Fund Information 2. Manager s Report 3-6. Fund Performance Trustee s Report 11. Auditor s Report Financial Statement 14-39

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2 TABLE OF CONTENTS Page/s Fund Information 2 Manager s Report 3-6 Fund Performance 7-10 Trustee s Report 11 Auditor s Report Financial Statement Statement by the Manager 40 Corporate Directory 41 Kenanga Global Dividend Fund Annual Report 1

3 1. FUND INFORMATION 1.1 Fund name, type and category Kenanga Global Dividend Fund ( the Fund ) is a feeder / growth fund. (Kenanga Global Dividend Fund formerly known as ING Global Dividend) 1.2 The Fund s investment objective The Fund aims to achieve capital growth by investing in a diversified portfolio of high dividend yielding equities globally through a target fund. 1.3 Fund duration and termination date (if any) The Fund is an open-ended fund and hence does not have a termination date. 1.4 The Fund s performance benchmark The Fund s performance benchmark index is MSCI World Index obtainable from The Fund s distribution policy Income (if any) will be distributed annually on a best effort basis. 1.6 Breakdown of unit holdings by size and number of investors Size of holding No. of Units held as at 30 Apr 2013 No. of Investors as at 30 Apr ,000 and below 0 0 5,001 10, , ,001 50,000 3,279, , ,000 3,259, ,001 & above 62,964, Total 70,211, Kenanga Global Dividend Fund Annual Report

4 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 diversified portfolio of global high dividend yielding equities through a target fund. 2.2 Comparison between the Fund s performance during period under review and performance of the benchmark disclosed in the prospectus since inception % Fund performance for each of the financial year and period under review period under review Kenanga Global Dividend Fund MSCI World Index Source: Perkasa Normandy Managers Sdn Bhd 2.3 Investment strategies and policies employed during the period under review (1 May April 2013) For the period under review, the Fund invested a minimum of 95% of its net asset value in ING (L) Invest Global High Dividend which is a fund denominated in Euro and domiciled in Luxembourg in line with its investment strategy and policy. The remaining was invested in liquid assets including money market instruments and deposits with licensed financial institutions. 2.4 The Fund s asset allocation (% of NAV) as at 30 April 2013 and comparison with the previous financial year Asset 30 Apr Apr 2012 ING (L) Invest Global High 95.7% 97.0% Dividend Liquid Assets 4.3% 3.0% Reasons for the difference in asset allocation The Fund s investment strategy has not been changed since the end of the previous period under review. The difference in asset allocation is due to fluctuations in the value of the target fund. Kenanga Global Dividend Fund Annual Report 3

5 2.5 Fund performance analysis based on NAV per unit (adjusted for income distribution; if any) since the last review period Period under review Kenanga Global Dividend Fund 12.48% MSCI World Index 14.77% Source: Perkasa Normandy Managers Sdn Bhd For the period under review, the Fund registered a return of 12.48% underperforming its benchmark which returned 14.77%. The underperformance was due to unfavourable asset allocation and stock selection. 2.6 Review of the market that ING (L) Invest Global High Dividend (Target Fund) invests in (Review period: 1 May 2012 to 30 April 2013) Market Review Global equity market made strong gains during the 12-month period ending April The MSCI developed market net return index gained +16.7%. Equity markets fell at the beginning of the period as uncertain worldwide growth and intensifying concerns over the fate of the eurozone triggered a flight to safety. However, risk appetite increased again on optimism that policy makers were preparing new steps to stimulate the troubled economies and address the crisis. A statement from European Central Bank (ECB) president Draghi to do whatever it takes to preserve the euro calmed fears about an escalation of the euro debt crisis. Into the summer, global equities made significant gains boosted by the ECB s strategy of intervening to support peripheral bond markets. In third quarter of 2012, the atmosphere began a little gloomy due to weak corporate earnings and a subdued global growth outlook. Gains were triggered by a constructive first round of budget negotiations in the US and confirmation of improving economic conditions in the US and China. Supportive statements from central bank presidents Bernanke and Draghi also boosted sentiment. A deal regarding the US fiscal cliff was finally reached after markets closed on December 31st; the uncertainty leading up to it was a source for volatility but the agreement to avert what many considered as a major problem for global growth significantly lifted markets. Positive data from the US on jobs creation and an improving home builder s sentiment provided further support. News from other regions was positive as well. Japanese equities rallied following the election of Shinzo Abe and the promise of expansionary monetary and fiscal policy. At the end of the period the new Bank of Japan governor announced aggressive easing measures that exceeded market expectations. 4 Kenanga Global Dividend Fund Annual Report

6 All sectors except Materials showed a positive performance for the period. Surprisingly for an upward market, defensive sectors posted the strong returns, with notable performances of the Healthcare (+29.4%), Telecom (+21.2%) and Consumer Staples (+22.9%) sectors. Financials (+27.6%) also did well on reducing systemic risk in the Eurozone. The commodity driven Energy (+4.7%) and Materials (-2.2%) sectors underperformed once again driven by lower energy and metal prices. Value stocks outperformed Growth, while small, and large cap stocks performed relatively in line with each other. Market Outlook and Current Strategy We remain positive about the prospects for equities. On the back of generally accommodative central bank policy stances and lower Eurozone risks, markets seem more willing to look beyond ongoing uncertainties related to the US debt ceiling and budget negotiations and the challenges in peripheral Europe. There are three key factors that underpin our positive stance: the moderate uptrend in economic data remains in place, though with regional differences. We are seeing signs of strengthening in the US and Chinese economies, Abenomics is spurring growth in Japan and we expect other countries to follow. Second, earnings trends improve. US earnings come in above expectations with 70% of companies beating. Global earnings momentum is still slightly negative but hides big regional differences. In Japan, it s strongly positive whereas in Europe and Emerging Markets earnings momentum remains weak. A third argument is valuation; absolute valuation metrics may be close to normal, relative to other asset classes, they are attractive. From a dividend perspective, a majority of companies across the globe are in excellent shape, have strongly deleveraged and are cash-rich. In addition, their pay outs are relatively low and that offers sustainable dividends with room for growth going forward. 2.7 Income distribution For the financial year 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. Kenanga Global Dividend Fund Annual Report 5

7 2.10 Circumstances that materially affect any interests of the unitholders During the period under review, there are no circumstances that materially affect any interests of the unitholders. However, there was a change in the Management Company of the Fund on 8th June 2013 on detailed in 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 did not receive any rebates or soft commissions from stockbrokers. 6 Kenanga Global Dividend Fund Annual Report

8 3. FUND PERFORMANCE 3.1 Details of portfolio composition of Kenanga Global Dividend Fund ( the Fund ) as at 30 April 2013 against last 3 financial years ended 30 April are as follows: a. Distribution among industry sectors and category of investments: FY FY FY FY % % % % Collective Investment Scheme - Foreign Collective Investment Scheme - Local Cash and others Note: The above mentioned percentages are based on total investment market value plus cash. b. Distribution among markets At 30 April 2013, the target fund ING (L) Invest Global High Dividend has invested in the following markets: Others 14.15% Singapore Netherlands Germany Canada Switzerland France Japan United Kingdom 2.08% 3.08% 4.29% 5.34% 5.54% 7.36% 8.80% 8.83% United States 40.52% Source: Commentary and target fund information provided by ING Investment Europe Kenanga Global Dividend Fund Annual Report 7

9 c. Distribution among industry At 30 April 2013, the target ING (L) Invest Global High Dividend has invested in the following sectors: Telecoms Utilities Consumer Staples Materials Information Technology Consumer Discretionary Energy Industrials Health Care Financials 4.14% 5.70% 6.71% 7.29% 10.08% 10.22% 11.77% 12.15% 12.73% 19.22% Source: Commentary and target fund information provided by ING Investment Europe 8 Kenanga Global Dividend Fund Annual Report

10 3.2 Performance details of the Fund for the financial year ended 30 April 2012 against last 3 financial years ended 30 April are as follows: FY FY FY FY Net asset value 24.44* (RM Million) Units in circulation (Million) Net asset value per * unit (RM) Highest NAV price (RM/unit) Lowest NAV price (RM/unit) Total return (%) Capital growth (%) Income growth (%) Gross distribution per unit (sen) Net distribution per unit (sen) Management expense ratio ( MER ) (%) Portfolio turnover ratio ( PTR ) (times) Note: Total return is the actual return of the Fund for the financial year, computed based 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 prices and NAV are not shown as ex-distribution as there were no distribution declared by the Fund in the current period under review. 1 The increase in MER was due to decrease of average of fund size for the year 2 The higher PTR was mainly due to higher number of transaction arising from larger fund movement. * The NAV and NAV price per unit are valued based on bid price fair valuation method. Kenanga Global Dividend Fund Annual Report 9

11 3.3 Average total return of the Fund 1 Year 30 Apr Apr 13 3 Years 30 Apr Apr 13 5 Years 30 Apr Apr 13 Kenanga Global 12.48% 3.38% -2.74% Dividend Fund MSCI World Index 14.77% 5.57% -1.18% 3.4 Annual total return of the Fund for each of the last 5 financial years or since inception (for the period ending 30 April) Period under review 1 Year 30 Apr Apr 12 1 Year 30 Apr Apr 11 Kenanga Global 12.48% -3.40% 1.68% Dividend Fund MSCI World Index 14.77% -4.86% 7.76% 1 Year 30 Apr Apr 10 1 Year 30 Apr Apr 09 1 Year 30 Apr Apr 08 Kenanga Global 22.00% % % Dividend Fund MSCI World Index 20.09% % -8.38% The performance data of the Fund is calculated based on net asset value per unit with distribution reinvested and is quoted from: Perkasa Normandy Managers Sdn Bhd. Note: Past performance is not necessarily indicative of future performance. Unit prices and investment returns may fluctuate. 10 Kenanga Global Dividend Fund Annual Report

12 4. TRUSTEE S REPORT We, CIMB COMMERCE TRUSTEE BERHAD being the Trustee of KENANGA GLOBAL DIVIDEND FUND (formerly known as ING GLOBAL DIVIDEND) are of the opinion that KENANGA INVESTORS BERHAD ( the Manager ), acting in the capacity of Manager of the Fund, have fulfilled their duties in the following manner for the financial year ended 30 April a. The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws during the financial year ended 30 April 2013; 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 LIEW PIK YOONG Head of Turstee Services 26 June 2013 Kenanga Global Dividend Fund Annual Report 11

13 5. INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA GLOBAL DIVIDEND FUND Report on the financial statements We have audited the financial statements of Kenanga Global Dividend Fund ( the Fund ), which comprise the statement of financial position as at 30 April 2013, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 14 to 39. Manager s and Trustee s responsibility for the financial statements The Manager of the Fund is responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements 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. 12 Kenanga Global Dividend Fund Annual Report

14 5. INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF KENANGA GLOBAL DIVIDEND FUND (CONTD.) Opinion In our opinion, the financial statements have been properly 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 the Fund as at 30 April 2013 and of its financial performance and the cash flows of the Fund for the financial year then ended. Other matters 1. As stated in Note 3 to the financial statements, the Fund adopted Malaysian Financial Reporting Standards on 1 May 2012 with a transition date of 1 May Theses standards were applied retrospectively by directors to the comparative information in these financial statements, including the statements of financial position as at 30 April 2012 and 1 May 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended 30 April 2012 and related disclosures. We were not engaged to report on the comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Fund for the year ended 30 April 2013 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 May 2012 do not contain misstatements that materially affect the financial position as of 30 April 2013 and financial performance and cash flows for the year then ended. 2. This report is made solely to the unit holders 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 Yeo Beng Yean No. 3013/10/14(J) Chartered Accountant Kuala Lumpur, Malaysia 26 June 2013 Kenanga Global Dividend Fund Annual Report 13

15 6. FINANCIAL STATEMENT 6.1 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 APRIL 2013 Note RM RM INVESTMENT INCOME Interest income 36,250 34,472 Net gain/(loss) from investments: - Financial assets at fair value through profit or loss ( FVTPL ) 7 2,772,960 (1,488,450) 2,809,210 (1,453,978) EXPENSES Manager s fee 4 98, ,008 Trustee s fee 5 20,882 25,272 Auditors remuneration 8,000 4,000 Tax agent s fee 2,844 2,800 Administration 14,514 7, , ,583 NET INCOME/(LOSS) BEFORE TAX 2,664,647 (1,607,561) Income tax expense NET INCOME/ (LOSS) AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 2,664,647 (1,607,561) Total comprehensive income/ (loss) is made up as follows: Realised loss (3,129,146) (3,183,763) Unrealised gain 5,793,793 1,576,202 2,664,647 (1,607,561) The accompanying notes form an integral part of the financial statements. 14 Kenanga Global Dividend Fund Annual Report

16 6.2 STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2013 ASSETS Note RM RM RM Collective investment scheme - foreign 7 23,390,277 26,987,317 39,025,766 Short term deposits 8 3,059,200 1,003, ,453 26,449,477 27,990,580 39,180,219 OTHER ASSETS Other receivables ,800,011 Cash at bank 10,028 3,810 4,199 10,275 3,891 1,804,210 TOTAL ASSETS 26,459,752 27,994,471 40,984,429 LIABILITIES Amount due to Manager 7, , ,989 Amount due to Trustee 1,742 1,923 2,596 Other payables 2,015,000 12,600 9,800 TOTAL LIABILITIES 2,024, , ,385 EQUITY NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS 10 24,435,410 27,820,807 40,695,044 TOTAL LIABILITIES AND EQUITY 26,459,752 27,994,471 40,984,429 NUMBER OF UNITS IN CIRCULATION 10(a) 70,211,273 89,928,707127,041,512 NET ASSET VALUE PER UNIT The accompanying notes form an integral part of the financial statements. Kenanga Global Dividend Fund Annual Report 15

17 6.3 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 APRIL 2013 Unitholders Accumulated Total Note capital losses equity RM RM RM 2013 At beginning of the year 71,253,904 (43,433,097) 27,820,807 Total comprehensive income for the year - 2,664,647 2,664,647 Creation of units 10(a) 19,318,638-19,318,638 Cancellation of units 10(a) (25,367,905) - (25,367,905) Distribution equalisation 10(a) (777) - (777) At end of the year 65,203,860 (40,768,450) 24,435, At beginning of the year 82,520,580 (41,825,536) 40,695,044 Total comprehensive loss for the year - (1,607,561) (1,607,561) Creation of units 10(a) 6,960,749-6,960,749 Cancellation of units 10(a) (22,011,108) - (22,011,108) Distribution equalisation 10(a) 3,783,683-3,783,683 At end of the year 71,253,904 (43,433,097) 27,820,807 The accompanying notes form an integral part of the financial statements. 16 Kenanga Global Dividend Fund Annual Report

18 6.4 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 APRIL RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 27,770,000 13,850,000 Purchase of investments (19,400,000) (1,500,000) Interest received 36,084 34,402 Manager s fee paid (99,012) (117,449) Trustee s fee paid (21,063) (25,945) Auditors remuneration paid (6,000) (4,000) Tax agent s fee paid (2,444) - Payment for other fees and expenses (14,513) (7,503) Net cash generated from operating and investing activities 8,263,052 12,229,505 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 19,318,638 4,656,689 Cash paid on units cancelled (25,519,535)(16,037,773) Net cash used in financing activities (6,200,897)(11,381,084) NET INCREASE IN CASH AND CASH EQUIVALENTS 2,062, ,421 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,007, ,652 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 3,069,228 1,007,073 Cash and cash equivalent comprise: Cash at bank 10,028 3,810 Short term deposits 3,059,200 1,003,263 3,069,228 1,007,073 The accompanying notes form an integral part of the financial statements. Kenanga Global Dividend Fund Annual Report 17

19 6.5 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 APRIL THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Global Dividend Fund (herein after referred to as The Fund ) was constituted pursuant to the executed Deed dated 6 February 2007 between ING Funds Berhad and CIMB Commerce Trustee Berhad as the Trustee. The Fund commenced operation on 19 March 2007 and will continue to be in operation until terminated by the Trustee as provided under Division of the Deed. As provided in the Deed, the accrual period or financial year shall end on 30 April. Pursuant to the executed First Supplemental Deed dated 15 May 2013 between Kenanga Investors Berhad and CIMB Commerce Trustee Berhad, Kenanga Investors Berhad was appointed as the Manager of the Fund with effect from 8 June 2013 and the name of the Fund was changed from ING Global Dividend to Kenanga Global Dividend Fund. The Fund seeks to achieve capital growth by investing in a diversified portfolio of high dividend-yielding equities globally through a target fund. To achieve the objective of the Fund, it will invest a minimum 95% in ING (L) Invest Global High Dividend ( IIGHD ), a fund which denominated in Euro, domiciled in Luxembourg. The remaining will be invested in liquid assets including money market instruments and deposits with licensed financial institution. IIGHD invests in a diversified portfolio of securities issued by companies established, listed or traded in various countries worldwide and offering an attractive dividend yield. 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, price risk and currency risk), liquidity risk, credit risk, country risk and external fund manager risk. Whilst these are the most important types of financial risks inherent in each type of financial instruments, the Manager and the Trustee would like to highlight that this list does not purport to constitute an exhaustive list of all the risks inherent in an investment in the Fund. The Fund has an approved set of investment guidelines and policies as well as internal controls which set 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. 18 Kenanga Global Dividend Fund Annual Report

20 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 currency risk, interest rate risk and price risk. Market risk arises when the value of the investments fluctuate in response to the activities of individual companies, general market or economic conditions. It stems from the fact that there are other economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertainties. Fluctuation in the investment prices caused by uncertainties in the economy, 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 investments and continuous monitoring of their performance and risk profiles. i. Interest rate risk The Fund s exposure to interest rate risk is mainly confined to short term placement with financial institutions. The Manager overcomes this exposure by way of maintaining deposits on short term basis. Interest rate risk sensitivity The following table demonstrates the sensitivity of the Fund s profit/(loss) for the year to a reasonably possible change in interest rates, with all other variables held constant. Changes in rate Basis points Increase/ (decrease) Effect on Effect on changes in profit/(loss) fair value of for the year financial assets Increase/ Increase/ (decrease) (decrease) RM RM /(5) 1,530/(1,530) /(5) 502/(502) - Kenanga Global Dividend Fund Annual Report 19

21 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s assets and liabilities are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Up to 1 year Noninterest bearing Total Effective interest rate* RM RM RM % 2013 Assets Collective investment scheme - foreign - 23,390,277 23,390,277 Short term deposit 3,059,200-3,059, Other assets - 10,275 10,275 3,059,200 23,400,552 26,459,752 Liabilities Other liabilities - 2,024,342 2,024,342-2,024,342 2,024,342 Total interest sensitivity gap 3,059,200 21,376,210 24,435, Assets Collective investment scheme - foreign - 26,987,317 26,987,317 Short term deposit 1,003,263-1,003, Other assets - 3,891 3,891 1,003,263 26,991,208 27,994,471 Liabilities Other liabilities - 173, , , ,664 Total interest sensitivity gap 1,003,263 26,817,544 27,820,807 * Computed based on interest-bearing assets only. 20 Kenanga Global Dividend Fund Annual Report

22 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk Price risk is the risk of unfavourable changes in the fair values of foreign collective investment scheme. The Funds invests in a foreign collective investment scheme which is exposed to price fluctuations. This may then affect the unit price of Kenanga Global Dividend Fund locally. The target fund manager, ING Investment Management Luxembourg S.A. adopts a risk management strategy according to ING Investment Manager s global investment philosophy and risk management process. Price risk sensitivity Manager s best estimate of the effect on the profit/(loss) for the year and other comprehensive income due to a reasonably possible change in investments in foreign collective investment scheme, with all other variables held constant is indicated in the table below: Changes in price Increase/ (decrease) Effects Effects on on other profit/(loss) comprehensive for the year income Increase/ Increase/ (decrease) (decrease) Basis points RM RM 2013 Collective investment scheme - foreign 5/(5) 11,695/(11,695) Collective investment scheme - foreign 5/(5) 13,494/(13,494) - In practice, the actual trading results may differ from the sensitivity analysis above and the difference could be material. Kenanga Global Dividend Fund Annual Report 21

23 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) ii. Price risk (Contd.) Price risk concentration The following table set out the Fund s exposure and concentration to price risk based on its portfolio of financial instruments as at the reporting date. Fair value Percentage of NAV RM RM % % Collective investment scheme - foreign 23,390,277 26,987, iii. Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. When the foreign currencies fluctuate in an unfavorable movement against Ringgit, the investment face currency loss in addition to capital gain/(loss). This will lead to lower NAV ( net asset value ) of the Fund. The Fund invests a minimum 95% in IIGHD, denominated in Euro, domiciled in Luxembourg. The Manager may consider managing the currency risk using currency hedging. However, this would be subjected to the current market outlook on the currency exposure risk as well. Currency risk sensitivity The Fund did not have any financial liabilities denominated in foreign currencies as at the reporting date. The following table indicates the currencies to which the Fund had significant exposure at the reporting date on its financial assets. The analysis calculates the effect of a reasonably possible movement of the currency rate against Ringgit Malaysia on equity and on profit/(loss) with all other variables held constant. 22 Kenanga Global Dividend Fund Annual Report

24 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) a. Market Risk (Contd.) iii. Currency risk (Contd.) Currency risk sensitivity (Contd.) Change in currency rate Increase/ (decrease) Effect on profit/(loss) for the year Increase/ (decrease) Effect on equity and NAV Increase/ (decrease) Basis points RM RM 2013 EURO/RM 5/(5) 11,695/(11,695) 11,695/(11,695) 2012 EURO/RM 5/(5) 13,494/(13,494) 13,494/(13,494) Currency risk concentration The following table set out the Fund s exposure to foreign currency exchange rates on its financial assets as at the reporting date. Fair value Percentage of NAV RM RM % % EURO 23,390,277 26,987, b. Credit Risk Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss to the Fund by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such risk. i. Credit risk exposure At the reporting date, the Fund s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position. ii. Financial assets that are either past due or impaired As at the reporting date, there are no financial assets that are either past due or impaired. Kenanga Global Dividend Fund Annual Report 23

25 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk Liquidity risk is defined as the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Fund could be required to pay its liabilities or cancel its units earlier than expected. The Fund is exposed to cash 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 net asset value per unit at the time of cancellation calculated in accordance with the Fund s Trust Deed. Unit trust funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risks. IIGHD s investment manager manages the risk by adopting ING s diversification policy that stipulates single and group issuer limits to confine over-exposure to a single company or group of companies. The following table analyses the maturity profile of the Fund s financial assets (undiscounted where appropriate) and financial liabilities in order to provide a complete view of the Fund s contractual commitments and liquidity. Less than 1 month RM 2013 Assets Collective investment scheme foreign 23,390,277 Short term deposits 3,059,200 Other assets 10,275 26,459,752 Liabilities Other liabilities 2,024,342 2,024,342 Net asset value 24,435,410 Liquidity gap 24,435, Kenanga Global Dividend Fund Annual Report

26 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (CONTD.) c. Liquidity Risk (Contd.) Less than 1 month RM 2012 Assets Collective investment scheme foreign 26,987,317 Short term deposits 1,003,263 Other assets 3,891 27,994,471 Liabilities Other liabilities 173, ,664 Net asset value 27,820,807 Liquidity gap 27,820,807 d. Country Risk If a fund invests in foreign markets, the foreign investments portion of the fund may be affected by risks specific to the country which it invests in. Such risks include changes in the country economic fundamentals, social and political stability, currency movements and foreign investment policies. These factors may have impact on the prices of the securities that the fund invested in. IIGHD manages the country risk by investing across various countries to diversify this country risk. e. External Fund Manager Risk The Kenanga Global Dividend Fund fund performance is dependent on the performance of the offshore collective investment scheme which in this case is IIGHD managed by ING Investment Management Luxembourg S.A. The manager of IIGHD does not report to the investment committee of Kenanga Investors Berhad. However, the fund is managed according to ING global investment philosophy. Kenanga Global Dividend Fund Annual Report 25

27 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. First-time adoption of MFRS These are the Fund s first annual financial statements prepared in accordance with MFRS. For the periods up to and including the financial year ended 30 April 2012, the financial statements of the Fund were prepared in accordance with Financial Reporting Standards ( FRS ) in Malaysia. The accounting policies set out in Note 3 have been applied in preparing the financial statements of the Fund for the financial year ended 30 April 2013, the comparative information presented in these financial statements for the financial year ended 30 April 2012 and in the preparation of the opening statement of financial position at 1 May 2011 (which is the Fund s date of transition to MFRS). The transition to MFRS did not give rise to any significant effects on the financial statements of the Fund. c. Standards and interpretations issued but not yet effective The Manager expect that the new MFRSs, Amendments to MFRSs and Interpretations which are issued but not yet effective for the financial year ended 30 April 2013 will not have a material impact on the financial statements of the Fund in the period of initial application. d. 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. 26 Kenanga Global Dividend Fund Annual Report

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) d. Financial Assets (Contd.) 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, directly attributable transaction costs. The Fund determines the classification of its financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss ( FVTPL ) and loans and 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 foreign collective investment scheme 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 Net gain or loss on financial assets at fair value through profit or loss. Interest earned elements of such instruments are recorded separately in interest income. Exchange differences on financial assets at FVTPL are not recognised separately in profit or loss but are included in net gain or net loss on changes in fair value of financial assets at FVTPL. ii. Loans and receivables Financial assets with fixed or determinable payment that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gain or loss is recognised in profit or loss when the loans and receivable are 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. Kenanga Global Dividend Fund Annual Report 27

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) e. Impairment of Financial Assets The Fund assesses at each reporting date whether there is any objective evidence that a financial assets is impaired. Trade and other receivables and other financial assets carried at amortised cost 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 interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial assets is reduced by the impairment loss directly for all financial assets. 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. f. Income Recognition Interest income is recognised using effective interest method on an accrual basis. The realised gain or loss on sale of investments is measured as the difference between the net disposal proceeds and the carrying amount of the investment, calculated on the daily basis. The unrealised gain or loss on change in value of investments is measured as the difference between the fair value and the carrying amount of the investment, calculated on a daily basis. g. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalent include cash at bank and short term deposits with financial institutions. 28 Kenanga Global Dividend Fund Annual Report

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) h. Income Tax Expense Income tax on the profit or loss for the year comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year. Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, i. Unrealised Reserves Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values and unrealised gain or loss from translating foreign currency monetary items at exchange rates prevailing at reporting date. This reserve is not distributable in nature. j. Financial Liabilities Financial liabilities are classified according to the substance of the collateral arrangements entered into and the definitions of a financial liability. Financial liabilities within the scope of MFRS 139, 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 liabilities which include amount due to Manager, amount due to Trustee and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is extinguished. Gain and loss is recognised in profit or loss when the liabilities are derecognised, and through amortisation process. k. Foreign Currency i. 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. Kenanga Global Dividend Fund Annual Report 29

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) k. Foreign Currency (Contd.) ii. Foreign currency transactions In preparing the financial statements of the Fund, transactions in currencies other than the Fund s functional currency (foreign currencies) are recorded in the functional currency using exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. All exchange gain or loss is recognised in the statement of comprehensive income. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in statement of comprehensive income for the year. The principal exchange rate for each respective units of foreign currency ruling at statement of financial position date is as follows: RM RM 1 Euro l. Unitholders Capital NAV Attributable to Unitholders The unitholders contributions to the Fund meet the definition of puttable instruments classified as equity instruments. Distribution equalisation represents the average distributable amount included in the creation and cancellation prices of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are cancelled. 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. 30 Kenanga Global Dividend Fund Annual Report

32 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) m. Significant Accounting Judgments and Estimates (Contd.) 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 4. MANAGER S FEE There are no key assumptions concerning the future and other key sources of estimation uncertainty at the financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Manager s fee is computed based on 1.80% per annum of the net asset value of the Fund, calculated on a daily basis, as provided under Division 13(1) of the Deed. As the Fund invests in units of IIGHD, 1.50% of the manager s fee is charged by the IIGHD s manager, ING Investment Management Luxembourg S.A., and the remaining of 0.30% is charged by the Manager, Kenanga Investors Berhad. Accordingly, there is no double charging of manager s fee. 5. TRUSTEE S FEE Trustee s fee is calculated on a daily basis at 0.08% per annum of the net asset value of the Fund, and subject to a minimum fee of RM18,000 per annum as provided under Division 13(2) of the Deed. 6. INCOME TAX EXPENSE Income tax is calculated at the Malaysian statutory tax rate of 25% of the estimated assessable income for the financial year. Income tax is calculated on investment income less partial deduction for permitted expenses as provided for under Section 63B of the Income Tax Act, The effective rate does not approximate the statutory tax rate mainly due to interest income exempted from tax in accordance with Schedule 6 of the Income Tax Act, 1967 and gain on disposal of investments are treated as capital in nature for tax purposes. Kenanga Global Dividend Fund Annual Report 31

33 6. INCOME TAX EXPENSE (CONTD.) 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: RM RM Net income/(loss) before tax 2,664,647 (1,607,561) Tax at Malaysian statutory tax rate of 25% (2012: 25%) 666,162 (401,890) Income not subject to tax (702,303) - Expenses not deductible for tax purposes (under Section 63B of the Income Tax Act, 1967) 36, ,890 Tax expense for the year COLLECTIVE INVESTMENT SCHEME - FOREIGN RM RM RM Financial assets held for trading, at FVTPL: Collective investment scheme - foreign 23,390,277 26,987,317 39,025,766 Net gain on financial assets at FVTPL comprised: Realised loss on disposals (3,020,833) (3,064,652) Unrealised changes in fair values 5,793,793 1,576,202 2,772,960 1,488,450 Details of collective investment scheme - foreign as at 30 April 2013: No. of Unit Cost RM Percentage Fair value of NAV RM % ING (L) Invest Global High Dividend Fund 23,398,322 23,390, Total collective investment scheme - foreign 23,398,322 23,390, Excess of cost over fair value (8,045) 32 Kenanga Global Dividend Fund Annual Report

34 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. The weighted average interest rate and average remaining maturity of the short term deposits are as follows:- Weighted average interest rates Remaining maturity % % % Days Days Days Short term deposits OTHER RECEIVABLES RM RM RM Interest income from short term deposits Amount due from brokers - - 1,800, ,800, NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS Net asset value attributed to unitholders is represented by: Note RM RM RM Unitholders contribution (a) 65,203,860 71,253,904 82,520,580 Retained earnings: Realised reserves (b) (40,760,405) (37,631,259) (34,447,496) Unrealised reserves (c) (8,045) (5,801,838) (7,378,040) 24,435,410 27,820,807 40,695,044 a. Unitholders contribution No. of units RM No. of units RM At beginning of the year 89,928,707 71,253, ,041,512 82,520,580 Distribution equalisation - (777) - 3,783,683 Add: Creation of units 57,861,501 19,318,638 15,081,817 6,960,749 Less: Cancellation of units (77,578,935) (25,367,905) (52,194,622) (22,011,108) At end of the year 70,211,273 65,203,860 89,928,707 71,253,904 Kenanga Global Dividend Fund Annual Report 33

35 10. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS (CONTD.) a. Unitholders contribution (Contd.) No. of units RM At beginning of the year 184,590, ,302,205 Distribution equalisation - 9,241,843 Add: Creation of units 378,910, ,889,904 Less: Cancellation of units (436,458,860) (204,913,372) At end of the year 127,041,512 82,520,580 b. Realised reserves RM RM RM At beginning of the year (37,631,259) (34,447,496) (16,556,424) Net realised loss (3,129,146) (3,183,763) (17,891,072) At end of the year (40,760,405) (37,631,259) (34,447,496) c. Unrealised reserves RM RM RM At beginning of the year (5,801,838) (7,378,040) (25,600,647) Net unrealised gain 5,793,793 1,576,202 18,222,607 At end of the year (8,045) (5,801,838) (7,378,040) In accordance with the Deed, the maximum number of units that can be issued for circulation is 675,000,000 (2012:675,000,000). The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad, and parties related to the Manager (if any) as of 30 April 2013 were nil (2012: nil). Pursuant to Sixth Schedule of the Deed dated 6 February 2007, the Manager is entitled to a sales charge of not more than 8% of the net asset value of the Fund. The sales charge was 6.5% of the net asset value for the financial year ended 30 April Kenanga Global Dividend Fund Annual Report