KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 ANNUAL REPORT

Transcription

1 KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 ANNUAL REPORT For the Financial Period From 20 November 2015 (date of commencement) 31 October 2016

2

3 KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 Contents Page Corporate Directory ii-iii Directory of Manager s Offices iv Fund Information 1 Fund Review 2 Trustee s Report 3 Shariah Adviser s Report 4 Independent Auditor s Report 5-6 Statement by the Manager 7 Financial Statements 8-18

4 CORPORATE DIRECTORY Manager: Kenanga Investors Berhad (Company No P) Registered Office Kenanga Investors Berhad (KIB) 8 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: Business Office Suite 12.02, 12 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: InvestorServices@kenanga.com.my Website: Board Of Directors Datuk Syed Ahmad Alwee Alsree (Chairman) Syed Zafilen Syed Alwee (Independent Director) Peter John Rayner (Independent Director) Imran Devindran bin Abdullah (Independent Director) Dato Bruce Kho Yaw Huat Ismitz Matthew De Alwis Investment Committee Dato Bruce Kho Yaw Huat (Chairman) Syed Zafilen Syed Alwee (Independent Member) Peter John Rayner (Independent Member) Imran Devindran bin Abdullah (Independent Member) Ismitz Matthew De Alwis Company Secretary: Norliza Abd Samad (MAICSA ) 9 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: External Fund Manager: Kenanga Islamic Investors Berhad (Company No D) Registered Office Kenanga Islamic Investors Berhad (KIIB) 8th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: Business Office Suite 12.03, 12th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: Trustee: CIMB Islamic Trustee Berhad (Company No M) Registered Office Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur. Tel: Fax: Website: Business Office Level 21, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur. Tel: Fax: ii Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

5 Shariah Adviser: IBFIM (Company No W) Registered Office No. 149A, 149B, 151B Persiaran Raja Muda Musa Port Klang Selangor Darul Ehsan, Malaysia Business Office 3rd Floor, Menara Takaful Malaysia Jalan Sultan Sulaiman Kuala Lumpur, Malaysia. Tel: Fax: Auditor: Ernst & Young (AF: 0039) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: Tax Adviser: Ernst & Young Tax Consultants Sdn Bhd (Company No K) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: Fax: Membership: Federation of Investment Managers Malaysia (FIMM) , 6th Floor, Wisma Tune, 19, Lorong Dungun, Damansara Heights, Kuala Lumpur, Malaysia. Tel: Fax: Website: Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report iii

6 DIRECTORY OF MANAGER S OFFICES Regional Branch Offices : Kuala Lumpur Suite 12.02, 12th Floor, Kenanga International Jalan Sultan Ismail, Kuala Lumpur, Malaysia Tel: Fax: Johor Bahru Lot 11.03, 11th Floor, Menara MSC Cyberport No. 5, Jalan Bukit Meldrum Johor Bahru, Johor Tel: / 4798 Fax: Melaka No. 25-1, Jalan Kota Laksamana 2/17 Taman Kota Laksamana, Seksyen Melaka Tel: / Fax: Klang No. 12, Jalan Batai Laut 3, Taman Intan Klang, Selangor Darul Ehsan Tel: / Fax: Penang 5.04, 5th Floor, Menara Boustead Penang No. 39, Jalan Sultan Ahmad Shah Penang. Tel : Fax : Miri 2nd Floor, Lot 1264, Centre Point Commercial Centre, Jalan Melayu, Miri, Sarawak Tel: Fax: Kuching 1st Floor, No 71, Lot 7 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel: Fax: Kuantan No. B8, Ground Floor, Jalan Tun Ismail Kuantan Pahang. Tel : Fax : Ipoh Suite 1, 2nd Floor, No. 63, Persiaran Greenhill, Ipoh, Perak, Malaysia Tel: / 7570 / 7575 Fax: Kota Kinabalu A-03-11, 3rd Floor Block A, Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel: / Fax: Seremban 2nd Floor, No. 1D-2, Jalan Tuanku Munawir Seremban, Negeri Sembilan Tel: Fax: iv Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

7 1. FUND INFORMATION 1.1 Fund Name Kenanga Islamic Balanced Wholesale Fund - Series 1 (KIBWFS1 or the Fund) 1.2 Fund Type / Category Growth & Income / Balanced (Islamic) 1.3 Investment Objective The Fund seeks to achieve returns over the medium to long-term through investments in Shariah-compliant equities and sukuk 1.4 Investment Strategy The Fund will invest in a balanced portfolio of Shariah-compliant equities and equityrelated securities* and sukuk. * Equity related securities refers to warrants, transferable subscription rights and depository receipts. 1.5 Asset Allocation Between 40% to 60% of the Net Asset Value (NAV) will be placed in Shariahcompliant equities and equity-related securities, another 40% to 60% in Sukuk and at least 2% will be invested in Islamic liquid assets. 1.6 Duration The Fund was launched on 20 November 2015 and it shall exist as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. 1.7 Performance Benchmark 60% FTSE-Bursa Malaysia Emas Shariah Index and 40% Maybank 12-month GIA rate. The risk profile of the Fund is not the same as the risk profile of the benchmark 1.8 Distribution Policy Subject to the availability of income, the Fund will distribute income annually. 1.9 External Fund Manager Kenanga Islamic Investors Berhad Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 1

8 2. FUND REVIEW For the first financial period under review as at 31 st October 2016, the Fund has been dormant and there are no units in circulation. Market Outlook BNM surprised move to cut the OPR in July 2016 was a pre-emptive move amid fragile growth and weaker external developments. BNM Governor s commented that BNM would evaluate the current economic data before taking any action on the rate. BNM held the Overnight Policy Rate (OPR) at 3.00% during its final meeting for this year. The decision was widely expected and marks the second meeting that OPR is kept on hold after 25bps cut in July. The next monetary policy meeting will be on January BNM projects global growth to improve slightly in 2017 compared to previous statement where BNM was more cautious and sounded that downside risks to global growth remain high. BNM sees the prospect of a shift towards progressive use of fiscal policy in the developed economies that would support growth. The domestic economy continued to expand in the third quarter and remains on track to expand in 2016 and Banking system continues to have excess funds and financial institutions continue to operate with strong capital and liquidity buffers. Malaysia s latest foreign reserves edged up 0.5% to US$98.3bn as at mid-november from US$97.8bn as at end of October. This marks the highest level of reserves since mid-july 2015, and equivalent to 8.4 months of retained imports and 1.2 times short term external debt. BNM expects inflation to come in at the lower end of projected 2.0%-2.5% for 2016 and expected to remain stable in Low global commodity prices, and fading impact of the goods and services tax are key contributory factors for easing inflationary pressure. With inflation poised to remain subdued, we are of the view that Bank Negara will maintain the OPR at 3.00% in the first quarter Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

9 3. TRUSTEE S REPORT KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 We, CIMB Islamic Trustee Berhad ( the Trustee ), being the Trustee of Kenanga Islamic Balanced Wholesale Fund - Series 1 ( the Fund ), are of the opinion that Kenanga Investors Berhad ( the Manager ), acting in the capacity of Manager of the Fund, has fulfilled its duties in the following manner for the first financial period from 20 November 2015 (Date of Commencement) to 31 October There was no creation and cancellation of units and no valuation/pricing of units of the Fund carried out for the first financial period from 20 November 2015 (date of commencement) to 31 October There were no unitholders or investment activity by the Fund during the financial period from 20 November 2015 (date of commencement) to 31 October For and on behalf of CIMB Islamic Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 19 December 2016 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 3

10 4. SHARIAH ADVISER S REPORT TO THE UNITHOLDERS OF KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 We have acted as the Shariah Adviser of Kenanga Islamic Balanced Wholesale Fund - Series 1. 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 Islamic Balanced Wholesale Fund - Series 1 in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission Malaysia pertaining to Shariah matters for the first financial period from 20 November 2015 (Date of Commencement) to 31 October In addition, we also confirm that the investment portfolio of Kenanga Islamic Balanced Wholesale Fund - Series 1 comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission Malaysia. As for the securities which are not certified by the Shariah Advisory Council of the Securities Commission Malaysia, we have reviewed the said securities and opine that these securities are designated as Shariah-compliant. For and on behalf of the Shariah Adviser IBFIM AHMAD ZAKIRULLAH BIN MOHAMED SHAARANI Shariah Advisor/ Designated Person Responsible for Shariah Advisory Kuala Lumpur, Malaysia 19 December Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

11 5 INDEPENDENT AUDITORS REPORT TO THE MANAGER OF KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 Report on the financial statements We have audited the financial statements of Kenanga Islamic Balanced Wholesale Fund - Series 1 ( the Fund ), which comprise the statement of financial position as at 31 October 2016, and the statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the first financial period from 20 November 2015 (date of commencement) to 31 October 2016, and a summary of significant accounting policies and other explanatory information, as set out on pages 8 to 18. Manager s and Trustee s responsibility for the financial statements and fair presentation 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 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. Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 5

12 5 INDEPENDENT AUDITORS REPORT TO THE MANAGER OF KENANGA ISLAMIC BALANCED WHOLESALE FUND - SERIES 1 (CONTD.) Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 31 October 2016 and of its financial performance, changes in net asset value and cash flows for the first financial period from 20 November 2015 (date of commencement) to 31 October 2016 in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Other matters This report is made solely to the Manager of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Chan Hooi Lam No. 2844/02/18(J) Chartered Accountant Kuala Lumpur, Malaysia 19 December Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

13 6. STATEMENT BY THE MANAGER I, Ismitz Matthew De Alwis, being a director of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial position as at 31 October 2016 and the related statement of comprehensive income, statement of changes in net asset value and statement of cash flows for the first financial period from 20 November 2015 (date of commencement) to 31 October 2016 together with notes thereto, are drawn up in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards so as to give a true and fair view of the financial position of Kenanga Islamic Balanced Wholesale Fund - Series 1 as at 31 October 2016 and of its financial performance and cash flows for the financial period from 20 November 2015 (date of commencement) to 31 October 2016 and comply with the requirements of the Deed. For and on behalf of the Manager Kenanga Investors Berhad Ismitz Matthew De Alwis Executive Director/Chief Executive Officer Kuala Lumpur, Malaysia 19 December 2016 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 7

14 7. FINANCIAL STATEMENTS 7.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FIRST FINANCIAL PERIOD FROM 20 NOVEMBER 2015 (DATE OF COMMENCEMENT) TO 31 OCTOBER 2016 INVESTMENT INCOME (date of commencement) to RM Profit income - NET INCOME BEFORE TAX - Income tax - NET INCOME AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD - Net income after tax is made up as follows: Realised gain - The accompanying notes form an integral part of the financial statements. 8 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

15 7.2 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2016 Note RM INVESTMENT Short term Islamic deposits - OTHER ASSET Cash at bank - TOTAL ASSETS - EQUITY Unitholder s contribution - Retained earning - NET ASSET VALUE ( NAV ) ATTRIBUTABLE TO UNITHOLDER - TOTAL EQUITY AND LIABILITY - NUMBER OF UNITS IN CIRCULATION - NET ASSET VALUE PER UNIT (RM) The accompanying notes form an integral part of the financial statements. Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 9

16 7.3 STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FIRST FINANCIAL PERIOD FROM 20 NOVEMBER 2015 (DATE OF COMMENCEMENT) TO 31 OCTOBER 2016 Unitholder s Retained contribution earnings Total NAV RM RM RM (date of commencement) to At the beginning/end of the financial period The accompanying notes form an integral part of the financial statements. 10 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

17 7.4 STATEMENT OF CASH FLOWS FOR THE FIRST FINANCIAL PERIOD FROM 20 NOVEMBER 2015 (DATE OF COMMENCEMENT) TO 31 OCTOBER 2016 CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES date of commencement) to RM Net cash generated from operating and investing activities - CASH FLOWS FROM FINANCING ACTIVITIES Net cash generated from financing activity - NET INCREASE IN CASH AND CASH EQUIVALENTS - CASH AND CASH EQUIVALENTS AT DATE OF COMMENCEMENT - CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD - Cash and cash equivalents comprise: Cash at bank - Short term Islamic deposits - - The accompanying notes form an integral part of the financial statements. Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 11

18 7.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FIRST FINANCIAL PERIOD FROM 20 NOVEMBER 2015 (DATE OF COMMENCEMENT) TO 31 OCTOBER THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Islamic Balanced Wholesale Fund - Series 1 ( the Fund ) was constituted pursuant to the executed Deed dated 18 June 2014 (collectively, together with deeds supplemental thereto, referred to as "the Deed") between the Manager, Kenanga Investors Berhad, and CIMB Islamic Trustee Berhad ("the Trustee"). The Fund commenced operations on 20 November 2015 and will continue to be in operation until as provided under Part 11 of the Deed. Kenanga Investors Berhad is a wholly-owned subsidiary of Kenanga Investment Bank Berhad. Prior to 2 November 2016, Kenanga Investment Bank Berhad was a whollyowned subsidiary of K & N Kenanga Holdings Berhad that was listed on the Main Market of Bursa Malaysia Securities Berhad. Pursuant to an internal reorganisation exercise on 2 November 2016, Kenanga Investment Bank Berhad has become the ultimate parent company for both Kenanga Investors Berhad and K & N Kenanga Holdings Berhad and assumed the listing status of K & N Kenanga Holdings Berhad. All of these companies are incorporated in Malaysia. The principal place of business of the Manager is Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur. The Fund seeks to achieve returns over the medium to long term through investments in Shariah-compliant equities and sukuk. The Fund has been dormant and there is no unit in circulation. The Manager has been actively looking for potential investors to invest in the Fund and will provide continued financial support to the extent that the Fund will be able to meet its liabilities as and when they fall due. The financial statements were authorised for issue by the Chief Executive Officer of the Manager on 19 December As the Fund does not have any unitholder as at the end of the financial period, the report of the auditors has been addressed to the Manager. 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund has no exposure to market risk, credit risk and liquidity risk in the current financial period as it has no unit in circulation and holds no financial instrument as at the reporting date. 12 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

19 ERIOD 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accounting The Fund is dormant and has no units in circulation as at the end of the financial period. As such, the financial statements have been prepared on a basis other than going concern. The Manager will provide continued financial support to the extent that the Fund will be able to meet its liabilities as and when they fall due. The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRS ) as issued by the Malaysian Accounting Standards Board ( MASB ) and International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. b. Standards and Amendments Issued But Not Yet Effective As at the reporting date, the following Standards and Amendments that have been issued by MASB will be effective for the Fund in future financial periods. The Fund intends to adopt the relevant standards when they become effective. Description Effective for financial period beginning on or after Amendments to MFRS contained in the documents entitled Annual Improvements to MFRSs Cycle 1 January 2016 MFRS 14: Regulatory Deferral Accounts 1 January 2016 Amendments to MFRS 10, MFRS 12 and MFRS 128: Investment Entities: Applying the Consolidation Exception 1 January 2016 Amendments to MFRS 11: Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 101: Disclosure Initiative 1 January 2016 Amendments to MFRS 116 and MFRS 138: Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141: Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 127: Equity Method in Separate Financial Statements 1 January 2016 Amendments to MFRS 107: Disclosure Initiative 1 January 2017 Amendments to MFRS 112: Recognition of Deferred Tax Assets or Unrealised Losses 1 January 2017 MFRS 9: Financial Instruments 1 January 2018 MFRS 15: Revenue from Contracts with Customers 1 January 2018 MFRS 16: Leases 1 January 2019 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be announced by MASB Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 13

20 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) b. Standards and Amendments Issued But Not Yet Effective (Contd.) The Fund will adopt the above pronouncements when they become effective in the respective financial periods. These pronouncements are not expected to have any significant impact to the financial statements of the Fund upon their initial application, other than MFRS 9. MFRS 9 replaces MFRS 139 on the following requirements: classification and measurement of financial assets and financial liabilities as defined in MFRS 139, impairment methodology and hedge accounting. The Fund is in the process of making an assessment of the impact of this Standard. c. Financial Assets Shariah-compliant financial assets are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss ("FVTPL"), directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition. i. Financial Assets at FVTPL Shariah-compliant financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Shariah-compliant financial assets held for trading are acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, Shariah-compliant 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 elements of such instruments are recorded in "profit income". ii. Receivables Shariah-compliant financial assets with fixed or determinable payments that are not quoted in an active market are classified as receivables. Subsequent to initial recognition, receivables are measured at amortised cost using the effective yield method. Gain or loss is recognised in profit or loss when the receivable is derecognised or impaired, and through the amortisation process. 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. 14 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

21 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) d. Impairment of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective 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 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 is recognised using the effective yield method. f. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and short term Islamic deposits with licensed financial institutions with insignificant risk of change in value. g. Income Tax Income tax on the profit or loss for the financial period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial period. As no temporary differences have been identified, no deferred tax has been recognised. Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 15

22 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) h. Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund s financial liabilities are classified as other financial liabilities. The Fund s financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective yield method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. i. Unitholder s Contribution NAV Attributable to Unitholder The unitholder s 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. j. 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. k. Distribution Distributions are at the discretion of the Manager. A distribution to the Fund s unitholder is accounted for as a deduction from retained earnings. l. 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. 16 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

23 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) l. Significant Accounting Judgments and Estimates (Contd.) 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. AUDITORS' REMUNERATION, TAX AGENT'S FEE AND OTHER ADMINISTRATION EXPENSES For the current financial period, the auditors' remuneration, tax agent fees and other administration expenses are borne by the Manager. 5. NET ASSET VALUE PER UNIT The net asset value per unit is the initial offer price of the Fund as stated in the Information Memorandum dated 20 November PORTFOLIO TURNOVER RATIO ( PTR ) PTR for the current financial period from 20 November 2015 (date of commencement) to 31 October 2016 is nil. PTR is the ratio of average sum of acquisitions and disposals of Shariah-compliant investments of the Fund for the financial period to the average NAV of the Fund, calculated on a daily basis. 7. MANAGEMENT EXPENSE RATIO ( MER ) MER for the current financial period from 20 November 2015 (date of commencement) to 31 October 2016 is nil. 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. 8. CAPITAL MANAGEMENT The capital of the Fund can vary depending on the demand for creation and cancellation of units to the Fund. The Fund is dormant and has no unit in circulation since commencement. Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report 17

24 9. COMPARATIVES There are no comparative amounts presented as this is the Fund's first set of financial statements since its commencement. 18 Kenanga Islamic Balanced Wholesale Fund - Series 1 Annual Report

25 This page has been intentionally left blank

26 This page has been intentionally left blank

27

28 Investor Services Center Toll Free Line: Fax: investorservices@kenanga.com.my Head Office, Kuala Lumpur Suite 12.02, 12th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. Tel: Fax: