KENANGA GLOBAL OPPORTUNITIES FUND (FORMERLY KNOWN AS ING GLOBAL OPPORTUNITIES) INTERIM REPORT

Transcription

1 KENANGA GLOBAL OPPORTUNITIES FUND (FORMERLY KNOWN AS ING GLOBAL OPPORTUNITIES) INTERIM REPORT For the Financial Period Ended 31 August 2013

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3 Contents Page CORPORATE DIRECTORY i DIRECTORY OF MANAGER S OFFICES ii MANAGER S REPORT FUND INFORMATION FUND REVIEW MARKET REVIEW & OUTLOOK PERFORMANCE DATA 6 TRUSTEE S REPORT 9 STATEMENT BY MANAGER 10 STATEMENT OF COMPREHENSIVE INCOME 11 STATEMENT OF FINANCIAL POSITION 12 STATEMENT OF CHANGES IN EQUITY 13 STATEMENT OF CASH FLOWS 14 NOTES TO THE FINANCIAL STATEMENTS 15-35

4 CORPORATE DIRECTORY MANAGER: KENANGA INVESTORS BERHAD (Company No P) REGISTERED OFFICE BUSINESS OFFICE Kenanga Investors Berhad (KIB) Suite 12.02, 12 th Floor, Kenanga Interna onal, 8 th Floor, Kenanga Interna onal, Jalan Sultan Ismail, Jalan Sultan Ismail, Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia. Tel: Tel: Fax: Fax: InvestorServices@kenanga.com.my Website: BOARD OF DIRECTORS Datuk 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) Bruce Kho Yaw Huat Abdul Razak bin Ahmad Peter John Rayner COMPANY SECRETARY: Norliza Abd Samad, (MAICSA ) 9 th Floor, Kenanga Interna onal, Jalan Sultan Ismail, Kuala Lumpur, Malaysia. TRUSTEE: CIMB COMMERCE TRUSTEE BERHAD (Company No A) REGISTERED AND BUSINESS OFFICE 5 th Floor, Bangunan CIMB, Jalan Semantan, Damansara Heights, Kuala Lumpur. Tel: Fax: AUDITOR: ERNST & YOUNG Level 23A, Menara Millennium, Jalan Damanlela, Pusat Bandar Damansara, Kuala Lumpur. Tel: i

5 DIRECTORY OF MANAGER S OFFICES REGIONAL BRANCH OFFICES: Kuala Lumpur Suite 12.02, 12 th Floor Kenanga Interna onal Jalan Sultan Ismail Kuala Lumpur, Malaysia Tel: Fax: Klang No. 12 Jalan Batai Laut 3 Taman Intan, Klang Selangor Darul Ehsan Tel: / Fax: Penang Blok A, Aras 3, Wisma Perkeso No. 269, Jalan Burma George Town, Penang Tel: Fax: Melaka No Jalan Kota Laksamana 2/17 Taman Kota Laksamana Seksyen Melaka Tel: / Fax: Agency Office Miri (Sarawak) c/o Lot 1084, 2 nd Floor, Jalan Merpa Miri Sarawak, Malaysia Tel: Johor Bahru Lot 11.03, 11 th Floor Menara MSC Cyberport 5 Jalan Bukit Meldrum Johor Bahru, Johor Tel: / 4798 Fax: Kuching 1 st Floor, No 71, Lot 7 Lot 10900, Jalan Tun Jugah Kuching, Sarawak Tel: Fax: Kota Kinabalu A-03-11, 3 rd Floor Block A Warisan Square Jalan Tun Fuad Stephens Kota Kinabalu, Sabah Tel: / Fax: Ipoh No. 5A, Persiaran Greentown 9 Greentown Business Centre Ipoh Perak Darul Ridzuan Tel: / 7570 Fax: ii

6 MANAGER S REPORT Dear Unit Holders, We are pleased to present the Manager s interim report and the financial statements of the KENANGA GLOBAL OPPORTUNITIES FUND (formerly known as ING Global Opportuni es) for the 6-month financial period ended 31 August FUND INFORMATION 1.1 Fund Name KENANGA GLOBAL OPPORTUNITIES FUND (KGOPF or the Fund) (formerly known as ING Global Opportuni es) 1.2 Fund Category / Type Feeder / Growth 1.3 Investment Objec ve The Fund aims to achieve capital growth by inves ng, via a target fund, in a diversified por olio of global equi es that are likely to yield higher earnings growth than the global average. 1.4 Investment Strategy The Fund will invest a minimum of 95% of its NAV in ING (L) Invest Global Opportuni es (IIGO) denominated in Euro, domiciled in Luxembourg. The remaining will be invested in liquid assets including money market instruments and deposits with licensed financial ins tu ons. 1.5 Asset Alloca on Minimum 95% in IIGO and minimum 2% in liquid assets. 1.6 Dura on The Fund was launched on 21 June 2010 and 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 con nue. 1.7 Performance Benchmark MSCI World AC Index 1.8 Distribu on Policy Income (if any) will be distributed annually on the best effort basis. 1

7 2.0 FUND REVIEW 2.1 Fund performance analysis based on NAV per unit (adjusted for income distribu on, if any) since last review date Period under review Kenanga Global Opportuni es Fund 8.12% MSCI World AC index 9.15% Source: Lipper During the period under review, the Fund registered a return of 8.12% underperforming its benchmark which returned 9.15%. The underperformance was due to unfavourable currency movement. 2.2 Has the Fund achieved its objec ve? For the period under review, The Fund fulfilled its investment objec ve, having invested in ING (L) Invest Global Opportuni es ( Target Fund ) with a diversified por olio of global equi es that are likely to yield higher earnings growth than the global average. 2.3 Strategies & policies employed For the period under review, the Fund s investment strategy and policy were to invest nearly all its assets into the Target Fund and the remaining in liquid assets. The strategy employed was in line with that disclosed in the prospectus. 2.4 The Fund s asset alloca on (% of NAV) as at 31 August 2013 and comparison with the previous financial period Asset 31 August August 2012 Collec ve Investment Scheme - Foreign 96.1% 95.6% Cash and others 3.9% 4.4% Reason for the differences in asset alloca on The difference in asset alloca on is due to fluctua ons in the value of the target fund. 2.5 State of Affairs of the Fund Pursuant to the acquisi on of ING Funds Berhad by Kenanga Investors Berhad on 19 th April 2013, Kenanga Investors Berhad had wri en to the Securi es Commission to seek the Securi es Commission s approval to become the Management Company of the Fund. The Securi es Commission had approved the applica on. With effect from 8 th June 2013, Kenanga Investors Berhad has become the Management Company of the Fund. 2

8 2.6 Circumstances that materially affect any interests of the unit holders 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 8 th June 2013 as detailed in Unit Holders Profile As at 31 August 2013, the number of units of the Fund in circula on stood at 13,611,918 (includes Manager Stock) units out of an approved Fund size of 675 million units. Breakdown of Unit Holdings by Size Unit Holders Unit Holdings Size of holdings Number % Units % 5,000 and below , ,001-10, , ,001-50, , , , , ,001 and above ,333, Total ,611, Manager and Related Party Holdings Breakdown of holdings by the Manager and related par es as at 31 August 2013 is as follows:- No. of Units Held Manager# - Director of the Manager - Other related par es - Total - # excludes normal & EPF bookings 2.8 Rebates & So Commission Any rebates received are channeled back to the Fund. On the other hand, so commissions received from the stockbrokers for goods and services such as technical analysis so ware, fundamental database, financial wire services, stock quota on system and por olio management so ware 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 so commissions from stockbrokers. 3

9 3.0 MARKET REVIEW & OUTLOOK 3.1 Market Review Global equi es made strong gains over the 6 month period ending August 31st The MSCI World net total return index ended up +6.1% in USD terms. US (+8.8%) and Japan (+7.8%) were the strongest regions while Emerging Markets lagged. The period began strongly for global equi es but there were large divergences between regions. Japan and the US advanced, driven by the rela ve strength of their earnings and macro data. In Europe the tough terms of a banking bailout deal in Cyprus added to the poli cal uncertainty which followed the inconclusive Italian elec ons in February. Emerging markets were the worst performers as equity flows to the region reversed and economic data did not come in strong enough to turn the de. Equi es worldwide then experienced a weak patch as markets reacted strongly to Fed Chairman Bernanke s announcement that the Fed could start reducing its third round of quan ta ve easing if the US economy con nued to recover. Around the same me doubts arose about Japanese monetary expansion, a er the Bank of Japan made confusing statements about its policy. Specula on about a reduc on in quan ta ve easing by the Fed sent US yield significantly higher and put pressure on defensive sectors that had acted as a bond proxy for yield seeking investors. The price of gold also sank as investors infla on expecta ons fell. Global equi es resumed their upward path in July supported by reassuring comments from central bankers that monetary policies will remain accommoda ve, as well as by a further improvement in macro economic data. Labor market data confirmed that the US economy was rebounding at a rela vely steady pace. The unemployment rate dropped from 7.6% to 7.4% in July, its lowest level since late Posi ve economic data surprises also picked up pace in Europe. Stocks retreated at the end of the period clawing back year-to-date gains. In addi on to tapering fears by the Fed, sen ment was influenced by turmoil in emerging market currencies and increased tensions in the Middle East. The worries came at a me when investors were very posi ve and the market showed sca ered signs of being overbought. Emerging markets recovered a li le, driven by signs of stabiliza on in Chinese data, however, divergence between the strong and weak countries increased. Consumer Discre onary and Health Care were the best performing sectors while raw material companies were the weakest on falling commodity prices. In terms of style, Value stocks outperformed Growth stocks, and large-caps did be er than both mid- and small-caps. 4

10 3.2 Market Outlook Despite recent currency turmoil in Emerging markets we believe that emerging market consumers will gain in rela ve wealth. We see an increasing need to increase farm land produc vity and selec ve investments in infrastructure in a number of ASEAN countries. We realize ourselves that top line growth in a number of emerging markets is coming down from historically high levels (though s ll at a higher levels than in developed markets) but are also aware of the fact that the nature of this growth is changing in a number of dominant countries (from export led to consump on led). We con nue to see a divergence between the emerging and the developed market economies. Developed market economies are unfortunately set for a long period of austerity in any scenario as the huge government debts have to be reduced. The convic on in our Economic Growth theme therefore remains high. Our convic on in the Graying Popula on sub theme within the Shi s in Demography main theme also con nues to be high. At this moment in me we see the Graying popula on coming closer while a number of healthcare companies are at the start of their own new cycle. We are at the crossroads of two important secular trends that are reinforcing each other and we are therefore becoming very posi ve on this theme. Source: ING Investment Management Europe 5

11 4.0 PERFORMANCE DATA 4.1 Performance Chart PERFORMANCE CHART SINCE LAUNCH 21/06/ /08/2013 KENANGA GLOBAL OPPORTUNITIES FUND VS. MSCI WORLD AC INDEX Source: Lipper 4.2 Average Total Returns 1 year 3 years Since Incep on 31 Aug Aug Jun Aug Aug Aug 13 Kenanga Global Opportuni es Fund 15.00% 6.89% 5.37% MSCI World AC Index 18.78% 12.17% 9.53% Source: Lipper 4.3 Annual Total Returns Period under review 1 Year 1 Year Since Incep on 28 Feb Feb Feb Jun Aug Feb Feb Feb 11 Kenanga Global Opportuni es Fund 8.12% 3.74% -7.88% 13.20% MSCI World AC Index 9.15% 9.45% -4.86% 14.47% Source: Lipper Investors are reminded that past performance is not necessarily indica ve of future performance and that unit prices and investment returns may fluctuate. 6

12 4.4 Por olio Composi on Details of por olio composi on of Kenanga Global Opportuni es Fund ( the Fund ) as at 31 August 2013 against last 3 financial years/period as at 28 February are as follows: a. Distribu on among industry sectors and category of investments: As at FY FY As at % % % % Collec ve Investment Scheme - Foreign Cash and others Note: The above men oned percentages are based on total investment market value plus cash. b. Distribu on among industry sectors As at 31 August 2013, the target fund ING (L) Invest Global Opportuni es has invested in the following industry sectors. Telecoms 0.75% U li es 0.81% Materials 8.72% Consumer Staples 8.86% Industrials 9.14% Energy 11.89% Consumer Discre onary 11.97% Healthcare 14.90% IT 15.69% Financials 17.27% Source: ING Investment Management Europe c. Distribu on among markets As at 31 August 2013, the target fund ING (L) Invest Global Opportuni es has invested in the following markets: India 2.61% France 2.68% Hong Kong 3.63% Japan 4.81% Netherlands 4.99% Canada 5.40% Switzerland 6.39% United Kingdom 11.06% Others 25.34% United States 33.08% 7 Source: ING Investment Management Europe

13 4.5 Performance Data Performance details of the Fund for the financial period ended 31 August 2013 against last 3 financial years/period ended 28 February are as follows: to FY FY to Net asset value (RM Million) 7.96* 1.01* Units in circula on (Million) Net asset value per unit (RM) * * Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) Capital growth (%) Income growth (%) Gross distribu on per unit (sen) Net distribu on per unit (sen) Management expense ra o ( MER ) (%) Por olio turnover ra o ( PTR ) ( mes) Note: Total return is the actual return of the Fund for the respec ve financial periods/years, 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 acquisi ons and total disposals of investment securi es of the Fund divided by the average fund size calculated on a daily basis. Above prices and NAV are not shown as ex-distribu on as there were no distribu on declared by the Fund in the financial period under review. 1 MER is higher against previous financial year due mainly to lower average fund size. 2 The higher PTR was due to more crea on into target funds. * The NAV and NAV price per unit are valued based on bid price fair valua on method. 4.6 Distribu on / Unit Split No distribu on / unit split was made during the period under review. Investors are reminded that past performance is not necessarily indica ve of future performance and that unit prices and investment returns may fluctuate. 8

14 TRUSTEE S REPORT To the Unit Holders of Kenanga Global Opportuni es Fund We, CIMB COMMERCE TRUSTEE BERHAD, being the Trustee of KENANGA GLOBAL OPPORTUNITIES FUND ( the Fund ) (formerly known as ING Global Opportuni es) are of the opinion that KENANGA INVESTORS BERHAD ( the Manager ), ac ng in the capacity of Manager of the Fund, have fulfilled their du es in the following manner for the financial year ended 31 August a) The Fund has been managed in accordance with the limita ons imposed on the investment powers of the Manager and the Trustee under the Deed, the Securi es Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) Valua on/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and c) Crea on and cancella on 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/Director, Group Trustee Services Kuala Lumpur, Malaysia 28 October

15 STATEMENT BY THE MANAGER To the Unit Holders of Kenanga Global Opportuni es Fund We, Abdul Razak Bin Ahmad and Bruce Kho Yaw Huat, being the directors of Kenanga Investors Berhad, do hereby state that, in the opinion of the Manager, the accompanying statement of financial posi on as at 31 August 2013 and the related statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial period ended at 31 August 2013 together with notes thereto, are drawn up in accordance with Malaysian Financial Repor ng Standards and Interna onal Financial Repor ng Standards so as to give a true and fair view of the financial posi on of Kenanga Global Opportuni es Fund (Formerly known as ING Global Opportuni es) as at 31 August 2013 and of its financial performance and cash flows for the period then ended and comply with the requirements of the Deed. For and on behalf of the Manager, Kenanga Investors Berhad Abdul Razak Bin Ahmad Director Bruce Kho Yaw Huat Director Kuala Lumpur, Malaysia 28 October

16 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 31 AUGUST 2013 UNAUDITED Note to to RM RM INVESTMENT INCOME Interest income 657 2,802 Net loss from investments: - Financial assets at fair value through profit and loss ( FVTPL ) (96,692) (51,661) (96,035) (48,859) EXPENSES Manager s fee 4 (4,148) (8,175) Trustee s fee 5 (9,026) (9,000) Auditors remunera on (2,357) (2,306) Tax agent s fee (1,434) (1,404) Administra on (3,129) (3,430) (20,094) (24,315) NET LOSS BEFORE TAX (116,129) (73,174) Income tax expense NET LOSS AFTER TAX, REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD (116,129) (73,174) Total comprehensive loss is made up as follows: Realised gain/(loss) 107,995 (22,043) Unrealised loss (224,124) (51,131) (116,129) (73,174) The accompanying notes form an integral part of the financial statements. 11

17 STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 2013 UNAUDITED Note RM RM ASSETS Collec ve investment scheme - foreign 7 7,649,594 4,183,346 Short term deposits 8 5,920, ,842 13,569,602 4,305,188 OTHER ASSETS Other receivables ,010 Cash at bank 10,032 3,920 10,511 83,930 TOTAL ASSETS 13,580,113 4,389,118 LIABILITIES Amount due to Manager 2,756 1,315 Amount due to Trustee 1,480 1,475 Other payables 5,616,113 11,414 TOTAL LIABILITIES 5,620,349 14,204 EQUITY NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS 10 7,959,764 4,374,914 TOTAL LIABILITIES AND EQUITY 13,580,113 4,389,118 NUMBER OF UNITS IN CIRCULATION 10(a) 13,611,918 8,603,700 NET ASSET VALUE PER UNIT The accompanying notes form an integral part of the financial statements. 12

18 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 AUGUST 2013 UNAUDITED (Accumulated Unitholders loss)/retained Note capital earnings Total equity RM RM RM At beginning of the year 938,966 68,635 1,007,601 Total comprehensive loss - (116,129) (116,129) Crea on of units 10(a) 12,962,414-12,962,414 Cancella on of units 10(a) (5,994,644) - (5,994,644) Distribu on equalisa on 10(a) 100, ,522 At end of the period 8,007,258 (47,494) 7,959, At beginning of the year 3,620,946 1,148,496 4,769,442 Total comprehensive loss - (73,174) (73,174) Crea on of units 10(a) 108, ,508 Cancella on of units 10(a) (429,862) - (429,862) Distribu on equalisa on 10(a) At end of the period 3,299,592 1,075,322 4,374,914 The accompanying notes form an integral part of the financial statements. 13

19 STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 31 AUGUST 2013 UNAUDITED to to RM RM CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Proceeds from sale of investments 5,889, ,000 Purchase of investments (7,060,000) (50,000) Interest received 179 2,808 Manager s fee paid (1,864) (8,276) Trustee s fee paid (8,927) (8,951) Auditors remunera on paid - (4,000) Tax agent s fee paid (2,454) - Payment for other fees and expenses (2,553) (2,526) Net cash (used in)/generated from opera ng and inves ng ac vi es (1,186,619) 239,055 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 13,145, ,508 Cash paid on units cancelled (6,087,603) (455,006) Net cash generated from/(used in) financing ac vi es 7,058,147 (326,498) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 5,871,528 (87,443) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 58, ,205 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 5,930, ,762 Cash and Cash equivalent comprise: Cash at bank 10,032 3,920 Short term deposits 5,920, ,842 5,930, ,762 The accompanying notes form an integral part of the financial statements. 14

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 AUGUST THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES Kenanga Global Opportuni es Fund (formerly known as ING Global Opportuni es) (hereina er referred to as The Fund ) was cons tuted pursuant to the executed Deed dated 13 October 2009 between ING Funds Berhad and CIMB Commerce Trustee Berhad. The Fund commenced opera on on 21 June 2010 and will con nue to be in opera on un l terminated by the Trustee as provided under Part 12 of the Deed. As provided in the Deed, the accrual period or financial year shall end on 28 February. 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 Opportuni es to Kenanga Global Opportuni es Fund. The Fund is set up with the aim of achieving capital growth by inves ng, via a target fund, in a diversified por olio of global equi es that are likely to yield higher earning growth than global average. To achieve the objec ve of the Fund, it will invest a minimum 95% of the net asset value in ING (L) Invest Global Opportuni es ( IIGO ), denominated in Euro, domiciled in Luxembourg. The remaining will be invested in liquid assets including money market instruments and deposits with licensed financial ins tu on. 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 cons tute an exhaus ve 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 op mise returns and preserve capital for the unitholders, consistent with the long term objec ves of the Fund. a. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes currency risk, interest rate risk and price risk. Market risk arises when the value of the investments fluctuate in response to the ac vi es of individual companies, general market or economic condi ons. It stems from the fact that there are other economy-wide perils, which threaten all businesses. Hence, investors are exposed to market uncertain es. Fluctua on in the investment prices caused by uncertain es in the economy, poli cal and social environment will affect the fair value of the Fund. The Manager manages the risk of unfavorable changes in prices by cau ous review of the investments and con nuous monitoring of their performance and risk profiles. 15

21 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) i. Interest rate risk The Fund s exposure to the interest rate risk is mainly confined to short term placement with financial ins tu ons. The Manager overcomes this exposure by way of maintaining deposits on short term basis. Interest rate risk sensi vity The following table demonstrates the sensi vity of the Fund s profit for the year to a reasonably possible change in interest rates, with all other variables held constant. Effect on changes in Changes in rate Effect on profit fair value of Basis points for the period financial assets Increase/(decrease) Increase/(decrease) Increase/(decrease) RM RM /(5) 2,960/(2,960) /(5) 61/(61) - Interest rate risk exposure The following table analyses the Fund s interest rate risk exposure. The Fund s assets and liabili es are disclosed at fair value and categorised by the earlier of contractual re-pricing or maturity dates. Effec ve 0-3 Non-interest interest months bearing Total rate* RM RM RM % Assets Collec ve investment scheme-foreign - 7,649,594 7,649,594 Short term deposit 5,920,008-5,920, Other assets - 10,511 10,511 5,920,008 7,660,105 13,580,113 16

22 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) i. Interest rate risk (Contd.) Interest rate risk exposure (Contd.) Effec ve 0-3 Non-interest interest months bearing Total rate* RM RM RM % Liabili es Other liabili es - 5,620,349 5,620,349-5,620,349 5,620,349 Total interest sensi vity gap 5,920,008 2,039,756 7,959, Assets Collec ve investment scheme-foreign - 4,183,346 4,183,346 Short term deposit 121, , Other assets - 83,930 83, ,842 4,267,276 4,389,118 Liabili es Other liabili es - 14,204 14,204-14,204 14,204 Total interest sensi vity gap 121,842 4,253,072 4,374,914 * Computed based on interest bearing assets only. ii. Price Risk Price risk is the risk of unfavourable changes in the fair values of foreign collec ve investment scheme. The Funds invests in a foreign collec ve investment scheme which is exposed to price fluctua ons. This may then affect the unit price of Kenanga Global Opportuni es Fund locally. The investment manager ING Investment Management Luxembourg S.A. adopts a risk management strategy according to ING Investment Management s global investment philosophy and risk management process. 17

23 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) ii. Price Risk (Contd.) Price risk sensi vity (Contd.) Manager s best es mate of the effect on the profit/(loss) for the year and other comprehensive income due to a reasonably possible change in investments in foreign collec ve investment scheme, with all other variables held constant is indicated in the table below: Effects on other Effect on profit comprehensive Changes in price for the period income Increase/(decrease) Increase/(decrease) Increase/(decrease) Basis points RM RM Collec ve investment scheme - foreign 5/(5) 3,825/( 3,825) Collec ve investment scheme - foreign 5/(5) 2,092/(2,092) - In prac ce, the actual trading results may differ from the sensi vity analysis below and the difference could be material. Price risk concentra on The following table set out the Fund s exposure and concentra on to price risk based on its por olio of financial instruments as at the repor ng date. Fair value Percentage of NAV RM RM % % Collec ve investment scheme - foreign 7,649,594 4,183,

24 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) 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 addi on to capital gain/(loss). This will lead to lower NAV ( net asset value ) of the Fund. The Fund invests a minimum 95% in IIGO, 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 sensi vity The Fund did not have any financial liabili es denominated in foreign currencies as at the repor ng date. The following table indicates the currencies to which the Fund had significant exposure at the repor ng 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. Change in currency Effect on profit Effect on equity rate for the period and NAV Increase/(decrease) Increase/(decrease) Increase/(decrease) Basis points RM RM EURO/RM 5/(5) 3,825/( 3,825) 3,825/( 3,825) EURO/RM 5/(5) 2,092/(2,092) 2,092/(2,092) Currency risk concentra on The following table set out the Fund s exposure to foreign currency exchange rates on its financial assets as at the repor ng date. 19

25 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. a. Market Risk (Contd.) iii. Currency risk (Contd.) Currency risk concentra on (Contd.) Fair value Percentage of NAV RM RM % % EURO 7,649,594 4,183, 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 obliga on. The Manager manages the credit risk by undertaking credit evalua on to minimise such risk. i. Credit risk exposure At the repor ng 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 posi on. ii. Financial assets that are either past due or impaired c. Liquidity Risk As at the repor ng date, there are no financial assets that are either past due or impaired. Liquidity risk is defined as the risk that the Fund will encounter difficulty in mee ng obliga ons associated with financial liabili es that are to be se led 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 liabili es or cancel its units earlier than expected. The Fund is exposed to cash cancella on of its units on a regular basis. Units sold to unitholders by the Manager are cancellable at the unitholder s op on based on the Fund s net asset value per unit at the me of cancella on calculated in accordance with the Fund s Trust Deed. Unit trust funds with principal investment strategies that involve foreign securi es, deriva ves or securi es with substan al market and/or credit risk tend to have the greatest exposure to liquidity risks. ING (L) Invest Global Opportuni es Fund s Investment Manager manages the risk by adop ng ING s diversifica on policy that s pulates single and group issuer limits to confine over-exposure to a single company or group of companies. 20

26 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. c. Liquidity Risk (Contd.) The following table analyses the maturity profile of the Fund s financial assets (undiscounted where appropriate) and financial liabili es in order to provide a complete view of the Fund s contractual commitments and liquidity. Less than 1 month RM Assets Collec ve investment scheme-foreign 7,649,594 Short term deposits 5,920,008 Other assets 10,511 13,580,113 Liabili es Other liabili es 5,620,349 5,620,349 Net asset value 7,959,764 Liquidity gap 7,959, Assets Collec ve investment scheme-foreign 4,183,346 Short term deposits 121,842 Other assets 83,930 4,389,118 Liabili es Other liabili es 14,204 14,204 Net asset value 4,374,914 Liquidity gap 4,374,914 21

27 2. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES CONTD. d. Country Risk If a fund invests in foreign markets, the foreign investments por on 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 poli cal stability, currency movements and foreign investment policies. These factors may have impact on the prices of the securi es that the fund invested in. IIGO manages the country risk by inves ng across various countries to diversify this country risk. e. External Fund Manager Risk The Kenanga Global Opportuni es Fund performance is dependent on the performance of the offshore collec ve investment scheme which in this case is IIGO managed by ING Investment Management Luxembourg S.A. The manager of IIGO does not report to the investment commi ee of Kenanga Investors Berhad. However, investor can be assured the fund is managed according to ING global investment philosophy, which has been adopted by Kenanga Investors Berhad. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accoun ng The financial statements of the Fund have been prepared in accordance with Malaysian Financial Repor ng Standards ( MFRS ) as issued by Malaysian Accoun ng Standards Board ( MASB ) and Interna onal Financial Repor ng Standards ( IFRS ) issued by Interna onal Accoun ng Standards Board ( IASB ). The financial statements have been prepared on the historical cost basis except as disclosed in the accoun ng policies below. 22

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. b. Standard and interpreta ons issued but not yet effecitve The Manager expect that the new MFRSs, Amendments to MFRSs and Interpreta ons which are issued but not yet effec ve for the financial period ended 31 August 2013 will not have a material impact on the financial statements of the Fund in the period of ini al applica on. c. Financial Assets Financial assets are recognised in the statement of financial posi on when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised ini ally, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly a ributable transac on costs. The Fund determines the classifica on of its financial assets at ini al recogni on, and the categories include financial assets at fair value through profit or loss, ( FVTPL ) 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 ini al recogni on. Financial assets held for trading include foreign collec ve investment scheme acquired principally for the purpose of selling in the near term. Subsequent to ini al recogni on, 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. Loan and receivables Financial assets with fixed or determinable payment that are not quoted in an ac ve market are classified as loans and receivables. Subsequent to ini al recogni on, loans and receivables are measured at amor sed cost using the effec ve interest method. Gain or loss is recognised in profit or loss when the loans and receivable are derecognised or impaired, and through the amor sa on process. 23

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. c. Financial Assets (Contd.) A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecogni on of a financial asset, the difference between the carrying amount and the sum of the considera on received is recognised in profit or loss. d. Impairment of Financial Assets The Fund assesses at each repor ng date whether there is any objec ve evidence that a financial assets is impaired. Trade and other receivables and other financial assets carried at amor sed cost To determine whether there is objec ve evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficul es 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 es mated future cash flows discounted at the financial asset s original effec ve 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 period, the amount of the impairment loss decreases and the decrease can be related objec vely to an event occurring a er 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 amor sed cost at the reversal date. The amount of reversal is recognised in profit or loss. e. Income Recogni on Interest income is recognised using effec ve 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. 24

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. f. 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 ins tu ons. g. Income Tax Expense Income tax on the profit or loss for the period comprises current tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the period. Income tax is calculated on investment income less par al deduc on for permi ed expenses as provided for under Sec on 63B of the Income Tax Act, h. Unrealised Reserves Unrealised reserves represent the net gain or loss arising from carrying investments at their fair values and unrealised gain or loss from transla ng foreign currency monetary items at exchange rates prevailing at repor ng date. This reserve is not distributable in nature. i. Financial Liabili es Financial liabili es are classified according to the substance of the collateral arrangements entered into and the defini ons of a financial liability. Financial liabili es within the scope of MFRS 139, are recognised in the statement of financial posi on when and only when, the Fund become a party to the contractual provisions of the financial instrument. The Fund s liabili es which include amount due to Manager, amount due to Trustee and other payables are recognised ini ally at fair value plus directly a ributable transac on costs and subsequently measured at amor sed cost using the effec ve interest method. A financial liability is derecognised when the obliga on under the liability is ex nguished. Gain and loss is recognised in profit or loss when the liabili es are derecognised, and through amor sa on process. j. Foreign Currencies i. Func onal and presenta on currency The financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates ( the func onal currency ). The financial statements are presented in Ringgit Malaysia (RM), which is also the Fund s func onal currency. 25

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. j. Foreign Currencies (Contd.) ii. Foreign currency transac ons In preparing the financial statements of the Fund, transac ons in currencies other than the Fund s func onal currency (foreign currencies) are recorded in the func onal currency using exchange rates prevailing at the dates of the transac ons. At each repor ng date, monetary items denominated in foreign currencies are translated at the rates prevailing on the repor ng date. All exchange gain or loss is recognised in the statement of comprehensive income. Exchange differences arising on the se lement of monetary items, and on the transla on of monetary items, are included in statement of comprehensive income for the period. The principal exchange rate for each respec ve units of foreign currency ruling at statement of financial posi on date is as follows: RM RM 1 Euro k. Unitholders Capital NAV A ributable to Unitholders The unitholders contribu ons to the Fund meet the defini on of pu able instruments classified as equity instruments. Distribu on equalisa on represents the average distributable amount included in the crea on and cancella on prices of units. This amount is either refunded to unitholders by way of distribu on and/or adjusted accordingly when units are cancelled. l. Significant Accoun ng Judgments and Es mates The prepara on of financial statements requires the use of certain accoun ng es mates and exercise of judgement. Es mates and judgements are con nually evaluated and are based on past experience, reasonable expecta ons of future events and other factors. i. Cri cal judgements made in applying accoun ng policies There are no major judgements made by the Manager in applying the Fund s accoun ng policies. 26

32 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTD. l. Significant Accoun ng Judgments and Es mates (Contd.) ii. Key sources of es ma on uncertainty 4. MANAGER S FEE 27 There are no key assump ons concerning the future and other key sources of es ma on uncertainty at the financial posi on date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabili es within the next financial period. 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 IIGO, 1.50% of the Manager s fee is charged by the IIGO s manager, ING Investment Management Luxembourg S.A., and the remaining of 0.3% 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 es mated assessable income for the financial period. Income tax is calculated on investment income less par al deduc on for permi ed expenses as provided for under Sec on 63B of the Income Tax Act, The effec ve 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. A reconcilia on of income tax expense applicable to net income before tax at the statutory income tax rate to income tax expense at the effec ve income tax rate of the Fund is as follows: RM RM Net loss before tax (116,129) (73,174) Tax at Malaysian statutory tax rate of 25% (2012: 25%) (29,032) (18,294) Income not subject to tax - - Expenses not deduc ble for tax purposes (under Sec on 63B of the Income Tax Act, 1967) 29,032 18,294 Tax expense for the period - -

33 7. COLLECTIVE INVESTMENT SCHEME - FOREIGN RM RM Financial assets held for trading, at FVTPL: Collec ve investment scheme - foreign 7,649,594 4,183,346 Net gain/(loss) on financial assets at FVTPL comprised: Realised gain on disposals 127,432 (530) Unrealised changes in fair values (224,124) (51,131) (96,692) (51,661) Details of collec ve investment scheme - foreign as at 31 August 2013: Fair Percentage No. of Cost value of NAV Units RM RM % ING (L) Invest Global Opportuni es Fund 5,981 7,805,083 7,649, Excess of cost over fair value (155,489) 8. SHORT TERM DEPOSITS Short term deposits were held with licenced commercial bank 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 rate Remaining maturity % % Days Days Short term deposits

34 9. OTHER RECEIVABLES RM RM Interest income from short term deposits Amount due from brokers - 80, , NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS Net asset value a ributed to unitholders is represented by: Note RM RM Unitholders contribu on (a) 8,007,258 3,299,592 Retained earnings: Realised reserves (b) 107,995 1,077,665 Unrealised reserves (c) (155,489) (2,343) 7,959,764 4,374,914 a. Unitholders contribu on No. of units RM No. of units RM At beginning of the year 1,862, ,966 9,235,817 3,620,946 Distribu on equalisa on - 100, Add: Crea on of units 22,044,553 12,962, , ,508 Less: Cancella on of units (10,295,356) (5,994,644) (843,749) (429,862) At end of the period 13,611,918 8,007,258 8,603,700 3,299,592 29

35 10. NET ASSET VALUE ATTRIBUTABLE TO UNITHOLDERS (CONTD.) b. Realised reserves RM RM At beginning of the year - 1,099,708 Net realised gain/(loss) 107,995 (22,043) At end of the period 107,995 1,077,665 c. Unrealised reserves RM RM At beginning of the year 68,635 48,788 Net unrealised loss (224,124) (51,131) At end of the period (155,489) (2,343) In accordance with the Deed and as disclosed in the prospectus, the maximum number of units that can be issued for circula on is 675,000,000 (2012: 675,000,000). The number of units legally or beneficially held by the Manager, Kenanga Investors Berhad and par es related to the Manager (if any) as of 31 August 2013 were nil (2012: nil). Pursuant to the Sixth Schedule of the Deed dated 13 October 2009, the Manager is en tled 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 period ended 31 August

36 11. NET ASSET VALUE PER UNIT Net asset value a ributable to unitholders is classified as equity in the statement of financial posi on. The net asset value per unit is calculated by dividing the net assets of RM7,959,764 (2012: RM4,374,914) by the 13,611,918 (2012: 8,603,700) units in issue as at 31 August DISTRIBUTION EQUALISATION Distribu on equalisa on represents the average amount of undistributed net income included in the crea on or cancella on price of units. This amount is either refunded to unitholders by way of distribu on and/or adjusted accordingly when units are released back to the Trustee. 13. INCOME DISTRIBUTION No income distribu on was declared by the Fund for the financial period ended 31 August 2013 (2012: nil). 14. PORTFOLIO TURNOVER RATIO The por olio turnover ra o ( PTR ) for the current financial period is 7.00 mes (2012: 0.05 mes). PTR is the ra o of the average of the acquisi ons and disposals of investments of the Fund for the period to the average net asset value of the Fund, calculated on a daily basis. 15. MANAGEMENT EXPENSE RATIO The management expense ra o ( MER ) for the current financial period is 1.51% (2012: 0.54%). MER is the ra o of total fees and recovered expenses of the Fund expressed as a percentage of the Fund s average net asset value, calculated on a daily basis. 31

37 16. TRANSACTIONS WITH FINANCIAL INSTITUTIONS Transac on Percentage value of total RM % ING Investment Management Luxembourg S.A.* 18,549, ,549, The above transac on values are in respect of investments in foreign collec ve investment schemes. Transac ons in these securi es do not involve any commission or brokerage fees. * As the Fund is in its nature a feeder fund to a global fund, IIGO, hence most of the transac ons were made with the global fund manager, ING Investment Management Luxembourg S.A. 17. SEGMENTAL REPORTING As stated in Note 1 to the financial statements, the Fund is a feeder fund whereby at least 95% of the Funds net asset value will be invested in IIGO while maintaining up to a maximum of 2% of the Fund s net asset value in liquid assets. IIGO is an open unit trust fund in Luxembourg and is managed by ING Investment Management Luxembourg S.A., a related company with the Manager. As the Fund is by nature a feeder fund to an underlying fund, it is not required to disclose its investments by business or geographical segments at the fund level. 18. FINANCIAL INSTRUMENTS a. Classifica on of financial instruments The Fund s financial assets and financial liabili es are measured on an ongoing basis at either fair value or at amor sed cost based on their respec ve classifica on. The significant accoun ng 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 liabili es of the Fund in the statement of financial posi on by the class of financial instrument to which they are assigned and therefore by the measurement basis. 32