KENANGA i-enhanced CASH FUND

Transcription

1 KENANGA i-enhanced CASH FUND INTERIM REPORT For the Financial Period from 1 November 2015 to 30 April 2016

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3 KENANGA i-enhanced CASH FUND Contents Page Corporate Directory ii-iii Directory of Manager s Offices iv Fund Information 1 Manager s Report 2-5 Fund Performance 6-8 Trustee s Report 9 Shariah Adviser s Report 10 Statement by the Manager 11 Financial Statement 12-37

4 CORPORATE DIRECTORY Manager: Kenanga Investors Berhad (Company No P) Registered Office Kenanga Investors Berhad (KIB) 8th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: Business Office Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: Website: Board Of Directors Datuk Syed Ahmad Alwee Alsree (Chairman) Syed Zafilen Syed Alwee (Independent Director) Peter John Rayner (Independent Director) Imran Devindran bin Abdullah (Independent Director) Dato Bruce Kho Yaw Huat Ismitz Matthew De Alwis Investment Committee Dato Bruce Kho Yaw Huat (Chairman) Syed Zafilen Syed Alwee (Independent Member) Peter John Rayner (Independent Member) Imran Devindran bin Abdullah (Independent Member) Ismitz Matthew De Alwis Company Secretary: Norliza Abd Samad (MAICSA ) 9th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: External Fund Manager: Kenanga Islamic Investors Berhad (Company No D) Registered Office Business Office Kenanga Islamic Investors Berhad (KIIB) Suite 12.03, 12th Floor, Kenanga International, 8th Floor, Kenanga International, Jalan Sultan Ismail, Jalan Sultan Ismail, Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia. Tel: Tel: Fax: Fax: Trustee: CIMB Commerce Trustee Berhad (Company No A) Registered Office Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur. Tel: Fax: Website: Business Office Level 21, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur. Tel: Fax: Shariah Adviser: IBFIM (Company No W) Registered Office Business Office No. 149A, 149B, 151B 3rd Floor, Menara Takaful Malaysia Persiaran Raja Muda Musa Jalan Sultan Sulaiman Port Klang Kuala Lumpur, Malaysia. Selangor Darul Ehsan, Malaysia Tel: Fax: ii Kenanga i-enhanced Cash Fund Interim Report

5 Auditor: Ernst & Young (AF: 0039) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: Tax Adviser: Ernst & Young Tax Consultants Sdn Bhd (Company No K) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: Membership: Federation Of Investment Managers Malaysia (FIMM) , 6th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur, Malaysia. Tel: Fax: Website: Kenanga i-enhanced Cash Fund Interim Report iii

6 DIRECTORY OF MANAGER S OFFICES Regional Branch Offices : Kuala Lumpur Suite 12.02, 12th Floor, Kenanga International Jalan Sultan Ismail, Kuala Lumpur, Malaysia Tel: Fax: Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen Melaka Tel: Fax: Klang No. 12, Jalan Batai Laut 3, Taman Intan Klang, Selangor Darul Ehsan Tel: / Fax: Penang 5.04, 5th Floor, Menara Boustead Penang 39, Jalan Sultan Ahmad Shah Penang. Tel : / Fax : Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir Seremban, Negeri Sembilan Tel : Fax : Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum Johor Bahru, Johor Tel: / 4798 Fax: Kuching 1st Floor, No 71, Lot 7 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel: Fax: Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel: / Fax: Ipoh Suite 1, 2nd Floor, 63, Persiaran Greenhill, Ipoh, Perak, Malaysia Tel: / 7570 Fax: Miri 2nd Floor, Lot 1264, Centre Point Commercial Centre, Jalan Melayu, Miri, Sarawak Tel: Fax: iv Kenanga i-enhanced Cash Fund Interim Report

7 1. FUND INFOATION 1.1 Fund Name Kenanga i-enhanced Cash Fund (KiECF or the Fund) 1.2 Fund Category / Type Islamic Fixed Income / Income 1.3 Investment Objective The Fund aims to provide investors a regular stream of income and high level of liquidity to meet cash flow requirement while maintaining capital preservation. 1.4 Investment Strategy To achieve the objective of the Fund, it will invest in high quality short to mediumterm sukuk with minimum credit ratings of A3 or P2 (by RAM) or equivalent rating by MARC. 1.5 Duration The Fund was launched on 2 August 2007and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. 1.6 Performance Benchmark Maybank 1-month GIA rate 1.7 Distribution Policy Income (if any) will be distributed monthly on a best effort basis. 1.8 External Fund Manager Kenanga Islamic Investors Berhad 1.9 Breakdown of unit holdings of KiECF as at 30 April 2016 Size of holdings No. of unitholders No. of units held 5,000 and below 0 0 5,001-10, ,001-50, , , ,001 and above 4 63,479,094 Total 4 63,479,094 Kenanga i-enhanced Cash Fund Interim Report 1

8 2. MANAGER S REPORT 2.1 Explanation on whether the Fund has achieved its investment objective. For the financial period under review, the Fund fulfilled its investment objective, having invested in medium-term sukuk and Islamic money market deposits to provide investors with a regular income stream, high liquidity and capital preservation. 2.2 Comparison between the Fund s performance and performance of the benchmark Performance Chart Since Launch (02/08/ /4/2016) Kenanga i-enhanced Cash Fund vs Maybank 1-month GIA rate Source: Lipper 2.3 Investment strategies and policies employed during the financial period under review For the financial period under review, the Fund s investment strategy and policy were to invest in short term sukuk for yield enhancement and Islamic deposits for liquidity requirements. 2.4 The Fund's asset allocation as at 30 April 2016 and comparison with the previous financial period Asset 30 Apr Apr 2015 Unquoted sukuk - 7.7% Islamic deposits and cash 100.0% 92.3% Reason for the differences in asset allocation The fund has realised it investment in short term Sukuk and invested in Islamic deposits to provide high liquidity and capital preservation. 2 Kenanga i-enhanced Cash Fund Interim Report

9 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any) since last review period Period under review Kenanga i-enhanced Cash Fund 1.70% Maybank 1-month GIA rate 1.58% Source: Lipper The Fund outperformed its benchmark due to higher yield received from sukuk investment and higher rates obtained from selected financial institutions. 2.6 Review of the market Money Market Review For the financial period under review, Bank Negara (BNM) maintained the Overnight Policy Rate (OPR) at 3.25% amid ample liquidity financial markets. Interbank rates (3M KLIBOR) hovers at 3.7% which marks a 14bps decline from 3.84% at end The reduction in interbank rates is aided by the 50bps reduction in the statutory reserve requirement ratio (SRR) in January as well as return of capital flows that has helped to buffer domestic liquidity. Loans growth slowed to 6.4% compared to February of 7.4% and it was broadbased. Deposits growth contracted 1.0% year-on-year but was relatively unchanged on month to month basis. This led to a lower loan/deposit ratio of 87.7% against February 2016 of 88.0%. This contraction signals a weak consumer spending and real GDP. April 2016 Consumer Price Index eased further to 2.1% year-on-year compared March 2016 of 2.6%. The very low base effects and the impact of GST effective April 15 that led the headline consumer price index (CPI) to peak at 4.2% in February 2016 have started to normalise in April this year. These factors coupled with the sustained contraction in fuel prices saw the year-on-year reading in CPI easing further during the month. Local government bonds saw strong rally on the front end of the yield curve on the back of the recovery in crude oil prices which drove the buying interest by foreign and local investors. However, long end of the yield curve edged higher in response to weaker Ringgit Malaysia. The month saw the re-opening of 15-year GII 09/30 which registered an attractive bid-to-cover ratio of times as local assets insurance and pension funds extended their portfolio durations and attractive yield spread against MGS. The month also saw the new issue of year MGS with an issuance size of 4.0 billion which registered a moderately strong book-to-cover ratio (BTC) of times along with supporting buying interests by local and foreign funds. In the secondary PDS market, we saw a slightly higher volume in trading activities this month compared to last month. Total trading volume for the month stood at billion compared to last month s total of billion. Kenanga i-enhanced Cash Fund Interim Report 3

10 2.6 Review of the market (Contd.) Money Market Review (Contd.) For the financial period under review, the Fund invested in Sukuk and short term Islamic deposits to provide a reasonable level of income while maintaining high liquidity to its investors. The strategy adopted by the Fund for the period is consistent with the investment guideline stated in the information memorandum. Money Market Outlook We project a higher average inflation of 3.2% in 2016 albeit subject to downward revision if oil price weakness persists and domestic demand moderates further. Petrol prices were raised by 5.1% % in April, the first increase since October last year. Despite the recent strengthening of the Ringgit, most products have seen upward price adjustments due to a lag effect from last year s currency weakness. Growth risks continue to outweigh inflation risks thus we anticipate Bank Negara Malaysia (BNM) to maintain its overnight policy rate (OPR) at 3.25% for now. In the near term, Malaysian government bonds are expected to be supported by high degree of stickiness of foreign holding which are mostly held by foreign asset managers (44%), followed by central bank/government (29%), pension funds (13%), banks (10%) and others (4%). Total foreign holdings of MGS have continued to stay above 47% of total outstanding since November Valuation wise, the MYR is expected to still have some leeway to appreciate and supported by expectations of further monetary easing. However, we are mindful of a reversal in bearish USD positioning on improving US labour market and rising US core inflation as well as the risk of front loading demand should Overnight Policy Rate (OPR) and Statutory Reserve Ratio (SRR) rates cut expectations tapers off. 2.7 Distributions For the financial period under review, the Fund has declared the followings distributions: Gross/Net distribution per unit Cum- NAV per unit Ex NAV per unit (sen) () () 24 November December January February March April Kenanga i-enhanced Cash Fund Interim Report

11 2.8 Details of any unit split exercise The Fund did not carry out any unit split exercise during the financial period under review. 2.9 Significant changes in the state of affair of the Fund during the financial period There were no significant changes in the state of affair of the Fund during the financial period under review and up until the date of the manager s report, not otherwise disclosed in the financial statements Circumstances that materially affect any interests of the unitholders During the financial period under review, there were no circumstances that materially affected any interests of the unitholders Rebates & Soft commissions Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, financial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the financial period under review, the Manager did not receive any rebates or soft commissions from stockbrokers. Kenanga i-enhanced Cash Fund Interim Report 5

12 3. FUND PERFOANCE 3.1 Details of portfolio composition of Kenanga i-enhanced Cash Fund ( the Fund ) for the financial period as at 30 April 2016 against last 3 financial years as at 31 October are as follows: a. Distribution among industry sectors and category of Shariah-compliant investments: As at FY FY FY % % % % Unquoted corporate sukuk Islamic deposits and cash Note: The above mentioned percentages are based on total Shariahcompliant investment market value plus cash. b. Distribution among markets The Fund invests in unquoted sukuk, Islamic deposits and cash instruments only. 6 Kenanga i-enhanced Cash Fund Interim Report

13 3.2 Performance details of the Fund for the financial period ended 30 April 2016 against last 3 financial years ended 31 October are as follows: Period from to FY 2015 FY 2014 FY 2013 Net asset value ("NAV") ( Million) 70.28* Units in circulation (Million) NAV per unit () * Highest NAV per unit () Lowest NAV per unit () Total return (%) Capital growth (%) Income growth (%) Gross distribution per unit (sen) Net distribution per unit (sen) Management expense ratio ( MER ) (%) Portfolio turnover ratio ( PTR ) (times) Note: Total return is the actual return of the Fund for the respective financial period/years, 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 Shariah-compliant investment securities of the Fund divided by the average fund size calculated on a daily basis. 1. MER is lower against previous financial year mainly due to lower recovered expenses incurred during the financial period under review. 2. PTR is higher for the current financial period under review due to higher Shariah-compliant investment activities compared to the previous financial year. * Based on bid price fair valuation method on all Shariah-compliant investments held by the Fund as at 30 April 2016, the NAV and NAV per unit would be million and respectively. (As disclosed under Note 13 of the financial statements) Kenanga i-enhanced Cash Fund Interim Report 7

14 3.3 Average total return of the Fund 1 Year 3 Years 5 Years 30 Apr Apr Apr Apr Apr Apr 16 Kenanga i-enhanced Cash Fund 3.31% 2.13% 2.66% Maybank 1-month GIA rate 3.82% 3.30% 3.27% Source: Lipper 3.4 Annual total return of the Fund Kenanga i- Enhanced Cash Fund Maybank 1- month GIA rate Source: Lipper Period under review 1 year 1 year 1 Year 1 Year 1 Year 31 Oct Apr Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct % 3.24% 1.34% -0.58% 1.15% 6.64% 1.58% 3.19% 2.82% 2.75% 2.89% 2.89% Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. 8 Kenanga i-enhanced Cash Fund Interim Report

15 4 TRUSTEE S REPORT TO THE UNITHOLDERS OF KENANGA i-enhanced CASH FUND We, CIMB COMMERCE TRUSTEE BERHAD ( the Trustee ), being the Trustee of KENANGA i-enhanced CASH FUND ( the Fund ) are of the opinion that KENANGA INVESTORS BERHAD ( the Manager ), acting in the capacity of Manager of the Fund, has fulfilled its duties in the following manner for the financial period ended 30 April a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, the Securities Commission Malaysia s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws; b) Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; c) Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements; and d) The distribution of returns by the Fund is tied to and reflects the investment objective of the Fund. For and on behalf of CIMB COMMERCE TRUSTEE BERHAD LEE KOOI YOKE Chief Operating Officer Kuala Lumpur, Malaysia 27 June 2016 Kenanga i-enhanced Cash Fund Interim Report 9

16 5. SHARIAH ADVISER S REPORT TO THE UNITHOLDERS OF KENANGA i-enhanced CASH FUND We have acted as the Shariah Adviser of Kenanga i-enhanced Cash Fund. Our responsibility is to ensure that the procedures and processes employed by Kenanga Investors Berhad are in accordance with Shariah principles. In our opinion, Kenanga Investors Berhad has managed and administered Kenanga i-enhanced Cash Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the financial period ended 30 April In addition, we also confirm that the investment portfolio of Kenanga i-enhanced Cash Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission. As for the securities which are not certified by the Shariah Advisory Council of the Securities Commission, we have reviewed the said securities and opine that these securities are designated as Shariah-compliant. For and on behalf of the Shariah Adviser IBFIM AHMAD ZAKIRULLAH BIN MOHAMED SHAARANI Shariah Advisor/ Designated Person Responsible for Shariah Advisory Kuala Lumpur 27 June Kenanga i-enhanced Cash Fund Interim Report

17 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 30 April 2016 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial period from 1 November 2015 to 30 April 2016 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 i-enhanced Cash Fund as at 30 April 2016 and of its financial performance and cash flows for the financial period from 1 November 2015 to 30 April 2016 and comply with the requirements of the Deed. For and on behalf of the Manager Kenanga Investors Berhad Ismitz Matthew De Alwis Executive Director/Chief Executive Officer Kuala Lumpur, Malaysia 27 June 2016 Kenanga i-enhanced Cash Fund Interim Report 11

18 7. FINANCIAL STATEMENT 7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 1 NOVEMBER 2015 TO 30 APRIL 2016 (unaudited) Note to to INVESTMENT INCOME Profit income 1,324,433 1,174,381 Net gain/(loss) from Shariahcompliant investments: -Financial assets at fair value through profit or loss ( FVTPL ) 4 1,490 (5,686) 1,325,923 1,168,695 EXPENSES Manager s fee 5 167, ,860 Trustee s fee 6 6,713 6,398 Auditors remuneration 3,471 - Tax agent s fee 1,984 - Administration expenses 11,802 6, , ,376 NET INCOME BEFORE TAX 1,134,117 1,001,319 Income tax NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD 1,134,117 1,001,319 Net income after tax is made up as follows: Realised gain 1,122, ,205 Unrealised gain 4 11,617 2,114 1,134,117 1,001,319 Distributions for the financial period: Gross/Net distribution () 8 921, ,347 Gross/Net distribution per unit (sen) The accompanying notes form an integral part of the financial statements. 12 Kenanga i-enhanced Cash Fund Interim Report

19 7.2 STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2016 (unaudited) Note INVESTMENTS Financial assets at FVTPL 4-4,831,133 Islamic deposits with licensed financial institutions 9 70,143,095 57,543,120 70,143,095 62,374,253 OTHER ASSETS Other receivable , ,566 Cash at bank 8,955 10, , ,706 TOTAL ASSETS 70,326,641 63,057,959 LIABILITIES Amount due to Manager 27,808 25,862 Amount due to Trustee 1,112 2,100 Other payables 11 13,441 7,011 TOTAL LIABILITIES 42,361 34,973 EQUITY Unitholders contribution 69,329,104 62,485,803 Retained earnings 955, ,183 NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNITHOLDERS 12 70,284,280 63,022,986 TOTAL EQUITY AND LIABILITIES 70,326,641 63,057,959 NUMBER OF UNITS IN CIRCULATION 12(a) 63,479,094 57,278,436 NET ASSET VALUE PER UNIT () The accompanying notes form an integral part of the financial statements. Kenanga i-enhanced Cash Fund Interim Report 13

20 7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL PERIOD FROM 1 NOVEMBER 2015 TO 30 APRIL 2016 (unaudited) Note Unitholders Retained contribution earnings Total NAV to At beginning of the financial period 63,324, ,661 64,051,974 Total comprehensive income - 1,134,117 1,134,117 Creation of units 12(a) 5,102,013-5,102,013 Cancellation of units 12(a) (18,912) - (18,912) Distribution equalisation 12(a) 15,088-15,088 Distribution 8 (15,088) (906,602) (921,690) Reinvestment of income distributed 12(a) 921, ,690 At end of the financial period 69,329, ,176 70,284, to At beginning of the financial period 61,824,370 87,980 61,912,350 Total comprehensive income - 1,001,319 1,001,319 Creation of units 12(a) 108, ,781 Distribution equalisation 12(a) Distribution 8 (231) (552,116) (552,347) Reinvestment of income distributed 12(a) 552, ,347 At end of the financial period 62,485, ,183 63,022,986 The accompanying notes form an integral part of the financial statements. 14 Kenanga i-enhanced Cash Fund Interim Report

21 7.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 NOVEMBER 2015 TO 30 APRIL 2016 (unaudited) Note to to CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from the maturity of investment 44,119,173 30,901,834 Proceeds from sale of financial assets at FVTPL 16,889, ,600 Profit received 1,699, ,873 Auditors remuneration paid (7,000) - Trustee s fee paid (7,731) (8,499) Payments for other fees and expenses (12,824) (381) Manager s fee paid (166,315) (155,256) Purchase of financial assets at FVTPL (11,605,014) - Placement of investment (37,789,240) (54,991,585) Net cash generated from operating and investing activities 13,120,451 (22,816,414) CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 5,117, ,317 Cash paid on units cancelled (18,978) - Net cash generated from financing activities 5,098, ,317 NET INCREASE IN CASH AND CASH EQUIVALENTS 18,218,640 (22,707,097) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD 14,144,170 56,170,606 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 32,362,810 33,463,509 Cash and cash equivalents comprise: Cash at bank 8,955 10,140 Short term Islamic deposits 9 32,353,855 33,453,369 32,362,810 33,463,509 The accompanying notes form an integral part of the financial statements. Kenanga i-enhanced Cash Fund Interim Report 15

22 7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 1 NOVEMBER 2015 TO 30 APRIL 2016 (unaudited) 1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga i-enhanced Cash Fund (the Fund ) was constituted pursuant to the executed Deed dated 4 July 2007 (collectively, together with deeds supplemental thereto, referred to as the Deed ) between the Manager, Kenanga Funds Berhad, and CIMB Commerce Trustee Berhad ("the Trustee"). The Fund commenced operations on 2 August 2007 and will continue to be in operation until terminated as provided under Part 12 of the Deed. Pursuant to the executed First Supplemental Deed dated 15 May 2013 between Kenanga Investors Berhad and CIMB Commerce Trustee Berhad, Kenanga Investors Berhad was appointed as the Manager of the Fund with effect from 8 June Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad, which in turn is a wholly-owned subsidiary of K & N Kenanga Holdings Berhad that is listed on the Main Market of Bursa Malaysia Securities Berhad. All of these companies are incorporated in Malaysia. The principal place of business of the Manager is Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur. The Fund seeks to provide investors a regular stream of income and high level of liquidity to meet cash flow requirement while maintaining capital preservation. To achieve the objective of the Fund, it will invest in high quality short to medium term sukuk with minimum credit ratings of A3 or P2 (by RAM) or equivalent rating by MARC. 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 a Shariah-compliant investment in the Fund. The Fund has an approved set of investment guidelines and policies as well as internal controls which sets out its overall business strategies to manage these risks to optimise returns and preserve capital for the unitholders, consistent with the long term objectives of the Fund. a. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes interest rate risk. 16 Kenanga i-enhanced Cash Fund Interim Report

23 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) Market risk arises when the value of the Shariah-compliant 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 Shariah-compliant investments valuation 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 Shariah-compliant 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 valuation of Shariah-compliant instruments. In the event of a rising interest rate environment, the valuation of Shariah-compliant instruments may decrease, and vice versa. Interest rate, such as the Overnight Policy Rate set by Bank Negara Malaysia, will have an impact on the investment decisions of the Fund regardless of whether it is a Shariahcompliant fund or otherwise. It does not in any way suggest that the Fund will invest in conventional financial instruments. The Fund s exposure to the interest rate risk is mainly confined to unquoted corporate sukuk. Interest rate risk sensitivity The following table demonstrates the sensitivity of the Fund s profit for the financial period to a reasonably possible change in rate of return, with all other variables held constant. Changes in rate Increase/ (Decrease) Basis points Effects on profit for the financial period Increase/ (Decrease) Financial assets at FVTPL 5/(5) (3,316)/3,318 In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material. Kenanga i-enhanced Cash Fund Interim Report 17

24 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s assets and liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Up to 1 year Above 1 year - 5 years Nonexposure to interest rate movement Total Weighted average effective rate of return* % Assets Islamic deposits with licensed financial institutions 70,143, ,143, Other assets , ,546 70,143, ,546 70,326,641 Liabilities Other liabilities ,361 42,361 Total interest rate sensitivity gap 70,143, ,185 70,284, Kenanga i-enhanced Cash Fund Interim Report

25 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure (Contd.) Nonexposure to interest rate Weighted average effective rate of return* Above 1 Up to 1 year year - 5 years movement Total % Assets Financial assets at FVTPL 2,253,676 2,534,583 42,874 4,831, Islamic deposits with licensed financial institutions 57,543, ,543, Other assets , ,706 59,796,796 2,534, ,580 63,057,959 Liabilities Other liabilities ,973 34,973 Total interest rate sensitivity gap 59,796,796 2,534, ,607 63,022,986 * Computed based on Shariah-compliant assets with exposure to interest rate movement only. Kenanga i-enhanced Cash Fund Interim Report 19

26 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) 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 unquoted corporate sukuk with at least investment grade credit rating by a credit rating agency. The following table analyses the Fund's portfolio of unquoted corporate sukuk by rating category: Financial assets at FVTPL Percentage of total unquoted sukuk Percentage of NAV % % % % Rating AA AA AA AAA Kenanga i-enhanced Cash Fund Interim Report

27 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) b. Credit Risk (Contd.) iii. Credit quality of financial assets (Contd.) The Fund invests in Islamic deposits with financial institutions licensed under Islamic Financial Services Act The following table analyses the licensed financial institutions by rating category: Islamic deposits Percentage of total Islamic deposits Percentage of NAV % % % % Rating P WR iv. Credit risk concentration Concentration risk is monitored and managed based on sectoral distribution. The table below analyses the Fund s portfolio of unquoted corporate sukuk by sectoral distribution: Percentage of total unquoted sukuk Percentage of NAV % % % % Finance Utilities Plantations Trading/Services Kenanga i-enhanced Cash Fund Interim Report 21

28 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cancellation of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholder s option based on the Fund s NAV per unit at the time of cancellation calculated in accordance with the Deed. The Islamic liquid assets comprise cash, Islamic deposits with licensed financial institutions and other Shariah-compliant 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. Note Above 1 Up to 1 year year - 5 years Total Assets Islamic deposits with licensed financial institutions 70,143,095-70,143,095 Other assets 183, ,546 (i) 70,326,641-70,326,641 Liabilities Other liabilities (ii) 42,361-42,361 Equity (iii) 70,284,280-70,284,280 Liquidity gap Kenanga i-enhanced Cash Fund Interim Report

29 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) Note Up to 1 year Above 1 year - 5 years Total Assets Financial assets at FVTPL 2,296,550 2,534,583 4,831,133 Islamic deposits with licensed financial institutions 57,543,120-57,543,120 Other assets 683, ,706 (i) 60,523,376 2,534,583 63,057,959 Liabilities Other liabilities (ii) 34,973-34,973 Equity (iii) 63,022,986-63,022,986 Liquidity gap (2,534,583) 2,534,583 - (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 unitholders can request for redemption of their units, they have been categorised as having a maturity of up to 1 year. As a result, it appears that the Fund has a liquidity gap within up to 1 year. However, the Fund believes that it would be able to liquidate its Shariah-compliant investments should the need arises to satisfy all the redemption requirements. Kenanga i-enhanced Cash Fund Interim Report 23

30 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 ) issued by the International Accounting Standards Board ( IASB ). The accounting policies adopted are consistent with those of the previous financial period except for the adoption of the new and amended MFRS which became effective for the Fund on 1 November The adoption of the new and amended MFRS did not have any significant impact on the financial position or performance of the Fund. The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. b. Standards and Amendments Issued But Not Yet Effective As at the reporting date, the following Standards and Amendments that have been issued by MASB will be effective for the Fund in future financial periods. The Fund intends to adopt the relevant standards when they become effective. Description Effective for financial period beginning on or after Amendments to MFRS contained in the documents entitled Annual Improvements to MFRSs Cycle 1 January 2016 MFRS 14: Regulatory Deferral Accounts 1 January 2016 Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception 1 January 2016 Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 101: Disclosure Initiative 1 January 2016 Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 127: Equity Method in Separate Financial Statements 1 January 2016 MFRS 9: Financial Instruments 1 January 2018 MFRS 15: Revenue from Contracts with Customers 1 January 2018 MFRS 16: Leases 1 January 2019 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be announced by MASB 24 Kenanga i-enhanced Cash Fund Interim Report

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES b. Standards and Amendments Issued But Not Yet Effective (Contd.) The Fund will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any significant impact to the financial statements of the Fund upon their initial application, other than MFRS 9. MFRS 9 replaces MFRS 139 on the following requirements: classification and measurement of financial assets and financial liabilities as defined in MFRS 139, impairment methodology and hedge accounting. The Fund is in the process of making an assessment of the impact of this Standard. c. Financial Assets Shariah-compliant financial assets are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instruments. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at FVTPL, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition. i. Financial assets at FVTPL Shariah-compliant financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Shariah-compliant financial assets held for trading include unquoted corporate sukuk acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those Shariah-compliant financial instruments are recorded in profit or loss. Profit earned elements of such instruments are recorded in profit income. ii. Receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective yield method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process. Kenanga i-enhanced Cash Fund Interim Report 25

32 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) c. Financial Assets (Contd.) ii. Receivables (Contd.) A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. d. Impairment of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective profit rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the assets does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. e. Income Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Profit income which includes the accretion of discount and amortisation of premium on unquoted corporate sukuk, is recognised using the effective yield method. The realised gain or loss on sale of Shariah-compliant investments is measured as the difference between the net disposal proceeds and the carrying amount of the Shariah-compliant investment. 26 Kenanga i-enhanced Cash Fund Interim Report

33 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) f. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term Islamic deposits with licensed financial institutions. g. Income Tax Income tax on the profit or loss for the financial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial period. As no temporary differences have been identified, no deferred tax has been recognised. h. Unrealised Reserves Unrealised reserves represent the net gain or loss arising from carrying Shariahcompliant investments at their fair values at reporting date. This reserve is not distributable. i. Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund s financial liabilities are classified as other financial liabilities. The Fund s financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective yield method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. j. Unitholders Contribution NAV Attributable to Unitholders The unitholders contribution to the Fund is classified as Shariah-compliant equity instruments. Distribution equalisation represents the average amount of undistributed net income included in the creation or cancellation price of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are released back to the Trustee. Kenanga i-enhanced Cash Fund Interim Report 27

34 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) k. Functional and Presentation Currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the functional currency ). The financial statements are presented in Ringgit Malaysia ( ), which is also the Fund s functional currency. l. Distribution Distributions are at the discretion of the Manager. A distribution to the Fund s unitholders is accounted for as a deduction from retained earnings. m. Significant Accounting Judgments and Estimates The preparation of financial statements requires the use of certain accounting estimates and exercise of judgment. Estimates and judgments are continually evaluated and are based on past experience, reasonable expectations of future events and other factors. i. Critical judgments made in applying accounting policies There are no major judgments made by the Manager in applying the Fund's accounting policies. ii. Key sources of estimation uncertainty There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period. 4. FINANCIAL ASSETS AT FVTPL Financial assets held for trading, at FVTPL: Unquoted corporate sukuk - 4,831, to to Net gain/(loss) on financial assets at FVTPL comprised: Realised loss on disposals (10,127) (7,800) Unrealised changes in fair values 11,617 2,114 1,490 (5,686) 28 Kenanga i-enhanced Cash Fund Interim Report

35 5. MANAGER S FEE The Manager s fee is computed on a daily basis at a rate not less than 0.5% per annum and not exceeding 3.0% per annum of the NAV of the Fund as provided under Division 13.1 of the Deed. The Manager is currently charging Manager s fee of 0.50% per annum of the NAV of the Fund (financial period from 1 November 2014 to 30 April 2015: 0.50% per annum). 6. TRUSTEE S FEE Pursuant to the Second Supplemental Deed dated 25 July 2014, the Trustee s fee is computed at a rate not exceeding 0.08% per annum of the NAV of the Fund and subject to a minimum fee of 9,000 effective from 1 August The Trustee s fee is currently computed at 0.02% per annum of the NAV of the Fund effective from 3 November Prior to 3 November 2014, the Trustee s fee was computed at 0.08% per annum. 7. INCOME TAX Income tax is calculated at the Malaysian statutory tax rate of 24% (financial period from 1 November 2014 to 30 April 2015: 25%) of the estimated assessable income for the financial period. Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, 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: to to Net income before tax 1,134,117 1,001,319 Tax at Malaysian statutory tax rate of 24% (financial period from 1 November 2014 to 30 April 2015: 25%) 272, ,330 Tax effect of: Income not subject to tax (320,652) (294,124) Loss not deductible for tax purposes 2,430 1,950 Expenses not deductible for tax purposes 4,837 3,129 Restriction on tax deductible expenses for unit trust fund 41,197 38,715 Income tax for the financial period - - Kenanga i-enhanced Cash Fund Interim Report 29

36 8. DISTRIBUTIONS Distributions to unitholders were made on the following dates: to to Distributions on : 24 November 2015/25 November ,143 17, December 2015/23 December ,514 22, January 2016/27 January , , February 2016/24 February , , March 2016/25 March , , April 2016/22 April , , , ,347 Distributions to the unitholders are from the following sources: to to Profit income 369, ,310 Distributions out of distribution equalisation (Note 12(a)) 15, Undistributed income from prior years 726,124 58,997 1,110, ,538 Less: Expenses (188,529) (83,191) Distribution for the financial period 921, ,347 Gross/Net distribution per unit (sen) ISLAMIC DEPOSITS WITH LICENSED FINANCIAL INSTITUTIONS Islamic deposits are held with licensed financial institutions in Malaysia at the prevailing profit rates Islamic deposits (tenure: more than 3 months) 37,789,240 24,089,751 Short term Islamic deposits (tenure: 3 months or less) 32,353,855 33,453,369 70,143,095 57,543, Kenanga i-enhanced Cash Fund Interim Report

37 10. OTHER RECEIVABLE Profit income from short term Islamic deposits 174, , OTHER PAYABLES Accrual for auditors remuneration 3,471 - Accrual for tax agent s fees 5,984 - Provision for printing and other expenses 3,986 7,011 13,441 7, NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS NAV attributed to unitholders is represented by: Note Unitholders contribution (a) 69,329,104 62,485,803 Retained earnings: Realised reserves 955, ,583 Unrealised reserves - 6, , ,183 (a) Unitholders contribution 70,284,280 63,022, to to No. of units No. of units At beginning of the financial period 58,039,868 63,324,313 56,675,959 61,824,370 Add: Creation of units 4,622,618 5,102,013 99, ,781 Less: Cancellation of units (17,136) (18,912) - - Distribution equalisation - 15, Distribution - (15,088) - (231) Reinvestment of income distributed 833, , , ,347 At end of the financial period 63,479,094 69,329,104 57,278,436 62,485,803 The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager as at 30 April 2016 were nil (30 April 2015: nil). Kenanga i-enhanced Cash Fund Interim Report 31