fee

Period

#Source : Lipper, 31 December 2018

Lipper Analytics15 Dec 2018

3-yearFund Volatility

Very Low

-10

0

10

20

30

40

50

60

70

80

90

100

Aug

02

Dec

02

Jun

03

Dec

03

Jun

04

Dec

04

Jun

05

Dec

05

Jun

06

Dec

06

Jun

07

Dec

07

Jun

08

Dec

08

Jun

09

Dec

09

Jun

10

Dec

10

Jun

11

Dec

11

Jun

12

Dec

12

Jun

13

Dec

13

Jun

14

Dec

14

Jun

15

Dec

15

Jun

16

Dec

16

Jun

17

Dec

17

Jun

18

Dec

18

% Cumulative Return, Launch to 31/12/2018

Kenanga Bond : 88.48 Maybank 12-month Fixed Deposit Rate : 71.34

Source: Novagni Analytics and Advisory

Based on the fund’s portfolio returns as at 15 December 2018, the Volatility Factor (VF) for this fund is 0.98 and is classified as “Very Low”. (Source: Lipper). “Very Low”

includes funds with VF that are 0 and less than or equal to 1.885 (source: Lipper). The VF means there is a possibility for the fund in generating an upside return or

downside return around this VF. The Volatility Class (VC) is assigned by Lipper based on quintile ranks of VF for qualified funds. VF is subject to monthly revision and VC

will be revised every six months. The fund’s portfolio may have changed since this date and there is no guarantee that the fund will continue to have the same VF or VC in

the future. Presently, only funds launched in the market for at least 36 months will display the VF and its VC. The Master Prospectus dated 30 June 2017 and the

Supplemental Prospectus (if any), its Product Highlights Sheets (“PHS”) or Supplemental Disclosure Document (“SDD”) (if any) have been registered with the Securities

Commission Malaysia, who takes no responsibility for its contents. A copy of the Master Prospectus, Supplemental Prospectus (if any), SDD (if any) and the PHS are

obtainable at our offices. Application for Units can only be made on receipt of application form referred to in and accompanying the Master Prospectus and/or Supplemental

Prospectus (if any), SDD (if any) and PHS. Investors are advised to read and understand the Master Prospectus, its PHS and any other relevant product disclosure

documents involved before investing. Investors are also advised to consider the fees and charges before investing. Unit prices and distributions may go down as well as

up. Where a unit split/distribution is declared, investors are advised that following the issue of additional units/distribution, the NAV per unit will be reduced from pre-unit

split NAV/cum-distribution NAV to post-unit split NAV/ex-distribution NAV. Where a unit split is declared, investors should note that the value of their investment in

Malaysian Ringgit will remain unchanged after the distribution of the additional units. A Fund’s track record does not guarantee its future performance. Investors are

advised to read and understand the contents of the unit trust loan financing risk disclosure statement before deciding to borrow to purchase units. Kenanga Investors

Berhad is committed to preventing Conflict of Interest between its various businesses and activities and between its clients / directors / shareholders and employees by

* Source: Kenanga Investors Berhad, 31 December 2018

5.26%

DISTRIBUTION HISTORY *

Gross Distribution

RM Yield (%)

4.97%

3.51%

3.48%

Date

16-May-16

4

Nil

ASSET ALLOCATION *

TOP FIXED INCOME HOLDINGS (% NAV) *

1

2

3

Lowest

Since Inception Date

RM 0.7471Redemption Charge

SECTOR ALLOCATION (% NAV) *

2.50 sen30-Dec-13

RM 0.4994

31-Dec-18

7-Mar-03

-

-

RM 0.7471

Highest

SUNWAY TREASURY SUKUK SDN BHD 0.0020190117

9.50%

9.16%

7.39%

6.63%

RM 34.19 million

5

Unit Split

-

30-Dec-14

3.56 sen

2.50 sen

All fees and charges payable to the Manager and the Trustee are

subject to the goods and services tax /sales and services tax/other taxes

of similar nature as may be imposed by the government or other

authorities from time to time.

UEM SUNRISE BHD 5.1520251031

BANK MUAMALAT MALAYSIA 5.8020260615

EDRA ENERGY SDN BHD 5.7920250103

WCT HOLDINGS BHD 5.1720231023

89.10%

80.90%

88.90%

10.90%

19.10%

11.10%

October

November

December

Liquidity CP / Bonds / Others

70.9%

11.1%

10.5%

4.2%

3.3%

Corporate Bonds (Unsecured)

Short Term Deposit and Cash

Commercial Papers

Quasi Government Securities

Corporate Bonds (Secured)

Berhad is committed to preventing Conflict of Interest between its various businesses and activities and between its clients / directors / shareholders and employees by

having in place procedures and measures for identifying and properly managing any apparent, potential and perceived Conflict of Interest by making disclosures to Clients,

where appropriate. The Manager wishes to highlight the specific risks of the Fund are credit and default risk and interest rate risk.


2.5 fund performance analysis based on naV per unit (adjusted for income distribution; if any ) since last review year

Year under review

Kenanga bond fund 3.76%Maybank 12-months fixed deposit rate 3.33%

Source: Lipper

For the financial year under review, the Fund registered a return of 3.76% against its benchmark return of 3.33%, outperforming its benchmark by 43 bps. The outperformance was led by investments in corporate bonds, where most of the corporate bond yields in the portfolio were down by 9-25 basis points.

2.6 Market Review

fixed Income Market Review

In January, the US Treasuries (UST) yield curve bearish steepened, with the 2x10 spread widened to 58 basis points (bps) as players continued to price in gradual rate hikes. As widely expected, the Federal Open Market Committee (FOMC) left the Federal Fund Rate (FFR) at 1.50% in the meeting on 31 January 2018 and has guided that inflation is expected to move higher in 2018. On local front, Bank Negara Malaysia (BNM) increased the Overnight Policy Rate (OPR) by 25 bps to 3.25% in the Monetary Policy Committee (MPC) meeting on 25 January 2018. As a result, the Malaysian Government securities (MGS) yield curve bearish flattened slightly.

Moving on to February, the UST yield curve continued to bearish steepened, with the 2x10 spread widened slightly to 61 bps. The second US government shutdown for the year – albeit short-lived - had also contributed to the widespread capital market volatility. The 10-year MGS yield posted the biggest rise imitating the surge in 10-year UST yield.

On 22 March 2018, the US Fed continued to embark on its tightening cycle, raising the FFR by 25 bps to 1.75% in the FOMC meeting. From concerns over increased interest rates for the rest of the year, trade war concerns took over and pressured yields lower towards the final week of the month. Consequently, the UST yield curve flattened in March, with the 2x10 spread narrowed to 47 bps led by 10-year UST yield down by 13 bps to 2.86%, while the 2-year yield increased by 2 bps to 2.27%. On local policy front, BNM kept the OPR steady at 3.25% in the MPC meeting held in March. Boosted by UST rally, MYR strength, central bank policy and buying on dip opportunities, the 3-, 5- and 10-year benchmark MGS yields fell by 9-15 bps to close at 3.45%, 3.48% and 3.95% respectively. As a result, foreign funds net bought RM2.9 billion of domestic bonds in March, recouping most of the RM3.9 billion outflows in February with foreign share of MGS rising to 45.6% (Feb: 45.4%).

In April, the FOMC minutes and the Fed’s Beige Book report highlighted expectation of gradual rate hikes supported by better labour market conditions, above-trend growth and moderate inflationary pressure. Following that, the 2-year UST yield closed higher by 22 bps month-on-month (M-o-M) at 2.49%, while the 10-year UST yield broke the 3.00% level to peak at 3.03% in the final week of the month, before easing to 2.95% (+21bps M-o-M) towards the end of the month, on the back of easing trade and geopolitical tensions. Moving in tandem with rising UST yields, the 3-year, 5-year, 7-year and 10-year MGS also peaked across the curve at 3.77%, 3.89%, 4.11% and 4.20% before easing to 3.63% (+18bps M-o-M), 3.77%, 3.97% (+14bps M-o-M) and 4.13% (+18bps M-o-M) respectively at the end of the month.


2.6 Market Review (Contd.)

fixed Income Market Review (Contd.)

Beginning of May, the FFR was kept at 1.75% during the FOMC meeting. The FOMC statement was on the dovish side given the recent economic data indicating that the economic outlook had changed little since the previous meeting. Subsequently, the US-China trade war concerns returned with the US slapping tariffs on China, as well as President Trump’s administration imposing tariffs on aluminium and steel on Canada, Mexico and the European Union. The Fed’s Beige Book report highlighted that the consumer spending was ‘soft’ although the economy is on moderate expansion and manufacturing activity is stronger. Consequently, the 2-year and 10-year UST yields closed lower by 9 bps and 12 bps M-o-M respectively at 2.40% and 2.83% month-end. Similarly, BNM kept the OPR unchanged at 3.25%, citing that the domestic economic outlook remains positive, the financial sector is strong and monetary and financial conditions are supportive of economic growth in the post-election environment. However, investors were cautious due to the uncertainties surrounding policy direction of the new government as well as its impact on the Malaysia’s sovereign rating sending the 3-, 5-, 7- and 10-year benchmark MGS yields higher by 5-10bps to 3.70%, 3.82%, 4.02% and 4.20% respectively.

In June, the Fed raised the upper limit of the FFR by 25 bps to 2.0% led by improving employment, household spending and inflation. The FOMC said it remains on track for four hikes this year with inflation rising to 2.8% from recent lows 2.5% year-on-year (Y-o-Y). Meantime, geopolitics and trade concerns vacillated - US & China downplayed and reigniting fears while US & North Korea appeared cooperative on the denuclearization agreement. Consequently, 2 and 10-year breached peak levels mid-June at 2.55% and 3.11% respectively before easing to 2.53% and 2.86% month-end (+13bps and +3bps respectively M-o-M). The UST yield curve has flattened further with the 2x10 spread at 33 bps end-June (43 bps in previous month). In contrast, the MGS yield curve steepened modestly at 56 bps (50 bps in previous month) as investors shed duration, grinding the 3-year MGS yield lower by 6 bps to 3.64%, while 10-year benchmark yield remains unchanged at 4.20%.

In July, the UST yield curve continued to bearish flatten with 2x10 spread of 29 bps, led by 2-year UST, which increased 14 bps M-o-M to 2.67% while the 10-year added 10 bps M-o-M to 2.96% due to rising interest rates outlook as Fed tightens yet long term rates are pressed down amid threats to inflation and growth especially with the US-led trade conflicts. Locally, the OPR was held at 3.25% in the MPC meeting held in July. The MGS yield curve bullish flattened to 52 bps (56 bps in June) as investors returned looking for yield pickup supported by the neutral-to-dovish tint in the MPC statement, pushing the yields lower by 9-13 bps M-o-M across the tenure (3Y: 3.55% (-9bps); 5Y: 3.75% (-11bps); 7Y: 3.96% (-11bps) and 10Y: 4.07% (-14bps)).

Beginning of August, the FOMC kept the FFR unchanged at 2%, with hints of a hike in September as anticipated. The UST yield curve continued to flatten in August with its spread narrowing to 23 bps. Despite increasing debt supply along with another two rate hikes for the year, the UST market rallied, with the 2-year yield closed 4 bps lower at 2.63%, while the 10-year yield was down 10 bps to 2.86% due to safe haven flows arising from concerns over global trade wars. Similarly, MGS also rallied during the month, partly attributed to the release of weaker Gross Domestic Product (GDP) growth of 4.5% Y-o-Y for 2Q18 (1Q18: 5.4% Y-o-Y). As investors’ interests were seen mainly on the short to medium MGS, the MGS benchmark yield curve bullish steepened to 56 bps with 3-year yield rallied the most at 7 bps lower to 3.51% vs 10-year yield down by 3 bps to 4.04%.




Moving into September, the UST yield curve steepened slightly for the first time in six months, as the 10-year yield increased by 20 bps M-o-M to 3.06% vis-à-vis a 19 bps M-o-M increase in 2-year to 2.82%. The selloff in UST came under upward re-pricing pressure ahead of the FOMC meeting. As expected, the Fed hiked the FFR by 25 bps to 2.25% on 27 Sept, while releasing a statement without reference to an “accommodative” policy; which was deemed rather dovish by market players. Locally, BNM on 5 September held its OPR unchanged at 3.25%, stating that the economy should stay on a steady growth path but heightened trade tensions are contributing to immediate term downside risks. After two consecutive months of gains, MGS came under selling pressure amid risk-off in the markets as lingering concerns over global trade war and selloffs in emerging markets. Consequently, the MGS benchmark yield curve bearish flattened during the month to 47bps, as the 3-year climbed 12bps higher M-o-M to 3.60%, while the 10-year saw some support from month-end rebalancing flows and closed 3bps higher M-o-M to 4.07%.

Subsequently in October, Fed Chair Powell surprised the market with a hawkish speech stating that the Fed is still a long way from neutral rates, which stoked the global markets with high possibilities for additional rate hikes. As a result, the UST yields rose higher across the curve but eased slightly towards the final week of the month due to risk-off sentiments amid political rumblings in the EU and lacklustre corporate earnings in the US. The UST yield curve continued to steepen for another month (2x10 spread of 27 bps vs 24 bps in previous month) as the 10-year yield increased by 8 bps M-o-M to 3.14% vis-à-vis 5 bps increase in 2-year yield to 2.87%. On the local bond market, selling pressure was seen across the curve after Moody’s indicated credit negative for Malaysia in the event of a budget deficit expansion in the budget. To recap, the government hinted that the fiscal deficit would go beyond the target set during Budget 2018; citing the transitional period for the new administration while revising 2020 fiscal deficit target to 3.0% to GDP. As such, the 3-, 5-, 7- and 10-year MGS yields closed 2-6 bps higher M-o-M at 3.66%, 3.79%, 4.01% and 4.09% respectively at the end of the month.

In the beginning of November, the results of the US mid-term election turned out to be widely expected with the Democrats finally gaining control over the House of Representatives after 8 years in the minority while the Republicans maintained their grip of the Senate. Meanwhile, in the FOMC meeting on 8 November 2018, Fed left the FFR unchanged at 2.25% as expected, while the statement affirms a December hike. Towards the final week of November, Fed Chairman Jerome Powell described the current level of interest rates as “just below” neutral, which caused the UST to rally with the 2-year yield closed lower by 8 bps M-o-M at 2.79% and 10-year down by 15bps M-o-M to 2.99%. Locally, BNM maintained the OPR at 3.25% during the MPC meeting on 8 November. Policymakers maintained that domestic economy is on steady growth path but downside risk to global growth remains due to continuous trade tensions. Policymakers also warned of risk from slower public sector spending coming from reprioritization of expenditure by the Government. Moving into 2019, inflation is projected to increase driven by higher projected global oil prices, floating of domestic fuel prices and consumption tax effect. Hence, the MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation. On the local bond market, it was another bearish month due to budget deficit concerns with the recent plunge in oil prices. Consequently, foreign holdings of MGS also declined by RM5.4 billion (38.8% foreign share of MGS) in November vs inflow of RM4.7 billion in October (40.7%). As such, the 3-, 5-, 7- and 10-year benchmark MGS yields closed 3-7 bps higher M-o-M at 3.69%, 3.86%, 4.04% and 4.13% respectively end-November.




In December, UST experienced one of the strongest rallies as the yield curve shifted sharply lower, with 2Y and 10Y dipped 30 bps to 2.49% and 2.69% respectively. The UST rally was spurred by headlines on US government shutdown as well as prospects of slower pace of monetary policy tightening guided by the Fed at the December FOMC meeting. The Fed dot plot now indicates a two rate hikes for 2019, while market is leaning for one instead. As widely expected, the Federal Reserve (Fed) raised its FFR by 25 bps to 2.50% on 19 December but lowered its projections for future hikes. Mirroring the bullish UST movements, the MGS also trended lower but at a smaller quantum of 5-10 bps across all tenure, with the 3-, 5-, 7- and 10-year benchmark MGS yields closed month-end at 3.61%, 3.76%, 3.99% and 4.07% respectively. Of note, the reopening of 20Y and 3Y Government Investment Issue (GII) during the month printed a commendable average bid-to-cover (BTC) of 2.38x, mainly supported by local investors.

fixed Income Market Outlook

The Fed has raised the FFR four times in 2018 as widely expected. In the last FOMC meeting of 2018, central bank officials revised down their forecast from three hikes to two hikes in 2019. Although market is expecting only one rate hike in 2019, the current market pricing is based on no additional rate hike. Going forward, the decision on interest rate would largely be data-dependent, taking into account the current economic conditions.

On local front, the estimated gross/net supply of MGS+GII of RM115 billion/RM52 billion in 2019 should be manageable due to ample liquidity, especially from the local pension funds and banks. With rising net contributions to pension funds, healthy growth in assets and an inherent demand for high-quality assets, we think the overall domestic demand for government bonds should remain supported in 2019. Moving on to the corporate bond market, the corporate bond supply is expected to remain healthy on the back a steady domestic growth, continuation of infrastructure projects such as MRT2 and LRT3 although with lower project costs, and the continuing of GG issuances.

On local monetary policy, there is less pressure for BNM to hike interest rates for 1H2019 due to expectations of a slower GDP growth and inflation, except if growth exceeds target or inflation tests the upper limit of the forecast range. The Government forecasts 2019 GDP growth at 4.9% year-on-year (Y-o-Y) (4.8% in 2018F) and inflation at 2.5-3.5% range (1.5-2.5% range in 2018F). The MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation.

2.7 distributions

For the financial year under review, the Fund did not declare any income distribution.

2.8 details of any unit split exercise

The Fund did not carry out any unit split exercise during the financial year under review.

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

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


2.10 Circumstances that materially affect any interests of the unit holders

During the financial year under review, there were no circumstances that materially affected any interests of the unit holders.

2.11 Cross trade

During the financial year under review, cross-trade transactions were undertaken by investment manager for the best interest of the fund in accordance to the relevant internal and regulatory requirements. Cross trades can only be undertaken upon the verification by Compliance based on the following conditions:(a) permitted by authorised personnel;(b) the sale and purchase decisions are in the best interest of clients, unit holders and the

fund as a whole;(c) reason(s) for such transactions is documented prior to execution of the trades;(d) transactions are executed through a dealer or a financial institution on an arm’s length

and fair value basis; and(e) cross trade transactions are disclosed to both clients accordingly.

2.12 Rebates and soft commissions

It is the policy of the Manager to credit any rebates received into the account of the Fund. Any soft commissions received by investment manager on behalf of the Fund are in the form of research and advisory services that assist in the decision making process relating to the investment of the Fund which are of demonstrable benefit to unit holders of the Fund. For the financial year under review, the Manager has received soft commissions from the stockbrokers.


3. fund PERfORManCE

3.1 Details of portfolio composition of the Fund for last three financial years as at 31 december are as follows:

a. distribution among industry sectors and category of investments:

fY2018

%

fY2017

%

fY2016

%

Unlisted corporate bonds 75.8 80.5 74.1 Unlisted government guaranteed

bonds 4.3 1.9 10.7 Unlisted commercial papers 10.7 - - Short term deposits and cash 9.2 17.6 15.2

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 unlisted fixed income securities and cash instruments only.


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

fY 2018

fY 2017

fY 2016

Net asset value (“NAV”) (RM Million) 34.19* 23.77 16.11 Units in circulation (Million) 45.76 33.01 23.21 NAV per unit (RM) 0.7471* 0.7200 0.6939 Highest NAV per unit (RM) 0.7471 0.7200 0.7156 Lowest NAV per unit (RM) 0.7200 0.6939 0.6800 Total return (%) 3.76 3.76 3.81- Capital growth (%) 3.76 3.76 -1.35- Income growth (%) - - 5.16 Gross distribution per unit (sen) - - 3.56 Net distribution per unit (sen) - - 3.56 Management expense ratio (“MER”) (%) 1 1.18 1.27 1.33 Portfolio turnover ratio (“PTR”) (times) 2 0.87 0.90 0.83

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

MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis.

1. MERisloweragainstpreviousfinancialyearmainlyduetoincreaseinaveragefundsizeduringthefinancialyearunderreview.

2. PTRforthecurrentfinancialyearremainedsimilartopreviousfinancialyearduetosimilar frequency in trading activities.

* Based on bid price fair valuation method on all investments held by the Fund as at 31 December2018,theNAVandNAVperunitwouldbeRM34.12millionandRM0.7456respectively.(AsdisclosedunderNote12ofthefinancialstatements)


3.3 average total return of the fund

1 Year31 dec 17 - 31 dec 18

3 Years31 dec 15 - 31 dec 18

5 Years31 dec 13 - 31 dec 18

Kenanga bond fund 3.76% 3.72% 3.23%Maybank 12-month fixed deposit Rate 3.33% 3.17% 3.18%

Source: Lipper

3.4 annual total return of the fund

Year under review

31 dec 17 - 31 dec

18

1 Year 31 dec 16 - 31 dec

17


16


15


14


13Kenanga bond fund 3.76% 3.76% 3.81% 2.45% 2.58% 0.46%Maybank 12-month fixed deposit Rate 3.33% 3.10% 3.21% 3.30% 3.20% 3.15%

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 unIT HOldERS Of KEnanGa bOnd fund

We, Universal Trustee (Malaysia) Berhad (“the Trustee”), being the Trustee of Kenanga Bond Fund (“the Fund”), are of the opinion that Kenanga Investors Berhad (“the Manager”), acting in the capacity as Manager of the Fund, has fulfilled its duties in the following manner for the financial year ended 31 December 2018.

(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 Malaysia’s Guidelines on Unit Trust Funds, the Capital Market and Services Act 2007 and other applicable laws;

(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

ONG TEE VANNChief Executive Officer

Kuala Lumpur, Malaysia

15 February 2019


5. IndEPEndEnT audITORS’ REPORT TO THE unIT HOldERS Of KEnanGa bOnd fund

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Kenanga Bond Fund (“the Fund”), which comprise the statement of financial position as at 31 December 2018, and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows of the Fund for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, as set out on pages 16 to 48.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 December 2018 and of its financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

Basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’responsibilitiesfortheauditofthefinancialstatements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence and other ethical responsibilities

We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Informationotherthanthefinancialstatementsandauditors’reportthereon

The Manager of the Fund (“the Manager”) is responsible for the other information. The other information comprises the information included in the annual report of the Fund, but does not include the financial statements of the Fund and our auditors’ report thereon.

Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.


5. IndEPEndEnT audITORS’ REPORT TO THE unIT HOldERS Of KEnanGa bOnd fund (COnTd.)

ResponsibilitiesoftheManagerandtheTrusteeforthefinancialstatements

The Manager is responsible for the preparation of financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

The Trustee is responsible for overseeing the Fund’s financial reporting process. The Trustee is also responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements.

Auditors’responsibilitiesfortheauditofthefinancialstatements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager.


5. IndEPEndEnT audITORS’ REPORT TO THE unIT HOldERS Of KEnanGa bOnd fund (COnTd.)

Auditors’responsibilitiesfortheauditofthefinancialstatements(contd.)

• Conclude on the appropriateness of the Manager’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Fund to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements of the Fund represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Other matters

This report is made solely to the unit holders of the Fund, as a body, in accordance with the Guidelines on Unit Trust Funds issued by the Securities Commission Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Chan Hooi LamAF: 0039 No. 2844/02/2020 JChartered Accountants Chartered Accountant


15 February 2019


6. STaTEMEnT bY THE ManaGER

I, Ismitz Matthew De Alwis, being a director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial position as at 31 December 2018 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial year ended 31 December 2018 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga Bond Fund as at 31 December 2018 and of its financial performance and cash flows for the financial year then ended and comply with the requirements of the Deed.

For and on behalf of the ManagerKENANGA INVESTORS BERHAD

ISMITZ MATTHEW DE ALWISExecutive Director/Chief Executive Officer


15 February 2019


7. fInanCIal STaTEMEnTS

7.1 STaTEMEnT Of COMPREHEnSIVE InCOME fOR THE fInanCIal YEaR EndEd 31 dECEMbER 2018

note 2018 2017RM RM

InVESTMEnT InCOME

Interest income 1,272,090 831,821 Net gain from investments:- Financial assets at fair value through profit or

loss (“FVTPL”) 4 25,129 110,761 1,297,219 942,582

EXPEnSES

Manager’s fee 5 279,502 190,877 Trustee’s fee 6 22,360 17,993 Auditors’ remuneration 7,500 7,500 Tax agent’s fee 4,000 4,000 Administration expenses 17,579 22,841

330,941 243,211

nET InCOME bEfORE TaX 966,278 699,371

Income tax 7 - -

nET InCOME afTER TaX, REPRESEnTInG TOTal COMPREHEnSIVE InCOME fOR THE fInanCIal YEaR 966,278 699,371

Net income after tax is made up as follows:Realised gain 953,084 618,588 Unrealised gain 4 13,194 80,783

966,278 699,371

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


7.2 STaTEMEnT Of fInanCIal POSITIOn aS aT 31 dECEMbER 2018

note 2018 2017RM RM

aSSETS

InVESTMEnTS

Financial assets at FVTPL 4 30,623,962 19,182,099 Short term deposits 8 3,109,000 3,960,350

33,732,962 23,142,449

OTHER aSSETS

Amount due from Manager 401,126 511,243 Other receivable 9 277 366 Cash at bank 11,552 143,104

412,955 654,713

TOTal aSSETS 34,145,917 23,797,162

lIabIlITIES

Amount due to Trustee 2,213 1,453 Other payables 10 24,000 27,864 TOTal lIabIlITIES 26,213 29,317

EQuITY

Unit holders’ contribution 30,172,942 20,787,361 Retained earnings 3,946,762 2,980,484 nET aSSET ValuE (“naV”) aTTRIbuTablE

TO unIT HOldERS 11 34,119,704 23,767,845

TOTal lIabIlITIES and EQuITY 34,145,917 23,797,162

nuMbER Of unITS In CIRCulaTIOn 11(a) 45,760,480 33,010,505

nET aSSET ValuE PER unIT (RM) 12 0.7456 0.7200



7.3 STaTEMEnT Of CHanGES In nET aSSET ValuE fOR THE fInanCIal YEaR EndEd 31 dECEMbER 2018

noteunit holders’ contribution

Retained earnings Total naV

RM RM RM

2018At beginning of the financial year 20,787,361 2,980,484 23,767,845 Total comprehensive income - 966,278 966,278 Creation of units 11(a) 25,784,616 - 25,784,616 Cancellation of units 11(a) (16,602,663) - (16,602,663)Distribution equalisation 11(a) 203,628 - 203,628 At end of the financial year 30,172,942 3,946,762 34,119,704

2017At beginning of the financial year 13,819,827 2,281,113 16,100,940 Total comprehensive income - 699,371 699,371 Creation of units 11(a) 23,980,568 - 23,980,568 Cancellation of units 11(a) (17,153,980) - (17,153,980)Distribution equalisation 11(a) 140,946 - 140,946 At end of the financial year 20,787,361 2,980,484 23,767,845



7.4 STaTEMEnT Of CaSH flOWS fOR THE fInanCIal YEaR EndEd 31 dECEMbER 2018

2018 2017RM RM

CaSH flOWS fROM OPERaTInG and InVESTInG aCTIVITIES

Proceeds from sale of financial assets at FVTPL 18,505,198 14,586,484 Interest received 1,108,606 799,971 Tax agent’s fee paid (7,500) - Auditors’ remuneration paid (7,500) (7,000)Trustee’s fee paid (21,600) (18,016)Payment for other fees and expenses (17,943) (20,309)Manager’s fee paid (269,780) (185,330)Purchase of financial assets at FVTPL (29,758,359) (20,244,059)Net cash used in operating and investing activities (10,468,878) (5,088,259)

CaSH flOWS fROM fInanCInG aCTIVITIES

Cash received from units created 26,420,466 24,269,905 Cash paid on units cancelled (16,934,490) (17,484,556)Net cash generated from financing activities 9,485,976 6,785,349

nET (dECREaSE)/InCREaSE In CaSH and CaSH EQuIValEnTS (982,902) 1,697,090

CaSH and CaSH EQuIValEnTS aT bEGInnInG Of THE fInanCIal YEaR 4,103,454 2,406,364

CaSH and CaSH EQuIValEnTS aT End Of THE fInanCIal YEaR 3,120,552 4,103,454

Cash and cash equivalents comprise:Cash at bank 11,552 143,104 Short term deposits 3,109,000 3,960,350

3,120,552 4,103,454



7.5 nOTES TO THE fInanCIal STaTEMEnTS fOR THE fInanCIal YEaR EndEd 31 dECEMbER 2018

1. THE fund, THE ManaGER and THEIR PRInCIPal aCTIVITIES

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

Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad that is listed on the Main Market of Bursa Malaysia Securities Berhad. All of these companies are incorporated in Malaysia.

The principal place of business of the Manager is Level 14, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur.

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

The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 15 February 2019.

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 unit holders, 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 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.


2. fInanCIal RISK ManaGEMEnT ObJECTIVES and POlICIES (COnTd.)

a. Market risk (contd.)

i. Interest rate risk

Interest rate risk refers to how the changes in the interest rate environment would affect the performance of Fund’s investments. Rate 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 unlisted corporate bonds, unlisted government guaranteed bonds, unlisted commercial papers and short term deposits.

The Fund’s exposure to the interest rate risk is mainly confined to unlisted corporate bonds, unlisted government guaranteed bonds and unlisted commercial papers.

Interest rate risk sensitivity

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

Changes in rate

Increase/(decrease)

basis points

Effects on profit for the financial

periodIncrease/

(decrease)RM

2018Financial assets at FVTPL 5/(5) (51,882)/51,936

2017Financial assets at FVTPL 5/(5) (36,271)/36,366

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

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b. Credit risk

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

i. Credit risk exposure

As at the reporting date, the Fund’s maximum exposure to credit risk is represented by the carrying amount of each class of financial asset recognised in the statement of financial position.

ii. financial assets that are either past due or impaired

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

iii. Credit quality of financial assets

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

unlisted bonds

Percentage of total unlisted bonds Percentage of naV

2018 2017 2018 2017% % % %

RatingAA- 32.0 21.4 25.3 17.2 AAA 19.8 14.0 15.7 11.3 AA3 12.0 36.2 9.5 29.2 AA1 10.7 11.9 8.5 9.6 A3 9.3 8.5 7.4 6.9 AA2 4.6 - 3.6 -A1 4.2 8.0 3.3 6.5 AA 3.8 - 3.0 -AA+ 3.6 - 2.9 -

100.0 100.0 79.2 80.7



b. Credit risk (contd.)

iii. Credit quality of financial assets (contd.)

unlisted commercial papers

Percentage of total unlisted commercial

papers Percentage of naV2018 2017 2018 2017

% % % %

RatingP1 50.0 - 5.3 -MARC-1 50.0 - 5.3 -

100.0 - 10.3 -

The Fund invests in deposits with financial institutions licensed under the 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

2018 2017 2018 2017% % % %

RatingWR 100.0 58.8 9.1 9.8 P1 - 41.2 - 6.9

100.0 100.0 9.1 16.7

iv. Credit risk concentration

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



b. Credit risk (contd.)

iv. Credit risk concentration (contd.)

unlisted bonds

Percentage of total unlisted bonds Percentage of naV

2018 2017 2018 2017% % % %

Finance 33.2 31.9 26.4 25.8 Properties 23.4 8.9 18.5 7.1 Utilities 22.7 15.2 18.0 12.2 Construction 16.1 15.4 12.7 12.4 Industrial products 4.6 20.6 3.6 16.7 Plantations - 8.0 - 6.5

100.0 100.0 79.2 80.7


Percentage of total unlisted commercial

papers Percentage of naV2018 2017 2018 2017

% % % %

Finance 50.0 - 5.3 - Properties 50.0 - 5.3 -

100.0 - 10.6 -

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 unit holders by the Manager are cancellable at the unit holders’ 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.



c. liquidity risk

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.

noteup to

1 year

above 1year - 5

years

above 5 year - 15

years TotalRM RM RM RM

2018assetsFinancial

assets at FVTPL 5,447,262 16,144,207 9,032,493 30,623,962

Short term deposits 3,109,000 - - 3,109,000

Other assets 412,955 - - 412,955 i. 8,969,217 16,144,207 9,032,493 34,145,917

liabilitiesOther liabilities ii. 2,213 - - 2,213

Equity iii. 34,119,704 - - 34,119,704

Liquidity gap (25,152,700) 16,144,207 9,032,493 24,000

2017assetsFinancial

assets at FVTPL 3,385,276 9,424,037 6,372,786 19,182,099

Short term deposits 3,960,350 - - 3,960,350

Other assets 654,713 - - 654,713 i. 8,000,339 9,424,037 6,372,786 23,797,162

liabilitiesOther liabilities ii. 1,453 - - 1,453

Equity iii. 23,767,845 - - 23,767,845

Liquidity gap (15,768,959) 9,424,037 6,372,786 27,864



c. liquidity risk (contd.)

i. financial assets

Analysis of financial assets at FVTPL into maturity groupings is based on the expected date on which these assets will be realised. For other assets, the analysis into maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised.

ii. financial liabilities

The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the date on which liabilities will be settled. When 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 the unit holders 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.

d. Regulatory reportings

It is the Manager’s responsibility to ensure full compliance of all requirements under the Guidelines on Unit Trust Funds issued by Securities Commission Malaysia. Any breach of any such requirement has been reported in the mandatory reporting to Securities Commission Malaysia on a monthly basis.

3. SuMMaRY Of SIGnIfICanT aCCOunTInG POlICIES

a. basis of accounting

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

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the new and amended MFRSs and IC interpretation, which became effective for the Fund on 1 January 2018.


3. SuMMaRY Of SIGnIfICanT aCCOunTInG POlICIES (COnTd.)

a. basis of accounting (contd.)

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

description

Effective for financial period beginning on or

after

Amendments to MFRS contained in the document entitled “Annual Improvements to MFRS Standards 2014 - 2016 Cycle” 1 January 2018

Amendments to MFRS 1: First-time Adoption of Malaysian Financial Reporting Standards contained in the document entitled “Annual Improvements to MFRS Standards2014-2016Cycle” 1 January 2018

Amendments to MFRS 128: Investments in Associates and Joint Ventures contained in the document entitled “AnnualImprovementstoMFRSStandards2014-2016Cycle” 1 January 2018

MFRS 9: Financial Instruments 1 January 2018MFRS 15: RevenuefromContractswithCustomers 1 January 2018Clarifications to MFRS 15: RevenuefromContractswithCustomers 1 January 2018

Amendments to MFRS 2: ClassificationandMeasurementof Shared-Based Payment Transactions 1 January 2018

Amendments to MFRS 4: Applying MFRS 9 Financial InstrumentswithMFRS4InsuranceContracts

Temporary exemption from MFRS 9 subject

to certain criteria being met for annual

periods beginning on or after

1 January 2018

Amendments to MFRS 140: Transfers of Investment Property 1 January 2018

IC Interpretation 22: ForeignCurrencyTransactionsandAdvanceConsideration 1 January 2018



a. basis of accounting (contd.)

The adoption of the new and amended MFRS and IC interpretation did not have any significant impact on the financial position or performance of the Fund other than the impacts as discussed below:

MfRS 9 Financial Instruments

MFRS 9 Financial Instruments replaces MFRS 139 Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9 for annual periods on or after 1 January 2018. MFRS 9 requires financial assets to be classified on the basis of the business model within which they are held and their contractual cash flow characteristics. The requirements related to the fair value option for financial liabilities were also changed to address own credit risk. The adoption of MFRS 9 has no effect on the classification and measurement of the Fund’s financial assets and financial liabilities.

MFRS 9 also requires impairment assessments to be based on an expected credit loss model, replacing the MFRS 139 incurred loss model. Finally, MFRS 9 aligns hedge accounting more closely with risk management, establish a more principle-based approach to hedge accounting and address inconsistencies and weaknesses in the previous model.

The Fund does not have any change in classification nor any material financial impact arising from the adoption of this standard.

b. Standards, amendments and interpretations issued but not yet effective

As at the reporting date, the following Standards, Amendments and Interpretation Committee’s (“IC”) Interpretations that have been issued by MASB will be effective for the Fund in future financial periods. The Fund intends to adopt the relevant standards and interpretations when they become effective.

description


after

Amendments to MFRS contained in the document entitled “Annual Improvements to MFRS Standards document 2015-2017Cycle” 1 January 2019

Amendments to MFRS 3 and MFRS 11: Previously Held Interest in a Joint Operation contained in the document entitled“AnnualImprovementstoMFRSStandards2015-2017Cycle” 1 January 2019

Amendments to MFRS 112: IncomeTaxConsequencesofPaymentsonFinancialInstrumentsClassifiedasEquity contained in the document entitled “Annual ImprovementstoMFRSStandards2015-2017Cycle” 1 January 2019



b. Standards, amendments and interpretations issued but not yet effective (contd.)

description


after

Amendments to MFRS 123: BorrowingCostsEligibleforCapitalisationcontainedinthedocumententitled“AnnualImprovementstoMFRSStandards2015-2017Cycle” 1 January 2019

MFRS 16: Leases 1 January 2019Amendments to MFRS 9: Prepayment Features with NegativeCompensation 1 January 2019

Amendments to MFRS 119: PlanAmendment,Curtailmentor Settlement 1 January 2019

Amendments to MFRS 128: Long-term Interests in Associates and Joint Ventures 1 January 2019

IC Interpretation 23: Uncertainty over Income Tax Treatments 1 January 2019

Amendments to MFRS 2: Share-Based Payment 1 January 2020Amendments to MFRS 3: BusinessCombinations 1 January 2020Amendments to MFRS 3: DefinitionofaBusiness 1 January 2020Amendments to MFRS 6: Exploration for and Evaluation of

Mineral Resources 1 January 2020Amendments to MFRS 14: Regulatory Deferral Accounts 1 January 2020Amendments to MFRS 101: Presentation of Financial

Statements 1 January 2020Amendments to MFRS 108: AccountingPolicies,Changes

in Accounting Estimates and Errors 1 January 2020Amendments to MFRS 101 & MFRS 108: Definitionof

Material 1 January 2020Amendments to MFRS 134: Interim Financial Reporting 1 January 2020Amendment to MFRS 137: Provisions,ContingentLiabilitiesandContingentAssets 1 January 2020

Amendment to MFRS 138: Intangible Assets 1 January 2020Amendments to IC Interpretation 12: ServiceConcession

Arrangements 1 January 2020Amendments to IC Interpretation 19: Extinguishing

Financial Liabilities with Equity Instruments 1 January 2020Amendment to IC Interpretation 20: StrippingCostsinthe

Production Phase of a Surface Mine 1 January 2020Amendments to IC Interpretation 22: ForeignCurrencyTransactionsandAdvanceConsideration 1 January 2020

Amendments to IC Interpretation 132: Intangible Assets - WebSiteCosts 1 January 2020

MFRS 17: InsuranceContracts 1 January 2022



b. Standards, amendments and interpretations issued but not yet effective (contd.)

description


after

Amendments to MFRS 10 and MFRS 128: Sale or ContributionofAssetsbetweenanInvestoranditsAssociate or Joint Venture

To be announcedby MASB

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.

c. financial instruments

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.

i. Initial recognition and subsequent measurement

The classification of financial assets at initial recognition depends on their contractual terms and the business model for managing the instruments, as described in Note 3(d)(i). Financial assets are initially measured at their fair value, except in the case of financial assets recorded at FVTPL, transaction costs are added to, or subtracted from, this amount. Trade receivables are measured at the transaction price. When the fair value of financial instruments at initial recognition differs from the transaction price, the Fund accounts for the Day 1 profit or loss, as described below.

ii. Measurement categories of financial assets and liabilities

From 1 January 2018, the Fund classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual terms, measured at either:

• Amortised cost • Fair value through other comprehensive income • Fair value through profit or loss

The Fund may designate financial instruments at FVTPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies.



c. financial instruments (contd.)

ii. Measurement categories of financial assets and liabilities (contd.)

The Fund’s financial assets include cash and bank balances and other receivables. Prior to 1 January 2018, the Fund classified its financial assets as receivables (amortised cost), as explained in Note 3(d)(i).

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

The Fund’s other financial liabilities include trade payables and other payables.

Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest rate. Gains or losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

d. financial assets and liabilities

i. due from banks, trade and other receivables at amortised cost

Prior to 1 January 2018, included in the financial assets are cash and bank balances, short-term deposits and other receivables including receivables which are those non–derivative financial assets with fixed or determinable payments that were not quoted in an active market.

From 1 January 2018, the Fund only measures the amount due from banks and other financial investments at amortised cost if both of the following conditions are met:

• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.

The details of these conditions are outlined below.

business model assessment

The Fund determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective.

The Fund’s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:



d. financial assets and liabilities (contd.)

i. due from banks, trade and other receivables at amortised cost (contd.)

business model assessment (contd.)

• How the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity’s key management personnel;

• The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed;

• How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets managed or on the contractual cash flows collected); and

• The expected frequency, value and timing of sales are also important aspects of the Fund’s assessment.

The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Fund’s original expectations, the Fund does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward, unless it has been determined that there has been a change in the original business model.

The SPPI test

As a second step of its classification process the Fund assesses the contractual terms of financial assets to identify whether they meet the SPPI test.

‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortisation/accretion of the premium/discount).

The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Fund applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.



e. Reclassification of financial assets and liabilities

From 1 January 2018, the Fund has not reclassified its financial assets and financial liabilities subsequent to their initial recognition and upon adoption of MFRS 9.

f. Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Fund also derecognises the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition.

The Fund has transferred the financial asset if, and only if, either:

• The Fund has transferred its contractual rights to receive cash flows from the financial asset; or

• It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement.

Pass-through arrangements are transactions whereby the Fund retains the contractual rights to receive the cash flows of a financial asset (the ‘original asset’), but assumes a contractual obligation to pay those cash flows to one or more entities (the ‘eventual recipients’), when all of the following three conditions are met:

• The Fund has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset, excluding short-term advances with the right to full recovery of the amount lent plus accrued interest at market rates;

• The Fund cannot sell or pledge the original asset other than as security to the eventual recipients; and

• The Fund has to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the Fund is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.

A transfer only qualifies for derecognition if either:

• The Fund has transferred substantially all the risks and rewards of the asset; or• The Fund has neither transferred nor retained substantially all the risks and

rewards of the asset, but has transferred control of the asset.

The Fund considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.

When the Fund has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Fund’s continuing involvement, in which case, the Fund also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Fund has retained.



f. Derecognition of financial assets (contd.)

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration the Fund could be required to pay.

If continuing involvement takes the form of a written or purchased option (or both) on the transferred asset, the continuing involvement is measured at the value the Fund would be required to pay upon repurchase. In the case of a written put option on an asset that is measured at fair value, the extent of the entity’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

g. Impairment of financial assets (Policy applicable from 1 January 2018)

i. Overview of the expected credit loss (“ECl”) principles

As described in Note 3 (a), the adoption of MFRS 9 has not fundamentally changed the Fund’s loan and receivable impairment method by replacing MFRS 139’s incurred loss approach with a forward-looking ECL approach.

ii. Write-offs

The Fund’s accounting policy under MFRS 9 remains the same as it was under MFRS 139. Financial assets are written off either partially or in their entirety only when the Fund has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.

h. Income

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

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

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

i. Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents include cash at bank and short term deposits with licensed financial institutions with insignificant risk of changes in value.

j. Income tax

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

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



k. 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.

l. unit holders’ contribution – naV attributable to unit holders

The unit holders’ 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 unit holders by way of distribution and/or adjusted accordingly when units are released back to the Trustee.

m. 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.

n. distributions

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

o. Significant accounting judgments and estimates

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

i. Critical judgments made in applying accounting policies

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

ii. Key sources of estimation uncertainty

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


4. fInanCIal aSSETS aT fVTPl

2018 2017RM RM

Financial assets held for trading, at FVTPL:Unlisted corporate bonds 25,594,598 18,744,999 Unlisted government guaranteed bonds 1,435,060 437,100 Unlisted commercial papers 3,594,304 -

30,623,962 19,182,099

Net gain on financial assets at FVTPL comprised:Realised gain on disposals 11,935 29,978 Unrealised changes in fair values 13,194 80,783

25,129 110,761

Details of financial assets at FVTPL as at 31 December 2018:

Quantityamortised

cost fair value Percentage

of naV RM RM %

unlisted corporate bonds

Aman Sukuk Berhad maturing on 21/10/2021 560,000 560,483 561,907 1.6

Bank Muamalat Malaysia Berhad maturing on 15/06/2021 2,500,000 2,521,303 2,516,275 7.4

CIMB Islamic Bank Berhad maturing on 25/09/2019 950,000 974,794 975,790 2.9

CJ Capital Sdn Bhd maturing on 15/07/2020 1,570,000 1,633,026 1,638,390 4.8

Edra Energy Sdn Bhd maturing on 03/01/2025 3,100,000 3,261,786 3,237,558 9.5

Fortune Premiere Sdn Bhd maturing on 13/03/2023 1,000,000 1,014,597 1,017,657 3.0

Gulf Investment Corporation G.S.C maturing on 20/06/2022 1,150,000 1,151,931 1,158,494 3.4


4. fInanCIal aSSETS aT fVTPl (COnTd.)

Details of financial assets at FVTPL as at 31 December 2018: (contd.)

Quantityamortised


of naV RM RM %

unlisted corporate bonds (contd.)

Hong Leong Islamic Bank Berhad maturing on 17/06/2019 580,000 582,109 582,681 1.7

Jati Cakerawala Sdn Bhd maturing on 31/07/2023 1,130,000 1,148,583 1,132,894 3.3

Malaysia Airports Capital Berhad maturing on 16/12/2022 560,000 567,108 569,152 1.7

MBSB Bank Berhad (formerly known as Asian Finance Bank Berhad) maturing on 09/12/2022 1,150,000 1,152,615 1,155,984 3.4

MEX II Sdn Berhad maturing on 29/04/2026 1,130,000 1,169,733 1,192,793 3.5

MMC Corporation Berhad maturing on 26/04/2023 460,000 468,581 464,674 1.4

MMC Corporation Berhad maturing on 27/04/2027 1,600,000 1,622,583 1,621,887 4.7

Sabah Credit Corporation maturing on 05/05/2022 1,130,000 1,139,968 1,146,599 3.4

UEM Sunrise Berhad maturing on 31/10/2025 3,050,000 3,084,927 3,122,370 9.1

UMW Holdings Berhad maturing on 04/10/2023 1,200,000 1,235,721 1,239,725 3.6

WCT Holdings Berhad maturing on 23/10/2023 2,240,000 2,254,350 2,259,768 6.6

Total unlisted corporate bonds 25,544,198 25,594,598 75.0


4. fInanCIal aSSETS aT fVTPl (COnTd.)

Details of financial assets at FVTPL as at 31 December 2018: (contd.)

Quantity amortised


of naV RM RM %

unlisted government guaranteed bonds

Cagamas Berhad maturing on 25/05/2023 1,100,000 1,104,882 1,115,761 3.3

Cagamas MBS Berhad maturing on 11/12/2020 310,000 320,877 319,299 0.9

Total unlisted government guaranteed bonds 1,425,759 1,435,060 4.2


Sabah Development Bank Berhad maturing on 17/01/2019 1,800,000 1,796,479 1,797,041 5.3

Sunway Treasury Sukuk Sdn Bhd maturing on 17/01/2019 1,800,000 1,796,755 1,797,263 5.3

Total unlisted commercial papers 3,593,234 3,594,304 10.6

Total financial assets at fVTPl 30,563,191 30,623,962 89.8

unrealised gain on financial assets at fVTPl 60,771


5. ManaGER’S fEE

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

The Manager is currently charging Manager’s fee of 1.00% per annum of the NAV of the Fund (2017: 1.00% per annum).

6. TRuSTEE’S fEE

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

Accordingly, the Trustee’s fee is currently calculated at 0.08% per annum of the NAV of the Fund (2017: minimum fee of RM18,000 per annum).

7. InCOME TaX

Income tax is calculated at the Malaysian statutory tax rate of 24% of the estimated assessable income for the current and previous financial years.

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:

2018 2017RM RM

Net income before tax 966,278 699,371

Tax at Malaysian statutory tax rate of 24% (2017: 24%)231,907 167,849

Tax effect of:Income not subject to tax (311,333) (226,220)Expenses not deductible for tax purposes 8,614 8,845 Restriction on tax deductible expenses for unit trust fund 70,812 49,526

Income tax for the financial year - -


8. SHORT TERM dEPOSITS

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

9. OTHER RECEIVablE

2018 2017RM RM

Interest receivable from short term deposits 277 366

10. OTHER PaYablES

2018 2017RM RM

Accrual for auditors’ remuneration 7,500 7,500 Accrual for tax agent’s fees 4,500 8,000 Provision for printing and other expenses 12,000 12,364

24,000 27,864

11. nET aSSET ValuE aTTRIbuTablE TO unIT HOldERS

NAV attributed to unit holders is represented by:

note 2018 2017RM RM

Unit holders’ contribution (a) 30,172,942 20,787,361

Retained earnings:Realised reserve 3,885,991 2,932,907 Unrealised reserve 60,771 47,577

3,946,762 2,980,484

34,119,704 23,767,845


11. nET aSSET ValuE aTTRIbuTablE TO unIT HOldERS (COnTd.)

(a) unit holders’ contribution

2018 2017no. of units RM no. of units RM

At beginning of the financial year 33,010,505 20,787,361 23,213,052 13,819,827

Add: Creation of units 35,812,920 25,784,616 34,405,858 23,980,568

Less: Cancellation of units (23,062,945) (16,602,663) (24,608,405) (17,153,980)

Distribution equalisation - 203,628 - 140,946

At end of the financial year 45,760,480 30,172,942 33,010,505 20,787,361

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 31 December 2018 were nil (2017: nil).

12. nET aSSET ValuE PER unIT

In line with the requirements of MFRS 9 and MFRS 13, 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 unit holders 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 unit holders for creation/cancellation of units and the NAV attributable to unit holders per the financial statements is as follows:

2018 2017RM RM/unit RM RM/unit

NAV attributable to unit holders for creation/cancellation of units 34,186,495 0.7471 23,768,209 0.7200

Effects of adopting bid prices as fair value (66,791) (0.0015) (364) -

NAV attributable to unit holders per statement of financial position 34,119,704 0.7456 23,767,845 0.7200

13. PORTfOlIO TuRnOVER RaTIO (“PTR”)

PTR for the financial year is 0.87 times (2017: 0.90 times).

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


14. ManaGEMEnT EXPEnSE RaTIO (“MER”)

MER for the financial year is 1.18% per annum (2017: 1.27% per annum).

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 lICEnSEd fInanCIal InSTITuTIOnS

Transaction value

Percentage of total

RM %

CIMB Bank Berhad 13,098,847 32.5 AmBank (M) Berhad 7,075,394 17.5 Hong Leong Bank Berhad 5,721,154 14.2 Alliance Bank Malaysia Berhad 4,746,488 11.8 Hong Leong Investment Bank Berhad 4,741,717 11.7 Affin Hwang Investment Bank Berhad 2,363,062 5.9 Maybank Berhad 1,500,000 3.7 RHB Investment Bank Berhad 1,096,097 2.7

40,342,759 100.0

The above transaction values are in respect of unlisted corporate bonds unlisted government guaranteed bonds and unlisted commercial papers. Transactions in unlisted corporate bonds, unlisted government guaranteed bonds and unlisted commercial papers do not involve any commission or brokerage fees.

16. SEGMEnTal REPORTInG

a. business segments

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


16. SEGMEnTal REPORTInG (COnTd.)

a. business segments (contd.)

unlistedfixed income instruments

Other investments Total

RM RM RM

2018RevenueSegment income 1,156,375 140,844 1,297,219 Unallocated expenditure (330,941)Income before tax 966,278 Income tax -Net income after tax 966,278

assetsFinancial assets at FVTPL 30,623,962 -Short term deposits - 3,109,000 Other segment asset - 277 Total segment assets 30,623,962 3,109,277 33,733,239 Unallocated assets 412,678

34,145,917

liabilitiesUnallocated liabilities 26,213

2017RevenueSegment income 849,044 93,538 942,582 Unallocated expenditure (243,211)Income before tax 699,371 Income tax - Net income after tax 699,371

assetsFinancial assets at FVTPL 19,182,099 - Short term deposits - 3,960,350 Other segment asset - 366 Total segment assets 19,182,099 3,960,716 23,142,815 Unallocated assets 654,347

23,797,162

liabilitiesUnallocated liabilities 29,317

b. Geographical segments

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


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 financial liabilities of the Fund in the statement of financial position by the class of financial instruments to which they are assigned and therefore by the measurement basis.

financialassets at

fVTPl

financial assets at

amortised cost

Otherfinancial liabilities Total

RM RM RM RM

2018assetsUnlisted corporate

bonds 25,594,598 - - 25,594,598 Unlisted

government guaranteed bonds 1,435,060 - - 1,435,060

Unlisted commercial papers 3,594,304 - - 3,594,304

Short term deposits - 3,109,000 - 3,109,000 Amount due from

Manager - 401,126 - 401,126 Other receivable - 277 - 277 Cash at bank - 11,552 - 11,552

30,623,962 3,521,955 - 34,145,917

liabilityAmount due to

Trustee - - 2,213 2,213


17. fInanCIal InSTRuMEnTS (COnTd.)

a. Classification of financial instruments (contd.)

financialassets at

fVTPl

financial assets at

amortised cost

Otherfinancial liabilities Total

RM RM RM RM

2017assetsUnlisted corporate

bonds 18,744,999 - - 18,744,999 Unlisted

government guaranteed bonds 437,100 - - 437,100

Short term deposits - 3,960,350 - 3,960,350 Amount due from

Manager - 511,243 - 511,243 Other receivable - 366 - 366 Cash at bank - 143,104 - 143,104

19,182,099 4,615,063 - 23,797,162

liabilityAmount due to

Trustee - - 1,453 1,453

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:2018Unlisted corporate

bonds - 25,594,598 - 25,594,598 Unlisted

government guaranteed bonds - 1,435,060 - 1,435,060

Unlisted commercial papers - 3,594,304 - 3,594,304


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 2017Unlisted corporate

bonds - 18,744,999 - 18,744,999 Unlisted

government guaranteed bonds - 437,100 - 437,100

Level 1: Listed 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 unlisted corporate bonds and unlisted government guaranteed bonds are based on bid prices provided by bond pricing agency accredited by the Securities Commission of Malaysia. The fair values of unlisted commercial papers are based on average of bid prices provided by financial institutions at reporting date.

c. financial instruments not carried at fair value and which their carrying amounts are reasonable approximations of fair value

The carrying amounts of the Fund’s other financial assets and financial 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 years.

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Investor Services CenterToll Free Line: 1 800 88 3737Fax: +603 2172 3133Email: [email protected]

Head Office, Kuala LumpurLevel 14, Kenanga Tower, 237 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia.Tel: 03-2172 3000 Fax: 03-2172 3080

KEnanGa bOnd fund · 2019. 2. 26. · Kenanga Bond Fund Annual Report 2 2. ManaGER’S REPORT 2.1...

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