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KENANGA SHARIAH BALANCED FUND(FORMERLY KNOWN AS ING SHARIAH BALANCED)

INtERIM REpORt

For the Financial Period 1 October 2013 to 31 March 2014

Investor Services CenterToll Free Line: 1 800 88 3737Fax: +603 2057 3722Email: [email protected]

Head Office, Kuala LumpurSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807

Kenanga Investors Berhad (353563-p)

KENANGA SHARIAH BALANCED FUND(FORMERLY KNOWN AS ING SHARIAH BALANCED)

Contents Page

Corporate Directory ii-iiiDirectory of Manager’s Offices ivFund Information 1Manager’s Report 2-5Fund Performance 6-8Trustee’s Report 9Shariah Adviser’s Report 10Statement by the Manager 11Financial Statement 12-38

ii Kenanga Shariah Balanced Fund Interim Report

CORPORATE DIRECTORY

Manager: Kenanga Investors Berhad (Company No. 353563-P)Registered office

Kenanga Investors Berhad (KIB)8th Floor, Kenanga International, Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax: 03-2161 4990

Business OfficeSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807E-mail: [email protected] Website: www.KenangaInvestors.com.my

Board Of DirectorsDatuk Syed Ahmad Alwee Alsree (Chairman)Syed Zafilen Syed Alwee (Independent Director)YM Raja Dato’ Seri Abdul Aziz bin Raja Salim (Independent Director)Vivek Sharma (Independent Director)Peter John Rayner (Independent Director)Bruce Kho Yaw HuatAbdul Razak bin Ahmad

Investment Committee Bruce Kho Yaw Huat (Chairman) Syed Zafilen Syed Alwee (Independent Member)Vivek Sharma (Independent Member)Peter John Rayner (Independent Member)Abdul Razak bin Ahmad

Company Secretary: Norliza Abd Samad (MAICSA 7011089)9th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax:03-2161 4990

External Fund Manager: Kenanga Islamic Investors Berhad (Company No. 451957-D)Registered Office

Kenanga Islamic Investors Berhad (KIIB)8th Floor, Kenanga International, Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Tel: 03-2162 1490 Fax: 03-2161 4990

Business Office Level 21, Menara CIMBSuite 12.03, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8805

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

Kenanga Shariah Balanced Fund Interim Report iii

Shariah Adviser: IBFIM (Company No. 763075-W)Registered Office

Level 149A, 149B, 151BPersiaran Raja Muda Musa42000 Port KlangSelangor Darul Ehsan, Malaysia

Business Office 3rd Floor, Menara Takaful MalaysiaJalan Sultan Sulaiman50000 Kuala Lumpur, Malaysia.Tel: 03-2031 1010 Fax: 03-2078 5250

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

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

Membership: Federation Of Investment Managers Malaysia (FIMM)19-06-1, 6th Floor, PNB Damansara, 19, Lorong Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia. Tel: 03-2093 2600 Fax: 03-2093 2700 Website: www.fimm.com.my

iv Kenanga Shariah Balanced Fund Interim Report

DIRECTORY OF MANAGER’S OFFICES

REGIONAL BRANCH OFFICES:

Kuala LumpurSuite 12.02, 12th Floor, Kenanga InternationalJalan Sultan Ismail,50250 Kuala Lumpur, MalaysiaTel: 03-2057 3688Fax: 03-2161 8807

Johor BahruLot 11.03, 11th Floor, Menara MSC Cyberport5 Jalan Bukit Meldrum80300 Johor Bahru, JohorTel: 07-223 7505/4798 Fax: 07-223 4802

MelakaNo. 25-1 Jalan Kota Laksamana 2/17Taman Kota Laksamana Seksyen 275200 MelakaTel: 06-281 8913, 282 0518 Fax: 06-281 4286

Kuching1st Floor, No 71, Lot 7Lot 10900, Jalan Tun Jugah93350 Kuching, SarawakTel: 082-572 228 Fax: 082-572 229

KlangNo. 12 Jalan Batai Laut 3, Taman Intan41300 Klang, Selangor Darul EhsanTel:03-3341 8818, 3348 7889 Fax:03-3341 8816

Kota KinabaluA-03-11, 3rd FloorBlock A Warisan SquareJalan Tun Fuad Stephens88000 Kota Kinabalu, SabahTel: 088-447 089/448 106 Fax: 088-447 039

Penang16th Floor , Menara Boustead Penang 39 , Jalan Sultan Ahmad Shah 10050 Penang. Tel : 04 227 3788 Fax : 04 210 6644

IpohNo. 5A, Persiaran Greentown 9Greentown Business Centre30450 Ipoh,Perak Darul RidzuanTel: 05-254 7573/7570 Fax: 05-254 7606

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

Agency OfficeMiri (Sarawak)c/o Lot 1084, 2nd Floor,Jalan Merpati98000 MiriSarawak, MalaysiaTel: 085-427 782

Kenanga Shariah Balanced Fund Interim Report 1

1. FUND INFORMATION

1.1 Fund Name

Kenanga Shariah Balanced Fund (KSBF or the Fund) (formerly known as ING Shariah Balanced)

1.2 Fund Type / Category

Islamic Balanced / Income & Growth

1.3 Investment Objective

The Fund aims to achieve long-term capital growth through diversified investment in equities, fixed income and money market instruments which are Shariah-compliant.

1.4 Investment Strategy

The Fund aims to invest in a balance mix between Shariah-compliant equities, sukuk and Islamic money market instruments. The Fund’s Shariah-compliant equity exposure ranges from 40% to 60% of the Fund’s Net Asset Value (NAV), with the remaining consisting of sukuk and Islamic money market instruments.

1.5 Duration

The Fund was launched on 23 April 2004 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unit holders for it to continue.

1.6 Performance Benchmark

A composite of FTSE Bursa Malaysia Emas Shariah Index (FBMS) (50%) and the All Malaysian Government Investment Issue (50%)

1.7 Distribution Policy

Income (if any) as secondary objective is paid annually.

1.8 External Fund Manager

Kenanga Islamic Investors Berhad

1.9 Breakdown of unit holdings of KSBF as at 31 March 2014

Size of holdings No. of unitholders No. of units held5,000 and below 79 111,0315,001 - 10,000 14 104,31310,001-50,000 10 195,99150,001-500,000 3 200,212500,001 and above 0 0Total 106 611,547

2 Kenanga Shariah Balanced Fund Interim Report

2. MANAGER’S REPORT

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

The fund has appreciated by 2.14% in net asset value terms for the period under review to achieve its long term capital growth objective.

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

Performance Chart Since Launch (23/04/2004– 31/03/2014)Kenanga Shariah Balanced Fund vs Benchmark*

% Cumulative Return, Launch to 31/3/2014

0.00-10.00-20.00

10.0020.0030.0040.0050.0060.0070.0080.00

23/4

/200

4

31/1

2/20

04

30/6

/200

4

30/6

/200

5

30/6

/200

6

30/6

/200

7

30/6

/200

8

30/6

/200

9

30/6

/201

0

30/6

/201

1

30/6

/201

2

30/6

/201

3

31/1

2/20

05

31/1

2/20

06

31/1

2/20

07

31/1

2/20

08

31/1

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09

31/1

2/20

10

31/1

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11

31/1

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12

31/1

2/20

1331

/3/2

014

Kenanga Shariah Balanced : 64.92 FTSE Bursa Malaysia Emas Shariah Index (50%) & All Malaysian Government Investment Issue (50%) : 74.10

*FTSE Bursa Malaysia Emas Shariah Index (50%) & All Malaysian Government Investment Issue (50%)Source: Novagni Analytics and Advisory Sdn Bhd

2.3 Investment strategies and policies employed during the period under review

For the period under review, the Fund continued with its strategy of investing in Shariah-compliant securities of companies with sustainable business models and competent management, whilst trading at a discount to their intrinsic / fair value.

Sectors that we favour include: i) Islamic REITs, ii) Consumer staples and FMCG, iii) Healthcare, iv) Plantations (on a longer term), and v) Oil & Gas.

On the sukuk, we continue to invest in high grade corporate sukuk and Islamic money market instruments. Given the small fund size however, it remained a challenge to fully undertake meaningful sukuk strategy to improve the performance of the Fund.


2.4 The Fund’s asset allocation as at 31 March 2014 and comparison with the previous financial period

Asset 31 March 2014 31 March 2013Quoted Shariah-compliant investment securities 53.3% 47.0%Unquoted sukuk 45.6% 44.2%Short-term Islamic deposits and cash 1.1% 8.8%

Reason for the differences in asset allocation

As at 31 March 2014, the Fund’s exposure in quoted Shariah-compliant investment securities has increased to 53.3% from 47% previously. The increase was to take advantage of the opportunity present in exposure in quoted Shariah-compliant investment securities whilst reducing the Islamic deposits and cash significantly.

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

Period under reviewKenanga Shariah Balanced Fund 2.14%Benchmark * 3.64%

* FBMS (50%) and the All Malaysian Government Investment Issue (50%)Source: Lipper and Novagni Analytics and Advisory Sdn Bhd

For the period under review to 31 March 2014, the Fund has appreciated by 2.14% but underperformed the 3.64% increase in its benchmark. The underperformance was mainly due to high expense ratio and limited trading strategy on the sukuk.

2.6 Review of the market

Market Review

The developed markets in the region rebounded significantly in the final quarter of 2013, sparked by the US Congress decision to pass a bill to reopen the government and raise the debt ceiling. This helped the US government to avoid a debt default as well as expectation that the US QE tapering being later as the recovery of the US economy is still uncertain. This helps to boost the performance of those markets but emerging markets continued to suffered except for Malaysia.

Indonesia and Thailand were aggressively sold in November 2013, down 5.6% and 5.0% month-on-month respectively due to continued fear over the weakening currencies and political uncertainty in the latter. Thailand was hit by street demonstration after the Constitutional Court ruled that the Government effort to amend the constitution was illegal.


2.6 Review of the market (contd.)

Market Review (contd.)

Fixed income/sukuk yields reacted negatively, where the 10-year Treasury yields increased by 86bp to 2.99% in Sept 2013 from 1.60% in May 2013. Subsequent movement of US treasury yields was volatile, reflecting market expectations the QE tapering pace and the potential interest rate hike. By the end of 1Q 2014, 10-year US Treasury yields regain some strength to close at 2.72%, as the cold winter in 2013 affected its economic growth in 1Q 2014, resurfacing expectations that interest rate hikes is delayed. While, the US Fed had highlighted that the pace and progress of the QE tapering programme will heavily depends on the health of US economy going forward, they further commented that low US interest rate environment will continue for some time even after the QE tapering ends.

The KLCI and FBMS Shariah Indices rose by 3.0% and 2.5% respectively in December 2013, as the often commented “window dressing” activities in selected counters helped to push the indices higher.

Emerging markets reacted positively in the 1Q 2014 after the US Federal Reserve Chairman in her first public comments remarked that she is committed to help the economy to return to full employment and return inflation to 2%. It suggests that tapering of US quantitative easing (QE3) is likely to be towards end of the year. Foreign funds begin to flow back into emerging markets especially into Philippines and Indonesia. The FBM Shariah index rose 0.7% in the 1Q 2014 as domestic institutional investors also turn active in the market.

Market Outlook

We believe volatility will be extended into Q2 2014, as global financial markets which benefited greatly from a powerful combination of lifting growth and vast liquidity, continue to adjust to a period of easing quantitative measures (Malaysia saw a net foreign outflow of RM6bn in Q1 this year). Seasonally, Q2 tend to be a slower period and corresponds this time around to the World Cup Season and Ramadan fasting in June. Hence, we expect intermittent weakness during the quarter, presenting an opportunity to position for stronger 2H as export recovery in Asia gather momentum.

Externally, a firmer US economy, coupled with recovering EU and Japan, are expected to lift the outlook for Asia. However, China remains a wildcard with monetary easing likely in Q2/Q3 as activity data continue to show further weakness. Economists now expect GDP growth to slow down to below 7.5% in Q1 and possibly drop below 7% in Q2, warranting some expansionary fiscal/ monetary policy (Reserved Requirement Ratio cuts etc) to shore up economic growth.

Malaysian corporate earnings are expected to grow 8% this year. Against the backdrop of a robust 2014 GDP growth forecast of 4.5-5.5%, the major earnings drivers are higher crude palm oil prices, increased exports and continuous capital expenditure in the oil & gas sector. Valuations wise, if we peg the market at 16.5 times forward PE, the KLCI has a potential to trade up to 1,990 points, which is more than a 6% upside from here. The key to outperformance lies with disciplined stock picking.


2.6 Review of the market (contd.)

Strategy

In the immediate term, we are of the view that the risk-award scale is at best balanced, with a possible tilt towards further consolidation as market valuations have remained elevated at 16 times. Therefore, we have raised more cash with our investment levels now averaging 80-85% (down from more than 90%) for relative-return funds, and 75%-85% for absolute-return funds. We will look to add on weakness, and aim to increase our investment level back to above 90% by end of Q2/ early Q3.

In terms of our investment strategy and sector selections, we maintain our barbell strategy of holding a good balance of high yielding/defensive Shariah-compliant stocks and beta Shariah-compliant stocks to ride through the volatility. Our Shariah-compliant stock selection favours sectors that will benefit from being the main drivers of the economy such as the oil & gas (which will continue to form the core holdings due to robust capex programme underpinning earnings growth), construction (beneficiary of ETP programme), exporters/manufacturers (beneficiaries of weak Ringgit and recovering external demand like glove, technology, ICT, etc) and plantation sector (rebound of CPO price from a decline in 2013), as well as property (pent up demand post digestion of cooling measures and compelling valuations).

On the sukuk portion, we maintain our preference for corporate sukuk. We prefer lower rated credit for yield enhancement as strength of the local credit environment remains intact. We are also targeting to rebalance the portfolio to a neutral duration to mitigate potential volatility in the short term.

2.7 Income Distribution

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

2.8 Details of any unit split exercise

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

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

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

2.10 Circumstances that materially affect any interests of the unitholders

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

2.11 Rebates & Soft commissions

Any rebates received are channeled back to the Fund. On the other hand, soft commissions received from the stockbrokers for goods and services such as technical analysis software, fundamental database, financial wire services, stock quotation system and portfolio management software incidental to investment management of the Fund shall be retained by the Manager. For the period under review, the Manager has received soft commissions from stockbrokers.


3. FUND PERFORMANCE

3.1 Details of portfolio composition of Kenanga Shariah Balanced Fund (formerly known as ING Shariah Balanced) (“the Fund”) as at 31 March 2014 against last 3 financial years as at 30 September are as follows:

a. Distribution among industry sectors and category of investments:

As at FY FY FY31.3.2014 2013 2012 2011

% % % %

Trading/Services 28.0 31.1 28.4 22.2Plantation 8.4 2.9 9.4 4.0Industrial products 5.8 4.4 4.3 3.8Finance 4.0 1.5 - -Properties 2.6 3.2 2.4 0.6Shariah-compliant warrants 2.0 0.8 - -Islamic REITs 1.4 - - 1.0Infrastructure 1.1 3.1 3.3 4.5Construction - - 1.0 4.3Unquoted sukuk 45.6 16.7 28.1 20.0Unquoted government guaranteed sukuk - 27.5 10.5 8.6Short term Islamic deposit and cash 1.1 8.8 12.6 31.0

100.0 100.0 100.0 100.0

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

b. Distribution among markets

The Fund invested in local Shariah-compliant investment securities, sukuk and cash instruments only.


3.2 Performance details of the Fund for the financial period ended 31 March 2014 against last 3 financial years ended 30 September are as follows:

Period from1.10.2013 to FY FY FY

31.3.2014 2013 2012 2011

Net asset value (“NAV”) (RM Million) 0.47* 4.42 16.49 20.14Units in circulation (Million) 0.61 5.83 23.40 31.70NAV per unit (RM) 0.7743* 0.7581 0.7047 0.6354Highest NAV per unit (RM) 0.7887 0.7650 0.7174 0.6838Lowest NAV per unit (RM) 0.7585 0.6908 0.6306 0.6224Total return (%) 2.14 7.58 10.91 2.20- Capital growth (%) 2.14 7.58 10.91 2.20- Income distribution (%) - - - -Gross distribution per unit (sen) - - - -Net distribution per unit (sen) - - - -Management expense ratio (“MER”) (%)1 1.99 2.11 1.94 1.87Portfolio turnover ratio (“PTR”) (times)2 1.46 2.75 3.75 2.56

Note:TotalreturnistheactualreturnoftheFundfortherespectivefinancialperiod/years,computedbased on NAV per unit and net of all fees.

MER is computed based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis. PTR is computed based on the average of the total acquisitions and total disposals of Shariah-compliant 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 current period under review.

1MERisloweragainstlastfinancialyearasthecomputationisinrespectof6monthsonlyforthecurrentfinancialperiod.

2 The lower PTR was mainly due to less trading in sukuk and improved Shariah-compliant stock selection.

* Based on bid price fair valuation method on all Shariah-compliant investments held by the Fundasat31March2014,theNAVandNAVperunitwouldbeRM0.47millionandRM0.7725respectively. (AsdisclosedunderNote12ofthefinancialstatements)


3.3 Average total return of the Fund

1 Year31 Mar 13 - 31 Mar 14

3 Years31 Mar 11 - 31 Mar 14

5 Years31 Mar 09 - 31 Mar 14

Kenanga Shariah Balanced Fund 8.52% 5.24% 8.78%Benchmark * 8.48% 6.34% 12.66%


3.4 Annual total return of the Fund

Period under review

30 Sep 13 - 31 Mar 14

1 Year30 Sep 12 - 30 Sep 13

1 Year30 Sep 11 - 30 Sep 12

1 Year30 Sep 10 - 30 Sep 11

1 Year30 Sep 09 - 30 Sep 10

1 Year30 Sep 08 - 30 Sep 09

Kenanga Shariah Balanced Fund

2.14% 7.58% 10.91% 2.20% 6.73% 2.44%

Benchmark * 3.64% 5.93% 14.01% -0.03% 10.14% 15.71%


Investors are reminded that past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate.


4 TRUSTEE’S REPORT TO THE UNITHOLDERS OF KENANGA SHARIAH BALANCED FUND

We, CIMB COMMERCE TRUSTEE BERHAD (“the Trustee”), being the Trustee of KENANGA SHARIAH BALANCED FUND (“the Fund”) (formerly known as ING Shariah Balanced) 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 31 March 2014.

a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, the Securities Commission Malaysia’s Guidelines on Unit Trust Funds, the Capital Markets and Services (Amendment) Act 2012 and other applicable laws;

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

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

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

LEE KOOI YOKE Chief Operating Officer

Kuala Lumpur, Malaysia

26 May 2014


5. SHARIAH ADVISER’S REPORTTO THE UNITHOLDERS OF KENANGA SHARIAH BALANCED FUND

We have acted as the Shariah Adviser of Kenanga Shariah Balanced Fund (formerly known as ING Shariah Balanced). 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 Shariah Balanced Fund (formerly known as ING Shariah Balanced) 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 31 March 2014.

In addition, we also confirm that the investment portfolio of Kenanga Shariah Balanced Fund (formerly known as ING Shariah Balanced) 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 AdviserIBFIM

BUDEEMAN MANASenior Shariah Officer/Designated Person Responsible for Shariah Advisory

Kuala Lumpur

26 May 2014


6. STATEMENT BY THE MANAGER

We, Abdul Razak Bin Ahmad and Bruce Kho Yaw Huat, being the directors of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial position as at 31 March 2014 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial period ended at 31 March 2014 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga Shariah Balanced Fund (formerly known as ING Shariah Balanced) as at 31 March 2014 and of its financial performance and cash flows for the period then ended and comply with the requirements of the Deed.

For and on behalf of the ManagerKenanga Investors Berhad

Abdul Razak Bin Ahmad Bruce Kho Yaw Huat

Kuala Lumpur, Malaysia

26 May 2014


7. FINANCIAL STATEMENT

7.1 STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL PERIOD 1 OCTOBER 2013 TO 31 MARCH 2014 (unaudited)

Note1.10.2013 to

31.3.20141.10.2012 to

31.3.2013RM RM

INVESTMENT INCOMEProfit income 17,496 109,358 Dividend income 4,375 91,639 Net gain from Shariah-compliant investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 78,046 196,637

99,917 397,634

EXPENSESManager’s fee 4 12,005 88,295 Trustee’s fee 5 8,976 8,963 Auditors’ remuneration 1,995 1,983 Tax agent’s fee 1,745 1,736 Administration expenses 6,055 11,628

30,776 112,605

NET INCOME BEFORE TAX 69,141 285,029

Income tax expense 6 - (78)

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 69,141 284,951

Net income after tax is made up as follows:Realised gain 265,120 460,738 Unrealised loss (195,979) (175,787)

69,141 284,951

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


7.2 STATEMENT OF FINANCIAL POSITIONAS AT 31 MARCH 2014 (unaudited)

Note 31.3.2014 31.3.2013RM RM

INVESTMENTSFinancial assets at FVTPL 7 465,767 4,851,116Short term Islamic deposits 8 - 862,080

465,767 5,713,196

OTHER ASSETSOther receivables 10 530 358,544Tax recoverable 20,024 22,263Cash at bank 5,152 15,885

25,706 396,692

TOTAL ASSETS 491,473 6,109,888

LIABILITIESAmount due to Manager 623 80,945Amount due to Trustee 1,529 1,430Other payables 16,930 169,331TOTAL LIABILITIES 19,082 251,706

EQUITYUnitholder’s contribution 368,755 2,486,138Retained earnings 103,636 3,372,044NET ASSET VALUE (“NAV”) ATTRIBUTABLE

TO UNITHOLDERS 11 472,391 5,858,182TOTAL EQUITY AND LIABILITIES 491,473 6,109,888

NUMBER OF UNITS IN CIRCULATION 11(a) 611,548 8,221,574

NET ASSET VALUE PER UNIT (RM) 12 0.7725 0.7125



7.3 STATEMENT OF CHANGES IN NET ASSET VALUEFOR THE FINANCIAL PERIOD 1 OCTOBER 2013 TO 31 MARCH 2014 (unaudited)

NoteUnitholders’ contribution

Retained earnings

Total net asset value

RM RM RM

31.3.2014At beginning of the period 724,703 3,689,750 4,414,453 Total comprehensive income - 69,141 69,141 Creation of units 11(a) 61,970 - 61,970 Cancellation of units 11(a) (4,010,211) - (4,010,211)Distribution equalisation 11(a) 3,592,293 (3,655,225) (62,962)At end of the period 368,755 103,636 472,391

31.3.2013At beginning of the period 13,369,363 3,087,093 16,456,456 Total comprehensive income - 284,951 284,951 Creation of units 11(a) 717,414 - 717,414 Cancellation of units 11(a) (11,338,992) - (11,338,992)Distribution equalisation 11(a) (261,647) - (261,647)At end of the period 2,486,138 3,372,044 5,858,182



7.4 STATEMENT OF CASH FLOWSFOR THE FINANCIAL PERIOD 1 OCTOBER 2013 TO 31 MARCH 2014 (unaudited)

1.10.2013 to 31.3.2014

1.10.2012 to 31.3.2013

RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIESProceeds from sale of financial assets at FVTPL 4,070,872 24,850,676 Purchase of financial assets at FVTPL (432,998) (16,611,213)Net dividends received 11,432 99,759 Profit received 24,589 171,989 Manager’s fee paid (17,013) (100,359)Trustee’s fee paid (8,927) (8,959)Auditors’ remuneration paid (4,690) (4,000)Tax agent’s fee paid (4,282) - Payment for other fees and expenses (7,393) (10,754)Cash generated from operating and investing activities 3,631,590 8,387,139Income tax refund - (78)Net cash generated from operating and investing activities 3,631,590 8,387,061

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 82,439 725,281 Cash paid on units cancelled (4,096,145) (11,538,804)Net cash used in financing activities (4,013,706) (10,813,523)

NET DECREASE IN CASH AND CASH EQUIVALENTS (382,116) (2,426,462)CASH AND CASH EQUIVALENTS AT BEGINNING

OF THE PERIOD 387,268 3,304,427 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 5,152 877,965

Cash and cash equivalents comprise:Cash at bank 5,152 15,885 Short term Islamic deposits - 862,080

5,152 877,965



7.5 NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD 1 OCTOBER 2013 TO 31 MARCH 2014 (unaudited)

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Shariah Balanced Fund (formerly known as ING Shariah Balanced) (herein after referred to as “The Fund”) was constituted pursuant to the executed Deed dated 16 April 2004 (collectively, together with the deeds supplemental thereto, referred to as “the Deed”) between ING Funds Berhad (currently known as Kenanga Funds Berhad) and CIMB Commerce Trustee Berhad as the Trustee. The Fund commenced operations on 23 April 2004 and will continue to be in operation until terminated by the Trustee as provided under Clause 38 of the Deed.

Pursuant to the executed Seventh 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 2013 and the name of the Fund was changed from ING Shariah Balanced to Kenanga Shariah Balanced Fund.

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

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

The Fund seeks to provide unitholders long-term capital growth through diversified investments in equities, fixed income and money market instruments which are Shariah-compliant.

The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 26 May 2014.

2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES

The Fund is exposed to a variety of risks including market risk (which includes interest rate risk and price risk), credit risk, liquidity risk and reclassification of Shariah status 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.


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

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 and price risk.

Market risk arises when the value of the quoted Shariah-compliant investment 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’ prices caused by uncertainties in the economic, political and social environment will affect the fair value of the Fund.

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

i. Interest rate risk

The risk refers to how the changes in the interest rate environment would affect the performance of Shariah-compliant instruments and/or sukuk portfolio. In the event of a rising interest rate environment, the performance 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 Shariah-compliant 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 sukuk.

Interest rate risk sensitivity

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

Effect on profitChanges in rate for the period

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

31.3.2014Financial assets at FVTPL 5/(5) 106/(106)

31.3.2013Financial assets at FVTPL 5/(5) 1,670/(1,670)



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 to1 year

Above1 year -5 years

Above5 year -

15 years

Non-exposure

to interestrate

movement Total

Weightedaverageeffective

rate of return*

RM RM RM RM RM %31.3.2014AssetsFinancial assets at FVTPL 40,230 42,033 129,956 253,548 465,767 4.84 Other assets - - - 5,682 5,682

40,230 42,033 129,956 259,230 471,449

LiabilitiesOther liabilities - - - 19,082 19,082

Total interest rate sensitivity gap 40,230 42,033 129,956 240,148 452,367

31.3.2013AssetsFinancial assets at FVTPL - 1,937,468 540,638 2,373,010 4,851,116 4.25 Short term Islamic deposits 862,080 - - - 862,080 2.91 Other assets - - - 374,429 374,429

862,080 1,937,468 540,638 2,747,439 6,087,625

LiabilitiesOther liabilities - - - 251,706 251,706

Total interest rate sensitivity gap 862,080 1,937,468 540,638 2,495,733 5,835,919

* Computed based on Shariah-compliant assets with exposure to interest rate movement only.




ii. Price risk

Price risk is the risk of unfavorable changes in the fair values of quoted Shariah-compliant equity securities and qouted Shariah-compliant collective investment schemes. The Fund invests in quoted Shariah-compliant equity securities and qouted Shariah-compliant collective investment schemes which are exposed to price fluctuations. This may then affect the unit price of the Fund.

Price risk sensitivity

Manager’s best estimate of the effect on the profit for the period due to a reasonably possible change in investments in quoted Shariah-compliant equity securities and qouted Shariah-compliant collective investment schemes, with all other variables held constant is indicated in the table below:

Effect on profitChange in price for the period

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

31.3.2014Financial assets at FVTPL 5/(5) 125/(125)

31.3.2013Financial assets at FVTPL 5/(5) 1,187/(1,187)

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

Price risk concentration

The following table set out the Fund’s exposure and concentration to price risk based on its portfolio of financial instruments as at the reporting date.

Fair Value Percentage of NAV31.3.2014 31.3.2013 31.3.2014 31.3.2013

RM RM % %

Quoted Shariah-compliant investments 250,782 2,373,010 53.1 40.5




ii. Price risk (Contd.)

Price risk concentration (Contd.)

The Fund’s concentration of Shariah-compliant investment security price risk from the Fund’s quoted Shariah-compliant equity securities and quoted Shariah-compliant collective investment schemes, analysed by sector is as follows:

Fair Value Percentage of NAV31.3.2014 31.3.2013 31.3.2014 31.3.2013

RM RM % %

Trading/Services 132,067 1,183,447 28.0 20.2 Plantation 39,352 402,300 8.3 6.8 Industrial products 27,338 142,107 5.8 2.4 Finance 18,648 29,304 3.9 0.5 Properties 12,239 139,578 2.6 2.4 Infrastructure 5,370 302,638 1.1 5.2 Consumer products - 18,676 - 0.3Constructions - 85,786 - 1.5Shariah-compliant

warrants 9,297 69,174 2.0 1.2 Islamic REITs 6,471 - 1.4 -

250,782 2,373,010 53.1 40.5

b. Credit Risk

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

i. Credit risk exposure

At the reporting date, the Fund’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets 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 sukuk with at least investment grade credit rating by a credit rating agency. The following table analyses the Fund’s portfolio of unquoted sukuk by rating category:



b. Credit Risk (Contd.)

iii. Credit quality of financial assets (Contd.)

Shariah-compliant Investments

Percentage of total unquoted sukuk

Percentage of NAV

31.3.2014 31.3.2013 31.3.2014 31.3.2013% % % %

RatingsAAA 66.7 100.0 30.4 12.7 AA+ 28.8 - 13.1 - AA3 4.5 - 2.0 -

100.0 100.0 45.5 12.7

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

Short term Islamic deposits

Percentage of total short term Islamic deposits

Percentage of NAV

31.3.2014 31.3.2013 31.3.2014 31.3.2013% % % %

RatingP1 - 100.0 - 12.8

- 100.0 - 12.8

iv. Credit risk concentration

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

Percentage of total unquoted sukuk

Percentage of NAV

31.3.2014 31.3.2013 31.3.2014 31.3.2013% % % %

Industrial products 57.0 - 25.9 - Finance 19.5 - 8.9 - Consumer products 19.0 - 8.7 - Utilities 4.5 - 2.0 - Government agency - 72.4 - 9.2 Conglomerate - 27.6 - 3.5

100.0 100.0 45.5 12.7



c. Liquidity Risk

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

The Islamic liquid assets comprise cash, short term 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.

NoteUp to

1 year

Above 1 year - 5 years

Above 5 year -

15 years TotalRM RM RM RM

31.3.2014AssetsFinancial assets at FVTPL 293,778 42,033 129,956 465,767Other assets 5,682 - - 5,682

(i) 299,460 42,033 129,956 471,449

LiabilitiesOther liabilities (ii) 19,082 - - 19,082

Equity (iii) 472,391 - - 472,391

Liquidity gap (192,013) 42,033 129,956 (20,024)

31.3.2013AssetsFinancial assets at FVTPL 2,373,010 1,937,468 540,638 4,851,116Short term Islamic deposits 862,080 - - 862,080Other assets 374,429 - - 374,429

(i) 3,609,519 1,937,468 540,638 6,087,625

LiabilitiesOther liabilities (ii) 251,706 - - 251,706

Equity (iii) 5,858,182 - - 5,858,182

Liquidity gap (2,500,369) 1,937,468 540,638 (22,263)



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. The Fund’s investments have been included in the “up to 1 year” category on the assumption that these are highly liquid investments which can be realised should all of the Fund’s unitholders’ equity be required to be redeemed. For other assets, the analysis into maturity groupings is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier, the expected date on which the assets will be realised.

(ii) Financial liabilities

The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity dated. When counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Fund can be required to pay.

(iii) Equity

As unitholders can request for redemption of their units, they have been categorised as having a maturity of “up to 1 year”. 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 of the Fund.

d. Reclassification of Shariah Status Risk

The risk that the currently held Shariah-compliant securities in the portfolio of Shariah-compliant based funds may be reclassified to be Shariah non-compliant upon review of the securities by the Shariah Advisory Council of the Securities Commission performed twice yearly. If this occurs, the Manager will take the necessary steps to dispose of such securities.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Accounting

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

The 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.)

b. Standards and Interpretations Issued But Not Yet Effective

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

Description

Effective for financial period

beginning on or after

Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities

1 January 2014

Amendments to MFRS 10, MFRS 12, and MFRS 127: Investment Entities 1 January 2014Amendments to MFRS 136: Recoverable Amount Disclosure for

Non-Financial Assets1 January 2014

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

Annual Improvements 2010 - 2012 cycle1 July 2014

Amendments to MFRSs contained in the documents entitled Annual Improvements 2011 - 2013 cycle

1 July 2014

MFRS 9: Financial Instruments (IFRS 9 Issued by IASB in November 2009)

To be announced

MFRS 9: Financial Instruments (IFRS 9 Issued by IASB in October 2010)

To be announced

MFRS 9: Financial Instruments: Hedge Accounting and amendments to MFRS 9, MFRS 7 and MFRS 139

To be announced

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



c. Financial Assets

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

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

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

i. Financial assets at FVTPL

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

Financial assets held for trading include quoted Shariah-compliant equity securities, quoted Shariah-compliant collective investment schemes, quoted Shariah-compliant warrants and unquoted 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 financial instruments are recorded in profit or loss.

Profit earned and dividend revenue elements of such instruments are recorded separately in ‘‘profit income’’ and “dividend income” respectively.

ii. Receivables

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

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

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

d. Impairment of Financial Assets

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

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



d. Impairment of Financial Assets (contd.)

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

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent 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 sukuk, is recognised using the effective rate method.

Dividend income is recognised on declared basis, when the right to receive the dividend is established.

f. Cash and Cash Equivalent

For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term Islamic deposits with financial institutions.

g. Income Tax Expense

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

h. Unrealised Reserves

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

i. Financial Liabilities

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



i. Financial Liabilities (Contd.)

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 rate method.

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

j. Unitholders’ Contribution – NAV Attributable to Unitholders

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

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

k. Functional and Presentation Currency

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

l. Distribution

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

m. Significant Accounting Judgments and Estimates

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

i. Critical judgments made in applying accounting policies

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

ii. Key sources of estimation uncertainty

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


4. MANAGER’S FEE

The Manager’s fee is computed on a daily basis at a rate not less than 1.2% per annum and not exceeding 3.0% per annum of the NAV of the Fund as provided under Clause 13(2) of the Deed.

The Manager is currently charging Manager’s fee of 1.55% per annum of the NAV of the Fund.

5. TRUSTEE’S FEE

The Trustee’s fee is computed on a daily basis at a rate not exceeding 0.20% per annum of the NAV of the Fund and subject to a minimum fee of RM18,000 per annum as provided under Clause 13(7) of the Deed.

The Trustee’s fee is currently computed at 0.07% per annum of the NAV of the Fund.

6. INCOME TAX EXPENSE

1.10.2013 to 1.10.2012 to31.3.2014 31.3.2013

RM RMMalaysian income tax:

Under provision in prior year - 78

Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial period. The statutory tax rate will be reduced to 24% effective from year of assessment 2016.

Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, 1967.

A reconciliation of income tax expense applicable to net income before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Fund is as follows:

1.10.2013 to 1.10.2012 to31.3.2014 31.3.2013

RM RM

Net income before tax 69,141 285,029

Tax at Malaysian statutory tax rate of 25% (financial period 1 october 2012 to 31 March 2013: 25%) 17,300 71,300

Tax effect of:Income not subject to tax (74,000) (143,400)Loss not subject to tax 49,000 43,900 Expenses not deductible for tax purposes 2,900 5,500Restriction on tax deductible expenses for unit trust fund 4,300 20,400Permitted expenses not used and not available for future years 500 2,300Under provision of tax in prior year - 78

Tax expense for the period - 78


7. FINANCIAL ASSETS AT FVTPL

31.3.2014 31.3.2013RM RM

Financial assets held for trading, at FVTPL:Quoted Shariah-compliant equity securities 235,014 2,303,836Quoted Shariah-compliant warrants 9,297 69,174Qouted Shariah-compliant collective investment schemes 6,471 - Unquoted sukuk 214,985 747,057Unquoted government guaranteed sukuk - 1,731,049

465,767 4,851,116

Net gain on financial assets at FVTPL comprised:Realised gain on disposals 274,024 372,424 Unrealised change in fair values (195,979) (175,787)

78,045 196,637

Details of financial assets at FVTPL as at 31 March 2014:

Aggregate Fair PercentageQuantity cost Value of NAV

RM RM %Quoted Shariah-compliant equity

securities

Trading/ServicesAlam Maritim Resources Berhad 2,100 3,349 2,940 0.6 Axiata Group Berhad 1,600 10,100 10,656 2.2 Dayang Enterprise Holdings Bhd. 1,200 4,581 4,500 0.9 Deleum Berhad 200 899 1,216 0.3 Maxis Berhad 800 5,320 5,560 1.2 MBM Resources Berhad 2,600 9,482 8,294 1.7 Oldtown Berhad 1,625 3,261 3,169 0.7 Perdana Petroleum Berhad 8,200 9,341 15,498 3.3 Perisai Petroleum Teknologi Bhd. 10,700 12,296 16,478 3.5 SapuraKencana Petroleum Berhad 3,900 12,157 17,511 3.7 Sime Darby Berhad 1,820 17,054 16,853 3.6 Suria Capital Holdings Berhad 2,100 5,020 5,124 1.1 Telekom Malaysia Berhad 1,900 10,449 11,134 2.4 Tenaga Nasional Berhad 1,100 7,782 13,134 2.8

39,845 111,091 132,067 28.0


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 March 2014: (contd.)


RM RM %Quoted Shariah-compliant equity

securities

PlantationBatu Kawan Berhad 500 9,923 9,850 2.1 IOI Corporation Berhad 1,900 7,621 9,101 1.9 Kuala Lumpur Kepong Berhad 450 9,727 10,845 2.3 Sarawak Oil Palms Berhad 700 4,265 4,620 1.0 United Plantations Berhad 200 5,043 4,936 1.0

3,750 36,579 39,352 8.3

Industrial productsCoastal Contracts Bhd. 2,000 8,600 10,080 2.1 PETRONAS Gas Berhad 500 9,310 11,840 2.5 Supermax Corporation Berhad 2,100 4,378 5,418 1.2

4,600 22,288 27,338 5.8

FinanceBIMB Holdings Berhad 2,960 10,770 12,698 2.7 Syarikat Takaful Malaysia Berhad 500 4,864 5,950 1.2

3,460 15,634 18,648 3.9

PropertiesIJM Land Berhad 2,900 8,262 8,439 1.8 Matrix Concepts Holdings Berhad 1,000 3,304 3,800 0.8

3,900 11,566 12,239 2.6

InfrastructureDiGi.Com Berhad 1,000 4,568 5,370 1.1 Total quoted Shariah-compliant equity

securities 56,555 201,726 235,014 49.7

Quoted Shariah-compliant warrantsBIMB Holdings Berhad - WA 5,560 - 3,781 0.8 Gamuda Berhad - WA 2,800 3,463 5,516 1.2

Total quoted Shariah-compliant warrants 8,360 3,463 9,297 2.0


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

Details of financial assets at FVTPL as at 31 March 2014: (contd.)


RM RM %Quoted Shariah-compliant collective

investment schemes

Axis Real Estate Investment Trust 1,979 6,748 6,471 1.4

Total quoted Shariah-compliant collective investment schemes 1,979 6,748 6,471 1.4

Unquoted sukuk

Cagamas Berhad maturing on 29/03/2019 40,000 42,025 42,039 8.9

Jati Cakerawala Sdn Bhd maturing on 31/07/2023 10,000 9,756 9,613 2.0

Malaysia Airports Capital Berhad maturing on 16/12/2022 60,000 61,839 60,578 12.8

Sime Darby Berhad maturing on 14/11/2014 40,000 40,793 40,873 8.7

Westports Malaysia Sdn Bhd maturing on 03/05/2021 60,000 63,182 61,882 13.1

210,000 217,595 214,985 45.5

Total unquoted sukuk 210,000 217,595 214,985 45.5

Total financial assets at FVTPL 429,532 465,767 98.6

Excess of fair value over cost 36,235

8. SHORT TERM ISLAMIC DEPOSITS

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


9. SHARIAH INFORMATION OF THE FUND

The Shariah Adviser confirmed that the investments portfolio of the Fund is Shariah-compliant, which comprises:

a. Equity securities listed on Bursa Malaysia which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission;

b. Investment in collective investment scheme was verified as Shariah-compliant by the Shariah Adviser;

c. Unquoted sukuk as per list of unquoted sukuk available at Bond Info Hub and Fully Automated System For Issuing/Tendering of Bank Negara Malaysia; and

d. Cash placements and liquid assets in local market, which have been placed in Shariah-compliant investments and/or instruments.

10. OTHER RECEIVABLES

31.3.2014 31.3.2013RM RM

Amount due from brokers - 347,134Dividend receivable 530 11,341Profit income from short term Islamic deposits - 69

530 358,544

11. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 31.3.2014 31.3.2013RM RM

Unitholders’ contribution (a) 368,755 2,486,138Retained earnings

Realised reserves 67,401 3,345,478Unrealised reserves 36,235 26,566

103,636 3,372,044

472,391 5,858,182


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

(a). Unitholders’ contribution (contd.)

1.10.2013 to 31.3.2014 1.10.2012 to 31.3.2013No. of units RM No. of units RM

At beginning of the period 5,830,735 724,703 23,400,465 13,369,363 Distribution equalisation - 3,592,293 - (261,647)Add: Creation of units 107,256 61,970 1,031,915 717,414 Less: Cancellation of unit (5,326,443) (4,010,211) (16,210,806) (11,338,992)

At end of period 611,548 368,755 8,221,574 2,486,138

The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad and parties related to the Manager as at 31 March 2014 were nil (31 March 2013: nil).

12. NET ASSET VALUE PER UNIT

NAV attributable to unitholders is classified as equity in the statement of financial position.

In line with the adoption of MFRS 139, quoted financial assets have been valued at the bid prices at the close of business. In accordance with the Deed, the calculation of NAV attributable to unitholders per unit for the creation and cancellation of units is computed based on quoted financial assets valued at the last done market price.

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

1.10.2013 to 31.3.2014 1.10.2012 to 31.3.2013RM RM/Unit RM RM/Unit

NAV attributable to unitholers for creation/cancellation of unit 473,552 0.7743 5,865,964 0.7135

Effect from adopting bid prices as fair value (1,161) (0.0018) (7,782) (0.0010)

NAV attributable to unitholers per statement of financial position 472,391 0.7725 5,858,182 0.7125

13. INCOME DISTRIBUTION

No income distribution was declared by the Fund for the financial period 1 October 2013 to 31 March 2014 (financial period 1 October 2012 to 31 March 2013: nil)

14. PORFOLIO TURNOVER RATIO

The portfolio turnover ratio (“PTR”) for the financial period 1 October 2013 to 31 March 2014 is 1.46 times (financial period 1 October 2012 to 31 March 2013: 1.79 times).

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


15. MANAGEMENT EXPENSE RATIO

The management expense ratio (“MER”) for the financial period 1 October 2013 to 31 March 2014 is 1.99% (financial period 1 October 2012 to 31 March 2013: 0.99%).

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 STOCKBROKING COMPANIES/FINANCIAL INSTITUTIONS

Transactionvalue

Percentageof total

Brokerage,stamp duty

and clearingfee

Percentageof total

RM % RM %

Kenanga Investment Bank Berhad* 2,043,441 45.4 1,568 17.6

Maybank Investment Bank Berhad 1,878,697 41.8 6,218 70.0

Malayan Banking Berhad 338,839 7.5 - - RHB Investment Bank Berhad 168,551 3.7 688 7.7 AmIslamic Bank Berhad 24,644 0.5 - - AmInvestment Bank Berhad 20,281 0.5 228 2.6 CIMB Investment Bank Berhad 12,525 0.3 97 1.1 Bank Islam Malaysia Berhad 8,600 0.2 - - Public Investment Bank Berhad 4,405 0.1 86 1.0

4,499,983 100.0 8,885 100.0

The above transaction values are in respect of quoted Shariah-compliant investment securities and unquoted sukuk. Transactions in unquoted sukuk do not involve any commission or brokerage fees.

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

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

17. SEGMENTAL REPORTING

a. Business Segment

In accordance with the objective of the Fund, the Fund can invest around 40% to 60% in quoted Shariah-compliant investment securities and 40% to 60% in unquoted sukuk and others. The following table provides an analysis of the Fund’s revenue, results, assets and liabilities by business segments:


17. SEGMENTAL REPORTING (CONTD.)

a. Business Segment (contd.)

QuotedShariah-

compliantinvestment

securitiesUnquoted

sukukOther

investments TotalRM RM RM RM

31.3.2014RevenueSegment income representing

segment results 85,446 13,172 1,299 99,917Unallocated expenditure (30,776)Net income before tax 69,141Income tax expense - Net income after tax 69,141

AssetsFinancial assets at FVTPL 250,782 214,985 - Other segment assets 530 - - Total segment assets 251,312 214,985 - 466,297Unallocated assets 25,176

491,473

LiabilitiesUnallocated liabilities 19,082NAV attributable to unitholers 472,391

491,473

31.3.2013RevenueSegment income representing

segment results 292,101 92,288 13,245 397,634Unallocated expenditure (112,605)Net income before tax 285,029Income tax expense (78)Net income after tax 284,951

AssetsFinancial assets at FVTPL 2,373,010 2,478,106 862,080Other segment assets 358,475 - 69Total segment assets 2,731,485 2,478,106 862,149 6,071,740Unallocated assets 38,148

6,109,888


17. SEGMENTAL REPORTING (CONTD.)

a. Business Segment (contd.)

QuotedShariah-

compliantinvestment

securitiesUnquoted

sukukOther

investments TotalRM RM RM RM

31.3.2013 (contd.)LiabilitiesUnallocated liabilities 251,706NAV attributable to unitholers 5,858,182

6,109,888

b. Geographical Segments

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

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 gain and loss, are recognised.

The following table analyses the financial assets and liabilities of the Fund in the statement of financial position by the class of financial instrument to which they are assigned and by the measurement basis.

Financialassets at

FVTPL ReceivablesFinancialliabilities Total

RM RM RM RM

31.3.2014AssetsFinancial assets at FVTPL 465,767 - - 465,767 Other receivables - 530 - 530 Cash at bank - 5,152 - 5,152 465,767 5,682 - 471,449


18. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (contd.)

Financialassets at

FVTPL ReceivablesFinancialliabilities Total

RM RM RM RM

31.3.2014 (contd.)LiabilitiesAmount due to Manager - - 623 623 Amount due to Trustee - - 1,529 1,529 Other payable - - 16,930 16,930

- - 19,082 19,082

31.3.2013AssetsFinancial assets at FVTPL 4,851,116 - - 4,851,116 Short term Islamic deposits - 862,080 - 862,080 Other receivables - 358,544 - 358,544 Cash at bank - 15,885 - 15,885

4,851,116 1,236,509 - 6,087,625

LiabilitiesAmount due to Manager - - 80,945 80,945 Amount due to Trustee - - 1,430 1,430 Other payable - - 169,331 169,331

- - 251,706 251,706

b. Financial instruments that are carried at fair value

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

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

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments:31.3.2014- Quoted Shariah-compliant equity

securities 235,014 - - 235,014 - Quoted Shariah-compliant warrants 9,297 - - 9,297 - Quoted Shariah-compliant collective

investment schemes 6,471 - - 6,471 - Unquoted sukuk - 214,985 - 214,985


18. FINANCIAL INSTRUMENTS (CONTD.)

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

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments:31.3.2013- Quoted Shariah-compliant equity

securities 2,303,836 - - 2,303,836 - Quoted Shariah-compliant warrants 69,174 - - 69,174 - Unquoted sukuk - 747,057 - 747,057 - Unquoted government guaranteed

sukuk - 1,731,049 - 1,731,049

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

The fair value of quoted Shariah-compliant equity securities, quoted Shariah-compliant warrants and quoted Shariah-compliant collective investment schemes are determined by reference to Bursa Malaysia Securities Berhad’s bid price at reporting date. The fair value of unquoted sukuk are based on average of bid price quoted by respective bankers at reporting date.

c. Financial instruments not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The carrying amounts of the Fund’s other financial assets and liabilities that are not carried at fair value approximate their 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 prospectus;

b. To maintain sufficient liquidity to meet the expenses of the Fund, and to meet cancellation requests as they arise; and

c. To maintain sufficient fund size to make the operation of the Fund cost-efficient.

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

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KENANGA INCOME PLUS FUND(FORMERLY KNOWN AS ING INCOME PLUS)

ANNUAL REPORt

For The Financial Year Ended 31 March 2014

Investor Services CenterToll Free Line: 1 800 88 3737Fax: +603 2057 3722Email: [email protected]

Head Office, Kuala LumpurSuite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.Tel: 03-2057 3688 Fax: 03-2161 8807

Kenanga Investors Berhad (353563-P)

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