KENANGA MANAGED GROWtH FUND (FORMERLY KNOWN AS …€¦ · Fax: 03-2161 4990 Business Office Suite...

KENANGA MANAGED GROWtH FUND(FORMERLY KNOWN AS ING MANAGED GROWtH)

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)

KENANGA MANAGED GROWTH FUND(FORMERLY KNOWN AS ING MANAGED GROWTH)

Contents Page

Corporate Directory iiDirectory of Manager’s Offices iiiFund Information 1Manager’s Report 2-7Fund Performance 8-10Trustee’s Report 11Independent Auditor’s Report 12-13Statement by the Manager 14Financial Statement 15-42

ii Kenanga Managed Growth Fund Annual 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

Trustee: CIMB Commerce Trustee Berhad (Company No. 313031-A)Registered Office

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

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

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

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

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

Kenanga Managed Growth Fund Annual Report iii

DIRECTORY OF MANAGER’S OFFICES

REGIONAL BRANCH OFFICES:

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

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

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

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

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

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

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

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 Managed Growth Fund Annual Report 1

1. FUND INFORMATION

1.1 Fund Name

Kenanga Managed Growth Fund (KMGF or the Fund) (formerly known as ING Managed Growth)

1.2 Fund Type / Category

Balanced / Income & Growth

1.3 Investment Objective

The Fund aims to achieve long-term capital growth through diversified investments in equities and bonds.

1.4 Investment Strategy

The Fund invests in a mixture of equities, bonds and money market instruments. The Fund engages active tactical allocation between asset classes with emphasis on managed growth and selects securities based on current earnings, growth prospects and potential for capital appreciation as well as income distribution. Tactical asset allocation between assets and sectors is determined by analyzing the economy, which influences the business cycle, and market factors.

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 100 Index (FBM 100) (50%) and the All Malaysian Government Securities (MGS) Index (50%) obtainable from www.bursamalaysia.com and www.quantshop.com.

1.7 Distribution Policy

Income (if any) will be distributed annually on a best effort basis.

1.8 Breakdown of unit holdings of KMGF as at 31 March 2014

Size of holdings No. of unitholders No. of units held5,000 and below 413 894,4475,001 - 10,000 117 830,06710,001-50,000 152 3,029,62250,001-500,000 21 2,626,961500,001 and above 2 5,571,544Total 705 12,952,641

2 Kenanga Managed Growth Fund Annual Report

2. MANAGER’S REPORT

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

For the period under review, the Fund fulfilled its investment objective, having invested in a mixture of equity securities, fixed income securities and money market instrument.

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

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

% Cumulative Return, Launch to 31/3/2014

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014

Kenanga Managed Growth : 103.09FTSE Bursa Malaysia Top 100 Index (50%) & All MGS Index by RAM Quant Shop (50%) : 85.35

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’s investment strategy and policy were to invest primarily in a mixture of equity securities, fixed income securities and money market instrument. The strategy employed was in line with that disclosed in the Master Prospectus.

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

Asset 31 March 2014 31 March 2013Quoted investment securities 58.2% 41.9%Corporate bonds/Malaysian government securities 31% 57.6%Short term deposits and cash 10.8% 0.5%

Reason for the differences in asset allocation

As at end 31 March 2014, the Fund’s exposure in quoted investment securities had increased from 41.9% to 58.2%. The increase in equity exposure was due to better economic situation while stock picking effort is enhanced.


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

Period under reviewKenanga Managed Growth Fund 11.96%Benchmark* 5.74%

* FTSE Bursa Malaysia 100 Index (50%) and the All Malaysian Government Securities Index (50%)Source: Lipper and Novagni Analytics and Advisory Sdn Bhd

The Fund recorded a return of 11.96%, outperforming the benchmark return of 5.74%. The Fund’s outperformance as compared to the benchmark was attributed to sector allocation and stock selection.

For the fixed income portion, the performance of government bonds underperformed the corporate bonds during the period under review. The portfolio only consists of corporate bonds as against the benchmark of All Malaysian Government Securities Index.

2.6 Review of the market

Equity Market Review

The FBM KLCI reached another all-time high index point of 1,882 points before ending the year 2013 at 1866.96 points. The index movement was driven mainly by high beta stocks as against high yield stocks a year earlier. Sectors that contributed to upward movements were largely the oil & gas, power and consumer sectors. Sectors that had done poorly were diversified, telecommunication, auto and plantation (full year).

During the April to June 2013 (2Q13 period), FBM KLCI gained 6.09% or 101.37 points. Buying was mainly focused on the small-mid cap stocks after which the 13th General election was over in May. The small-mid cap stocks advanced another 17.92% during this period. Barisan Nasional won 133 out of 222 parliament seats allowing it to hold on to power for the next term. The margin of victory at 60% (vs 63% in 2008) of parliament seats was sufficient to ensure a secure and stable government for the next 4-5 years. The stock market moved up strongly, indicating positive continuation of growth policy and transformation programme, making it able to catch up with regional performance. May’s 1Q13 corporate results season was encouraging in that earnings cuts were the mildest in four quarters. Earnings cut were inevitable due to lower CPO prices and weak external factors.

In the Q3 2013, the FBM KLCI was flat with about 2.6% trading range whereas the FBM Small Cap index gained another 6.68%. Investors were concerned about: 1) Fitch’s downgrading of Malaysia’s sovereign outlook to “negative” from “stable”; 2) the potential of a twin deficit in Malaysia; and 3) the US Quantitative Easing tapering which had caused the Ringgit to depreciate from its low of MYR 2.96/US$ in May to MYR 3.33/US$. The high household debt to GDP and the rich valuation of the Malaysian market vs. the valuation of the regional markets also contributed negatively towards the sentiments of the market.


2.6 Review of the market (Contd.)

Equity Market Review (Contd.)

Foreign holding in Malaysian equity market have improved from the 20% level during the Global Financial Crisis (GFC) to the level of around 25%. This suggests that the foreigners have not sold down much yet. However, it was noted that the current level is still below the peak level of 28% seen in 2007. The major concern now is the high holding level in the bond market - relatively speaking, foreign bond investors are now sitting on losses.

In Q4 2013, the FBM KLCI gained 5.56% or 98.34 points on thinner volume while small cap moved up slower by 2.87%. Earlier, equity markets were concerned by the; 1) the shutdown of US Government and 2) the debate to raise US debt ceiling to above US$16.7 trillion. 5) the UMNO General Assembly and 6) Malaysia Budget 2014. Later, it was made known that top posts within UMNO remained largely unchanged, suggesting policy continuity. Meanwhile, the Budget 2014 emphasizes mainly on further fiscal consolidation through more prudent operating and development expenditure spending which was viewed to be stock market-neutral. Few major issues were announced during the budget including 1) raising the real property gain tax (RPGT) and removal of developer interest bearing scheme (DIBS), 2) introduction of 6% GST effective April 2015 and 3) corresponding 1 – 3% reduction in income tax rates when GST is introduced later.

The FBM KLCI remained relatively flat in November despite investors selling property and construction stocks after the introduction of real property gain tax. The loss was off-set by a 3% gain in the plantation sector as CPO prices staged a recovery. The country’s third quarter GDP growth also performed better than expected at 5% year-on-year (“YOY”) against consensus expectation of a 4.8% growth.

Later on, The US Fed unexpectedly announced that it will start to taper its quantitative easing (QE) by reducing its purchases of treasuries and mortgage-backed securities by US$10b to US$75b per month starting in January, 2014. It will continue to keep short-term interest rate low until there is significant improvement in US unemployment rate. Investors took the news positively as it signals a recovery in the US economy but the gradual reduction is not deemed to cause a distress in the market.

Unfortunately, the regional markets reaction was mixed as local events superseded QE tapering. Thailand and Shanghai Composite Index were down 5.3% and 4.7% month-on-month respectively. Thailand continued to be rocked by street demonstrations. While Chine experienced another round of sharp increase in the Chinese interbank rate which continued to raise cash crunch concerns. The FBM KLCI however rose by 3.0% in December, 2013 as the often commented “window dressing” activities in selected counters helped to push the indices higher.

However in Q1 2014, the FBM KLCI corrected by 0.95% after a strong Q4 2013 period. On the other hand, the FBM Small Cap index gained 0.91%. We noticed during the period, there was heavy foreign selling of emerging markets equities including Malaysia. This is due fear of liquidity squeeze when the US starts its QE tapering. There was even a fear of accelerated tapering if the US economy improves dramatically together with economic improvement in Europe which is rather apparent. Fitch ratings on Malaysia had remained to be on negative outlook but commented that Malaysia is making progress after studying the 2014 National budget and our GST implementation. In defending capital flights, many emerging markets started to increase interest rates such as India, Argentina, South Africa, Turkey, New Zealand and China.



Equity Market Review (Contd.)

In February, CPO prices went up briefly from RM2,559 to RM2800 per metric ton, contributing to consumer staples’ outperformance (+4.1%). There was appetite for high-yielding stocks such as telcos when the 10Y bond yields retraced from 4.24% to 4.12%. Malaysian economy expanded 5.1% YOY in 4Q13 better than consensus expectation of 4.8% making the full year 2013 growth at 5% (upper band). However, domestic demand slowed after a strong Q3 2013, with some of the weakness likely due to the beginning of subsidy rationalisation in Sep 2013 (increase in prices for fuel and some food items). Malaysian exports grew by 2.4% in 2013 much higher than expectation of 1.2% growth helped by weaker Ringgit and improving economic conditions in the developed countries.

Towards end of Q1 2014, market sentiment was swayed by concerns over the Russia-Ukraine military tension and the slowdown fear in China. However, market held to its levels when Malaysian January exports grew 12.2% YOY slower than 14.04% in Dec 2013 but better than the expectation of 8.2%. Palm oil exports grew 4.5% while Electrical & Electronics grew 14.6%.

Equity Market Outlook

We expect continued volatility as markets digest concerns in the Chinese economy and geopolitical risk from the developments in Ukraine. The local market is also expected to be tepid given the seasonally slower period corresponding to the World Cup season and Ramadan fasting month which is likely to fall in June/July. Despite that, we expect intermittent weakness to be buying opportunities to position for a stronger H2 as export recovery takes hold.

We expect corporate earnings to grow about 8% this year while 2014 GDP is expected to grow between 4.5 – 5.5%. Growth drivers include higher CPO prices, improving exports and robust investment in the oil & gas and construction segments which should offset weaker consumer demand. If we peg the market to 16.5 times forward PE, the FBM KLCI has the potential to trade up to 1,990 points which is more than a 6% upside from here.

Fixed Income Market Review

The local fixed income market during the period under review was eventful in 2013, although it was relatively quiet in the first 3 months. The most significant factor was the fear of the US government tapering its quantitative easing programme that buys bond assets to keep interest rates and yields low. In May 2013, Bernanke in his address to the Congressional Joint Economic Committee said that the Fed may scale back the monthly US$85 billion purchase of bonds by the Fed over the bank’s “next few meetings” if the economy’s recovery momentum is sustainable. Fixed income yields reacted negatively, where the 10-year Treasury yields increased by 86bp to 2.99% in Sept 2013 from 1.60% in May. Subsequent movement of US treasury yields was a reflection of market expectations on the timing of the QE tapering. By the end of 2013, 10-year US Treasury yields closed at 3.03%, after the Fed announced in the December that they will initiate a reduction of US 10 billion from its QE programme beginning January 2014. The US Fed also highlighted that this acts as a forward guidance and that the progress of the tapering programme will heavily depends on the health of US economy going forward.



Fixed Income Market Review (Contd.)

Locally, the bond market was still in euphoric mood in 1H2013 on the back looming elections, as investors were generally more cautious in taking equity market risk. When the general election held on 5th May revealed a status quo of power in the Federal government, the bond market maintained its strength, but quickly reversed when QE tapering fears sets upon the emerging markets. Yields went mostly upward for the rest of the year, except for short time frame during September and October, when a much-anticipated initiation of the QE tapering did not materialised in September. The rally during the 2 months was short lived as selling pressure re-emerged upon new speculations on the timing of QE tapering. Overall, yields on the 3-year and 10-year MGS increased from 3.01% to 3.41%, and 3.47% to 4.11% respectively by the end of period under review.

The widely anticipated 2014 National Budget as announced in October 2013 appeared committed to a fiscal reform to address our fiscal deficit concerns. Malaysia’s credit rating was earlier put under ‘negative outlook’ by Fitch in July 2013. Through the Budget, the government is seeking to increase its revenue by tax reformation and subsidiary rationalisation. For a start, subsidy on fuel and sugar prices was reduced by 20sen and 34sen. It also finally revealed the plan to implement goods and services tax (GST) regime at 6% by April 2015. However, the Budget had a muted impact on the bond market.

On the economy front, Bank Negara Malaysia reported a GDP growth of 4.7% for 2013, supported by resilient private consumption, private investment and stronger export data in the later months of 2013. The overnight policy rate (OPR), as widely expected, stayed at 3.0% in 2013, as inflationary pressure remained under control, despite some adverse effect from hike in petrol and sugar prices.

Fixed Income Market Outlook

2014 is generally viewed as more optimistic for US and the European region, although some are still concerned about China’s slowing growth. IMF is forecasting a global GDP growth of 3.6% for 2014, underpinned by recent US economic data that showed better job creation by the private sector, higher manufacturing output and consumer spending. IMF also forecasts US GDP growth of 1.6% and 2.6% for 2013 and 2014. Meanwhile, US Federal revised upward its GDP growth forecast for 2013 and 2014 to a range between 2.2-2.3% and 2.8%-3.2% from its previous forecast of 2.0-2.3% and 2.9-3.1% respectively.

With a brighter global backdrop, the optimistic momentum may spill into Malaysia’s economy growth as export and manufacturing activities are expected to accelerate further in 2014. Factors that have been holding our economy intact in year 2013, domestic demand and investment spending, are viewed to remain supportive in year 2014. On the other hand, the expected cost-push inflation in 2014 following the cost cutting measures by the Federal government may prompt reduction of consumer spending and increase of interest rates. Eyes are on the Monetary Policy Meeting on 28-29 January 2014, anxious on their call on the OPR. However, we do not expect the events are material enough to budge the OPR yet. Nevertheless, BNM expects GDP growth at 4.5-5.5% for 2014. They believe the fiscal deficit target is intact, and is expected to reduce to 4.0% in 2013, and subsequently to 3.5% and 3.0% in 2014 and 2015.


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

Pursuant to the acquisition of ING Funds Berhad by Kenanga Investors Berhad on 19th April 2013, Kenanga Investors Berhad had written to the Securities Commission to seek the Securities Commission’s approval to become the Management Company of the Fund.

The Securities Commission had approved the application. With effect from 8th June 2013, Kenanga Investors Berhad has become the Management Company of the Fund.

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. However, there was a change in the Management Company of the Fund on 8th June 2013 as detailed in 2.9.

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 Managed Growth Fund (formerly known as ING Managed Growth) (“the Fund”) for the last 3 financial years as at 31 March are as follows:

a. Distribution among industry sectors and category of investments:

FY FY FY2014 2013 2012

% % %

Trading/Services 26.2 16.8 21.2Finance 10.4 9.4 10.3Properties 4.2 2.4 0.5Industrial products 3.6 0.9 2.0Infrastructure 2.9 4.7 -Consumer products 2.3 1.6 0.5Plantation 2.1 4.1 8.9Construction 1.8 1.5 4.6Technology 1.5 - -Warrants 1.4 0.5 -REITs 1.8 - -Collective investment scheme - - 0.5Unquoted corporate bonds 31.0 44.3 28.4Malaysian government securities - 13.3 7.9Short term deposits and cash 10.8 0.5 15.2

100.0 100.0 100.0

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

b. Distribution among markets

The Fund invested in local equities, fixed income securities/ cash instruments only.


3.2 Performance details of the Fund for the last 3 financial years ended 31 March are as follows:

FY FY FY2014 2013 2012

Net asset value (“NAV”) (RM Million) 11.41* 31.97 77.48Units in circulation (Million) 12.95 40.62 100.92NAV per unit (RM) 0.8811* 0.7870 0.7677Highest NAV per unit (RM) 0.8811 0.7882 0.7740Lowest NAV per unit (RM) 0.7864 0.7475 0.6901Total return (%) 11.96 2.51 3.83- Capital growth (%) 11.96 2.51 3.83- Income distribution (%) - - -Gross distribution per unit (sen) - - -Net distribution per unit (sen) - - -Management expense ratio (“MER”) (%)1 2.00 1.72 1.69Portfolio turnover ratio (“PTR”) (times) 2 1.34 3.65 4.33

Note:Total return is theactual returnof theFund for the respective financial years, computedbased on net asset value per unit and net of all fees.

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

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

1MER is higher against last financial yearmainly due to lower average fund size in currentfinancialyear.

2 The lower PTR was mainly due to lower trading activity.

* Based on bid price fair valuation method on all investments held by the Fund as at 31 March 2014,theNAVandNAVperunitwouldbeRM11.38millionandRM0.8786respectively.(AsdisclosedunderNote11ofthefinancialstatements)


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 Managed Growth Fund 11.96% 6.38% 12.52%Benchmark* 5.74% 5.36% 12.78%


3.4 Annual total return of the Fund

Period under review

31 Mar 13 - 31 Mar 14

1 Year31 Mar 12 - 31 Mar 13

1 Year31 Mar 11 - 31 Mar 12

1 Year31 Mar 10 - 31 Mar 11

1 Year31 Mar 09 - 31 Mar 10

Kenanga Managed Growth Fund

11.96% 2.51% 3.83% 16.08% 17.57%

Benchmark* 5.74% 4.70% 4.80% 11.45% 26.67%


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 MANAGED GROWTH FUND

We, CIMB COMMERCE TRUSTEE BERHAD (“the Trustee”), being the Trustee of KENANGA MANAGED GROWTH FUND (“the Fund”) (formerly known as ING Managed Growth) 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 year 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 Act 2007 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. INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA MANAGED GROWTH FUND

Report on the financial statements

We have audited the financial statements of Kenanga Managed Growth Fund (formerly known as ING Managed Growth) (“the Fund”), which comprise the statement of financial position as at 31 March 2014 and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 15 to 42.

Manager’sandTrustee’sresponsibilityforthefinancialstatementsandfairpresentation

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

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Manager, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


5. INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF KENANGA MANAGED GROWTH FUND (CONTD.)

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 31 March 2014 and of its financial performance, changes in net asset value and the cash flows of the Fund for the financial year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards.

Other matters

This report is made solely to the unitholders of the Fund, as a body, in accordance with the requirements of Securities Commission Malaysia’s Guidlines on Unit Trust Fund, and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Gloria Goh Ewe GimAF: 0039 No. 1685/04/15(J)Chartered Accountants Chartered Accountant


26 May 2014


6. STATEMENT BY THE MANAGER

I, Abdul Razak Bin Ahmad, being the director 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 year ended 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 Managed Growth Fund (formerly known as ING Managed Growth) as at 31 March 2014 and of its financial performance and cash flows for the year then ended and comply with the requirements of the Deed.

For and on behalf of the ManagerKenanga Investors Berhad

Abdul Razak Bin Ahmad


26 May 2014


7. FINANCIAL STATEMENT

7.1 STATEMENT OF COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 31 MARCH 2014

Note 2014 2013RM RM

INVESTMENT INCOMEInterest income 295,454 1,181,170 Dividend income 234,508 959,560 Net gain from investments:

- Financial assets at fair value through profit or loss (“FVTPL”) 1,291,755 226,701

1,821,717 2,367,431

EXPENSESManager’s fee 4 209,619 904,168 Trustee’s fee 5 18,148 40,857 Auditors’ remuneration 6,000 8,000 Tax agent’s fee 3,297 3,326 Administration expenses 30,274 45,756

267,338 1,002,107

NET INCOME BEFORE TAX 1,554,379 1,365,324

Income tax credit/(expense) 6 3,558 (55,531)

NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,557,937 1,309,793

Net income after tax is made up as follows:Realised gain 939,579 1,974,277 Unrealised gain/(loss) 618,358 (664,484)

1,557,937 1,309,793

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


7.2 STATEMENT OF FINANCIAL POSITIONAS AT 31 MARCH 2014

Note 2014 2013RM RM

INVESTMENTSFinancial assets at FVTPL 7 10,128,284 30,644,776Short term deposits 8 1,220,496 155,786

11,348,780 30,800,562

OTHER ASSETSOther receivables 9 9,986 2,130,750Tax recoverable 58,544 81,626Cash at bank 5,239 10,614

73,769 2,222,990

TOTAL ASSETS 11,422,549 33,023,552

LIABILITIESAmount due to Manager 13,514 105,204Amount due to Trustee 1,529 1,794Other payables 26,682 982,617TOTAL LIABILITIES 41,725 1,089,615

EQUITYUnitholder’s contribution 3,772,560 11,156,566Retained earnings 7,608,264 20,777,371NET ASSET VALUE (“NAV”) ATTRIBUTABLE TO

UNITHOLDERS 10 11,380,824 31,933,937

TOTAL EQUITY AND LIABILITIES 11,422,549 33,023,552

NUMBER OF UNITS IN CIRCULATION 10(a) 12,952,641 40,620,995

NET ASSET VALUE PER UNIT (RM) 11 0.8786 0.7861



7.3 STATEMENT OF CHANGES IN NET ASSET VALUEFOR THE FINANCIAL YEAR ENDED 31 MARCH 2014

NoteUnitholders’ contribution

Retained earnings

Total net asset value

RM RM RM

2014At beginning of the year 11,156,566 20,777,371 31,933,937 Total comprehensive income - 1,557,937 1,557,937 Creation of units 10(a) 687,895 - 687,895 Cancellation of units 10(a) (22,487,335) - (22,487,335)Distribution equalisation 10(a) 14,415,434 (14,727,044) (311,610)At end of the year 3,772,560 7,608,264 11,380,824

2013At beginning of the year 57,901,875 19,467,578 77,369,453 Total comprehensive income - 1,309,793 1,309,793 Creation of units 10(a) 9,239,083 - 9,239,083 Cancellation of units 10(a) (55,164,188) - (55,164,188)Distribution equalisation 10(a) (820,204) - (820,204)At end of the year 11,156,566 20,777,371 31,933,937



7.4 STATEMENT OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 MARCH 2014

2014 2013RM RM

CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES

Proceeds from sale of financial assets at FVTPL 30,795,635 237,754,208 Purchase of financial assets at FVTPL (8,038,563) (196,562,574)Net dividends received 262,588 918,424 Interest received 480,809 1,371,313 Manager’s fee paid (234,456) (968,277)Trustee’s fee paid (18,413) (43,729)Auditors’ remuneration paid (6,000) (6,000)Tax agent’s fee paid (4,797) (7,426)Rebate from management fee - 1,017 Payment for other fees and expenses (31,524) (40,506)Cash generated from operating and investing activities 23,205,279 42,416,450Refund of tax credit 31,959 26,653 Net cash generated from operating and investing activities 23,237,238 42,443,103

CASH FLOWS FROM FINANCING ACTIVITIESCash received from units created 704,017 9,280,224 Cash paid on units cancelled (22,881,920) (59,422,463)Net cash used in financing activities (22,177,903) (50,142,239)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,059,335 (7,699,136)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 166,400 7,865,536

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 1,225,735 166,400

Cash and cash equivalents comprise:Cash at bank 5,239 10,614 Short term deposits 1,220,496 155,786

1,225,735 166,400



7.5 NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 MARCH 2014

1. THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Kenanga Managed Growth Fund (formerly known as ING Managed Growth) (herein after referred to as “the Fund”) was constituted pursuant to the executed Master Deed dated 16 April 2004 between ING Funds Berhad (currently known as Kenanga Funds Berhad) and CIMB Commerce Trustee Berhad. The Fund commenced operation 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 appointecd as the Manager of the Fund with effect from 8 June 2013 and the name of the Fund was changed from ING Managed Growth to Kenanga Managed Growth 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 investors long-term capital growth through diversified investments in equities and bonds.

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 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 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 financial instruments fluctuate in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the prices of financial instruments caused by uncertainties in the economic, political and social environment will affect the fair value of the Fund.

The Manager manages the risk of unfavorable changes in prices by cautious review of the financial instruments and continuous monitoring of their performance and risk profiles.

i. Interest rate risk

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

Interest rate risk sensitivity

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

Effect on profitChanges in rate for the year

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

2014Financial assets at FVTPL 5/(5) 1,760/(1,760)

2013Financial assets at FVTPL 5/(5) 8,869/(8,869)

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.



a. Market Risk (Contd.)

i. Interest rate risk (Contd.)

Interest rate risk exposure (Contd.)

Up to 1 year

Above1 year -5 years

Above5 year -

15 years

Non-exposure

to interestrate

movement Total

Weightedaverageeffectiveinterest

rate*RM RM RM RM RM %

2014AssetsFinancial assets at

FVTPL 1,106,536 2,379,444 - 6,642,304 10,128,284 4.76 Short term deposits 1,220,496 - - - 1,220,496 2.97 Other assets - - - 15,225 15,225

2,327,032 2,379,444 - 6,657,529 11,364,005

LiabilitiesOther liabilities - - - 41,725 41,725

Total interest rate sensitivity gap 2,327,032 2,379,444 - 6,615,804 11,322,280

2013AssetsFinancial assets at

FVTPL - 13,872,535 3,646,166 13,126,075 30,644,776 4.54 Short term deposits 155,786 - - - 155,786 2.95 Other assets - - - 2,141,364 2,141,364

155,786 13,872,535 3,646,166 15,267,439 32,941,926

LiabilitiesOther liabilities - - - 1,089,615 1,089,615

Total interest rate sensitivity gap 155,786 13,872,535 3,646,166 14,177,824 31,852,311

* Computed based on interest-bearing assets only.




ii. Price risk

Price risk is the risk of unfavorable changes in the fair values of quoted equity securities, quoted warrants and quoted collective investment schemes. The Fund invests in quoted equity securities, quoted warrants and quoted 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 equity securities, quoted warrants and qouted collective investment schemes, with all other variables held constant is indicated in the table below:

Effect on profitChange in price for the year

Increase/(Decrease) Increase/(Decrease)Basic points RM

2014Quoted investments 5/(5) 3,305/(3,305)

2013Quoted investments 5/(5) 6,454/(6,454)

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 sets out the Fund’s exposure and concentration to price risk based on its portfolio of quoted investment securities as at the reporting date.

Fair Value Percentage of NAV2014 2013 2014 2013

RM RM % %

Quoted investments 6,609,041 12,907,369 58.1 40.4




ii. Price risk (Contd.)

Price risk concentration (Contd.)

The Fund’s concentration of quoted investment securities price risk analysed by the Fund’s quoted equity securities and quoted collective investment scheme by sector is as follows:

Fair Value Percentage of NAV2014 2013 2014 2013

RM RM % %

Trading/Services 2,972,224 5,174,982 26.1 16.2 Finance 1,181,875 2,887,013 10.4 9.0 Properties 473,107 752,480 4.1 2.4 Industrial products 413,492 268,027 3.6 0.8 Infrastructure 326,496 1,433,312 2.9 4.5 Consumer products 260,784 481,602 2.3 1.5 Plantation 233,768 1,276,700 2.1 4.0 Construction 138.550 477,013 1.2 1.5 Technology 167,613 - 1.5 -Warrants 231,633 156,240 2.0 0.5 REITs 209,499 - 1.9 -

6,609,041 12,907,369 58.1 40.4

b. Credit Risk

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

i. Credit risk exposure

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

ii. Financial assets that are either past due or impaired

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

iii. Credit quality of financial assets

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



b. Credit Risk (Contd.)

iii. Credit quality of financial assets (Contd.)

Investments

Percentage of total investments

Percentage of NAV

2014 2013 2014 2013% % % %

RatingsAAA 42.4 35.5 13.1 15.1 AA1 29.0 41.4 9.0 17.7 AA2 28.6 - 8.8 -AA- - 11.6 - 5.0 AA3 - 11.5 - 4.9

100.0 100.0 30.9 42.7

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

Short term deposits

Percentage of total short term deposits

Percentage of NAV

2014 2013 2014 2013% % % %

P1 100.0 100.0 10.7 0.5100.0 100.0 10.7 0.5

iv. Credit risk concentration

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

Percentage of total investments

Percentage of NAV

2014 2013 2014 2013% % % %

Finance 60.5 52.9 18.7 22.6 Government agency 39.5 20.4 12.2 8.7 Infrastructure - 11.6 - 5.0 Conglomerate - 7.6 - 3.2 Gaming - 7.5 - 3.2

100.0 100.0 30.9 42.7



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

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

NoteUp to

1 year

Above 1 year - 5 years

Above 5 year -

15 years TotalRM RM RM RM

2014AssetsFinancial assets at FVTPL 7,748,840 2,379,444 - 10,128,284Short term deposits 1,220,496 - - 1,220,496Other assets 15,225 - - 15,225

(i) 8,984,561 2,379,444 - 11,364,005

LiabilitiesOther liabilities (ii) 41,725 - - 41,725

Equity (iii) 11,380,824 - - 11,380,824

Liquidity gap (2,437,988) 2,379,444 - (58,544)

2013AssetsFinancial assets at FVTPL 13,126,075 13,872,535 3,646,166 30,644,776Short term deposits 155,786 - - 155,786Other assets 2,141,364 - - 2,141,364

(i) 15,423,225 13,872,535 3,646,166 32,941,926

Liabilities

Other liabilities (ii) 1,089,615 - - 1,089,615

Equity (iii) 31,933,937 - - 31,933,937

Liquidity gap (17,600,327) 13,872,535 3,646,166 (81,626)



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 year 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.

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.

b. Standards and Interpretations Issued But Not Yet Effective

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


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

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

Description

Effective for financial year

beginning on or after

Amendments to MFRS 132: Offsetting Financial Assets and Financial Liabilities

1 January 2014

Amendments to MFRS 10, MFRS 12, and MFRS 127: Investment Entities

1 January 2014

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

1 January 2014

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

Annual Improvements 2010 - 2012 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 years. 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 equity securities, quoted warrants, quoted collective investment schemes and unquoted corporate bonds acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in profit or loss.

Interest earned and dividend revenue elements of such instruments are recorded separately in “Interest 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 interest method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process.

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

d. Impairment of Financial Assets

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



d. Impairment of Financial Assets (Contd.)

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 rate of return. The impairment loss is recognised in profit or loss.

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

If in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

e. Income

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

Interest income, which includes the accretion of discount and amortisation of premium on unquoted bonds, is recognised using the effective interest 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 deposits with financial institution.

g. Income Tax Expense

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

h. Unrealised Reserves

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

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

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

j. Unitholders’ Contribution – NAV Attributable to Unitholders

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

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

k. Functional and Presentation Currency

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

l. Distribution

Distributions are at the discretion of the 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 year.


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 0.2% 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, subject to a minimum fee of RM18,000 per annum.

6. INCOME TAX EXPENSE

2014 2013RM RM

Malaysian income tax:Current year tax - 47,000 (Over)/Under provision for pior year (3,558) 8,531

(3,558) 55,531

Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial year. 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:

2014 2013RM RM

Net income before tax 1,554,379 1,365,324

Tax at Malaysian statutory tax rate of 25% (2013: 25%) 388,595 341,331 Tax effect of:

Income not subject to tax (450,110) (687,528)Loss not subject to tax - 166,121 Expenses not deductible for tax purposes 6,614 14,985 Restriction on tax deductible expenses for unit trust fund 54,198 212,091 Permitted expenses not used and not available for future years 703 - (Over)/Under provision of tax in prior years (3,558) 8,531

Tax (credit)/expense for the year (3,558) 55,531


7. FINANCIAL ASSETS AT FVTPL

2014 2013RM RM

Financial assets held for trading, at FVTPL:Quoted equity securities 6,167,909 12,751,129Quoted warrants 231,633 156,240Quoted collective investment schemes 209,499 - Unquoted corporate bonds 3,519,243 13,637,400Unquoted government guaranteed bonds - 4,100,007

10,128,284 30,644,776

Net gain on financial assets at FVTPL comprised:Realised gain on disposals 673,397 891,185 Unrealised change in fair values 618,358 (664,484)

1,291,755 226,701

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

Quoted equity securities

QuantityShares/

Units

AggregatecostRM

FairValue

RM

Percentage of netassetvalue

%

Trading/ServicesAlam Maritim Resources Berhad 91,000 112,975 127,400 1.1 Axiata Group Berhad 22,500 140,689 149,850 1.3 Barakah Offshore Petroleum Berhad 50,000 87,708 74,000 0.6 Deleum Berhad 16,000 67,048 97,280 0.9 Dialog Group Berhad 52,800 140,159 187,968 1.6 Malaysia Airport Holdings Berhad 8,600 68,619 67,424 0.6 Maxis Berhad 44,100 290,737 306,495 2.7 Perdana Petroleum Berhad 197,900 225,388 374,031 3.3 Perisai Petroleum Teknologi Bhd. 169,000 200,080 260,260 2.3 SapuraKencana Petroleum Berhad 50,300 174,994 225,847 2.0 Sime Darby Berhad 22,466 212,170 208,035 1.8 Telekom Malaysia Berhad 44,100 241,773 258,426 2.3 Tenaga Nasional Berhad 53,200 378,535 635,208 5.6

821,966 2,340,875 2,972,224 26.1


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

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


QuantityShares/

Units

AggregatecostRM

FairValue

RM


%

FinanceAlliance Financial Group Berhad 14,100 73,005 61,899 0.5 AMMB Holdings Berhad 17,000 110,830 121,720 1.1 BIMB Holdings Berhad 36,680 134,603 157,357 1.4 CIMB Group Holdings Berhad 39,205 298,038 279,532 2.5 Malayan Banking Berhad 43,506 399,015 419,398 3.7 RHB Capital Berhad 16,861 130,703 141,969 1.2

167,352 1,146,194 1,181,875 10.4

PropertiesIJM Land Berhad 80,600 226,624 234,546 2.0 Matrix Concepts Holdings Berhad 20,000 69,999 76,000 0.6S P Setia Berhad 37,500 126,345 109,125 1.0 UEM Sunrise Berhad 24,400 68,048 53,436 0.5

162,500 491,016 473,107 4.1

Industrial ProductCoastal Contracts Bhd. 39,800 161,701 200,592 1.8 PETRONAS Gas Berhad 7,400 137,109 175,232 1.5 Supermax Corporation Berhad 14,600 30,828 37,668 0.3

61,800 329,638 413,492 3.6

InfrastructureDiGi.Com Berhad 60,800 278,152 326,496 2.9

60,800 278,152 326,496 2.9

Consumer ProductsKarex Berhad 21,600 42,743 68,688 0.6 PPB Group Berhad 11,600 144,901 192,096 1.7

33,200 187,644 260,784 2.3

PlantationsIOI Corporaton Berhad 32,200 127,985 154,238 1.4 Kuala Lumpur Kepong Berhad 3,300 70,903 79,530 0.7

35,500 198,888 233,768 2.1


7. FINANCIAL ASSETS AT FVTPL (CONTD.)

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


QuantityShares/

Units

AggregatecostRM

FairValue

RM


%

ConstructionMalaysian Resources Corporation Berhad 85,000 133,166 138,550 1.2

TechnologyGlobetronic Technology Bhd. 40,700 113,846 139,601 1.2 ViTrox Corporation Berhad 18,800 26,732 28,012 0.3

59,500 140,578 167,613 1.5

Total quoted equity securities 1,487,618 5,246,151 6,167,909 54.2

Quoted warrantsBIMB Holdings Berhad - WA 10,480 - 7,127 - Gamuda Berhad - WD 79,200 104,011 156,024 1.4 IJM Corporation Berhad - WC 35,300 48,675 68,482 0.6

Total quoted warrants 124,980 152,686 231,633 2.0

Quoted collective investment schemesAxis Real Estate Investment Trust 22,100 75,526 72,267 0.7 CapitaMalls Malaysia Trust 95,300 163,177 137,232 1.2

Total quoted collective investment schemes 117,400 238,703 209,499 1.9

Unquoted corporate bondsBright Focus Berhad maturing on

22/01/2016 1,000,000 1,007,710 1,007,097 8.8 Cagamas Berhad maturing on 08/08/2018 500,000 519,995 538,329 4.7 Cagamas MBS Berhad maturing on

08/08/2017 820,000 859,170 851,327 7.5 Danga Capital Berhad maturing on

24/04/2014 100,000 101,896 101,893 0.9 Public Bank Berhad maturing on

10/12/2014 1,000,000 1,019,073 1,020,597 9.0

Total unquoted corporate bonds 3,420,000 3,507,844 3,519,243 30.9

Total Financial asset at FVTPL 9,145,384 10,128,284 89.0

Unrealised gain on financial assets at FVTPL 982,900


8. SHORT TERM DEPOSITS

Short term deposits are held with licensed commercial banks in Malaysia, on a daily renewal basis at the prevailing interest rate.

9. OTHER RECEIVABLES

2014 2013RM RM

Amount due from brokers - 2,087,452Dividend receivable 9,886 43,285Interest income from short term deposits 100 13

9,986 2,130,750

10. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS

NAV attributed to unitholders is represented by:

Note 2014 2013RM RM

Unitholders’ contribution (a) 3,772,560 11,156,566Retained earnings

Realised reserves 6,625,364 20,412,829Unrealised reserves 982,900 364,542

7,608,264 20,777,37111,380,824 31,933,937

(a) Unitholders’ contribution

2014 2013No. of units RM No. of units RM

At beginning of the year 40,620,995 11,156,566 100,921,651 57,901,875 Distribution equalisation - 14,415,434 - (820,204)Add: Creation of units 850,080 687,895 12,146,030 9,239,083 Less: Cancellation of

units (28,518,434) (22,487,335) (72,446,686) (55,164,188)At end of year 12,952,641 3,772,560 40,620,995 11,156,566

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 (2013: nil).


11. NET ASSET VALUE PER UNIT - EX DISTRIBUTION

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:

2014 2013RM RM/Unit RM RM/Unit

NAV attributable to unitholders for creation/cancellation of units 11,412,675 0.8811 31,967,265 0.7870

Effect from adopting bid prices as fair value (31,851) (0.0025) (33,328) (0.0009)

NAV attributable to unitholders per statement of financial position 11,380,824 0.8786 31,933,937 0.7861

12. INCOME DISTRIBUTION

No income distribution was declared by the Fund for the financial year ended 31 March 2013 (2013: nil).

13. PORFOLIO TURNOVER RATIO

The portfolio turnover ratio (“PTR”) for the current financial year is 1.34 times (2013: 3.65 times).

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

14. MANAGEMENT EXPENSES RATIO

The management expense ratio (“MER”) for the current financial year is 2.00% (2012: 1.72%).

MER is the ratio of total fees and recovered expenses of the Fund expressed as a percentage of the Fund’s average NAV, calculated on a daily basis.


15. TRANSACTIONS WITH STOCKBROKING COMPANIES/FINANCIAL INSTITUTIONS

Brokerage, stamp duty

Transaction Percentage and clearing Percentagevalue of total fee of total

RM % RM %

RHB Investment Bank Berhad 13,771,562 38.4 8,865 14.8 KAF-Seagroatt & Campbell

Securities Sdn Bhd 4,763,184 13.3 7,783 13.0 Kenanga Investment Bank

Berhad* 4,318,422 12.0 8,270 13.8 Credit Suisse Securities

(Malaysia) Sdn Bhd 2,605,712 7.3 9,195 15.3 Standard Chartered Bank

Malaysia Berhad 2,037,537 5.7 - - Macquarie Capital Securities

(Malaysia) Sdn Bhd 1,976,679 5.5 7,037 11.7 CIMB Investment Bank Berhad 1,611,785 4.5 6,313 10.5 UBS Securities Malaysia Sdn

Bhd 1,450,386 4.0 5,153 8.6 Malayan Banking Berhad 985,583 2.8 - - Maybank Investment Bank

Berhad 574,297 1.6 2,007 3.3 Others 1,745,472 4.9 5,436 9.0

35,840,619 100.0 60,059 100.0

The above transaction values were in respect of quoted investment securities and unquoted corporate bonds. Transactions in unquoted corporate bonds do not involve any commission or brokerage fees.

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

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

16. SEGMENTAL REPORTING

a. Business Segment

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


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segment (Contd.)

Quotedinvestment

securities

Unquotedcorporate

bondsOther

investments TotalRM RM RM RM

2014RevenueSegment income representingsegment results 1,632,139 172,615 16,963 1,821,717Unallocated expenditure (267,338)Net income before tax 1,554,379Income tax expense 3,558Net income after tax 1,557,937

AssetsInvestments 6,609,041 3,519,243 1,220,496Other segment assets 9,886 - 100Total segment assets 6,618,927 3,519,243 1,220,596 11,358,766Unallocated assets 63,783

11,422,549

LiabilitiesOther segment liabilities represent

total segment liabilities 3,982 - - 3,982Unallocated liabilities 37,743NAV attributable to unitholders 11,380,824

11,422,549

2013RevenueSegment income representingsegment results 1,163,704 1,123,886 79,841 2,367,431Unallocated expenditure (1,002,107)Net income before tax 1,365,324Income tax expense (55,531)Net income after tax 1,309,793


16. SEGMENTAL REPORTING (CONTD.)

a. Business Segment (Contd.)

Quotedinvestment

securities

Unquotedcorporate

bondsOther

investments TotalRM RM RM RM

2013 (Contd.)AssetsInvestments 12,907,369 17,737,407 155,786Other segment assets 2,130,737 - 13Total segment assets 15,038,106 17,737,407 155,799 32,931,312Unallocated assets 92,240

33,023,552

LiabilitiesOther segment liabilities represent

total segment liabilities 957,167 - - 957,167Unallocated liabilities 132,448NAV attributable to unitholders 31,933,937

33,023,552

b. Geographical Segments

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

17. FINANCIAL INSTRUMENTS

a. Classification of financial instruments

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

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


17. FINANCIAL INSTRUMENTS (CONTD.)

a. Classification of financial instruments (Contd.)

Financial assets at Financial

FVTPL Receivables liabilities TotalRM RM RM RM

2014AssetsFinancial assets at FVTPL 10,128,284 - - 10,128,284 Short term deposits - 1,220,496 - 1,220,496 Other receivables - 9,986 - 9,986 Cash at bank - 5,239 - 5,239

10,128,284 1,235,721 - 11,364,005

LiabilitiesAmount due to Manager - - 13,514 13,514 Amount due to Trustee - - 1,529 1,529 Other payable - - 26,682 26,682

- - 41,725 41,725

2013AssetsFinancial assets at FVTPL 30,644,776 - - 30,644,776 Short term deposits - 155,786 - 155,786 Other receivables - 2,130,750 - 2,130,750 Cash at bank - 10,614 - 10,614 30,644,776 2,297,150 - 32,941,926

LiabilitiesAmount due to Manager - - 105,204 105,204 Amount due to Trustee - - 1,794 1,794 Other payable - - 982,617 982,617

- - 1,089,615 1,089,615


17. FINANCIAL INSTRUMENTS (CONTD.)

b. Financial instruments that are carried at fair value

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

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

Level 1 Level 2 Level 3 TotalRM RM RM RM

Investments:31.1.2014- Quoted equity securities 6,167,909 - - 6,167,909- Quoted warrants 231,633 - - 231,633- Quoted collective investment

schemes 209,499 - - 209,499- Unquoted corporate bonds - 3,519,243 - 3,519,243

31.12.2012- Quoted equity securities 12,751,129 - - 12,751,129 - Quoted warrants 156,240 - - 156,240- Unquoted corporate bonds - 13,637,400 - 13,637,400 - Government investment

issues - 4,100,007 - 4,100,007

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 equity securities, quoted warrants and quoted collective investment scheme are determined by reference to Bursa Malaysia Securities Berhad’s bid price at reporting date.

The fair value of unquoted corporate bonds 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 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.


18. CAPITAL MANAGEMENT

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

The Fund’s objectives for managing capital are:

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

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

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

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

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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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