KEnAnGA yiEld EnhAncEmEnT fund...50,001 - 500,000 5 780,038 500,001 and above 11 122,578,690 Total 18 123,444,960 Kenanga Yield Enhancement Fund Annual Report 2 2. mAnAGER’S REPORT

AnnuAl REPORT

For the Financial Year Ended 31 May 2019

KEnAnGA yiEld EnhAncEmEnT fund

KEnAnGA yiEld EnhAncEmEnT fund

Contents Page

corporate directory ii Directory of Manager’s Offices iiifund information 1manager’s Report 2 - 6fund Performance 7 - 9Trustee’s Report 10independent Auditors’ Report 11 - 13Statement by the manager 14financial Statements 15 - 46

ii Kenanga Yield Enhancement 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 AlwisNorazian Binti Ahmad Tajuddin (independent

director)

investment committee Syed Zafilen Syed Alwee (independent

member)Peter John Rayner (independent member)Imran Devindran bin Abdullah (independent

member)Ismitz Matthew De AlwisNorazian Binti Ahmad Tajuddin (independent

member)

company Secretary: norliza Abd Samad (MAICSA 7011089)

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

Trustee: cimB commerce Trustee Berhad (Company No. 313031-A)

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

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

Auditor: Ernst & young (AF: 0039)

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

Tax Adviser: Ernst & young Tax consultants Sdn Bhd (Company No. 179793-K)

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

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

Kenanga Yield Enhancement Fund Annual Report iii

diREcTORy Of mAnAGER’S OfficESRegional Branch Offices :

Kuala lumpurLevel 13, Kenanga Tower237, Jalan Tun Razak50400 Kuala Lumpur, MalaysiaTel: 03-2172 3123 Fax: 03-2172 3133

Johor BahruNo. 63Jalan Molek 3/1, Taman Molek81100 Johor Bahru, JohorTel: 07-288 1683 Fax: 07-288 1693

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, PahangTel : 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 Yield Enhancement Fund Annual Report

1. fund infORmATiOn1.1 fund name

Kenanga yield Enhancement fund (KyEf or the fund)

1.2 fund Type / category

Income & Growth / Fixed Income

1.3 investment Objective

The Fund seeks to provide Investors with income and capital growth by investing into short to medium-term money market instruments and fixed income securities.

1.4 investment Strategy

The Fund seeks to achieve its objective by investing a minimum of 60% of its NAV and a maximum of 100% of its NAV in fixed income securities. The Fund will invest up to 40% of its NAV in placements of fixed deposits with financial institutions and development financial institutions, money market instruments and fixed income securities with a maturity period of 2 years and below.

1.5 Asset Allocation

Minimum of 60% to a maximum of 100% of its NAV will be invested in fixed income securities; and up to 40% of its NAV will be invested in placements of fixed deposits, money market instruments and fixed income securities with a maturity period of 2 years and below.

1.6 duration

The Fund was launched on 18 January 2016 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.

1.7 Performance Benchmark

4.5% per annum.

Please note that the benchmark herein is NOT a guaranteed rate of return of the Fund; instead it is a benchmark reference rate which is used to measure the performance of the Fund.

1.8 distribution Policy

Subject to the availability of income, income distribution (if any) will be incidental.

1.9 Breakdown of unit holdings of the fund as at 31 may 2019

Size of holdingsno. of

unit holdersno. of

units held5,000 and below - -5,001 - 10,000 - -10,001 - 50,000 2 86,23250,001 - 500,000 5 780,038500,001 and above 11 122,578,690Total 18 123,444,960

Kenanga Yield Enhancement Fund Annual Report 2

2. mAnAGER’S REPORT

2.1 fund performance analysis based on nAV per unit (adjusted for income distribution) since last review year

year under review

Kenanga yield Enhancement fund 5.74%4.5% per annum 4.50%

Source: Novagni Analytics and Advisory; Lipper

For the financial year under review, the Fund registered a return of 5.74% against its absolute benchmark return of 4.50%, outperforming its benchmark by 124 basis points (bps). The outperformance was led by investment in high yield bonds.

2.2 The fund’s asset allocation as at 31 may 2019 and comparison with the previous financial year

Asset 31 may 2019 31 may 2018Unlisted fixed income securities 84.8% 96.9%Short term deposits and cash 15.2% 3.1%

2.3 market review and strategy

In June 2018, the Federal Reserve (Fed) raised the upper limit of the Federal Funds Rate (FFR) by 25 basis points (bps) to 2%, led by improving employment, household spending and inflation. The Federal Open Market Committee (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 and China downplayed and reigniting fears while US and North Korea appeared cooperative on the denuclearization agreement. Consequently, 2Y and 10Y breached peak levels mid-June at 2.55% and 3.11% respectively before easing to 2.53% and 2.86% month-end (+13 bps and +3 bps month-on-month (M-o-M)). The US Treasury (UST) yield curve has flattened further with the 2x10 spread at 33 bps end-June (43 bps in previous month). In contrast, the Malaysian Government Securities (MGS) yield curve steepened modestly at 56 bps (50 bps in previous month) as investors shed duration, grinding the 3Y MGS yield lower by 6 bps to 3.64%, while 10Y benchmark yield remains unchanged at 4.20%.

In July, the UST yield curve continued to bearish flatten with 2x10 spread of 29 bps (33 bps in previous month), led by 2Y UST, which increased 14 bps M-o-M to 2.67% while the 10Y 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 Overnight Policy Rate (OPR) was held at 3.25% in the Monetary Policy Committee (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 bps - 13 bps M-o-M across the tenure (3Y: 3.55% (-9 bps); 5Y: 3.75% (-11 bps); 7Y: 3.96% (-11 bps) and 10Y: 4.07% (-14 bps)).


2.3 market review and strategy (contd.)

Beginning of August, the FOMC kept the FFR unchanged at 2%, with hints of a hike in September. 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 2Y yield closed 4 bps lower at 2.63% and 10Y yield was down 10 bps to 2.86% due to safe haven flows arising from concerns over global trade wars. Similarly, and coupled weaker Gross Domestic Product (GDP) growth of 4.5% Y-o-Y for 2Q18 (1Q18: 5.4% Y-o-Y), MGS also rallied. As investors’ interests were seen mainly on the short to medium MGS, the MGS benchmark yield curve bullish steepened to spread of 56 bps with 3Y yield rallied the most at 7 bps lower to 3.51% vs 10Y 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 10Y yield increased by 20 bps M-o-M to 3.06% vis-à-vis 2Y +19 bps M-o-M to 2.82%. The selloff in UST came under upward re-pricing pressure ahead of the FOMC meeting. As expected, Fed hiked the FFR by 25 bps to 2.25% on 27 September, while releasing a statement without reference to an “accommodative” policy; which was deemed rather dovish by market players. Locally, Bank Negara Malaysia (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 47 bps, as the 3Y climbed 12 bps higher M-o-M to 3.60%, while the 10Y saw some support from month-end rebalancing flows and closed 3 bps 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 European Union and lackluster corporate earnings in the US. The UST yield curve continued to steepen for another month (2x10 spread of 27 bps versus 24 bps in previous month) as the 10Y yield increased by 8 bps M-o-M to 3.14% vis-à-vis 2Y + 5 bps 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 3Y, 5Y, 7Y and 10Y MGS yields closed 2 bps - 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, 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 2Y yield closed lower by 8 bps M-o-M at 2.79% and 10Y down by 15 bps M-o-M to 2.99%. Locally, BNM maintained the OPR at 3.25% during the MPC meeting on 8 November. Clouded by budget deficit concerns with the recent plunge in oil prices, it was a bearish month for the local bond market. As such, the 3Y, 5Y, 7Y and 10Y benchmark MGS yields closed 3 bps - 7 bps higher M-o-M at 3.69%, 3.86%, 4.04% and 4.13% respectively month-end.



In the final month of year 2018, 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 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 by smaller range of 5 bps - 10 bps across all tenure, with the 3Y, 5Y, 7Y and 10Y benchmark MGS yields closed month-end at 3.61%, 3.76%, 3.99% and 4.07% respectively.

Moving into January 2019, UST yield curve flatten and shifted lower on safe-haven bids as unresolved trade issues between US and China continue to linger, with 2Y and 10Y dipped 3 bps and 6 bps respectively to 2.46% and 2.63%. The UST rallied another month due to the ongoing partial US government shutdown as well as the upcoming debt-ceiling revisit in early March 2019. Mirroring the bullish UST movements, the MGS also trended lower but at a smaller quantum of 1 bps - 3 bps in only 3Y and 10Y benchmarks in January. The 3Y, 5Y, 7Y and 10Y benchmark yields closed month-end at 3.58%, 3.76%, 3.99% and 4.06% respectively. Meanwhile, in the MPC meeting on 24 January, BNM maintained the OPR at 3.25%.

Thereafter in February, UST yield curve bearish steepened as the long-end sold off on risk-on mode due to stronger-than-expected 4Q18 US GDP growth of 3.1% Y-o-Y from 3.0% Y-o-Y in 3Q18, bringing the full year GDP growth to 2.9% from 2.2% in 2017. As a result, the 2Y and 10Y UST yields rose 6 bps and 9 bps to 2.52% and 2.72% respectively. Locally, the MGS market was very upbeat on emerging market inflows as Ringgit touched 4.06-4.07 levels against the US dollar. Interest was more apparent on the longer-ends with the 7Y and 10Y yields down by 12 bps and 17 bps M-o-M to 3.87% and 3.89% respectively. Meanwhile, the 3Y and 5Y also trended lower but at a smaller quantum of 1 basis point and 6 bps to 3.57% and 3.70% respectively.

Going into March, UST reverted to its bullish flattening yield curve following the Fed’s FOMC statement on 20 March, indicating a change in projection from two hikes to a median projection of its dot plot signalling no hike at all for 2019, and just one for 2020. During the FOMC meeting, the FFR was maintained at 2.50%; policymakers are adopting a patient stance as US economy has cooled so far this year, with ‘slight-to-moderate’ growth across most of its district. The dovish Fed statement and consensus expectation of a slower 2019 GDP forecast to 2.4% from 2.5% estimated earlier as a result of the unresolved US-China trade conflicts, sent the 2Y and 10Y UST yields to fall by 26 bps and 31 bps to 2.26% and 2.41% respectively month-end as investors are expecting a rate cut to follow suit. Moving on to Malaysia, BNM also maintained the OPR at 3.25% during the MPC meeting on 5 March. In the MPC statement, BNM stated that it now expects inflation to stay low in the immediate term and be “broadly stable” in 2019 as compared to 2018, after previously saying that it would trend higher. As a result of the more cautious tone, some economists started to expect BNM to cut its OPR which sparked strong buying momentum in MGS across all tenures. With investors pricing in the 25 bps rate cut as early as next meeting in May, the 3Y, 5Y, 7Y and 10Y yields tumbled 19 bps, 17 bps, 15 bps, and 12 bps respectively to close at 3.38%, 3.53%, 3.72% and 3.77% month-end.



Thereafter in April, the UST market experienced some bond sell-off, led by the 10Y rising 9 bps to 2.50% as US-China trade negotiations have been showing encouraging progress in April, which bearish steepened the yield curve during the month. Meanwhile, the 2Y UST yield remained stable at 2.27% (+1 basis point) as investors kept their expectation of a rate cut. On the local bond market, the triple negative news flow of Norwegian Sovereign Wealth Fund cutting exposure on Emerging Markets fixed income holdings, FTSE Russell Index potential exclusion of Malaysia from the FTSE World Government Bond Index and Moody’s credit negative warning on government’s aid of RM6.2 billion to Felda during mid-April caused selling pressure with yields spiking up by 11 bps - 20 bps. However, the kneejerk reaction was short-lived supported by abundant domestic liquidity. The MGS recovered most of its losses before month-end with the 3Y, 5Y and 7Y yields climbed 3 bps - 6 bps M-o-M to close at 3.41%, 3.59% and 3.76% respectively as at end-April. Meanwhile, 10Y stood stable at 3.78% month-end, up 1 basis point M-o-M.

In May, UST yield curve bullish flattened on the back of heightened worries over the impact of the long-drawn US-China trade barriers on both US and global growth. President Donald Trump ratchets up further trade tensions with China, which involves the imposition of 25% tariffs on about $200 billion of Chinese goods, as well as imposing a new 5% tariffs on all Mexican imports (which was later called off). As a result, it heightened expectations that the Fed will cut interest rates in 2019, sending the 2Y and 10Y UST yields tumbling down by 35 bps and 38 bps to 1.92% and 2.13% respectively, a fresh 20-month low. Locally, the MPC decided to reduce the OPR by 25 bps to 3.00% on 7 May, which was intended to preserve the degree of monetary accommodativeness in supporting a steady growth in the wake of downside risks to global and local growth. As the rate cut was priced in earlier, the 3Y and 10Y MGS benchmark yields were largely unchanged at 3.40% (-1 basis point) and 3.78% respectively. Meanwhile, the bellies of the curve gained the most during the month; with 5Y and 7Y yields down by 6 bps and 7 bps, closing at 3.53% and 3.69% respectively as at end-May. In 1Q2019, Malaysia’s GDP stood at 4.5% (1Q2018: 5.3%), mainly anchored by the services, manufacturing and agriculture sectors. Meanwhile, Consumer Price Index (CPI) remains unchanged at 0.2% Y-o-Y in April, which is lower than market expectation of 0.4% Y-o-Y.

2.4 market outlook

On 4 June, during the 2-days Fed conference in Chicago, Fed officials signalled that rates could come down to keep the economy on solid ground. Fed Chairman Powell mentioned that the Fed is closely monitoring the implication of US-China trade talks for the US economy, and it will act as appropriate to sustain the expansion, with a strong labour market and inflation near the symmetric 2% objective. This could imply that the Fed may no longer take a patience stance in revising rates.

Locally, BNM is expected to keep its OPR unchanged at 3.00% for the rest of 2019. Headline inflation could still stay fairly muted in the near term underpinned by softening domestic sentiments and volatile global crude oil prices. MPC is expected to continue monitoring and assessing the balance of risks surrounding the outlook for domestic growth and inflation.

2.5 distributions

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

2.6 details of any unit split exercise

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


2.7 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.

2.8 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.

2.9 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. Any dealing with the broker or dealer is executed on terms which are the most favourable for the Fund. For the financial year under review, the Manager has received soft commissions from the stockbrokers.

2.10 cross trade

During the financial year under review, no cross-trade transactions were undertaken by investment manager for the Fund.


3. fund PERfORmAncE

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

a. distribution among industry sectors and category of investments:

As at fy fy 2019 2018 2017

% %

Unlisted fixed income securities 84.8 96.9 92.3Short term deposits and cash 15.2 3.1 7.7

100.0 100.0 100.0

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

b. distribution among markets

The Fund invests in unlisted fixed income securities and cash instruments only.


3.2 Performance details of the Fund for the last three financial years/period ended 31 May as follows:

fy 2019 fy 2018

financial period from 18.1.2016

(date of commencement)

to 31.5.2017

Net asset value (“NAV”) (RM Million) 146.92* 96.71 33.03Units in circulation (Million) 123.44 85.92 30.92NAV per unit (RM) 1.1902* 1.1256 1.0683Highest NAV per unit (RM) 1.1123 1.1256 1.0683Lowest NAV per unit (RM) 1.0685 1.0685 1.0000Total return (%) 5.74 5.36 6.83- Capital growth (%) 5.74 5.36 6.83- Income growth (%) - - -Gross distribution per unit (sen) - - -Net distribution per unit (sen) - - -Management expense ratio (“MER”)

(%) 1 0.85 0.95 1.21Portfolio turnover ratio (“PTR”) (times) 2 0.25 1.28 0.71

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

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

Above NAV and NAV per unit are not shown as ex-distribution as there were no distribution declared by the Fund in the financial year under review.

1. MER is lower against previous financial year mainly due to increase in average fund size during the financial year under review.

2. PTR is significantly lower for the financial year under review as compared to the previous financial year due to minimal trading activities.

* Based on amortised cost fair valuation method on all investment held by the Fund as at 31 May 2019, the NAV and NAV per unit would be RM147.31 million and RM1.1933 respectively.

(As disclosed under Note 13 of the financial statements.)


3.3 Average total return of the fund

1 year31 may 18 - 31 may 19

3 years31 may 16 - 31 may 19

Kenanga yield Enhancement fund 5.74% 5.29%4.5% per annum 4.50% 4.70%

Source: Novagni Analytics and Advisor; Lipper

3.4 Annual total return of the fund

year under review

31 may 18 - 31 may 19

1 year31 may 17 - 31 may 18

Since inception

18 Jan 16 - 31 may 17

Kenanga yield Enhancement fund 5.74% 5.36% 6.83%4.5% per annum 4.50% 4.50% 6.20%

Source: Novagni Analytics and Advisory, 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 yiEld EnhAncEmEnT fund

We, CIMB Commerce Trustee Berhad being the trustee for Kenanga Yield Enhancement 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 May 2019.

a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager under the Deed, the Securities Commission Malaysia’s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws;

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

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

For and on behalf of CIMB Commerce Trustee Berhad

Lee Kooi Yoke Chief Executive Officer Kuala Lumpur, Malaysia

16 July 2019


5. indEPEndEnT AudiTORS’ REPORT TO ThE uniT hOldERS Of KEnAnGA yiEld EnhAncEmEnT fund

REPORT On ThE AudiT Of ThE finAnciAl STATEmEnTS

Opinion

We have audited the financial statements of Kenanga Yield Enhancement Fund (“the Fund”), which comprise the statement of financial position as at 31 May 2019, 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 15 to 46.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 May 2019 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’ responsibilities for the audit of the financial statements 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.

Information other than the financial statements and auditors’ report thereon

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 yiEld EnhAncEmEnT fund (cOnTd.)

Responsibilities of the Manager and the Trustee for the financial statements

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’ responsibilities for the audit of the financial statements

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 yiEld EnhAncEmEnT fund (cOnTd.)

Auditors’ responsibilities for the audit of the financial statements (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 Unlisted Capital Market Products under the Lodge and Launch Framework 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 Ng Sue EanAF: 0039 No. 03276/07/2020 JChartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

16 July 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 May 2019 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 May 2019 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 Yield Enhancement Fund as at 31 May 2019 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 Manager KENANGA INVESTORS BERHAD

ISMITZ MATTHEW DE ALWISExecutive Director/Chief Executive Officer

Kuala Lumpur, Malaysia

16 July 2019


7. finAnciAl STATEmEnTS

7.1 STATEmEnT Of cOmPREhEnSiVE incOmE fOR ThE finAnciAl yEAR EndEd 31 mAy 2019

note 2019 2018Rm Rm

inVESTmEnT incOmE

Interest income 8,281,282 3,694,685Net gain/(loss) from investments:- Financial assets at fair value through profit or

loss (“FVTPL”) 4 809,470 (500)9,090,752 3,694,185

EXPEnSES

Manager’s fee 5 676,979 303,668Trustee’s fee 6 27,079 12,147Performance fee 7 427,120 199,329Auditors’ remuneration 9,600 9,000Tax agent’s fee 4,000 4,000Administration expenses 4,177 46,751

1,146,955 574,895

nET incOmE BEfORE TAX 7,941,797 3,119,290

Income tax 8 - -

nET incOmE AfTER TAX, REPRESEnTinG TOTAl cOmPREhEnSiVE incOmE fOR ThE finAnciAl yEAR 7,941,797 3,119,290

Net income after tax is made up as follows:Realised gain 7,123,976 3,119,156Unrealised gain 4 817,821 134

7,941,797 3,119,290

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


7.2 STATEmEnT Of finAnciAl POSiTiOn AS AT 31 mAy 2019

note 2019 2018Rm Rm

ASSETS

inVESTmEnTS

Financial assets at FVTPL 4 125,643,209 94,010,055 Short term deposits 9 22,334,111 2,939,092

147,977,320 96,949,147

OThER ASSETS

Other receivable 10 16,584 262 Cash at bank 20,409 30,532

36,993 30,794

TOTAl ASSETS 148,014,313 96,979,941

liABiliTiES

Amount due to Manager 689,276 240,360 Amount due to Trustee 2,486 1,641 Other payables 11 16,100 30,820 TOTAl liABiliTiES 707,862 272,821

EQuiTy

Unit holders’ contribution 134,651,665 91,994,131 Retained earnings 12,654,786 4,712,989 nET ASSET VAluE (“nAV”) ATTRiBuTABlE

TO uniT hOldERS 12 147,306,451 96,707,120

TOTAl liABiliTiES And EQuiTy 148,014,313 96,979,941

numBER Of uniTS in ciRculATiOn 12(a) 123,444,960 85,917,869

nET ASSET VAluE PER uniT (Rm) 13 1.1933 1.1256



7.3 STATEmEnT Of chAnGES in nET ASSET VAluEfOR ThE finAnciAl yEAR EndEd 31 mAy 2019

unit holders’ Retained note contribution earnings Total nAV

Rm Rm Rm

2019At beginning of the financial year 91,994,131 4,712,989 96,707,120 Total comprehensive income - 7,941,797 7,941,797 Creation of units 12(a) 73,050,560 - 73,050,560 Cancellation of units 12(a) (35,523,469) - (35,523,469)Distribution equalisation 12(a) 5,130,443 - 5,130,443 At end of the financial year 134,651,665 12,654,786 147,306,451

2018At beginning of the financial year 31,432,188 1,593,699 33,025,887 Total comprehensive income - 3,119,290 3,119,290 Creation of units 12(a) 59,763,950 - 59,763,950 Cancellation of units 12(a) (4,761,261) - (4,761,261)Distribution equalisation 12(a) 5,559,254 - 5,559,254 At end of the financial year 91,994,131 4,712,989 96,707,120



7.4 STATEmEnT Of cASh flOWSfOR ThE finAnciAl yEAR EndEd 31 mAy 2019

2019 2018Rm Rm

cASh flOWS fROm OPERATinG And inVESTinG AcTiViTiES

Proceeds from sale of financial assets at FVTPL 38,000,000 15,000,000 Interest received 7,685,276 3,352,809 Tax agent’s fee paid (4,000) (5,700)Auditors’ remuneration paid (9,000) (9,000)Payments for other fees and expenses (19,497) (31,708)Trustee’s fee paid (26,234) (11,068)Performance fee paid (199,329) (179,926)Manager’s fee paid (655,853) (276,690)Purchase of financial assets at FVTPL (68,244,000) (78,000,500)Net cash used in operating and investing activities (23,472,637) (60,161,783)

cASh flOWS fROm finAncinG AcTiViTiES

Cash received from units created 84,010,686 65,874,161 Cash paid on units cancelled (41,153,153) (5,312,218)Net cash generated from financing activities 42,857,533 60,561,943

nET incREASE in cASh And cASh EQuiVAlEnTS 19,384,896 400,160 cASh And cASh EQuiVAlEnTS AT BEGinninG Of

ThE finAnciAl yEAR 2,969,624 2,569,464 cASh And cASh EQuiVAlEnTS AT End Of ThE

finAnciAl yEAR 22,354,520 2,969,624

Cash and cash equivalents comprise:Cash at bank 20,409 30,532 Short term deposits 22,334,111 2,939,092

22,354,520 2,969,624



7.5 nOTES TO ThE finAnciAl STATEmEnTSfOR ThE finAnciAl yEAR EndEd 31 mAy 2019

1. ThE fund, ThE mAnAGER And ThEiR PRinciPAl AcTiViTiES

Kenanga Yield Enhancement Fund (“the Fund”) was constituted pursuant to the executed Deed dated 29 September 2015 (“the Deed”) between the Manager, Kenanga Investors Berhad, and CIMB Commerce Trustee Berhad (“the Trustee”). The Fund commenced operations on 18 January 2016 and will continue to be in operation until terminated in accordance with Part 11 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 income and capital growth by investing into short to medium term money market instruments and fixed income securities.

The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 16 July 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.


2. finAnciAl RiSK mAnAGEmEnT OBJEcTiVES And POliciES (cOnTd.)

a. market risk (contd.)

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

i. interest rate risk

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 fixed income medium term notes and deposits.

The Fund’s exposure to the interest rate risk is mainly confined to unlisted fixed income medium term notes.

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

yearGain/(loss)

Rm

2019Financial assets at FVTPL

5/(5) (172,869)/173,489 2018Financial assets at FVTPL 5/(5) (59,867)/59,951

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

21

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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 fixed income medium term notes with at least investment grade credit rating by a credit rating agency. The following table analyses the Fund’s portfolio of unlisted fixed income medium term notes by rating category:

financial assets at fVTPl

Percentage of total unlisted fixed income securities Percentage of nAV

2019 2018 2019 2018% % % %

RatingNot rated 83.2 100.0 70.9 97.2AA3 16.8 - 14.4 -

100.0 100.0 85.3 97.2



b. credit risk (contd.)

iii. Credit quality of financial assets (contd.)

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

2019 2018 2019 2018% % % %

RatingP1 77.6 - 11.8 -WR 22.4 100.0 3.4 3.0

100.0 100.0 15.2 3.0

iv. credit risk concentration

Concentration risk is monitored and managed based on sectoral distribution. The table below analyses the Fund’s portfolio of unlisted fixed income medium term notes by sectoral distribution:

financial assets at fVTPl

Percentage of total unlisted fixed income securities Percentage of nAV

2019 2018 2019 2018% % % %

Finance 83.2 100.0 70.9 97.2Properties 16.8 - 14.4 -

100.0 100.0 85.3 97.2

c. liquidity risk

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



c. liquidity risk (contd.)

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.

noteup to

1 year

Above 1 year - 5 years

Above5 years -15 years Total

Rm Rm Rm

2019AssetsFinancial

assets at FVTPL 69,746,209 35,329,000 20,568,000 125,643,209

Short term deposits 22,334,111 - - 22,334,111

Other assets 36,993 - - 36,993i. 92,117,313 35,329,000 20,568,000 148,014,313

liabilitiesOther liabilities ii. 691,762 - - 691,762

Equity iii. 147,306,451 - - 147,306,451

Liquidity gap (55,880,900) 35,329,000 20,568,000 16,100

2018AssetsFinancial

assets at FVTPL 39,010,055 55,000,000 - 94,010,055

Short term deposits 2,939,092 - - 2,939,092

Other assets 30,794 - - 30,794i. 41,979,941 55,000,000 - 96,979,941

liabilitiesOther liabilities ii. 242,001 - - 242,001

Equity iii. 96,707,120 - - 96,707,120

Liquidity gap (54,969,180) 55,000,000 - 30,820



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 Unlisted Capital Market Products under the Lodge and Launch Framework 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 financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.


3. SummARy Of SiGnificAnT AccOunTinG POliciES (cOnTd.)

a. Basis of accounting (contd.)

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the new and amended MFRS and Interpretation Committee’s (“IC”) Interpretation which became effective for the Fund on 1 June 2018.

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 Standards 2014 - 2016 Cycle” 1 January 2018

Amendments to MFRS 128: Investments in Associates and Joint Ventures contained in the document entitled “Annual Improvements to MFRS Standards 2014 - 2016 Cycle” 1 January 2018

MFRS 9: Financial Instruments 1 January 2018MFRS 15: Revenue from Contracts with Customers 1 January 2018Clarifications to MFRS 15: Revenue from Contracts with

Customers 1 January 2018Amendments to MFRS 2: Classification and Measurement

of Shared-Based Payment Transactions 1 January 2018

Amendments to MFRS 4: Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts

Temporary exemption from MFRS 9 subject

to certain criteria being met for annual periods

beginning on or after1 January 2018

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

IC Interpretation 22: Foreign Currency Transactions and Advance Consideration 1 January 2018

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.



a. Basis of accounting (contd.)

mfRS 9 Financial Instruments (contd.)

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 did not change the classification of its investments nor were there 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 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


or after

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

Amendments to MFRS 3 and MFRS 11: Previously Held Interest in a Joint Operation contained in the document entitled “Annual Improvements to MFRS Standards 2015 - 2017 Cycle” 1 January 2019

Amendments to MFRS 112: Income Tax Consequences of Payments on Financial Instruments Classified as Equity contained in the document entitled “Annual Improvements to MFRS Standards 2015 - 2017 Cycle” 1 January 2019

Amendments to MFRS 123: Borrowing Costs Eligible for Capitalisation contained in the document entitled “Annual Improvements to MFRS Standards 2015 - 2017 Cycle” 1 January 2019

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

Negative Compensation 1 January 2019Amendments to MFRS 119: Plan Amendment, Curtailment

or Settlement 1 January 2019Amendments to MFRS 128: Long-term Interests in

Associates and Joint Ventures 1 January 2019IC Interpretation 23: Uncertainty over Income Tax

Treatments 1 January 2019Amendments to MFRS 2: Share-Based Payment 1 January 2020Amendments to MFRS 3: Business Combinations 1 January 2020Amendments to MFRS 3: Definition of a Business 1 January 2020



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

description


or after

Amendments to MFRS 6: Exploration for and Evaluation of Mineral Resources 1 January 2020

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

Statements 1 January 2020Amendments to MFRS 108: Accounting Policies, Changes

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

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

Liabilities and Contingent Assets 1 January 2020Amendment to MFRS 138: Intangible Assets 1 January 2020Amendments to IC Interpretation 12: Service Concession

Arrangements 1 January 2020Amendments to IC Interpretation 19: Extinguishing

Financial Liabilities with Equity Instruments 1 January 2020Amendment to IC Interpretation 20: Stripping Costs in the

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

Transactions and Advance Consideration 1 January 2020Amendments to IC Interpretation 132: Intangible Assets -

Web Site Costs 1 January 2020MFRS 17: Insurance Contracts 1 January 2021Amendments to MFRS 10 and MFRS 128: Sale or

Contribution of Assets between an Investor and its Associate 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 instruments.



c. financial instruments (contd.)

i. Measurement categories of financial assets and liabilities

From 1 June 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; and• 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.

The Fund’s other financial assets include cash and bank balances, short term deposits and other receivables. Prior to 1 June 2018, the Fund classified its other financial assets as receivables (amortised cost), as explained in Note 3(c)(iii).

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.

ii. 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(c)(iii). 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.

After initial measurement, debt instruments are measured at amortised cost, using the effective interest rate (“EIR”) method, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. Expected credit losses (“ECLs”) are recognised in the statement of comprehensive income when the investments are impaired.

Financial assets at FVTPL are recorded in the statement of financial position at fair value. Changes in fair value are recorded in profit or loss.




iii. due from banks, short term deposits, trade and other receivables at amortised cost

Prior to 1 June 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 June 2018, the Fund only measures the amount due from banks, short term deposits and other receivables 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:

• 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.




iii. due from banks, short term deposits, trade and other receivables at amortised cost (contd.)

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 judgment 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.

iv. financial investments

Financial assets in this category are those that are managed in a fair value business model, or that have been designated by management upon initial recognition, or are mandatorily required to be measured at fair value under MFRS 9. This category includes debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell.

d. Reclassification of financial assets and liabilities

The Fund has not reclassified its financial assets and financial liabilities subsequent to their initial recognition and upon adoption of MFRS 9.

e. 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.



e. Derecognition of financial assets (contd.)

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.

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.



f. Impairment of financial assets (Policy applicable from 1 June 2018)

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

As described in Note 3(a), the adoption of MFRS 9 has fundamentally changed the Fund’s receivables 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.

g. 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.

h. 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.

i. 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.

j. 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.



k. 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.

l. 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.

m. 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.

n. 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

2019 2018Rm Rm

Financial assets held for trading, at FVTPL:Unlisted fixed income securities 125,643,209 94,010,055

2019 2018Rm Rm

Net gain/(loss) on financial assets at FVTPL comprised:Realised loss on disposals (8,351) (634)Unrealised changes in fair values 817,821 134

809,470 (500)

Details of financial assets at FVTPL as at 31 May 2019:

QuantityAmortised

cost fair valuePercentage

of nAV Rm Rm %

Unlisted fixed income securities

Dynasty Harmony Sdn Berhad maturing on 20/06/2031 5,000,000 5,205,130 5,299,337 3.6



Hektar Black Sdn Bhd maturing on 18/07/2019 5,000,000 5,050,411 5,051,061 3.4

Hektar Green Sdn Bhd maturing on 29/10/2019 3,000,000 3,023,671 3,024,691 2.1

KYS Assets Sdn Bhd maturing on 06/05/2020 5,000,000 5,024,931 5,030,431 3.4

KYS Assets Sdn Bhd maturing on 09/12/2019 15,000,000 15,497,671 15,511,771 10.5


4. finAnciAl ASSETS AT fVTPl (cOnTd.)

Details of financial assets at FVTPL as at 31 May 2019: (contd.)

QuantityAmortised

cost fair valuePercentage

of nAVRm Rm %

Unlisted fixed income securities (contd.)

Radimax Group Sdn Bhd maturing on 03/10/2023 35,000,000 35,367,740 35,696,740 24.2

Radimax Group Sdn Bhd maturing on 22/05/2020 40,000,000 40,061,644 40,196,844 27.3

Total unlisted fixed income securities, representing total financial assets at fVTPl 124,825,254 125,643,209 85.3

unrealised gain on financial assets at fVTPl 817,955

5. mAnAGER’S fEE

The Manager’s fee is calculated on a daily basis at a rate not exceeding 1.0% per annum of the NAV of the Fund as provided under Division 12.1 of the Deed.

The Manager is currently charging management fee of 0.50% per annum of the NAV of the Fund (2018: 0.50% per annum).

6. TRuSTEE’S fEE

Trustee’s fee is calculated on a daily basis at a rate not exceeding 0.02% per annum of the NAV of the Fund as provided under Division 12.2 of the Deed.

The Trustee’s fee is currently calculated at 0.02% per annum of the NAV of the Fund (2018: 0.02% per annum).

7. PERfORmAncE fEE

The performance fee is calculated and readjusted on a daily basis at a rate of 20% on the appreciation in the NAV per unit over and above the hurdle value during a particular performance period.


7. PERfORmAncE fEE (cOnTd.)

However, in the interest of investors, the Manager imposes a hurdle value, that is high water mark (“HWM”) plus 4.5%, in which the Fund’s performance have to exceed before the Manager is eligible for a performance fee. Although calculation is on a daily basis, the performance fee is only payable to the Manager at the end of each performance period.

Performance period means a period of 12 months beginning from 1 June to 31 May every year to coincide with the start and the end of the Fund’s financial year. However, the Fund’s financial year may be more or less than 12 months in the first financial period, depending on when the Fund is launched.

High water mark refers to the NAV per unit that forms the basis of calculating and determining the hurdle value for a particular performance period. At launch, the HWM will be the initial offer price and thereafter, will be the closing NAV per unit on the last business day of the preceding performance period or the previous HWM of the preceding performance period, whichever is higher.

8. 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:

2019 2018Rm Rm

Net income before tax 7,941,797 3,119,290

Tax at Malaysian statutory tax rate of 24% (2018: 24%) 1,906,031 748,630 Tax effect of:

Income not subject to tax (2,183,784) (886,757)Losses not deductible for tax purposes 2,004 152 Expenses not deductible for tax purposes 7,611 14,009 Restriction on tax deductible expenses for unit trust fund 268,138 123,966

Income tax for the financial year - -


9. ShORT TERm dEPOSiTS

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

10. OThER REcEiVABlE

2019 2018Rm Rm

Interest receivable from short term deposits 16,584 262

11. OThER PAyABlES

2019 2018Rm Rm

Accrual for auditors’ remuneration 9,600 9,000 Accrual for tax agent’s fees 3,500 3,500 Provision for printing and other expenses 3,000 18,320

16,100 30,820

12. nET ASSET VAluE ATTRiBuTABlE TO uniT hOldERS

NAV attributed to unit holders is represented by:

note 2019 2018Rm Rm

Unit holders’ contribution (a) 134,651,665 91,994,131

Retained earnings:Realised reserves 11,836,831 4,712,855 Unrealised reserves 817,955 134

12,654,786 4,712,989

147,306,451 96,707,120


12. nET ASSET VAluE ATTRiBuTABlE TO uniT hOldERS (cOnTd.)

(a) unit holders’ contribution

2019 2018no. of units Rm no. of units Rm

At beginning of the financial year 85,917,869 91,994,131 30,915,180 31,432,188

Add: Creation of units 73,050,560 73,050,560 59,763,950 59,763,950

Less: Cancellation of units (35,523,469) (35,523,469) (4,761,261) (4,761,261)

Distribution equalisation - 5,130,443 - 5,559,254

At end of the financial year 123,444,960 134,651,665 85,917,869 91,994,131

The Manager, Kenanga Investors Berhad, did not hold any units in the Fund, either legally or beneficially, as at 31 May 2019 (2018: nil). The number of units legally or beneficially held by the other parties related to the Manager were 174,601 units valued at RM208,351 as at 31 May 2019 (2018: 89,526 units valued at RM100,770).

13. nET ASSET VAluE PER uniT

Financial assets at FVTPL have been valued at the marked-to-market price based on prices provided by a bond pricing agency accredited by the Securities Commission of Malaysia at reporting date. The calculation of NAV attributable to unit holders per unit for the creation and cancellation of units is computed based on financial assets measured at amortised cost.

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:

2019 2018Rm Rm/unit Rm Rm/unit

NAV attributable to unit holders for creation/cancellation of units 146,918,931 1.1902 96,707,120 1.1256

Effects of adopting marked-to-market prices as fair value 387,520 0.0031 - -

NAV attributable to unit holders per statement of financial position 147,306,451 1.1933 96,707,120 1.1256


14. PORTfOliO TuRnOVER RATiO (“PTR”)

PTR for the financial year is 0.25 times (2018: 1.28 times).

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

15. mAnAGEmEnT EXPEnSE RATiO (“mER”)

MER for the financial year is 0.85% (2018: 0.95% 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.

16. TRAnSAcTiOnS WiTh licEnSEd finAnciAl inSTiTuTiOnS

Transaction value

Percentage of total

Rm %

Kenanga Investment Bank Berhad* 60,244,000 88.3 Kenanga Investors Berhad 8,000,000 11.7

68,244,000 100.0

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

The above transaction values are in respect of unlisted fixed income medium term notes and such transactions do not involve any commission or brokerage fees.

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


17. SEGmEnTAl REPORTinG

a. Business segments

In accordance with the objective of the Fund, the Fund can invest up to 100% of its NAV in placements of deposits, money market instruments and fixed income securities. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:

unlisted fixed income

securitiesOther

investments TotalRm Rm Rm

2019RevenueSegment income 8,585,675 505,077 9,090,752 Unallocated expenditure (1,148,955)Income before tax 7,941,797 Income tax -Net income after tax 7,941,797

AssetsFinancial assets at FVTPL 125,643,209 -Short term deposits - 22,334,111 Other segment asset - 16,584 Total segment assets 125,643,209 22,350,695 147,993,904 Unallocated assets 20,409

148,014,313

liabilitiesUnallocated liabilities 707,862


17. SEGmEnTAl REPORTinG (cOnTd.)

a. Business segments (contd.)

unlisted fixed income

securitiesOther

investments TotalRm Rm Rm

2018RevenueSegment income 3,389,227 304,958 3,694,185 Unallocated expenditure (574,895)Income before tax 3,119,290Income tax -Net income after tax 3,119,290

AssetsFinancial assets at FVTPL 94,010,055 -Short term deposits - 2,939,092Other segment asset - 262Total segment assets 94,010,055 2,939,354 96,949,409Unallocated assets 30,532

96,979,941

liabilitiesUnallocated liabilities 272,821

b. Geographical segments

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


18. finAnciAl inSTRumEnTS

a. Classification of financial instruments

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

The following table analyses the financial assets and 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.

financial assets at

fVTPl

financial assets at

amortised cost

Other financial liabilities Total

Rm Rm Rm Rm

2019AssetsUnlisted fixed

income securities 125,643,209 - - 125,643,209 Short term deposits - 22,334,111 - 22,334,111 Other receivable - 16,584 - 16,584 Cash at bank - 20,409 - 20,409

125,643,209 22,371,104 - 148,014,313

liabilitiesAmount due to

Manager - - 689,276 689,276 Amount due to

Trustee - - 2,486 2,486 - - 691,762 691,762

2018AssetsUnlisted fixed

income securities 94,010,055 - - 94,010,055Short term deposits - 2,939,092 - 2,939,092Other receivable - 262 - 262Cash at bank - 30,532 - 30,532

94,010,055 2,969,886 - 96,979,941

liabilitiesAmount due to

Manager - - 240,360 240,360 Amount due to

Trustee - - 1,641 1,641 - - 242,001 242,001


18. finAnciAl inSTRumEnTS (cOnTd.)

b. financial instruments that are carried at fair value

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

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

level 1 level 2 level 3 TotalRm Rm Rm Rm

investments:2019Unlisted fixed

income securities - - 125,643,209 125,643,209

2018Unlisted fixed

income securities - - 94,010,055 94,010,055

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 fixed income medium term notes are based on prices provided by a bond pricing agency accredited by the Securities Commission of Malaysia at reporting date.

Reconciliation of fair value measurements of level 3 financial instruments

The Fund carries unlisted fixed income medium term notes as financial assets at FVTPL classified as level 3 within the fair value hierarchy.

The following table shows a reconciliation of all movements in the fair value of the unlisted fixed income medium term notes categorised within level 3 between the beginning and the end of the financial year.

financial assets at fVTPl2019 2018

Rm Rm

At beginning of the financial year 94,010,055 30,667,808 Total gain recognised in profit and loss 1,633,154 342,247Net investment costs 30,000,000 63,000,000 At end of the financial year 125,643,209 94,010,055


18. finAnciAl inSTRumEnTS (cOnTd.)

b. financial instruments that are carried at fair value (contd.)

Reconciliation of fair value measurements of Level 3 financial instruments (contd.)

The following table presents additional information about valuation methodology and input used for investment that are measured at fair value and categorised within Level 3:

fair valueValuation

methodology

unobservable input – return

rateRm

2019Unlisted fixed income securities 125,643,209 Amortised cost 6.25% - 8.0

2018Unlisted fixed income securities 94,010,055 Amortised cost 6.0% - 8.0%

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.

19. cAPiTAl mAnAGEmEnT

The capital of the Fund can vary depending on the demand for creation and cancellation of units to the Fund.

The Fund’s objectives for managing capital are:

a. To invest in investments meeting the description, risk exposure and expected return indicated in its information memorandum;

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 financial year and previous financial year.

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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

Documents

KEnAnGA yiEld EnhAncEmEnT fund...50,001 - 500,000 5 780,038 500,001 and above 11 122,578,690 Total 18 123,444,960 Kenanga Yield Enhancement Fund Annual Report 2 2. mAnAGER’S REPORT